Reimbursement for Satisfaction of Community Obligations with Separate Property: Getting What's Yours

• Author: Kimberly D. Higginbotham
• Pages: 181-218

Kimberly D. Higginbotham.The author wishes to express her gratitude to Professor Andrea B. Carroll for her guidance, patience, and wisdom in this work, as well as to Tom, Patti, and Allison Higginbotham for their unfailing love and support during this process.

Page 181

I Reimbursement-An Overview

A husband and wife divorce, ending years of arguing and emotional roller coasters. Unfortunately, the real fight has not even begun. After the judge enters the divorce judgment, each spouse uses portions of the community property and awaits partition. The wife retains a car and a house as she begins to make a new life for herself, no longer part of a duo. She has never worked outside the home and does not even have a college education. Now, she is forced to support herself and her children on minimum wage and monthly child support payments. Soon, the mortgage on the house and the car note fall due.¹ In an effort to prevent foreclosure and repossession, she pays both community notes out of her salary-separate property²--but does not have enough to make ends meet this month. She hopes for reimbursement from her husband for half her expenses, but none comes because of the type of property related to the obligation and timing of payments, the source of a circuit split among Louisiana courts. Unable to sustain the notes, she gives up both house and car to her husband in a settlement to alleviate her burden. She and the children then move to a small apartment and she continues to Page 182carve out a living-struggling but surviving. Such is the harsh reality of many divorces. What can be done to protect this woman and other spouses like her who use their separate funds to pay community obligations?

The prevalence of divorces in the United States is increasing dramatically.³ The marriage rate is currently 7.5 per 1,000 total population.⁴ However, the current rate of divorce in the United States is an astounding 3.6 per 1,000 total population.⁵ Based on these statistics, chances are great that many of us will face a grueling trip to family court. Unfortunately, the family court's task is not an easy one. In the midst of a private emotional battle between a husband and wife, a public legal battle is waged in the courtroom. The job of the court is to sort through the broken pieces of this union, undo, and repair. To do this, the court must attempt to separate lives that have become intertwined-to untangle the untangleable.

Because Louisiana is a community property state,⁶ the court's task is further complicated. The central notions of mutuality and sharing imposed by the community property regime⁷ create complications as spouses are tied together financially, almost inextricably. Such complications of the community property system could easily be avoided if the spouses contracted for a separate property regime.⁸ However, this is not a practical solution for many living in community property states. Often, spouses without the benefit of a legal education are not cognizant of state laws concerning marriage. They simply do not realize that contracting for a separate property regime is possible before marriage. Also, many couples do not possess the financial Page 183 resources to seek legal advice or properly execute the required documentation to establish the separate property regime.⁹Therefore, few people will pursue the separate property regime, and most spouses are left with the community property system already in place along with its inherent complications.

The Louisiana community property regime's scheme of reimbursement,¹⁰ in particular, is a complicated maze that Louisiana courts must navigate in separating spouses. The right of reimbursement upon the termination of the community is the major vehicle in Louisiana for adjusting claims between spouses, as it lessens the economic burden imposed on one spouse when he or she pays a debt for which he or she should not be held solely responsible.¹¹ The notion of reimbursement may seem elementary; however, this ostensibly simple concept has wrought serious controversy in the courts and legislature since its adoption in 1978.

The Louisiana reimbursement scheme provides, in part, that"if community property has been used to satisfy a separate obligation of a spouse, the other spouse is entitled to reimbursement upon the termination of the community property regime for one-half the amount of the value that the property had at the time it was used."¹² Thus, assume a Louisiana husband purchased a car or

Page 184 home before marriage and took out a loan to finance the purchase price. Even if, after marrying and establishing a community property regime, the wife uses her earnings (community property)¹³ to pay the loan payments, the wife will have no ownership interest in the car or home.¹⁴ Louisiana's classification scheme classifies property primarily at the time of acquisition.¹⁵The contribution of funds of a different character later is irrelevant for classification purposes.¹⁶ In Louisiana, the remedy for the

Page 185wife's contribution is reimbursement rather than an ownership interest in the husband's car or house.¹⁷ Under article 2364 of the Louisiana Civil Code, the wife may get back one-half of the funds she paid.

However, the real problems concerning reimbursement have come not with reimbursement of community funds used to satisfy a separate obligation, but rather with the counterpart concept of reimbursement when one spouse uses his separate funds to satisfy a community obligation. Article 2365 states:"If separate property of a spouse has been used to satisfy a community obligation, that spouse, upon termination of the community property regime, is entitled to reimbursement for one-half of the amount or value that the property had at the time it was used."¹⁸ This very language implies that one spouse is theoretically and equitably responsible for only one-half of a community obligation. For instance, if wife uses her separate funds (saved before marriage or acquired by inheritance)¹⁹ to pay a community loan on a house or car, she should be able to see a return of one-half of the payments upon termination of the community property regime. This is because she has paid a community debt owed by both spouses.²⁰ This core concept of equalizing the economic burden of payment seems rather straightforward, but in light of recent misinterpretations of article 2365, the wife, who paid the debt for which both parties were accountable, may get nothing, either because of the timing of the payment or because of the type of underlying property on which the debt was paid.

Controversy over article 2365 has raged since its adoption in 1980. Twenty-seven years later, the controversy remains Page 186 powerful, and the Louisiana Supreme Court still has not addressed the circumstances under which reimbursement for satisfaction of a community obligation with separate funds is available. The time has come for the court to step in and resolve the competing views in the Louisiana circuits over the proper circumstances for reimbursement under article 2365. The purpose of this comment is to serve as a guide for this resolution by addressing the totality of the jurisprudential confusion regarding when a spouse may obtain reimbursement for separate property used to satisfy a community obligation.

The various Louisiana circuit courts have employed several strained interpretations of the right to reimbursement for the use of separate funds to satisfy a community obligation. Some courts have held that one must distinguish between the type of property related to the community obligation-movable or immovable- and allow reimbursement only for payments made on immovable property.²¹ Other courts have hinged the availability of reimbursement on the timing of the payment.²² As a derivative of this theory, some Louisiana courts have held that reimbursement is available only for payments made before termination of the legal regime, thus disallowing reimbursement for payments made after the termination of the marriage, but before the partition of the community property.²³ Others, on the contrary, have allowed all Page 187post-termination payments, as long as they were made pre-partition of community property.²⁴

Ultimately, the statutory and scholarly authority, along with equity and public policy, demand that the spouse who satisfies a community obligation with separate funds should be reimbursed even if payment was made after termination of the community property regime (as long as it was made pre-partition of property). Courts should not refuse reimbursement because the payment was not made during the existence of the community or draw a distinction between an obligation related to movables and one related to immovables. The wealth of Louisiana jurisprudence indicating otherwise is misguided and should be overruled.

Part II of this comment looks at the different treatments utilized by Louisiana courts in...