When can you accept benefits under a judgment while continuing to complain about it on appeal? Until recently, the answer has been “almost never.” A 1950 case, Carle v. Carle, set forth the rule that “a litigant cannot treat a judgment as right and wrong,” with a “narrow” exception where the benefits accepted by the appellant would be due to him or her regardless of the outcome of the appeal.

The exception has been applied rigorously and harshly, with especially unjust results in family-law cases. If, for example, a divorce judgment awarded the husband the house, the vacation home, the 401(k), and the Mercedes-Benz, and the wife the broken-down station wagon, and during her appeal the wife traded in the station wagon, the courts reasoned that on remand, the trial court might award the station wagon to the husband, and so the wife’s appeal was subject to dismissal. A few courts crafted additional exceptions, such as “financial distress,” but their application was sporadic and unpredictable.

The rule was problematic in other ways. Lawyers representing appellants often lived in fear that they would open their mail and find a check from the other side attempting to pay the judgment. What to do? Tell the client to cash it, and risk dismissal under the acceptance-of-benefits doctrine? Hold it and let it go stale? Or send it back, risking a contention that the judgment was discharged by the rejected tender of payment? And even if the exception seemingly applied in a particular situation, could counsel be sure that the client would be entitled to the accepted benefits under every conceivable scenario following the appeal?

In Kramer v. Kastleman, decided on January 27, the Supreme Court of Texas changed all that. There, the trial court had enforced a divorce settlement agreement despite the wife’s objection that it was fraudulently procured. She appealed, and the husband successfully moved to dismiss the appeal because the wife had collected rental income from property awarded her in the settlement agreement and divorce decree, and had requested the opportunity to remove personal property from a condominium that had been awarded to the husband and that he was selling.

The Supreme Court, emphasizing that the acceptance-of-benefits doctrine is rooted in equity and estoppel, eschewed any bright-line test in favor of a multi-factored equitable inquiry. It identified a number of relevant factors bearing on whether the doctrine should be applied:

• whether acceptance of benefits was voluntary or was the product of financial duress;
• whether the right to joint or individual possession and control preceded the judgment on appeal or exists only by virtue of the judgment;
• whether the assets have been so dissipated, wasted, or converted as to prevent their recovery if the judgment is reversed or modified;
• whether the appellant is entitled to the benefit as a matter of right or by the appellee’s concession;
• whether the appeal may result in a more favorable judgment but there is no risk of a less favorable one;
• if a less favorable judgment is possible, whether there is no risk the appellant could receive an award less than the value of the assets dissipated, wasted, or converted;
• whether the appellant affirmatively sought enforcement of rights or obligations that exist only because of the judgment;
• whether the issue on appeal is severable from the benefits accepted;
• the presence of actual or reasonably certain prejudice; and
• whether any prejudice is curable.

This test will no doubt eliminate much of the harshness previously associated with the acceptance-of-benefits doctrine, but is likely to increase the uncertainty about whether the doctrine will be applied in a particular situation. Appellants and their counsel must think carefully about the risks and rewards of accepting benefits under an appealed judgment, and must recognize that any decision to do so may well be the subject of high-stakes second-guessing with no predictable outcome.