The issue of joinder may arise in several legal situations, including in a divorce. If one spouse has transferred marital assets to a third party before the divorce, or if a third party has a legitimate claim to marital property, that third party may be joined to the divorce suit. This article will discuss the doctrine of joinder in Texas law and examine its effects on adding businesses to a Texas divorce.
The doctrine of joinder allows a party (either plaintiff or defendant) to join outside people or entities as new parties to a suit. The Texas Rules of Civil Procedure provide for two kinds of joinder – mandatory and permissive. Tex. R. Civ. Pro. 39 & 40. A party qualifies for mandatory joinder if:
- they are necessary to afford complete relief between the parties, or
- they “clai[m] an interest relating to the subject of the action” and their absence may:
- “impair or impede” their ability to protect that interest, or
- cause any of the parties to be at a “substantial risk of incurring double, multiple, or otherwise inconsistent obligations…”
Tex. R. Civ. Pro. 39.
Once a party qualifies for mandatory joinder, and joinder is feasible, the Court must join them to the suit. A party qualifies for permissive joinder if their claims arise from a common series of occurrences and share a question of law or fact with the claims already at issue. Tex. R. Civ. Pro. 40. Once a party qualifies for permissive joinder, the Court has discretion on whether to join them to the suit.
Joinder in Divorce
Joinder arises in a divorce when a third party claims an interest in property that one or both of the spouses has attempted to classify as community property. Such a third party qualifies for mandatory joinder and must be added to the divorce proceedings by the court. Fuentes v. Zaragoza, 555 S.W.3d 141, 167-68 (Tex. App.—Hous. [1st Dist.] 2018, no pet.); see also Boyo v. Boyo, 196 S.W.3d 409, 420 (Tex. App.—Beaumont 2006, no pet.). If the transferred property does belong to the community estate, the third party is necessary to afford complete relief between the spouses and may be joined under allegations of conspiracy and fraud. If the transferred property belongs instead to the third party, they must be joined to protect their own interest in it. See id. at 168.
In Boyo, Husband and Wife owned a business. 196 S.W.3d at 420. During the course of their marriage, Husband transferred community property to the business and transferred business funds to his family and friends. Id. at 421. Wife filed for divorce and joined the business as a third party, alleging that the business defrauded her of community property. Id. at 413. The Court of Appeals upheld a trial court order that joined the business to the divorce. Id. at 421. First, they held that the business was community property and that Wife was entitled to an equal share in it. Id. at 420. Second, they held that by conveying business assets which belonged to Wife to questionable third parties, the business had defrauded Wife of her community property. Id. at 421. On top of that, they noted that well-established Texas law allows for joinder of third parties in divorce proceedings when community property has been transferred to them. Id. at 420. When a family owned business improperly conveys community property outside of the marriage, it may be joined as a third party to the divorce.
Similarly, in In re Burgett, Husband and Wife owned a business together, and that business was community property. In re Burgett, 23 S.W.3d 124, 125-26 (Tex. App.—Texarkana 2000, pet. denied). Wife alleged that Husband used the business to “purchase” another company (“Baker”) for far more than what that company was worth, effectively transferring community funds out of the community estate with no compensation. Id. at 126. When Wife filed for divorce, she joined the family business and Baker as third parties, alleging conspiracy and fraud against her estate. Id. The district court severed Wife’s claims against the businesses from the divorce proceeding, but the Court of Appeals reversed. Id. at 127-28. The Court held that the allegations against the companies would affect the value and the division of community property, making them necessary parties to afford complete relief between the parties. Id. When an outside business improperly receives community assets, it may be joined as a third party to the divorce.
In Fuentes, Husband owned and operated several businesses while married to Wife. Fuentes, 555 S.W.3d at 150 (Tex. App.—Hous. [1st Dist.] 2018, no pet.). Wife filed for a divorce, and several of Husband’s businesses asserted an interest in property that Wife had classified as community. Id. at 150-52. The trial court refused to join those businesses to the proceeding, and they divided the contested community property between Husband and Wife. Id. at 151-52. The Court of Appeals reversed and held that the third-party businesses should have been joined. Id. at 168. They reasoned that the businesses had been divested of their property without notice and without a chance to defend against Wife’s claims. Id. When a business asserts an interest in property that a spouse has classified as part of their community estate, it may be joined as a third party to the divorce.
Under Texas law, businesses may be joined as third parties to a Texas divorce when (1) they have received or transferred funds from the community estate, or (2) when they assert a claim over allegedly community property. The first kind of business is necessary to afford complete relief between the parties, as they might possess community property to which the divorcing spouses are entitled. The second kind must be joined to adequately protect their own interests in the disputed property. These same principles ought to allow parties to join third-party trusts to a divorce suit.