Lanza v. Lanza
2005 WL 487725, 898 So.2d 280 (2005)
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Rule of Law:
Renewal commissions received by an insurance agent spouse after the termination of the community property regime are considered community property to the extent they were earned through the effort, skill, or industry of that spouse during the existence of the community. An agency agreement that grants no ownership rights to the agent is not itself a community property asset subject to partition.
Facts:
- Louis Lanza and Vicki Coudrain were married on August 1, 1975.
- During the marriage, on January 23, 1981, Louis Lanza signed an Agent's Agreement with State Farm and began operating the Lou Lanza State Farm Agency.
- The agreement specified that Mr. Lanza had no ownership interest in the agency, could not sell or assign it, and that State Farm retained ownership of all client information and the 'book of business'.
- The agreement could be terminated at will by either party, at which point all rights to future compensation would cease.
- The community property regime terminated on September 11, 1997, when a petition for divorce was filed.
- After the termination of the community, Mr. Lanza continued to work as a State Farm agent and receive 'service compensation' (renewal commissions) on policies that were originally written during the marriage.
Procedural Posture:
- Louis Lanza and Vicki Coudrain were unable to agree on the partition of community property following their divorce.
- After a three-day trial, the trial court ruled in favor of Mr. Lanza, finding the State Farm agency was not property subject to partition and that Ms. Coudrain had no interest in income Mr. Lanza earned after the divorce petition was filed.
- Ms. Coudrain appealed to the Louisiana Fourth Circuit Court of Appeal.
- The court of appeal affirmed the trial court's ruling that the agency was not property, but it reversed the ruling on post-divorce income, finding Ms. Coudrain was entitled to a portion of the renewal commissions and remanded the case.
- Both Ms. Coudrain and Mr. Lanza filed writ applications to the Supreme Court of Louisiana, which granted both and consolidated the cases.
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Issue:
Are renewal commissions received by an insurance agent spouse after the termination of the community, on policies written during the community, considered community property to the extent they are attributable to the agent's labor during the community?
Opinions:
Majority - Justice Victory
Yes. Renewal commissions received after the termination of the community are considered community property to the extent they are the result of the effort, skill, or industry of the agent spouse during the community. While the State Farm agency itself is not a community asset because the agent agreement grants Mr. Lanza no ownership rights, the right to compensation for work performed during the community is a community asset. Citing La. C.C. art. 2338, the court reasoned that 'property acquired' during the community includes the right to payment for work done, regardless of when the payment is actually received. The court followed its recent precedent in Ross v. Ross, which established that renewal commissions are, at least in part, the product of the agent-spouse's labor. Therefore, to the extent that post-termination renewal commissions are compensation for work performed during the community, they are subject to partition. The court remanded the case for a factual determination of what portion of the commissions resulted from Mr. Lanza's labor during the community.
Concurring - Justice Johnson
Concurred without a separate written opinion.
Analysis:
This case clarifies the distinction between a personal service contract, like an insurance agency agreement with no transferrable ownership rights, and the income stream it generates. The decision establishes that while the business structure itself may not be a divisible community asset, the earnings attributable to labor during the community are divisible, even if received post-termination. This holding prevents a spouse from being denied a share of deferred compensation earned during the marriage simply because the payment occurs after divorce. It reinforces the principle that the timing of payment is secondary to the timing of the labor that earned it and places a significant evidentiary burden on the spouses to prove the portion of income attributable to community versus separate labor.
