[WSBAPT] Separate debt - community property question

Wed Jan 29 14:52:38 PST 2020

Eric

Very helpful!!

Thanks!!!

Ron

I AM TYPICALLY IN THE SEATTLE OFFICE ON TUESDAY AND THURSDAY AND IN THE
MOUNT VERNON OFFICE ON MONDAY, WEDNESDAY AND FRIDAY 

Ronald G. Housh, P.S.

Attorney at Law

Seattle Office:

1420 Fifth Avenue, Suite 3000

Seattle, WA 98101-2393

Phone:   206-381-1341

Fax:        206-464-0461

Email:     <mailto:ron at housh.org> ron at housh.org

Mount Vernon Office:

21411 Bluejay Place

Mount Vernon, WA 98274

Phone:  206-235-2459

Email:    <mailto:ron at housh.org> ron at housh.org

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>
On Behalf Of Eric Nelsen
Sent: Wednesday, January 29, 2020 2:38 PM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Separate debt - community property question

Yes, you are definitely right to be concerned.

>From WSBA Community Property Deskbook Ch. 6.2:

The power to create a community obligation also does not require knowledge
on the part of the other spouse. Capital Nat'l Bank v. Johns,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=170+Wash.+250&fn=Washington%20Community%20Property%20Deskbook>
170 Wash. 250,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=16+P.2d+452&fn=Washington%20Community%20Property%20Deskbook> 16
P.2d 452 (1932); Gould v. Culver,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=148+Wash.+689&fn=Washington%20Community%20Property%20Deskbook>
148 Wash. 689,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=270+P.+93&fn=Washington%20Community%20Property%20Deskbook> 270
P. 93 (1928). The obligation must not be a gift. It must be created with the
expectation to produce a "community benefit." Beyers v. Moore,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=45+Wn.2d+68&fn=Washington%20Community%20Property%20Deskbook> 45
Wn.2d 68,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=272+P.2d+626&fn=Washington%20Community%20Property%20Deskbook>
272 P.2d 626 (1954); Sun Life Assurance Co. v. Outler,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=172+Wash.+540&fn=Washington%20Community%20Property%20Deskbook>
172 Wash. 540,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=20+P.2d+1110&fn=Washington%20Community%20Property%20Deskbook>
20 P.2d 1110 (1933). The community obligation exists even if the anticipated
benefit is not realized. Beyers,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=45+Wn.2d+68&fn=Washington%20Community%20Property%20Deskbook> 45
Wn.2d 68; Way v. Lyric Theater Co.,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=79+Wash.+275&fn=Washington%20Community%20Property%20Deskbook>
79 Wash. 275,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=140+P.+320&fn=Washington%20Community%20Property%20Deskbook> 140
P. 320 (1914). Although the presumption of community obligation is
rebuttable, it is becoming increasingly difficult to rebut it, as
discussions of particular types of obligations will indicate.

BUT from Ch. 6.2(2)(c):

In the absence of a community benefit, guarantees, accommodation
endorsements, and suretyship contracts are ineffective to create community
liability. Potlatch Fed. Credit Union v. Kennedy,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=76+Wn.2d+806&fn=Washington%20Community%20Property%20Deskbook>
76 Wn.2d 806,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=459+P.2d+32&fn=Washington%20Community%20Property%20Deskbook>
459 P.2d 32 (1969). Even a holder in due course may not recover against
community property. Peterson v. Zimmerman,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=142+Wash.+385&fn=Washington%20Community%20Property%20Deskbook>
142 Wash. 385,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=253+P.+642&fn=Washington%20Community%20Property%20Deskbook> 253
P. 642 (1927); Gund v. Parke,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=15+Wash.+393&fn=Washington%20Community%20Property%20Deskbook>
15 Wash. 393,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=46+P.+408&fn=Washington%20Community%20Property%20Deskbook> 46
P. 408 (1896). Absent community benefit, an accommodation endorsement by one
spouse constitutes an attempt to give community credit-an act ineffective
without the consent of both spouses. RCW
<http://links.casemakerlegal.com/states/WA/books/Revised_Code/browse?ci=14&c
odesec=26.16.030&title=26&fn=Washington%20Community%20Property%20Deskbook>
26.16.030(2); Nichols Hills Bank v. McCool,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=104+Wn.2d+78&fn=Washington%20Community%20Property%20Deskbook>
104 Wn.2d 78,
<http://links.casemakerlegal.com/states/WA/books/Case_Law/results?ci=14&sear
ch%5bCite%5d=701+P.2d+1114&fn=Washington%20Community%20Property%20Deskbook>
701 P.2d 1114 (1985). In Nichols Hills Bank, the court also refused to allow
the beneficiary of a unilateral spousal guarantee to reach the obligated
spouse's half interest in the couple's community property.

I think, representing the contractor, I would advise the client to require
that both spouses sign the personal guarantee jointly and severally. That
would potentially subject all community and both spouse's separate property.
Or, at the very least have the husband sign as separately liable and the
wife sign to confirm community liability (but not her separate liability).
You would want the community liable as a whole, not just 50%, I would think.
It gets very messy trying to figure out what "50% community liability" even
means in reference to a specific asset to be attached/garnished/foreclosed.

As a matter of security for the contractor, it makes no sense to give the
community any defense based on the separate/community distinction.

Sincerely,

Eric

Eric C. Nelsen

Sayre Law Offices, PLLC

1417 31st Ave South

Seattle WA 98144-3909

206-625-0092

eric at sayrelawoffices.com <mailto:eric at sayrelawoffices.com> 

From: wsbapt-bounces at lists.wsbarppt.com
<mailto:wsbapt-bounces at lists.wsbarppt.com>
<wsbapt-bounces at lists.wsbarppt.com
<mailto:wsbapt-bounces at lists.wsbarppt.com> > On Behalf Of Ron Housh
Sent: Wednesday, January 29, 2020 12:40 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com
<mailto:wsbapt at lists.wsbarppt.com> >
Subject: Re: [WSBAPT] Separate debt - community property question

LLC owns real estate and has contracted to build a home.

Contractor wants husband to sign a personal guaranty guarantying payment
owed to contractor.

Husband wants to sign "John Doe - In His Individual Capacity on behalf of
his Separate Property"

I represent contractor.  I had asked that he sign "John Doe - In His
Individual Capacity on behalf of his Separate Property and his 50% interest
in community property."

My concern is that Husband John Doe may not have any liquid separate
property.  

Am I correct in being concerned that if Husband signs "John Doe - In His
Individual Capacity on behalf of his Separate Property" and the LLC defaults
on payments and John Doe has no liquid separate property, Contractor may not
be able to recover against John Doe - Husband's interest in community
property??

Bar exam type question???

Thanks,

Ron

I AM TYPICALLY IN THE SEATTLE OFFICE ON TUESDAY AND THURSDAY AND IN THE
MOUNT VERNON OFFICE ON MONDAY, WEDNESDAY AND FRIDAY 

Ronald G. Housh, P.S.

Attorney at Law

Seattle Office:

1420 Fifth Avenue, Suite 3000

Seattle, WA 98101-2393

Phone:   206-381-1341

Fax:        206-464-0461

Email:     <mailto:ron at housh.org> ron at housh.org

Mount Vernon Office:

21411 Bluejay Place

Mount Vernon, WA 98274

Phone:  206-235-2459

Email:    <mailto:ron at housh.org> ron at housh.org

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