Court Opinion

ID: 9551921
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:02:06.103257+00
Date Added: 2024-06-11T15:25:05.243537
License: Public Domain

Horowitz, J.
(dissenting) — This case considers the remedy available under Washington law for a creditor of a married person who has signed a promissory note for payment of a debt incurred for the sole benefit of his noncom-munity property. The trial court reached the correct result in refusing to hold the Lapp marital community liable on this note signed only by Mr. Lapp in Colorado with respect to and for the benefit of his noncommunity property. I therefore must dissent from the majority's reversal of the Court of Appeals decision upholding the trial court's dismissal of Pacific Gamble's claim against defendant Lapps' marital community.
As set forth in the majority opinion, this case concerns a contract debt originally incurred by Mr. Lapp in Colorado while the Lapps were domiciled in that state. The majority correctly notes that "the validity and effect of a contract are governed by the law of the state having the most significant relationship with the contract", i.e., Colorado. Majority opinion, at page 343. I have no quarrel with this conclusion; it appears, at any rate, that under the laws of Colorado or Washington, the note must be considered in *351default and judgment could be had against it. The contractual basis for an action on the breached contract to pay the debt made by Mr. Lapp is undisputed.
The majority errs, however, in thereafter concluding that simply because Colorado law will determine the "validity and effect" of the contract — i.e., the note's enforceability and the breach of its terms — that Colorado law must also determine whether Pacific Gamble is entitled to collect its debt in Washington from the Lapps' community property, subsequently acquired in Washington, the Lapps' domicile. The majority makes its argument to this effect not on the basis of a Colorado judgment against the Lapps, but merely because of its view that the husband would have had the benefit of property characterized as community in this state to pay the debt had that property been earned in Colorado.
I cannot agree with the majority's analysis. The funds available to satisfy this judgment, even if rendered on the basis of another state's contract law, must be left to the law of the debtor's marital domicile and forum, Washington. In this case, Colorado law cannot be expected to resolve the question of liability of Washington community property for the debt, for no such concept of marital property ownership exists in Colorado. Our courts should look instead to Washington law to determine whether one spouse, acting alone, for the sole benefit of his sole business, can subject community property in Washington to liability on a debt such as that incurred by Mr. Lapp in this case. RCW 26.16.010-.020, and .200 clearly preclude such liability for Mr. Lapp's noncommunity debt.
Under Washington law, a separate debt, created in aid of the husband's separate business, and therefore not incurred for the benefit of the community, cannot be collected out of community property. This state's public policy is to protect the community marital property against a debt not incurred for its benefit. Colorado is not a community property state. Instead, it has a form of common law marital *352property that prevents a wife's separate earnings and property from being subjected to the payment of her husband's debts.
The majority has compared the public policies of Washington and Colorado in protecting the interests of a spouse who has had no involvement in contracting her marital partner's debt. Then, by misapplying conflict of laws rules, the majority determines that Washington's public policy in this regard must yield to Colorado's, subjecting community property, earned in Washington by Washington domiciliar-ies, to the payment of the husband's debt, incurred in Colorado, a debt which would be separate in nature under Washington law. For the reasons set out below, I object to the majority's analysis and conclusion.
The case most extensively relied on by the majority, Potlatch No. 1 Fed. Credit Union v. Kennedy, 76 Wn.2d 806, 459 P.2d 32 (1969), in fact clearly supports the analysis set forth in this dissent. In Potlatch, this court applied Washington law, which was more protective of community property than the competing Idaho law, in determining the liability of the Washington marital community for a debt incurred by the husband in Idaho. As noted by the majority, our conclusion in Potlatch was based on an analysis of the "conflicting policy decisions" made by the legal systems of the two states. Majority opinion, at page 345, citing Potlatch No. 1 Fed. Credit Union, at 808. For the same reasons set out more fully in this opinion below, we there applied Washington law to determine the liability of the Washington marital community for a debt incurred in another state.
What the majority overlooks in its citation, on the strength of Potlatch, to Restatement (Second) of Conflict of Laws § 188 (1971), is the fact that the appropriateness of the application of a particular state's laws will depend on the issue being considered:
Courts have long recognized that they are not bound to decide all issues under the local law of a single state. See Restatement (Second), Conflict of Laws § 188, Comment *353d ... . Therefore, with respect to the issue now before us of whether the community property of Washington residents is subject to the suretyship obligation of the husband entered into with an Idaho company with no benefit to the community, we hold that the law of Washington has the most significant relationship to that portion of the transaction.
(Italics mine.) Potlatch No. 1 Fed. Credit Union v. Kennedy, supra at 813. Restatement (Second) of Conflict of Laws § 188(1) itself, as cited in the majority opinion at page 346, sets out that the determination of the state with the "most significant relationship to the transaction" is to be accomplished "with respect to an issue" (italics mine) actually contested in the proceeding. Review of the conflict of laws principles with regard to the single issue of the source of funds available to satisfy a contractual obligation should lead to the conclusion, reached in Potlatch, that Washington law will determine the liability of the community property of a couple domiciled in Washington for a debt, wherever incurred, that is sued upon in Washington.
Without clearly identifying the problem presented by the distinction between contractual validity and contractual payment source of funds, Potlatch considered this question of the source of funds available to satisfy a contractual obligation in a manner that clearly draws this distinction in conflict of laws analysis. Neither cases nor commentaries in this country have considered the choice of law issues raised by jurisdictional differences in the classes of property available to satisfy the judgment for a litigant damaged by breach of contract:
In this area which is beset with highly significant differences among the several laws, conflicts problems have been widely discussed abroad. No similar treatment can be found in this country. Thus, for instance, neither interstate nor international conflicts cases seem to have been reported concerning the remedies available for the enforcement of contracts . . .
A. Ehrenzweig, Conflict of Laws § 125, at 357 (1962). The few foreign treatises available also offer no guidance in *354determining how the source of funds for contract damages is to be determined in a case such as this, although most acknowledge the distinction in choosing the law to govern contractual validity and the law to govern the funds available for contractual damage recovery. However, I feel that in this case we should explicitly make this distinction between choice of law in contractual validity and in contractual damage recovery. This case concerns no issue of validity but considers instead only the source of funds for collection of contract damages. We should reaffirm the application of the law of the marital domicile and forum, Washington, to the question of the source of funds available for contract damages, because of the overriding interest this state has in consistent and conscientious application of the policies underlying the law of community property.
This examination of the policies of our community property law is entirely consistent with and necessary to arrive at a decision between the conflicting principles of law presented here. It is in the best tradition of modern conflict of laws analysis, considering the policies for application of one state's law, rather than another's because
[t]he natural desire of every good court [is] to achieve justice by applying what it regards as intrinsically the better rule of law . . .
R. Leflar, American Conflicts Law § 4, at 7 (1968). See also Restatement (Second) of Conflict of Laws § 188, comment c (1971) ("The purpose sought to be achieved by the contract rules of the potentially interested states, and the relation of these states to the transaction and the parties, are important factors to be considered in determining the state of most significant relationship.") As noted by Mr. Justice Holmes, law is not a closed system that "can be worked out like mathematics." It is the duty of judges to "weigh considerations of social advantage."4
*355With this duty in mind, I examine the public policy behind Washington's community property law.
This state has a unique, progressive system of property ownership that affords marital partners equal control over community assets. RCW 26.16.030. Our law generally refuses to allow those assets to be burdened by the non-community debts of either spouse.5 Washington's community property scheme reflects a policy which should not be subjected to the vagaries of out-of-state debt accrual; all marital communities in this state are afforded the protection and predictability of our community property provisions.
The practical result of the majority's analysis is to permit an out-of-state creditor to collect his debt from assets in this state which our law would forbid to a local creditor who has no claim to community property. As the Court of Appeals pointed out, had Mr. Lapp contracted this debt in Washington, only his separate property would have been subject to the debt. Pacific Gamble Robinson Co. v. Lapp, 24 Wn. App. 795, 800, 604 P.2d 1300 (1979). Joslyn Fruit was Mr. Lapp's noncommunity property, purchased by him prior to his marriage. It would be characterized as separate property under the law of this state. The obligation now sued upon by Pacific Gamble, which was undertaken for Joslyn Fruit's sole benefit, would have created no community liability if incurred in Washington. Piles v. Bovee, 168 Wash. 538, 12 P.2d 914 (1932); Schramm v. Steele, 97 *356Wash. 309, 166 P. 634 (1917). But by applying Colorado law to determine the remedy available to Pacific Gamble, the majority subjects community property, wages and property earned and owned in this state by Mr. Lapp, to execution. There is no reason or benefit to the people of this state in according such a preference to an out-of-state creditor.
We instead should look at the interests of the parties to this action for recovery of damages and at the policies of the states with which this action is connected. The plaintiff Pacific Gamble's principal place of business is Washington; presumably familiar with the law of this state, it could have prevented the result of which it now complains by, for example, the simple device of obtaining an agreement signed by husband and wife at the time the debt was incurred. Household Fin. Corp. v. Smith, 70 Wn.2d 401, 423 P.2d 621 (1967). The defendants are domiciled here, wholly subject to the benefits and liabilities inherent in our system of marital property ownership. The courts of this state must enforce any judgment for damages, determining the source of funds, the procedure for satisfaction, and all other mechanics of enforcing plaintiff's substantive contractual claim. The law of this state should apply. Washington's interest in this decision and its impact on our citizens' marital property rights is far greater than any continuing interest by Colorado in the remedy available for breach of a transitory contract sued upon in this state. See Potlatch No. 1 Fed. Credit Union v. Kennedy, supra at 813-14 ("We have seriously considered the governmental interest of the state of Idaho in protecting its creditors, but do not believe they are paramount in this case."). See also O'Brien v. Shearson Hayden Stone, Inc., 90 Wn.2d 680, 686, 586 P.2d 830 (1978).
The law of Washington should determine the source of funds from which Pacific Gamble's damages for breach of contract can be had. Washington is the state with the most significant relationship to the single issue of the source of funds available for contract damages. Potlatch No. 1 Fed. *357Credit Union v. Kennedy, supra at 813. Mr. Lapp's non-community debt cannot be satisfied from the marital community's property. We should affirm the dismissal of Pacific Gamble's suit against the Lapp marital community. I therefore respectfully dissent.
Utter, C.J., concurs with Horowitz, J.

Quoted in Cook, Oliver Wendell Holmes: Scientist, 21 A.B.A.J. 211, 212 (1925). See also O. Holmes, Common Law 35-36 (1881).

The majority relies on a wholly statutory exception to the rule that community assets are not subject to noncommunity debts. Majority opinion at page 347, footnote 2. RCW 26.16.200 was necessary to change the rule of a long line of cases refusing to allow recovery for antenuptial separate debts from the community property of newly married individuals. See Katz v. Judd, 108 Wash. 557, 185 P. 613 (1919). See also National Bank of Commerce v. Green, 1 Wn. App. 713, 463 P.2d 187 (1969) (refusing to give retroactive application to RCW 26.16.200 because it so clearly overruled earlier case law and altered the very nature of community property rights). The fact that these exceptions were accomplished only by legislation helps demonstrate the general strength and validity of the rule protecting community assets from noncommunity debts. See deElche v. Jacobsen, 95 Wn.2d 237, 622 P.2d 835 (1980) (Horowitz, J., dissenting).