Another Example of Fraud and Community Property from a Divorce Attorney

In Louisiana, a married couple has what is known as "community property." This basically means that they share equally the things which they earn over the course of the marriage. For example, if two spouses decide to start up and business together, and do so using money which they have earned from their respective jobs, than a divorce attorney is probably going to view it as community property. That said, Louisiana law also permits situations where one spouse has the power to "manage" the community property. This does not change the other spouse's ownership interest in the property; it merely facilitates the ability of the manager spouse to run the property or business in an efficient way. However, the managing spouse should be careful in their decision-making, because they are not only managing their own property, but their spouse's as well.

Take for example Zach and Mary. They have been married for around eight years. A few years ago, they decided to start a used car dealership together. This business venture required a bank loan, which they both co-signed on. After securing the loan, leasing a lot, and buying some used cars, Zach and Mary (who is a paralegal to a divorce attorney) were up and running. Because Zach knew a lot more about cars, and also because he had a great deal more experience in the used car sales industry, the couple decided that Zach would be the "manager" of the dealership. This would allow him to sell the cars without getting Mary's approval for each and every transaction of the business.

As time went by, Zach and Mary's used car dealership became quite successful. In fact, every subsequent year the business seemed to become more profitable. Mary was not always quite sure how Zach managed to do it; especially because many of the other used car dealerships in the area were suffering. She just assumed it was because she had married a very smart business man.

In reality, Zach was making the business profitable through fraud. His modus operandi was to purchase cars from other places that had very high mileage. The high mileage made the cars pretty cheap to purchase. Then, when he got the cars back to the shop, he would turn back the odometers so that it appeared to consumers that they were buying a car with many less miles on it than it actually had.

Eventually, this fraudulent practice caught up to Zach. Somehow or another, some of his old customers were able to figure out what he was doing. They initiated legal proceedings against him, and also got state regulators involved in investigating his deceptive practices. The dealership went belly up. Almost immediately afterwards, Mary hired a divorce attorney.

Under Louisiana Civil Code article 2354, a divorce attorney may hold Zach liable for the fraud and mismanagement of community property, which in this case is the car dealership. This code article is one way that Mary could protect herself from the actions that were taken against a business which, technically, she was part owner. Obviously, this code article wants to protect a spouse from being harmed by the actions of the other spouse, when that other spouse is committing fraud with the community property.

This article is written to be general information only; it should not be taken as legal advice. Will Beaumont. New Orleans.