                                  NO. 12-09-00274-CV

                       IN THE COURT OF APPEALS

               TWELFTH COURT OF APPEALS DISTRICT

                                     TYLER, TEXAS

JAMES TRUMAN HENSLEE,                         §              APPEAL FROM THE
APPELLANT

V.                                            §              COUNTY COURT AT LAW

MARY GLENDA HENSLEE,
APPELLEE                                      §              ANDERSON COUNTY, TEXAS

                                  MEMORANDUM OPINION
       This is an appeal from a decree of divorce. In two issues, James Truman Henslee
complains the trial court erred in characterizing his separate property as community property so
that its property division divested him of his separate estate. We affirm.


                                          BACKGROUND
       Mary and James Henslee married on August 29, 1996. On September 24, 1996, James
was injured while performing his duties as a trainman for the Burlington Northern and Santa Fe
Railway Company. James filed suit against the railway company seeking damages for lost
wages, diminished earning capacity, past and future physical pain, physical impairment, and
mental anguish, and past and future medical services and care. James settled with the railroad
for $465,000.00 and executed a release of all claims.
       James placed the settlement proceeds in two joint tenancy accounts at A.G. Edwards.
Prior to the marriage, James had purchased three disability policies renewable monthly. James
also deposited the proceeds from the disability policies in the A.G. Edwards joint accounts. It
was James‟s decision to place the proceeds in a joint account in the names of James and Mary
Henslee. Mary occasionally wrote checks on the accounts to buy items for the house. James did
not withdraw any of the money except to pay court approved attorney‟s fees.
        Mary filed her petition for divorce on January 17, 2003. On September 23, 2004, the trial
court signed a Final Decree of Divorce Nunc Pro Tunc. The court granted James‟s motion for
new trial on November 18, 2004 “on the sole issue of the characterization of the FELA
settlement and, if a different characterization is found, its effect on the property division.”
        The court heard the case again on June 4, 2007. On August 26, 2009, the court signed a
final decree of divorce. The court awarded James “[o]ne-half of the community portion of the
A.G. Edwards‟ accounts . . . which includes proceeds from James Truman Henslee‟s lawsuit and
Trustmark policy proceeds . . . .” The court awarded the other one-half to Mary ($91,992.06).
The court also awarded Mary the house, but awarded James reimbursement of $62,082.00. The
court found that $20,015.61 in the A.G. Edwards accounts was James‟s separate property and
$5,265.00 was Mary‟s separate property.


                                CHARACTERIZATION OF PROPERTY
        In his first issue, James challenges the trial court‟s characterization of the proceeds of the
FELA settlement as community property. In his second issue, he challenges the trial court‟s
characterization of the disability insurance payments from Trustmark Insurance Company as
community property. The trial court‟s rulings, he argues, divest him of his separate property, an
error that requires reversal.
Standard of Review
        The standard of review for property division in family law cases is abuse of discretion.
Wilson v. Wilson, 132 S.W.3d 533, 536 (Tex. App.–Houston [1st Dist.] 2004, pet. denied). In
determining whether the trial court abused its discretion, the reviewing court must decide
whether the trial court acted without reference to any guiding rules or principles, so that its ruling
was so arbitrary or unreasonable as to be clearly wrong. Downer v. Aquamarine Operators,
Inc., 701 S.W.2d 238, 241-42 (Tex. 1985); Zeptner v. Zeptner, 111 S.W.3d 727, 734 (Tex.
App.–Fort Worth 2003, no pet.) (op. on reh‟g). When the standard of review is abuse of
discretion, legal and factual insufficiency are not independent grounds of error, but are relevant
factors in assessing whether the trial court abused its discretion. See Beaumont Bank v. Buller,
806 S.W.2d 223, 226 (Tex. 1991); Crawford v. Hope, 898 S.W.2d 937, 940 (Tex. App.–
Amarillo 1995, writ denied). Merely because a trial court may decide a matter within its
discretion in a different manner than an appellate court would in similar circumstances does not

                                                  2
demonstrate an abuse of discretion. Downer, 701 S.W.2d at 242. To determine whether there
has been an abuse of discretion because the evidence is legally or factually insufficient to support
the trial court‟s decision, the appellate court conducts a two part inquiry: (1) did the trial court
have sufficient evidence upon which to exercise its discretion, and (2) did the trial court err in the
application of that discretion? In re T.D.C., 91 S.W.3d 865, 872 (Tex. App.–Fort Worth 2002,
pet. denied) (op. on reh‟g).
       When the burden of proof at trial is by clear and convincing evidence, we apply a higher
standard of legal and factual review. In re J.F.C., 96 S.W.3d 256, 265-66 (Tex. 2002). Clear
and convincing evidence is defined as 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 (Vernon Supp. 2009); Transp. Ins. Co. v.
Moriel, 879 S.W.2d 10, 31 (Tex. 1994).                It is an intermediate standard between the
preponderance standard of civil proceedings and the beyond a reasonable doubt standard in
criminal trials. In re G.M., 596 S.W.2d 846, 847 (Tex. 1980).
Applicable Law
       Property possessed by either spouse during or on dissolution of the marriage is presumed
to be community property, absent clear and convincing evidence to the contrary. TEX. FAM.
CODE ANN. § 3.003 (Vernon Supp. 2009). The Texas Family Code defines separate property as
that property owned by a spouse before marriage, acquired during the marriage by gift, devise or
descent. Id. § 3.001(1), (2) (Vernon Supp. 2009). The Family Code also defines as separate
property “the recovery for personal injuries sustained by the spouse during marriage, except any
recovery for loss of earning capacity during marriage.” Id. § 3.001(3) (Vernon 2006); see, e.g.,
Perez v. Perez, 587 S.W.2d 671, 673 (Tex. 1979). Portions of a personal injury award belonging
to the community estate include damage for lost wages, medical expenses, and other expenses
associated with injury to the community estate. See, e.g., Graham v. Franco, 488 S.W.2d 390,
396 (Tex. 1972); Cottone v. Cottone, 122 S.W.3d 211, 213 (Tex. App.–Houston [1st Dist.] 2003,
no pet.). “When a spouse receives a settlement from a lawsuit during marriage, some of which
could be separate property and some of which could be community property, it is that spouse‟s
burden to demonstrate which portion of the settlement is [his] separate property.” Licata v.
Licata, 11 S.W.3d 269, 273 (Tex. App.–Houston [14th Dist.] 1999, pet. denied).



                                                  3
       The determination of whether property is separate because owned or acquired before
marriage is governed by the inception of title doctrine. Smith v. Smith, 22 S.W.3d 140, 145
(Tex. App.–Houston [14th Dist.] 2000, no pet.) (op. on reh‟g). Inception of title occurs when a
party first has a right of claim to the property by virtue of which title is finally vested. Id. In
order to overcome the community presumption, the burden is on the spouse claiming certain
property as separate to trace and clearly identify the property claimed to be separate. Estate of
Hanau v. Hanau, 730 S.W.2d 663, 667 (Tex. 1987). Separate property will retain its character
through a series of exchanges so long as the party asserting separate ownership can overcome the
presumption of community ownership by tracing the assets on hand during the marriage back to
property that, because of the time and manner of its acquisition, is separate in character.
Cockerham v. Cockerham, 527 S.W.2d 162, 168 (Tex. 1975).               However, if separate and
community property have been commingled so as to defy resegregation and identification, the
community presumption prevails. Hanau, 730 S.W.2d at 667.
       A trial court may not divest a spouse of his separate property. Eggemeyer v. Eggemeyer,
554 S.W.2d 137, 142 (Tex. 1977). It is unnecessary to show harm, because divestiture of
separate property requires reversal. See, e.g., Shestawy v. Shestawy, 150 S.W.3d 772, 780 (Tex.
App.–San Antonio 2004, pet. denied).
       Any doubt as to the character of property should be resolved in favor of the community
estate. Akin v. Akin, 649 S.W.2d 700, 703 (Tex. Ap.–Fort Worth 1983, writ ref‟d n.r.e.).
The FELA Settlement
       In his suit, James sought to recover damages for past and future lost wages, diminished
earning capacity, past and future physical pain, physical impairment, and mental anguish, and
past and future medical services and care. James settled all claims for $465,000.00. Damages
for lost wages and diminished earning capacity are community property. Recovery for medical
expenses incurred during marriage is community property. Id.; Graham, 488 S.W.2d at 396.
Damages for personal injury are separate property. Perez, 587 S.W.2d at 673.
       James contends the entire settlement was intended to compensate him for his personal
injury; hence it is all his separate property. James signed several documents in connection with
the settlement. James argues that a sentence in one of the documents supports his contention that
the entire settlement was compensation for personal injury, and none of the money was for lost
earnings or earning capacity. James relies on the following language in one of the settlement

                                                4
documents: “For Railroad Retirement Act purposes, I agree the entire amount of this payment is
apportioned to factors other than time lost; nevertheless, I understand this is a final payment and
complete release and includes any claim I may have for time lost.” At the same time he signed
the release, James signed an “Apportionment of Claim Settlement,” which recited that it was
“[f]or the purpose of the Railroad Retirement Act, Railroad Unemployment Insurance Act and
Railroad Retirement Tax Act. . . .” It also showed that the amount of the settlement was
apportioned to “other than taxable time lost.” The document stated, “This apportionment and
allocation is made solely for the purpose of determining creditable earnings and computing taxes
under said Acts to provide for the reimbursement of the Railroad Retirement Board for the
amount paid employee for sickness benefits.”
       James signed a third document entitled “Agreement Not to Mark Up/Resignation”
wherein he stated that he had agreed to


       accept the settlement of his claims for personal injuries, disabilities and illnesses arising out of
       such events and circumstances more fully described in said Settlement and Release Agreement,
       and for any and all employment claims for personal injuries, disabilities and illnesses arising out
       of such events and circumstances more fully described in said Settlement and Release Agreement,
       and for any and all employment claims arising from my employment from the BURLINGTON
       NORTHERN AND SANTA FE RAILWAY COMPANY.


This document also stated, “I hereby assert and agree that said sums so paid me are based upon
representations of such permanent disability that will forever prohibit and incapacitate me from
returning to any railroad employment. . . .” James promised not to seek future employment with
the railroads. He also confirmed that the agreement “includes a settlement and compromise of
any and all claims that could have been or could be brought under the Railroad Labor Act. . . .”
       We are not persuaded that the apportionment of the settlement to factors other than time
lost establishes that it was intended solely as compensation for personal injury and therefore
separate property. Read in their entirety, the documents show that “time lost” refers to the
special meaning the term has in the calculation of the employee‟s retirement annuity and
disability eligibility under the Railroad Retirement Act. The sentence James relies on clearly
states that the apportionment is for “Railroad Retirement purposes” and concludes,
“Nevertheless, I understand that this a final payment and complete release and includes any
claim I may have for lost time.” (Emphasis added). We conclude that, as the trial court found,


                                                        5
the allocation of the settlement “to other than „time lost‟ was meant only to avoid the
consequences of an award for „time lost‟ under the Railroad Retirement Act.”
       In accepting the settlement, James released a broad range of claims including community
claims for lost employment, earning capacity, and medical expenses. In a separate document, he
gave up any claim for future earning capacity “based upon representations of such permanent
disability that will forever prohibit and incapacitate me from returning to any railroad
employment. . . .” The trial court also found that the amount of the lump sum payment was
approximately the amount he would have earned as a railroad employee had he continued with
that employment from the date of the accident to the date he would be eligible to retire with
benefits.
       We believe that part of the settlement James received was in consideration of his release
of community claims such as lost wages, diminished earning capacity, and medical expenses.
Since the settlement included compensation for both community and separate claims, it was
James‟s burden to establish, by clear and convincing evidence, what portion of the proceeds were
separate property. See Cottone, 122 S.W.3d at 213. James failed to sustain his burden of
demonstrating what part of the proceeds was community and what was separate. Instead, he
insisted that the entire sum was separate property. Without clear and convincing evidence
establishing what part of the settlement was separate property, the trial court correctly concluded
that all of the settlement must be presumed to be community property. Licata, 11 S.W.3d at 273.
Appellant‟s first issue is overruled.
Disability Policy Proceeds
       James argues that he first purchased the disability policies prior to the marriage. He
claims that under the inception of title doctrine, the character of the policies as separate property
was fixed at the time he first executed the insurance agreements. Therefore, he contends that the
total of $60,000 in monthly disability payments that he received during the marriage during the
period he was unable to work is his separate property.
       In its findings of fact made after the 2004 trial, the trial court found that “the Trustmark
policy vested after the marriage of the parties.” It further concluded that “the payments under
the policy are community property.”
       The court granted a new trial solely on the issue of the characterization of the FELA
settlement. At the hearing conducted on June 4, 2007, the parties agreed that court could take

                                                 6
judicial notice of the testimony and exhibits in the first trial. However, no record of those
proceedings has been brought forward on appeal. The limited testimony adduced at the second
(2007) hearing concerns evidence related only to the characterization of the FELA settlement.
The monthly disability payments from Trustmark are not mentioned. After the 2007 hearing, the
court made no findings of fact related to the Trustmark proceeds.
         James‟s pleadings show that he purchased three disability policies prior to his marriage to
Mary. But the policies state that they require renewal each month and that the period of
insurance is one month. The maximum benefit under the policies was twenty-four months. All
of the disability payments were paid during the marriage and were intended to replace earnings
lost while James and Mary were married.
         “If a person becomes disabled or injured, any disability payment or workers‟
compensation payment is community property to the extent it is intended to replace earnings lost
while the disabled or injured person is married.” TEX. FAM. CODE ANN. § 3.008(b) (Vernon
2006).     The twenty-four monthly benefit payments of $2,500.00 totaling $60,000.00 are
community property. Appellant‟s second issue is overruled.


                                                   DISPOSITION
         The judgment is affirmed.


                                                                         BILL BASS
                                                                             Justice



Opinion delivered July 30, 2010.
Panel consisted of Griffith, J., Hoyle, J., and Bass, Retired Justice, Twelfth Court of Appeals
sitting by assignment.
                                                    (PUBLISH)




                                                           7
