So Youve Married a Mismanager: The Inadequacy of Louisiana Civil Code Article 2354

AuthorKelly Kromer Boudreaux
Pages219-262

    Kelly Kromer Boudreaux. I would like to thank Professor Andrea Carroll for her invaluable help with this article-I could not have wished for a better advisor. I would also like to thank my family, especially Mitch, for unwavering support and faith in me.

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So, you've married a mismanager? Oh yes, that's the type. Spending lots of money on lots of nothing? Investing in recycled breakfast cereal as the next big thing? I bet when you first started dating it was refreshingly impulsive-perhaps even charmingly madcap. What can you do about it now? You could go ahead and get the divorce. If that's not for you then maybe just a separation of property, but that won't help the stuff already gone. And then there's article 2354, oh wait, that won't work either . . . .

TABLE OF CONTENTS

I.Introduction. II. History of Community Property Management in Louisiana A. Management in 1870 Under Louisiana Civil Code Article 150. B. Management in 1888 Under Louisiana Civil Code Article 2404. C. Equal Management Under the 1980 Revision: Louisiana Civil Code Article 2354 D. Current Community Property Provisions in Louisiana: The Standard Governing Management. 1. Management of Community Property During the Marriage. 2.Management of Community Property Between Divorce and Partition. 3. Comparison of the Management Standards During and After Marriage. III. Moving Toward A Heightened Management Standard. A. The Need for a Continuous Management Standard. B. Consistency with Court Involvement During Marriage in General. C. Consistency with Standards of Care Imposed by the Louisiana Civil Code on Other Relationships. 1. Business Partners: A Fiduciary Duty. 2. Mandataries: Prudence and Diligence. 3. Curators: The Highest Duty. D. Consistency with California: A Fiduciary Duty. 1. Development of a Need for an Articulated Standard. 2. The Standard Imposed Upon Managing Spouses. 3. Relation to Louisiana. E. Recognizing the Psychology Behind Management Duties. IV. Conclusion

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I Introduction

Under Louisiana Civil Code article 2354, a spouse may recover damages due to the other spouse's fraud or bad faith management of community property during marriage.1 One spouse's poor management decisions, made without malicious intent but certainly without thought, are not covered by the duty imposed upon spouses during marriage.2 However, the management standard imposed upon spouses is heightened as soon as the spouses divorce. Suddenly, a spouse may be liable for his fault, default, or neglect.3 Unlike during marriage, during the interim period between divorce and court partition of community property, a spouse may be liable for poor business decisions even without a showing of malicious intent. Thus, for example, a spouse investing imprudently in the stock market using community funds will be liable to the other for damages for substandard investment decisions made after the divorce but not during marriage.4

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By imposing a heightened standard after divorce until partition of community property, the law sets up an artificial distinction based on a presumption that during the marriage, including the time up to divorce, a spouse will have the other spouse's best interest at heart when dealing with community property. This presumption is not necessarily true and does not take into account the volatile period leading up to the divorce, a period during which either spouse may feel ambivalent toward management of community property.

Not only do the standards imposed during and after the marriage use a questionable presumption regarding when spouses stop thoughtfully managing the community property, but the low standard during marriage is also insufficient when compared to the management standards imposed upon other relationships contemplated by the Louisiana Civil Code. For business partners, mandataries, and curators, the standard imposed is much higher.5

Some critics of raising the management standard in the marriage context may suggest that courts should not involve themselves in the intimate workings of domestic relations during the marriage, but such involvement is already sanctioned by the Louisiana Civil Code. Article 2355 allows a spouse to obtain judicial authorization to individually manage community property that would normally require the concurrence of the other spouse.6Further, another community property state, California, has already addressed the need for a higher management standard during marriage and now imposes a fiduciary duty upon spouses.7

Raising the standard imposed upon spouses in the management of community property during marriage would give spouses experiencing management difficulties an additional option when dealing with their community property. Allowing spouses anPage 222option within both marriage and the community property regime would emphasize the idea that marriage is a long-term investment and commitment.

Louisiana should raise the duty owed by spouses during marriage to be commensurate with the duty imposed between divorce and partition, the standards of care expected of business partners and mandataries, and the duty imposed upon spouses in other community property states. Part II of this comment discusses the history of management of community property in Louisiana, beginning with the management standard articulated in the original Louisiana Civil Code and ending with the current management standard under Louisiana Civil Code article 2354. Part III discusses various reasons for moving toward a heightened management standard, including the need for a continuous management standard throughout the marriage until partition of community property and the need to establish consistency with standards dictated in other relationships of trust. Part IV concludes the article.

While many of the problems that arise within the community property system could be avoided if the spouses opted for a separate property regime, under the default system of community property, a spouse's management of community property is subject only to the low standard set forth in article 2354. In order to recover damages from a spouse during the marriage, the spouse seeking to recover must meet the high bar of proving fraud or bad faith on the other's part. This standard is especially low when considered in conjunction with the management duty imposed upon spouses during the interim between termination of the community regime and partition of the community property. Likewise, the management standard during marriage is insufficient when compared to standards imposed on other relationships in the Louisiana Civil Code. For a spouse who has married a mismanager and wishes to address that mismanagement within both the marriage and the community property regime, the current standard set forth in Louisiana Civil Code article 2354 offers inadequate relief.

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II History Of Community Property Management In Louisiana

Louisiana is a community property state.8 As such, it recognizes that both a husband and a wife contribute to their marriage. This recognition of equally valuable yet different contributions to the marriage was seen in Louisiana as early as the eighteenth century through the "custom of Paris."9 As the Louisiana Supreme Court explained in West v. Ortego, "one of the major considerations behind the community property system is to recognize and reward a wife's industry and labor (or the husband's

. . . where the wife may be the principal breadwinner) which may only indirectly serve to enhance the community financially."10 In a community property regime, each spouse is recognized as "equally contributing by his or her industry to [the marriage's] prosperity, and possessing an equal right to succeed to the property after its dissolution."11 Community property states thus recognize that different, but valuable, contributions are made to the marriage by both the working and non-working spouse.12 "There is nothing more fundamental in our law," the Louisiana Supreme Court noted in 1956, "than the rule of property which declares that this Page 224community is a partnership in which husband and wife own equal shares."13

Recognition of equality is one of many benefits of a community property system. From a psychological perspective, the shared ownership of property may in itself lend stability to the marriage. In Coming Apart: A Prognostic Instrument of Marital Breakup, John N. Edwards and other sociology professors linked marital property ownership to marital stability.14 The acquisition of property that a state recognizes as community-owned15 not only promotes recognition of equality between the spouses but also promotes marital stability through common ownership. In both these...

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