In the first article on fiduciary duties I discussed generally the fiduciary duty owed between spouses. In the second article, I discussed an example where wife’s hiding of lottery winnings during divorce proceedings was found to be a breach of her fiduciary duty, leading the court to award the winnings to her husband.
This post discusses the case of In Re Marriage of Fossum (2011) 192 Cal.App.4th. 336 in which wife took a cash advance of $24,000 on her credit cards without disclosing the transaction to her husband. At trial the judge found that wife breached her fiduciary duty as set forth in California Family Code section 721 by failing to disclose this transaction to her husband and awarded husband $12,000. However, the trial court denied husband’s request for attorneys fees.
On appeal, husband argued that California Family Code section 1101(g), which sets forth the remedies for breach of fiduciary duty, requires that the party who breached their fiduciary duty pay the attorneys fees of their spouse. The court of appeal agreed, finding that the language of section 1101(g) clearly and unambiguously requires an award of attorneys fees on top of awarding the other spouse 50% of any asset for breach of fiduciary duty.
Section 1101(g) states in relevant part:
“Remedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other 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.”
Thus, the statute requires that the spouse who breached their fiduciary duty pay 50% of any asset that they failed to disclose or transferred in breach of their fiduciary duty plus attorneys fees and costs. These attorneys fees are likely limited to those required to bring an action for breach of fiduciary duty.
Still, without the additional penalty of paying attorneys fees, an order to pay 50% of the asset would just be ordering payment of money rightfully belonging to the other spouse. Additionally, a mandatory award of attorneys fees in this sort of case incentivizes the spouse who knows of a breach of fiduciary duty to bring an action to recover for the breach.
It should be noted that this case is different than Marriage of Rossi because the trial court here found that wife’s breach of fiduciary duty was not conduct rising to the level of fraud, malice, or oppression. It is only when a court finds fraud, malice, or oppression that the court is required to award 100% of the asset to the other spouse.
Interestingly enough, California Family Code Section 1101(h), which applies when the breach of fiduciary duty involves fraud, malice, or oppression, the court is only mandated to award the full value of the asset and any award of attorneys fees on top of that is discretionary. I suspect that the penalty of 100% of the value of any asset obtained through fraud, malice, or oppression is thought to be sufficient to deter such conduct.
Being honest from the beginning can help settle a case early and save you money on attorneys fees and the headaches of dealing with a trial before a judge. If you want an attorney who will help you reach a compromise that is good for both parties, call Paul D. McGuire at the Law Office of Paul D. McGuire to schedule a free consultation