Curtis v. Curtis
969 So. 2d 1277, 7 La.App. 3 Cir. 392, 2007 La. App. LEXIS 2081 (2007)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Under the principle of real subrogation, when separate property owned before a marriage is exchanged for a new asset of a similar nature during the marriage, the new asset retains the classification of separate property. The distribution of a corporation's capital assets, which diminishes its substance, is considered a product belonging to the owner's separate estate, not a civil fruit that would become community property.
Facts:
- In 1982, Laurence Curtis, an attorney, formed a professional corporation, Lawrence N. Curtis, Ltd. ('Curtis, Ltd.').
- Shortly after, Curtis, Ltd. entered into a verbal joint venture with another attorney, J. Minos Simon, to handle legal cases, under which Curtis, Ltd. held a one-third interest in the cases and profits.
- Laurence Curtis and Lynn Marie Sorola married in 1987.
- In February 1991, during the marriage, the joint venture with Simon ended.
- Curtis, Ltd. then transferred its interest in the existing case files to Laurence Curtis individually.
- Curtis subsequently contributed these same case files to a new law firm, Curtis & Lambert, APLC, in exchange for stock in that corporation.
- The couple divorced on May 1, 1998.
Procedural Posture:
- Lynn Marie Sorola Curtis filed a petition for partition of community property against Laurence Curtis in a Louisiana trial court in October 1998, following their divorce.
- Sorola filed a motion and traversal, arguing that stock in Curtis's law firm, acquired during the marriage, should be classified as a community asset.
- After a trial, the trial court found that the stock in Curtis & Lambert, APLC was the separate property of Laurence Curtis.
- Sorola, as the appellant, appealed the trial court's judgment to the Louisiana Court of Appeal, Third Circuit. Curtis is the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does stock in a law corporation, acquired by a spouse during a marriage in exchange for his pre-marital professional corporation's interest in its case files, constitute separate property?
Opinions:
Majority - Gremillion, Judge.
Yes, the stock constitutes separate property. The court affirmed the trial court's finding that a joint venture existed between Curtis, Ltd. and J. Minos Simon, meaning Curtis's pre-marital corporation owned a distinct property interest in the case files. The court then distinguished between a 'fruit' and a 'product' of property. Civil fruits, such as income, derived from separate property during a marriage become community property. However, a product is derived from a thing through the diminution of its substance. Here, the case files were a substantial capital asset of Curtis, Ltd., and transferring them away diminished the corporation's substance. Therefore, the files were a 'product,' not a 'fruit,' and remained Curtis's separate property. Finally, applying the principle of real subrogation, when Curtis exchanged this separate asset (the interest in the case files) for a new, similar asset (stock in the new firm), the new asset retained the classification of separate property.
Analysis:
This decision reinforces the application of real subrogation to intangible business assets like an interest in a professional practice. It provides a crucial distinction between the income generated by a spouse's skill and labor during marriage (community property) and the underlying capital asset of the practice itself (which can remain separate property if owned pre-maritally). The characterization of a law firm's case files as a 'product' or capital asset, rather than a 'fruit,' is significant for future marital property disputes involving professionals. This precedent solidifies that an equity interest in a business can be transformed or reinvested into a new business structure during a marriage without losing its separate property status.
