Q. After my husband and I separated, he was hospitalized and incurred $28,000 in medical bills. The creditor is threatening to sue me. Am I liable?
In a recent appellate decision out of San Diego County (CMRE Financial
Services, Inc. v. Parton), the wife called police after an incident of
domestic violence and shortly thereafter filed for DV restraining orders.
A week later the parties separated, and the husband was admitted to Tri-City
Medical Center for treatment for a severe emotional illness. He incurred
substantial medical bills.
The wife filed a dissolution action three months after that. In her Schedule
of Assets and Debts she listed the debt as owed by her husband. A judgment
for dissolution came to be entered several months later, and it did not
assign the hospital obligation to the wife. It appears to have been a
default judgment against the husband.
CMRE, the assignee of Tri-City Hospital, sued both the husband and wife
to collect the money for husband's treatment; by then husband had
disappeared and was never served with the lawsuit. Wife responded by denying
liability, and with a cross-complaint that alleged that by sending her
collection notices CMRE had violated the provisions of the Fair Debt Collection
Practices Act (Title 15, United States Code section 1692 et seq.), and
that she should obtain damages against them.
CMRE filed a motion to toss out the cross-complaint, relying on the language of
Family Code section 914(a)(2), which states that spouses are liable for debts incurred by the other when
separated if these are for "necessaries of life."
The trial court agreed with CMRE, and the matter proceeded to a judgment against the wife for the full amount plus interest. Wife appealed.
Once a Dissolution Judgment is Entered, Liability for Spousal Debts Ends
The appellate court ruled in favor of wife, and reversed the trial court.
Wife would have been liable for these medical costs IF a dissolution including
property division had not been granted, or if the dissolution judgment
had assigned the debt to her, or if she had agreed to support her estranged
husband while they were separated. For instance, if the parties had reconciled
and if CMRE had sued the wife and obtained a money judgment against her,
she would have been on the hook. But once a dissolution judgment was entered
that did not assign the debt to the wife she was protected.
Family Code section 916.
The appellate court also noted that an independent basis for holding wife
free of the debt included
Family Code section 4302 which states that a person is not liable for the support of their spouse
when the person is living separate from the spouse by agreement, unless
the agreement calls for support. The court reasoned that while the starting
point is that spouses are liable for the other's necessaries while
living separately that rule will not apply where they are separated by
agreement (apparently the agreement can be verbal or implied from conduct),
unless the agreement includes a promise to support the other.
This appellate decision seems confusing because the language of the statutes
themselves conflict. The court continued by noting that the legislature
has declared that one spouse's liability for the other spouse's
post-separation necessaries is entirely derivative of the fact of marriage
and not the same as a debt personally incurred by the supporting spouse.
This means that "the liability imposed by section 914 can be avoided
by the simple expedient of entering into a separation agreement which
does not provide for support."
The only exception might be where a creditor alleges a marital settlement
agreement violates the Uniform Fraudulent Transfer Act. CMRE did not allege
any fraud between these spouses.
This is landmark case because up to this point most lawyers and judges
believed that spouses were liable for the necessaries of life of the other,
even after separating, and that this was a special exception to the general
rule that once spouses separate liability for debt ends.
Now we know that you have at least two ways to avoid this debt: (1) Obtain
a Judgment for Dissolution before the creditor obtains a civil judgment
against you, but be sure that the debt is assigned to the other spouse;
and (2) be sure that you don't have an agreement to support the other
spouse in place, at least at the time the debt is incurred. The judgment
can be based upon a marital termination agreement.
If you pretend to separate, or separate just to avoid the debt, and if
the creditor claims you did this fraudulently to avoid liability, the
outcome might be different.
One additional point of information: Under the circumstances of this case,
CMRE was found to have in fact violated the federal Fair Debt Collection
Practices Act just by sending threatening letters, and of course by filing
suit. Knowledge of this case can be used to back off creditors who are
harassing you.
Thurman W. Arnold III, CA Family Attorney