The attorney in a divorce will need to prepare documents reflecting the disposition of the family home in the divorce. These documents typically include the decree of divorce, a special warranty deed, a deed of trust, a deed of trust to secure assumption, and an assignment of escrow balance. Counsel may also want to have an assignment of utility or telephone deposits and accounts, and an assignment of the right to use the telephone number at the house. An assignment of rights under a contract with a security company may also be needed. The transferor may wish to send a letter to the local real property tax assessor- collector, enclosing a copy of the warranty deed and requesting that his or her name be removed from the tax account for that property.
1. The Necessity for an Adequate Description
It is a matter of great concern that the real property being transferred in the divorce be adequately described. As troublesome as it may be, there is nothing better than using the full legal description of the property in every document which touches upon it.
2. Partition and Exchange Agreement
When creditors of a spouse might cause problems for the other spouse after divorce, the parties may wish to consider using a partition and exchange agreement instead of an agreement incident to divorce. Ordinarily, spouses take property in a divorce subject to the claims of the creditors of each of the spouses. Worse still, in one case the creditors of an spouse succeeded in setting aside that spouse's property settlement agreement as a fraudulent transfer. Steed v. Bost, 602 S.W.2d 385 (Tex. Civ. App.--Austin 1980, no writ). By partitioning the property instead of dividing it, the wife may be better insulated from the claims of the husband's creditors, and vice versa, since partitions and exchanges are binding upon creditors unless done with the intent to defraud them.TEX.FAM.
CODE § 4.106; TEX.CONST. art. XVI, § 15.
3. Special Warranty Deed with Vendor's Lien
In conveying the house from one spouse to the other, it is advisable to use a special warranty deed. If part of the consideration of the transfer is a promise to pay money in the future, the deed should retain a vendor's lien in the property conveyed, particularly if it is to be the homestead of the transferee. If the house is the separate property of a spouse, a quitclaim deed from the other spouse should suffice to eliminate any potential claim against the property.
Whenever the transferee spouse is to pay the transferor spouse a sum of money in return for conveyance of the house, the obligation should be secured by a vendor's lien retained in the warranty deed, and by a deed of trust. Although the Texas Supreme Court has ruled that an implied vendor's lien arises from an agreement incident to divorce, when part of the purchase price is unpaid, it will take a lawsuit to establish such a lien, and without a deed of trust the only foreclosure procedure available is judicial foreclosure. See McGoodwin v. McGoodwin, 671 S.W.2d 880 (Tex. 1984); Magallanez v. Magallanez, 911 S.W.2d 91, 94-95 (Tex. App. – El Paso 1995, no writ).
5. Deed of Trust to Secure Assumption
The transferring spouse will want a deed of trust to secure assumption whenever there is a debt on the home which is not extinguished in the transfer incident to divorce.
a. Mortgage Debt of Transferor Not Extinguished
by Divorce
Ordinarily, both spouses will have signed any purchase money or home improvement loan obligations pertaining to the home. The mere fact that the property is transferred from one spouse to the other in the divorce, and the transferee spouse agrees and/or is ordered to pay those debts, in no way relieves the transferor spouse of liability under the notes signed by him or her. The liability of the spouses to third party creditors who are not parties to the divorce is in no way diminished by the disposition of property in the divorce.
b. The Role of the Deed of Trust to Secure
Assumption
The deed of trust to secure assumption basically allows the transferor spouse to pay arrearages in the mortgage payment which may subsequently accrue, or to expend other sums required of the parties under the deed of trust securing the assumed lien, and to demand reimbursement from the party assuming the indebtedness. If reimbursement is not received within a specified time, the trustee under the deed of trust to secure assumption can post notice and sell the transferee-spouse's interest in the property at non- judicial foreclosure sale, subject of course to the assumed indebtedness secured by superior lien in the property.
6. Assignment of Escrow Balance and Insurance
Rights
It is advisable to secure an assignment of the escrow balance on the house mortgage and any insurance policies relating to the husband. While the
likelihood is that the mortgage company will pay taxes and insurance with that escrow balance in the due order of business, arguably if the escrow balance is not divided in the decree it constitutes an undivided community property asset.
7. Muniment of Title Language in Decree
Muniment of title has been defined as “[d]ocumentary evidence of title,” and “[t]he instruments of writing and written evidences which the owner of lands, possessions, or inheritances has, by which he is enabled to defend the title of his estate.”Black's Law Dictionary 918 (5th ed.1979). The language in the Decree of Divorce may serve as a muniment of title for the award of real property to the spouses. See McCarthy v. George, 623 S.W.2d 772, 777-78 (Tex. App. – Fort Worth 1981, writ ref’d n.r.e.) (evidence of a divorce judgment was sufficient as a muniment of title).
8. Other Documents
Other documents that could be prepared in connection with the division of the family home include, without limitation, an assignment of utility deposits; an assignment of the right to use the telephone number; a letter to the local taxing authority removing the grantor's name from the tax account; a letter to the homeowners' association; an assignment of a contract for home security; an assignment of any outstanding insurance claim for damage or repairs to the home; a quitclaim deed relinquishing any claim in the separate property home of a spouse, etc.
9. Getting Documents Signed
It has been held that an order requiring the parties to sign all notes and instruments necessary to carry out the decree is not enforceable by contempt. Ex parte Myrick, 474 S.W.2d 767 (Tex. Civ. App.-- Houston [1st Dist.] 1971, no writ). To skirt the problem, copies of the documents actually to be signed can be attached to the decree of divorce and the parties ordered to sign, notarize and deliver them when the decree is signed by the court. See Ex parte McKinley, 578 S.W.2d 437 (Tex. Civ. App.--Houston [1st Dist.] 1979). Failing that, the decree or agreement will have to be relied upon to pass title, or else a proceeding to enforce the decree can be brought pursuant to Section 9.001-9.014 of the Texas Family Code.
10. Other Ideas
While the special warranty deed, deed of trust, and deed of trust to secure assumption are the usual combination of documents used to award the family home to a spouse upon divorce, there is no reason why other approaches could not be used.
VIII. HOME AND CHILD SUPPORT
A. Use of Home During Minority as Child