CASE STUDY:
Chance v. Chance 1997

Chance v. Chance, 694 So.2d 613 (La. Ct. App. 2d Cir. 1997).

Facts and procedural history: Dr. Hoyet Chance and Bonnie Chance were divorced in April 1992 and, retroactively to February 3, 1992, terminated the community of acquets and gains. After stipulations resolved several aspects of the subsequent partition litigation, the remaining issues came before the trial court in March 1996. The trial court ruled in favor of Dr. Chance and Bonnie Chance appealed.

Issues:

  • (1) Whether mortgage payments on a depreciable asset are not reimbursable;

  • (2) whether the district court wrongly refused Ms. Chance a credit for the fair rental value of the former family home;

  • (3) whether the trial court erred in utilizing Dr. Chance’s expert’s testimony rather than Ms. Chance’s;

  • (4) whether the monies received from the Prostate Center are civil fruits that compromise community property; and

  • (5) whether Dr. Chance’s disability benefits constitute community property when the premiums for the disability insurance policy had been paid with community funds.

Rule: Under La. C.C. art. 2358, upon termination of a community property regime, a spouse may assert reimbursement claims against the other spouse. More directly, 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 when used. La. C.C. art. 2365. Chance v. Chance, 29,591 (La. App. 2 Cir. 5/7/97), 694 So. 2d 613, 616, overruled by Mason v. Mason, 40,804 (La. App. 2 Cir. 4/19/06), 927 So. 2d 1235.

 

Once the community of acquets and gains has been dissolved by separation, the spouses become co-owners, or owners in indivision, of the marital home. As such, they are entitled to the use, enjoyment, and disposition of the property. La. C.C. arts. 477, 480; McConathy v. McConathy, 25,542 (La.App.2d Cir. 02/23/94), 632 So.2d 1200, writ denied, 94–0750 (La. 05/06/94), 637 So.2d 1052.

 

A corollary right permits use and occupancy of the property by the co-owner without the payment of rent. McConathy, supra; Jones v. Jones, 605 So.2d 689 (La.App. 2d Cir.1992), writ denied, 607 So.2d 571 (La.1992). Of course, pursuant to La. R.S. 9:374, the trial court may order rental payments on the family home.

 

Such an order, however, must be made at the time of the award of use and occupancy. The trial court does not have, at the time of partition, blanket discretion to order retroactive rental payments. Chance v. Chance, 29,591 (La. App. 2 Cir. 5/7/97), 694 So. 2d 613, 616, overruled by Mason v. Mason, 40,804 (La. App. 2 Cir. 4/19/06), 927 So. 2d 1235.

 

The determination that such a policy has been acquired with community monies, however, does not necessarily classify the disability benefits as community. Brant v. Brant, 26,508 (La.App.2d Cir. 01/25/95), 649 So.2d 111. Indeed, unlike retirement income, disability payments present special problems. Johnson v. Johnson, 582 So.2d 926 (La.App. 2d Cir.1991).

 

Proper designation requires careful examination to determine if such disability payments represent deferred compensation in the nature of retirement or pension income. Brant, supra. If so, the proceeds should be categorized as community to the extent they are attributable to years of service performed during the existence of the community. Johnson, supra. Chance v. Chance, 29,591 (La. App. 2 Cir. 5/7/97), 694 So. 2d 613, 618, overruled by Mason v. Mason, 40,804 (La. App. 2 Cir. 4/19/06), 927 So. 2d 1235.

 

Analysis: The court found that the trial court did not err in granting Dr. Chance reimbursement on the mortgage payments per La. C.C. art. 2358. Although other circuits treat reimbursement claims differently, depending upon whether the mortgage payments pertain to movable or immovable property. This court concurs with the first circuit that La. C.C. art. 2365 makes no such distinction.

 

The court also found that because Ms. Chance did not seek an award for the fair rental value of the house prior to the partition hearing, she was barred from recovering the fair rental value of the house. The next issue concerns a twenty percent community interest in the ex-husband’s medical practice.

 

This court found that the trial court did not err in utilizing Dr. Chance’s expert’s testimony because Ms. Chance’s expert’s testimony included the value of future operations which could not be applied to her interest in his medical practice because his present health significantly affects his ability to practice medicine.

 

Regarding expert testimony on the medical practice’s accounts receivable, the court affirmed the lower courts utilization of Dr. Chance’s expert’s testimony because he calculated the average collection ratios in valuing accounts receivable. Since this court has previously approved the use of average collection ratios in valuing accounts receivable, utilization of Dr. Chance’s expert’s calculations was not erroneous.

 

Next, Ms. Chance contends that monies received from the Prostate Center are returns on a community investment and thus compromise community property. For ultrasound testing procedures, the physicians at Urology Associates refer their patients to the Prostate Center. This limited partnership is owned one-half by the general partner, Urology Associates, while the other fifty percent interest is held by various children and spouses of the physicians. Prostate Center profits, thus, are logically distributed according to the ownership percentages. Those proceeds received by Urology Associates eventually flow to the physicians there, based upon their productivity. For example, if a doctor fails to refer any patients to Prostate Center, he receives none of this income. Similarly, if the patients of one urologist account for thirty percent of Prostate Center's business, that physician collects thirty percent of Urology Associate's share of the profits. Dr. Chance, although a partner in Urology Associates, participates in any Prostate Center profits only in the above-mentioned manner.

 

The trial judge found that Dr. Chance's disbursements from the prostate center are generated by his professional skill and effort, and, thus, constitute separate property. When referring individuals to the testing facility, the doctors accompany their patients, supervise the procedures, and interpret the results. Further, as noted by Dr. Chance, if his efforts produce no income for Prostate Center, he receives no portion of the profits. Thus, this court affirmed the trial judge’s ruling.

 

Finally, Ms. Chance contests the trial court ruling that her ex-husband's monthly disability benefits became his separate property after termination of the marital regime. She argues that, because the premiums for the disability insurance policy had been paid with community funds, the proceeds belong to the community. The policy in the instant case clearly does not accord deferred compensation or retirement. Instead, its benefits are payable only for total physical disability. In fact, the insurer has acknowledged that Dr. Chance's medical condition renders him totally disabled under the policy, and, thus, eligible for benefits until such time as his health improves.

 

Disability payments that do not qualify as deferred income, such as those in the present case, should be characterized in accordance with the approach utilized for tort damages and worker's compensation benefits. Thus, concerning injuries sustained by a spouse during the existence of the community, that portion of any award designed to compensate for loss of earnings would be community property during the existence of the marital regime, but separate property following termination. Therefore, the trial court did not err in treating the disability insurance benefits payable to Dr. Chance subsequent to the community termination as his separate property.

Conclusion: Finding no error in the lower court’s rulings, this court affirmed the judgment of the lower court.