                                    In The
                               Court of Appeals
                      Seventh District of Texas at Amarillo

                                    No. 07-11-00220-CV


                      IN THE MATTER OF THE MARRIAGE
              OF MELISSA LEA GUNN EVERSE AND JOHANNES EVERSE

                       On Appeal from the County Court at Law No. 3
                                   Lubbock County, Texas
              Trial Court No. 2009-549,549, Honorable Judy C. Parker, Presiding

                                      June 18, 2013

                                        OPINION
                 Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.


       In this appeal from a divorce decree, Johannes Everse and Melissa (“Lea”)

Everse both challenge the trial court‟s characterization of assets held in accounts. We

will affirm in part and reverse in part and remand for the trial court to reconsider its

division of the marital estate.


                                        Background


       The parties were married in July 1993 and separated in October 2009. Lea filed

for divorce that month. They had no children together. Johannes has a doctorate in

chemistry and was employed as a professor at Texas Tech University throughout his
marriage to Lea. Lea was a homemaker during her marriage to Johannes. Ultimately,

the trial court found the total value of the community estate to be $1,013,196.20 and

awarded $555,812.56 to Lea and $457,383.70 to Johannes.


                                       Analysis


Applicable Law


      There is a statutory presumption that all property possessed by either spouse on

dissolution of the marriage is community property. See Tex. Fam. Code Ann. § 3.003(a)

(West 2011); Tarver v. Tarver, 394 S.W.2d 780, 783 (Tex. 1965). The degree of proof

necessary to overcome the presumption is clear and convincing evidence. Tex. Fam.

Code Ann. § 3.003(b) (West 2011). Clear and convincing evidence is that measure or

degree of proof which will produce in the mind of the trier of fact a firm belief or

conviction as to the truth of the allegations sought to be established. Tex. Fam. Code

Ann. § 101.007. The proof must weigh more heavily than merely the greater weight of

the credible evidence, but the evidence need not be unequivocal or undisputed. Boyd v.

Boyd, 131 S.W.3d 605, 611 (Tex.App.—Fort Worth 2004, no pet.).


      Tracing involves establishing the separate origin of property through evidence

showing the time and means by which the spouse originally obtained possession of the

property. Moroch v. Collins, 174 S.W.3d 849, 856-57 (Tex.App.—Dallas 2005, pet.

denied). To overcome the community property presumption, the party asserting

separate ownership must clearly trace the original separate property into the particular

assets on hand during the marriage. Cockerham v. Cockerham, 527 S.W.2d 162, 167

(Tex. 1975). The burden of tracing is a difficult, but not impossible, burden to sustain.

                                           2
Boyd, 131 S.W.3d at 612. As a general rule, mere testimony that funds came from a

separate source, without any tracing of the funds, will not constitute the clear and

convincing evidence necessary to rebut the community presumption. Id.; see In re

Marriage of Born, No. 06-08-00066-CV, 2009 Tex.App. LEXIS 2569, at *13-15

(Tex.App.—Texarkana April 16, 2009, no pet.) (mem. op.) (collecting cases); Osorno v.

Osorno, 76 S.W.3d 509, 512 (Tex.App.—Houston [14th Dist.] 2002, no pet.).


       A showing of community and separate funds existing in the same account does

not divest the separate funds of their identity and establish the entire amount as

community, if the separate funds may be traced and the trial court is able to determine

accurately the interest of each party. Holloway v. Holloway, 671 S.W.2d 51, 60 (Tex.

App.—Dallas 1983, writ dism'd). In such cases, we presume the community funds are

drawn out first, before separate funds are withdrawn, and where there are sufficient

funds at all times to cover the separate property balance in the account at the time of

the divorce, we presume the balance remains separate property. Smith v. Smith, 22

S.W.3d 140, 146 (Tex.App.—Houston [14th Dist.] 2000, no pet.).


Husband‟s Appeal


Funds in Prudential Discovery Select Annuity


       In Johannes‟ first issue, he contends the trial court mischaracterized as

community property part of the assets held in a Prudential Discovery Select Annuity

account. The record shows a balance of $53,257.80 in the account at the time divorce

proceedings were initiated. In its findings of fact, the trial court found $13,551.21 of the




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amount to be Johannes‟ separate property, but treated the remaining $39,706.59 as

community property. It is this characterization Johannes challenges.


       There is no dispute that Johannes traced the $13,551.21 to an Aetna account

which contained that amount at the time of the marriage. He contends he traced the

remaining $39,706.59 to accrued retirement benefits he received in 1994 from the

University of California, where he worked from 1969 to 1976.


       When tracing separate property, it is not enough to show that separate funds

could have been the source of a subsequent deposit. Boyd, 131 S.W.3d at 612. Lea

points to gaps in Johannes‟ tracing evidence, including a gap of over ten years between

a November 1999 statement in evidence and a statement for September 2010. We

conclude the trial court did not err by finding Johannes‟ tracing evidence as to the

$39,706.59 to be less than the clear and convincing evidence required. Johannes‟ first

issue is overruled.


American State Bank Account #6061


       In his second issue, Johannes similarly contends the trial court mischaracterized

funds in American State Bank account #6061 as community property because he

established their separate property character. At issue here again is the evidence

Johannes set forth at trial to show the savings balance of $23,773.84 in account #6061

was his separate property.


       Johannes testified he placed his Social Security payments for 2010 in that

account. The record also indicates a document pertaining to the balances of the

accounts at American State Bank was present in the courtroom, and was discussed by

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the parties. The document was not offered into evidence, however, and we cannot

conclude the trial court erred by finding Johannes‟ testimony insufficient to establish the

separate character of the funds, particularly given his testimony that he transferred

funds from account to account.      Boyd, 131 S.W.3d at 612; see In re Marriage of

Robbins, No. 06-10-00019-CV, 2010 Tex.App. LEXIS 6579, at *8-9 (Tex.App.—

Texarkana, Aug. 12, 2010, no pet.) (mem. op.).1 We overrule Johannes‟ second issue.


Just and Right Division


        Johannes presents a third issue challenging the trial court‟s division of the

community property. Because our disposition of Lea‟s appeal will require remand of the

case for a new division, we need not address Johannes‟ third issue. Tex. R. App. P.

47.1.


Wife‟s Appeal


Treatment of Social Security Benefits


        By her first issue, Lea contends the trial court erred by characterizing amounts

held in certain investment accounts as Johannes‟ separate property. The court found




        1
        We note also that the trial court awarded the disputed funds to Johannes. We
do not address his contention regarding the impact of the asserted characterization
error. He states only it appears from the trial court‟s findings of fact it would have
awarded him a larger share of community property and the “sum is not insignificant.”


                                            5
Johannes successfully traced the amounts to Social Security benefits2 he had

received.3


       Defending the trial court‟s characterization, Johannes cites Richard v. Richard,

659 S.W.2d 746, 748-79 (Tex.App.—Tyler 1983, no writ), in which the court found

section 407(a) of the Social Security Act4 precluded division under community property

laws of Social Security disability benefits.5 Lea responds that Richard dealt with an

award to the wife of half of the husband‟s future monthly disability payments. Richard,

659 S.W.2d at 747. Here, she points out, the benefits have been received by Johannes

and are held in investment accounts. She argues treatment of the received benefits as

community property subject to a just and right division does not interfere with the federal

statutory system,6 and thus should not be precluded. Cf. Hisquierdo v. Hisquierdo, 439

U.S. 572, 588, 99 S. Ct. 802, 59 L. Ed. 2d 1 (1979) (addressing similar anti-attachment


       2
           See 42 U.S.C. § 402.
       3
       See generally Marvel, Annotation, Pension or Retirement Benefits as Subject to
Award or Division by Court in Settlement of Property Rights Between Spouses, 94
ALR3d 176 (1979).
       4
           42 U.S.C. § 407(a) provides:

       (a) In general. The right of any person to any future payment under this title [42
           USC §§ 401 et seq.] shall not be transferable or assignable, at law or in
           equity, and none of the moneys paid or payable or rights existing under this
           title [42 USC §§ 401 et seq.] shall be subject to execution, levy, attachment,
           garnishment, or other legal process, or to the operation of any bankruptcy or
           insolvency law.
       5
        See Granger v. Granger, 236 S.W.3d 852, 857 (Tex.App.—Tyler 2007, pet.
denied) (applying Richard to Supplemental Security Income benefits).
       6
         See generally Flemming v. Nestor, 363 U.S. 603, 80 S.Ct. 1367, 4 L.Ed.2d
1435 (1960); Helvering v. Davis, 301 U.S. 619, 57 S.Ct. 904, 81 L.Ed. 1307 (1937)
(describing purpose and structure of Social Security Act).

                                            6
provision of Railroad Retirement Act, stating such provisions “ensure[] that the benefits

actually reach the beneficiary”). But in Philpott v. Essex County Welfare Bd., 409 U.S.

413, 93 S.Ct. 590, 34 L.Ed.2d 608 (1972), the United States Supreme Court applied

section 407(a) to Social Security disability benefits that had been received and

deposited. Noting the benefits received were “moneys paid” within the language of

section 407(a), it found them protected. Id. at 415-16. Federal and state courts have

applied Philpott’s holding. See, e.g., Hoult v. Hoult, 373 F.3d 47, 56 (3d Cir. 2004)

(“There is no question that § 407(a) . . . applies to benefits after they have been

distributed to beneficiaries,” citing Philpott); Jones v. Goodson, 772 S.W.2d 609, 611

(Ark. 1989) (citing Philpott, noting the section 407(a) exemption “applies even after the

benefits are in the debtor‟s hands”); Fitzpatrick v. Leasecomm Corp., No. 12-07-00487-

CV, 2008 Tex.App. Lexis 6872, *5-*6 (Tex.App.—Tyler September 17, 2008, pet. ref‟d)

(mem. op.) (citing Philpott for proposition “benefits received retained the quality of

„moneys‟ and their exempt status even after they had been deposited in an account

where they were readily withdrawable for the recipient‟s benefit”). See also Wissner v.

Wissner, 338 U.S. 655, 70 S.Ct. 398, 94 L.Ed. 424 (1950) (finding similar anti-

attachment provision in National Service Life Insurance Act precluded wife‟s community

property claim against life insurance policy proceeds paid to military member‟s parents

pursuant to his beneficiary designation).


      We do not find a Texas case in which section 407(a) has been applied to

preclude a just and right division of Social Security benefits already received, but courts

in other states have applied section 407(a) to their laws regarding division of marital

property. The facts in Bowlden v. Bowlden, 794 P.2d 1145 (Idaho Ct. App. 1989),


                                            7
remanded, 794 P.2d 1140 (1990), are similar to ours.         There, the husband began

receiving monthly Social Security benefits during the marriage. The marital community

had sufficient other income to support the couple so the benefits the husband received

from Social Security were deposited in checking and savings accounts. At the time the

parties were divorced, the husband claimed the money he received from Social Security

was his separate property, while the wife maintained it was community in nature. Id. at

1145. Citing cases including Hisquierdo, 439 U.S. at 577, the Idaho court concluded

Congress positively required by direct enactment that state law be preempted with

respect to the treatment of Social Security benefits. As a result, the court agreed with

the husband‟s characterization of the money he received as Social Security benefits.

Id. at 1147.


       The court in Thibodeaux v. Thibodeaux, 712 So.2d 1024 (La.App. 1 Cir. May 15,

1998), reached a similar conclusion. There, the husband was awarded Social Security

disability benefits following a work injury during the marriage. The trial court

characterized those benefits as the husband‟s separate property on its dissolution. On

appeal, citing Hisquierdo, 439 U.S. 572, and Philpott, 409 U.S. at 417, the court noted

the “Congressional intent to preclude claims based on marital and family obligations as

well as those of ordinary creditors.” Id. at 1027. The court determined that the treatment

of Social Security disability benefits paid during the marriage as community property

would do "major damage" to "clear and substantial" federal interests and accordingly,

found the Supremacy Clause of the United States Constitution preempted classification

of the husband‟s Social Security disability benefits as community property. Id. at 1028.

See also Dinges v. Dinges, 743 N.W.2d 662, 670-71 (Neb. Ct. App. 2008) (similarly


                                            8
finding section 407(a) precluded trial court‟s treatment of lump sum Social Security

disability award received by the wife as a marital asset subject to division; and

extending finding to amount of award traceable to modular home purchased after

couple‟s separation).


      In addition to the anti-attachment provision, both the Idaho and Louisiana courts

found support for their conclusions Congress intended to “replace state family law as it

applies to Social Security,” Thibodeaux, 712 So.2d at 1028, in the comprehensive

benefit scheme provided the federal law. Those courts noted that Old Age Survivors

and Disability Insurance (OASDI)7 benefits are payable to the spouse, dependent

children and even the divorced spouse of the retired or disabled employee, in addition

to the benefits payable to the employee. Thibodeaux, 712 So.2d at 1028.


      Section 407(a) notwithstanding, the Congress has permitted garnishment and

similar remedies for enforcement of child support and alimony obligations. 42 U.S.C. §

659(a). For that purpose it has defined “alimony,” however, to exclude payments or

transfers of property or its value in compliance with any community property settlement,

equitable division of property, or other division of property between spouses or former

spouses. 42 U.S.C. § 659(F)(i)(3)(B)(ii).


      We are persuaded by the reasoning of courts in other states and conclude the

trial court was correct to exempt Johannes‟ Social Security benefits, though previously

received and at the time of divorce held in accounts, from the just and right division of

the community property. Lea‟s first issue is overruled.


      7
          42 U.S.C. §§ 402 et seq.

                                            9
       Dutch Social Security


       Johannes is a native of the Netherlands and worked there from 1948 through

1960. In 1996, during his marriage to Lea, he began receiving what he described as

“Dutch Social Security” benefits.      The trial court treated funds traceable to those

benefits as his separate property, in the same manner as his United States Social

Security benefits. By her second issue, Lea contends the trial court erred by doing so.

We agree.


       Our conclusion Johannes‟ United States Social Security benefits were not

subject to division is the result of judicial application of our nation‟s “highly complex and

interrelated statutory structure” for Social Security.      Flemming, 363 U.S. at 610

(describing legislative judgments inherent in specific provisions of Social Security

statutes).   Our conclusion results directly from the specific provision precluding

assignment and attachment of benefits.        Whether the Dutch system that produced

benefits for Johannes beginning in 1996 contains provisions contrary to application of

our community property laws to the benefits received and now held in accounts owned

by these Texas residents, we do not know. Nor do we know whether such provisions, if

in place, would have been binding on the trial court. And the record before us sheds no

light on the questions. We know Johannes‟ entitlement to the benefits is related to his

employment in the Netherlands, that the benefits are received in Euros and that they

are paid initially to an account in the Netherlands.


       The funds in the accounts in question, like all assets in possession of the parties

on divorce, are presumptively community property. Tex. Fam. Code Ann. § 3.003 (West



                                             10
2012) (all property owned or possessed at the time of divorce is presumed to be

community property); see Zagorski v. Zagorski, 116 S.W.3d 309 (Tex.App—Houston

[14th Dist.] 2003, pet. denied) (applying tracing to funds held, at time of marriage, in

foreign bank account). It was Johannes‟ burden to overcome the presumption by clear

and convincing evidence. Id. at 314. We cannot agree that funds are shown to be

exempt from division simply by evidence they are attributable to “Dutch Social Security.”

Lea‟s second issue is sustained.


Tracing Issues


      In her third issue, Lea argues Johannes failed to meet his burden to provide clear

and convincing evidence of the separate property characterization of funds in particular

accounts. The trial court‟s characterization resulted in part from a tracing of funds to

Dutch Social Security benefits.    Because we have determined the presumption of

community property applicable to funds from the Dutch benefits was not overcome, we

agree with Lea that a characterization of funds as separate that is dependent on tracing

to Dutch benefits was erroneous. To that extent, Lea‟s third issue is sustained.


      Lea‟s argument in support of her third issue also includes a contention that the

trial court erred by taking into account, in its division of the community property, the

character as separate or community of certain funds that were withdrawn by Lea after

separation or were distributed pursuant to temporary orders during the pendency of the

divorce. Because some of the funds withdrawn or distributed were attributed to Dutch

Social Security benefits, and because we will remand the case for a new division of the




                                           11
community property, we need not now address Lea‟s complaint concerning the previous

division.


Just and Right Division


       In her fourth issue, Lea asserts the trial court‟s erroneous characterization of

funds as Johannes‟ separate property was harmful and requires remand for a just and

right division of the properly characterized community property. Because the funds

attributable to the Dutch Social Security were not divided as part of the community

estate, and because they have a value that would have affected the court‟s just and

right division, we agree remand is required. See Jacobs v. Jacobs, 687 S.W.2d 731,

732 (Tex. 1985); McElwee v. McElwee, 911 S.W.2d 182, 189 (Tex.App.—Houston [1st

Dist.] 1995, writ denied). Accordingly, we sustain Lea‟s fourth issue.


                                        Conclusion


       Based on the foregoing, we reverse that portion of the trial court‟s judgment

confirming as Johannes‟ separate property assets consisting of Dutch Social Security

benefits. We also reverse the portions of the trial court‟s judgment reflecting its division

of the community estate.     In all other respects, we affirm the divorce decree. We

remand the case to the trial court for further proceedings consistent with this opinion.




                                                 James T. Campbell
                                                     Justice




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