Fraud on the Community and the Importance of Accurate Accounting and Thorough Jury Charges

Case Watch: Horgan v. Horgan and the Pitfalls of Reconstituting the Estate in Hybrid Trial

Subject: Texas Family Law, Fraud on the Community, Jury Charges, Property Division

In complex divorce litigation involving fraud claims, parties often agree to split duties: the jury handles the existence and value of fraud, while the judge handles the just and right division. However, the recent Fourteenth Court of Appeals opinion in Horgan v. Horgan serves as a stark warning about the procedural guardrails required in these “hybrid” trials.

In Horgan, the appellate court reversed and remanded a property division, finding errors in how the trial court handled duplicate jury findings, unsubmitted fraud claims, and the characterization of registry funds.

Here are the critical takeaways for family law practitioners regarding the reconstitution of the marital estate and the preservation of error.

1. The “Use It or Lose It” Rule for Jury Charges

Perhaps the most critical practice point in Horgan concerns the scope of the reconstituted estate. In this case, the parties agreed to submit specific issues of fraud to the jury. However, regarding the final division, the trial court added three additional transactions (totaling over $242,000) to the reconstituted estate that were not submitted to the jury.

The trial court likely reasoned that these transfers were clear instances of waste. The Court of Appeals, however, held that this “invaded the purview of the jury”. Because the parties agreed the jury was the trier of fact on fraud, any transaction omitted from the jury charge was waived.

The Lesson: You cannot rely on the trial court to “clean up” fraud claims on the back end. If you are submitting fraud to a jury, every transaction you wish to include in the reconstituted estate must be part of that submission. The trial court lacks the discretion to unilaterally identify unsubmitted transactions as fraudulent after the fact.

2. Double-Dipping and Sufficiency of Evidence

The Horgan court sustained challenges to specific jury findings that were duplicative or unsupported by the record.

• The Duplicate Finding: The jury found a $215,000 deposit into the wife’s mother’s account to be unfair. However, the evidence showed this deposit was merely the clearing of two checks (for $65,000 and $150,000) that the jury also found to be unfair. The Court held that finding all three unfair artificially inflated the fraud amount.

• The “Mystery” Transfer: The jury found a $200,000 transfer from a Chase account to be unfair. Upon review, the record contained no evidence that this specific transfer ever occurred on that date.

The Lesson: When submitting itemized fraud lists to a jury, practitioners must meticulously audit bank records to ensure line items (checks vs. deposits) do not represent the same funds. Appellate courts will scour the record for “conclusive evidence” contrary to the verdict.

3. The Burden of Proof for Offsets

The wife argued that the trial court failed to credit the community for over $1 million allegedly returned by her mother. Relying on Key v. Key, the Court reiterated that while fraud can be offset if funds are returned, the burden of proof lies strictly with the disposing spouse.

The wife failed to trace the returned funds to a specific community benefit, offering only a vague assertion that the money “dissipated through other means”.

The Lesson: A “boomerang” transfer is not an automatic defense. If funds return to the estate, the spouse accused of fraud must trace those funds to a verifiable community asset or debt payment to receive an offset.

4. The Property Owner as Valuator Rule Lives On

The husband was awarded the family jewelry business. The wife appealed, arguing there was insufficient evidence of its value because no expert testified. The husband, testifying as the owner, utilized an “asset approach” and “market analysis approach” based on recent income.

The Court upheld the valuation. Under the Property Owner Rule, a spouse’s testimony regarding the value of a business is sufficient as “some evidence” as long as it is based on market value factors and not mere speculation.

5. Registry Funds and Community Debt

Finally, the trial court attempted to return $250,000 sitting in the court registry to the wife’s mother, finding that the mother had loaned the funds for the wife’s bond. The Appellate Court reversed. Because the debt (the loan from the mother) was acquired during the marriage, the funds were presumptively community property. The trial court lacked the discretion to distribute community assets to a non-party (the mother) who had already released her claims, rather than dividing the asset between the spouses.

Conclusion

Horgan is a reminder that while trial courts have broad discretion in a “just and right” division, they are strictly bound by the procedural mechanism of the jury charge and the presumption of community property.

The case was remanded for a new division of the estate, excluding the unsubmitted and unsupported fraud findings, and including the registry funds.

Case Citation: Horgan v. Horgan, No. 14-22-00893-CV, 2025 WL [Pending] (Tex. App.—Houston [14th Dist.] Nov. 20, 2025, no pet. h.).