Liability and Management Issues Flashcards
Tort Recovery from Other Spouse
If the other spouse was the tortfeasor, the tort recovery is SP.
Personal Injury Recovery Against Third-Party Tortfeasor
A cause of action in tort arises when the injury is inflicted.
- If a cause of action arises during marriage, any recovery is CP.
- If a cause of action arises after separation, it is the injured spouse’s SP BUT the injured spouse must reimburse the community for any expenses paid on account of the injury.
At divorce, community estate personal injury damages will be awarded entirely to the injured spouse (assuming it can be traced and was not already spent) unless the interests of justice require otherwise.
Upon either party’s death, the recovery will be treated as CP.
Order of Satisfaction of Tort Liability
If one spouse is liable for a tort that occurred while they was performing an activity for the benefit of the community, liability will first be satisfied from CP and second from that person’s SP.
If liability is not based on an activity for the benefit of the community, liability will first be satisfied from the SP of the tortfeasor and second from CP.
If the order of satisfaction is not followed, spouse may seek reimbursement from the tortfeasing spouse.
Management and Control of CP, QCP, and SP
Each spouse has the exclusive management and control of their SP.
Quasi-CP is SP for purposes of management and control.
Each spouse has equal management and control of CP- may buy, sell, spend, or encumber all CP (subject to some exceptions)
Personal Belongings Exception to CP Equal Management Rule
One spouse cannot sell or encumber personal property used in the family dwelling (e.g., furniture or clothing) without written consent of the other spouse.
The non-consenting spouse may void such a transfer in its entirety at any time during or after the marriage and need not return the transferee’s purchase price.
Business Exception to CP Equal Management Rule
A spouse who is operating a business (that is CP) has primary management and control of the business and may act alone in all transactions. BUT they must give prior written notice to the other spouse of any sale, lease, or exchange of all, or substantially all, of the personal property used in the operation of the business.
If the required notice is not given, the non-managing spouse has a remedy only if the managing spouse’s behavior has substantially impaired her one-half interest in the community estate. The non-managing spouse may not void the transfer.
Bank Account Exception to CP Equal Management Rule
A bank account in the name of a married person is held for the exclusive benefit of that person and is free from the control or lien of any other person except a creditor.
The bank is held harmless against all claims by the depositor’s spouse.
Selling Real Property that is CP
Both spouses must join in executing any instrument selling community real property, or conveying/leasing that real property for more than a year.
Generally, neither spouse can transfer or encumber their 1⁄2 interest in real CP.
What happens when CP is titled in one spouse’s name only, and that spouse misrepresents their marital status to an innocent transferee?
The non-consenting spouse has one year to bring an action to void the transfer.
However, if the purchaser knew or should have known that the seller was married, then there is no statute of limitations.
Transfers to good faith purchasers are presumed valid, but the non-consenting spouse can show that they did not consent to or participate in the transfer. They can then void the conveyance and must return the transferee’s purchase price.
What if a security interest is CP is given to a creditor by one spouse
The non-consenting spouse may entirely void any such security interest. The debt underlying the security interest remains intact.
EXCEPTION: A spouse can unilaterally encumber their 1⁄2 interest in real CP to pay an attorney representing that spouse in a divorce action.
Limitations on Managerial Power: Gifts of CP
A spouse may not make a gift of community personal property without the written consent of the other spouse.
- Non-donor spouse may ratify the gift in a separate writing
- Non-consenting spouse may revoke the gift in its entirety during the donor’s lifetime
- After the donor dies, non-consenting spouse may recover their one-half interest in the unauthorized gift against the donee or the donor’s estate.
Creditor’s Rights to CP.
General rule: A creditor may reach any property over which the debtor has the legal right of management and control.
One spouse’s SP cannot be reached to satisfy the other spouse’s separate debt
Exception to Creditor’s Rights: Doctrine of Necessities
Each spouse has the duty to support the other spouse and the minor children:
- Each spouse is personally liable for the other spouse’s contracts for necessaries (e.g., food, clothing, and medical bills.)
If CP funds are available, a spouse whose SP was used to pay for the other spouse’s necessaries (including medical bills) can be reimbursed from the community estate.
Can CP be reached by one spouse’s creditor for a debt incurred before the marriage?
YES. Generally, CP can be reached for a debt incurred before marriage. However, the earnings of a non-debtor spouse cannot be reached for premarital debts if held in a separate account (in which the other spouse has no right of withdrawal) and not commingled with other CP funds.
When is a debt incurred?
A contract debt is incurred at the time the contract is made. A tort debt is incurred at the time the tort occurs. A spouse’s child support and spousal support obligations from prior relationships are treated as debts incurred before marriage.
In all other cases, a debt is incurred at the time the obligation arises.
