Case Name: Patricia Ann Faust KYSON, Plaintiff-Appellant, v. Gene Douglas KYSON, Defendant-Appellee
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 1991-08-21
Citations: 596 So. 2d 1308
Docket Number: No. 22586-CA
Parties: Patricia Ann Faust KYSON, Plaintiff-Appellant, v. Gene Douglas KYSON, Defendant-Appellee.
Judges: Before NORRIS, HIGHTOWER and STEWART, JJ.
Reporter: Southern Reporter, Second Series
Volume: 596
Pages: 1308–1324

Head Matter:
Patricia Ann Faust KYSON, Plaintiff-Appellant, v. Gene Douglas KYSON, Defendant-Appellee.
No. 22586-CA.
Court of Appeal of Louisiana, Second Circuit.
Aug. 21, 1991.
On Rehearing Sept. 19, 1991.
Writ Denied May 22, 1992.
Love, Rigby, Dehan, McDaniel & Goode by Kenneth Rigby, Shreveport, for plaintiff-appellant.
A. Richard Snell, Bossier City, for defendant-appellee.
Before NORRIS, HIGHTOWER and STEWART, JJ.

Opinion:
STEWART, Judge.
Plaintiff, Patricia Ann Faust Kyson, appeals from a judgment separating community property of the marriage between plaintiff and defendant, Gene Douglas Ky-son. We remand.
FACTS
Patricia Ann Faust and Gene Douglas Kyson were married on January 30, 1981. On February 2, 1982, Gene Kyson executed an affidavit of paraphernality in accordance with LSA-C.C. Art. 2339 which reserved the rents from certain separate property as his separate property. That affidavit was recorded in Bossier Parish, the situs of his separate immovable property, on February 5, 1982.
On September 24, 1986, Mrs. Kyson filed a petition for divoree from Gene Kyson and was granted a divorce on March 4, 1987.
Defendant filed a petition to partition the community assets on June 26, 1987, attaching a detailed descriptive list thereto. In response, plaintiff filed a set of interrogatories and a request for production of documents and thereafter filed her answer and detailed descriptive list. Plaintiff additionally filed a traverse to defendant's detailed descriptive list of assets and liabilities.
The matter was presented to the district court with testimonial and documentary evidence, including dozens of exhibits entered into evidence by plaintiff and defendant. Plaintiff appeals the district court judgment which held that rental income that her ex-husband, defendant, Gene Douglas Kyson, received from separate property which he owned, managed, repaired, and oversaw was his separate property. She also complains that the district court incorrectly characterized a bank account and an investment account as separate property and that the district court refused to find that defendant's early termination of a ten-year lease violated his fiduciary duty to properly maintain a community asset. Finally, she asks this court to render a judgment in her favor for one-half of the allegedly community income for which Mr. Ky-son failed or refused to account.
DISCUSSION
Community property comprises: property acquired during the existence of a legal regime through the effort, skill, or industry of either spouse . all other property not classified by law as separate property. LSA-C.C. Art. 2338.
However, the natural and civil fruits of the separate property of a spouse, minerals produced or attributable to a separate asset, and bonuses, delay rentals, royalties, and shut-in payments arising from mineral leases are community property. A spouse may reserve them as separate property by declaration made in an authentic act or in an act under private signature duly acknowledged. LSA-C.C. 2339.
Fruits are things that are produced by or derived by another thing without diminution of its substance. There are two kinds of fruits; natural fruits and civil fruits. Natural fruits are products of the earth or of animals. Civil fruits are revenues derived from a thing by operation of law or by reason of a juridical act, such as rentals, interest, and certain corporate distributions. LSA-C.C. Art. 551.
In her first assignment of error, Mrs. Kyson complains that rental funds received by her husband were community property, contrary to the trial court's finding.
Neither party contests the fact that the income in dispute is qualified as rental income received from the separate property of Mr. Kyson. The parties, however, dispute the classification of this income. Gene Douglas Kyson argues that under a clear wording of LSA-C.C. Art. 2339, when he filed an affidavit of separation of property, the rental payments became separate property. Mrs. Kyson, however, argues that the rental income from the separate property was produced primarily as a result of the effort, skill, or industry of Mr. Kyson and therefore the filing of the affidavit under Art. 2339 does not have the effect of rendering the payments separate property.
The testimony of Mr. Kyson indicates that he considered himself a "rental manager." He testified that he handled and managed the property which included responsibilities of finding tenants, collecting the rent, and making repairs and improvements on the property. The total income produced by the rental properties from January 30, 1981 to September 24, 1986 amounted to $99,150.44. The remainder of income not relating to rental properties for the same period of time amounted to $54,-714.00.
Spaht and. Hargrave discuss the issue in this case in their treatise on Louisiana civil law:
Fruits are "things that are produced by or derived from another thing without diminution of its substance." Civil code examples of natural fruits are "products of the earth or of animals." Civil fruits include "revenues derived from a thing by operation of law or by reason of a juridical act, such as rentals, interest, and certain corporate distributions." In the simplest case, production of these fruits would not involve labor or industry of a spouse — the typical passive investment. However, it is quite common for many investments to combine one spouse's separate capital with community labor to produce fruits. In such an instance, proration is necessary and an often less than precise allocation is required.
16 K. Spaht and W.L. Hargrave, Louisiana Civil Law Treatise, "Matrimonial Regimes" § 3.5 at 48 (1989) [hereinafter cited as Spaht & Hargrave'].
While the money received by Mr. Kyson qualifies as rental revenue, the rental payments were the result of a substantial amount of time spent by Mr. Kyson on managing the rental properties.
In Paxton v. Bramlette, 228 So.2d 161 (La.App. 3d Cir.1969), the Third Circuit Court of Appeal addressed certain issues of whether salaries received by the wife during a marriage were separate or community property. The wife filed a written instrument declaring her intention to administer her paraphernal property for her separate benefit. She formed a realty company and received an annual salary of $1,800 from the corporation in addition to rental payments. She personally performed most of the managerial duties of the operation of the realty company, maintained a desk where the realty company was housed, collected all rents, deposited them in the bank, handled all the maintenance repairs of the various buildings, and generally held most responsibility for the realty company. The wife additionally received a salary of $12,-000 from a separate company in which she owned 82 percent of the stock, but received no dividends. She maintained a desk in the building of the corporate offices but had no specific duties. The court held that the $1,800 received from the realty company was community property and also found that the $12,000 paid to her annually were earnings derived from her labor and industry because she performed substantial services to the corporation, in addition to reporting these sums on her federal income tax returns as salary. The court therefore classified the $12,000 as salary which was property of the community.
While Mrs. Kyson cites Paxton for the proposition that the rent received by Mr. Kyson should be declared community property, we do not read Paxton as so holding. There, the wife received a salary from the realty company and the court found this salary to be community property. The court specifically addressed the classification of this income but no mention was made of the rental income received by her after the day of the filing of the affidavit. Thus, on these facts, the cases are therefore distinguishable. However, Paxton is useful in an analysis of the present situation based upon its holding that the $12,000 salary tendered in lieu of dividends was classified as community earnings due to the performance of "substantial services" to the corporation which derived from her labor and industry. While Paxton was decided under prior law, namely LSA-C.C. Art. 2386, we find that the rationale underlying this decision is persuasive to a resolution of the case at hand. Mr. Kyson, by his own admission, engaged in the trade of rental manager. He spent much of his time taking care of that property and seeing to it that it was properly managed. At no time did he hire any other property manager to do the work. As such, this investment combined Mr. Kyson's separate capital with his community labor which resulted in the production of fruits. Like in Paxton, he performed "substantial services" to this rental business which derived from his labor and industry. Certainly, however, even if Mr. Kyson had not participated in the rental management he would have received some rentals as a passive investment. We find this to be a case in which "separate capital is combined with community labor to produce fruits." Spaht & Hargrave, supra. Thus, a determination must be made as to the amount of labor attributed to the investment. An appropriate analysis is to examine the relative contributions of labor and capital to the funds involved and a pro ration of the funds according to these contributions. Paxton v. Bramlette, supra; Comment, Symposium: Community Property, "Classification of Property," 25 La.L.Rev. 95 at 104 (1964); Morrow, Matrimonial Property Law in Louisiana, 34 Tul.L.Rev. 3 (1959). Also, Spaht & Hargrave, supra. Considerations include, the employee's qualifications, the nature of the employee's work, size and complexity of the business, comparison of salaries paid in comparison with gross and net income, prevailing economic conditions, prevailing rates of compensation for comparable positions, salary policy of employer as to all employees and comparison with salaries for previous years. Unfortunately, we are unable to determine from the record before this court the value of Mr. Kyson's labor in order that the required proration of funds can be made. We therefore find it necessary to remand to the trial court for this determination based upon the aforementioned considerations. Mohr v. Mohr, 374 So.2d 203 (La.App. 4th Cir.1979). While the passive rental income remains separate property after the filing of the declaration by Mr. Kyson, the value of his labor invested in producing the passive rentals is community property in accordance with LSA-C.C. Art. 2338 and is subject to Mrs. Kyson's claim.
CONCLUSION
Based upon the foregoing, we find it unnecessary at this juncture to address the remaining issues on appeal. Once the trial court completes its proration of the rental income, it is directed to reexamine any of the remaining issues raised on appeal that are affected by the proration. This case is remanded to the trial court for resolution in accordance with this opinion.
REMANDED.
. These figures include income received prior to the filing of the affidavit on February 2, 1982. Any income received prior to this date and after the date of marriage is classified as community property. LSA-C.C. Art. 2339. This appeal is limited to the classification of the income after the February 2 date.
. The pertinent parts of former LSA-C.C. Art. 2386 read as follows:
The fruits of the paraphernal property of the wife, wherever the property be located and however administered, whether natural, civil, including interest, dividends and rents, or from the result of labor, fall into the conjugal partnership, if there exists a community of acquets and gains; unless the wife, by written instrument, shall declare that she reserves all of such fruits for her own separate use and benefit and her intention to administer such property separately and alone....
By its wording fruits resulting from labor were considered community property unless the wife declared her intent to have them separate. Despite this seemingly restrictive language, the courts refused to hold that certain fruits which were the result of labor and which were reserved as separate property were in fact separate. (Paxton, supra.) It seems to follow then that this rationale continues to apply under the less restrictive provisions of the present LSA-C.C. Art. 2339.