Breach of Fiduciary Duty in Divorce
California law imposes on a married couple a duty to act as a fiduciary to the other. What this means, is that spouses have a legal obligation to act in good faith with one another to ensure fair dealing between them, and to avoid taking unfair advantage of the other.The California Family Code sections 720, 721, 1100, 1101, and 1102 are most commonly referenced in spousal fiduciary duty issues. By diving into the actual language of the law, we can better understand what the courts expect between spouses regarding their fiduciary duties to one another.
This is, of course, a quick sum-up of the main points of the law. Far more detail and specifics are found in the code itself.
- Family Code 720 mandates mutual respect, fidelity and support.
- Family Code 721 states each spouse’s fiduciary duties in transactions with each other, specifying that spouses are subject to the same rules that govern fiduciary relationships between persons that have confidential relations between each other. Spouses owe each other the duty of highest good faith and fair dealing.
- Family Code 1100 states the fiduciary duties in community property transactions with others. Among other things, this section of the law forbids spouses from gifting or disposing of community personal property for less than fair and reasonable value without getting the other spouse’s written consent.
- Family Code 1100 states the fiduciary duties of spouses when managing or operating a business.
- Family Code 1100 states there is a fiduciary relationship in management and control of community liabilities and assets
The law does not stop at the code sections. Appellate court and Supreme Court cases have interpreted these code sections and applied them in actual cases, resulting in “case law” that informs courts on how to analyze and rule on specific circumstances and issues.
How Does Breach of Fiduciary Duty Happen in a Divorce?
A breach of fiduciary duty can arise on several occasions. Actions that may be deemed as breaches of a spouse’s fiduciary duties include:
- Selling property without the other spouse’s consent. This could, for example, apply if one spouse sells an income property without the other spouse’s knowledge or consent.
- Fraudulently transferring an asset. For example, imagine that one spouse transfers ownership of a car to a close friend with the understanding that the friend will return the car once the divorce is concluded. This might be done to attempt to falsely claim that the car is not community property and its value is not included in the calculation for dividing marital property.
- Improper gifting. This is similar to fraudulent transferring, but the gift is actually given here – there is not an attempt to defraud, and reclaim the gift later.
- Concealing or hiding an asset. This could happen if a spouse takes ownership of an asset in only their name and the other spouse does not know that the asset exists, and/or the spouse does not report an asset as part of the inventory of marital assets. This might happen, for instance, if one spouse takes cash out of a joint bank account and purchases a valuable art piece and hides it.
Consequences to Breach of Spousal Fiduciary Duty
There are various consequences and remedies set in place should a spouse be found guilty of breaching their fiduciary duty. One consequence is that the offending spouse loses their share to the asset in question entirely. This is one of the reasons why it is so important to work with an experienced divorce attorney if you suspect this may be an issue in your divorce case.
Contact Cardwell Steigerwald Young, LLP
Our experienced San Francisco divorce lawyers can help explain how the statutory law and case law will apply in your specific circumstances. Contact our office today to begin speaking with our team.
