Opinions, April 9, 2015

On April 9, 2015, the First Court of Appeals released an unpublished opinion in Thottam v. Joseph, No. 01-13-00377-CV (Tex.App.–Houston [1st Dist.] Apr. 9, 2015). In the divorce Jameson and Elizabeth agreed to submit child custody issues to a mediator which resulted in an MSA. They then submitted property issues to an arbitrator. Jameson filed a motion to vacate the arbitration award and an objection to the entry of the divorce decree. He subsequently filed a motion for new trial and a motion to modify, correct and/or reform the custody portion of the judgment. The trial court denied Jameson’s motion for new trial but granted his motion correct, modify, and/or reform the judgment, ordering the parties to arbitration over custody-related provisions in the decree. The trial court finally signed an amended final divorce decree which incorporated the MSA and the arbitration award.

Jameson’s appeal can be divided into custody-related issues and property-related issues. In all of his custody-related arguments, Jameson alleged the final divorce decree differed substantially from the MSA: geographical restriction, period of possession, and arbitration. On each issue, the court of appeals disagreed and affirmed the trial court.

Things get more interesting with the property issues. On page 15 of the opinion, the court mentions for the first time that Jameson filed Chapter 7 bankruptcy on the second day of arbitration. The bankruptcy court signed a settlement order authorizing the trustee to enter into a settlement with some of Jameson’s bankruptcy estate creditors, including Elizabeth (Jameson appealed this settlement order to the U.S. District Court, but that was dismissed). That settlement became final in the bankruptcy court. Under this settlement, Elizabeth agreed to transfer one of the properties she received in the arbitration to the bankruptcy estate (which would then liquidate it).

Elizabeth argued that by voluntarily filing bankruptcy which resulted in the relinquishment, sale and liquidation of marital property asserts allocated to him in the trial court’s property division which went to pay off his creditors, Jameson accepted the benefit of the judgment which precluded his pursuit of issues regarding the division on appeal. In response, Jameson argued two narrow exceptions to the “acceptance of benefits” doctrine, including: 1) he accepted the benefits out of economic necessity; and 2) a reversal of the judgment will not affect his rights to the benefits he received.

As for economic necessity, Jameson argued that although he accepted benefits from the division of the marital estate, he provided ample evidence to demonstrate financial hardship. But, disastrously for his argument, he failed to point out where in the 5,000+ page record the evidence was.

As for the effect of reversal of the judgment, Jameson argued a reversal of the judgment cound not have possibly affected his right to the benefits accepted because he would have filed for bankruptcy regardless of the pending divorce proceedings. The Court of Appeals called this argument misplaced because if the judgment was reversed, Jameson could not be assured that the properties already sold to pay off his creditors would be awarded to him in any re-division of the marital estate. This was enough uncertainty to defeat Jameson’s argument.

As such, Elizabeth’s motion to dismiss the property-related portion of the appeal was granted.

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