## Facts

- Arlene O. Marshall and J.W. “Woody” Marshall were previously married and divorced, then remarried on March 18, 1983; there were no children of the second marriage.
- Before the remarriage, Woody was a partner in Marshall Pipe and Supply Company (a partnership).
- The partnership agreement provided Woody would be paid a fixed salary ($700 per month) and that additional amounts paid to him were distributions of partnership profits.
- During the marriage, the partnership disbursed $542,315.72 to Woody; partnership records and tax returns treated $22,400 as salary and the remainder as profit distributions.
- After both spouses filed for divorce on June 25, 1984 (in consolidated proceedings), the trial court signed a divorce decree on December 31, 1985; only the property and related rulings were appealed.
- The trial court characterized all partnership disbursements to Woody as his separate property, even though Woody conceded on appeal that the salary portion was community property.
- Arlene sought reimbursement to the community estate for (1) $125,375.50 in community funds used to pay Woody’s 1982 income taxes (incurred before the remarriage), and (2) $63,325.58 in community funds Woody gave to his daughter (and related family gifts) during the marriage.
- The parties disputed whether the community estate was liable for unpaid debts of Leasing Telephone Concepts, Incorporated (LTC), including debts incurred after June 25, 1984, and whether a temporary order affected responsibility for those obligations.
- Household furnishings used during the marriage were divided in kind between the spouses, while the partnership asserted that some or all of those furnishings were partnership property and should not have been awarded as community assets.
- A Mercedes automobile in Arlene’s possession was taken by Woody; the trial court found Woody had given Arlene a “usufructuary right” in the vehicle, awarded Arlene $5,500 for its value, and ordered Woody to pay $12,500 of Arlene’s attorney’s fees.

## Issues

1. Whether partnership profit distributions paid to a spouse during marriage are presumed community property, and whether Woody proved they were separate property as a return of his separate capital.
2. Whether the community estate was entitled to reimbursement for community funds used to pay Woody’s premarital tax liability (1982 taxes).
3. Whether Arlene was entitled to reimbursement for gifts of community funds made by Woody to his daughter and family members based on constructive fraud.
4. Whether unpaid LTC debts incurred during the marriage (including after June 25, 1984) were community obligations, and whether a temporary order altered that characterization.
5. Whether the trial court erred in dividing household furnishings in kind where the partnership claimed ownership of those items.
6. Whether the trial court erred in its treatment and valuation of the Mercedes (including the “usufructuary right” finding) and whether it properly awarded Arlene $12,500 in attorney’s fees.

## Decision

- The court of appeals affirmed in part, reversed and rendered in part, and reversed and remanded in part.
- The court reversed the trial court’s characterization of the partnership’s profit distributions to Woody as his separate property; absent proof tracing the payments to a return of Woody’s separate capital, the distributions received during marriage were community property.
- The court reversed and rendered to grant reimbursement to the community estate for community funds used to pay Woody’s 1982 income taxes, treating that liability as Woody’s separate premarital debt.
- The court affirmed the denial of reimbursement for the challenged gifts to Woody’s daughter and family, concluding the trial court did not abuse its discretion in rejecting constructive-fraud reimbursement on this record.
- The court reversed the portion of the decree that treated LTC obligations incurred during the marriage as not community liabilities, holding those debts were community debts and that a temporary order did not convert them into Arlene’s separate obligations.
- The court reversed and remanded the household-furnishings division to resolve the partnership’s ownership claim and to adjust the property division consistent with any furnishings proven to be partnership property.
- The court reversed the portion of the judgment addressing the Mercedes to the extent it rested on the trial court’s “usufructuary right” theory and related valuation remedy.
- The court affirmed the award requiring Woody to pay $12,500 of Arlene’s attorney’s fees.

## Legal Principles

- Property possessed or acquired during marriage is presumed community property; the spouse claiming separate property must prove separateness by clear and convincing evidence, typically through tracing.
- Payments from a partnership to a spouse during marriage labeled as profits or distributions are presumptively community property unless the spouse proves the payments were a return of separate capital rather than income earned during marriage.
- A spouse’s premarital tax liability is a separate debt; when community funds are used to pay a spouse’s separate obligation, the community may have a reimbursement claim absent proof the payment was intended as a gift.
- Gifts of community property to third parties may support a reimbursement claim on a constructive-fraud theory, but the complaining spouse must show unfairness; appellate review gives deference to the trial court’s division if supported by the record.
- Debts incurred during marriage in connection with marital or business activity are generally community debts; responsibility assigned by temporary orders during a pending divorce does not change the underlying marital characterization of those obligations.
- A trial court must account for credible third-party ownership claims to property included in the marital division; if items are owned by a partnership, they are not subject to division as community assets.
- Attorney’s fees awards in divorce-related proceedings are reviewed for abuse of discretion and may be affirmed if supported by the evidence and within the trial court’s discretion.

## Conclusion

In this divorce property appeal, the court corrected the trial court’s treatment of major marital assets and liabilities by holding that partnership profit distributions received during marriage were community property absent proof they were a return of separate capital, ordering reimbursement for community payment of Woody’s premarital tax debt, reclassifying LTC obligations incurred during marriage as community debts, and sending back the furnishings dispute to address the partnership’s ownership claim, while leaving intact the denial of reimbursement for family gifts and affirming the attorney’s-fee award.


Marshall v. Marshall, 735 S.W.2d 587 (1987)