Recently in Fiduciary Duty Category

January 19, 2012

San Diego Court Places Limits on Parents' Duty to Disclose Financial Changes

896161_71592802_01252012.jpgThe California Fourth District Court of Appeals in San Diego ruled earlier this month that a parent or spouse's obligation under the Family Code to disclose changes in financial status to the other party does not extend past the date a court enters a final judgment. The court reversed the trial court's order imposing sanctions against an obligor ex-husband and father, which were based in part on a failure to disclose certain financial changes after a divorce decree was granted.

This case could have a significant impact on how California parents handle child support issues after entry of a decree, and it will be important for parents who have child support orders, both as obligor and obligee. An obligee, who receives payments from the other parent, has an interest in knowing if that parent is not paying the full amount of which they are capable.

The parties in this case have three children. All of the children were minors when the mother filed for divorce from the father in Wyoming in 2003. A Wyoming court granted the divorce in 2003. The wife and children relocated to San Diego, and a California court confirmed the decree in 2005. At the time of the divorce, the father declared an annual income of $800,000 and agreed to pay $8,500 per month in child support. The child support amount would reduce to $4,000 per month when only one child remained a minor. The father also agreed to pay monthly spousal maintenance of $12,000 for a ten-year period.

The mother brought an action in San Diego in 2007 to modify and enforce support. She requested an increase in the child support amount, enforcement of arrears on spousal maintenance, and court costs. Her financial declaration to the court indicated that she had a net worth at the time of $14 million and monthly expenses of over $40,000. The father's financial declaration showed significant changes from the time of the divorce. He had sold his business, his monthly income was less than $11,000, and he claimed to have $60,000 per month in expenses. He had earned $3 million from his business in 2006, which he had not disclosed to the mother. He had also brought in over $100 million in 2007 from the sale of the business, but later ventures had not been successful.

The mother asked for sanctions against the father for failing to disclose these sources of income. The trial court agreed, finding that he had "unnecessarily prolonged litigation" and breached his fiduciary duty. It increased his child support to $18,000 per month and ordered him to pay attorney fees and sanctions. The father appealed some of the trial court's holdings.

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February 9, 2011

California Divorce Update Regarding Spousal Duties

Thumbnail image for Justia-photo-87 fiduciary.jpegA "fiduciary duty" is a duty to act in the best interest of a person to whom a duty is owed under the law. As a San Diego Certified Family Law Specialist my office has followed the developments of California Family Law regarding the definition and expanding obligations of fiduciary duties owed by a spouse to the other spouse. With a family law office located in La Jolla California, I am in a community where fiduciary duties are often associated with corporations and estate planning. However, fiduciary duty is a lawful concept and significant obligation under California Family Law.

For example, is a fiduciary duty may be violated when, during the marriage, the Husband has the Wife sign over (quitclaim) joint tenancy deeds to the Husband so that the properties are owned solely under the Husband's name? (Changing community property to Husband's separate property.) Has a Wife violated a fiduciary duty when, during the marriage, the Wife has the Husband transfer real estate under his name (owned prior to the marriage) to Husband and Wife as "joint tenants"? Does it matter that the marriage is a short term marriage as opposed to a long term marriage? Does a parent violate a fiduciary duty when the parent seeks to turn a child against the other parent, immediately prior to separation, thus seeking to affect the child custody orders?

Surprises can be nice during a marriage. For example, consider a spouse who secretly buys a diamond ring to give to the marital partner on Valentine's Day. Such a gift may involve a unilateral act, by a spouse, without the knowledge or consent of the other spouse. Does this violate a fiduciary duty? What if the spouse gives the ring to a woman friend, not his Wife? Without the Wife's knowledge or consent, a gift of significant expense to a woman friend hardly seems to be an action in the best interest of the Wife. And when fiduciary duties are violated, what action will the San Diego Superior Court take? Consider the case of Fossum (IRMO Fossum) now certified for publication by the California Appellate Court.

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