Conley v. Moe , 7 Wash. 2d 355 ( 1941 )

I accept, as correct, the majority's statement of the facts in the case, and, likewise, agree with what is said in the opinion from its beginning down through its analysis of the case of Leggv. Legg, 34 Wn. 132, 75 P. 130. The remainder of the opinion, however, proceeds upon a theory and reaches a conclusion with which I am not wholly in accord.

The question presented by the issues in this case is whether or not, under the facts and circumstances here involved, the trustee in bankruptcy of the marital community is entitled to have an equitable lien impressed upon the separate property of John Moe, a member of that community. Any right of the trustee in that respect must necessarily be founded upon a similar right vested in, or accruing to, the marital community. The immediate question, then, is whether or not, under the facts andcircumstances presented by this case, an equitable lien shouldbe impressed upon the separate property of the husband, John Moe, to the extent that community earnings were expended in connection with that property.

If I correctly understand the theory and holding of the majority, they are that, if the separate property of one of the spouses is enhanced in value by the use of community funds, theproperty, to the extent of such enhancement becomes, and is,community property; or, expressed somewhat differently, that, if the marital community invests substantial sums of money in the improvement of the separate property of the husband, the community thereby acquires an interest in, or an equitable lien against, the property, which passes to the trustee in bankruptcy upon adjudication of the community as a bankrupt. I differ with the majority in both of those concepts. In my opinion, the expenditure of funds of the marital community upon the separate property of either spouse does not,of itself, change either the title or the character of the property, nor does it, of itself, vest in the contributor any interest in the property of either spouse. To the contrary, theproperty, even though so enhanced, remains the separate property of the original owner, subject only to such equitable interests therein as may be adjudicated by the court. The proper principle applicable to such situations, and the one which this court has adopted and followed, is that the contributing party, whether it be the marital community itself, or one of the individual spouses, may be entitled to be reimbursed for improvements made upon, or for enhancement of the value of, such property through such contributions, and, to the extent that may be necessary in order to effect such reimbursement, equity will award an equitable lien upon the property in favor of the contributor. The one case which the majority opinion analyzes, Legg v. Legg,34 Wn. 132, 75 P. 130 (cited in 77 A.L.R. 1023), specifically so holds. But reimbursement under certain circumstances is a far different thing from an interest in property under any and all circumstances.

The majority opinion endeavors to state the position of the minority by saying:

"It cannot be gainsaid that we have consistently held that the wife, at the death of her husband, should, in equity and good conscience, be awarded the interest to which she is entitled in improvements by the community on land separately owned by the husband; however, it is the position of the minority that, if a creditor of a community seeks to impress a lien against such interest, he should be denied relief." (Italics mine.)

That is not an accurate statement of my position, nor do I accept the applicability of the premise, upon which is based the conclusion that a dissentient view is maintained by the minority.

In the first place, this case does not present an instance of a "death of the husband." John Moe, so far as this record discloses, is not dead; he is alive and active. So far as we are informed, the marital community is still intact, and is supported entirely by his earnings; in fact, his earnings compose the only property owned by the community, and from those earnings, solely, was the separate property improved. In the next place, the majority opinion assumes that the marital community isentitled to an interest in the separate property, when that is the very question to be decided in this case. Implied in that assumption, of course, is also the inference that we are dealing with a situation in which the wife is asserting her right to reimbursement and to the imposition of an equitable lien, and that, under all the facts and circumstances here involved, she is entitled to such relief. To the contrary, the wife, as a member of the marital community, denies her right to reimbursement, and, as I view it, she should not be required to have it forced upon her, under the facts and circumstances presented by the case. And, finally, the statement of the majority assumes that it is the position of the minority that a creditor should be denied relief merely because he is a creditor. My position in that respect is, rather, that the creditor, who stands in no stronger position than the debtor, should be denied relief for the simple reason that his debtor isneither asking nor is entitled to such relief.

If my position in this case has not already been made clear, it may be now stated thus: Substantial expenditures by the marital community or by either of the spouses, for the improvement of the separate property of the other spouse, or such expenditures by either spouse out of his or her separate property for the improvement of property owned by the marital community, may be the foundation of a claim by the contributing party or entity forreimbursement from the party whose property has been improved, or enhanced in value, by such expenditures, which claim for reimbursement may be asserted or relinquished by the contributor; that, when such claim is asserted, a court of equity will grant or withhold allowance of reimbursement according to the equities of the particular case, and, where allowance is granted, the court may, in order to secure such reimbursement, impress an equitable lien upon the property involved. In the very nature of things, the equities will vary according to the particular facts and circumstances, and in some cases the equities may flow partly in favor of one party, and partly in favor of the other, in which event it is in the power of the court, and it should be its purpose, to determine in whose favor the balance of the equities lies.

While our cases upon the subject have not laid down any specific rule by which every factual ingredient of a particular situation can be appraised or determined with exactness, there can be no doubt that this court has, by its decisions, adopted the view that, under proper circumstances, equity will allow reimbursement, and, if necessary, will award an equitable lien, in favor of the community, for improvements upon, or enhancement of, separate property, and, conversely, under like circumstances will, though perhaps not so readily, grant similar relief to an individual member of the community for contributions from separate property to community property. The granting of such relief is predicated upon the theory that evenhanded justice requires the allowance of that form of judicial aid, under certain circumstances, in order to afford complete protection to the contributing spouse.

Most often, as our cases show, such relief is granted in a situation where the interests of the wife are involved. The reason impelling the court to such action in behalf of the wife is that, otherwise, the husband, having the greater control over community affairs, could thereby deprive the wife of every particle of interest in the community property, in many instances leaving her destitute after years of effort in acquiring and conserving a community estate. Law and equity will cooperate to defeat such results. This resume of our holdings is supported by the cases cited in the majority opinion, to which may be added the case of Merritt v. Newkirk, 155 Wn. 517, 522,285 P. 442, 444.

With this understanding of the direction and extent to which equity will go in such cases, I will briefly state my reasons for concluding that, under the facts and circumstances here involved, no reimbursement and no equitable lien should be awarded to the wife, nolens volens, and, a fortiori, none to the respondent.

In the first place, there is no evidence, nor is there the least intimation or inference, of any overreaching or constructive fraud practiced by the husband, John Moe, upon his wife, Borghild J. Moe. To the contrary, the community is intact in every sense. The parties have not only maintained an amicable marital relationship continuously to the time of the judgment in this action, but, so far as the record gives any evidence, will continue to do so in the future. Hence, there is no occasion to consider that the wife's interests are in jeopardy by virtue of any act or design on the part of the husband.

The agreed statement of facts reveals that both Mr. Moe and Mrs. Moe testified at the trial that, soon after their marriage, they entered into an oral agreement that neither of them should ever make any claim to the separate property of the other, and that no such claim had ever been made by either of them. It is a reasonable inference from that testimony that it was the intention of the parties that any contribution to the separate property of either spouse should be considered as a gift. While that testimony was admitted over the objection of respondent, no assignment of error is predicated upon its admission; and while the court may not have believed that testimony, there is no evidence to support a contrary conclusion. In all such cases heretofore decided by this court, the function of equity has been to protect the survivor of a marital community which no longer exists or is in process of dissolution; the effect of the majority opinion is to disrupt the security of a marital community that is still intact.

Furthermore, the wife does not in this instance occupy the position of one who requires the assistance of a court of equity to protect her against destitution. She not only has the present and continued support of her husband, but, as shown by the statement of facts, she has separate property of her own, capable of the same use as that to which the property here in question has been put. From aught that appears in the record, its value is comparable to that standing in the name of John Moe.

A further fact to be considered in the balancing of equities is this: If the community is to be reimbursed for the value of the improvements placed upon the husband's separate property, then the husband is likewise entitled to a reasonable rental for the use of the premises during the more than seven-year period of its occupancy by the community. While there is no evidence before us as to the rental value of the property, I think that it may be safely assumed, on the basis of the facts that we do have, that the total rental value equalled, or nearly equalled, the amount of the community contributions. At any rate, respondent has not shown that the value of the improvements and other contributions, for which he seeks an equitable lien, is in excess of the reasonable rental value of the property during its period of occupancy by the community.

Finally, it is to be noted that, while in all such instances, generally, the primary purpose of a court of equity in awarding reimbursement or granting an equitable lien is to protect the marital community, and particularly the wife, no such result would follow in this case, for here the very decree which would establish the lien in favor of the community would by the same stroke deprive the community of its benefit, and would thus leave the wife and the marital community in a considerably worse position than they were in before. When equitable interposition is invoked, a court of equity may, and should, consider the consequences of the relief which it is asked to afford, and should extend or withhold its hand in accordance with the full equities of the case.

There are, undoubtedly, instances where the interest of a bankrupt in certain property can be made available to the trustee in bankruptcy, as, for example, where, under a contract for the purchase of realty, the purchaser who subsequently becomes bankrupt had previously acquired an equitable interest in the land, or where the purchase price of realty has been paid, in whole or in part, by one person who thereafter is adjudicated a bankrupt, and the title to the land has been taken in the name of another. The facts in this case, however, do not approach those situations, nor should they necessarily predispose the court to create and impose an involuntary lien in favor of one person merely for the purpose of transferring the benefit of such lien to another person.

In view of all the circumstances involved in this case, I see no reason for impressing an equitable lien upon the property in question in favor of the marital community, and consequently none should be decreed in favor of the trustee in bankruptcy.

The decree should be reversed, with direction to dismiss the action.

ROBINSON, C.J., BEALS, and JEFFERS, JJ., concur with STEINERT, J.