Stace Carol LeGrand-Brock v. Roy Richard Brock

IN THE TENTH COURT OF APPEALS No. 10-04-00251-CV Stace Carol LeGrand-Brock, Appellant v. Roy Richard Brock, Appellee From the 221st District Court Montgomery County, Texas Trial Court No. 02-10-06730 CV MEMORANDUM Opinion This is a dispute over the division of a community estate in a marriage dissolution between Stace Carol Le Grand-Brock (“Stace”) and Roy Richard Brock (“Roy”). The trial court held that cash payments received during marriage were Roy’s separate property. Stace appeals in seven issues. Her sixth issue asserts that it was error for the trial court to exclude her proffered expert testimony concerning the characterization of these cash payments. Her final issue is whether the division is “just and equitable,” as required by the Family Code. Her other five issues revolve around whether the court erred in its ruling that the cash payments were separate property. We will find that the trial court erred in refusing to admit Stace’s expert testimony on characterization of these payments, reverse the property division, and remand for further proceedings. BACKGROUND At the time of their marriage, Roy owned, as his separate property, 740.5 shares in BTH Holdings, Inc. (“BTH”), a Delaware corporation. On February 15, 1999, the Board of Directors and Shareholders passed unanimous resolutions to dissolve BTH. This liquidation was to be effected over a period of three years, and after all of the debts, liabilities, and obligations were satisfied, the remainder of the assets were to be distributed to the shareholders “according to their respective rights and interests in complete cancellation or redemption of all the shares of capital stock” of BTH. Roy received four cash payments: (1) $4,443,000 in March, 1999; (2) $1,406,950 in September, 1999; (3) $444,300 in November, 1999; and (4) $681,260 in November, 2001.[1] It is unclear from the record how many shares, if any, were relinquished in connection with each cash payment. BTH received a certificate of dissolution on October 31, 2001 from the State of Delaware. During the trial, the trial judge ruled as a matter of law that the cash payments were Roy’s separate property. She then excluded Stace’s proposed expert testimony regarding the characterization of this property. Stace made an offer of proof. RELEVANT LAW AND ANALYSIS All property possessed by either spouse during or on dissolution of marriage is presumed to be community property. Tex. Fam. Code Ann. § 3.003(a) (Vernon 2004). To prove that property is separate property, clear and convincing evidence is required. Id. § 3.003(b). Cash dividends received on separately held stock are community property. Bakken v. Bakken, 503 S.W.2d 315, 317 (Tex. Civ. App.—Dallas 1973, no writ). The character of property is not changed by the sale, mutation, exchange, substitution, or change in form of separate property. Norris v. Vaughan, 152 Tex. 491, 260 S.W.2d 676, 679 (1953); Horlock v. Horlock, 533 S.W.2d 52, 60 (Tex. Civ. App.—Houston [14th Dist.] 1975, writ dism’d w.o.j.). Federal or state tax treatment does not control the character of marital property in Texas. See Tex. Const. art. XVI, § 15; Thomas v. Thomas, 738 S.W.2d 342, 345 (Tex. App.—Houston [1st Dist.] 1987, writ denied). We find that Stace properly preserved her exclusion-of-evidence issue with a sufficient offer of proof. See Tex. R. Evid. 103; Chance v. Chance, 911 S.W.2d 40, 51-52 (Tex. App.—Beaumont 1995, writ denied). We review challenges to the exclusion of expert testimony under an abuse of discretion standard. E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 558 (Tex. 1995). For expert testimony to be relevant, the proposed testimony must be sufficiently tied to the facts of the case that it will aid the trier of fact in resolving a factual dispute. Id. at 556. During the offer of proof, Stace’s expert opined that (1) Roy’s stock was never sold; (2) during the liquidation, BTH paid out large liquidation dividend distributions to its shareholders from its retained earnings and profits; and (3) the cash distributions Roy received are community property. Regarding characterization, Roy argues that his stock was exchanged for BTH’s net cash assets (i.e., mutation), which therefore remain his separate property. Thus, Roy argues that this expert testimony was not relevant because it would not assist the trier of fact to determine a fact in issue. Because there was a fact issue regarding whether Roy’s stock was exchanged/sold for cash or whether the cash payments were (in whole or in part) dividends, we find that Stace’s expert testimony was relevant and essential for the trier of fact to determine if the cash payments were community or separate property. See Robinson, 923 S.W.2d at 556, 558. CONCLUSION We have found that the trial court erred in refusing to admit Stace’s expert testimony on the characterization of the payments received by Roy from BTH over a three-year period. We further find that the error probably caused the rendition of an improper judgment regarding the just and equitable division of the parties’ community estate. Tex. R. App. P. 44.1(a). Thus, we reverse the judgment with respect to the division of the community estate and remand this cause for further proceedings. Id. 43.3(a), 44.1(b); see also Jacobs v. Jacobs, 687 S.W.2d 731, 733 (Tex. 1985); Glud v. Glud, 641 S.W.2d 688, 691 (Tex. App.—Waco 1982, no writ). We affirm the judgment in all other respects. BILL VANCE Justice Before Chief Justice Gray, Justice Vance, and Justice Reyna (Chief Justice Gray dissenting) Reversed and remanded in part; affirmed in part Opinion delivered and filed October 12, 2005 [CV06] [1] Although not at issue in this appeal, as a result of a spin-off, Roy also received 740.5 shares of BTH Property Services, Inc.