Charles Clinton White v. Lynda White--Appeal from 255th District Court of Dallas County

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Laws-info.com » Cases » Texas » 10th District Court of Appeals » 1995 » Charles Clinton White v. Lynda White--Appeal from 255th District Court of Dallas County

State: Texas

Court: Texas Northern District Court

Docket No: 10-94-00094-CV

Case Date: 03/08/1995

Plaintiff: Charles Clinton White

Defendant: Lynda White--Appeal from 255th District Court of Dallas County

Preview:Charles Clinton White v. Lynda White--Appeal from
255th District Court of Dallas County
IN THE
TENTH COURT OF APPEALS
No. 10-94-094-CV
CHARLES CLINTON WHITE,
Appellant
v.
LYNDA WHITE,
Appellee
From the 255th District Court
Dallas County, Texas
Trial Court # 94-916-S
O P I N I O N
Appellant Charles Clinton White appeals a final declaratory judgment holding that a prenuptial agreement entered into
by himself and his former spouse, appellee Lynda White, was unenforceable. He brings a single point of error:
Whether the trial court erred in finding that the parties' prenuptial agreement did not provide for an exchange of
community interests. We will reverse and render judgment in favor of the appellant.
Charles and Lynda, married on May 3, 1981. Two days earlier, they executed a prenuptial agreement. The agreement
provided, in relevant part:
This agreement is made by and between Charles Clinton White ... and Lynda Sue English (now White) ... in
contemplation and consideration of their forthcoming marriage. It is the express desire and intention of both [parties]
to define that property which each brings into the marriage and to that end to designate that property and set it apart as
the sole and separate property of each such party.
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It is specifically recognized by both [parties] that Charles Clinton White has over the years and prior to the [parties']
marriage accumulated numerous assets consisting of both real and personal property of a substantial value and it is the
specific intent and desire of Lynda Sue English to forever disclaim any interest in these assets and the income or
benefits which they might produce after the [parties'] marriage.
[T]he parties do hereby stipulate and agree as follows:
1. All real property hereinafter described and set forth in Exhibit "A" ... together with all income presently derived
therefrom or which may be derived therefrom in the future as well as all real property interest hereafter acquired as the
result of options relating to said property which provides for the right to purchase, partake, participate in, rent, lease or
acquire additional property shall be and the same shall forever remain the sole and separate property of Charles
Clinton White.
2. All personal property hereinafter described and set forth as Exhibit "B" ... together with all present and future
income derived from said property ... shall be and shall ... forever remain the sole and separate property of Charles
Clinton White.
4. All personal property hereinafter described and set forth in Exhibit "C" ... together with all present and future
income derived therefrom shall be and the same shall forever remain the sole and separate property of Lynda Sue
English.
As an additional consideration to the execution of the agreement, Charles Clinton White agrees to obtain a policy of
ordinary life insurance upon his life in the amount of $10,000.00, within 180 days after the marriage of the parties, and
shall designate Lynda Sue English as the primary beneficiary of the policy to be retained as such as long as the policy
remains in effect.
The value of the real properties listed in Exhibit "A" was estimated at $825,000.00. Exhibit "B" listed personal
properties with an estimated value of $1,778,379.48. Listed in Exhibit "C", the properties belonging to Lynda prior to
her marriage to Charles, were a 1978 Buick Regal, whose value was not indicated; a coin set with accompaniments
worth approximately $1,095.00; life insurance policies for Lynda and her two daughters whose values were not
indicated; and a contingent interest in the proceeds from a personal injury lawsuit whose estimated value was not
indicated.
Notwithstanding either the intention of Lynda in entering the agreement or the express wording thereof, she argued to
the trial court by means of a suit for declaratory judgment that the agreement failed to divide the marital estate so as to
allow each party to characterize the income // from his or her separate property as separate property. The trial court
entered judgment in her favor.
The source of Charles's and Lynda's conflict is the sole constitutional provision in this state governing the proper
characterization of marital property as either separate or community property, article XVI, section 15. See Tex. Const.
art. XVI, 15 (1948, amended 1980). On the date the Whites were married, which simultaneously served as the effective
date of their prenuptial agreement, article XVI, section 15, provided:
All property, both real and personal, of a spouse owned or claimed before marriage, and that acquired afterward by
gift, devise or descent, shall be the separate property of that spouse; and laws shall be passed more clearly defining the
rights of the spouses, in relation to separate and community property; provided that persons about to marry and
spouses, without the intention to defraud pre-existing creditors, may by written instrument from time to time partition
between themselves all or part of their property, then existing or to be acquired, or exchange between themselves the
community interest of one spouse or future spouse in any property for the community interest of the other spouse or
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future spouse in other community property then existing or to be acquired, whereupon the portion or interest set aside
to each spouse shall be and constitute a part of the separate property and estate of such spouse or future spouse; and
the spouses may from time to time, by written instrument, agree between themselves that the income or property from
all or part of the separate property then owned by one of them or which thereafter might be acquired, shall be the
separate property of that spouse; and if one spouse makes a gift of property to the other that gift is presumed to include
all the income or property which might arise from that gift of property. //
Id. It is undisputed that article XVI, section 15, allows prospective spouses to recharacterize their community interests
in the income generated from the other's separate property as separate property, provided the prospective spouses
either partition or exchange those interests. See id. Charles argues that the prenuptial agreement accomplished an
exchange of community interests in the income generated from the other's separate property and, therefore, is
enforceable under article XVI, section 15. Lynda, however, contends the agreement did not involve either a partition or
an exchange of community interests and, consequently, is unenforceable under article XVI, section 15. She raises two
arguments in support of her contention; first, she argues our reasoning in Fanning v. Fanning, 828 S.W.2d 135 (Tex.
App. Waco 1992), rev'd on other grounds, 847 S.W.2d 225 (Tex. 1993), demands a decision in her favor; second, she
contends the language of the agreement reveals solely an attempt by both parties to define the property each spouse
brought into the marriage as separate property, not to effectuate a partition or exchange of each other's community
interests.
I. Whether Fanning Compels a Decision in Lynda's Favor
This court previously addressed in Fanning the enforceability of prenuptial agreements under article XVI, section 15,
where the future spouses appear to have attempted to exchange their community interests in the income derived from
each other's separate property. At issue in Fanning were two separate and distinct paragraphs from the parties'
prenuptial agreement. They read:
6.01) During their marriage, all income and revenue (other than that which is part of the property itself) from the
separate property of each party hereto is the community property of the parties if so defined by Texas law. However,
the parties understand that the 66th Texas legislature approved H.J.R. 54, to be submitted to the voters on November
1980, by the terms of which spouses may, by agreement between themselves, provide that the income from separate
property owned by either of them, or thereafter acquired, shall be the separate property of the spouse owning such
separate property. If such amendment to Article XVI, Section 15, of the Texas Constitution is approved by the voters,
the parties agree that as soon as legally possible all income from their respective estates shall be the separate property
of the spouse from whose separate estate such income is derived.
6.02) The parties agree that each may, from time to time, designate certain banks as his or her agent to assist in
carrying out this Agreement by administering accounts in the name of the respective party, by the name of the party
adding "as separate property," or otherwise, to the end that all funds which are deposited to the separate accounts of
the parties hereto and income therefrom will be identified as the separate property of the party in whose name such
funds are held. As received, the respective parties shall deposit funds received that are the income or revenue from
their respective separate property into one of their respective several or separate property accounts created in their
respective and on deposit (if not before) such funds shall be the separate property of the spouse whose separate
property produced such income or revenue, if so provided by this Agreement. The parties hereto hereby instruct any
bank holding such funds on deposit as provided in this paragraph that such funds are the separate property of the party
in whose name such deposit was made as provided in this paragraph.
Fanning, 828 S.W.2d at 139-140. While each of the two paragraphs evinces an attempt by both parties to recharacterize
the income from their separate property as separate property, we held only the latter paragraph enforceable under
article XVI, section 15. Id. at 140-142.
In concluding that paragraph 6.02 was enforceable, we cited a decision by the Texas Supreme Court in Beck v. Beck,
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814 S.W.2d 745 (Tex. 1991), cert. denied, U.S. , 112 S.Ct. 1266 (1992), holding that a substantially similar provision
in the prenuptial agreement at issue in Beck was enforceable, i.e., the income from the spouses' separate property in the
bank accounts mentioned in paragraph 6.02 would be considered to be each spouse's separate property. The provision
in Beck provided:
Notwithstanding that under the laws of the State of Texas the income from respective separate properties of [the
spouses] will be community property, they hereby agree that all the properties of every kind and nature, real and
personal, held or standing in the name of only one of them shall be considered as a separate property of the one of
them in whose name such property is held or stands, and that only properties, whether real or personal, held or
standing in their joint names shall be considered as community property.
Beck, 814 S.W.2d at 746. // This provision in Beck, like paragraph 6.02 in Fanning, successfully accomplished an
exchange of the spouses' community interests in the income derived from the other's separate property by each party
specifically referring to the individual owner of the separate property which generated the disputed income and
correspondingly stating their intention to characterize such income as the separate property of the owner of the
separate estate that generated it.
Article XVI, section 15, as this court indicated in Fanning, allows both spouses and future spouses to "partition" or
"exchange" between themselves their individual interests in the marriage's community property, which means that both
spouses and prospective spouses may swap and/or divide between themselves their interests in the community property
acquired or to be acquired during their marriage. Fanning, 828 S.W.2d at 140-141. However, in construing the plain
language of article XVI, section 15, we held that only spouses, not prospective spouses, could recharacterize by mere
agreement their community interests in the income to be derived from each other's separate property as separate
property, i.e., without a bilateral partition or exchange. Id. at 141.
Upon examining the wording of paragraph 6.01, this court found in Fanning that the parties, as future spouses, were
attempting in their prenuptial agreement to do what article XVI, section 15, forbade them from doing: they were
attempting by mere agreement, i.e., without a partition or exchange, to recharacterize their individual community
interests in the income derived from their separate property as separate property. Id. While the two paragraphs in
Fanning at first glance appear to have accomplished the same goal in a similar manner, they nevertheless must be
treated differently because paragraph 6.01, unlike paragraph 6.02, referenced the language of the proposed amendment
to article XVI, section 15, which concerned the ability of spouses only to recharacterize by mere agreement their
community interests in the income to be derived from the other's separate property. Fanning, 828 S.W.2d at 141-142;
see also Dokmanovic v. Schwarz, 880 S.W.2d 272, 274 (Tex. App. Houston [14th Dist.] 1994, n.w.h.). The Fannings
did not incorporate into paragraph 6.01 any language to reflect their intention, as prospective spouses, to partition or
exchange their community interests in the income to be generated by each other's separate property. Fanning, 828
S.W.2d at 141-142. By referencing the language of the proposed amendment concerning the ability of spouses, not
prospective spouses, to partition or exchange their community interests, the Fannings locked themselves into a
construction of their agreement that they were attempting to do as future spouses what only presently-married spouses
could do, i.e., recharacterize their community interests as separate property by mere agreement.
Lynda contends that since her agreement with Charles is substantially similar to paragraph 6.01 of the Fannings'
prenuptial agreement we are compelled to conclude that her prenuptial agreement is likewise unconstitutional. //
However, their agreement does not even closely resemble paragraph 6.01 of the Fannings' agreement. Instead, the
Whites' agreement closely resembles the prenuptial agreement the Fourteenth Court of Appeals found to be
enforceable in Dokmanovic, 880 S.W.2d at 273. The parties in Dokmanovic, as prospective spouses, executed a
prenuptial agreement wherein they, among other things, exchanged their community interests in the income to be
derived from each other's separate property. // Unlike the Fanning agreement, the parties in Dokmanovic did not
expressly reference the language in article XVI, section 15, concerning the ability of only spouses, not future spouses,
to recharacterize their community interests in the income from separate property by mere agreement. See id. at 274-
275. They, like the Whites, simply used language which reflected an intention to define each other's separate property
and to characterize the income from that separate property as the owner's separate property. Therefore, because we
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believe Dokmanovic was properly decided, we conclude that Fanning does not require a decision in Lynda's favor.
II. Whether the Agreement Failed to Accomplish Either a Partition or an Exchange
In answer to Lynda's second contention, we find that the Whites effected an exchange of their community interests by
listing the separate property they both brought into their marriage and then specifying in the agreement that such
separate property, including income derived therefrom, would continue to belong to their separate estates after their
marriage. We further hold the language in the agreement, indicating the parties' intention to define the separate
property each brought into the marriage, does not mean that they did not intend to exchange their community interests
in the income derived from each other's separate estate. A delineation of each other's separate property serves not only
the purpose, as Lynda would have it, of assisting the parties in tracing ownership upon dissolution of the marital estate,
but allows the parties to determine the source of the income derived from each other's separate property an essential
task for a successful completion of an exchange by future spouses of each other's community interests in the income
derived from the other's separate property.
Lynda points out that the words "partition" and "exchange" are nowhere to be found in the Whites' agreement;
however, we conclude that these words, while helpful, are not essential to create a partition or an exchange. Charles
and Lynda, in executing their prenuptial agreement, disavowed any interests they might have in the income derived
from the other's separate property enumerated in the agreement. // See Dokmanovic, 880 S.W.2d at 272 (holding
statements in a prenuptial agreement that income derived from the separate property of the parties would be
characterized as the owner's separate property accomplished a partition or exchange under article XVI, section 15); see
also Winger v. Pianka, 831 S.W.2d 853 (Tex. App. Austin 1992, writ denied) (an expression of intention by both
parties not to hold any community property accomplished an exchange as required by article XVI, section 15);
Fanning, 828 S.W.2d at 142; Dewey v. Dewey, 745 S.W.2d 514 (Tex. App. Corpus Christi 1988, writ denied)
(upholding a prenuptial agreement virtually identical to the Whites', although the court did not rule on the
constitutional issue of partition or exchange); Williams v. Williams, 720 S.W.2d 246 (Tex. App. Houston [14th Dist.]
1986, no writ) (same). This mutual disavowal of interests effectively accomplished an exchange between the two
parties of their community interests in the income derived from the other's separate property.
Lynda makes the argument that the marked disparity in the value of the separate assets brought into the marriage by the
parties precludes any finding of a partition or an exchange. The value of the interests exchanged, however, has no
bearing upon a valid execution of a partition or an exchange. See Chiles v. Chiles, 779 S.W.2d 127, 129 (Tex. App.
Houston [14th Dist.] 1989, writ denied). Article XVI, section 15, requires only that the future spouses partition or
exchange their community interests in order to recharacterize what would be community property as separate property;
no mention is made of a requirement that the values partitioned or exchanged be of an equal or even proportionate
value, and we will not infer one. // See id.; see also Hibbler v. Knight, 735 S.W.2d 924, 926 (Tex. App. Houston [1st
Dist.] 1987, writ ref'd n.r.e.). Accordingly, we conclude that an exchange was effected by Lynda and Charles in their
prenuptial agreement.
In conclusion, we sustain Charles's point of error and render judgment in his favor.
BOBBY L. CUMMINGS
Justice
Before Chief Justice Thomas,
Justice Cummings, and
Justice Vance
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Reversed and rendered
Opinion delivered and filed March 8, 1995
Do not publish
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