Opinion, April 12, 2016: Mi Casa, Sue Casa: Reimbursement Claims & Capital Improvements

The Fourteenth Court of Appeals issued its published opinion in In re McCoy, No. 14-14-00870-CV today, a case concerning the evidence necessary to prove up a capital improvements reimbursement claim.

Husband and Wife were married in 1976. In 1990, Husband inherited real property where he and Wife lived until they separated in 2013. During the bench trial, Wife testified as to various home improvements made to the house during the marriage. Additionally, in 2004, there was a kitchen fire which resulted in the kitchen being completely redone. Wife testified that the total cost of all improvements was almost $100,000.00 and that all improvements were paid with community funds. Wife’s expert testified that the value of the house in 1990–when Husband inherited it–was $113,000.00 and that the value of the property at the time of trial in 2014 was $275,000.00. Wife testified that the “enhanced value” of the property was $162,000.00 (275,000-113,000=162,000) and that the improvements were what increased the value to its then-present value.

The trial court found in favor of Wife on her reimbursement claim in the amount of $162,000.00. The trial court split that amount between the parties, $81,000.00, and granted Wife an equitable lien on Husband’s real party in the amount of $81,000.00. Husband appealed, challenging the determination on Wife’s reimbursement claim.

The Court of Appeals found that there was sufficient evidence for the trial court to conclude that improvements to the property enhanced its value but found the evidence for the amount of the enhanced value wanting.

Enhanced value, the Court of Appeals continued, is the difference between the fair market value before and after improvements made during the marriage. The party seeking reimbursement must establish the enhanced value was due to the renovations. It is not enough for the party seeking reimbursement to show the value of the property has increased over time or the cost and expense to undertake the improvements.

In this case, the only evidence on this issue was the value of the house in 1990, before improvements, and in 2014, after improvements. There was no evidence on the causal relationship between the improvements and the enhanced value. The Court of Appeals remanded for a new trial on the reimbursement claim.






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