A California Court of Appeal has ruled decedent’s second wife is personally liable to his first wife for continuing spousal support payments up to the fair market value of real property (including joint tenancy property) he and second wife held at time of his death. In the case of Kircher v. Kircher, Husband married his first wife (Wife-1) on December 10, 1960; they separated on February 13, 1970. In June 1976, Husband and Wife-1 signed a Marital Settlement Agreement that, among other things, required Husband to pay Wife-1 spousal support of $700 per month until the death of either party or Wife-1’s remarriage, divided their community property assets and debts, and required Husband to make an equalizing payment to Wife-1 of $124,000 at the rate of $1,100 per month. Husband also agreed to will to Wife-1 his half interest in real property on Eddy Street in San Francisco. That Marital Settlement Agreement was apparently incorporated into their divorce judgment.
In Mary of 1987, Husband and Wife-1 signed a stipulation to modify their divorce judgment to provide that Husband’s spousal support obligation would increase to $2,000 per month on February 1, 1987 and continue until Wife-1’s remarriage, her cohabitation for 30 days in a "marital-like relationship," or her death. Husband also agreed to buy or lease a new car for Wife-1 every five years and to provide health insurance for her under same conditions, as spousal support payments.
Husband married his second wife (Wife-2) in July of 1998. On November 11, 2004, Husband signed a new will that left Wife-2 several real properties and leasehold interests. Later, Husband transferred title to three of those real properties to himself and Wife-2, as joint tenants.
In January 2005, Husband died. Wife-2 subsequently sold two of the joint tenancy properties for net proceeds of more than $6 million. On July 11, 2005, Wife-1 filed creditor’s claim against Husband’s estate in Probate Trial Court for past and future obligations under the 1987 modification of the Marital Settlement Agreement and the divorce judgment. Wife-2 made monthly spousal support payments to Wife-1 until April 2008, after which she paid only Wife-1’s health insurance.
On May 16, 2008, Wife-1 filed a complaint against Wife-2 personally and in her capacity as Husband’s executor, claiming that Wife-2 was personally liable for Husband’s debts under Probate Code Sections 13550-13552 and seeking an award of damages and attorney’s fees for breach of the modified Marital Settlement Agreement. Wife-1 followed up on October 7, 2008, with an amended complaint seeking a declaration that Wife-2 was obligated, as Husband’s executor and personally, to comply with provisions of the modified Marital Settlement Agreement. In opposition, Wife-2 filed a motion for determination that Wife-1 could not seek payment from joint tenancy properties because surviving joint tenant takes property free of creditor’s claims. In response, Wife-1 explained that she was not seeking a lien on those properties, but wanted imposition of personal liability for continuing support payments up to their fair market value.
After a hearing, Trial Court denied W-2’s motion, finding that pursuant to Probate Code Section 13351, a surviving spouse’s liability for decedent spouse’s debts is limited to the fair market value of parties’ real property community property and decedent’s separate property at the time of death, including joint tenancy property. After the bench trial, Trial Court determined that Husband knowingly and intentionally waived provisions of California Family Code Section 4337 [spousal support obligation terminates on death of either party or supported spouse’s remarriage] when he executed the modified Marital Settlement Agreement. Therefore, the obligations set forth in that document survived his death.
After moving unsuccessfully for a new trial, Wife-2 appealed, but, in a partially-published opinion, the California Court of Appeals has affirmed the Trial Court’s decision. The Appellate Court has ruled that (1) California Probate Code Section 13351 refers to property characterized as community property or decedent’s separate property at the time of death; (2) the extent of surviving spouse’s liability depends on characterization of property, not form of title; (3) the fact that joint tenancy property passed to Wife-2 through right of survivorship does not change its characterization as community property at the time of Husband’s death (joint tenancy property presumed to be community property); and (4) surviving spouse’s liability for decedent spouse’s debts is not extinguished because surviving joint tenant takes property free of encumbrance placed by decedent. The Appellate Court further ruled that Trial Court did not err in concluding that the value of joint tenancy property should be included in calculating the limit of Wife-2’s liability for Husband’s debts to Wife-1. In the unpublished part of the opinion, the Appellate Court agreed with Trial Court that modified Marital Settlement Agreement was a written agreement that waived application of California Family Code Section 4337.