§41.04 Postnuptial or Post-Domestic-Partnership-Registration Obligations for Contractual and other Nontort Obligations

• Jurisdiction: Washington

§ 41.04 POSTNUPTIAL OR POST-DOMESTIC-PARTNERSHIP-REGISTRATION OBLIGATIONS FOR CONTRACTUAL AND OTHER NONTORT OBLIGATIONS

Debt acquired after marriage or state registration of domestic partnership is presumptively community in character. In re Marriage of Hurd, 69 Wn. App. 38, 54-55, 848 P.2d 185, review denied, 122 Wn.2d 1020 (1993); RCW 26.60.015. Either community member is authorized to manage and control community property. RCW 26.16.030. The acting community member is liable individually for debt incurred, and as long as the actions are taken in good faith and in the best interest of the community, the community is bound as well. In re Marriage of Chumbley, 150 Wn.2d 1, 6, 74 P.3d 129 (2003). Where the noncontracting member offers an independent promise of some sort, he or she, too, becomes liable. U.S. Lumber Co. v. McDonald, 68 Wn.2d 741, 745-46, 415 P.2d 77 (1966).

To bind the community, there need not be an actual profit or benefit to the community; there only needs to be a potential benefit for the community. Brubaker v. Hovde, 45 Wn. App. 44, 723 P.2d 1193 (1986). The presumption of a community benefit must be overcome by clear and convincing evidence. In re Marriage of Manry, 60 Wn. App. 146, 803 P.2d 8 (1991).

When funds are borrowed for separate property purposes, the characterization of ownership of funds between spouses does not control the character of the debt. Rather, the expectation of the creditor will control. Auernheimer v. Gardner, 177 Wash. 158, 31 P.2d 515 (1934). The same rule controls for mortgages. Beam v. Beam, 18 Wn. App. 444, 569 P.2d 719 (1977), review denied, 90 Wn.2d 1001 (1978). Money borrowed by either spouse during marriage is presumed to be community in nature, regardless of the character of the property pledged for security. Marriage of Hurd, 69 Wn. App. 38.

MARRIAGE OF MANRY, 60 Wn. App. 146, 803 P.2d 8 (1991). In Manry, the court held the wife separately responsible for her personal credit card purchases. There, wife had exclusive control of the records but withheld them, denying the husband the ability to meet his burden of proof that the debt was not for a community purpose.

Practice Tip: The presumption of community debt cannot be used capriciously against the other member of the community. When evidence regarding the community nature of a debt is solely within the control of one party, counsel for that party should take all possible steps to secure the requested records. Although the divorce court's assignment is not binding on a creditor, nondisclosure assumes the risk of being characterized as separate with the sole liability for the debt being assigned as well.

There are five areas that provide exceptions to the case law holding that the nonacting community member does not bear separate liability for the actions of the acting community member. These exceptions might apply when joinder is required pursuant to RCW 26.16.030; for taxes; when the family expense statute, RCW 26.16.205, applies; for torts; and when there is a valid agreement between community members.

[1] Transactions Requiring Joinder Pursuant to RCW 26.16.030(3), (4), and (5)

Although either spouse acting in the best interest of the community is authorized to manage and transfer community personal property, Marriage of Chumbley, 150 Wn.2d at6, certaintransactions involving community property require joinder. RCW26.16.030(3), (4), and (5).

Specifically, joinder is required

1. to give community property, RCW 26.16.030(2).
2. to sell, convey, or encumber community real property, RCW 26.16.030(3);
3. to purchase or contract to purchase community real property, RCW 26.16.030(4);
4. to sell, convey, or encumber community household goods, furnishings, appliances, or a community mobile home, RCW 26.16.030(5); and
5. to acquire, sell, convey, or encumber community business assets when both spouses or state registered domestic partners participate in the management of the business, RCW 26.16.030(6).

When joinder is required, conduct showing "participation" or "ratification" by the other spouse will satisfy the joinder requirement. Klaas v. Haueter, 49 Wn. App. 697, 700, 745 P.2d 870 (1987). The burden is on the community to rebut this basic presumption by clear and convincing evidence. Pac. Gamble Robinson Co. v. Lapp, 95 Wn.2d 341, 344, 622 P.2d 850 (1980).

When the signatures of both community members appear, each signature creates a separate obligation as well as a presumptive community obligation. Separate liability exists for the acting community member despite any lack of benefit to the separate estate. Colo. Nat'l Bank of Denver v. Merlino, 35 Wn. App. 610, 668 P.2d 1304, review denied, 100 Wn.2d 1032 (1983).

[a] Protection to the Community Absent Joinder or Ratification

The purpose of the joinder requirement is to shield the community and nonacting community member from improvident transfers or encumbrances by one community member acting alone. Taylor Distrib. Co. v. Haines, 31 Wn. App. 360, 641 P.2d 1204 (1982). If both community members do not "join" or "participate" in the transaction, the nonjoining member has the power to disaffirm the transaction. Consumers Ins. Co. v. Cimoch, 69 Wn. App. 313, 323, 848 P.2d 763 (1993). Lack of joinder results in a voidable transaction, not a void transaction. The power of avoidance is held by the nonjoining party only. Taylor Distrib. Co., 31 Wn. App. 360.

[b] Protection to Creditors When There Is Authorization or Ratification

The statute requiring joinder may not be used as a sword. Protection is provided to creditors on the basis of participation that takes the form of authorization, ratification, or estoppel. If participation exists, a...