§ 4.06 MANAGEMENT AND DISPOSITION OF COMMUNITY PERSONALTY

• Jurisdiction: Washington

§ 4.06 MANAGEMENT AND DISPOSITION OF COMMUNITY PERSONALTY

Other than property restricted by RCW 26.16.030(5) (community household goods, furnishings, appliances, or a community mobile home), either spouse can manage community personal property assets in any way except to make a gift, for which consent of the other is required by RCW 26.16.030(2). The statute before 1972 did not expressly restrict gifts, but the court did, on the reasoning that it is the responsibility of the spouse to act for community benefit in a business sense. The effectiveness of a donative transaction cannot be established through a presumption of consent by the other spouse. Sun Life Assurance Co. of Canada v. Outler, 172 Wash. 540, 20 P.2d 1110 (1933). The statute codifies that position. An improper gift transaction is void ab initio. In re Estate of Yiatchos, 60 Wn.2d 179, 373 P.2d 125 (1962), rev'd in part on other grounds, vacated in part sub nom. Yiatchos v. Yiatchos, 376 U.S. 306, 84 S. Ct. 742, 11 L. Ed. 2d 724 (1964); see also In re Marriage of Schweitzer, 132 Wn.2d 318, 937 P.2d 1062 (1997). But see Hanley v. Most, 9 Wn.2d 429, 470-71, 115 P.2d 933 (1941) (suggesting that there is a de minimis exception to this rule because "the law does not concern itself with trifles"). In Schweitzer, the court concluded that the wife's use of community property to pay for the education of her son from a previous marriage was a gift that was not consented to and was therefore reimbursable to the community.

[1] Damaging Community Household Goods by a Spouse

Under State v. Webb, 64 Wn. App. 480, 824 P.2d 1257, review denied, 119 Wn.2d 1015 (1992), a criminal prosecution will lie against a separated husband who in the wife's absence vandalizes community household goods. The wife has a possessory, proprietary interest in them, without reference to the restriction of RCW 26.16.030(5). In State v. Coria, 146 Wn.2d 631, 48 P.3d 980 (2002), the court held that a husband who had damaged community property during a fight with his wife could be prosecuted for malicious mischief, because the wife's interest in community property satisfied the requirement in the statute that the damage be done to property of another.

RCW 48.18.550, first enacted in 1998, provides, among other provisions, that an insurer cannot deny coverage for loss caused by domestic abuse of another insured.

[2] Life Insurance

Transactions that are not sales are not automatically classified as gifts. Thus, surrender of a life insurance policy for its cash value, even though it may be unwise, is not a gift and does not require participation of both spouses. Page v. Prudential Life Ins. Co., 12 Wn.2d 101, 120 P.2d 527 (1942). A pledge of a community life insurance policy in exchange for credit is not a proscribed gift. Seattle Ass'n of Credit Men v. Bank of Cal., 177 Wash. 130, 30 P.2d 972 (1934). The policy itself, of course, could be the subject matter of a gift. See, e.g., Kern v. United States, 491 F.2d 436 (9th Cir. 1974); Livingston v. Shelton, 85 Wn.2d 615, 537 P.2d 774 (1975), cert. denied, 424 U.S. 958 (1976). The courts formerly held that a designation of a beneficiary of life insurance proceeds by the insured spouse without consent of the other spouse amounted to an ineffective inter vivos gift. The quasi-testamentary quality of the act has now been held to remove it from the statutory restriction. See Francis v. Francis, 89 Wn.2d 511, 573 P.2d 369 (1978).

[3] Gift of Credit

Although the gift of credit is ineffective to create a community liability, there being no community benefit, it is effective to create a separate liability of the acting spouse. Nichols Hills Bank v. McCool, 104 Wn.2d 78, 701 P.2d 1114 (1985).

[4] Creation of Joint Account With Third Party

An attempt by one spouse, using community funds, to create a joint tenancy bank account with a third person will fail as an unauthorized gift. See Munson v. Haye, 29 Wn.2d 733, 189 P.2d 464 (1948). Adding a partner to an existing community business, however, does not necessarily amount to a gift of the community share in the business. Fields v. Andrus, 20 Wn.2d 452, 149 P.2d 313 (1944).

[5] Negotiable Instruments

If the community asset is a negotiable instrument, only the named payee or endorsee may "negotiate" it under the provisions of the Uniform Commercial Code, RCW 62A.3-201. Either spouse may bring suit on the instrument, however, and, in most instances, may otherwise deal with the instrument. RCW 4.08.030; 26.16.030. If the spouses are joint payees or endorsees of a community property negotiable instrument, the signatures of both are necessary to "negotiate" it. It should be noted that before 1972, when the wife had no statutory managing power, she nevertheless had the power to negotiate a promissory note in which she was the payee, by reason of commercial necessity. Castor v. Peterson, 2 Wash. 204, 26 P. 223 (1891). In Nance v. Woods, 79 Wash. 188, 140 P. 323 (1914), the court held that the wife could maintain an action to foreclose a real estate mortgage that secured payment of a promissory note given to her in her own name even if the note was community property. Under current law, the same result would be reached. RCW 4.08.030.

[6] One Spouse Acting Where Joinder Required

There is no inherent limitation upon the management powers of the spouses acting jointly. occasionally, one spouse alone purports to enter into a transaction for which joint action is required. Not all such transactions can be defeated by...