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§4.4.4 Creditors
  • 1 §4.4.4.1 Place of contracting

    • 1.1 Pacific Gamble Robinson Co. v. Lapp

      1
      95 Wn.2d 341 (1980)
      2
      622 P.2d 850
      3
      PACIFIC GAMBLE ROBINSON CO., Petitioner,
      v.
      CONRAD C. LAPP, ET AL, Respondents.
      4
      No. 46837.
      The Supreme Court of Washington, En Banc.
      5
      December 31, 1980.
      6

      [342] Ryan, Swanson, Hendel & Cleveland, by Morey G. Priest, for petitioner.

      7

      Bruce G. Hand, for respondents.

      8
      WILLIAMS, J.
      9

      In 1962, Conrad C. Lapp acquired 100 percent of the stock of the Joslyn Fruit Company (Joslyn), a Colorado corporation. In 1975, Conrad Lapp married his present wife, Laura D. Lapp, in Colorado, where both were residents. Under Colorado law, the stock of Joslyn remained Mr. Lapp's sole property, which he could encumber or convey without the consent of his wife. Goldberg v. Musim, 162 Colo. 461, 427 P.2d 698 (1967); Bostron v. Bostron, 128 Colo. 535, 265 P.2d 230 (1953).

      10

      By the spring of 1977, Joslyn was in severe financial difficulty and indebted to petitioner Pacific Gamble Robinson Company in the amount of $34,710.70. In an effort to assist Lapp and to enable Joslyn to remain in business, petitioner agreed to continue to supply produce if Lapp signed a promissory note on which he would be personally liable [343] along with Joslyn. On April 14, 1977, the promissory note for $34,710.70 was executed in Colorado by Lapp individually and on behalf of Joslyn. Mrs. Lapp did not sign the note. Under Colorado law, Mr. Lapp's earnings and property alone were subject to that debt, and his wife could not object to the encumbrance. Imel v. United States, 184 Colo. 1, 8, 517 P.2d 1331 (1974).

      11

      In July of 1977, Joslyn and Mr. Lapp defaulted on the note. In September, the Lapps moved to Washington. On January 31, 1978, petitioner brought this action in Washington against Joslyn, Conrad Lapp individually, and the Lapp marital community to recover the balance due and owing on the note.

      12

      The trial court granted summary judgment against Conrad Lapp individually but refused to hold that the community had incurred any legal obligation. Petitioner appealed from that portion of the judgment dismissing the marital community. In a split decision, the Court of Appeals affirmed the trial court. Pacific Gamble Robinson Co. v. Lapp, 24 Wn. App. 795, 604 P.2d 1300 (1979). We reverse.

      13

      This case presents the following issue: Is the creditor on an obligation incurred by one spouse in a foreign, noncommunity property state where both spouses were domiciled, restricted in its recovery to the separate property of the obligor spouse, as the term "separate property" is defined by Washington law, after the couple moves to Washington?

      14

      [1] Washington has adopted the so-called "center of gravity" or "most significant relationship" approach to contract choice of law problems. 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 significant relationship with the contract. Potlatch No. 1 Fed. Credit Union v. Kennedy, 76 Wn.2d 806, 459 P.2d 32 (1969); Baffin Land Corp. v. Monticello Motor Inn, Inc., 70 Wn.2d 893, 425 P.2d 623 (1967); Restatement (Second) of Conflict of Laws § 188 (1971).

      15

      [344] [2] Under the law of this state, a debt is presumed to be a community obligation. Oregon Improvement Co. v. Sagmeister, 4 Wash. 710, 30 P. 1058 (1892). The burden of proving that a debt is not a community obligation rests on the community. Beyers v. Moore, 45 Wn.2d 68, 70, 272 P.2d 626 (1954). If the obligation is incurred by the community, then community property, including the earnings of both spouses, is liable for the debt. Beyers, at 70; RCW 26.16.030. On the other hand, if a debt is characterized under Washington law as separate, or for the benefit of the husband's separate property, then it may not be satisfied from the earnings of either spouse, because earnings during coverture are community property. RCW 26.16.030; RCW 26.16.200.

      16

      In Colorado, however, as we explain more fully below, the law subjects only the husband's property, including earnings, to payment of a debt incurred by him alone. Imel v. United States, at 8. This is a result not possible under Washington law. But see deElche v. Jacobsen, 95 Wn.2d 237, 622 P.2d 835 (1980).

      17

      Accordingly, if this transaction had taken place entirely in Colorado, with the Lapps remaining there as domiciliaries, petitioner would have been entitled to judgment against only Conrad Lapp's property, including his earnings. If the transaction had occurred entirely in Washington, however, regardless of whether the debt were characterized as a community or a separate obligation, petitioner would not be entitled to have its judgment satisfied from Conrad Lapp's wages alone. Depending on how the obligation was characterized, petitioner could alternatively reach the wages and earnings of both spouses, or of neither spouse.

      18

      Since the result is different under the law of the two states, we are not faced with a "false conflict", as was found by the court in Pacific States Cut Stone Co. v. Goble, 70 [345] Wn.2d 907, 425 P.2d 631 (1967).[1] Rather, there is a "real" conflict of laws, making this situation analogous to that faced by this court in Potlatch No. 1 Fed. Credit Union, where we said:

      19
      This case presents a single issue ..., and that is whether the community of a cosigner of a note may be held liable on the note although the community derived no benefit therefrom.
      20

      Potlatch No. 1 Fed. Credit Union, at 811.

      21
      The legislatures and courts of the two states have made conflicting policy decisions with respect to this question. Idaho has chosen to recognize the interests of creditors over the interests of marital property in these situations. Washington has taken the opposite view. These two policy decisions come into direct conflict where, as here, the controversy involves an Idaho creditor and a Washington marital community.
      22

      (Italics ours.) Potlatch No. 1 Fed. Credit Union, at 808-09.

      23

      [346] In such a case, we apply the most significant relationship test, which is summarized in the Restatement, supra at § 188, p. 575.

      24
      (1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in § 6.
      25
      (2) In the absence of an effective choice of law by the parties (see § 187), the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
      26
      (a) the place of contracting,
      27
      (b) the place of negotiation of the contract,
      28
      (c) the place of performance,
      29
      (d) the location of the subject matter of the contract, and
      30
      (e) the domicil, residence, nationality, place of incorporation and place of business of the parties.
      31
      These contacts are to be evaluated according to their relative importance with respect to the particular issue.
      32
      (3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203.
      33

      [3] As we observed in Potlatch No. 1 Fed. Credit Union, in applying this test we do not merely count the contacts between each state and the transaction at issue. "Rather, these contacts are guidelines indicating where the interests of particular states may touch the transaction". Potlatch No. 1 Fed. Credit Union, at 810. Moreover, "[t]hese competing policies must also be weighed against the justified expectations of the parties." Potlatch No. 1 Fed. Credit Union, at 810. See Restatement, supra at § 188, comment c, p. 578. See also Powers, Formalism and Nonformalism in Choice of Law Methodology, 52 Wash. L. Rev. 27, 60-62 (1976); Sedler, The Contracts Provisions of the Restatement (Second): An Analysis and a Critique, 72 Colum. L. Rev. 279, 311 (1972).

      34

      [4] Applying these principles to the present case, we think it plain that Colorado has numerous governmental [347] interests in this transaction. The entire transaction occurred in Colorado. Petitioner was doing business in Colorado, and the Lapps were domiciled in Colorado at the time of the execution of the note, which was signed in Colorado by Mr. Lapp individually and on behalf of a Colorado corporation. Moreover, both parties apparently contemplated that all performance was to be in Colorado. We may assume that Colorado's interest is to ensure the predictability of business relations and to prevent the flight of debtors to other states to avoid payment of otherwise legitimate debts.

      35

      What is Washington's interest in the note at issue? Clearly, Washington has a general interest in protection of marital communities from the entirely separate debts of one spouse. RCW 26.16.010, .020.[2] But Washington had no connection whatever with the present transaction until the Lapps established their domicile here just 2 months after the note went into default. While the record demonstrates no cause and effect relationship between the default and the parties' move to Washington, we may safely assume that this state has no policy interest in maintaining within its borders a sanctuary for fleeing debtors.

      36

      [348] Turning to the expectations of the parties, we think that both spouses could reasonably expect at the time the note was executed that the transaction would be governed by Colorado law. Since the Lapps had long been domiciled in Colorado, and remained there some months after the note was signed, they could not justifiably believe that the obligation could be fairly avoided by the device of removing to a state where a husband's wages would not be subject to the debt. See Pacific States Cut Stone Co., at 913.

      37

      Petitioner was aware that Joslyn was a Colorado corporation, and had been so at least since 1962 when Conrad Lapp acquired all its stock. Petitioner knew that the Lapps had been Colorado domiciliaries from the time of their marriage up to and including the time the note was signed. As between Colorado, the state of the debtor's domicile, and a later possible domicile, a creditor would reasonably expect that Colorado law would apply. Although petitioner's principle place of business is in Washington, petitioner was doing business in Colorado and had willingly subjected itself to Colorado law by entering into a contract with a Colorado resident and could justifiably assume that the Colorado law would likewise apply to petitioner's business debtor. A creditor need not anticipate that a debtor may avoid a debt merely by moving to any of 49 other states.

      38

      It is thus plain that all parties to the contract would undoubtedly have assumed Colorado law to apply, if they had considered the matter. Moreover, it is clear to us that the numerous contacts, competing policies, and justifiable expectations of the parties show Colorado's interest in the contract to be far more significant than Washington's, Potlatch No. 1 Fed. Credit Union v. Kennedy, 76 Wn.2d 806, 811-13, 459 P.2d 32 (1969), and we accordingly apply Colorado law. This conclusion is consistent with the Restatement view, which states:

      39
      (3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied, except as otherwise provided in §§ 189-199 and 203 [not relevant here].
      40

      [349] Restatement (Second) Conflict of Laws § 188, at 575 (1971). Moreover, the parties agree that Colorado law applies to determine the validity of the debt; indeed, the debtor pleaded Colorado law.

      41

      Our analysis of Colorado law discloses the following: Unlike Washington, Colorado is not a community property state and does not use the term "separate property" when referring to a husband's sole property. Rather, "separate property" is a statutory concept designed to relieve married women of the historic disabilities of coverture under the common law. Hedlund v. Hedlund, 87 Colo. 607, 290 P. 285 (1930); Tuttle v. Shutts, 43 Colo. 534, 96 P. 260 (1908); Palmer v. Hanna, 6 Colo. 55 (1881). All other property not jointly owned is the husband's whether acquired in such a way as to make it either separate or community property under Washington law. A debt incurred by the husband in Colorado without the consent of the wife may not be satisfied from the wife's property, including her wages. Colo. Rev. Stat. 14-2-201, 14-2-203, XX-XX-XXX. It is not accurate, therefore, to state that the husband's "separate property" under Colorado law is subject to the claims of creditors on his separate obligations. Rather, only the wife may own separate property as that term is understood in Colorado. Since application of community property concepts is unknown in Colorado, we do not speak in terms of these concepts when we apply Colorado law.

      42

      It follows that, in Colorado, all property of the Lapps would be subject to Mr. Lapp's debt to petitioner except Mrs. Lapp's separate property, including her earnings. Imel v. United States, 184 Colo. 1, 8, 517 P.2d 1331 (1974). Thus, a fair application of Colorado law to this debt in an action brought in Washington is that the same property subject to payment of a debt in Colorado, including Mr. Lapp's wages and acquisitions, is likewise subject to payment of the debt in Washington, notwithstanding such [350] property is characterized as "community" under Washington law.[3]

      43

      The judgment of the Court of Appeals is reversed.

      44
      ROSELLINI, STAFFORD, BRACHTENBACH, DOLLIVER, and HICKS, JJ., concur. HOROWITZ, J. (dissenting)
      45

      This case considers the remedy available under Washington law for a creditor of a married person who has signed a promissory note for payment of a debt incurred for the sole benefit of his noncommunity property. The trial court reached the correct result in refusing to hold the Lapp marital community liable on this note signed only by Mr. Lapp in Colorado with respect to and for the benefit of his noncommunity property. I therefore must dissent from the majority's reversal of the Court of Appeals decision upholding the trial court's dismissal of Pacific Gamble's claim against defendant Lapps' marital community.

      46

      As set forth in the majority opinion, this case concerns a contract debt originally incurred by Mr. Lapp in Colorado while the Lapps were domiciled in that state. The majority correctly notes that "the validity and effect of a contract are governed by the law of the state having the most significant relationship with the contract", i.e., Colorado. Majority opinion, at page 343. I have no quarrel with this conclusion; it appears, at any rate, that under the laws of Colorado or Washington, the note must be considered in [351] default and judgment could be had against it. The contractual basis for an action on the breached contract to pay the debt made by Mr. Lapp is undisputed.

      47

      The majority errs, however, in thereafter concluding that simply because Colorado law will determine the "validity and effect" of the contract — i.e., the note's enforceability and the breach of its terms — that Colorado law must also determine whether Pacific Gamble is entitled to collect its debt in Washington from the Lapps' community property, subsequently acquired in Washington, the Lapps' domicile. The majority makes its argument to this effect not on the basis of a Colorado judgment against the Lapps, but merely because of its view that the husband would have had the benefit of property characterized as community in this state to pay the debt had that property been earned in Colorado.

      48

      I cannot agree with the majority's analysis. The funds available to satisfy this judgment, even if rendered on the basis of another state's contract law, must be left to the law of the debtor's marital domicile and forum, Washington. In this case, Colorado law cannot be expected to resolve the question of liability of Washington community property for the debt, for no such concept of marital property ownership exists in Colorado. Our courts should look instead to Washington law to determine whether one spouse, acting alone, for the sole benefit of his sole business, can subject community property in Washington to liability on a debt such as that incurred by Mr. Lapp in this case. RCW 26.16.010-.020, and .200 clearly preclude such liability for Mr. Lapp's noncommunity debt.

      49

      Under Washington law, a separate debt, created in aid of the husband's separate business, and therefore not incurred for the benefit of the community, cannot be collected out of community property. This state's public policy is to protect the community marital property against a debt not incurred for its benefit. Colorado is not a community property state. Instead, it has a form of common law marital [352] property that prevents a wife's separate earnings and property from being subjected to the payment of her husband's debts.

      50

      The majority has compared the public policies of Washington and Colorado in protecting the interests of a spouse who has had no involvement in contracting her marital partner's debt. Then, by misapplying conflict of laws rules, the majority determines that Washington's public policy in this regard must yield to Colorado's, subjecting community property, earned in Washington by Washington domiciliaries, to the payment of the husband's debt, incurred in Colorado, a debt which would be separate in nature under Washington law. For the reasons set out below, I object to the majority's analysis and conclusion.

      51

      The case most extensively relied on by the majority, Potlatch No. 1 Fed. Credit Union v. Kennedy, 76 Wn.2d 806, 459 P.2d 32 (1969), in fact clearly supports the analysis set forth in this dissent. In Potlatch, this court applied Washington law, which was more protective of community property than the competing Idaho law, in determining the liability of the Washington marital community for a debt incurred by the husband in Idaho. As noted by the majority, our conclusion in Potlatch was based on an analysis of the "conflicting policy decisions" made by the legal systems of the two states. Majority opinion, at page 345, citing Potlatch No. 1 Fed. Credit Union, at 808. For the same reasons set out more fully in this opinion below, we there applied Washington law to determine the liability of the Washington marital community for a debt incurred in another state.

      52

      What the majority overlooks in its citation, on the strength of Potlatch, to Restatement (Second) of Conflict of Laws § 188 (1971), is the fact that the appropriateness of the application of a particular state's laws will depend on the issue being considered:

      53
      Courts have long recognized that they are not bound to decide all issues under the local law of a single state. See Restatement (Second), Conflict of Laws § 188, Comment [353] d.... Therefore, with respect to the issue now before us of whether the community property of Washington residents is subject to the suretyship obligation of the husband entered into with an Idaho company with no benefit to the community, we hold that the law of Washington has the most significant relationship to that portion of the transaction.
      54

      (Italics mine.) Potlatch No. 1 Fed. Credit Union v. Kennedy, supra at 813. Restatement (Second) of Conflict of Laws § 188(1) itself, as cited in the majority opinion at page 346, sets out that the determination of the state with the "most significant relationship to the transaction" is to be accomplished "with respect to an issue" (italics mine) actually contested in the proceeding. Review of the conflict of laws principles with regard to the single issue of the source of funds available to satisfy a contractual obligation should lead to the conclusion, reached in Potlatch, that Washington law will determine the liability of the community property of a couple domiciled in Washington for a debt, wherever incurred, that is sued upon in Washington.

      55

      Without clearly identifying the problem presented by the distinction between contractual validity and contractual payment source of funds, Potlatch considered this question of the source of funds available to satisfy a contractual obligation in a manner that clearly draws this distinction in conflict of laws analysis. Neither cases nor commentaries in this country have considered the choice of law issues raised by jurisdictional differences in the classes of property available to satisfy the judgment for a litigant damaged by breach of contract:

      56
      In this area which is beset with highly significant differences among the several laws, conflicts problems have been widely discussed abroad. No similar treatment can be found in this country. Thus, for instance, neither interstate nor international conflicts cases seem to have been reported concerning the remedies available for the enforcement of contracts ...
      57

      A. Ehrenzweig, Conflict of Laws § 125, at 357 (1962). The few foreign treatises available also offer no guidance in [354] determining how the source of funds for contract damages is to be determined in a case such as this, although most acknowledge the distinction in choosing the law to govern contractual validity and the law to govern the funds available for contractual damage recovery. However, I feel that in this case we should explicitly make this distinction between choice of law in contractual validity and in contractual damage recovery. This case concerns no issue of validity but considers instead only the source of funds for collection of contract damages. We should reaffirm the application of the law of the marital domicile and forum, Washington, to the question of the source of funds available for contract damages, because of the overriding interest this state has in consistent and conscientious application of the policies underlying the law of community property.

      58

      This examination of the policies of our community property law is entirely consistent with and necessary to arrive at a decision between the conflicting principles of law presented here. It is in the best tradition of modern conflict of laws analysis, considering the policies for application of one state's law, rather than another's because

      59
      [t]he natural desire of every good court [is] to achieve justice by applying what it regards as intrinsically the better rule of law ...
      60

      R. Leflar, American Conflicts Law § 4, at 7 (1968). See also Restatement (Second) of Conflict of Laws § 188, comment c (1971) ("The purpose sought to be achieved by the contract rules of the potentially interested states, and the relation of these states to the transaction and the parties, are important factors to be considered in determining the state of most significant relationship.") As noted by Mr. Justice Holmes, law is not a closed system that "can be worked out like mathematics." It is the duty of judges to "weigh considerations of social advantage."[4]

      61

      [355] With this duty in mind, I examine the public policy behind Washington's community property law.

      62

      This state has a unique, progressive system of property ownership that affords marital partners equal control over community assets. RCW 26.16.030. Our law generally refuses to allow those assets to be burdened by the noncommunity debts of either spouse.[5] Washington's community property scheme reflects a policy which should not be subjected to the vagaries of out-of-state debt accrual; all marital communities in this state are afforded the protection and predictability of our community property provisions.

      63

      The practical result of the majority's analysis is to permit an out-of-state creditor 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. As the Court of Appeals pointed out, had Mr. Lapp contracted this debt in Washington, only his separate property would have been subject to the debt. Pacific Gamble Robinson Co. v. Lapp, 24 Wn. App. 795, 800, 604 P.2d 1300 (1979). Joslyn Fruit was Mr. Lapp's noncommunity property, purchased by him prior to his marriage. It would be characterized as separate property under the law of this state. The obligation now sued upon by Pacific Gamble, which was undertaken for Joslyn Fruit's sole benefit, would have created no community liability if incurred in Washington. Piles v. Bovee, 168 Wash. 538, 12 P.2d 914 (1932); Schramm v. Steele, 97 [356] Wash. 309, 166 P. 634 (1917). But by applying Colorado law to determine the remedy available to Pacific Gamble, the majority subjects community property, wages and property earned and owned in this state by Mr. Lapp, to execution. There is no reason or benefit to the people of this state in according such a preference to an out-of-state creditor.

      64

      We instead should look at the interests of the parties to this action for recovery of damages and at the policies of the states with which this action is connected. The plaintiff Pacific Gamble's principal place of business is Washington; presumably familiar with the law of this state, it could have prevented the result of which it now complains by, for example, the simple device of obtaining an agreement signed by husband and wife at the time the debt was incurred. Household Fin. Corp. v. Smith, 70 Wn.2d 401, 423 P.2d 621 (1967). The defendants are domiciled here, wholly subject to the benefits and liabilities inherent in our system of marital property ownership. The courts of this state must enforce any judgment for damages, determining the source of funds, the procedure for satisfaction, and all other mechanics of enforcing plaintiff's substantive contractual claim. The law of this state should apply. Washington's interest in this decision and its impact on our citizens' marital property rights is far greater than any continuing interest by Colorado in the remedy available for breach of a transitory contract sued upon in this state. See Potlatch No. 1 Fed. Credit Union v. Kennedy, supra at 813-14 ("We have seriously considered the governmental interest of the state of Idaho in protecting its creditors, but do not believe they are paramount in this case."). See also O'Brien v. Shearson Hayden Stone, Inc., 90 Wn.2d 680, 686, 586 P.2d 830 (1978).

      65

      The law of Washington should determine the source of funds from which Pacific Gamble's damages for breach of contract can be had. Washington is the state with the most significant relationship to the single issue of the source of funds available for contract damages. Potlatch No. 1 Fed. [357] Credit Union v. Kennedy, supra at 813. Mr. Lapp's noncommunity debt cannot be satisfied from the marital community's property. We should affirm the dismissal of Pacific Gamble's suit against the Lapp marital community. I therefore respectfully dissent.

      66
      UTTER, C.J., concurs with HOROWITZ, J.
      67

      [1] The usual meaning of "false conflict" is that there is no conflict between the laws of two states. That is, "[i]f the laws of both states relevant to the set of facts are the same, or would produce the same decision in the law suit, there is no real conflict between them and the case ought to be decided under the law that is common to both states." R. Leflar, American Conflicts Law§ 93, at 188 (3d ed. 1977).

      68

      In fact, Pacific States Cut Stone Co. v. Goble, 70 Wn.2d 907, 425 P.2d 631 (1967), was in error in finding a false conflict. The case involved a debt incurred in Oregon by two husbands who were Washington residents. The result under Oregon law would not subject the wives' earnings to the debt, because their wages were separate property, as that term is defined in Oregon. Ore. Rev. Stat. 108.050. The result under Washington law would subject the wives' earnings to the debt, because (1) the debt was a community obligation, (2) community property was reachable to satisfy it, and (3) the wives' earnings were community property in Washington. Thus, a real, not false, conflict was presented in the Pacific States Cut Stone Co. case, although the court failed to recognize it.

      69

      In spite of the confusion in the Pacific States Cut Stone Co. opinion, it has been widely heralded, apparently because of its salutary overruling of a long line of precedent which had prevented out-of-state creditors from reaching assets that would have been available to Washington creditors. See Cross, The Community Property Law in Washington, 49 Wash. L. Rev. 729, 843 (1974); Trautman, Evolution in Washington Choice of Law — A Beginning, 43 Wash. L. Rev. 309, 312-13 (1967); R. Weintraub, Commentary on the Conflict of Laws 367 n. 57 (2d ed. 1980); R. Leflar, American Conflicts Law § 233, at 474 (3d ed. 1977).

      70

      [2] It may be noted, however, that the Washington policy in favor of the protection and predictability of the marital property provisions is not always followed strictly, but has been modified by this court and the legislature in some circumstances. In the case of deElche v. Jacobsen, 95 Wn.2d 237, 622 P.2d 835 (1980), for example, the court has decided that a tort-feasor's share of community property, including wages, may be available for a judgment on a separate tort. This is so, even though (1) the debt was incurred during the marriage, (2) the debt was characterized as "separate", because it was not incurred for the benefit of the community, and (3) this type of community property has not heretofore been available to a plaintiff in such an action. Moreover, RCW 26.16.200, the so-called "marital bankruptcy" statute, provides that the earnings and accumulations of a spouse shall be available to creditors for the satisfaction of debts incurred by that spouse prior to marriage for a period of 3 years from the date of the marriage. Thus, although neither of these incursions on the traditional community property rule as to separate debts of a spouse applies to the facts of this case, it is clear that neither this court nor the legislature currently adheres to the rule that the marital property, including the wages of a debtor spouse, are under all circumstances to be insulated from the claims of a creditor on a separate debt.

      71

      [3] This result is consistent with the reasoning we employed in Potlatch No. 1 Fed. Credit Union v. Kennedy,76 Wn.2d 806, 459 P.2d 32 (1969). Although we there concluded that Washington law should apply to the question whether the community was liable for the husband's suretyship obligation to an Idaho creditor, the result was reached through a careful analysis of all the factors. Had we found that Idaho had the most significant relationship to the transaction, it is clear we would have applied Idaho law and accordingly imposed liability on the Washington marital community.

      72

      Potlatch No. 1 Fed. Credit Union thus provides the analytical framework for deciding this case, although our conclusion requires us to apply foreign law. There is no persuasive authority for the view that the property liable on a debt is a question of remedy which must always be decided by the law of the forum.

      73

      [4] Quoted in Cook, Oliver Wendell Holmes: Scientist, 21 A.B.A.J. 211, 212 (1925). See also O. Holmes, Common Law 35-36 (1881).

      74

      [5] The majority relies on a wholly statutory exception to the rule that community assets are not subject to noncommunity debts. Majority opinion at page 347, footnote 2. RCW 26.16.200 was necessary to change the rule of a long line of cases refusing to allow recovery for antenuptial separate debts from the community property of newly married individuals. See Katz v. Judd, 108 Wash. 557, 185 P. 613 (1919). See also National Bank of Commerce v. Green, 1 Wn. App. 713, 463 P.2d 187 (1969) (refusing to give retroactive application to RCW 26.16.200 because it so clearly overruled earlier case law and altered the very nature of community property rights). The fact that these exceptions were accomplished only by legislation helps demonstrate the general strength and validity of the rule protecting community assets from noncommunity debts. See deElche v. Jacobsen, 95 Wn.2d 237, 622 P.2d 835 (1980) (Horowitz, J., dissenting).

  • 2 §4.4.4.2 Forum law

    • 2.1 American Standard Life and Accident Ins. v. Speros

      1
      494 N.W.2d 599 (1993)
      2
      AMERICAN STANDARD LIFE AND ACCIDENT INSURANCE COMPANY, Plaintiff and Appellee,
      v.
      Charles J. SPEROS, Defendant,
      Ralph W. Thomas and Gateway Chevrolet, Inc., Defendants and Appellants.
      3
      Civ. No. 920240.
      Supreme Court of North Dakota.
      4
      January 6, 1993.
      5

      [601] Patrick B. Kenney of Miller, Norman & Kenney, Moorhead, MN, for plaintiff and appellee.

      6

      Steven A. Johnson (argued), and H. Patrick Weir of Vogel, Brantner, Kelly, Knutson, Weir & Bye, Ltd., Fargo, for defendants and appellants.

      7
      VANDE WALLE, Justice.
      8

      Ralph W. Thomas and Gateway Chevrolet, Inc. appealed from a district court judgment which granted American Standard Life & Accident Insurance Company's [American Standard] motion for summary judgment. The judgment ordered that American Standard, the garnishor, recover from Gateway Chevrolet, Inc. [Gateway], the garnishee, $138,443.90, plus interest and costs as the result of an Arizona judgment against defendant Thomas, an employee and major shareholder of Gateway. We affirm.

      9

      American Standard obtained a judgment against Thomas on October 2, 1991, in Maricopa County, Arizona. The judgment arose from an agreement in which Thomas guaranteed a loan extended by American Standard. The guarantee agreement specified it was to be governed by Arizona law. After the loan was in default, American Standard commenced a proceeding in Arizona to sell the real estate which secured the loan. The real estate was sold but the proceeds did not satisfy the claim, and American Standard successfully sued Thomas for the deficiency. Under Arizona law, the judgment against Thomas for the deficiency was limited to his "sole and separate property."

      10

      An authenticated copy of that judgment was filed in Cass County, North Dakota, on January 14, 1992, pursuant to Chapter 28-20.1, NDCC, North Dakota's codification of the Uniform Enforcement of Foreign Judgments Act. Since then, several garnishee summons have been served, most notably against Gateway. The bases for the garnishee summons upon Gateway are that it pays Thomas a monthly salary and pays a rental on land which is leased from Thomas and owned in joint tenancy by Thomas and his wife.

      11

      After initially denying holding any money that was the "sole and separate property" of Thomas, Gateway made two garnishment disclosures, and the deposition of Bruce A. Nelson, Office Manager of Gateway, was taken. The disclosures and deposition revealed that Thomas's monthly salary from Gateway was $5,149.00. They also revealed that Gateway entered into a written lease with Thomas, individually, whereby Gateway pays him, individually, $26,500.00 per month for property in Cass County which is owned in joint tenancy by Thomas and his wife. Although acknowledging service of the Garnishment Summons, Gateway has continued to issue salary and lease checks to Thomas and has neither applied nor set off any monthly salary payments or lease payments to Thomas against the amount claimed in American Standard's garnishee summons.

      12

      Because of Gateway's failure to apply or set off any money owed to Thomas, American Standard brought a motion for summary judgment for the entire amount claimed in the garnishee summons. See NDCC § 32-09.1-15. The district court granted the motion. The issue before us on appeal is whether North Dakota or Arizona law applies to the wages and lease payments received by Thomas as a result of the Arizona judgment transferred to North Dakota through Chapter 28-20.1, NDCC.

      13

      In 1969, North Dakota adopted the 1964 Revised Act of the Uniform Enforcement of Foreign Judgments Act as approved by the National Conference of Commissioners on Uniform State Laws and the American Bar Association. Chapter 28-20.1 provides a summary procedure for actions on foreign judgments by providing the enacting state with a speedy and economical method [602] of doing what it is required to do by the Constitution of the United States, that is, to provide full faith and credit to the judgments of courts of other states. NDCC §§ 28-20.1 et seq.; Unif. Enforcement of Foreign Judgments Act (1964) Prefatory Note, 13 U.L.A. 150 (1986).

      14

      The Full Faith and Credit Clause of the United States Constitution asserts:

      15
      "Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the Congress may by general laws proscribe the manner in which such acts, records, and proceedings shall be proved, and the effect thereof."
      16

      U.S. Const. art. IV, § 1. In applying the Uniform Enforcement of Foreign Judgments Act, constitutional full faith and credit is afforded to foreign judgments even though a similar judgment could not be obtained in the forum state as a matter of law, Matson v. Matson, 333 N.W.2d 862 (Minn.1983)[1], or though the judgment could not be obtained in the forum state as a matter of strong public policy. Hamilton v. SCM Corp., 334 N.W.2d 688 (Wis.Ct. App.1983); Medina & Medina, Inc. v. Gurrentz Int'l, 304 Pa.Super. 76, 450 A.2d 108 (1982).

      17

      When a properly authenticated foreign judgment is filed with the clerk of any district or county court in North Dakota and notice is properly given to all parties, Beck v. Smith, 296 N.W.2d 886 (N.D.1980), the clerk treats the foreign judgment in the same manner as a judgment of a district or county court of this state. NDCC § 28-20.1-02. "A judgment so filed has the same effect and is subject to the same procedures, defenses, and proceedings for reopening, vacating, or staying as a judgment of a district court or county court of any county of this state and may be enforced or satisfied in like manner." Id. The local law of the forum determines the methods by which a judgment of another state is enforced. United Bank of Skyline v. Fales, 395 N.W.2d 131, 133 (Minn.Ct. App.1986) citing Jones v. Roach, 118 Ariz. 146, 150, 575 P.2d 345, 349 (Ct.App.1977) ["[P]rocedurally a foreign judgment is subject to the same procedure as a final judgment of this state."]; First of Denver Mortg. Investors v. Riggs, 692 P.2d 1358 (Okla.1984); Restatement (Second) Conflicts of Laws § 99 (1969).

      18

      Appellants contend that, because American Standard and Thomas agreed that the guarantee be construed according to the laws of Arizona, Arizona law should be applied to the enforcement of the judgment in North Dakota. Matters of procedure and remedial rights are governed by the law of the forum where relief is sought. Dixon's Extrs. v. Ramsay's Extrs., 7 U.S. (3 Cranch.) 319, 2 L.Ed. 453 (1805). Thus the remedies and procedures to enforce a contract made in another state are the remedies and procedures of the enforcing state. The same reasons to look to the intent of the parties in the case of the substance of the contract do not apply in the case of matters pertaining to the remedy, as the parties presumably do not necessarily consider the remedy when they enter into the contract. They bind themselves to do what the law they live under requires, but since they bind themselves generally, it is as if they had contemplated the possibility of enforcement in another jurisdiction. While the obligation of a contract is always protected by the state and federal constitutions, that which is purely a matter of process or remedy is governed and regulated by the laws of the place where the remedy is sought. The inhibition of the constitution will not be held to apply where there is a change in the form of the remedy, or a modification of it, provided no substantial right secured by the [603] contract is thereby impaired. 16 Am.Jur.2d Conflicts of Laws § 118 (1979).

      19

      Although we are bound to give full faith and credit to the substance of foreign state judgments, procedure and remedies are different from substance; and what is procedure and what is substance is determined by the forum. Anderson v. State Farm Mut. Auto. Ins. Co., 222 Minn. 428, 24 N.W.2d 836 (1946). The substance of the contract has already been determined by the Arizona court. The only inquiry we make is how to enforce it, and for this we rely upon North Dakota law.

      20

      Here, applying Arizona law which the parties agreed controlled the guarantee agreement, the Arizona court held that American Standard recover from Thomas as to his sole and separate property, a fixed sum plus costs and interest. Relying upon North Dakota law for the methods and procedure of enforcement of its judgment, American Standard initiated garnishment proceedings against Thomas and Gateway to execute upon two sources of income—Thomas's salary and Thomas's rental income. North Dakota law therefore governs the enforcement of the Arizona order in North Dakota.

      21

      Chapter 32-09.1, NDCC, provides a method by which a judgment creditor may proceed by garnishing property, real or personal, belonging to the creditor's debtor which would satisfy the judgment creditor's claim. NDCC § 32-09.1-02. A garnishment action is the exclusive procedure which may be used to execute on earnings of a debtor while those earnings are held by a third party employer. Id. We have long held that fundamental in any garnishment procedure, only the actual interest of the defendant can be reached by garnishment proceedings, and the creditor cannot obtain any more than actually belongs to the debtor:

      22
      "The rights of the debtor are the source of the creditor's rights. The stream cannot rise higher than its source.... Under no circumstances can the plaintiff be placed in a more favorable, or the garnishee in a worse, position than if the defendant was himself enforcing his claim. For the plaintiff cannot, by garnishment, place himself in a superior position, as regards a recovery, than is occupied by the principal defendant."
      23

      Hatcher v. Plumley, 38 N.D. 147, 164 N.W. 698, 700 (1917) [citations omitted]. The procedural law of North Dakota in enforcing a valid judgment by garnishment thereby allows the garnishor to reach only the property in which the defendant has an interest, and only to the extent of that interest. See NDCC § 32-09.1-03. The crux of the matter in this case is whether Arizona or North Dakota law applies in delineating the extent of the interest which Thomas holds and which American Standard may garnish.

      24
      Thomas's Wage Income from Gateway
      25

      Arizona is a community property state.[2] The wages Thomas receives from Gateway are personal property acquired during the marriage and are community property and therefore not his "sole and separate property" under Arizona law. A.R.S. § 25-211. Applying Arizona law, the wages would not be subject to the present garnishment actions.

      26

      North Dakota is not a community property state. Rozan v. Rozan, 129 N.W.2d 694 (N.D.1964); Matter of Estate of Erickson, 368 N.W.2d 525 (N.D.1985).[3] Wages and salaries are one's sole and separate personal property,[4] and wages are subject to garnishment actions.

      27

      [604] Arguably, North Dakota law allows foreign laws to reach a party's personal property located within North Dakota by stating that "[i]f there is no law to the contrary in the place where personal property is situated, it is deemed to follow the person of its owner and is governed by the law of his domicile."[5] NDCC § 47-07-01. The source note of section 47-07-01, NDCC, incorrectly states it was derived from section 946 of the California Civil Code,[6] which in turn was derived from the Field Code.[7] This section of the Field Code was enacted by the Dakota Territory Legislature in 1865 (Civ.C.1865, § 364). It was subsequently adopted by the North Dakota Legislature where it has undergone only minor changes.[8]

      28

      For the purposes of historical reference and to aid in interpretation, the provisions of the modern Century Code are to be considered as continuations of previously existing sections if the two are substantially similar. NDCC § 1-02-25. Section 47-07-01 is substantially similar to section 364 of the 1865 Dakota Civil Code, which in turn is substantially similar to California's adaptation of the Field Code. In construing statutes, we may look to its legislative history and former statutory provision, including laws upon the same or similar subjects. NDCC § 1-02-39; Furlong Ent. v. Sun Exploration & Prod., 423 N.W.2d 130 (N.D.1988). Therefore, we look to California case law and interpretation of section 946, Cal.Civ.Code, for guidance in interpreting section 47-07-01, NDCC.

      29

      Foreign case law interpreting statutes is most persuasive if the cases were decided prior to our own adoption of the statute. Although we find no relevant case law interpreting the Field Code provision, prior to North Dakota's adoption of it, we find relevant interpretations after our enactment; and although not mandatory, California's interpretation of it is somewhat persuasive. E.g., Estate of Zins by Kelsch v. Zins, 420 N.W.2d 729 (N.D.1988).

      30

      In In re Lathrop's Estate, 165 Cal. 243, 131 P. 752 (1913), the California Supreme Court stated that section 946, Cal.Civ.Code, is part of the "jus gentium" [law of nations] and that it announces the clearly established rule arising out of consideration of justice and the principle of comity that the law controlling personal property is governed by the law of the domicile of the owner. But this declaration is accompanied by the all-important limitation that the law of the domicile controls "if there is no law to the contrary in the place where the personal property is situated." Id. 131 P. at 754. This limitation of the otherwise universal rule applies when the disposition of the property does violence to the law of the place where the property is located, or where it is contrary to public policy.

      31

      The "exception to the rule" was expounded upon in In re Nolan's Estate, 135 Cal. App.2d 16, 286 P.2d 899 (1955), wherein the court stated that section 946, Cal.Civ.Code, was not merely a maxim of law, but a part of the conflict of laws. It held that "[t]he obvious meaning of the statute is that personal property is governed by the law of the domicile of its owner, unless a general or specific law where the property is situated provides that the law of the domicile shall not govern." Id. 286 P.2d at 901 [605] citing In re Barton's Estate, 196 Cal. 508, 238 P. 681, 683 (1925).

      32

      In Waite v. Waite, 6 Cal.3d 461, 99 Cal. Rptr. 325, 492 P.2d 13 (1972), the defendant worked in California where he earned retirement benefits. He later became a resident of Nevada, and sued for divorce in Nevada. Subsequently the plaintiff sued for divorce in California, and the California Supreme Court was asked to determine which court had jurisdiction over retirement benefits earned in California—California or Nevada. Acknowledging that Nevada lacked in personam jurisdiction over the plaintiff, the defendant contended that his right to the retirement benefits was a species of intangible personal property,[9] and that Nevada, as the state of his domicile, could exercise jurisdiction in rem to adjudicate and award that property. In support of his contention, he cited section 946, Cal.Civ.Code. The California Supreme Court concluded that Nevada had no jurisdiction over the relevant benefits and observed that an "intangible, unlike real or tangible personal property, has no physical characteristics that would serve as a basis for assigning it to a particular locality. The location assigned to it depends on what action is to be taken with reference to it." Id. 99 Cal.Rptr. at 329, 492 P.2d at 17 [emphasis deleted]; Atkinson v. Superior Court, 49 Cal.2d 338, 316 P.2d 960, 963 (1957); In re Waits' Estate, 23 Cal.2d 676, 146 P.2d 5, 8 (1944). See also Hanson v. Denckla 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958).

      33

      In American Standard's case, the purpose of assigning a situs to the wages is to establish the jurisdiction in which to garnish them. Within this context, jurisdiction should be determined "in light of the totality of contacts with the state involved" and the "bearing that local contacts have to the question of over-all fair play and substantial justice." Atkinson, supra, 316 P.2d at 965. Accordingly, we enumerate the relevant "contacts" of each state in this action. The wages at issue arise from Thomas's employment at Gateway Chevrolet, a North Dakota corporation doing business in North Dakota. These wages are subject to North Dakota taxes and withholding. The laws of North Dakota, not Arizona or Texas, determine Thomas's right to the wages, and likewise fix the character of the wages as sole and separate property. It is his service in North Dakota that entitles Thomas to the wages. Neither Arizona nor Texas has closer contacts with the wages.

      34

      As unpaid wages are intangibles and the action taken with reference to them shows closer connections to North Dakota than any other state, the wages are classified according to North Dakota law. Because North Dakota is not a community property state, the wages are Thomas's sole and separate property. We accordingly hold that Thomas's wages are subject to the garnishment proceeding. Because there is no dispute as to fact, the trial court did not err in granting summary judgment in favor of American Standard in this regard. Rule 56, N.D.R.Civ.P.; Capsco Prods., Inc. v. Savageau, 493 N.W.2d 650 (N.D.1992).

      35
      Thomas's Rental Income from Gateway
      36

      When a foreign court attempts to affect title to real property located in North Dakota, we have said that:

      37
      "It is settled in this State that a court decree or court judgment of another state in its determination of property rights may not directly affect or transfer title to real property situate in North Dakota.... A decree or judgment of a court of another jurisdiction having such a purported consequence will not be accorded [606] full faith and credit under Article IV, Section I, of the Constitution of the United States."
      38

      Rozan, supra, at 700. In this case, however, the valid Arizona judgment did not directly convey or encumber North Dakota real estate. Although the Arizona judgment did not affect real property, the garnishment action which executes the Arizona judgment does affect real property by essentially encumbering the property by taking the rentals. In addition we believe the right to receive land lease payments would be classified as intangible personal property. See f.n. 9. We therefore apply North Dakota law to the garnishment of the lease income.

      39

      In 1988, the property which forms the basis of Gateway's lease was quit-claimed to Thomas and his wife "as joint tenants, and not as tenants in common." As joint tenants, both Thomas and his wife hold a joint interest in the property. A joint interest is one owned by several persons in equal shares by a title created by a single transfer. NDCC § 47-02-06. Contrary to Thomas's assertions, the land is not, nor ever can be, community property by the mere fact that the marital couple resided in a community property state.[10] North Dakota is not a community property state and we do not apply community property principles to land within our borders.[11]

      40

      We have held that each joint tenant has the right of enjoyment to the extent of his or her interest. In re Estate of Paulson, 219 N.W.2d 132 (N.D.1974). Although a joint tenant may not convey or otherwise encumber another joint tenant's interest in property without the authorization or consent of the cotenant, one may deal with strangers as freely as owners of property held individually, and may convey or otherwise encumber one's own interest in the property without the consent of the other joint tenant. Olson v. Fraase, 421 N.W.2d 820 (N.D.1988). It follows that during the continuance of the joint tenancy, each joint tenant may have his or her fractional interest taken for the satisfaction of their individual debts. Schlichenmayer v. Luithle, 221 N.W.2d 77 (N.D.1974). As Thomas is free to pledge, encumber, lease, or sell his interest in the joint estate—or have it the subject of a judgment against him—it is his "sole and separate property."

      41

      In 1988, Thomas leased the entire property to Gateway. The lease was not signed by the other joint tenant, Thomas's wife. We have held that a joint tenant may not encumber another joint tenant's interest in the property without the authorization or consent of the cotenant. Olson, supra. Though a lease of joint property must be made by the act of all cotenants, if such a lease is made without the cotenant's consent or authority, the lease will in most instances be deemed valid and deemed for the benefit of both joint tenants. Shelby v. Shelby, 212 Ky. 552, 279 S.W. 942 (1926). Even if Thomas's wife did not consent or otherwise ratify the lease, she would be entitled to an equal share of the rents, profits, and income of the joint property. [607] While there is authority that one joint tenant may receive the whole rent of the joint property and is not accountable to his or her cotenant for receiving more than his or her share of the rents and profits, Black v. Black, 91 Cal.App.2d 328, 204 P.2d 950 (1949), we believe the better view is that a joint tenant is liable to account to his or her cotenant for receiving more than his or her portion of the rents and profits. See Falkner v. Falkner, 58 Mich.App. 558, 228 N.W.2d 461 (1975); Lawrence v. Lawrence, 231 Ark. 324, 329 S.W.2d 416 (1959). Compare In re Estate of Paulson, supra, [possession by one joint tenant is possession for the benefit of both]. This view is consistent with previous opinions of this court concerning the obligations existing between joint tenants. See, e.g., Fettig v. Fettig, 277 N.W.2d 278 (N.D.1979) [mortgagor who redeems in his own name presumptively redeems for all his cotenants and his holding of title will be in trust for benefit of all cotenants].

      42

      This right to accounting, however, is a personal one. In the past, we have held that tenants in common are entitled to an accounting against their cotenants. Stevahn v. Meidinger, 57 N.W.2d 1 (N.D. 1952); Johnson v. Johnson, 164 N.W. 327 (N.D.1917). We agree with the rationale that, absent a statute to the contrary, when one joint tenant collects rents on the property and does not proportionately share the rents with their joint tenants, the other joint tenants do not have a lien on the collecting joint tenant's share of the property. Palpar, Inc. v. Thayer, 115 Cal. App.2d 333, 252 P.2d 51 (1953); Anno. Accountability of Cotenants for Rents and Profits or Use and Occupation, 27 A.L.R. 184 (1923); Anno. Accountability of Cotenants for Rents and Profits or Use and Occupation, 51 A.L.R.2d 388 § 30 (1957). Rather, the liability for rents and profits on a joint tenancy is a personal charge against the joint tenant who holds the rents, and one is not entitled to a lien on the land to secure the sums adjudged to be due. Succession of Grubbs, 182 So.2d 203 (La.Ct. App.1965); Pistole v. Lanier, 214 Ky. 290, 283 S.W. 88 (1926).

      43

      Thomas's wife made no appearance to defend her interest. She is entitled to a personal charge against Thomas for her share of the rental income, but it is not our province to apportion the income in order to limit American Standard's access to only Thomas's one-half interest in the income. We accordingly hold that all the rental income received by Thomas is subject to the garnishment proceeding. The trial court did not err in granting summary judgment in favor of American Standard in this regard. Rule 56 N.D.R.Civ.P.; Capsco, supra.

      44

      We affirm the trial court's judgment.

      45

      ERICKSTAD, C.J., MESCHKE, J., ALLAN SCHMALENBERGER, District Judge, and BERT L. WILSON, Surrogate Judge, concur.

      46

      ALLAN SCHMALENBERGER, District Judge, and BERT L. WILSON, Surrogate Judge, sitting in place of LEVINE and JOHNSON, JJ., disqualified.

      47

      ----------

      48

      [1] Pursuant to section 1-02-13, NDCC, we freely cite to other jurisdictions which have adopted, and whose courts are applying, the 1964 revision of the Uniform Enforcement of Foreign Judgments Act. This section states: "Any provision in this code which is a part of a uniform statute must be so construed as to effectuate its general purpose to make uniform the law of those states which enact it." NDCC § 1-02-13. Conversely, appellant's arguments stemming from the heavy reliance upon California cases will be given minimal weight as that jurisdiction has not adopted the Act.

      49

      [2] Section 25-211, A.R.S., states: "All property acquired by either husband or wife during the marriage, except that which is acquired by gift, devise or descent, is the community property of the husband and wife."

      50

      [3] Section 14-07-04, NDCC, negates community property principles in domestic relations by stating, "Separate property—Rights and privileges. Except as otherwise provided by section 14-07-03, neither the husband nor the wife has any interest in the property of the other, but neither can be excluded from the other's dwelling."

      51

      [4] Section 1-01-49(4), NDCC, states, "`Personal property' includes money, goods, chattels, things in action, and evidences of debt," and section 47-01-07, NDCC, states, "`Personal property' shall mean and include every kind of property that is not real."

      52

      [5] Apparently the domicile of Thomas may have been Texas, but Texas, like Arizona, is a community property state. See Tex.Fam.Code Ann. § 5.01(b) ["Community property consists of the property, other than separate property, acquired by either spouse during marriage."].

      53

      [6]The source note of section 47-07-01, NDCC, cites as its derivation section 946 of the California Civil Code, which reads:

      54

      "If there is no law to the contrary, in the place where personal property is situated, it is deemed to follow the person of its owner, and is governed by the law of his domicile."

      55

      [7] The source notes of the North Dakota Century Code incorrectly cite to the Territorial Civil Code of 1877 as the earliest source of Dakota Territory's Field Code. However, Dakota Territory enacted the Field Code in December of 1865. Laws of Dakota Territory, §§ 1-2034. See Furlong Ent. v. Sun Exploration & Prod., 423 N.W.2d 130, n. 15 (N.D.1988).

      56

      [8] R.C. 1895, § 3465; R.C. 1899, § 3465; R.C. 1905, § 4901; C.L. 1913, § 5444; R.C. 1943, § 47-0701.

      57

      [9] Wages which have been paid and received in the form of money are tangible assets. However, a garnishment action involves the execution "on earnings of a debtor while those earnings are held by a third party employer." NDCC § 32-09.1-02. Not yet having received the wages, the wage-earner only has a "right" to the wages. "Intangible property" is generally defined as "claims, interest and rights," Black's Law Dictionary 1217 (6th ed. 1990), and "property [that] has no intrinsic and marketable value, but is merely the representative or evidence of value, such as certificates of stock, bonds, promissory notes...." Id. at 809. As a right, claim, or interest against the employer, wages yet to be received are intangible property.

      58

      [10] Even if we were to apply Arizona or Texas community property law, the result would probably be the same. A common principle of community property law is that a husband and wife can hold property in derogation of their community property status if it clearly appears that the spouses agreed that the property should be taken in that manner. McClennen v. McClennen, 11 Ariz.App. 395, 464 P.2d 982 (Ct.App. 1970); In re Marriage of Berger, 140 Ariz. 156, 680 P.2d 1217 (Ct.App.1983) [joint tenancy allowed in community property state, despite having been purchased with community funds]; Russo v. Russo, 80 Ariz. 365, 298 P.2d 174 (1956) [when spouses own property as joint tenants in community property state, each owns his or her respective interest as separate property]. As the property was deeded to Thomas and his wife as joint tenants, a joint tenancy is presumed and Thomas's interest in his share of the joint estate is his "sole and separate property."

      59

      [11] In Rozan v. Rozan, 129 N.W.2d 694 (N.D. 1964), we held that North Dakota real estate purchased with marital community funds by a husband who resided with his wife in a community property state did not alter the land's character to community property. As the land was purchased by the husband with community funds, the couple became tenants in common and a resulting trust for one-half interest in the land developed in favor of the wife. Here, however, the land in question remains a joint tenancy and not a tenancy in common with a resulting trust. See also Matter of Estate of Erickson, 368 N.W.2d 525 (N.D.1985).

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