Recent Family Law Case Clarifies Breach of Fiduciary Duty Remedy

In San Diego Family Courts, Judges take the issue of breach of spousal fiduciary duty very seriously. Harsh punishments are available in family court for nondisclosure of assets, failure to provide truthful information regarding income and assets and other misconduct. In April 2013, the California Court of Appeal ruled in In re Marriage of Simmons, a case of first impression. In this case, Mr. Simmons failed to disclose a separate property savings account with a value of $245,850.24. As a result of Mr. Simmons’s breach of fiduciary duty, the trial court awarded Ms. Simmons the account in full. However, the appellate court reversed that award.

California Family Code § 721
imposes “a duty of the highest good faith and fair dealing” on spouses when dealing in transactions with each other. Family Code § 1100 clarifies that duty by stating that it “includes the obligation to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest…” During a divorce case, both spouses are obligated to disclose all assets regardless of whether those assets are community property or separate property. The court may impose various sanctions for failure to disclose an asset. If a spouse discovers an undisclosed asset he or she may request 100% of the asset or an amount equal to 100% of the asset as a remedy.

Although the Family Code is clear regarding the availability of the “value of the asset remedy” if the asset is community property, Mr. Simmons disputed the availability of that remedy with regard to separate property assets. The appellate court agreed with Mr. Simmons and, for the first time, ruled that the “value of the asset remedy” is not available if a spouse has only failed to disclose separate property assets. However, despite the appellate court’s inclination to rule in favor of Mr. Simmons, it was still aggravated by his pattern of misconduct. Therefore, the appellate court remanded the case back to the trial court level directing the trial court to consider any additional sanctions it would like to impose against Mr. Simmons. Various other family codes, such as Family Code § 271, are available to the trial court as authority upon which to base an additional sanctions awards.

Under Family Code § 271, the court may impose monetary sanctions against a party for obstreperous conduct which impedes the policy of settlement in a divorce case. The court is not limited to an amount of sanctions and may impose them in an amount sufficient to deter future misconduct. Under this provision, the Simmons trial court may decide to order $245,850.24 in sanctions against Mr. Simmons for failure to disclose his separate property asset.

Breach of fiduciary duty is a complex divorce issue that requires representation by a competent attorney. Don’t settle for less when determining your rights.

Contact Bickford Blado & Botros if you considering a divorce from your spouse, a legal separation, or have questions regarding child custody and visitation. Nancy J. Bickford is the only attorney in San Diego County representing clients in divorces, who is a Certified Family Law Specialist (CFLS) and who is actively licensed as a Certified Public Accountant (CPA). Call (858) 793-8884 for more information on the consultation process.

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