Preserving Your Pocket Book: Narrowing the Unilateral Power of a Co-owner

• Author: Kristen E. Bell
• Position: Recipient of the Association Henri Capitant, Louisiana Chapter
• Pages: 140-174

Page 140

I Introduction

Air-conditioning installation.¹ Property taxes.² Lawn care.³Insurance payments.⁴ Sewage treatment facilities expansion.⁵ Roof replacement.⁶ All of these expenses have been classified by courts as "necessary" to preserve property. The broad range of these expenditures presents a difficulty: while some are undeniably required to prevent loss or imminent damage, others are merely useful or convenient.

Under the default co-ownership regime in Louisiana, a co-owner may take "necessary steps for the preservation" of the co-owned thing without the consent of any other co-owner.⁷ In addition, the acting co-owner is entitled to reimbursement for these "necessary expenses . . . from the other co-owners in proportion to their shares."⁸ This scheme gives a Louisiana co-owner more unilateral power to incur necessary expenses than in almost any other jurisdiction.

Under the Louisiana rule, the initial determination of whether an expense is necessary to preserve the property is left entirely to the subjective intention of a single co-owner. Since beliefs about what is or is not necessary will inevitably vary among co-owners, granting such vast unilateral authority is likely to result in conflict among the parties, particularly when reimbursement is demanded. The other co-owners are consequently left with the choice of either writing a reimbursement check or wasting time and money in a courtroom disputing the necessity of the act. The ambiguity of the Louisiana rules causes tension among co-owners, often springing unforeseen expenses and creating excessive litigation.

Due to an increased incidence of co-ownership arrangements across the nation,⁹ a new standard must emerge in Louisiana toPage 141 remedy these ills. The Louisiana co-ownership rules should be changed such that a co-owner's unilateral authority is determined according to the exigency of the circumstances, as it is in many other jurisdictions. For instance, if the property faces an imminent threat, a co-owner should be permitted to act alone, as a lapse of time needed to consult with the other co-owners would only further endanger the property. In such circumstances, the acting co-owner should be charged with a duty of good faith to ensure that he acts within reasonable bounds. Absent such an emergency, a co-owner wishing to perform an ordinary act of preservation¹⁰ should be expected to do more. Unilateral action is unnecessary in such situations and should generally be prohibited. The law should require that a co-owner consult the others holding an interest in the co-owned property prior to incurring the necessary, yet not imminent, expense. Such a rule would better serve co-owners because, unlike current articles 800 and 806, it gives precise notice of when necessary expenses may be incurred.

This Comment will begin in Part I by explaining the current Louisiana rules granting a co-owner authority to incur, and to be reimbursed for, necessary expenses. The interpretation of these rules by Louisiana courts and scholars will be detailed in Part II. Part III will contain a brief analysis of the historical development of civilian co-ownership provisions, the impact that the past has had on the Louisiana rules, and the current state of co-ownership law in European jurisdictions. Part IV will describe the flaws of the current rule in light of practical examples which display its faulty application and its discouraging effect on real estate investment. Last, Part V will propose a new standard, with an analysis showcasing its more sensible approach and investor friendly effects.

II The Current Louisiana Rules

The pertinent legislation to this discussion is Louisiana Civil Code articles 800 and 806. Read in pari materia, these articles lay the foundation for preservation of co-owned property and reimbursement for expenses flowing from such acts. Specifically, article 800 authorizes unilateral preservation of co-owned property,Page 142 providing that "[a] co-owner may without the concurrence of any other co-owner take necessary steps for the preservation of the thing that is held in indivision."¹¹

A co-owner acting under article 800 may receive reimbursement for preservatory expenses by way of article 806, which provides in pertinent part that: "A co-owner who on account of the thing held in indivision has incurred necessary expenses . . . is entitled to reimbursement from the other co-owners in proportion to their shares."¹²

The key terms "necessary" and "preservation" are not defined by this section of the Code; however, their true meaning is vital to the proper application of these rules. The definitions of these terms may be aided by the use of other code articles, doctrinal sources, and jurisprudential interpretation.

What is "necessary"? This amorphous term, appearing in both articles 800 and 806, may have a different connotation depending on the context in which it is used. In a co-ownership setting, the meaning of "necessary" is assisted by drawing a distinction between categories of expenses-those that are necessary, useful, or luxurious.¹³ Necessary expenses are those that are "incurred for the preservation of the thing" or to relieve the property of private or public burdens.¹⁴ Examples of such expenses would be property taxes¹⁵ or insurance payments.¹⁶ The jurisprudence also includes repairs other than those needed for ordinary maintenance within the definition of necessary expenses.¹⁷ "Useful" expenses, on the other hand, are defined as those that enhance the value of the property rather than preserve its condition.¹⁸ Finally, "luxurious" expenses are contrasted from the other classes of expenses in that they are "made for the gratification of one's personalPage 143 predilections."¹⁹ Therefore, compared to useful and luxurious expenses, "necessary" expenses may be defined as those that are unavoidable or required under the circumstances to protect the property.

What is "preservation"? Doctrine equates the term preservation with conservation.²⁰ Acts of this type prevent the property from being "destroyed, damaged or lost for the owner."²¹ While it is clear from doctrine that acts of preservation consist of something less than what is involved with other categories of acts, the boundaries distinguishing one kind of act from another are very blurred.²² Classification of an act as one to preserve property should largely depend on the purpose of the act, rather than its nature.²³

In attempting to interpret the terms "necessary" and "preservation," the potential for subjective alteration of their meanings becomes apparent. Scholarly guidance is unmistakably valuable to the proper interpretation of articles 800 and 806 and has no doubt aided co-owners and courts in resolving difficult exegetical issues. However, practical application of this rule reveals that one co-owner's idea of an expense necessary to protect property may be very different from that of another co-owner.²⁴Furthermore, co-owners have also struggled with classifying an act as one to preserve.²⁵ With a few linguistic alterations to thePage 144 legislation, however, many of these definitional issues can be resolved, thus facilitating the functional application of the rule.

III Background

Why is the Louisiana rule regarding necessary expenses so broad and vague? A glance at the past reveals that Roman preference for full ownership, combined later with French disgust for co-ownership, had a lasting effect on surrounding European jurisdictions, as well as in Louisiana. A gap in Roman-French law governing the rights and duties among co-owners left many civilian jurisdictions on their own to draft such provisions without model legislation. Thus, wide discrepancies now exist among these European rules. In the face of such variance, the Louisiana drafters apparently took a different approach and chose to create a co-ownership provision devoid of much detail.

A Historical Setting

The flaws of Louisiana's current co-ownership articles can be traced to Roman ideals,²⁶ which expressed a general preference for full ownership and, thus, passively discouraged co-ownership. This favoritism for singular ownership was expressed in many underlying principles of Roman property law. For instance, the Romans believed that each co-owner's interest struck "every molecule of the thing,"²⁷ rather than each co-owner physically owning a percentage of the property itself. Ownership could not be fractionalized in any instance, even when held by many persons.²⁸Also, if the property itself was to be transferred, it had to be done so in toto or not at all.²⁹ The Romans viewed co-ownership as a temporary and exceptional condition, as evidenced by the adage, nemo in communione potest invitus detineri.³⁰

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During the Roman era, it was as if no one in good sense would ever choose co-ownership over "full" ownership and that no person should ever feel compelled to remain in such an unfavorable arrangement. Roman law looked hesitantly upon any arrangement which restricted the rights of a single owner.³¹ Since property in a co-owned scenario must be shared among several proprietors, the privileges of owning...