Lessie Oliver Hatsfelt v. Ronald Vernon Hatsfelt

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

05-0947

LESSIE OLIVER HATSFELT

VERSUS

RONALD VERNON HATSFELT

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APPEAL FROM THE
THIRTY-THIRD JUDICIAL DISTRICT COURT,
PARISH OF ALLEN, NO. C-2003-352,
HONORABLE PATRICIA C. COLE, DISTRICT JUDGE

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JIMMIE C. PETERS
JUDGE

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Court composed of Jimmie C. Peters, J. David Painter, and James T. Genovese,
Judges.

REVERSED AND RENDERED.

Elizabeth A. Dugal
Attorney at Law
Post Office Box 2885
Lafayette, LA 70502-2285
(337) 237-2535
COUNSEL FOR PLAINTIFF/APPELLANT:
Lessie Oliver Hatsfelt

Judi F. Abrusley
Attorney at Law
Post Office Drawer 1114
Oakdale, LA 71463
(318) 335-9771
COUNSEL FOR DEFENDANT/APPELLEE:
Ronald Vernon Hatsfelt

PETERS, J.

Lessie Oliver Hatsfelt appeals a portion of the trial court judgment partitioning

the community of acquets and gains previously existing between herself and her

former husband, Ronald Vernon Hatsfelt, wherein she was ordered to pay her former

husband an equalizing payment of $6,925.34. For the following reasons, we reverse

that portion of the trial court judgment at issue and render judgment changing the

equalizing payment by ordering Ronald Vernon Hatsfelt to pay his former wife the

sum of $17,027.70 as an equalizing payment.

DISCUSSION OF THE RECORD

Lessie Oliver Hatsfelt (Lessie) and Ronald Vernon Hatsfelt (Ronald) were

married on October 18, 1966, and separated for the last time in November of 2002.

On June 17, 2003, Lessie filed a petition seeking a divorce and other relief. After an

August 20, 2003 hearing, the trial court rendered judgment granting Lessie a divorce,

partially allocating the use of certain community properties and the payment of

certain community obligations, and enjoining either party “from alienating,

encumbering, mortgaging or otherwise disposing of the community property.” The

trial court reduced this judgment to writing on October 16, 2003.

After the divorce judgment, and after Lessie filed a number of other pleadings

addressing discovery issues, Ronald filed a petition to judicially partition the

community of acquets and gains. The trial court conducted a three-day trial

addressing the partition issues beginning October 26, 2004, and, after completion of

the evidence, took the issues under advisement. On February 7, 2005, the trial court

issued written reasons for judgment wherein it assigned the various assets and

liabilities to the individual parties and reconciled the assignments by ordering that

Lessie pay Ronald an equalizing payment of $10,725.34. On the same day, the trial

court signed a judgment incorporating its written reasons for judgment.

Lessie then filed a motion for new trial, which the trial court granted for the

purpose of reargument only. After the April 19, 2005 hearing on the motion, the trial

court issued additional reasons for judgment and a new judgment which, among other

things, reduced Lessie’s equalizing payment to $6,925.34. In her sole assignment of

error on appeal, Lessie asserts that the trial court erred in requiring her to pay an

equalizing payment because it erred in awarding Ronald reimbursement for certain

post-community debts described as follows:1

1. A $4,000.00 obligation to Bruce Jones as evidenced by a
promissory note executed by Ronald in that amount, dated
September 3, 2003, and made payable to Bruce Jones. (Balance
awarded—$4,000.00.)

2. A $15,000.00 obligation to Ronald Shelton Hatsfelt, Ronald’s
son, as evidenced by a promissory note executed by Ronald in
that amount, dated November 3, 2003, and made payable to
Ronald Shelton Hatsfelt. (Balance awarded—$13,444.00.)

3. A $7,000.00 obligation to Rush Mortgage Investment Company
(Rush Mortgage) as evidenced by a promissory note executed by
Ronald in that amount, dated May 26, 2004, and made payable to
Rush Mortgage. (Balance awarded—$6,462.08.)

4. A $7,000.00 obligation to MBNA Platinum Plus MasterCard
(MBNA MasterCard) as evidenced by a cash withdrawal by
Ronald on the MBNA MasterCard in that amount on September
13, 2004. (Balance awarded—$7,000.00.)

5. A $7,000.00 obligation to Chase Platinum MasterCard (Chase
MasterCard) as evidenced by a cash withdrawal by Ronald on the
Chase MasterCard in that amount on September 14, 2004.
(Balance awarded—$7,000.00.)

1
In her appellate brief and at oral argument, Lessie brought up other issues involving pre-
community termination issues. However, she did not assign these as assignments of error and we
will not consider them.

2

6. A February 4, 2004 written agreement by Ronald to pay Judi
Abrusley, attorney at law, $5,000.00 for legal representation in a
dispute over parish sales tax. (Balance awarded—$5,000.00.)

7. A January 7, 2004 written agreement by Ronald to pay Judi
Abrusley, attorney at law, $5,000.00 for legal representation in
defending him in a civil tort matter. (Balance
awarded—$5,000.00.)

The post-separation operation of a family restaurant gave rise to the

reimbursement issues set forth above. The evidentiary record establishes that, for

over ten years before their separation, Lessie and Ronald owned and operated a

restaurant in Oakdale, Louisiana. In September of 1999, they changed restaurant

locations when the Hardwood Mill Restaurant located on Louisiana Highway 10

became available for purchase. Prior to that time, they operated a restaurant on U.S.

Highway 165. Although Lessie worked in both restaurants from time to time, Ronald

ran the day-to-day operation, and, when the parties separated, he continued its

operation. Lessie did not work in the restaurant at all after their November 2002

separation.

Lessie testified at trial that she was not aware of any debts on the restaurant

when she and Ronald separated and that, prior to the separation, their financial

obligations were current. Additionally, she testified that, before the separation, the

restaurant operating expenses and some personal travel expenses were paid from the

restaurant checking account, but all personal financial obligations, with the exception

of some household supplies and groceries supplied through the restaurant, were paid

separate from the restaurant. Ronald did not dispute her testimony in this regard, but

testified that he changed the procedure after the parties separated and began paying

everything, business and personal, through the restaurant account.

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The five loans at issue total $40,000.00, and they as well as the $10,000.00

attorney fees commitment were all consummated between September 3, 2003, and

September 14, 2004, or within a period of slightly over one year. Ronald testified

that he deposited the $40,000.00 into the restaurant operating account and used it to

pay restaurant obligations. Concerning the attorney representation, Ronald testified

that it was necessary to protect the restaurant business in two separate legal matters.

However, at trial, he had yet to pay anything on the attorney fee obligations.

In support of his testimony with regard to the loans, Ronald offered the

following documentary evidence:

1. Bruce Jones $4,000.00 obligation—A copy of the promissory
note and a copy of a $4,000.00 check both dated September 3,
2003, drawn on the account of Cotton’s Heating & Cooling, and
made payable to Ronnie Hatfelt; and a copy of a deposit slip from
First Federal Savings and Loan Association (First Federal) dated
September 8, 2003, purporting to include the $4,000.00 as a part
of a deposit into the restaurant operating account.

2. Ronald Shelton Hatsfelt $15,000.00 obligation—A copy of the
promissory note dated November 3, 2003; a copy of a $15,000.00
United States Treasury check dated October 30, 2003, made
payable to Ronald Hatsfelt; and a copy of a deposit slip from First
Federal dated November 3, 2003, purporting to include the
$15,000.00 as a part of a deposit into the restaurant operating
account.

3. Rush Mortgage $7,000.00 obligation—A copy of the promissory
note (described as a promissory note, truth-in-lending disclosure
statement, and security agreement); a copy of a $7,000.00 check
dated May 26, 2004, drawn on the account of Rush Mortgage and
made payable to Ronnie Hatsfelt; and a copy of a deposit slip
from First Federal dated June 1, 2004, purporting to include the
$7,000.00 as a part of a deposit into the restaurant operating
account. The promissory note lists two recliners, a 46-inch RCA
big screen television, an RCA satellite system, and a satellite dish
as security for the transaction.

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4. Copy of a MBNA MasterCard statement bearing a September 22,
2004 closing date which reflects a $7,000.00 cash debit to the
account on September 16, 2004.2

5. Copy of a Chase MasterCard statement bearing a September 23,
2004 closing date which reflects a $7,000.00 cash debit to the
account on September 14, 2004, and a copy of a deposit slip from
First Federal dated September 13, 2004, purporting to include the
$7,000.00 as a part of a deposit into the restaurant operating
account.

In support of his testimony with regard to the attorney fees, Ronald offered the

following documentary evidence:

1. Copy of an attorney/client contract of employment dated January
7, 2004, wherein Ronald agreed to retain Judi F. Abrusley,
attorney at law, to represent the restaurant in litigation involving
a tort claim against the restaurant. The contract provides that
Ronald agreed to pay the attorney $5,000.00 as a non-refundable
initial fee and agreed to do so “prior to the commencement of
trial.”

2. Copy of an attorney/client contract of employment dated February
4, 2004, wherein Ronald agreed to retain Judi F. Abrusley,
attorney at law, to represent the restaurant in litigation involving
Allen Parish sales and use tax. The contract provides that Ronald
agreed to pay the attorney $5,000.00 as a non-refundable initial
fee.

In her appeal, Lessie asserts that the trial court erred in classifying these

obligations as community debts because Ronald failed to prove by a preponderance

of the evidence that these debts were even incurred. Additionally, even assuming

their existence, Lessie asserts that they should not have been credited to the

community because they were incurred after dissolution of the community of acquets

and gains and were incurred in violation of the temporary restraining order issued by

the trial court.

2
Ronald’s brief suggests that the record also contains the corresponding deposit slip from
First Federal Savings and Loan Association purporting to show that the funds were deposited into
the restaurant account. However, our review of the record does not reveal that deposit slip.

5

OPINION

The community of acquets and gains previously existing between Lessie and

Ronald terminated on June 17, 2003, the day Lessie filed her petition for divorce. See

La.Civ.Code art. 159. Thus, the transactions at issue were not community

transactions, and the trial court erred in classifying them as such. However, the fact

that the debts at issue arose after termination of the community of acquets and gains

does not automatically disqualify Ronald from seeking reimbursement of one-half of

the amounts if they were incurred while fulfilling his duty under La.Civ.Code art.

2369.3 to preserve the former community property under his control. That Article

provides:

A spouse has a duty to preserve and to manage prudently former
community property under his control, including a former community
enterprise, in a manner consistent with the mode of use of that property
immediately prior to termination of the community regime. He is
answerable for any damage caused by his fault, default, or neglect.

A community enterprise is a business that is not a legal entity.

Additionally, this court noted in Kline v. Kline, 98-1206, p. 5 (La.App. 3 Cir.

2/10/99), 741 So.2d 670, 673:

The comments to Article 2369.3 explain that unlike ordinary co-
owners, this article imposes a higher and affirmative duty of care for the
management of former community property since the presumption that
a spouse will act in the best interest of the community no longer exists.
Additionally, Comment (f) recognizes the entitlement that La.Civ.Code
art. 806 grants, to-wit: “[a] spouse who incurs expenses in compliance
with the obligation imposed by this Article is entitled [to]
reimbursement for one-half the costs in accordance with general
principles of the law of co-ownership.” Article 806 provides, in
pertinent part, the following:

A co-owner who on account of the thing held in
indivision has incurred necessary expenses, expenses for
ordinary maintenance and repairs, or necessary
management expenses paid to a third person, is entitled to

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reimbursement from the other co-owners in proportion to
their shares.

Thus, as a co-owner in possession and control of the former community property,

Ronald was burdened with the duty to prudently preserve and manage the restaurant

operation and was entitled to reimbursement for one-half of any expenditures made

in compliance with that duty.

With regard to the five loans at issue, Ronald offered the exhibits previously

described and testified that he used the funds to pay various restaurant debts.3 He did

not specify which debts were paid by the first two loans, but suggested that the Rush

Mortgage loan was used to pay for past-due rent in the amount of $6,000.00 and that

the remaining $1,000.00 was used to pay other undisclosed restaurant expenses. The

two credit card withdrawals, according to Ronald, were used to pay past-due light and

water bills.

Although the evidence does establish that Ronald deposited the proceeds of

those loans into the restaurant’s operating account, we find that the evidence is

woefully inadequate to establish that Ronald used the proceeds to pay any particular

restaurant obligation. In fact, his testimony with regard to the ultimate use of the

money is self-serving, unsupported by the record, and totally inconsistent with his

own filings.

After he assumed sole operation of the restaurant and began paying all of his

personal bills from the restaurant account, Ronald ceased keeping the cash register

receipts as a record of the actual daily income and began taking cash from the

3
Although he presented no records to support his testimony, Ronald testified that the
restaurant debts paid by the loan proceeds included at various times rent ($1,500.00 per month),
electricity ($1,400.00 to $1,900.00 per month), gas and water ($600.00 to $700.00 per month), food
and supplies ($2,200.00 per week), and telephone ($237.00 per month).

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restaurant proceeds on a regular basis. These acts made it impossible for anyone to

trace the restaurant income with any degree of accuracy. Kimberly Gardener, a

Lafayette, Louisiana certified public accountant who was retained by Lessie to place

a value on the restaurant, testified that when she examined Ronald’s 2003 tax return,4

she could not reconcile it with the bank statements provided to her and found the

supporting records to be totally inadequate and inconsistent. When questioned at trial

about the discrepancies in the records and the lack of records in general, Ronald

simply stated that he was not very good at keeping records. In fact, Ronald

acknowledged at trial that he had no evidence to establish which restaurant debts

were paid by the loans.

Ronald used basically the same logic in failing to respond to Lessie’s discovery

requests. On June 26, 2003, Lessie began propounding discovery requests in the form

of interrogatories and requests for production to Ronald, seeking to obtain

information with regard to the operation of the restaurant. These were followed with

additional requests in both November and December of 2003, and Ronald either

partially complied with or ignored completely the discovery requests. When

questioned concerning certain requested bank records which he did not provide in

response to discovery, he simply responded that he did not believe he had to produce

them. Ronald took the same attitude with regard to the October 16, 2003 judgment

enjoining him from mortgaging the community property as he used community

property as security for the Rush Mortgage loan.5

4
Ms. Gardener also examined the couple’s tax returns from 1998 through 2002, but the 2003
return was the first individual return filed by Ronald after the separation.
5
The loan document lists two recliners, a 46- inch television, a satellite system, and a satellite
dish as security for the loan. These items are listed on both Ronald’s and Lessie’s detailed
descriptive lists as community property.

8

Despite Ronald’s inability to document the monthly expenses of the restaurant

and the debts paid by the five loans, he had no difficulty in identifying the community

assets. On June 15, 2004, or the day before he filed his petition to have the

community property partitioned, Ronald executed an eleven-page detailed descriptive

list purporting to identify all of the assets and liabilities of the community.6 In that

detailed descriptive list, he identified three pieces of immovable property and 137

items of movable property as belonging to the community. Additionally, he identified

over twenty community debts, three additional items for which he sought

reimbursement, and five other items for which either he or Lessie were seeking

reimbursement and which were disputed. Notably, he did not mention any of the first

three loans in the detailed descriptive list despite the fact that the Rush Mortgage

transaction had occurred less than thirty days before.7

An appellate court’s review of factual findings of the trial court is governed by

the manifest error/clearly wrong standard. Rosell v. ESCO, 549 So.2d 840 (La.1989).

“[W]here there is conflict in the testimony, reasonable evaluations of credibility and

reasonable inferences of fact should not be disturbed upon review, even though the

appellate court may feel that its own evaluations and inferences are as reasonable.”

Id. at 844. In this case, we do find that the trial court was manifestly erroneous in

accepting Ronald’s unsupported testimony with regard to the payment of restaurant

debts, particularly where Ronald failed to establish the debts purportedly paid. In

reaching this conclusion, we are not unmindful of La.Civ.Code art. 1846, which

requires proof “by at least one witness and other corroborating circumstances” when

6
Ronald filed this detailed descriptive list on August 5, 2004.
7
An expense affidavit executed by Ronald on October 18, 2004, or eight days before trial,
represents the first indication in the record that the loans and attorney fees were the subject of
reimbursement issues.

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the obligation at issue exceeds $500.00. (Emphasis added.) While Ronald did not

specify which restaurant obligations were paid, he implied that all or most were in

excess of $500.00. As we pointed out in Sheridon v. Sheridon, 03-103, p. 12

(La.App. 3 Cir. 2/4/04), 867 So.2d 38, 47, when the debt exceeds $500.00, “[t]he

issue is not one of credibility, but of sufficiency of the evidence.” Given the record

before us, we find merit in Lessie’s assignment of error with regard to the loans at

issue and reverse the allocation of one-half of these obligations to her and allocate all

to Ronald.

Turning to the attorney fees at issue, we find that the trial court erred in

awarding Ronald reimbursement for those amounts as well. As previously stated,

La.Civ.Code art. 2369.3 requires that Ronald preserve and manage the restaurant as

a prudent manager, “in a manner consistent with the mode of use of that property

immediately prior to termination of the community regime.” If he fails in that regard,

he is answerable to Lessie for any damage caused thereby.

Again, the record does not contain sufficient evidence to reconstruct the legal

issues at hand or to determine the current status of either. While the sales tax issue

seems to have arisen before the final separation in November of 2002, Ronald failed

to preserve the records necessary to resolve the issue. Even after Ronald was

instructed by the agency conducting the audit of the business to maintain certain

records, he failed to comply. Additionally, with regard to the alleged tort suit, Ronald

presented no evidence to establish when the act giving rise to the litigation occurred

or when the restaurant ceased to be covered for liability purposes. That is to say, the

record contains no evidence to suggest that the restaurant was operated without

liability insurance protection prior to the termination of the community. Given

10

Ronald’s failure to maintain the appropriate records from which an accurate audit

could be performed, and given the lack of evidence concerning the specifics of the

tort suit, we cannot conclude that Ronald fulfilled his obligation mandated by

La.Civ.Code art. 2369.3, and he should not be allowed to profit from his failure.

DISPOSITION

For the foregoing reasons, we reverse the trial court’s determination that

Ronald Vernon Hatsfelt should be reimbursed one-half of the amounts at issue, or

$23,953.04. In reversing the trial court in this regard, we amend the trial court

judgment to delete the requirement that Lessie Oliver Hatsfelt pay her former husband

an equalizing payment of $6,925.34 and order that Ronald Vernon Hatsfelt pay Lessie

Oliver Hatsfelt an equalizing payment of $17,027.70. We assess all costs of this

appeal to Ronald Vernon Hatsfelt.

REVERSED AND RENDERED.

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