National Bank of Commerce of Seattle v. Green

• Decision Date: 31 December 1969
• Docket Number: No. 68--40558--I,68--40558--I
• Citation: 463 P.2d 187,1 Wn.App. 713
• Parties: The NATIONAL BANK OF COMMERCE OF SEATTLE, a banking corporation, Respondent, v. George R. GREEN and Jane Doe Green, his wife, Appellants, Citation Realty, Inc., a Washington corporation, Defendant, Seattle-First National Bank, Bellingham Branch, a banking corporation, Garnishee.
• Court: Washington Court of Appeals

Page 713

1 Wn.App. 713

463 P.2d 187

The NATIONAL BANK OF COMMERCE OF SEATTLE, a banking corporation, Respondent, v. George R. GREEN and Jane Doe Green, his wife, Appellants Citation Realty, Inc., a Washington corporation, Defendant Seattle-First National Bank, Bellingham Branch, a banking corporation, Garnishee.

No. 68--40558--I.

Court of Appeals of Washington, Division 1, Panel Two.

Dec. 31, 1969.

Sherwood & Forrest, Marshall Forrest, Bellingham, for appellants.

Livesey, Kingsbury & Livesey, Burtan A. Kingsbury, Bellingham, for respondent National Bank of Commerce of Seattle.

Frank W. Smith, Jr., Asst. Professor of Law, University of Washington, Seattle, amicus curiae.

HOROWITZ, Acting Chief Judge.

Defendant Green was indebted to the plaintiff on a $15,000 note executed while he was single, prior to his second marriage. Plaintiff garnished the sum of $5,000 on deposit in the joint account of the defendants Green in the defendant garnishee bank. Following trial of the garnishment action, the court, sitting without a jury, found that the sum garnished was the defendant Green's separate property and accordingly entered judgment in favor of the plaintiff against the garnishee defendant in the sum of $5,000. Defendant Green appeals, contending that the sum garnished is the community property of the second marriage.

The substance of the court's findings may be briefly summarized referring to the persons involved by surname only.

Green, in September 1966, owned separate property upon which in a personal financial statement to the plaintiff, he placed a value of $150,000. Early in 1967, Green was divorced from his prior wife. In the divorce he assumed substantial financial obligations but received the bulk of the properties which belonged to him or the marital community. The value is not disclosed by the record. In July 1967, Green executed and delivered a $15,000 note to the plaintiff, on the basis of which the writ of garnishment below was issued. In August 1967, after Green's divorce from his first wife, Green borrowed $5,000 from Cohen, Green giving his 30-day promissory note therefor. The court found that This loan was paid and renewed every thirty days thereafter. Defendant Green would give Mr. Cohen a check for $5,000 and shortly thereafter Mr. Cohen would give Mr. Green a check for $5,000.00. On each occasion Mr. Green would give Mr. Cohen a note for $5,000.00 This transaction seems to have run from month to month, maturing about the first of each month, and after his marriage to his present wife, about November 1, 1967, Mr. Green continued the indebtedness by giving Mr. Cohen a check for $5,000.00 and receiving a check in similar amount, and giving a new note. This note was not signed by his present wife of George R. Green but was signed by him alone.

We understand by the finding supplemented by the evidence that the August 1967 note was paid by Green's check on September 1, 1967, and upon the check's clearing, Cohen again advanced the sum of $5,000 to Green upon Green's giving Cohen a new 30-day note; and that the same procedure of payment and re-borrowing was repeated on October 1st and November 1, 1967.

Green re-married about October 14, 1967. As in each prior note, the November 1, 1967 note was signed only by Green. The court further found that about November 1, 1967 Green also borrowed $10,000 from Cohen on the joint note of his present wife and himself. The proceeds of the $10,000 note were disposed of early in November 1967, although the use to which those proceeds were put does not appear.

On December 1, 1967, the November 1, 1967 note became due. The marital community about that time had some but virtually no assets. Green was without funds to pay that note. Accordingly, on December 1, 1967, he arranged to borrow $5,000 from one Martin. Martin wrote a check to Banks for $5,000 and Banks, on the same day, issued his check to Green in the sum of $5,000. Green deposited the Banks check in Green's point account with his wife in the Seattle-First National Bank. On December 1 or 2, 1967, Green issued his check for $5,000 to Cohen in order to pay the November 1, 1967 note theretofore signed by Green. On December 6, 1967, Green borrowed $5,000 from Cohen, receiving Cohen's check in that amount, which check he endorsed over to Martin. Martin deposited that check to his account. There was a delay in clearing the Martin to Banks check and the Banks to Green check, because of uncollected funds. There is no finding or evidence as to when Green's check to Cohen cleared nor is there any finding that it failed to clear. The evidence is that when the funds were finally collected in the Green account they were garnished about December 14, 1967.

The court found, as has already been pointed out, that beginning with the August 1967 loan from Cohen to Green, the 'loan was Paid and renewed every thirty days thereafter' (emphasis supplied). The court further found that 'the net result of the transaction set forth above (the December transaction) was that the loan from Mr. Cohen to defendant Green originating in the summer of 1967, was again Paid off and renewed' (emphasis supplied) and that 'the transaction was intended to and did actually result in simply a continuation of the pre-existing indebtedness to Mr. Cohen which had existed since the summer of 1967.' The court concluded that the $5,000 sequestered by writ of garnishment 'was the separate property of defendant George R. Green and remained so. It was borrowed upon the separate credit of defendant Green and arose from a continuous transaction originating when defendant George R. Green was unmarried and continuing substantially unchanged thereafter during and after his marriage in October 1967.' Green assigns error to the entry of the findings and conclusions which in substance treat the December 1967 transactions as a continuation of the pre-existing indebtedness arising in the summer of 1967. The assignments of error raise the common issue of the community or separate status of the $5,000 sequestered by writ of garnishment and will be considered together.

The resolution of the basic question presented must be made in light of well settled principles of Washington law.

The statutory description of Washington's marital property system (RCW 26.16.010--26.16.210) is by no means complete and it is necessary to look to the decisions for amplifying detail. Generally, except for the separate property of each spouse acquired prior to marriage and the separate property acquired by either spouse after marriage, all other property acquired after marriage by either husband or wife or both is community property and the husband has the management and control of community personal and real property. The burden is upon one who claims that property acquired after marriage is separate property to establish such claim, (Rustad v. Rustad), 61 Wash.2d 176, 377 P.2d 414 (1963)) by clear and convincing evidence. Dizard & Getty v. Damson, 63 Wash.2d 526, 387 P.2d 964 (1964); Beyers v. Moore, 45 Wash.2d 68, 272 P.2d 626 (1954); Meng v. Security State Bank, 16 Wash.2d 215, 133 P.2d 293 (1943).

The husband as manager of the community personal property is empowered to subject the community property to community debts by his sole act or signature. Thus a note executed by him after marriage is presumptively for the benefit of the marital community, and presumptively is a community obligation. Fies v. Storey, 37 Wash.2d 105, 221 P.2d 1031 (1950); Meng v. Security State Bank, Supra; Acme Finance Co. v. Zapffe, 161 Wash. 312, 296 P. 1050 (1931). The proceeds of the note are presumptively community property. See Fies v. Storey, Supra. The 'acid test' for determining whether the obligation or liability is separate or community in nature is the purpose for which the note is executed. Fies v. Storey, Supra. See Zarbell v. Mantas, 32 Wash.2d 920, 204 P.2d 203 (1949). If the note is executed for the benefit of the marital community, the presumption of community obligation is not overcome. Thus money borrowed to pay off a community debt or to acquire a community asset is for a community purpose. Kupka v. Dickson, 72 Wash.2d 217, 432 P.2d 657 (1967); Underwood v. Sterner, 63 Wash.2d 360, 387 P.2d 366 (1963); Beyers v. Moore, Supra; Fies v. Storey, Supra; Ness v Bender, 18 Wash.2d 243, 138 P.2d 864 (1943); Mattinson v. Mattinson, 128 Wash. 328, 222 P. 620 (1924); Rea v. Eslick, 87 Wash. 125, 151 P. 256 (1915). If the debt is separate in character, the note is collectible only out of separate property. Smyser v. Smyser, 17 Wash.2d 301, 135 P.2d 455 (1943). The wife's signature presumptively does not create a community obligation and hence such a signature is not necessary to the creation of a community obligation. Balkema v. Grolimund, 92 Wash. 326, 159 P. 127 (1916). The husband's act or signature is enough. The purpose or proposed benefit may be evidenced by the community or separate uses to which the proceeds of a note or other obligation are put. See Household Finance Corp. of Kelso v. Corby, 61 Wash.2d 184, 377 P.2d 441 (1963); Mapes v. Mapes, 24 Wash.2d 743, 167 P.2d 405 (1946); Steward v. Bounds, 167 Wash. 554, 9 P.2d 1112 (1932); Protzman v. Billings, 120 Wash. 123, 206 P. 848 (1922); Way v. Lyric Theatre Co., 79 Wash. 275, 140 P. 320 (1914).

It follows from what has been stated that a joint signature of husband and wife presumptively renders the husband and wife each separately liable but also subjects the community property of the spouses to liability for community debts, not because the wife has signed but because the husband has done so. The presumptions created by joint signature of the spouses may be rebutted. Thus the evidence may show that the joint signatures create only a community obligation, (Finley v. Finley, 47 Wash.2d 307, 287 P.2d 475 (1955); Auernheimer v. Gardner, 177 Wash. 158, 31 P.2d 515 (1934)) or that the joint signatures, especially if secured...