Definition of separate and community debts.

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A. "Separate debt" means:

(1) a debt contracted or incurred by a spouse before marriage or after entry of a decree of dissolution of marriage;

(2) a debt contracted or incurred by a spouse after entry of a decree entered pursuant to Section 40-4-3 NMSA 1978, unless the decree provides otherwise;

(3) a debt designated as a separate debt of a spouse by a judgment or decree of any court having jurisdiction;

(4) a debt contracted by a spouse during marriage which is identified by a spouse to the creditor in writing at the time of its creation as the separate debt of the contracting spouse;

(5) a debt which arises from a tort committed by a spouse before marriage or after entry of a decree of dissolution of marriage or a separate tort committed during marriage; or

(6) a debt declared to be unreasonable pursuant to Section 2 [40-3-10.1 NMSA 1978] of this act.

B. "Community debt" means a debt contracted or incurred by either or both spouses during marriage which is not a separate debt.

History: 1953 Comp., § 57-4A-3, enacted by Laws 1973, ch. 320, § 4; 1983, ch. 75, § 1.

ANNOTATIONS

Purpose. — Subsection A is directed mainly toward relations between couples and their creditors. The legislature did not intend to restrict the courts' ability to practice fairness as between two spouses. Fernandez v. Fernandez, 1991-NMCA-001, 111 N.M. 442, 806 P.2d 582.

Requirement of written notice to creditor. — The main purpose of Subsection A(4), requiring written notice to the creditor, is to protect creditors who might be unaware that spouses do not intend to create a community debt. As between spouses, however, it is not as necessary to require strict compliance with the statute. Where there is evidence that spouses do not intend the debt to be community and take steps to ensure it is not, a court may find this substantial compliance sufficient to declare the debt separate as between the spouses. Fernandez v. Fernandez, 1991-NMCA-001, 111 N.M. 442, 806 P.2d 582.

The fundamental purpose behind the written notice requirement of Subsection A(4) is to protect creditors who might be unaware that the debtor spouse intends to create a separate debt, rather than a community debt. Huntington Nat'l Bank v. Sproul, 1993-NMSC-051, 116 N.M. 254, 861 P.2d 935.

Threshold question of whether item is community or separate debt is a legal issue. Bursum v. Bursum, 2004-NMCA-133, 136 N.M. 584, 102 P.3d 651, cert. denied, 2005-NMCERT-003, 137 N.M. 290, 110 P.3d 506.

Remainder of wife's attorney's fees not considered community debt. — The district court could reasonably have ruled that the remainder of wife's attorney fees, while stipulated to be reasonable in amount for the work done, was unreasonably incurred and therefore would not be considered community debt. Bursum v. Bursum, 2004-NMCA-133, 136 N.M. 584, 102 P.3d 651, cert. denied, 2005-NMCERT-003, 137 N.M. 290, 110 P.3d 506.

Fiduciary duty. — Each spouse owes the other a fiduciary duty when managing community property. This fiduciary duty limits a spouse's ability to enter into any transaction in which he or she might wish to engage, without fear of subsequent liability to the other spouse. Fernandez v. Fernandez, 1991-NMCA-001, 111 N.M. 442, 806 P.2d 582.

Wife's estate not liable for loss in public office. — Where no attempt was made to show that defendant's wife was in any way responsible for the loss appearing in the records of her husband's public office, her separate estate was not liable for her husband's separate obligations. U.S. Fid. & Guar. Co. v. Chavez, 126 F. Supp. 227 (D.N.M. 1954).

Wife's estate exempt from attachment proceedings. — The entire community estate of the defendant and his wife was not subject to his indebtedness, where the wife, so far as the record showed, had no knowledge of any shortage on the part of her husband, nor did she give her consent thereto, or ratify the acts, if any, of her husband, which resulted in the shortage, and neither did the shortage benefit the community estate, so far as was shown; therefore, the vested estate of the wife (intervenor) in and to the community property tracts was exempt from the attachment proceedings instituted by the bonding company, and the community interest of the husband was subject to sale under the attachment, inasmuch as his shortages created a separate liability on his part, resulting in a judgment against him. U.S. Fid. & Guar. Co. v. Chavez, 126 F. Supp. 227 (D.N.M. 1954).

Separate debt. — At least as between the parties to a divorce, and under certain circumstances, a debt may be classified as separate even if it was incurred while the parties lived together and even though it may not meet the strict requirements of Subsection A. Fernandez v. Fernandez, 1991-NMCA-001, 111 N.M. 442, 806 P.2d 582.

Evidence supported a determination that the parties attempted to arrange a loan as a separate debt instead of a community debt, where the husband knew that the wife would not participate in the transaction and that she did not want any community assets included, the mortgage securing the loan explicitly stated that the husband was a married man dealing in his sole and separate property, and the wife testified that the creditor asked her to sign documents disclaiming any interest in the collateral. Fernandez v. Fernandez, 1991-NMCA-001, 111 N.M. 442, 806 P.2d 582.

Underlying obligation represented by a fraudulently executed promissory note was a separate debt of the wife, and the proceeds received did not benefit the community, where the wife committed fraud against her husband by allowing her brother to impersonate her husband and forge his name on financial documents. Beneficial Fin. Co. v. Alarcon, 1991-NMSC-074, 112 N.M. 420, 816 P.2d 489.

Husband may have separate credit and debt. — While the credit of the husband belongs presumptively to the community, still he may contract a separate debt based upon his separate credit and assets acquired in that manner are his separate property. Campbell v. Campbell, 1957-NMSC-001, 62 N.M. 330, 310 P.2d 266.

Determination whether tort debt of community or spouse. — This section leaves to the courts the problem of determining whether a tort committed by a spouse during marriage is a "community" or a "separate" tort. Under the rule followed in most community property states, the test to be applied in such cases is an after-the-fact determination of whether the act in which the spouse was engaged at the time of the tort was one which was of actual or potential benefit to the community. If it was of benefit, the tort is a "community" tort, and thus a community debt, to be collected under the provisions of 40-3-11 NMSA 1978. Dell v. Heard, 532 F.2d 1330 (10th Cir. 1976).

In determining the issue of whether a tort committed by a spouse is a "community" or a "separate" tort, the test to be applied is an after-the-fact determination of whether the act in which the spouse was engaged at the time of the tort was one which was of actual or potential benefit to the community; if it was of benefit, the tort is a "community" tort, and thus a community debt; if the activity in which the tortfeasor spouse was engaged was of no benefit to the community, the tort is a "separate" tort and thus a separate debt. Delph v. Potomac Ins. Co., 1980-NMSC-140, 95 N.M. 257, 620 P.2d 1282.

It is inappropriate to enter a judgment against one spouse solely because the other spouse has committed a community tort. Such a judgment could readily create confusion, because the judgment ordinarily could not be executed against the separate property of the spouse who was not the tortfeasor. Naranjo v. Paull, 1990-NMCA-111, 111 N.M. 165, 803 P.2d 254.

There is no reason why the same court that hears a tort case could not concurrently decide whether the tort was a community tort, at least when both spouses are defendants. Such a proceeding should not be foreclosed just because the plaintiff may also have the option of waiting until execution on the judgment to litigate whether the tort was a community tort. Naranjo v. Paull, 1990-NMCA-111, 111 N.M. 165, 803 P.2d 254.

Husband's breach of listing agreement subjected community to debts without wife's concurrence. — The fact that, upon the breach of a real estate listing agreement by the husband, the listing agent can bring suit, obtain a judgment and levy on the property without the wife's signature on the agreement is not violative of this section, inasmuch as a husband can subject the community to certain debts without the concurrence of his wife. Execu-Systems v. Corlis, 1980-NMSC-121, 95 N.M. 145, 619 P.2d 821.

Attorney's fees incurred due to child visitation issues from previous marriage. — Chapter 7 debtor-husband was liable for attorney's fees incurred by spouse in connection with child visitation issues from a previous marriage, as spouse's debt was incurred as a community debt. In re Strickland, 153 Bankr. 909 (Bankr. D.N.M. 1993).

Trial court's finding of separate property upheld. — The trial court, upon dissolution of a marriage, has a duty to determine whether debts and obligations incurred by the parties during coverture are community or separate debts; the trial court's finding assigning income tax liability and intervenor's claim as husband's separate debts would not be disturbed where husband had failed to demonstrate on appeal that the trial court's ruling was unsupported by substantial evidence, nor had husband shown that he requested a finding of fact on this issue, and wife's counsel had also failed to provide authority for the merits of her discussion on this issue. Fenner v. Fenner, 1987-NMCA-066, 106 N.M. 36, 738 P.2d 908, cert. denied, 106 N.M. 7, 738 P.2d 125.

Presumption that debt of the community. — In New Mexico, there is a presumption that debt incurred by a married person is community debt. Swink v. Sunwest Bank (In re Fingado), 113 Bankr. 37 (Bankr. D.N.M. 1990).

As a general rule, one spouse may incur a community debt even though the other spouse does not participate in the transaction. Fernandez v. Fernandez, 1991-NMCA-001, 111 N.M. 442, 806 P.2d 582.

As between a spouse and the other spouse's creditor, Subsection A(4) requires that the debtor spouse expressly communicate the separate nature of a marital debt to a creditor in writing when creating a marital debt intended to be that spouse's separate obligation, and since the defendant debtor was unable to point to any written provision in the note or to any other written agreement between himself and the creditor bank that identified the debt as his own separate obligation, the debt remained a community debt. Huntington Nat'l Bank v. Sproul, 1993-NMSC-051, 116 N.M. 254, 861 P.2d 935.

Presumption that debt of the community. — The community is liable for community debts and there is a presumption that all debts contracted during the marriage are community debts. 1960 Op. Att'y Gen. No. 60-37 (rendered under former law).

Community not obligated for support of spouse's parent. — In terms, at least, no obligation is placed on the child and his or her spouse to support their parents. The ultimate effect of the former statute may be exactly this, but not because the obligation, as created, invests it with this character. Further, it is not an obligation which is incurred for the benefit of the community. It cannot be said that the discharge of this obligation in any direct manner enhances, or is intended to enhance, the interest of the community. 1956 Op. Att'y Gen. No. 56-6499 (rendered under former law).

Only husband's share of community subject to his separate tort. — Upon the question of recovery from the community property for an obligation based on the husband's separate tort, it would seem that not the whole of the community, but only his share therein, could be subjected to payment. 1956 Op. Att'y Gen. No. 56-6499 (rendered under former law).

Law reviews. — For article, "The Community Property Act of 1973: A Commentary and Quasi-Legislative History," see 5 N.M.L. Rev. 1 (1974).

For annual survey of New Mexico law relating to domestic relations, see 12 N.M.L. Rev. 325 (1982).

Am. Jur. 2d, A.L.R. and C.J.S. references. — Liability of community property for antenuptial debts and obligations, 68 A.L.R.4th 877.

41 C.J.S. Husband and Wife § 164 et seq.


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