In my previous post about fiduciary duties owed between spouses until property division is complete, I discussed generally the penalties for breach of fiduciary duty. I received a few requests for some examples of cases where courts have imposed the harsh sanction. The strongest example available is the case of Marriage of Rossi.
In Marriage of Rossi (2001) 90 Cal.App.4th 34, wife won the lottery and concealed the winnings from her husband. During the divorce process, wife filled out disclosures of assets including her income and expense declaration. She never listed the lottery winnings on the disclosures even under the category of separate property.
After the divorce was finalized, husband discovered the lottery winnings because a letter was sent to his residence asking if wife would like a lump sum payment of the winnings. After confirming that wife had won the lottery, husband consulted with an attorney and brought an action seeking the full value of the lottery winnings as a penalty for the wife’s breach of fiduciary duty.
The judge at the trial court found that wife had breached her fiduciary duty and awarded husband the full value of the lottery winnings. Wife appealed and the court of appeal affirmed. They emphasized the importance of full disclosure in marriage cases saying:
“full disclosure of marital assets is absolutely essential to the trial court in determining the proper dissolution of property and resolving support issues. The statutory scheme for dissolution depends on the parties’ full disclosure of all assets so they may be taken into account by the trial court.”
Wife’s lottery winnings amounted to $1,336,000, her share of a $6,680,000 jackpot won by a group she participated in at work that pooled together funds every week to play the lottery. Because the trial court stated it was likely the lottery funds should have been classified as community property, wife would have been ordered to give husband half of her earnings if they had been disclosed. Still, sharing half of her earnings is better than paying over the entire amount.
This case illustrates why disclosing all your assets, whether you classify them as community property or separate property, is very important. A judge may disagree with how you or your attorney decide to classify your assets. If this happens, the property you claimed was your separate property will have to be divided equally with your spouse.
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