Concealment of community property in California and the remedies available are the topic of this blog post. Family Code section 721 imposes a fiduciary duty on spouses of the highest good faith and fair dealing.
Family Code section 1101 provides that any spouse that conceals community property in California can be ordered to pay to the other spouses fifty percent (50%) of the value of the concealed community property and the attorney fees and costs of the other party. If the court determines that malice, fraud or oppression have been shown the court can order the non-disclosing party to pay the other party one hundred percent (100%) of the value of the concealed community property and also has the discretion to order them to pay the attorney fees and costs of the other party.
Any party to a divorce, legal separation or nullity in California can request damages and sanctions on the grounds that the other party breached their fiduciary duty by intentionally concealing valuable community property.
A motion filed under Family Code section 1101 is very effective due to the powerful remedies that the law provides. The request is commenced by the filing of a notice of motion or request for order. The motion is filed under the provisions of Family Code sections 721 and 1101 athough other code sections such as Family Code sections 271 and 2100 may also be applicable.
I do want to stress that there is a three year statute of limitations which begins to run as of the date the petitioning spouse had actual knowledge that the transaction or event for which the remedy is being sought occurred unless the other spouse is deceased.
Family Code § 721 outlines the fiduciary duties of spouses in California and states that,
(a) Subject to subdivision (b), either spouse may enter into any transaction with the other, or with any other person, respecting property, which either might if unmarried.
(b) Except as provided in Sections 143, 144, 146, 16040, and 16047 of the Probate Code, in transactions between themselves, spouses are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including, but not limited to, the following:
(1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying.
(2) Rendering upon request, true and full information of all things affecting any transaction that concerns the community property. Nothing in this section is intended to impose a duty for either spouse to keep detailed books and records of community property transactions.
(3) Accounting to the spouse, and holding as a trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse that concerns the community property.”
Family Code § 1101 states in pertinent part that,
“(a) A spouse has a claim against the other spouse for any breach of the fiduciary duty that results in impairment to the claimant spouse’s present undivided one-half interest in the community estate, including, but not limited to, a single transaction or a pattern or series of transactions, which transaction or transactions have caused or will cause a detrimental impact to the claimant spouse’s undivided one-half interest in the community estate.
(b) A court may order an accounting of the property and obligations of the parties to a marriage and may determine the rights of ownership in, the beneficial enjoyment of, or access to, community property, and the classification of all property of the parties to a marriage.
(c) A court may order that the name of a spouse shall be added to community property held in the name of the other spouse alone or that the title of community property held in some other title form shall be reformed to reflect its community character, except with respect to any of the following:
(1) A partnership interest held by the other spouse as a general partner.
(2) An interest in a professional corporation or professional association.
(3) An asset of an unincorporated business if the other spouse is the only spouse involved in operating and managing the business.
(4) Any other property, if the revision would adversely affect the rights of a third person.
(d) (1) Except as provided in paragraph (2), any action under subdivision (a) shall be commenced within three years of the date a petitioning spouse had actual knowledge that the transaction or event for which the remedy is being sought occurred.
(2) An action may be commenced under this section upon the death of a spouse or in conjunction with an action for legal separation, dissolution of marriage, or nullity without regard to the time limitations set forth in paragraph (1).
(3) The defense of laches may be raised in any action brought under this section.
(4) Except as to actions authorized by paragraph (2), remedies under subdivision (a) apply only to transactions or events occurring on or after July 1, 1987.
(e) In any transaction affecting community property in which the consent of both spouses is required, the court may, upon the motion of a spouse, dispense with the requirement of the other spouse’s consent if both of the following requirements are met:
(1) The proposed transaction is in the best interest of the community.
(2) Consent has been arbitrarily refused or cannot be obtained due to the physical incapacity, mental incapacity, or prolonged absence of the nonconsenting spouse.
(f) Any action may be brought under this section without filing an action for dissolution of marriage, legal separation, or nullity, or may be brought in conjunction with the action or upon the death of a spouse.
(g) Remedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs. The value of the asset shall be determined to be its highest value at the date of the breach of the fiduciary duty, the date of the sale or disposition of the asset, or the date of the award by the court.
(h) Remedies for the breach of the fiduciary duty by one spouse, as set forth in Sections 721 and 1100, when the breach falls within the ambit of Section 3294 of the Civil Code shall include, but not be limited to, an award to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset undisclosed or transferred in breach of the fiduciary duty.”
The award of 100 percent of the asset for a fraudulent, oppressive or malicious breach of fiduciary duty is a civil sanction or penalty as stated by at least one California Court of Appeal in a published case. Other cases from the California Courts of Appeal have upheld an award of 100 percent of the asset for a fraudulent, oppressive or malicious breach of fiduciary duty.
At least two published decisions from the California Courts of Appeal have stated that when a breach of fiduciary duty is found the court cannot deny a request for attorney fees and costs by the prevailing party. In other words an award of attorney fees and costs is mandatory for a breach of fiduciary duty.
Attorneys or parties in California that would like to view a portion of a sample 17 page motion for damages and sanctions under Family Code sections 271, 721, 1101 and 2100 containing brief instructions, a memorandum of points and authorities with a table of contents and table of authorities along with citations to case law and statutory authority and sample declaration sold by the author of this blog post can see below.
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Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.
The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.