DON’T HIDE THAT ASSET!by Geoffrey A. Norris on 09/27/13
A recent case from the 4th District court of appeal overturned a trial court’s award of 100% of a separate property asset to the aggrieved spouse due to husband’s failure to disclose the asset to his wife. The court of appeal held that the statutory remedy of an award of 100% of an undisclosed asset only applies to community property assets, NOT separate property assets.
The Simmons case (citation below) is interesting for the proposition of what can happen to a spouse who consistently refuses to disclose assets and income at the trial level. During the course of the case and before the trial, the trial court had to appoint a discovery referee as Husband was not disclosing his income or assets. In fact Husband refused to show up at his deposition and only attended the first day of trial. Before the trial the discovery referee recommended and the court imposed numerous monetary sanctions against the husband. In one instance husband understated his bank account balances stating that he had $44,530 in the bank when the statements around that date exceeded $200,000. [Simmons at 589] It was this bank account that the trial court awarded entirely to Wife upon conclusion of the evidence.
The meat and potatoes of the holding are as follows:
We conclude the Legislature intended that section 1101(h)
provides a remedy only when a spouse fails to disclose community property.
First, the section 1101(h) remedy is set forth in a portion of the Family Code
that exclusively concerns matters associated with community property. And, section
1101, subdivision (a) specifies that a spouse may raise a breach of fiduciary
claim under this section when there is an impairment to the spouse's community
interest. (See fn. 16, ante.) Although section 1101(h)'s use of the term “any
asset” can on its face encompass both separate and community property, when
read in conjunction with section 1101, subdivision (a)'s statement that a
breach of fiduciary claim arises upon an impairment of a community interest,
this strongly suggests that “any asset” means any community asset.
Second, section 1101, subdivision (f) provides that the section 1101(h) remedy may be pursued in an action even when the parties have not filed for dissolution. The availability of the remedy during the **692 existence of the marriage supports that the remedy is not intended to extend to separate property, which is generally not subject to the control of the non-owner spouse and which typically only becomes relevant upon the filing for dissolution. (§§ 752, 770, subd. (b); see Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group 2012) ¶ 8:650, p. 8–158.11 (rev.# 1, 2012).)
Third, the Legislature has enacted remedies that are
expressly applicable to separate property, including section 271 for
uncooperative conduct in dissolution proceedings, and section 2107 for
nondisclosure of marital or separate property in dissolution proceedings. The
existence of distinct statutory remedies for nondisclosure of separate property
assets supports that a remedy located in a section of the code devoted solely
to community property was not designed to apply to separate property.
Fourth, a fundamental principle of family law, including during dissolution proceedings, is that each spouse has a one-half interest in community property. (§ 2550.) The fiduciary duty with respect to marital property is designed, among other things, to preserve that one-half interest. (§ 1101, subd. (a).) Through the enactment of the section 1101 value-of-the-asset remedy, the Legislature has in effect altered the one-half interest community property formula in the event a spouse violates his or duty to preserve the *594 other spouse's one-half right to the property, by awarding the aggrieved spouse more than his or her one-half interest. This one-half interest formula does not apply to separate property; i.e., by its nature separate property is not co-owned by, or divided between, the parties. Because separate property assets are not subject to equal ownership and division between the parties, it follows that the Legislature's alteration of the one-half interest formula was not meant to be applied to nondisclosure of separate property. [SEE Marriage of Simmons, 215 Cal.App.4th 584, 691,692]