In Banister v. Banister, the trial court found that a wife breached her fiduciary duty to the husband, committed fraud on the community estate, and wasted community assets. No. 03-21-00517-CV, 2023 Tex. App. LEXIS 4063 (Tex. App.—Austin June 13, 2023, no pet. history). The evidence established the wife paid attorney’s fees for her paramour from community assets, did not charge the paramour rent for a rental property belonging to the parties, and forced payment of a finder’s fee to her paramour at the closing of the marital residence. In its division, the district court valued the community estate at $3,993,630, awarded the husband $1,972,629 in net assets, or 50.15% of the estate, an awarded the wife $1,961,001 in net assets, or 49.85% of the estate. The wife appealed.
The court of appeals discussed the legal requirements for fraud and breach of fiduciary duties in the context of a divorce proceeding:
A fiduciary duty exists between a husband and a wife as to the community property controlled by each spouse. “In the divorce context, a claim for a breach of fiduciary duty is the same as a claim for fraud on the community,” which is “a judicially created concept based on the theory of constructive fraud.” No dishonesty of purpose or intent to deceive must be established to prove constructive fraud. “A presumption of constructive fraud arises where one spouse breaches the fiduciary duty owed to the other spouse and disposes of the other spouse’s one-half interest in community property without the other’s knowledge or consent.”
A related concept is waste of community assets, which occurs when one spouse, dishonestly or purposefully with the intent to deceive, deprives the community estate of assets to the detriment of the other spouse. “Evidence of a spouse using excessive funds without the other spouse’s consent supports a waste finding.” “Expenditures for the benefit of a paramour also establish waste,” as do disbursements of community funds to relatives and friends. “Further, while waste claims are often premised on specific transfers or gifts of community property to a third party, a waste judgment can also be sustained by evidence of community funds unaccounted for by the spouse in control of those funds.”
Id. (internal citations omitted). The court of appeals affirmed the trial court’s order as the evidence supported a finding of waste:
Assuming without deciding that there is insufficient evidence to support findings of breach of fiduciary duty/constructive fraud regarding those claims, we conclude that there is sufficient evidence to support findings that Janet wasted community assets. The evidence shows that Janet entered into two contracts with Mikulencak, one to repair the marital residence for $72,463.77, and the other for a “finder’s fee” that amounted to $25,230.00. It is undisputed that Greg did not sign either of these contracts and was not made aware of them until days before closing, when the title company informed him of liens on the property filed by Mikulencak. Additionally, Greg testified that Janet told him that Mikulencak would be doing repairs on the property free of charge, in exchange for him living rent-free in one of their rental properties. This representation turned out to be false. Regarding the finder’s fee, Short testified that he did not meet Mikulencak until after he had already found the house on Zillow and that his decision to purchase the residence was not based on anything that Mikulencak said or did. Greg did not believe that Mikulencak should receive any finder’s fee, but Janet offered to lower the fee from six percent to three percent “just to try to entice [Greg] to go through with the sale of the house.” Although Greg ultimately agreed to pay Mikulencak, he agreed to do so only because there were liens on the property at closing and the buyer was threatening to sue Greg if he did not follow through on the sale. As Greg explained, “The whole situation to me seemed like it was designed to force me to agree to the sale of the house with Kevin Mikulencak getting nearly $100,000 from the proceeds of the house.” A factfinder also could infer that Greg allowed Mikulencak to live in the rental house without requiring Mikulencak to pay rent or utilities because Janet caused Greg to believe that “in lieu of any rent that he would be paying” for living there, Mikulencak would be making repairs to the marital residence. Although Mikulencak made repairs to the house, they were not free, contrary to Janet’s claim. We conclude that this evidence is sufficient to prove that Janet, dishonestly or purposefully with the intent to deceive Greg, deprived the community estate of assets to Greg’s detriment.