## Facts

- Kenneth Russell Nelson (husband) and Bessie Mae Nelson (wife) married on April 9, 1995.
- Before the marriage, Kenneth purchased a five-acre tract from his parents and still owed money on the purchase price; the debt was not secured by a lien on the land.
- Before the marriage, Bessie owned a house in Stephenville, Texas, sold it for about $17,500, and deposited the proceeds into Kenneth’s checking account.
- Kenneth and Bessie used $16,616.51 from the house-sale proceeds to pay construction costs for a residence built on Kenneth’s five-acre tract; the residence was largely complete by the time they married.
- After the marriage, the parties used about $5,600 in community funds to finish the house.
- After the marriage, the parties paid Kenneth’s parents $2,000 in “full satisfaction” of the remaining balance on the five-acre tract purchase, despite the absence of any lien securing that obligation.
- During the marriage, the parties also acquired an adjacent 12.03-acre tract from Kenneth’s parents; the trial court treated that tract as community property.
- In the divorce decree, the trial court (among other rulings) confirmed the five-acre tract and improvements as Kenneth’s separate property, found claims for economic contribution and reimbursement tied to the five-acre tract, ordered Kenneth to execute a promissory note payable to Bessie secured by a lien on the five-acre tract, and conditionally appointed a receiver to sell the 12.03-acre tract if the parties could not agree on disposition.

## Issues

1. May a divorce court award an equitable reimbursement claim based on a spouse’s pre-marital expenditures of separate-property funds used to improve the other spouse’s separate real property?
2. Did the evidence support treating the $16,616.51 spent on construction as Bessie’s separate property, even though the proceeds were deposited into Kenneth’s bank account?
3. Did payment of Kenneth’s remaining purchase-price balance to his parents support a statutory economic contribution claim when the obligation was not secured by a lien on the five-acre tract?
4. Did the trial court err in calculating reimbursement and economic contribution by failing to tie reimbursement to the property’s increase in value and by using incorrect statutory valuation dates for economic contribution?
5. Did the trial court err by conditionally appointing a receiver to sell the 12.03-acre community tract without first determining whether the tract was subject to partition in kind?
6. Could the trial court secure the amounts awarded to Bessie by imposing a lien on Kenneth’s separate real property?

## Decision

- Affirmed the characterization of the five-acre tract and its improvements as Kenneth’s separate property.
- Affirmed the finding that the $16,616.51 used for construction was Bessie’s separate property based on tracing from the sale of her premarital home.
- Held that a reimbursement claim is an equitable remedy and is not barred merely because the contributing expenditures occurred before the marriage; the trial court had discretion to recognize a reimbursement claim for Bessie’s premarital expenditures.
- Reversed the economic contribution award to the extent it was based on paying Kenneth’s debt to his parents, because the economic contribution statute applies to reduction of principal on a debt secured by a lien on the benefited property, and the parents’ debt was unsecured.
- Reversed and remanded the amounts awarded for reimbursement and economic contribution because the trial court’s calculations did not apply the correct measuring concepts (including tying reimbursement to the increase in value of the benefited property and using the statutory valuation framework for economic contribution).
- Reversed and remanded the conditional receivership order because the trial court did not first determine whether the 12.03-acre tract could be partitioned in kind.
- Affirmed the trial court’s authority to impose a lien on Kenneth’s separate five-acre tract to secure payment of amounts properly awarded in the divorce property division.

## Legal Principles

- Reimbursement between marital estates is an equitable claim; it may be recognized for expenditures that occurred before marriage if equity supports reimbursement in the divorce property division.
- Separate-property funds deposited into another spouse’s account may retain separate-property character if the contributing spouse can trace the funds to a separate-property source.
- Statutory economic contribution requires that the contributing estate’s funds be used to reduce principal on a debt secured by a lien on the benefited property (or otherwise fit within the statute); paying an unsecured obligation does not qualify.
- A reimbursement award for improvements is generally limited by the amount the improvements added to the value of the benefited property rather than the raw dollars spent.
- Economic contribution must be calculated using the valuation reference points required by the Texas Family Code; using incorrect valuation dates is reversible error.
- Appointment of a receiver to sell marital real property is an extraordinary remedy; a trial court must determine that a fair partition in kind is not feasible before ordering a sale through a receiver.
- In a divorce, a trial court may secure payment of reimbursement or contribution obligations by imposing a lien on separate real property as part of a just and right division.

## Conclusion

Nelson v. Nelson holds that a spouse’s premarital separate funds used to improve the other spouse’s separate property may support an equitable reimbursement claim in divorce, but reimbursement must be measured by the value added to the property rather than simply the amount spent; it also limits statutory economic contribution to lien-secured indebtedness and requires correct statutory valuation methods, and it requires a partition-in-kind determination before a receivership sale, while permitting liens on separate property to secure amounts awarded in the property division.


Nelson v. Nelson, 193 S.W.3d 624 (2006)