## Facts

- Sylvester Jackson and Eliza Smith lived together in Texas for about five years and held themselves out as husband and wife.
- During the relationship, Sylvester obtained a life-insurance policy issued by Massachusetts Indemnity and Life Insurance Company (MILICO).
- Premiums on the MILICO policy were paid with funds treated as community property.
- Sylvester named his sister, Betty Jackson, as the sole beneficiary of the MILICO policy.
- Sylvester also transferred substantial value to Betty through other benefits, including proceeds from another life-insurance policy of about $60,000.
- Eliza was unaware that Betty was the MILICO beneficiary; Sylvester told Eliza she was “taken care of.”
- After Sylvester’s death, both Eliza and Betty claimed the MILICO proceeds; MILICO filed an interpleader and deposited the proceeds into the court registry.

## Issues

1. Whether legally sufficient evidence supported a finding that Sylvester and Eliza had a Texas common-law marriage.
2. Whether naming a third-party beneficiary on a community-funded life-insurance policy, coupled with substantial related transfers and nondisclosure to the spouse, constituted fraud on the community.
3. Whether the trial court’s division of the policy proceeds—awarding part to Eliza and part to Sylvester’s estate rather than to Betty—was legally correct.

## Decision

- The court of appeals held there was some evidence supporting the trial court’s finding of a common-law marriage.
- The court upheld the finding that Sylvester’s disposition of community-funded benefits to Betty, without Eliza’s knowledge and in light of misleading assurances, amounted to fraud on the community.
- The court agreed Eliza could recover her community interest from the insurance proceeds despite the beneficiary designation.
- The court modified the judgment because part of the allocation was erroneous, concluding the trial court erred in awarding $34,250 to Sylvester’s estate.

## Legal Principles

- A Texas common-law marriage may be found based on evidence of an agreement to be married, cohabitation in Texas as spouses, and representations to others that the parties are married; an appellate court will uphold the finding when supported by some evidence.
- Property acquired and earnings during marriage are presumed community property; premiums paid with community funds give the community an interest in the resulting insurance benefits.
- A spouse may make reasonable gifts of community property to third parties, but disproportionate or concealed transfers can constitute constructive fraud on the community.
- When a spouse shows community funds were used for a third-party benefit, the donee bears the burden to show the gift was fair and reasonable in light of the overall community estate.
- Courts may reallocate life-insurance proceeds to restore the defrauded spouse’s community share when a community-funded beneficiary designation operates as fraud on the community.

## Conclusion

The court sustained findings that Eliza was Sylvester’s common-law spouse and that community-funded transfers to Betty through insurance benefits constituted fraud on the community, allowing Eliza to recover her community interest from the policy proceeds, while modifying the judgment to correct an improper award to Sylvester’s estate.


Jackson v. Smith, 703 S.W.2d 791 (Tex. App.—Dallas 1985)