LOLLEY, J.
This appeal arises from a judgment in which the 26th Judicial District Court, Bossier Parish, State of Louisiana, declared certain assets to be community property and awarded credit for such to former husband, Phillip Ray Haley. Former wife, Kathryn Wagner Haley, now appeals certain limited portions of the judgment partitioning the community property. For the following reasons, we reverse the contested portions of the judgment and remand to the trial court to redistribute the assets in accordance with this opinion.
Phillip and Kathryn were married September 10, 1990, and their last marital domicile was in Bossier Parish, Louisiana. On August 10, 2011, Phillip filed a petition for divorce. A subsequent judgment was rendered terminating the community of acquets and gains retroactive to the filing date of the original petition. The parties agreed by consent to most of the partition of the community property. A hearing was held to determine the classification of the currently growing timber on Kathryn's separate property (the "standing timber") and the funds within Citizens National Bank, account number 1906232 (the "bank account"). The trial court found both of the above disputed items to be community property.
During the marriage, in August 2001, Kathryn acquired ownership of an undivided one-half interest in a 120-acre tract of
After the clear cut, the property was reseeded with Loblolly pine trees. According to the testimony of Sam Crawford, consulting forestry expert, standing timber becomes merchantable after approximately 30 years. At the time of trial, the trees on the property were 11 years old and valueless if harvested in that condition. Crawford referred to the trees as being young "pre-merchantable" pines, but testified he used a present-day discounted cash flow analysis to determine that the current value of Kathryn's interest in the standing timber was $66,044.00. His opinion was based on the standing timber becoming merchantable approximately 20 years from the date of trial, and having a future value of $3,000.00 per acre.
The bank account had a balance of $42,816.66 upon the termination of the community property regime. Kathryn's share of the clear cut timber proceeds had been deposited into the bank account. She later received an additional payment from the sale of stumpage, which she presumably deposited in the bank account also. Kathryn testified that the bank account also contained funds from the benefits of both her parents' annuities paid upon their deaths. Funds from the bank account were used to reseed the property and pay for her father's annuity before his death. Kathryn claimed that all funds within the bank account are her separate property, but the trial court found that she failed to overcome the presumption that all property possessed by either spouse during the marriage is community property.
The trial court issued a ruling finding that the standing timber is a fruit of Kathryn's separate property, and as such, community property. It also ruled that the entirety of the funds within the bank account was community property, finding Kathryn failed to prove otherwise. A subsequent judgment pursuant to the ruling was issued in favor of Phillip, and this appeal followed.
In Kathryn's first assignment of error she argues that the trial court erred in classifying the standing timber on her separate property as a "fruit" of the property, and, therefore, community property. We agree.
Tracts of land, with their component parts, are immovables. La. C.C. art. 462. Standing timber is a component part of a tract of land when it belongs to the owner of the ground. La. C.C. art. 463. Typically, standing timber is considered a capital asset, or product, of land unless the timber is managed as a tree farm or regularly exploited forest. Alexander v. Dunn, 44,272 (La.App.2d Cir. 06/03/09), 15 So.3d 302, 304; see, Kennedy v. Kennedy, 1996-0732 (La. 11/25/96), 699 So.2d 351 (on rehearing). Trees in a tree farm or forest are by nature a crop, such as sugar or cotton, rather than a product or a mineral. IP Timberlands Operating Co., Ltd. v. Denmiss Corp., 1993-1637 (La.App. 1st Cir. 05/23/95) 657 So.2d 282.
The natural and civil fruits of the separate property of a spouse, minerals produced from or attributable to a separate asset, and bonuses, delay rentals, royalties,
In concluding that the standing timber was a fruit, the trial court made an erroneous finding of fact that Kathryn's property was a tree farm. Since the fruit of separate property is community property, unless reserved, the trial court's faulty reasoning led to the conclusion that the standing timber was community property. This was in error.
The Louisiana Civil Code articles on ownership specifically address how a court is to determine when standing timber may be treated as a fruit. If the property is not being used as a tree farm then timber is, by default, not a fruit, but a capital asset. The Louisiana Civil Code has established a test to determine when timber may be classified as a fruit. Comment (b) to La. C.C. art. 551 states:
Thus, a finding that standing timber may be classified as a fruit necessarily depends on a finding that a tree farm exists. The code does not define "tree farm," but the Louisiana Supreme Court has set forth some determining factors for making a finding that a tree farm exists in Succession of Doll v. Doll, 593 So.2d 1239 (La. 1992).
In Doll, a father made a disguised donation of property to one daughter before his death, and after his death, the father's other children sought to recover the property through collation. The property consisted of approximately 468 acres, of which 346 acres were naturally seeded forest and timberland and the rest open pasture. Shortly after the donation, a plan was set into motion to ultimately have the property certified as a tree farm. A private forestry consultant was hired, trees were selectively marked and bids were solicited for thinning. After thinning, pine seedlings were planted. After two years under this plan, the property was certified as a tree farming operation under a master management plan by the American Forest Council. The court specifically noted, "Dr. Doll rejected a $103,000 offer to clear cut the remaining timber, evidencing an intention to manage the property to provide sustained income." Id. at 1249.
To define "tree farm" the Louisiana Supreme Court looked at the ordinary meaning of the phrase, and also the commonly accepted definition of professionals within the tree farming industry. In doing so, it stated:
In concluding the Doll property was a tree farm, the court provided:
Most importantly, the Doll court emphasized that a tree farm produces continuous harvests of trees. It implied that "continuous" encompasses a period of five to six years between harvests. Normally, without implementation of proper management techniques the natural time it takes for timber to grow and become merchantable is a lengthy period of time. Selective thinning and replanting provides sustained yields so that the property managed as a tree farm provides continuous proceeds.
Here, the property had been previously unexploited. Kathryn did consult with a forestry expert prior to cutting the trees, and opted to clear cut and reseed the property with pine seeds. The decision to clear cut the property rejected the possibility of implementing a system of thinning and replanting. Further, the clear cut depleted the property, such that it would not be profitable again for another 30 years. As stated, Crawford testified that, at the time of trial, the standing timber on the property consisted of young, pre-merchantable trees, about 11 years old, which would not become merchantable until approximately 2030. Thirty years between harvests is far outside the range of the five to six years contemplated by the Louisiana Supreme Court as "continuous" in terms of determining the existence of a tree farm. The evidence also showed that the property is occasionally looked after by Kathryn's sister's life partner and not professionally managed by a paid forestry consultant. It was never certified as a tree farm, and, while the Louisiana Supreme Court stated that certification is not essential for a finding that a tree farming operation exists, it is a persuasive factor. The property does not qualify as a tree farm under the current binding precedent, and the trial court erred in so finding. Thus, the standing timber may not be considered fruits as stated in comment (b) to La. C.C. art. 551.
If Kathryn's standing timber was not a fruit, then how should it be classified? Unharvested standing timber is a component part of the immovable property on which it stands when the ownership of the land and the timber are united. La. C.C. arts. 462-4. Kathryn's interest in the property, with its component parts, are her separate property.
Consider, Alexander, supra, a suit against co-owners for treble damages under the "timber trespass" statute, in which this court recognized the difficulty of characterizing
Ultimately, the trial court erred in finding that the standing timber on Kathryn's separate property constitutes a fruit, and thus community property, because the Doll factors for determining the existence of a tree farm are not present. We reverse the ruling of the trial court, finding instead that this particular standing timber on the property does not constitute a "fruit" under the law and is Kathryn's separate property.
In her second assignment of error, Kathryn argues the trial court erred in finding that she failed to overcome the presumption of community in proving the bank account was her separate property. The trial court noted that it found Kathryn's testimony confusing and she lacked evidence to show with sufficient certainty that the bank account funds had not been commingled with community funds. The trial court found the $42,816.66 previously held in the bank account to be community in nature, and as such, divisible between the parties.
Things in the possession of a spouse during the existence of a regime of community of acquets and gains are presumed to be community, but either spouse may prove that they are separate property. La. C.C. art. 2340. The party alleging the separate character of the property must establish that the property was acquired and paid for with separate funds by proof that is "fixed, positive and legally certain." Thomson v. Thomson, 34,353 (La.App.2d Cir. 01/24/01), 778 So.2d 736, 740. When separate and community funds are deposited into one bank account, this fact does not convert the entire account into community property. Fulco v. Fulco, 50,256 (La.App.2d Cir. 11/18/15), 183 So.3d 573, 578. Only when separate funds are commingled with community funds indiscriminately so that the separate funds cannot be identified or differentiated from the community funds are all of the funds characterized as community funds. Id.
Louisiana Civil Code article 2341 defines separate property:
Death benefits or proceeds of a life insurance policy with a named beneficiary other than the estate of the insured owner, do not form part of the owner's estate either separate or community, but belong to the validly designated beneficiary. Succession of Jackson, 402 So.2d 753, 756 (La.App. 4th Cir.1981). The owner of the death benefits or proceeds is entitled exclusively to the proceeds when the policy accrues at death. Id. Timber cut from a spouse's separate property has traditionally been classified as separate property. See, 16 La. Civ. L. Treatise, 3:10. Proceeds from the sale of timber located on a spouse's separate property do not fall into the community. Succession of Rugg, 339 So.2d 519, 522 (La.App. 2d Cir.1976), writ denied, 341 So.2d 897 (La.1977).
Evidence at trial indicated that the funds in the contested bank account originated from: the clear cut timber proceeds; death benefits from Kathryn's mother's annuity; and, death benefits from her father's annuity. According to Kathryn's testimony, she deposited the clear cut timber proceeds to into a MetLife annuity for her father in the name of the Wagner Management Trust. When Kathryn's father passed in March 2010, the death benefits from the MetLife annuity were deposited into the bank account. The statements from the bank account cover the period from July 2010 to October 2012. These statements evidence few transactions, and they were as follows:
The trial court found that Kathryn's separate funds became commingled with community funds. In its ruling, the trial court stated, "The evidence served to indicate that a portion of these funds originated from certain community timber proceeds." The finding of fact by the trial court was clearly wrong. The proceeds from the sale of the clear cut timber on Kathryn's separate property did not fall to the community, and, therefore, are properly classified as Kathryn's separate property. Furthermore, Kathryn was a named beneficiary of her parents' annuities, and any benefits received from those policies were her exclusive separate property. There was no commingling of funds, and all the funds in the bank account were clearly Kathryn's separate property. The trial court was manifestly erroneous in finding otherwise.
Kathryn's interest in the standing timber, which was misclassified as a community asset, was valued at $66,044.00. The bank account, also misclassified as community property, contained $42,816.66 at the time when the community regime terminated. These two items are indeed Kathryn's separate property.
For the reasons expressed, the portion of the judgment finding the standing timber and bank account to be community property is reversed, and this case is remanded to the trial court to redistribute the assets in accordance with this opinion.