A June 2025 case from the Dallas Court of Appeals shows how hard it is to prove “enhancement of value” in pursuing a reimbursement claim for funds expended on the property of another estate. This case also reminds us that tracing is required when trying to prove a reimbursement claim owed by the community estate to a spouse’s separate estate.
In re T.E.R., 05-24-00014-CV (Tex. App. – Dallas 6/26/2025)(mem. op.) involved a wife alleging reimbursement claims for her separate estate for the alleged use of her inherited funds to purchase and improve two different houses purchased during the marriage. The court of appeals reversed the the trial court‘s reimbursement awards to Wife in the amounts of $475,000; $46,780.68; $73,035; and $46,642.75 because the wife failed to trace and prove her separate property funds had been used.
The court of appeals also held that the wife failed to prove how much her alleged use of separate funds enhanced the values of the properties. The wife offered evidence of the value of the houses at the time of purchase and at the time of trial, but that was held to NOT be proof of how much the specific expenditures enhanced the value of the homes. The court stated:
Wife’s argument that the trial court could have considered the sale price of the Collinsville property minus the initial cost of the land to determine the increase in value is misplaced. The sale price might be evidence of the fair market value of the property with improvements at the time of the divorce proceeding but it is no evidence of what the fair market value of the land would be at that time without improvements. See, e.g., Vazquez v. Bailey, No. 03-22-00290-CV, 2024 WL 1774857, at *4 (Tex. App.-Austin Apr. 25, 2024, no pet.) (mem. op.) ( trial court considered original value of property and appraisals of property at the time of dissolution, “[b]ut those appraisals addressed the fair market value of the improved [residence], rather than analyzing the hypothetical fair market value of the [residence] if the renovations had not taken place”). Wife simply failed to produce any evidence of the enhanced value of the property with improvements.
The court addressed the wife’s failure to prove enhancement of value in the other property as well:
Evidence of the cost of improvements alone, which is the $73,035 Wife is seeking, is insufficient to prove enhanced value. See In re Marriage of McCoy, Jr., and Els, 488 S.W.3d 430, 435 (Tex. App.-Houston [14th Dist.] 2016, no pet.). Furthermore, Wife’s argument on appeal that the value increased by at least $104,000 if calculated by subtracting the purchase price and pool cost from the sales price is again misplaced. See, e.g., id. at 435-38 ( “it is not sufficient for the party seeking reimbursement to prove that the value of property has simply increased over time; the party seeking reimbursement must prove that the enhanced value of the property ‘was actually due to the renovations’ or other improvements” and concluding Wife’s evidence of the value of the property before the improvements and then its value with the improvements at the time of trial is insufficient to sustain a finding as to the amount of the enhancement value). It is the difference between the fair market value of the property with improvements at the time of dissolution compared with what the fair market value of the property at the time of dissolution would be if the improvements had not been made that establishes the enhancement value of an improvement. Id. at 435. Wife failed to present any evidence of what the Springbell’s fair market value would have been without the pool addition.
It would seem that expert testimony would be needed to prove how much an expenditure increased the value of a property. For example, an appraiser or realtor might testify,”the money spent for that swimming pool probably increased the house’s value by $30,000.” Real estate brokers are forbidden in Texas from giving opinions on value. 25 Tex. Admin. Code Sec. 535.17. A licensed appraiser was willing to testify, such speculation would be subject to challenge under Daubert/Robinson as being unreliable. The case of In re Edwards, No. 06-12-00016-Cv (Tex. App. – Texarkana 10/2/2012)(mem. op.) is an example of a real estate appraiser testifying that 120 acres of separate property was worth $325,000 before enhancements and $502,960 after a house was added and other improvements were made.
Texas allows the owner of a property to testify as to the property’s value. Mata v. Mata, 710 S.W.2d 745, 758 (Tex. App.— Corpus Christi 1986, no writ). The testimony of a spouse as to the pre- and post-improvement value of property was deemed sufficient to sustain a finding as to the amount of the enhancement value. Smith v. Smith, 715 S.W.2d 154, 157 (Tex. App.—Texarkana 1986, no writ).
This In re T.E.R. opinion provides a lot specifics about the evidence, the financial transactions involved, and how wife tried to prove her claims. A lawyer planning to prove a reimbursement claim should study the details of this case to see how not to try to prove such a claim. The legal holdings in this case which should apply in almost all reimbursement cases include:
- As the spouse seeking reimbursement, Wife had the burden to prove that (1) she used her separate marital estate to confer a benefit on the community marital estate; (2) the value of the benefit conferred; and (3) unjust enrichment would occur if the community estate was not required to reimburse her separate property.
- When separate property is used to pay a community debt, liability or expense, the value of the benefit conferred is measured by the amount of the debt, liability, or expense paid by the conferring estate. Id. § 3.402(d)(1).
- If the separate property is used to make improvements on the community property estate, “then the value of the benefit conferred is measured by the enhancement in the value of the benefited estate’s real property that resulted from the improvements.”
- The party pleading a claim for reimbursement [for his/her separate estate] has the burden of proving by clear and convincing evidence that the expenditures or improvements were made by the party‘s separate property and that they are reimbursable.
- Wife failed to adequately trace: This snapshot of the money in and out of the parties‘ various bank accounts between November 2020 and March 2021, illustrates the precision needed to trace Wife’s separate property through the accounts. Wife’s attempt to trace her separate property through the accounts at trial and prove that it was her separate property that funded the Collinsville property improvements falls well short of clear and convincing evidence. Money was being transferred into the different accounts from various sources, thus commingling community and separate property, and was used not only on the Collinsville improvements but on a wide variety of general household expenditures and other expenses. One of the expense items listed in the family code for which the trial court may not award a claim for reimbursement is “the living expenses of a spouse or child of a spouse.” Tex. Fam. Code § 3.409(2). Without more precise testimony, either from herself or an expert, tracing the deposits and withdrawals through the accounts, specifically following a community-out-first presumption, and without resegregating Wife’s separate property funds, Wife’s evidence is insufficient to support her claim for reimbursement.
(quotes are italics, emphasis added, citations mostly omitted).
Click here to read this entire case.