Property acquired by either or both spouses during their marriage is community property[i]. In Hammonds v. Commissioner, 106 F.2d 420 (10th Cir. 1939), the court held that it is a fundamental postulate of the community property system that whatever is gained during coverture by the toil, talent, or other productive faculty of either spouse is community property.
Separate property can be considered community property by agreement, gift or commingling[ii]. Also, parties may by written agreement provide that property which would otherwise be community property is separate property[iii].
A court looks to the domicile of the parties at the time the property was acquired to characterize the property as separate or community[iv]. The status of property as community or separate is established at the time the property is acquired and the test is whether it is acquired with community funds or community credit or with separate funds or separate credit[v].
As a general rule, the law of the matrimonial domicile controls the property rights of husband and wife[vi]. The character of the property as community or separate may be controlled by its actual or fictional situs, and in determining the applicability of a community property statute to property acquired in one state while the matrimonial domicile is in another, the situs of the property is determined by reference to the general distinction between movable and immovable property.
Movables acquired by married persons are subject to the law of the domicile of the acquiring spouse[vii]. The status of real property is governed by the law of the state in which the property is situated[viii]. Thus, in the absence of an antenuptial contract between the parties, the respective rights of the husband and wife in real property are governed by the law of the place where such property is situated, rather than by the law of the domicile of the parties or of the place where the marriage was celebrated[ix]. Accordingly, upon consideration of comity, real estate acquired in a state by a nonresident married couple is governed by the lex rei sitae[x].
Although a state may well deny to non-residents the incidents of its community property laws, it may extend the community property system to non-residents, at least as to lands acquired by them within the state[xi].
Even though the questions relating to interests in real property are determined by the law of the situs, this rule does not apply where the funds used for the purchase were acquired by spouses while domiciled in another state[xii].
In Hammonds v. Commissioner, 106 F.2d 420 (10th Cir. 1939), the court held that marital rights in lands are regulated by the law of the situs subject to the following: where property is acquired in a community property state, through purchase by funds which are the separate property of one of the spouses, or in exchange for separate property of one of the spouses, the character of the funds or of the property given in exchange is transmitted to the property acquired.The identifiable proceeds of sale of separate property are separate property, whether the property sold is real or personal[xiii]. However, rents, issues, and profits derived from the separate property of either spouse, during the existence of the marriage, are considered community property[xiv].
One of the fundamental rules respecting personal property is that the rights of a husband and a wife in the property are determined by the law of domicile at the time of acquisition[xv]. If parties have their domicile in one state, their acquisitions of personal property in another state are governed by the laws of the state of domicile. If the acquisition is of real property in another state, the title is determined by the law of the state where it is situated[xvi].
Thus, marital interests in money and property acquired during a marriage are governed by the law of the domicile at the time of their acquisition, even when such money and property is used to purchase real property in another state[xvii]. Also, property rights are not lost simply because property is transported into another state and exchanged there for other property.
In Everson v. Everson, 264 Pa. Super. 563 (Pa. Super. Ct. 1979), the court held that real estate in Pennsylvania can never be community property as defined by the community property states and the courts of such states have no jurisdiction over such property and any attempt to transform Pennsylvania real estate into community property as defined by community property states is a nullity.
In Brenholdt v. Brenholdt, 94 N.M. 489 (N.M. 1980), the court held that when there is a conflict of laws issue involving a division of property in a divorce action in a state, the law of the foreign state where the funds used to purchase the property were acquired should apply. Further, funds or property brought in from a non-community property state where the funds or property were there considered to be the separate property of an individual will retain the same character. The court observed that there is an obvious difference between property which first acquires its separate nature while the husband is domiciled in a community property state and his separate property that can be traced to property acquired in a common-law state where the wife has inchoate equitable rights in that property.
Since military retirement benefits are movables, the state’s law is applied to that portion of the benefits acquired while the military spouse was a domiciliary of that particular state[xviii].
Similarly, the character of retirement pay is determined by the law of state where it is earned. If earned in a community property state during the marriage, it is community property, and if earned in a non community property state during the marriage, it is separate property[xix].
Generally neither husband nor wife is liable for debts incurred by the other[xx]. A married woman’s property is not subject to the debts of her husband. However, in Pac. States Cut Stone Co. v. Goble, 70 Wn.2d 907 (Wash. 1967), the court held that there is no community property law in Oregon and where contractual obligations are incurred by one spouse, the creditor is able to reach all property of the couple in satisfaction of the debt except that separately owned by the other spouse. The court observed that where the Oregon law is applied to couples living in Washington, a community property state, the obligation of one spouse subjects the couple community property to the debt, with the other spouse’s separate property excepted.
The fact that a debt is designated under the laws of a noncommunity-property state as a separate obligation is not particularly relevant to a determination of whether, under the law of that state, the community property of spouses living in the state would be obligated for the debt, since in a noncommunity-property state the term separate would not mean noncommunity[xxi].
In Household Fin. Corp. v. Smith, 70 Wn.2d 401 (Wash. 1967), the court held that a community is not a juristic entity separate and distinct from the husband and wife comprising it, but rather the property of the community is under the ownership of the spouses and their interest in the community property may be reached to satisfy a judgment based upon a joint and several obligation of the two.
[i] Nichols v. Nichols, 98 N.M. 322 (N.M. 1982)
[ii] Nationwide Resources Corp. v. Massabni, 143 Ariz. 460 (Ariz. Ct. App. 1984)
[iii] Ladd v. Ladd, 265 Ark. 725 (Ark. 1979)
[iv] Grappo v. Coventry Fin. Corp., 235 Cal. App. 3d 496 (Cal. App. 1st Dist. 1991)
[v] Woods v. Naimy, 69 F.2d 892 (9th Cir. Wash. 1934)
[vi] Reeves v. Schulmeier, 303 F.2d 802 (5th Cir. Tex. 1962)
[vii] Rearden v. Rearden, 568 So. 2d 1111 (La.App. 2 Cir. 1990)
[viii] Woods v. Naimy, 69 F.2d 892 (9th Cir. Wash. 1934)
[ix] Hammonds v. Commissioner, 106 F.2d 420 (10th Cir. 1939)
[xi] Black v. Commissioner, 114 F.2d 355 (9th Cir. 1940)
[xii] Grappo v. Coventry Fin. Corp., 235 Cal. App. 3d 496 (Cal. App. 1st Dist. 1991)
[xiii] Commissioner v. Skaggs, 122 F.2d 721 (5th Cir. Tex. 1941)
[xiv] In re Will of Clark, 59 N.M. 433 (N.M. 1955)
[xv] Crosby v. Commissioner, 27 B.T.A. 1234, 1236 (B.T.A. 1933)
[xvi] Hammonds v. Commissioner, 106 F.2d 420 (10th Cir. 1939)
[xvii] Grappo v. Coventry Fin. Corp., 235 Cal. App. 3d 496 (Cal. App. 1st Dist. 1991)
[xviii] Rearden v. Rearden, 568 So. 2d 1111 (La.App. 2 Cir. 1990)
[xix] St. Joseph‘s Hosp. & Medical Ctr. v. Maricopa County, 163 Ariz. 132 (Ariz. Ct. App. 1989)
[xx] Pac. States Cut Stone Co. v. Goble, 70 Wn.2d 907 (Wash. 1967)