In Good Times and in Debt: the Evolution of Marital Agency and the Meaning of Marriage

• Publication year: 2021

87 Nebraska L. Rev. 373. In Good Times and in Debt: The Evolution of Marital Agency and the Meaning of Marriage

In Good Times and in Debt: The Evolution of Marital Agency and the Meaning of Marriage

Marie T. Reilly(fn*)

TABLE OF CONTENTS

I. Introduction ............................................ 373 R
II. The Effect of Married Women's Property Reform on
Creditor's Rights Against Married People................. 376 R
III. Spouses' Responsibility for Each Other Under Modern
Marriage ................................................ 397 R
A. Status-Based Shared Liability ........................ 399 R
B. Imputed Liability .................................... 403 R
IV. The Effect of Change in Marriage on Marital Agency:
Some Observations........................................ 413 R
V. Conclusion............................................... 419 R

I. INTRODUCTION

A person's liability for the debts his or her spouse was once an invariable attribute of marital status. Two individual persons merged into one legal persona. The husband managed the legal persona and acted as the exclusive agent for both spouses.(fn1) Today, marriage is

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more like partnership than merger.(fn2) Married persons hold property and incur liability together but also remain distinct individuals. A spouse may incur liability on her own behalf or as an agent for the other.

In many situations, whether a married person is financially responsible for her spouse's debt is a simple question of personal liability under contract or other law. Suppose one spouse wants to buy a motorcycle on credit. If the other spouse co-signs the loan, both spouses are directly liable to the creditor, even though only one of them rides the motorcycle and even though they think of the loan as solely his responsibility. In some situations, one spouse becomes liable for the other not by consent but rather by imputation. Suppose a married person defrauds a business associate and becomes liable in tort. If the tortfeasor acted as agent for the other spouse or on behalf of their marital partnership, then the other spouse is liable by imputation.

Consider what is at stake in imputed marital liability cases. Imputation spreads liability from one spouse to both. The pool of assets available to satisfy the creditor's claim also expands to include the other spouse's property.(fn3) This expansion is important when the directly liable person is insolvent.(fn4) The other spouse and the creditor both have a powerful argument against the debtor that they should not be responsible for his conduct. But his insolvency inescapably requires one of them to bear it.(fn5) If the other spouse loses her property to

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the creditor, she acquires a right of reimbursement against the insolvent spouse and his insolvency becomes her problem. On the other hand, a finding that a directly liable spouse acted solely as an individual protects the other spouse and her assets from risk of loss to his creditor. His creditor ends up with all the loss while the other spouse bears none.

Under what circumstances should one spouse's liability be the other spouse's problem? Today, married people can to some extent set the scope of their shared marital enterprise and their financial responsibility for each other by agreement.(fn6) Imputed liability, however, is a legal construct imposed on the couple without their consent, at a creditor's request. It is generally beyond the couple's power to control by private agreement.(fn7)

This Article explores the historical and modern role of marital agency law in defining a critical aspect of what it means to be married the scope of spouses' imputed liability for each other to third parties. Part II explains how the emergence in the nineteenth century of married women's legal capacity was driven in part by demand for a reliable legal mechanism to shield assets invested in marriage from the claims of husbands' creditors. Part III considers the scope of marital agency and shared liability under the modern view of marriage as a voluntary partnership among equals, terminable at the will of either. Spouses' financial responsibility for each other to third parties varies widely among jurisdictions. The variety reflects differences in spousal property rights among marital community and non-community property regimes. It also reveals the absence of a consistent theory of the scope of shared risk and reward relative to spouses' individuality within marriage. Part IV offers an explanation for the persistent complexity of the law governing creditors' rights against married people. Even in the context of divorce, in which the partnership metaphor is most robust, we lack consensus on the legal effect of

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marriage on a couple's legal relationship with each other. This void complicates not only divorce but also the related question of the scope of spouses' shared responsibility to third party creditors during their marriage. Despite the daunting complexity of marital agency law, it is a mirror of judicial and legislative attitudes about the balance between public and private regulation of intimate relationships. And, it is an undeniably powerful instrument of social policy.

II. THE EFFECT OF MARRIED WOMEN'S PROPERTY REFORM ON CREDITORS' RIGHTS AGAINST MARRIED PEOPLE

Until reform in the nineteenth century, marriage created an aggregate of two individuals dominated by one of them. Under this theory of marital unity, the husband owned and controlled nearly all the couple's wealth.(fn8) As a legal and practical matter, married women were isolated from market activity. Without legal capacity or property of their own, married women were hardly worth creditors' attention. Only husbands could become liable to a creditor. Creditors enjoyed recourse to the full extent of his property, which included interests he acquired from his wife by virtue of marriage.

Although, in theory, a married woman lacked legal capacity as an individual,(fn9) she existed as a legal person for some purposes. She could act as an agent for herself and her husband in emergencies, such as "when her husband [was] imprisoned for life or for years, or [had] fled the country or been exiled."(fn10) Moreover, married women enjoyed derivative legal capacity as retail consumers. A married woman could bind her husband and the wealth he controlled by a contract for "necessaries" as if he had incurred the obligation directly.(fn11) To reconcile the legal construct of marital unity of person with the doctrine of necessaries, courts commonly explained a husband's indirect liability for necessaries as a corollary of a husband's common law duty to sup-

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port his wife.(fn12) A wife's legal agency for her husband lurked unmistakably. Whether a particular debt was for "necessaries" depended on the economic circumstances and expectations of the particular couple, rather than an inflexible standard based on wives' minimal expectation of support.(fn13)

During the early nineteenth century, social and economic change became a dominant theme in Americans' lives.(fn14) Families increasingly encountered entrepreneurial and tort liability, presenting a range and magnitude of risk far greater than consumer debt for necessaries.(fn15) The wage labor force grew and families grew increasingly dependent on income without the safety net of a real property portfolio. Change in the type and level of risk facing families affected their

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economic organization in a way that made change in marital law inevitable.(fn16)

At the time, however, marital law was highly inflexible. Under the Blackstonian theory of marriage as merger, a husband could incur debt only as an agent for his marriage and not as an individual.(fn17) Nor could he easily segregate "marital" wealth into a distinct asset pool shielded from risk of loss from his creditors. Married couples needed a low cost, accessible, and reliable way for one of them to take risk without exposing all their wealth to creditors.

The first response was judicial. Courts recognized limited, equitable property rights for married women as a means of segregating family wealth from the husband's creditors. By the beginning of the nineteenth century, a couple with legal advice could opt-out of a prospective husband's marital prerogative over a wife's property rights by conveyance of property (typically by her father or her husband) to her "separate estate" established via an express or implied trust for her benefit.(fn18) Even without agreement between the spouses, in response to foreclosure, some courts reserved a priority equitable interest for a married woman in personal property she owned prior to, or inherited during, marriage.(fn19) The sole purpose of recognizing priority for a

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wife's equitable interest in property was to protect it from seizure by the husband's creditors. A married woman continued to have no legal right to manage any property, including property attributed to a trust for her benefit, except as provided expressly in the trust.(fn20)

The manipulation of property rights to protect some of a married couple's property interests from market risk was not a new idea.(fn21) In the colonial period, some American jurisdictions had adopted the English common law joint marital estate, tenancy by the entirety, as a device for segregating family wealth from the claims of creditors.(fn22) Blackstone explained that because husband and wife were one person under the law, they could not hold property jointly in a true concurrent estate, but only "by the entireties."(fn23) The wealth-shielding effect of estate by the entirety is analogous to that of an equitable separate estate. A husband cannot alienate or encumber it unilaterally. Nor could a creditor of only one spouse partition property held by the entirety by foreclosure during...