Can One Spouse Obligate the Marital Community Through a Confession Judgment?
Recently, in the Copper Leaf, LLC v. Ace Paving CO. INC. decision, the Washington Court of Appeals addressed a case in which one spouse incurred debt and appeared to obligate the marital community by signing a confession of judgment.
We must first address the questions, what is a martial community, and what is community property? Property acquired during a marriage or committed intimate relationship (“CIR,” to learn more about a CIR click here) is presumed to be acquired by the community. If you have purchased a home with your spouse, it likely is community property.
One spouse’s debts are also usually payable from community property. In Oil Heat Co v. Sweeny, the court said the general rule is that where there is a marital community, it is presumed that a debt incurred by one spouse is a debt owed by the marital community. Oil Heat Co. v. Sweeney, 26 Wn. App. 351, 613 P.2d 169 (1980).
In Copper Leaf, the husband personally guaranteed several business loans taken out by Ace Paving and other companies. The companies defaulted on the loans and entered into a forbearance agreement with their creditor, Copper Leaf. In an amendment, the husband and the other debtors agreed to a confession of judgment in favor of Copper Leaf (i.e. he consented to judgment without the necessity of personal service, notice, hearing, or prejudgment presentment, and he waived defenses to entry of judgment). Per the forbearance amendment, the husband appeared to sign on behalf of his marital community. Notably, the wife did not sign the forbearance amendment nor any other related documentation. The husband and companies again defaulted on the loans and Copper Leaf moved for entry of the confession judgment. Central to the dispute was the question of whether the husband could obligate his marital community through the confession judgment. The trial court reasoned that the wife never signed, and her due process rights cannot be waived by her spouse.
Interestingly, the Court held that while the confession of judgment, signed by the husband only, was not sufficient to bind the marital community, the Court found that its decision was not dispositive of the marital community’s liability to Copper Leaf. The Court held that Copper Leaf was free to pursue collection through a suit against the marital community, where there would be an opportunity for the marital community to defend. Thus, one spouse cannot waive the due process rights of their spouse, by signing a confession of judgment. However, their marital community may be liable for the debt one spouse personally guaranteed pursuant to the general rule that where there is a marital community, debts incurred by a spouse are debts of the martial community. Of course, there are often exceptions to that general rule.
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