HBA-SEB C.S.H.B. 2142 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2142 By: Goodman Juvenile Justice and Family Issues 4/12/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Under current law, a spouse in a suit for the dissolution of a marriage must prove that an increase in value of separate property results from the spouse's time, toil, and effort in order for the increase in value to be considered community property and for the spouse to be reimbursed for that effort. C.S.H.B. 2142 creates the presumption that an increase in the value of separate property is community property and that the increase in value results from the time, toil, and effort of one or both spouses. In this way, in order for an increase in value of separate property to not be considered community property, a spouse must prove that the increase in the value is not due to the time, toil, and effort of the other spouse. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. POLICY STATEMENT. Sets forth legislative findings. SECTION 2. AMENDMENT. Amends Chapter 3, Family Code, by adding Subchapter E, as follows: SUBCHAPTER E. EQUITABLE INTEREST OF COMMUNITY ESTATE IN ENHANCED VALUE OF SEPARATE PROPERTY Sec. 3.401. ENHANCEMENT IN VALUE DUE TO COMMUNITY TIME, TOIL, AND EFFORT. Establishes that the enhancement in value during a marriage of separate property owned by a spouse due to the time, toil, and effort of one or both spouses during the marriage creates an equitable interest of the community estate in the separate property. Authorizes the existence of the equitable interest to be rebutted only to the extent that the spouse who owns the separate property proves that the enhancement in value is not sue to the time, toil, and effort of either spouse during the marriage. Sec. 3.402. ENHANCEMENT IN VALUE DUE TO FINANCIAL CONTRIBUTION OF COMMUNITY PROPERTY. Establishes that the enhancement in value during a marriage of separate property owned by a spouse due to financial contributions made with community property creates an equitable interest of the community estate in the separate property. Provides that the equitable interest created under this section is measured by the amount of the enhancement in value of the separate property. Sec. 3.403. USE OF COMMUNITY PROPERTY TO DISCHARGE DEBT ON SEPARATE PROPERTY. Provides that the use of community property to discharge all or part of a debt on separate property owned by a spouse creates an equitable interest of the community estate in the separate property. Sets forth the computation for the equitable interest created in this section. Establishes that for the purposes of this section, the cost of any improvements made to the separate property paid for by either the separate or community estate is included as part of the principal of the debt. Sec. 3.404. APPLICATION OF INCEPTION OF TITLE RULE. Establishes that this subchapter does not affect the rule of inception of title under which the character of property is determined at the time the right to the property is acquired. Provides that property owned or claimed by a person before or after the existence of a marriage or acquired during the marriage by gift, devise, or descent is separate property. Specifies that the respective ownership interests of two marital estates in a property are determined by the rule of inception of title if the community estate and the separate estate of either or both spouses have an ownership interest in the property. Establishes that the respective equitable interests in that property are measured by the contributions of each estate. Sec. 3.405. EQUITABLE LIEN. Authorizes a court to impose an equitable lien of community or separate property to protect a claim of an equitable interest by a separate or community estate. SECTION 3. AMENDMENT. Amends Section 7.002, Family Code, to require the court in a decree of divorce or annulment to order a division of separate property in which an equitable interest of the community estate is created as provided by Subchapter E, Chapter 3. Makes a conforming change. SECTION 4. EFFECTIVE DATE. Effective date: September 1, 1999. Provides that this Act applies to a suit for dissolution of marriage pending on that date or filed after that date. SECTION 5. EMERGENCY. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original by adding new SECTIONS 1 and 2 and redesignating SECTIONS 2-4 of the original to SECTIONS 3-5 of the substitute, as follows: The substitute modifies the original in SECTION 1 by setting forth legislative findings to adopt the rationale stated by the Texas Supreme Court in Anderson v. Gilliland and reject the rationale expresses in Jensen v. Jensen. SECTION 1 of the original would have amended Section 3.003, Family Code, to provide that the increase in value during a marriage of separate property owned by a spouse due to the time, toil, and effort of one or both of the spouses during the marriage or due to the financial contributions made with community property for the separate property is presumed to be community property. The original would have also set forth the process for rebuttal of that presumption and established the consideration of a discharge of a debt by the community property as the principal reduction of the debt. The substitute modifies the original in SECTION 2 to amend Chapter 3, Family Code, by adding Subchapter E, which establishes the equitable interest of community estate in enhanced value of separate property. The substitute modifies the original in SECTION 3 by amending Section 7.002, Family Code, to require the court in a decree of divorce or annulment to order a division of separate property in which an equitable interest of the community estate is created as provided by Subchapter E, Chapter 3. This differs from the original because the original referred to property that increased or appreciated in value during a marriage as provided by Section 3.003, the amendments to which were deleted by the substitute.