Family Law: Ex-Husband’s Pre-Marriage Contractual Debt, Including Attorney’s Fees Liquidated Later Through A Post-Separation Award, Were Properly Characterized As A Responsibility Of Ex-Wife

It Did Not Matter If The Debt Was Incurred Before Marriage Or If The Fee Award Was Fixed After Separation.

               Although unpublished, Marriage of Ferris, Case No. A165952 (1^st Dist., Div. 5 Mar. 15, 2024) (unpublished) may be an eye opener for spouses who may not have been informed about contractual debts incurred by their new husband or wife before the marriage or for debts fixed in amount after the couples separate.

               Ferris was a situation where ex-husband entered into a real estate contract, with a contractual fees clause, later giving rise to a judgment for attorney’s fees against him and in favor of the other prevailing party to the contract after she successfully demurred to ex-husband’s cross-complaint.  The contract was entered into by the ex-husband and prevailing party years before ex-husband and ex-wife got married, even though the lawsuit against ex-husband and fees judgment occurred while the couple were legally separated.  Prevailing party then intervened in the couple’s divorce action to collect on the judgment based on there being surplus funds from a foreclosure sale of the couple’s former house.

Ex-wife successfully argued at the trial court level that (1) ex-husband’s real estate venture occurred before the marriage and did not benefit the community; and (2) the fees were awarded after the couple’s separation.  The lower court agreed that the fee award was not a “contract debt” under Family Code section 903 because any obligation to pay attorney’s fees was contingent on future events, the obligation to pay fees occurred after the date of separation such that it was ex-husband’s separate obligation, and the debt was not for the common necessaries of life for either spouse/children of the marriage.

               The 1/5 DCA reversed.  The appellate court framed the key issue as follows:  Who is liable on a debt for contractual attorney fees arising from litigation on a contract entered by one spouse before the marriage and awarded after the marriage’s demise?  It decided this presented a question of statutory interpretation subject to de novo review.

               It had to consider two Family Code statutory provisions.  Section 910(a) provides that “the community estate is liable for a debt incurred by either spouse before or during marriage, regardless of which spouse has the management and control of the property and regardless of whether one or both spouses are parties to the debt or to a judgment for the debt.”  Section 903, in turn, states that a contractual debt is incurred “at the time the contract is made.”  Piecing these two provisions together, the reviewing panel found that the community estate was liable for a spouse’s breach of a contract he or she entered into before or during the marriage, with section 903 oblivious to the time of performance of a contract.  (In re Marriage of Feldner, 40 Cal.App.4^th 618, 621-622 (1995).)

               It was immaterial that the potential liability for fees on the contract were uncertain at the time the contract was made, given that contractual rights contingent upon future events still mean the debt belonged to the community.  (In re Marriage of Nassimi, 3 Cal.App.5^th 667, 685-686 (2016); In re Marriage of Brown, 15 Cal.3d 838, 846 n. 8 (1976); In re Marriage of Fonstein, 17 Cal.3d 738, 746 (1976).). It was also irrelevant that the marital community did not benefit from the contract, because ex-wife could seek reimbursement from ex-husband for the debt to the third-party.  Finally, “the necessaries of life” argument did not prevail because the debt was incurred before marriage, not during it.  Bottom line, the debt was community in nature.