250_C027

---

PROPERTY MANAGER STOLE RENTAL PAYMENTS
BUT HER HUSBAND WAS ALSO RESPONSIBLE FOR DEBT

---

Masur-Dean Properties (Masur) operated 85 rental apartment units in Monroe, Louisiana. It hired Malissa Pennington (Malissa) as its property manager in April 1999. In that capacity, she prepared leases, accepted rental payments and security deposits, recorded receipt of funds collected and bank deposits in a bookkeeping computer program, deposited those funds in the bank and prepared records of receipts for Masur's Certified Public Accountant (CPA).

While preparing taxes for Masur in March 2002, the CPA disclosed that revenues had decreased, despite expenses remaining steady. After an independent CPA audit, it was determined that $54,350 had been misappropriated. After independently verifying that the funds had been stolen, Masur's insurer, Lafayette Insurance Company (Lafayette), paid Masur the $50,000 employee dishonesty limit on its policy and then sued Malissa and her husband Benny.

The trial court held that the Penningtons were liable in solido (each being liable for the entire amount, as in joint and several) for $50,000 to Lafayette, $4,350 to Masur, expert fees amounting to $8,258.75 and attorneys' fees. It based its decision on the direct evidence that included receipts Malissa signed in addition to testimony by tenants that they personally paid Malissa in cash and received those receipts. However, the independent CPA audit confirmed that the data from the bookkeeping computer program and bank records did not show any cash received, recorded or deposited that correlated with those receipts in Masur's account by Malissa or anyone else. Rental properties indicated as vacant were actually lived in by tenants who paid cash. Suspicions surfaced when the receipt book with rental payment information disappeared soon after Malissa left Masur. In addition, Malissa acknowledged that she was solely responsible for taking rental payments and that she was aware of Masur's "no cash" policy. If another employee had taken funds that were not attributed to the correct tenant account, Malissa would have pursued those tenants because they did not pay their rent. The Penningtons appealed.

The Penningtons sole argument on appeal was that insufficient evidence was introduced at trial to determine with certainty who was responsible for the missing funds. They argued that several people knew about and had access to the funds that were deposited at the property manager's office. They also argued that Benny neither had access to the funds nor benefited from the alleged misappropriation. Lafayette contended that the evidence was overwhelming that Malissa stole the funds and that both she and Benny were liable in solido, since the funds benefited both of them.

The appellate court agreed with Lafayette for all the reasons indicated above. It cited Louisiana Civil Code that stated that fraud is a misrepresentation or a suppression of the truth made with the intention to either obtain an unjust advantage for one party or to cause a loss or inconvenience to another. Fraud is proved by a preponderance of evidence and may be established by circumstantial evidence. The appellate court also agreed with the trial court that Benny was also responsible for Malissa's debt, in solido. It stated that an obligation incurred by a spouse during the existence of a community property regime for the common interest of the spouses or for the interest of the other spouse is a community obligation. While Benny may not have known of Malissa's illegal activity, he was responsible for the monetary damages incurred by her fraudulent behavior. The judgment of the trial court was affirmed and the costs of the appeal charged to the Penningtons.

Court of Appeal of Louisiana, Second Circuit. Lafayette Insurance Company, Plaintiff-Appellee, v. Malissa and Benny Pennington, Defendants-Appellants. No. 42,434-CA. Sept. 19, 2007. 966 So.2d 136.