## Facts

- A husband and wife married in Mexico in 1958; years later the husband began a long-term relationship with another woman while still married.
- While still married, the husband participated in a ceremonial marriage with the other woman and had children with her; evidence indicated she knew he remained married.
- The husband earned substantial income through multiple businesses and exercised sole management and control over at least one community-property business; the lawful wife had no involvement in management.
- Using business accounts and other funds treated as community property, the husband made substantial transfers benefiting the other woman, including a house down payment, furnishings, years of mortgage payments, and vehicles.
- The house later went through foreclosure, generating a $26,400 surplus that was deposited into the court registry.
- In the divorce, the trial court awarded the lawful wife a $460,000 joint-and-several money judgment against the husband and the other woman as reimbursement for fraudulent depletion of the community estate, and also awarded the lawful wife two vehicles and the $26,400 surplus.
- The other woman appealed, challenging both the money judgment and the awards of the vehicles and foreclosure surplus.

## Issues

1. Whether the evidence supported a joint-and-several reimbursement judgment against a non-spouse third party for community funds diverted by a spouse in fraud of the other spouse’s community interest.
2. Whether a non-spouse who knowingly participates in or benefits from a spouse’s breach of fiduciary duty to the community estate may be held jointly and severally liable for the resulting fraud.
3. Whether awarding the lawful wife the vehicles and foreclosure surplus was proper where the third party claimed ownership.

## Decision

- The court held that a non-spouse third party who knowingly benefits from a spouse’s fraud on the community may be held jointly and severally liable for the community’s loss.
- The court concluded the evidence did not support the full $460,000 amount and reformed the money judgment to $355,000.
- The court affirmed the award to the lawful wife of the two vehicles and the $26,400 foreclosure surplus as property traceable to fraudulent transfers from the community estate.
- The judgment was affirmed as reformed.

## Legal Principles

- Spouses owe each other a fiduciary duty in the management of community property; breach of that duty constitutes fraud on the community.
- Substantial gifts of community property to a paramour may support a reimbursement claim by the innocent spouse.
- When community assets are wrongfully diverted to a third party, the innocent spouse may seek recovery from the recipient if the recipient knowingly participated in or benefited from the fraud.
- Joint-and-several liability may be imposed on a knowing third-party recipient so the innocent spouse may collect from either the wrongdoer spouse or the third party.
- Reimbursement and property awards must be supported by evidence establishing the amount and tracing assets to the fraudulent depletion of the community estate.

## Conclusion

The appellate court recognized third-party joint-and-several liability for a knowing recipient of community assets obtained through a spouse’s fraud on the community, reduced the reimbursement judgment to $355,000 for lack of evidentiary support for the larger amount, and otherwise affirmed the divorce decree’s awards returning traceable assets to the lawful wife.


Osuna v. Quintana, 993 S.W.2d 201 (Tex. App.—Corpus Christi 1999)