In the context of divorce litigation, fraud on the community estate falls within the wide spectrum of various acts frequently termed as “marital fraud.” Prior to the passage of Section 7.009 of the Texas Family Code, the Texas Supreme Court’s opinion in Schlueter was considered to be the authority on remedies available to an innocent spouse in a divorce involving fraud on the community estate. See Schlueter v. Schlueter, (Tex. 1998). In Schlueter, the Texas Supreme Court reasoned that because the fraud was committed against the community estate, the innocent spouse’s remedy was to be awarded a disproportionate share of the estate. The inevitable problem was that the fraud may have depleted the community estate to such a level that full compensation to the wronged spouse would be impossible. The Schlueter Court also ruled that a just and right division may include a money judgment on the fraud claim (not exceeding the value of the community estate). The two options made available by Schlueter, disproportionate division and money judgment, were often interpreted as being mutually exclusive. In other words, the innocent spouse could either seek a disproportionate division of the community estate (which might not make the innocent spouse whole because insufficient assets remain to be divided) or the innocent spouse may seek a money judgment (which might be essentially worthless if there are no assets subject to collection).

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Tags: community estate, Texas Supreme Court