SEPARATE PROPERTY TRACING

What Is The Pro-Rata Approach to Property Tracing?

Although this method is only mentioned in a handful of Texas cases, an understanding of the methods of tracing would not be complete without addressing the pro-rata approach. For example, if separate funds of each spouse are mixed in an account containing no community funds, it would seem logical that acquisitions from the account would be owned pro-rata by each party in generally equal proportion to the entire account balance; therefore, there would be no “presumption” relating to the community and the pro-rata treatment of the asset would be only the means of determining the relative ownership of the parties.

Duncan v. U.S., 247 F.2d 845 (5th Cir. 1957).

In Duncan, the federal appeals court discussed a pro rata form of tracing. Over a brief marriage, the parties acquired only $16,000 of total community income. Despite such a low amount of income, substantial deposits were made to their accounts over the period of the marriage. As of the date of the purchase of stocks for $7,241, the account balance was $17,8113, of which $5,000 was community. Instead of applying the community out first theory (5,000/17,813) to total purchase of $7,241, the court stated that “All community funds might have been exhausted on the first purchase, or all might be ratably applied throughout the year. As this neither is nor can now be demonstrated, it does not overcome the presumption which the law affords to the community that to this full extent, all was proportionally community property”.

What Is The Item Tracing Approach To Property Tracing?

Item tracing is no misnomer. It is, in fact, identifying the character of a specific item as separate, then tracing its transformations from its original form to its present form. As in all instances, the tracing must show clearly and convincingly that the original asset was separate, must show how, when, and in some instances why it changed forms each time that it transformed until the shift is complete within the current asset. Cockerham v. Cockerham; supra Tarver v. Tarver, 394 S.W.2d 780 ( Tex. 1965); Love v. Robertson, 7 Tex 6 (1851).  To begin the tracing, the character of the original asset must be clearly established. This means an affirmative showing of how the asset was acquired in the first place in such a way as to make it a separate asset. Mortenson v. Trammell, 604 S.W.2d 269 (Tex. Civ. App. - Corpus Christi 1980, writ ref’d n.r.e.); Logan v. Barge, 568 S.W.2d 863 (Tex. Civ. App.-Beaumont 1978, writ ref’d n.r.e.); Bile v. Tupa, 549 S.W.2d 217 (Tex. Civ. App. - Corpus Christi 1977, writ ref’d n.r.e.). For instance, deeds to property acquired prior to marriage must be introduced, demonstrating that the inception of title was prior to marriage.

From the original characterization, the tracing begins and evidence must clearly establish the chain of character. It is not sufficient to show that the original asset, or some mutation of that original asset could have been the source of the ultimate asset in question. Latham v. Allison, supra; Barrington v. Barrington, supra; Sibley v. Sibley, supra; Farrow v. Farrow, 238 S.W.2d 255 (Tex. Civ. App. - Austin 1951, no writ); Coggin v. Coggin, supra; McKinley v. McKinley, supra.

This burden sounds stringent and, indeed it is. However, case law seems to suggest that stronger burdens are placed on creditors cases and estate disputes. In fact, referenced herein are Holloway v. Holloway and Coggin v. Coggin. The courts in those cases used a more liberal standard in allowing testimony by one party or the other regarding marital agreements, either expressed or implied. This is limited to a spouse of the marriage who would have that discreet knowledge and will generally not be extended to a third party. Furthermore, the fact finder is always able to disbelieve the spouse testifying to the agreement.

What Is The Value Tracing Approach To Property Tracing?

Value tracing is much the same as item tracing. However, in this case, instead of tracing the origin, transformation, and eventual nature of the asset, we are simply tracing cash assets in the same manner. In some ways, this form can be easier than asset tracing because the proponent of the tracing is aided by the theory that “(O)ne dollar has the same value as another; there can be no commingling of dollars where the number owned by each claimant is known.” In Re Marriage of Tandy, 532 S.W.2d 714 (Tex. Civ. App. - Amarillo 1976, no writ).  Keeping in mind the other principals discussed in this paper, even commingled funds can potentially be traced, depending, of course, on how and to what extent the funds were commingled and what documentation and evidence is available to overcome the community property presumption.

Dallas Divorce Lawyers Who Can Trace Separate Property



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