Breach of Fiduciary Duty in the Management and Control of Community Property After Separation

BREACH OF FIDUCIARY DUTY IN THE MANAGEMENT AND CONTROL OF COMMUNITY PROPERTY AFTER SEPARATION

The duties owed between spouses in the management and control of community property are the same with regard to those in a fiduciary relationship. The marital entity is one with the greatest degree of confidence. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and a duty to refrain from taking any unfair advantage of the other. Fam. Code Sec. 721(b) This fiduciary duty continues after separation until the date of distribution of community property. A problem frequently arises when after separation but before dissolution, one spouse breaches the fiduciary duty by mismanaging or transferring community property in prejudice of the other spouse’s rights. The aggrieved party has certain remedies available in this situation.

Family Code Sec. 1101 provides a statutory basis for a breach of fiduciary duty claim against a spouse. An actionable claim against one’s spouse lies where there is a breach of fiduciary duty which results in “impairment to the claimant spouse's present undivided one-half interest in the community estate.” Fam. Code Sec. 1101(a). An impairment that falls under the foregoing code may be the result of a single transaction or a pattern or series of transactions which have caused a detrimental impact to the claimant spouse’s undivided one-half interest in the community estate.

A wide array of remedies is available under Family Code Sec. 1101. The court may order an accounting to determine the spouses’ marital property and obligations, and it may determine the rights of ownership in community property. In addition, the court may order that title to certain community property be reformed to include the name of the claimant spouse. Furthermore, remedies for breach of the fiduciary duty by a spouse, shall include, but not be limited to, an award to the claimant 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.Fam. Code Sec. 1101(g). Under subsection g., attorney’s fees and court costs are mandatory. If the breach by a spouse can be shown to have been done with fraud, oppression or malice, the claimant spouse’s remedies include an award of 100%, or an amount equal to 100%, of any asset undisclosed or transferred in breach of the fiduciary duty. Fam. Code Sec. 1101(h).

The relief afforded by Family Code Sec. 1101 is not exclusive. An aggrieved spouse may seek other remedies not outlined in the section. A spouse whose community property interests have been compromised as a result of his/her spouse’s breach may maintain an action to set aside an unauthorized transfer or encumbrance of property, or to impose a constructive trust. Many options are indeed available for one who is faced with a breach of fiduciary duty by his/her spouse. If you are faced with a breach of the fiduciary duty by your spouse, it is important to consult an attorney as soon as possible to determine what avenues of relief to pursue.

Please note that this article is not legal advice and is not intended as legal advice. The article is intended to provide only general, non-specific legal information. This article is not intended to cover all the issues related to the topic discussed. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. This article does not create any attorney-client relationship between you and the Law Offices of Kenneth U. Reyes, P.C. This article is not a solicitation.

Attorney Kenneth Ursua Reyes is a Certified Family Law Specialist. He was President of the Philippine American Bar Association. He is a member of both the Family law section and Immigration law section of the Los Angeles County Bar Association. He is a graduate of Southwestern University Law School in Los Angeles and California State University, San Bernardino School of Business Administration. He has extensive former CPA experience prior to law practice. LAW OFFICES OF KENNETH REYES, P.C. is located at 3699 Wilshire Blvd., Suite 700, Los Angeles, CA, 90010. Tel. (213) 388-1611 or e-mail kureyeslaw@gmail.com or visit our website at Kenreyeslaw.com