INTERESTING CASES: April 5, 2017
Sallee S. Smyth
1. In re Morgan, 2016 Tex. App. LEXIS 11810 (Tex. App. – Houston [1st Dist.] November 1, 2016, orig. proceeding) (Cause No. 01-16-00530-CV)
NOTE: Better late than never. I missed this Opinion when it came out in early November 2016. Thank you Ami Feltovich for bringing it to my attention and congrats on your victory.
H filed suit for divorce and sought appointment of the children’s primary parent JMC. The parties entered into agreed temporary orders. H served W with discovery which included a request for production seeking records relating to W’s medical, psychological and/or psychiatric treatment, consultation diagnoses, including related prescriptions since January 2011. W objected on the basis that the request was outside the scope of discovery, unduly burdensome, and sought information subject to the physician-patient privilege. .After hearing the trial court issued an order which found that H was relying upon W’s medical condition (a nerve disorder or injury known as Reflex Sympathetic Dystrophy or RDS) as part of his claim or defense for conservatorship, making records related to her condition relevant and thus an exception to the privilege under TRE 509(e)(4). The court ordered production of the documents for in camera inspection and upon such review thereafter ordered them produced, but contemplated W’s filing of a petition for writ of mandamus. W did in fact file such a petition. W argued that no pleading supported reliance upon any medical condition sufficient to support the litigation exception of the physician-patient privilege. The COA determined that the test for determining whether the exception applies is not simply whether the condition is relevant because almost any litigant could plead matters in a way to make it relevant wherein the privilege would cease to exist. The COA also found that the exception is not met when the condition is merely an evidentiary or intermediate issue of fact rather than an ultimate issue to the claim or defense. In other words, the exception does not exist if the condition is merely tangential to a claim rather than central to it. The COA holds that the condition itself upon which discovery is sought must be so central as to require the jury, as part of its determination of the claim or defense, to make factual determinations concerning the condition itself. The COA notes that H’s pleadings make no assertion that W’s medical condition affects her suitability as a conservator of the children. Further W’s pleadings raise no issue regarding her condition. As such the trial court abused its discretion by ordering the records produced under the litigation exception to the attorney client privilege. Mandamus granted. COMMENT: If a party suffers from a physical and/or mental condition which would or could influence their suitability as a conservator, it would be prudent to include brief factual allegations concerning the condition within pleadings seeking relief, demonstrating reliance upon the condition as part of a claim or defense and in turn supporting requested discovery on the issue. I’m confident other evidence would need to be offered if the discovery was resisted, but the pleadings would at least set the groundwork for the arguments to be made more effectively.
2. Banker v. Banker, 2017 Tex. App. LEXIS 1799 (Tex. App. – Corpus Christi March 2, 2017) (Cause No. 13-15-00385-CV)
H & W married in 1990. During marriage they purchased two businesses, Banker Corp. Insurance agency run by W and El Campo Livestock (ECL) run by H. W filed for divorce in 2010 and the case proceeded to a bench trial in April 2013. The court admitted W’s I&A, most of her exhibits regarding value of the assets as well as her testimony. W sought to admit the testimony of two experts, one a property valuation expert and the other a business valuation expert regarding the value of ECL and support for W’s claims that H had committed fraud by selling off a large number of livestock and thereafter hid the proceeds from W. H objected to both experts on various grounds and offered a rebuttal expert. The trial court ultimately excluded the property valuation expert altogether and while the business valuation expert offered some evidence, the court issued findings that his opinions were not credible. H offered his testimony on value and a few exhibits, however the majority of his exhibits were not admitted, including his I & A. After trial the court deferred its ruling and ordered the parties to attend mediation which proved unsuccessful. In April 2014, one year after trial, the court circulated a draft decree to the parties. W filed a motion to reconsider and motion to divide property. In July 2014 the court entered a final decree. H was awarded ECL, multiple vehicles and trailers titled in his name and “all goods in H’s possession or subject to his control.” W was awarded the insurance agency and other assets. The division was said to represent a 55/45 split in favor of W and to equal that outcome the court awarded W a money judgment and lien against H in the amount of $455,133. W requested findings and filed a MNT and a motion to reform the judgment. W also filed a 2nd amended petition and motion for leave which requested pre-judgment interest for the first time. In January 2015 the court granted W’s motion to reform and indicated it would increase the judgment against H to $676,733. H filed a motion to reform the judgment asking to decrease it to $573,640 but the court denied his request. The court entered a modified decree keeping the judgment at $676.733 but did not include pre-judgment interest. Ultimately the court issued findings on this judgment rejecting W’s fraud claims, finding that pre-judgment interest should be awarded, but never modified the decree again to grant that relief. W appealed challenging the valuation of certain assets, asserting error in the two year delay between valuation and rendition of judgment and complaining about the failure to award pre-judgment interest. As to the valuation of ECL, the trial court found it to be worth $1.44 million. W argued that since H’s I&A was not admitted, that the only evidence of value was her experts value at close to $1.7 million. The COA readily agreed that an I&A must be admitted into evidence before it can be considered. However the COA focused on the “property-owner” rule as a means of providing evidence of valuation, noting that the owner of a business can, within limits, testify as to the value of the business. To do so property the owner must provide the factual basis upon which his opinion rests, including possibly information regarding how much was paid for the business, nearby sales, tax valuations, appraisals and online resources. A bare assertion of value of a business will not be sufficient. Here the COA found that the H’s testimony regarding ECL included many sound reasons as a basis for his $1.44 valuation which properly invoked reliance upon the property-owner valuation rule. W further argued that the trial court erred in rejecting her request that ECL good will be valued as an asset. The COA agreed that goodwill is a divisible asset, however the COA found no error in the trial court’s decision to reject the only testimony supporting it which came from W’s business valuation expert because his “income based” valuation approach to ECL overall was rejected and the good will value was derived from this overall valuation, thus W failed to carry her burden of producing proper evidence of good will value. W also complained about the value of the vehicles awarded to H, however her arguments relied upon valuations prepared by her property valuation expert whose testimony had been wholly excluded at trial and W had not complained on appeal about the trial court’s decision to exclude this witness. W also complained that the trial court “overvalued” two bank accounts awarded to her by $44,133, based on values provided in H’s I&A which was not admitted in evidence. The COA determined that no evidence supported the $44K figure and that the last viable evidence of value supported something closer to $32K. The COA then suggested a “remittitur” to W from H of $4,914 which represented 55% of the differential in the value found and the actual evidence. The COA found that the valuation discrepancy did not render the overall division manifestly unjust and ruled that if H voluntarily remitted the $4914 amount to W within 15 days of their Opinion it would consider reversible error cured. W further complained about the delay between the trial and evidence and the ultimate rendition and entry of judgment. The COA notes that W carried to burden to establish that the delay was unreasonable and caused harm. The COA found that much of the delay was attributed to the various motions that W herself had filed post trial. The COA was also unpersuaded by the changing values of property over the delay period noting that if the court had issued its decision immediately following the trial in 2013, the values of the various properties awarded would have still fluctuated and the W would have been in the exact same position. Finally the COA rejected W’s claim of newly discovered evidence (involving change in asset values) because they determined such evidence to be merely “new evidence” not “newly discovered evidence” which was otherwise cumulative only. W also asserted that the trial court had erred in failing to divide certain livestock in H’s possession, specifically 6 horses. H argued that the court had in fact awarded these to him because the decree specified he was awarded all “goods” in his possession which he argued included the horses. The COA disagreed finding that the decree also awarded W “goods” and then separately awarded W any other livestock in her possession, indicating that the court did not intend “goods” to include livestock. The COA remanded the issue of valuation and division of the horses to the trial court. Finally, the COA rejected W’s arguments supporting her timely pleading request for pre-judgment interest, determining that W’s pleading after the first judgment was signed was too late. Property division reversed and remanded for determination of value of 6 horses and re-division of property thereafter based on existing evidence. Remittitur of $4914 suggested and if accepted, valuation of all other assets conditionally affirmed. All other matters affirmed. COMMENT: This is the first time I can remember ever seeing “remittitur” used as a device to otherwise correct error in a property division on appeal. In my experience, a $10K valuation error in an overall $2 million++ estate would be considered “de minimis” and would not result in reversible error on a division of property. Here however the COA finds the error reversible but offers the H an inexpensive way out of a complete property division reversal. I’m guessing payment of $4,914 versus the fees and expenses involved in a complete new trial makes for an easy decision on H’s part.
3. In re V.J.A.O., 2017 Tex. App. LEXIS 2049 (Tex. App. – Dallas March 9, 2017) (mem. opinion) (Cause No. 05-15-01534-CV)
M and F had one child born in France. When the child was an infant, M and the child moved to the US to live with F. They never married but lived together and purchased a residence together. When the separated, F moved out and later remarried. M and F continued to share custody of the child. In a parentage action the court named the parties JMC and gave M the exclusive right to establish the child’s residence in Dallas and contiguous counties and to make decisions regarding education. F was given an SPO with expanded elections. F was ordered to pay $5,000 in child support per month and W was awarded $30,600 in fees. F appealed the child support orders. F asserted that the factors in TFC 154.123(b) for determining whether guideline child support was unjust could only be considered in those cases where the obligor’s net resources were below $8550. F claimed that when ordering child support beyond the presumed amount because the obligor’s net resources exceeded $8550, the court could only consider the needs of the child and the resources and circumstances of the parties as provided in TFC 154.126(a). Although the COA agreed that the child support issue in this case was to be considered under TFC 154.126(a), it found no error upon the trial court’s consideration of other factors. The COA noted that the broad scope of the factors identified within TFC 154.123(b) were subsumed within the three criteria in TFC 154.126 (needs of child, resources and circumstances of parties) and that the evidence established the proven needs of the child justifying the amount of child support ordered in this case. Regarding attorney fees the COA found that M’s attorney did not testify to the special factors required to support an award of paralegal/legal assistant fees (qualifications, work performed, hourly rate and hours expended), necessitating a slight modification of the fee award. Judgment affirmed.
4. King v. King, 2017 Tex. App. LEXIS 2075 (Tex. App. – Dallas March 9, 2017) (mem. opinion) (Cause No. 05-16-00467-CV)
During marriage, H participated in the Texas Municipal Retirement System (TMRS). In divorce proceedings the parties entered into an MSA which awarded W a specified amount of H’s TMRS account and awarded the balance to H. The decree specifically awarded W this amount and awarded H his TMRS account with the City of Mesquite except that portion awarded to W. The Decree expressly represented a merger of the MSA and the parties agreed the Decree would control in the event of any conflicts. Sometime after the divorce was final, W filed a Chapter 9 suit, asserting that the City matching contributions to H’s retirement (maintained in a separate general fund but held for H’s benefit and paid only at retirement) had not been divided upon divorce. At trial W offered expert testimony that the matching contribution was not paid until retirement and held in an accumulated fund separate from the participants contribution account. W’s expert testified that in his opinion, the “account” awarded to H under the terms of the decree only awarded H his contribution amounts. W testified that she assumed any matching funds would follow the award of the contributed funds, such that she would receive that portion of the matching funds that followed her $32,000 award from H’s TMRS account. At the conclusion of W’s case, H moved for judgment which the trial court granted, finding that the parties’ Decree “intended” to divide all assets and that the Decree and MSA combined to partition all assets. W appealed. On appeal W focused on the decree’s division of H’s TMRS “account” which she argued contained only his contributed funds. In contrast, H focused on the parties expressed intent to fully and completely resolve the issues in their divorce including a just and right division of their estate. The COA noted that W could not have truly believed the matching funds would follow her portion of the award if she did not also believe that these matching funds had been disposed of. The COA concluded that the trial court’s interpretation was supported by H’s argument that a complete division had been intended and that H had been awarded everything in his TMRS plan except the specified portion awarded to W. Judgment affirmed.