American Olean Tile Co. Inc. v. Schultze

Horst and Irmgard Schultze (defendants) separated on April 1, 1980. Horst and Irmgard owned a company called H&S Tile during their marriage. After separation, Horst continued to run H&S Tile. On May 6, 1981, the Schultzes entered into a marital settlement agreement to divide the community estate. As part of the marital settlement agreement, Horst received H&S Tile as Horst’s separate property. On May 6, 1981, Horst also signed a promissory note to American Olean Tile Company (American) (plaintiff) for debts owed to American. The marital settlement agreement was incorporated into the judgment of dissolution of marriage filed on June 19, 1981. Horst did not make payments on the promissory note. On August 1, 1981, American filed a complaint against Horst for the debt owed. American obtained a default judgment against Horst for the debt on November 25, 1981. American was unable to locate Horst in order to collect on the judgment. American obtained a court order vacating the default judgment. American subsequently filed an amended complaint. American claimed that Irmgard’s former community property could be applied toward the amount owed on the promissory note because the note was incurred and executed during the Schultze’s marriage. The case went to trial in 1983, but Horst did not appear before the court. The trial court found that since Horst was dealing with his separate property, rather than community property, when Horst signed the promissory note, Horst was solely responsible for the debt. American appealed the trial court’s ruling.