Schoenfeld's Estate, In re

• Decision Date: 05 May 1960
• Docket Number: No. 35218,35218
• Parties: In the Matter of the ESTATE of L. Kenneth SCHOENFELD, Deceased. Ruth G. BLETHEN, Executrix of the Estate of L. Kenneth Schoenfeld, Deceased, Respondent, v. SUPERVISOR OF INHERITANCE TAX DIVISION for the STATE TAX COMMISSION, Appellant.
• Court: Washington Supreme Court

Page 197

56 Wn.2d 197

351 P.2d 935

In the Matter of the ESTATE of L. Kenneth SCHOENFELD, Deceased.

Ruth G. BLETHEN, Executrix of the Estate of L. Kenneth

Schoenfeld, Deceased, Respondent, v. SUPERVISOR OF INHERITANCE TAX DIVISION for the STATE TAX

COMMISSION, Appellant.

No. 35218.

Supreme Court of Washington, En Banc.

May 5, 1960.

John J. O'Connell, Atty. Gen., Henry W. Wager, Asst. Atty. Gen., Tax Commission, for appellant.

Monheimer, Schermer & Mifflin, Seattle, for respondent.

ROSELLINI, Judge.

The question in this case is: Can community debts of a deceased husband and surviving wife be charged against the separate property of the decedent before the community property is exhausted? The answer is: they cannot.

L. Kenneth Schoenfeld died testate on March 22, 1954, a resident of King county. There was in the estate community property subject to debts in the amount of $73,865.48, and separate property of the decedent amounting to $188,510. The community debts totaled $154,992, and the funeral expenses $2,334.69. There were separate debts of the decedent in the amount of $9,780.33.

For the purposes of computing the inheritance tax, the state of Washington first applied the community property to the payment of the community debts and funeral expenses. This exhausted the community property, and the unpaid balance of such debts and funeral expenses was charged to the separate property. The respondent successfully challenged this ruling in the superior court, with the result that her inheritance tax was reduced $810.39. This was achieved by allocating the community debts between the community and separate property in the ratio that the community property bore to the whole property. The reason this method resulted in a lesser tax is immaterial to the issue involved in the appeal.

The state has appealed, contending that the ruling of the decision was contrary to statute and to the well-established principles of community property law; and with this we agree.

RCW 11.04.050 provides that, upon the death of either spouse,

'* * * one-half of the community property shall go to the survivor, subject to the community debts, and the other half shall be subject to testamentary disposition of the deceased husband or wife, subject also to the community debts. * * *'

It is well established that the whole of the community property shall be administered for the purpose of collecting the community assets and paying the community debts. Ryan v. Fergusson, 3 Wash. 356, 28 P. 910; Stanton v. Everett Trust & Savings Bank, 145 Wash. 165, 259 P. 10.

RCW 11.04.020 and 11.04.030 provide for the distribution of personal property subject to the debts of the decedent.

As this court said in Columbia Nat. Bank v. Embree, 2 Wash. 331, 26 P. 257, the liability of the community property for community debts and the liability of separate property for separate debts would have existed without the statute, and the express mention of them must have come from 'inadvertence or an excess of caution.'

There is nothing in the language of RCW 11.04.020, 11.04.030, or 11.04.050 which would indicate that the legislature intended to enlarge the liability of community property for separate debts or that of separate property for community debts. The fundamental principles which determine the priority of claims were clearly stated by this court in In re Hill's Estate, 6 Wash. 285, 33 P. 585, 586, and have never been departed from, insofar as we have been able to ascertain. The court in that case said:

'Where the separate property of the deceased and the community property of the deceased and the surviving spouse is administered, the same should be kept separate, for the separate debts of the deceased would be primarily a charge upon the separate property, and the community debts would be primarily a charge upon the community property. In case there should not be enough of the separate property to pay the separate debts, the deficiency could be made good out of the decedent's interest in the community property, should there be anything remaining after the payment of the community debts, and the same would be true with regard to a deficiency of the community property, as, after the separate debts had been paid, the remainder of the separate property would be liable for the community debts so remaining unpaid. * * *'

The rule in a case such as this, as in other cases of primary and secondary liability, is that the creditor must exhaust his remedy against the primary fund before he can resort to the secondary fund. See Butterworth v. Bredemeyer, 74 Wash. 524, 133 P. 1061.

Of course, a decedent's will may provide that all of the debts of the estate, including the community debts, shall be paid out of his share, and that direction will be honored so long as the estate is adequate to pay those debts. Redelsheimer v. Zepin, 105 Wash. 199, 177 P. 736. Otherwise, the surviving spouse is liable for his pro rata share of the community debts. In re Hart's Estate, 150 Wash. 482, 273 P. 735.

While it was at first argued that the community estate should not be liable at all for separate debts, this court many years ago laid down the rule that, after payment of community debts, the share of the community property belonging to the decedent can be reached by separate creditors. Columbia Nat. Bank v. Embree, 2 Wash. 331, 26 P. 257. The rule has been consistently followed. Kelley v. Butler, 182 Wash. 310, 47 P.2d 664; In re McHugh's Estate, 165 Wash. 123, 6 P.2d 834; Crawford v. Morris, 92 Wash. 288, 158 P. 957. The reasoning which led to this conclusion was that the legislature has provided for the division of community property between the spouses on the death of either, and that, once the community debts have been paid, the balance, distributed to the surviving spouse and to the estate of the decedent, becomes separate property to which a separate debt of the owner can attach.

It has never been held, and no logical or equitable reason appears why it should be held, that the share of the...