Opinion ID: 2606432
Heading Depth: 2
Heading Rank: 2

Heading: Separate Liability

Text: Transfer of community real property is restricted by A.R.S. § 25-214. Unless both spouses join, any purported transfer is voidable and damages for breach of contract will not be assessed against the community. Consolidated Roofing & Supply Co. v. Grimm, 140 Ariz. 452, 682 P.2d 457 (App. 1984). This rule furthers the purpose of A.R.S. § 25-214 by protecting the interests of both spouses in their community real property. Of course, a contract that can be performed by the signing spouse alone may be enforced solely against the signing spouse's separate property. In such cases, the objectives of A.R.S. § 25-214 become irrelevant and the general rule of liability for breach of contract logically applies. For example, Grimm held that a guarantee signed only by the husband was unenforceable against his wife or their community. However, since the husband could perform the guarantee separately, without his wife's consent, Grimm reasoned that the husband's separate estate was liable on the guaranty. 140 Ariz. at 458, 682 P.2d at 463; accord Arizona Feeds v. A & R Argo, Inc., 136 Ariz. 420, 666 P.2d 520 (App. 1983); cf. Eng v. Stein, 123 Ariz. 343, 346, 599 P.2d 796, 799 (1979). This case is slightly different than Grimm. Unlike a guarantee, a lease agreement cannot be performed by the signing spouse without the nonsigning spouse's consent. Some courts have concluded, as the court of appeals did here, that if the contract is avoided by the nonsigning spouse and cannot be performed without his or her consent, then all contract terms, including any warranties, are unenforceable against the signing spouse. E.g., Sims v. Craig, 96 N.M. 33, 627 P.2d 875 (1981) (signing spouse is not liable in contract but may be liable in tort for negligent misrepresentation). See generally Annot., 5 A.L.R. 4th 1310 (1981). Washington courts, however, have concluded that the signing spouse is independently liable on his or her contracts even though the contract cannot be performed without the nonsigning spouse's consent. E.g., Geoghegan v. Dever, 30 Wash.2d 877, 899, 194 P.2d 397, 408-09 (1948) (husband is separately liable on contract employing broker to sell community real property); Smith v. Stout, 40 Wash. App. 646, 700 P.2d 343 (Wash. Ct. App.) (wife's disaffirmance does not release husband from potential separate liability for breach of agreement to sell community property), rev. denied, 104 Wash.2d 1009 (1985); Colorado Nat'l Bank of Denver v. Merlino, 35 Wash. App. 610, 621, 668 P.2d 1304, 1311 (Wash. Ct. App.) (husband may be separately liable on contract to purchase real property), rev. denied, 100 Wash.2d 1032 (1983). We have long recognized that the community property laws of Arizona are more like those of Washington than of any other state, and that the rulings of the courts of that state are very persuasive when similar questions arise under our law. Pratt v. Daly, 55 Ariz. 535, 548, 104 P.2d 147, 152 (1940) (overruled on other grounds by Ontiveros v. Borak, 136 Ariz. 500, 667 P.2d 200 (1983)); accord Mortensen v. Knight, 81 Ariz. 325, 327, 305 P.2d 463, 464 (1956). We think the rule articulated by Washington courts, imposing individual liability for breach of contract, is the better rule. First, contracts falling within A.R.S. § 25-214 are not per se void, only voidable by the nonsigning spouse. See Smith, 40 Wash. App. at 649, 700 P.2d at 345-46 (Washington statute similar to A.R.S. § 25-214); W. DeFUNIAK & M. VAUGHN, PRINCIPLES OF COMMUNITY PROPERTY § 118, at 290 (2d ed. 1971) (interpreting California statute similar to A.R.S. § 25-214). See generally 5 A. CORBIN, CORBIN ON CONTRACTS § 993 (1964). The nonsigning spouse could, for example, validate a lease by accepting payment or otherwise consenting to the agreement. Because only the nonsigning spouse can avoid contracts under A.R.S. § 25-214, contract provisions such as warranties that can be performed by the signing spouse without injuring the community should be enforceable against the signing spouse. That the lease is voidable by the nonsigning spouse does not preclude individual liability for breach of contract. Smith, 40 Wash. App. at 651, 700 P.2d at 346; Colorado Nat'l Bank, 35 Wash. App. at 621, 668 P.2d at 1311; cf. Grimm, supra . Of course, as in Grimm, the signing spouse's liability must be limited to his or her separate property; otherwise, the legislative judgment that community real property should be transferred or encumbered only by consent of the community would be circumvented. Protection of community interests, however, is not furthered by prohibiting all contract actions against the separate estate of the signing spouse. Second, A.R.S. § 25-214 was intended to protect both spouses' interest in their common property, not to shield from individual liability those who freely choose to enter into contracts. The signing spouse should not be free to ignore the policies supporting A.R.S. § 25-214 and then to use that statute to avoid obligations freely undertaken. See Grimm, supra . The common law ordinarily holds persons responsible for their own conduct. See Del E. Webb Corp. v. Superior Court, 151 Ariz. 164, 170, 726 P.2d 580, 586 (1986). Roger Putzi signed the lease, accepted consideration, and warranted that he had the right to make the contract. The warranty apparently was breached. We can discern no rationale for allowing him to escape individual responsibility for his actions.