Citation. 95 Wn.2d 341,622 P.2d 850, 1980 Wash.
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A man conducted business and married in one state. The couple moved to another state, and his creditor is looking to collect from both their properties.
Synopsis of Rule of Law.
When a person incurs a debt and then moves to another state with different rules on marital property, the state where the debt was incurred will apply, if the parties believed at the time the transaction was entered into that that law would apply.
Facts.
Conrad C. Lapp (Defendant) acquired all the stock of a fruit company in Colorado. He later married in Colorado, but the stock remained his sole property. In order to assist Defendant and enable the company to stay in business, Pacific Gamble Robinson Company (Petitioner) agreed to continue supplying produce if Defendant agreed to sign a promissory note on which he would be personally liable along with the fruit company. Defendant’s wife did not sign the note, and only his earnings and property were subject to the debt. Defendant defaulted on the note and moved to Washington. Petitioner brought suit to recover against the company, Defendant, and the marital property.
Issue.
Is a creditor of one spouse in a foreign, non-community property state where both spouses are domiciled, limited in recovery to the separate property of the obligor spouse, after the couple moves to Washington?
Held.
Yes.
In Washington, in the absence of an effective choice of law by the parties, the validity and effect of a contract are governed by the law of the state having the most relationship with the contract.
Colorado has more interest in this obligation. In Colorado, the law subjects only the husband’s property, including earnings, to payment of a debt incurred by him alone.
It is reasonable to expect that both parties believed that at the time the note was executed, the transaction would be governed by Colorado law. Petitioner knew the company was a Colorado corporation and that Defendant lived in Colorado. A creditor does not need to anticipate that a debtor may avoid a debt my moving to another state. Thus, all parties believed Colorado law would apply.
In Colorado, a debt incurred by the husband without the consent of his wife may not be satisfied from the wife’s property, including her wages. Defendant’s wife’s separate property, including her wages, is not subject to the debt.
Dissent.
The effect of the majority’s analysis is to permit out-of-state creditors 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.
Discussion.
When a married couple moves to another state, a problem often arises on how their assets should be considered: they are either separate or community property. Here, the court decided that the law to be applied should be the law of the state in which the parties expected it to be governed.
