## Facts

- Kymberly Benson Lifshutz and James C. Lifshutz married in 1990 and separated in 1997; both brought substantial separate property into the marriage.
- James controlled several closely held entities (including Liberty Financial Corporation, Liberty Properties Partnership, CJS Associates, Ltd., Texas Home Improvements, Inc., and Berlee Lumber Company, Inc.) as an officer, CEO, or managing partner.
- The trial court found James’s ownership interests in the companies were his separate property (acquired before marriage or by gift), and Kymberly did not dispute that characterization.
- Kymberly sought a divorce and a “just and right” division of the community estate, and also sued the companies to treat corporate assets as available for division under an alter-ego theory.
- The companies asserted James diverted corporate opportunities and used corporate funds for personal and marital expenses and to acquire assets; they sought damages and a constructive trust over assets acquired through the alleged misconduct.
- After a bench trial, the court found (1) most companies were James’s alter ego (except CJS) and pierced the veil only to the extent of James’s one-third interest to increase the community estate, and (2) James breached fiduciary duties to the companies but denied the companies damages and a constructive trust.
- The trial court awarded Kymberly 25% of the community estate and James 75%.

## Issues

1. Whether the trial court abused its discretion under the “just and right” standard by awarding Kymberly only 25% of the community estate.
2. Whether the evidence supported alter-ego findings and limited veil piercing against the companies (except CJS) for purposes of the divorce property division.
3. Whether the trial court erred by denying damages and a constructive trust after finding James breached fiduciary duties owed to the companies.

## Decision

- The appellate court affirmed the disproportionate 25%/75% community-property division, finding no abuse of discretion.
- The appellate court upheld the trial court’s limited alter-ego veil piercing (excluding CJS) to the extent of James’s one-third interest, as a means to prevent misuse of the corporate form from distorting the marital estate.
- The appellate court reversed in part and remanded for further proceedings on the companies’ breach-of-fiduciary-duty remedies, directing reconsideration of relief consistent with the opinion’s treatment of corporate misuse and the property-division framework.
- Disposition: affirmed in part; reversed and remanded in part.

## Legal Principles

- A Texas divorce court must divide the community estate in a manner it deems “just and right”; the division need not be equal, and appellate review is for abuse of discretion.
- In dividing community property, the trial court may consider factors such as the parties’ financial circumstances, earning capacities, and marital fault when determining whether an unequal division is equitable.
- Alter-ego veil piercing may be applied when a spouse dominates a closely held entity, disregards corporate separateness, and uses the entity to commit fraud or where respecting the corporate form would promote injustice; in divorce, the remedy may be tailored to prevent artificial reduction of the community estate.
- A corporate fiduciary’s diversion of corporate opportunities or use of corporate funds for personal benefit can support corporate claims for monetary relief and equitable remedies such as constructive trust, subject to limits preventing duplicative recovery and inconsistent treatment of marital and corporate interests.

## Conclusion

The court sustained an unequal divorce property division and approved limited veil piercing to account for a spouse’s misuse of closely held entities, but required further proceedings on whether and how the corporations should receive remedies after a fiduciary breach finding.


Lifshutz v. Lifshutz, 61 S.W.3d 511 (Tex. App.—San Antonio 2001)