|
|
|
Recent Posts in Fraud and Perjury Category
| January 21, 2012 |
| Court Upholds PRENUPTIAL AGREEMENT Where Wife Alleged Husband Falsely Stated Net Worth |
| Posted By Thurman Arnold, C.F.L.S. |
 |
While prenuptial agreements were once viewed with suspicion by trial courts, a recent decision reflects the current trend to uphold them particularly when the complaining party has competent legal representation and practical access to all relevant information concerning the other person's finances - whether they took advantage of that opportunity or not. One lesson is that people need to take the waivers set forth in these agreements quite seriously, because there is high likelihood you will become stuck with them.
One of the useful aspects to the Second Appellate District's decision in In Re Marriage of Hill and Dittmer is that the justices kindly include an Appendix setting forth selected portions of the prenup which were upheld as fully enforceable, providing family law practitioners who draft premarital agreements a useful partial template for language that will likely pass muster.
The opinion also demonstrates how important it is for the parties, and their attorneys, to maintain a complete file of the negotiations leading to the execution of such agreements including maintaining copies of the succession of drafts that come to be altered as discussions evolve, as potential evidence when the agreement is (inevitably?) attacked. Whether premarriage agreements will be enforced years later is a highly fact specific inquiry. Many lawyers are reluctant to be involved in drafting them, because they are seen to be potential malpractice traps. Those that do often charge significant fees as a result, in order to justify the risks of subsequently being sued by their own former clients. This case is interesting because the wife, who came to challenge the agreement some seven years after she signed it, ultimately had her own attorney be the primary drafter of the agreement. That attorney evidently did a good job in helping to create an agreement that would be, and turned out to be, binding - which is not what the wife wanted to have happen years later, after the fact. Where one party later perceives that they will be better off if their premarital agreement can be set aside, the first thing their (new) lawyer will do is to try to find a "hook" for attacking its enforceability. This case represents a creative attempt by wife's attorneys to create such a hook by contending that the husband had misrepresented his net worth when it was signed, but their efforts failed.
Parties' Circumstancs
Sandra Hill and Thomas Dittmer married in April, 2001. Some six months prior to the wedding, Dittmer insisted that before he would marry, they needed to execute a premarital agreement. At that time, Hill agreed. Each was wealthy and business savvy by any standard. Hill had a net worth of at least $10 million, and Dittmer possessed at least $40 million. Each had "high-pressure jobs which required deadlines to be met and contracts reviewed, edited, and signed." Hill had been a magazine editor and published author, and had her own television production company; Dittmer was the founder of a major commodities trading company.
Hill hired Santa Barbara family law attorney Jamie Raney to represent her, and they first met to discuss it three months before the marriage. While Dittmer's attorney prepared an initial draft, Raney decided that it would be better for her client if Raney drafted the agreement and Dittmer agreed to allow this to occur. Numerous versions were created and exchanged as the agreement took shape, and evidently these drafts were maintained in the attorneys' files over the ensuing years and so came to be admitted into evidence in the subsequent trial. The more drafts that are generated, as they agreements are being formed, the greater the inference that both parties are actively engaged in an arm's length transaction to create a contract that they both intend to be binding and which they both fully understand. Hence, when one soon to be spouse is favored over the other, or gains benefits they view as important, that spouse's counsel very much wants the other party's attorney to actively input into changes to the agreement. For instance, when I draft them on behalf of the person with greater income or assets, the last thing I hope for is that the other side will just accept my version. Indeed, some lawyers intentionally leave mistakes in a draft (misidentifying parties, misspellings, provisions they know aren't acceptable) exactly so there is a record that these were corrected or changed.
The agreement came to be signed on the day of the wedding, before the ceremony. It included a waiver of spousal support and precluded the creation of community property during the marriage by reason of the contributions of time, skill, and efforts of each party, that would otherwise have belonged to them jointly but for the prenup.
As is often the case where the enforceability of a premarital agreement is in issue, the trial court bifurcated the proceedings and permitted an early trial of that issue alone since if the agreement was upheld, the overall case would be severely truncated and shortened.
Hill's best argument to challenge her agreement was evidently that Dittmer had failed in the agreement to actually disclose the nature and extent of his income and assets beyond a generalized representation that his net worth amounted to $40 million. To prove this assertion Hill attempted to obtain discovery of Dittmer's net worth when the agreement was signed, which would likely have consisted in the information she could have obtained but did not then obtain. Dittmer resisted this discovery as largely irrelevant, but the trial court allowed some limited inquiry by Hill but not to the degree that she had wanted.
Dittmer's attorney had smartly insisted a provision be added to the agreement that acknowledged that Dittmer had provided Hill's legal counsel with full and complete access to Dittmer's financial information, including an opportunity to consult with Dittmer's attorney and his accountants and other representatives "as to the nature, value and cash flow from any of his assets and the nature and extent of his liabilities." This turned out to be Hill's undoing - Hill never availed herself of this invitation, and conducted no inquiry. This effectively waived her right to contest the agreement on this basis later, notwithstanding the fact that the first draft that Raney circulated was presented on March 23, 2011, and that the revision with this acknowledge came "a week later" and therefore on or about April 1. Raney faxed Dittmer's attorney the final draft of the agreement on April 11, 2001, three days before the wedding day, when it came to be signed. Hence, evidently the "opportunity" to inspect Dittmer's net worth representations, including what would certainly have been questions about a complex financial estate, was open for just the two weeks leading up to the marriage. As a practical matter relating to how we humans are hard-wired, I find it difficult to imagine how Hill could have undertaken any kind of real investigation within that time period (without, for instance, canceling or moving the wedding date). Nonetheless, she had the chance to do so and her decision not to deprived her of a legal basis to claim fraud for nondisclosure, or inadequate disclosure, of Dittmer's holdings and income as of that time.
Apparently the terms that the parties came to agree upon had little to do with specifics relating to their assets - one can speculate that if Hill cared enough then about what she claimed to care about now, had her inquiry resulted in the discovery that Dittmer was worth $50 million rather than merely $40 million, her attorney might have been motivated to negotiate a better deal or request some additional provisions. Of course, what is unsaid but implied in the decision is that Hill loses because her theory of the case is simply a technical ruse to invalidate what she doesn't like today - something that evidently didn't matter then. How the Court Ruled
The court's opinion states:
"The contention that the Agreement is tainted by fraudulent and inadequate disclosures is refuted by evidence that Hill, both in the Agreement itself and in her conduct during the three-month period of negotiation, waived this claim. The Agreement states in part: 'Each party waives the provisions of California Probate Code Section 143 and California Family Code Section 1615 relating to financial disclosures. . . . The absence of disclosures shall not create any legal right in favor of either party, nor any legal remedy by either party against the other including, but not limited to, challenging the validity or enforceability of this Agreement. Based upon each party's knowledge of the other's income and assets and their access to same, and in consideration of the prospective marriage, each party acknowledges that this Agreement is fair and equitable at the time of its execution. The foregoing waivers of disclosure are voluntary and express and shall be deemed conclusive for the purposes of Section 1615 (a)(2)(8) of the California Family Code and for all other purposes.'
The circumstances surrounding the execution of the premarital Agreement provide substantial evidence that Hill entered into the Agreement voluntarily. She had the advice of two attorneys specializing in family law and estate planning during the nine months the Agreement was being discussed and negotiated. Hill's lawyer drafted the Agreement and revised drafts of the Agreement in consultation with Dittmer and his attorney. These facts, coupled with Hill's professional background and evident skills are strong evidence that she entered into the Agreement voluntarily.
There is no evidence that Hill took any steps to obtain financial disclosures from Dittmer during the negotiation period, although she was invited to do so by Dittmer's attorney. Dittmer's attorney sent a memorandum to Rainey in this regard as follows: 'Article IV (perhaps in Section 4.4) should acknowledge that the financial information provided by Tom includes his Trust and that 'Tom has provided Sandy's legal counsel and representatives with full and complete access to the books and records of Tom and his Trust, with the opportunity to consult with him, and any of his accountants, agents and representatives as to the nature, value and cash flow from any of his assets and the nature and extent of his liabilities.' This provision was contained, in substance, in the Agreement.
Hill's additional argument, that she did not see the final draft of the Agreement until the date of the wedding and that the agreement she signed was incomplete, is not persuasive. As the trial court found, the record shows that the provisions upon which Hill bases her claims of invalidity had been in prior drafts of the Agreement. Hill's assertions that she was too busy with wedding preparations to read or understand the Agreement ring hollow in light of her education and her extensive business experience. In this regard, the trial court said: 'The Court further finds that the prenuptial agreement signed by [Hill] was full and complete and contained page 14. Even if the version that [Hill] signed was missing that page, the Court finds that the failure to include it was a clerical error by [Hill's] attorney and not a surprise to [Hill] and was included in prior drafts of the prenuptial agreement provided to [Hill]. It was a provision that had been agreed to by the parties prior to the execution of the agreement.' Moreover, any failure on her part in this regard is not a sufficient basis for invalidating a contract. (See, e.g., Wal-Noon Corp. v. Hill (1975) 45 Cal.App.3d 605, 615 ['[f]ailure to make reasonable inquiry to ascertain or effort to understand the meaning and content of the contract . . . constitutes neglect of a legal duty such as will preclude recovery for unilateral mistake of fact'].)
The trial court found as a fact that Hill had adequate opportunity to review the various drafts of the agreement and that she was aware of and understood its contents. Substantial evidence supports this finding. Furthermore, even if it were true that she was unaware of portions of the final Agreement, her failure to take reasonable steps to become aware of the contents of the Agreement, particularly given her business background, her awareness of earlier drafts, and her access to counsel, precludes a finding of that she entered into the Agreement involuntarily. (See, e.g., Bauer v. Jackson (1971) 15 Cal.App.3d 358, 370 ['[o]rdinarily, when a person with capacity of reading and understanding an instrument signs it, he may not, in the absence of fraud, imposition, or excusable neglect, avoid its terms on the ground he failed to read it before signing it'].)"
Hill also contended that the changes to Family Code section 1615 that became effective a year later, in 2002, should be retroactively applied to the question of the agreement's validity and that if they were a different result would have occurred. Specifically, current section 1615(c)(2) creates a presumption that a prenup is not executed voluntarily unless the court makes a finding that the party against whom enforcement is sought had at least seven calendar days between the date he or she was "first presented" with the agreement and advised to seek independent counsel, and the time he or she signed the agreement.
Hence, the amended provisions that are no effective presumes a premarital agreement is unenforceable when the party who is challenging it did not receive it at least seven days before it was signed - Hill argued that the final version was only given her the day of the wedding. The decision ignores the question whether the "final, final" draft needs to be presented more than seven days before, because the Court (and an earlier decision) have found that the 2002 revisions to the Uniform Premarital Agreement Act are not to be applied retroactively to agreements entered into prior to January 1, 2002.
The language that Dittmer's attorney requested will likely become the standard for future agreements like this one, and will create a method of by which actual disclosure of assets and debts in the prenup can be avoided - which, the standard of professional care now suggests based on this decision should become the rule and not the exception. Why now ever give a detailed financial disclosure, whether by way of exhibits or statements made in the agreement itself, when that can be waived? Giving detailed facts in an agreement would appear to be unwise, since the party who is attacking enforceability then has something specific to challenge. A 'multitude of sins' can be shielded if the opportunity to investigate is extended, but not undertaken.
It bears repeating that the provisions attached in the Appendix, including a form of spousal support waiver, are a very good starting point for drafting the language for your own agreements.
Thurman Arnold, III, C.F.L.S.
|
|
| Continue reading "Court Upholds PRENUPTIAL AGREEMENT Where Wife Alleged Husband Falsely Stated Net Worth" » |
|
Permalink | Comments(0)  |
| |
| August 16, 2011 |
| Marriage of MARGULIS - Fiduciary Duties of MANAGING SPOUSES |
| Posted By Thurman Arnold, CFLS |
|
Marriage of Margulis, Part 2 - Duties of Managing Spouses
Please see Part I of my evaluation of
IRMO Margulis as the launching point for understanding the appellate court's outline of interspousal fiduciary duties.
The Margulis rule states that once a nonmanaging spouse makes a prima facie showing concerning the existence and value of community assets in the control of the other spouse postseparation, the burden of proof shifts to the managing spouse to rebut the showing or prove the proper disposition or lesser value of these assets.
The rule is justified by examining the scope of fiduciary duties imposed by the California Family Code. Interestingly, the trial court had found that the Husband (Alan) had breached his fiduciary duties to Wife (Elaine) "to maintain proper records of all community assets which he had exclusive control and management over...." Yet, other than imposing $20,000 in sanctions and assessing $30,000 in attorney fees against Alan, the trial court did not believe Elaine had produced sufficient evidence to explain what had really happened to the deposit accounts that were at issue beyond Exhibit 18, 'the smoking gun'. $50,000 in sanctions was a cheap price to pay relative to the disappearance of hundreds of thousands of dollars. It was reversed for applying too narrow a breach of fiduciary duty and applying the wrong remedy.
Since Margulis contains a great explanation of how statutory fiduciary duties operate I quote the decision as follows:
"Family Code provisions detailing the fiduciary obligations between spouses provide strong support for shifting the burden of proof to the managing spouse when determining the value and disposition of missing assets. The starting point is section 721, which provides that accountability for the management of community assets is a fundamental aspect of the fiduciary duties owed between spouses.
Section 721, subdivision (b), states, in relevant part: between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including, but not limited to, the following: ¶(1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying. ¶(2) Rendering upon request, true and full information of all things affecting any transaction which concerns the community property. Nothing in this section is intended to impose a duty for either spouse to keep detailed books and records of community property transactions. ¶(3) Accounting to the spouse, and holding as a trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the community property.
Section 721's specific incorporation of the same rights and duties of nonmarital business partners, as provided in• section 16403 of the Corporations Code, makes clear that the duty to disclose relevant information concerning transactions affecting the community property is an affirmative and broad obligation. Corporations Code section 16403 requires each partner to furnish to a partner ... [¶] (1) Without demand, any information concerning the partnership's business and affairs reasonably required for the proper exercise of the partner's rights and duties under the partnership agreement or this chapter.... (Corp. Code, § 16403, subd. (c), italics added.)
Section 1100 further delineates the scope of a managing spouse's accountability. That statute not only prohibits a spouse from engaging in certain conduct, such as making a unilateral gift of community personal property or disposing of it for less than fair and reasonable value, without the written consent of the other spouse (§ 1100, subd. (b)), but it also requires each spouse to act as a fiduciary toward the other in the management of community assets in accordance with the general rules governing fiduciary relationships ... as specified in Section 721, until such time as the assets and liabilities have been divided by the parties or by a court. This duty includes the obligation to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest.... (§ 1100, subd. (e).)
Importantly, section 1101 creates a right of action and specific remedies for the breach of fiduciary duty between spouses. Subdivision (a) of section 1101 gives each spouse a claim against the other spouse for any breach of the fiduciary duty that results in impairment to the claimant spouse's present undivided one-half interest in the community estate.... The statutory remedies for a breach of fiduciary duty, specifically including a breach of those [duties] set out in Sections 721 and 1100, include a mandatory award of 50 percent of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney's fees and court costs.... (§ 1101, subd. (g).)
If the nondisclosure or wrongful disposition of community property falls within the ambit of Civil Code section 3294 (punitive damages upon clear and convincing evidence of oppression, fraud or malice), the court must award to injured spouse the entire value of
the asset (§ 1101, subd. (h)).
Finally, section 2100 makes clear that these fiduciary obligations of disclosure and accounting continue to bind spouses after separation until final distribution of assets. Section 2100 states: [A] full and accurate disclosure of all assets and liabilities in which one or both parties have or may have an interest must be made in the early stages of a proceeding for dissolution of marriage or legal separation of the parties.... Moreover, each party has a continuing duty to immediately, fully, and accurately update and augment that disclosure to the extent there have been any material changes so that at the time the parties enter into an agreement for the resolution of any of these issues, or at the time of trial on these issues, each party will have a full and complete knowledge of the relevant underlying facts. (§ 2100, subd. (c), italics added; see also § 2102, subd. (a)(1) [from date of separation to date community assets are distributed, spouses are subject to § 721's fiduciary duty to disclose assets and update material changes].)
Taken together, these statutes impose on a managing spouse affirmative, wide-ranging duties to disclose and account for the existence, valuation, and disposition of all community assets from the date of separation through final property division. Simply put, these statutes require the spouse to account for his or her management of the property. The managing spouse must reveal if the community property changes value, ceases to exist, or is transferred for less than its worth, thereby depriving the nonmanaging spouse of his or her half-interest. Because of the fiduciary relationship between spouses, the managing spouse must reveal any self-dealing or other conduct that impaired the value of the property and entitles the other spouse to compensation.
Applying these statutes to the facts of this case, a trial court could conclude Alan breached his fiduciary duties of disclosure and accounting. A court could find he breached his duty to provide full and accurate disclosure of all community assets when in pretrial exchanges he failed to inform Elaine that $20,000 was in the Charles Schwab IRA's, asserting that the only existing community property was the Sycamore house. A trial court similarly could find Alan breached his duty to disclose immediately and fully any material changes in the community property (§ 2100, subd. (c)), by failing to tell Elaine until just before trial that all the community investment and checking accounts he had managed were virtually empty. Additionally, by refusing to provide Elaine with any documentary or other corroborating proof of what actually happened to the money that had once been in those accounts, Alan may have breached his duty to furnish to Elaine any information concerning the [community's] business and affairs reasonably required for the proper exercise of [her] rights (Corp. Code, § 16403, subd. (c)(1); § 721, subd. (b)), which included her right to pursue a claim against Alan for impairment to [her] ... one-half interest in the community estate (§ 1101, subds. (a), (g) & (h)).
The trial court, however, found a single, narrow breach of duty by Alan: a breach of the duty to keep and provide adequate records. In so ruling, the trial court impliedly found Alan did not owe broader fiduciary duties of disclosure and accounting. The trial court's erroneous finding on the scope of Alan's duties led it to apply the wrong remedy. Instead of awarding Elaine at least 50 percent of the value of undisclosed or wrongfully transferred assets (§ 1101, subds. (g) [50 percent], (h) [100 percent upon proof of oppression, fraud or malice]), the trial court ordered Alan to pay Elaine $20,000 as sanctions, plus attorney fees.
The trial court's failure to find Alan breached his broader fiduciary duties of disclosure and accounting stemmed from the court's denial of Elaine's request to charge Alan with the exhibit 18 asset values unless he disproved those values or proved he properly disposed of those assets. Although the trial court found that Elaine had satisfied the requisite foundation to admit the exhibit, it accorded the document little or no weight because Elaine had not prepared it and had no evidence to support it. Consequently, according to the trial court, Elaine failed to carry her burden of proving the accounts itemized in exhibit 18 ever had the values listed in that document, and Alan could not be charged with wrongfully disposing of assets he never possessed. But, as discussed above, the trial court misapplied the burden of proof.
Elaine's introduction of exhibit 18, which Alan conceded he prepared, satisfied her initial burden. The statutory fiduciary duties of disclosure and accounting then effectively shifted the burden to Alan to rebut the presumption he should be charged with the assets listed on exhibit 18, a document that was prima facie evidence of the account values it stated."
Based upon the foregoing the case was reversed and remanded to the trial court. The sanctions award of $20,000 plus $30,000 was also reversed "so that the court may revisit the question of the appropriate remedy should the evidence establish Alan's breach of fiduciary duty" - in other words, the appellate court is directing the trial court to hit Alan harder than was amounted to a slap on the wrist. As Justice Aronson wryly directs:
"Alan's cross-appeal merits little discussion. His challenge to the trial court's finding that he breached his fiduciary duties to Elaine is meritless. Likewise, his additional challenges to the award against him for sanctions and attorney fees fails, given the clear statutory authorization for both awards in light of Alan's breach of duty.... Nevertheless, we reverse the attorney fees and sanctions award so the court may revisit the question of the appropriate remedy should the evidence established Alan's breach of duty." Elaine is to be awarded her attorney fees and costs for this appeal.
Margulis also contains an excellent discussion regarding Epstein credits, debt payment in lieu of support, and tracing issues. I will endeavor to blog that portion of the decision in Part III.
Thurman W. Arnold, III, C.F.L.S. |
|
| Continue reading "Marriage of MARGULIS - Fiduciary Duties of MANAGING SPOUSES" » |
|
| Permalink | Comments(0) |
| |
| August 03, 2011 |
| Divorce and Family Lawyers Who LIE - EQUANIMITY and DIVORCE PRACTICE |
| Posted By Thurman Arnold |
|
Lawyers Who Lie
Some lawyers, like some people, lie to the Court - particularly in the more contentious of family law cases where emotions run highest. Our culture (and our lower natures) places so much value upon our sense of being entitled to getting what we want, regardless whether it is earned or deserved or the suffering it inflicts upon others when it is not, that otherwise decent, moral people disconnect from their sworn oaths, and more. I often remind my clients that while the judicial system aspires to do justice, the adversarial system only has enough time and resources to devote in any given case to approximate the appearance of justice. For those people who face dishonest lawyers, I apologize and sympathize deeply with your predicament. These men and women seem to forget that real people are involved and that outcomes ruin not on the lives of the parties themselves, but also their children. This of course models behaviors that will repeat - often for generations. I will speculate that lawyers who lie learned the related behaviors from trauma within their own families of origin.
Fortunately it is a rare event in my experience. Most attorneys are honest and ethical, at least in my small community. In 30 years of practice I can count the times that opposing counsel themselves submitted perjured testimony to a Judge. These attorneys became so personally aligned with their clients, or so egotistically challenged, that boundaries evaporated and they became willing to say anything.
There are also a middle category of divorce attorneys whose advocacy style relies upon disinformation but not necessarily outright misrepresentation. It is not uncommon to hear some story or event postured in ways that the lawyer knows are untrue and go beyond a lawyer's ethical obligation to paint his client in a favorable light. Whole stories can even be spun out and laid out before a judicial officer under the guise of "argument" even though no evidence supports the argument, and it is inflammatory, painful to listen to, and without foundation. I believe that why the public, and other lawyers and bench officers, most hold family law attorneys in lowered esteem is because such behaviors are so common among the legal brothers and sisters that it is considered as natural and even humorous. This style of practice exists in a zone of greyishness, one that is reinforced by the conditioning that lawyers receive early on and may be compounded by their own personal histories.
While the latter situations are unfortunate, they occur frequently enough that I've grown desensitized to them. Unfortunately, judges - who can't necessarily discern truth any faster than the rest of us, especially with their limited time and resources - often decline to control these situations. The California Family Code does not provide clear direction or remedies that are efficient and not cumbersome.
This is why I advocate an amendment to Family Code section 271 or a parallel statute authorizing sanctions awards directly against attorneys, and not just their clients, under circumstances and for lawyer conduct that we really could categorize easily since the legal bunch can list it easily. If attorneys are not personally responsible for their actions under the umbrella of "zealous representation" then training the public to curb their attack dogs will take forever and not be successful.
Lawyers accusing lawyers of unethical behavior is painful and unseemly and this discussion is uncomfortable for lawyers. The dangers in making attorney misconduct directly sanctionable in family law cases include adding another layer where potential manipulative name-calling abuses can occur and even more court time can be consumed. But if we agree attorney misconduct should be deterred, and that the costs to clients and court that they case are equally or more substantial, how else might we achieve this? If lawyers cannot be held accountable, even as their clients may find up footing the consequences as illustrated in the Davenport decision, then we must expect more of the same.
Equanimity is difficult in such circumstances. Adversarial litigation brings the worst out of some people. Many lawyers fit that profile - and certainly many clients lost in the land of relationship end are in a deep destructive trance where the perceived benefits of the ends justify the means. Hell, we all fit that profile from time to time. Unfortunately, those ends never are grounded in anything but illusion.
"All creatures desire peace and happiness" - as your relationship ends, protect yourself but be strong and be whole.
TWA |
|
| Continue reading "Divorce and Family Lawyers Who LIE - EQUANIMITY and DIVORCE PRACTICE" » |
|
| Permalink | Comments(1) |
| |
| March 24, 2011 |
| Overcoming the PRESUMPTION Against SPOUSAL SUPPORT in DOMESTIC VIOLENCE Cases |
| Posted By Thurman Arnold |
|
Q. My wife obtained domestic violence restraining orders against me. The truth is I was not guilty of what she claimed I did, but the judge at our DV hearing said that all he needed was a 'preponderance of the evidence' to issue those orders against me. He said the evidence needed only to tip "slightly" in her favor, and he evidently believed her even though she had no witnesses and she was never injured in any way. I had no idea it would make my life a living hell.
After I was kicked out of our home, she took control of 20 properties that we owned together, and raided our bank accounts - in fact, even before she called police that night, she was moving money out of our joint accounts. I was forced out with nothing, including my tools that I need to use as a diesel mechanic (most employers expect mechanics to work with their own equipment, and there is no way for me to free-lance without the tools). I left with only the clothes I was wearing. She was planning the whole thing.
It is now 18 months later and I am living with family. I haven't had access to anything that we amassed during our marriage, which include rentals and the properties that I owned at the time we were married (she made me put her name on the deeds). I need spousal support help. I have no job and I have no way to get one. But my lawyer tells me that I am cooked - that judges won't ever award spousal support to anybody that has had domestic violence orders issued against them.
What do you think?
"Fred"
Fred:
This is a very difficult situation, and assuming that your wife trumped these charges up against you I am sorry for your circumstance. It happens alot. Many litigants and their attorneys will exaggerate, and even invent, domestic violence scenarios to gain advantage in divorce cases. To assume that every person (be them a man or woman) who claims to be a victim of domestic violence really has been would be naive. There is no question that major benefits can inure to parties who successfully allege domestic violence. While I recognize that the majority of DV victims are women, I have seen cases where I was convinced a female claimant was gaming the system. How could it be otherwise - there is no gender priority for truth.
These benefits for falsely asserting DV include:
- Exclusive residence possession (kick out orders) [FC §6321]
- Ensuring the other party has limited access to children [FC §3044]
- Making their own spousal support claims seem more meritorious [FC §4320(i)]
- Anticipating and cutting off an anticipated spousal support request from a lower earner spouse [FC §§ 4320(i) and 4325]
To be fair to judges, these cases are hard to evaluate. The California legislature has set a very low standard of proof and hasn't cleared up inadequacies, ambiguities, and contradictions within our own Family Code statutory scheme and so a default strategy has been assumed that it is appropriate to treat DV offenders, once a finding has been made, quite harshly (a good example of this is that the statutes below reference FC § 6211, when domestic violence is not really defined anywhere in the California Family Code). There are few appellate decisions that guide trial courts, and the ones that exist are based upon bad facts at least as far as the alleged perpetrator is concerned in the sense that the DV offenses were serious. There is no good appellate court case yet on behalf of an alleged abuser who committed a relatively minor infraction (i.e., damage to property with no physical threats or violence), and none that speak to mitigating circumstances.
I want to be very clear that I abhor domestic violence. But I abhor manipulative litigation strategies just as much - because I believe that domestic violence comes in many forms, and that abusing the system to gain power in legal proceedings is also exactly the type of violence that people, possibly like you, should be protected against. The problem for judges is that it is hard to spot, and making mistakes can result in deaths.
So this is where you are:
California Family Code section 4325 provides:
"(a) In any proceeding for dissolution of marriage where there is a criminal conviction for an act of domestic violence perpetrated by one spouse against the other spouse entered by the court within five years prior to the filing of the dissolution proceeding, or at any time thereafter, there shall be a rebuttable presumption affecting the burden of proof that any award of temporary or permanent spousal support to the abusive spouse otherwise awardable pursuant to the standards of this part should not be made.
(b) The court may consider documented evidence of a convicted spouse's history as a victim of domestic violence, as defined in Section 6211, perpetrated by the other spouse, or any other factors the court deems just and equitable, as conditions for rebutting this presumption.
(c) The rebuttable presumption created in this section may be rebutted by a preponderance of the evidence."
Hence, in the event of a criminal conviction of DV within five years there is a rebuttable presumption of no support, period. However, notice that rebutting this is by the same standard that the judge remarked to you about when he/she issued the restraining orders - in other words, "more probable than not." One hopes that judges apply the same standards to each question they face.
Family Code section 4320(i), regarding post-judgment spousal support, is being interpreted by courts as applying to temporary support order applications as well. It reads:
"In ordering spousal support under this part, the court shall consider all of the following circumstances:
* * * (i) Documented evidence of any history of domestic violence, as defined in Section 6211, between the parties, including, but not limited to, consideration of emotional distress resulting from domestic violence perpetrated against the supported party by the supporting party, and consideration of any history of violence against the supporting party by the supported party.
* * * (m) The criminal conviction of an abusive spouse shall be considered in making a reduction or elimination of a spousal support award in accordance with Section 4325."
4320(i) does not require evidence of any kind of conviction, although of course that would be relevant - and it cuts both ways: It gives the court discretion to award more spousal support just as well as giving the court to deny spousal support, upon "[d]ocumented evidence." Subsection (m) just restates 4325.
Hence, whether a presumption against spousal support attaches per 4325 or is just in the judge's mind under 4320(i), what you need to present is evidence that will overcome the presumption of 4325. This means: Why should the court not follow the legislative directive that presumes you are not entitled to spousal support? There is no case yet that gives trial courts any guidance on this subject (i.e., "what needs to be proved?"), and it will take a dedicated judge who is deeply passionate about the law - and the proper facts - to turn the populist pendulum that is still in reactive mode to the deplorable sins that true DV generates.
I recommend the following arguments for rebutting the presumption, as applicable:
- Assuming that you had a criminal conviction, argue that you served your time
- Assuming that you were ordered to complete a 52-week batterer's program, argue that you complied
- If you have a long term marriage, i.e., for more than 10 years point that out
- Did your Wife allege a single incident or a pattern of incidents? One of the thorny problems concerning domestic violence restraining orders is that so many different types of conduct, ranging from merely annoying to life threatening, can give rise to them. What your wife alleged in terms of the apparent seriousness (or lack of injury) of your offense might mitigate in your favor by a preponderance of the evidence when balanced against your need for support and all other relevant circumstances considered together
- If there is evidence that you and your wife were mutual combatants at any time, i.e., that (as with too many families) you both behaved badly, present that evidence
- Remind the court that at worst you have the same burden to justify support now as your wife had to justify DV orders then
- Point out that you have been deprived of your livelihood by reason of your Wife's conduct, and that she is, as you say, in control of not only your properties, your joint funds, but also your tools
- Demonstrate that your spouse took control of all the assets, even before the DV situation erupted, not to attack the prior court ruling (which your present judge will always assume was valid and binding), and that she has maintained this control to such an extent such that you have been entirely deprived of your community property entitlements (in breach of fiduciary duties owing you from her) but also that you have been deprived of the very items that would allow you to be self-supporting. Where DV is indeed trumped up, the reporting party tends to behave in predictably controlling ways. Point this out together with any relevant conduct on the part of your spouse - has she met her sua sponte disclosure obligations? Has she ruined your credit by not paying some of property creditors that you are obligated on? Has she changed your mailing address so that you didn't receive information that might impact your livelihood?
- I cannot overstate that the likelihood is that only a breach, or the substantial appearance thereof, of fiduciary duties on the part of your spouse will meet your burden. Fiduciary duties and alleged spousal abuse are linked at the hip....
- Remind the court more than once that you have met your own burden of proof by the same standard that allowed you to get into this mess
- Request an evidentiary hearing to establish all of the foregoing. Remember Family Code section 217!
This is a difficult situation. We need a good appellate decision on it, or some legislative guidance.
As I come up with other ideas I will come back and supplement this article.
Thurman W. Arnold, III, CFLS
|
|
| Continue reading "Overcoming the PRESUMPTION Against SPOUSAL SUPPORT in DOMESTIC VIOLENCE Cases" » |
|
| Permalink | Comments(1) |
| |
| December 03, 2010 |
| ELKINS and New FAMILY CODE SECTION 217: How It AFFECTS YOU! |
| Posted By Thurman Arnold, CFLS |
|
The most important new rule in decades affecting the experience of California Family Law litigants is set to be unleashed on January 1, 2011.
It promises a radical change in the way that all family court proceedings - whether they be dissolutions, legal separations, annulments, support applications, custody, and modifications of all of the above - are processed and decided by Superior Court judges and commissioners.
This is a result of the Elkins Task Force, which has been quietly operating in the background of the California family law world since roughly August 6, 2007, when the game changing case of Jeffrey Elkins v. Superior Court (2007) 41 Cal.4th 1337 was decided by our California Supreme Court.
Elkins was a landmark decision which held that the Contra Costa County Superior Court could not through its local rules limit parties in marital dissolution actions to introducing evidence in written declaration form that had to be submitted in advance of trial, or prohibiting except in "unusual circumstances" one party from cross-examining the other about the contents of those declarations. Such a rule, intended for the sake of calendar management and judicial economy, not only had the practical if unintended consequence of favoring parties with attorneys who understood how to work with these rules but fundamentally it violated due process by cutting off litigants' abilities to present all relevant, competent evidence on material issues. Judges, as the triers of fact, are not able to assess witness demeanor and credibility without live testimony.
What is earth shattering about this decision in these economic times is that the Contra Costa Superior Court had urged that its policies and local rules were essential for the "expeditious resolution of family law cases." Soon to be former Chief Justice Ronald George rejected this justification:
"We are aware that superior courts face a heavy volume of marital dissolution matters, and the case load is made all the more difficult because a substantial majority of cases are litigated by parties who are not represented by counsel. [Reference omitted]....
In light of the volume of cases faced by trial courts, we understand their efforts to streamline family law procedures. But family law litigants should not be subjected to second-class status or deprived of access to justice. Litigants with other civil claims are entitled to resolve their disputes in the usual adversary trail proceeding governed by the rules of evidence established by statute. It is at least as important that courts employ fair proceedings when the stakes involve a judgment providing for custody in the best interest of a child and governing a parent's future involvement in his or her child's life, dividing all of a family's assets, or determining levels of spousal and child support....
Trial courts certainly require resources adequate to enable them to perform their function. If sufficient resources are lacking in the superior court or have not been allocated to the family courts, courts should not obscure the source of their difficulties by adopting programs that exalt efficiency over fairness, but instead should devote their efforts to allocating or securing the necessary resources."
Justice George ended by directing the California Judicial Council to create a task force (the 'Elkins Task Force) "to study and propose measures to assist trial courts in achieving efficiency and fairness in marital proceedings and to ensure access to justice for litigants, many of whom are self-represented. Such a task force might wish to consider proposals for adoption of new rules of court establishing state wide rules of practice and procedure for fair and expeditious proceedings in family law, from the initiation of an action to postjudgment motions. Special care might be taken to accommodate self-represented litigants. Proposed rules could be written in a manner easy for lay-persons to follow, be economical to comply with, and ensure that a litigant be afforded a satisfactory opportunity to present his or her case to the court." Hence, the Elkins decision is essentially a Jeffersonian ruling that its intended to empower family law litigants and to require counties and courts to adapt.
The Elkins Task force completed its work and has issued lengthy recommendations. The first changes take place on January 1, 2011. Possibly the most important change is embodied in Family Code section 217. It states:
"(a) At a hearing on any order to show cause or notice of motion brought pursuant to this code, absent a stipulation of the parties or a finding of good cause pursuant to subdivision (b), the court shall receive any live, competent testimony that is relevant and within the scope of the hearing and the court may ask questions of the parties.
(b) In appropriate cases, a court may make a finding of good cause to refuse to receive live testimony and shall state its reasons for the finding on the record or in writing. The Judicial Council shall, by January 1, 2012, adopt a statewide rule of court regarding the factors a court shall consider in making a finding of good cause.
(c) A party seeking to present live testimony from witnesses other than the parties shall, prior to the hearing, file and serve a witness list with a brief description of the anticipated testimony.
If the witness list is not served prior to the hearing, the court may, on request, grant a brief continuance and may make appropriate temporary orders pending the continued hearing."
Family Code section 217 will cause a sea-change in day to day family court proceedings across our state, unless family court judicial officers ignore it to the limited extent possible by court rules. It will likely have immense financial and resource consequences upon not only the courts but upon parties to family court proceedings. It will force the state government in coming years to study whole new paradigms for resolving divorce and domestic partnership dissolution outside the adversary template, including those currently practiced in New Zealand and southern Australia.
It will also pressure parties to consider mediation, and collaborative processes which occur outside congested courthouses, much more carefully. The costs of adversary litigation are about to sky-rocket, making mediation even more appealing from a financial perspective (I have written extensively about the emotional and psychological benefits here an elsewhere). There simply is no governmental money available to absorb the coming Elkins Onslaught. For more information about an alternative method for resolving family disputes, please visit us at www.DesertFamilyMediationServices.com.
At the same time, at least in the short run taken together with some of the other revisions that become effective next month, it may encourage more people to litigate more stubbornly and so make mediation seem less attractive than it did before the changes (just the reverse will be true). Some folks will mistakenly assume that this invites the use of court hearings as a live-testimony forum for sharing unresolved complaints relating to their marriage or domestic partnership dissolution with the other party in open court. Instead, judges will sustain objections to such irrelevant material and parties who seek to use Family Court as a platform to air relationship grievances will find themselves alienating the trier of fact in ways that will have adverse consequences to them beyond just the time and expense of the exercise.
The purpose of today's Blog is to introduce you to section 217 and the new changes. I will follow up with more articles in coming weeks. Without a doubt the new rules will make all the information I provide on my websites more relevant and timely for my readers.
December is new legislation month at the Southern California Family Law Blog presented by Family Law Attorney Thurman W. Arnold. My goal is to inform you well, and early on, on any number of topics that will improve your outcome in family law matters and hopefully help you to reach results that are fair for you, your spouse or ex-partner, your children, and your blended and extended families.
T. W. ARNOLD, III, CFLS
(State Bar of California, Board of Legal Specialization) |
|
| Continue reading "ELKINS and New FAMILY CODE SECTION 217: How It AFFECTS YOU!" » |
|
| Permalink | Comments(1) |
| |
| October 22, 2010 |
| How Can I STOP My Spouse From LIQUIDATING OUR COMMUNITY PENSION? |
| Posted By Thurman Arnold |
|
Q. I am afraid my husband may liquidate our 401k and IRA's that are in his name. Is there anything I can to do freeze the accounts or make sure he can't empty them out before I can hire a lawyer or file for dissolution?
A. There is always the risk that one party will loot the community estate in anticipation of a family law proceeding, or that they may even act innocently but still wind up depriving the other spouse of their community interest in a pension asset.
If the spouse in whose name an IRA, 401k, or other pension device is held wants to access these monies and you object, or just want to make it impossible for them to do so without first securing your agreement, there are important steps that will work so long as you undertake them in time.
Two situations with pension plans or retirement assets are common: 1) a retired or disabled spouse is already drawing upon them on a monthly or other basis and 2) or they may want to liquidate the account entirely. The latter situation is especially common, in my experience, with plans valued under $50,000.
Lets assume your husband has a Roth IRA for $50,000. It was opened during marriage when all contributions were made, and half therefore belongs to you. He instructs Fidelity Investments to cash it out. Since this is an early withdrawal (presumably), there is a both a 15% penalty to the IRS (unless the money is rolled into a new IRA within 60 days, or the withdrawal occurs within 60 days from the date of entry of a Divorce Judgment dividing the assets) and the monies he receives will be taxed as ordinary income at rates that depend upon his bracket.
If there is sufficient other property in the community estate to ensure that you will get your half from some other source down the road, this may not be a problem for you. However, down the road has a habit of never arriving and in this economy other assets from which you expected a reimbursement might evaporate.
Perhaps, this is not okay with you from a number of angles. For instance, an exception to the automatic restraining orders contained in the California Dissolution Summons regarding the prohibition from invading accounts allows parties to do so to generate the monies to hire their lawyers. These "ATRO's" will not likely protect you from this type of withdrawal after the fact - however, it may protect you as a preemptory strike. As always I urge you to act fairly and not to abuse power or be manipulative in your divorce.
You have a couple of options for protecting your interests, including joining the pension plan into the family law proceedings.
But the most important and immediate device you can use is a notice to the Plan Administrator pursuant to Family Code section 755(b). Essentially this written demand tells them that you are claiming an adverse interest in the pension assets and its legal effect is to put the Plan on the hook for any payments they make after receiving the notice. They will not release any money once you properly draft and serve it.
Serve it either personally through a process server (which may be difficult and expensive if they are in another town or state), or by registered or certified mail, return receipt requested.
Keep in mind that joinder of certain types of pensions - like federal public entity plans - cannot be achieved through a California joinder pursuant to Family Code section 2060. Thus, this §755 Notice is really important to freeze the status quo pending an ultimate QDRO.
By the way, this will also work to freeze other forms of payments - for instance from insurance companies.
T.W. ARNOLD
"We provide you cutting edge, insider information about the law"
If you appreciate it, take a moment to rate us on Alexa or elsewhere,
or simply comment to our Blog! |
|
| Continue reading "How Can I STOP My Spouse From LIQUIDATING OUR COMMUNITY PENSION?" » |
|
| Permalink | Comments(1) |
| |
| September 24, 2010 |
| My Ex Has Been EXCLUSIVELY USING Our RESIDENCE - Is There an EPSTEIN CREDIT For This? |
| Posted By Thurman Arnold |
|
Q. I have been occupying the home after my wife left over a year ago. I pay all the interest only mortgage, property taxes, and insurance with no help from her. Does she owe me half of any of this?
A. You may be owed you something, but not necessarily one-half of what you have paid out.
This situation involves at least three potential legal issues:
- Epstein Credits
- Watts Credits
- Jeffries Credits
This particular Blog addresses your question in terms of Epsteins - the next blog deals specificially with Watts and Jeffries credits.
Epstein Credits
I have described Epstein Reimbursements in another Blog. "Epstein credits" is a doctrine derived from the case of Marriage of Epstein (1979) 24 Cal.3d 76, 84-85. It holds that as a general rule, courts must reimburse one spouse out of the community property who uses earnings or other separate funds after separation to pay pre-existing community obligations. This commonly occurs with credit cards where there was a balance remaining when the parties separated that one or the other pays after that date. Epsteins only apply to payments on the portion of a debt that existed at date of separation, and not new debt on an old card that was incurred afterwards. The rule is not limited to credit cards but can apply to almost any class of debts.
Courts are required not to order this reimbursement if under the circumstances it would be unreasonable for the paying spouse to have expected reimbursement. If there was an agreement that a party would not be reimbursed, if the paying spouse intended the payment as a gift, or when the payment is made on account of a debt for an asset that the paying spouse was or is using and the amount was not substantially in excess of the value of the use, the Court may decline to order reimbursement. This idea of the value of use of some property acquired through debt that continues to exist after separation underlies the concepts of Watts credits and Jeffries credits, and is obviously implicated in your question since you occupy the house for which you seek credits and reimbursements.
So, Epsteins are almost always granted as to post-separation payments for expenses, or goods and services, that didn't leave a tangible asset behind that is now being exclusively enjoyed by only one of the two spouses.
As an example of how this works if there is $15,000 owing Visa for that trip to Hawaii, some groceries, and a child's school tuition at the time of separation and one party pays it off or makes monthly installments on the debt with their earnings or other separate property after that date, a benefit has been conferred upon the community because a joint obligation has been extinguished or reduced. That benefit must be equalized by a payment to the payor of one-half the amount paid or a credit or set-off against other property that gets divided. One-half is paid because the paying spouse owed their half anyway. Any portion paid before the DOS (date of separation) ordinarily will not be reimbursed.
This is generally true even if only one of the parties actually took the trip to Hawaii, unless that trip was in breach of a marital or fiduciary duty (if the husband snuck off with his paramour to Hawaii, an argument exists that he should not be reimbursed for paying that portion of the debt over the wife's objection). Family Code section 2625 directs courts to award a debt incurred by one spouse to them alone if debt was not "incurred for the benefit of the community." Family Code section 2602 empowers courts to "award ... the amount the court determines to have been deliberately misappropriated by the party to the exclusion of the interest to any other party in the community estate." FC section 2625 is a powerful and much underused statute (many attorneys seem to be unaware of it or try to bluff as though it didn't exist).
Compare this with a situation where a credit card was used to buy a dishwasher that the paying spouse possesses or receives in the divorce - since they are retaining a tangible asset it may not be fair to allow them to both keep the asset and get reimbursed for one-half its costs. Applying Epsteins can become fairly fact specific.
In situations involving use of a family residence or other tangible assets that continue to exist after separation and which are used and enjoyed by only one of the spouses, an Epstein analysis provides only a part of the answer to the reimbursement question. In effect first the amount of the Epstein reimbursements are determined, and then the question requires a Watts analysis to determine under equitable principles whether it is fair to actually order reimbursement and, if so, in what amount.
Hence, to resolve your issue you would begin by adding up the costs of everything related to the house that is spent to preserve or protect the asset. Property taxes are included, but utilities are not. The utilities you used after the physical separation are your obligation anyway, because they were not incurred during 'the marriage.' (Please see the Blog Category "Physical Separation.") Mortgage payments and insurance are considered, and probably the poolman or gardner as well.
Please continue on to the next blog for detailed infomation concerning Watts credits.
Epstein Credits and Fiduciary Duty Issues
Sometimes a spouse or domestic partner will raid the credit cards and take cash advances or buy a new wardrobe, or fix a car, during the weeks prior to separating. If it later appears that their intention was to stick the other spouse for one-half of this expense, the presumption that this is a community debt (because incurred during marriage) may be overcome and so it may be assigned to the one spouse alone. It is not fair to hold both parties responsible for debts incurred in anticipation of separation.
However, when one partner incurs a debt frivolously as opposed to recklessly before separation, in a situation not amounting to a breach of fiduciary duty - even over the prior objection of the other spouse - it is likely to be equally divided and Epstein reimbursements ordered. Both spouses have, under California law, equal rights of management and control of the community property and community credit.
Courts in my experience are reluctant to find breaches of fiduciary duty in Esptein situations unless the behavior was fairly eggregious. Charging 10 pairs of shoes at Macy's a month before separation may not be viewed as a big deal. If the debt was incurred in pursuit of an illegal activity like supporting a drug habit or sex addiction, many judges are less reluctant to declare a breach.
To illustrate another twist, if the credit card was used to pay the spouse's tuition expense instead a child's schooling as in my example above, it may also be unfair to charge the non-schooled parent with one-half the tuition portion of the credit card balance. A court is likely to look at whether this schooling benefited the community in some way before splitting that debt betwen the parties - i.e., because of the schooling did the student spouse earn more money which was then contributed to the community standard of living and so confer a benefit on both? Pure student loans are usually awarded to the party who incurred the debt as their separate property obligation.
T. W. Arnold III
http://www.DesertFamilyMediationServices.com
|
|
| Continue reading "My Ex Has Been EXCLUSIVELY USING Our RESIDENCE - Is There an EPSTEIN CREDIT For This?" » |
|
| Permalink | Comments(0) |
| |
| May 11, 2010 |
| What are EPSTEIN REIMBURSEMENTS? |
| Posted By Thurman Arnold |
|
Q. My soon to be ex wife and I are getting our divorce with the assistance of a paralegal. That person has prepared a Marital Settlement Agreement. The paralegal says she cannot give us legal advice. There is a phrase in the agreement that says something about each of us waiving Epstein reimbursements. I have no idea what this means.
A. "Epstein reimbursements" deal with the question: "How do we divide debts that we incurred during the marriage, where one of us made payments after we separated and up to the time of divorce?"
A common situation is that parties have credit card debt that needs to be divided in the divorce. Say there was a balance of $10,000 owing to American Express on December 31st, the day before your wife drank too much at the office New Year's celebration and had an unfortunate tryst with her boss - this isn't the first time this has happened, and your New Year's resolution is to move out (sorry, I am just trying to be colorful), and so you do move out the next day. Her reaction is to file for divorce, because her boss looks way more interesting to her than you do these days.
Under this example January 1 is your date of separation. From the date of separation on, the earnings of either spouse are no longer community property, or joint earnings, but instead these earnings belong to each of you separately. Family Code § 771.
Often where a credit card is in the name of one person alone, the other spouse or domestic partner doesn't contribute to the payments after separation - sometimes because they won't and sometimes because they can't. But as between the two of you, the $10,000 is jointly owed to American Express, even if the other spouse did not sign the credit card application or is not named on the card, or on the statement. This is also true whether or not both parties directly benefitted from the use of the credit card - for instance, maybe the $10,000 was charged by your wife to buy shoes over the course of the past year to help make herself feel better about the fact that you never have intimate conversations with her any more (or for any other reason), or perhaps you charged the card to add more chrome to your Harley Davidson FatBoy because your hairline is receding.
If the card is not paid, American Express can pursue collection either against the spouse who is the account holder, or against the community property of both spouses. Family Code § 910. If the credit card is in your name alone, it will be your credit that might be ruined if the monthly installments are missed.
Now again, as between you and your wife, the general rule is that each of you owe one-half of the credit card debt which means that all other things being equal, in a property settlement or if a Judge is forced to divide your property and estate, if one party is assigned 100% of the debt the other owes a reimbursement of $5,000. Lawyers and Judges speak of assigning the debt to one party or the other on the "marital balance sheet" which implies a corresponding credit or right of setoff against the division of some other item of property.
There are, of course, exceptions. These exceptions frequently include (a) situations where a debt was incurred in breach of a fiduciary obligation owing the community estate or to the other spouse and (b) where one party retains the benefit of the property that the credit card was used to acquire (believe it or not, I am frequently asked about breast augmentations or other cosmetic surgeries - except in extreme cases, courts do not charge one party for these). For example, if when you learned of your wife's affair your reaction included flying to Las Vegas and having a wild weekend and you recklessly charged the $10,000 at the casino, this might be considered a breach of fiduciary duty and result in the entire $10,000 being your responsibility even though the two of you had yet to physically separate. Or, if instead you spent the $10,000 buying more chrome for your Harley and you expect to keep it in the divorce, then even though the $10,000 was otherwise a community obligation equitable considerations may result in the debt being assigned to you. If in the divorce the two of you decide to sell the Harley but the chrome you spent $10,000 buying adds only $2,000 in value to the sale's price, in that case the $10,000 remains a joint obligation because you neither breached a fiduciary duty nor retained a sufficient benefit that the law would charge you for it and the asset is being divided. Another common situation is where one spouse retains the furniture or refrigerator charged at Lowes - in that case more of the debt may be assigned to that party.
Assuming you continue to make monthly payments of principal and interest on the credit card up to the point of dividing the debt in a marital settlement agreement (MSA), or if a judge makes the call for you both after a trial, as a general proposition your wife owes you one-half of all those payments. These are called Epstein credits or Epstein reimbursements in California, and many other community property states have similar rules. These are also called equitable reimbursements, meaning that the right to be reimbursed is not absolute and certain but that the court has wide discretion to grant the reimbursement or not depending upon fairness. Typically California family law courts do grant the reimbursement so long as the parties benefited equally (or the money was equally wasted).
The principle in California was first set forth in the case of Marriage of Epstein (1979) 24 Cal.3d 76. It is to be distinguished from the rule that the debt itself, if community, must be divided equally between parties in divorce. Family Code § 2550. It covers reimbursements rights that accrue between physical separation and the date of ultimate division of the liability.
So, the agreement the paralegal has prepared includes an agreement each of you is giving up any right to be reimbursed for debt related payments made after separation. You are not being asked to waive your credit for $5,000 if the $10,000 debt is assigned to you (unless there is a separate provision assigning the credit card balance to you completely). You are being asked to waive all the debt maintenance up to this point. It is not an unusual clause in an MSA, but it may or may not be in your best interests to agree to it.
Epstein credits take a variety of forms, and are not limited to credit card debt. The Epstein case itself involved a husband who voluntarily made the mortgage, insurance, and tax payments on the family residence during the separation period. Wife and their son occupied the home. Up to that point the law was that if one party used separate property (earnings after separation) to pay community debt (the mortgage, etc., on the residence), there was a presumption that this was intended to be a gift to the community unless an agreement could be proved that it was not to be a gift.
Each party may have separate Epstein claims as to different items of debt.
Upon separating, it is a smart idea to get and keep copies of credit card statements and statements for all liability accounts as of the date of separation. From an accounting point of view, the date of separation is a critical snapshot of a point in time. It is essential that the parties maintain these records as proof of what the numbers were, and of what payments were made afterwards.
Whether or not you should waive the Epstein reimbursements that might be owing you is part of the give and take of negotiating a divorce settlement. These are usually simple accounting issues, but not always.
If your Wife gets an attorney that attorney might try to convince you to waive the Espteins, or hope that you don't understand the concept or have it independently explained to you. In my experience where we are speaking in terms of vanilla debt (meaning there is no questionable conduct and the charges were incurred in the normal course), your wife's lawyer would also agree that you are entitled to these reimbursements without a fight if you know enough to insist.
There is an important flip side and hybrid of the Epstein reimbursement concept - that of Watts charges and credits. The deal generally with who pays for the beneficial use of community property (i.e., the home) during the separation period, once the divorce is finalized.
I will address those separately.
Thurman W. Arnold III
http://www.ThurmanArnold.com |
|
| Continue reading "What are EPSTEIN REIMBURSEMENTS?" » |
|
| Permalink | Comments(0) |
| |
| April 13, 2010 |
| How Do I Defend a Request by My (Former) Spouse to SET ASIDE our Support Orders? |
| Posted By Thurman Arnold |
|
Q. My former spouse claims that I lied on my Income and Expense Declaration and filed a motion to set aside that order, and is now seeking more money. What are my rights?
A. This type of support modification can occur in two situations: Where it is alleged that you aren't paying enough because you committed some fraud or where you alleged you are paying too much because the other party committed some fraud in connection with an Income and Expense Declaration [FL-150] or some other sworn pleading filed with the Court.
If you are defending a support set aside motion, there are three bits of law you need to know.
First, there are important time limitations on when a motion must be filed before a Court will set aside a prior support order. As action based upon fraud or perjury must be brought within six months after the date on which the complaining party discovered or should reasonably have discovered the fraud or perjury. Family Code section 3691.
Second, the moving party must convince the trial court that all the other party has established is that it was a) inequitable when made or b) subsequent circumstances caused the the supported ordered to be inadequate or excessive, but that nothing more has been proved that that those grounds are insufficient by themselves. Family Code section 3692.
Third, on April 8, 2010, the case of In re Marriage of Zimmerman was decided and certified for publication and it is the first reported California appellate decision to squarely address these family code provisions. You will want to cite this case to the judge.
In Zimmerman a mother and former wife filed a motion to have all child support recalculated going back some five years, on the ground that the father had committed fraud and perjury with respect to prior order by concealing income in his earlier FL-150's. However, because of facts alleged in earlier pleadings she had filed with the Court a declaration making reference to these very same claims, the trial court was affirmed when it found that more than six months before she filed the Motion she had discovered or reasonably should have discovered the alleged fraud and perjury.
This is a very important case in this area because family law litigants are frequently claiming in their papers that the other side is lying or concealing information. This case stands for the proposition that it is unwise practice to even mention these claims prematurely, because if one does then the defending party will point to those statements - 'you see, she knew she had this claim two years ago.' It is always unwise to make statements to the Court about dishonest conduct on the part of the other side where there is no solid proof, yet, in any event.
Thurman W. Arnold III
http://www.ThurmanArnold.com
4/13/10
|
|
| Continue reading "How Do I Defend a Request by My (Former) Spouse to SET ASIDE our Support Orders?" » |
|
| Permalink | Comments(0) |
| |
| April 13, 2010 |
| What Are My Rights When I Believe My Spouse Committed Fraud in Their Income & Expense Statement? |
| Posted By Thurman Arnold |
|
Q. What remedies do you have if you believe your spouse concealed income or lied about assets in their Income and Expense Declaration [Form FL-150]?
A. The FL-150 Income and Expense Declaration must be filed by each party in every California family law case involving requests for money (whether support or attorney fees), and it must accompany the FL-142 Schedule of Assets and Debts that is part of the Preliminary Declaration of Disclosure that must be exchanged in all action for dissolution of marriage or domestic partnership, legal separation, and annulment. In addition, Rule of Court 5.128 requires these Income and Expense Declarations to be current, which means they need to be updated so that they are, generally speaking, not more than 90 days stale.
Family Code section 3691 sets for the grounds and time limits for filing a Motion or OSC to set aside and correct an order for child support or spousal support which was obtained by your present or former spouse, or the other parent. You need to be very careful with these time limits, because they are shorter than other set aside remedies contained in the Family Code (for instance, Family Code section 2122 dealing with property settlements and judgments). It is important get the applicable code sections right, because different time limits apply for seeking relief from the Court.
Family Code lists the grounds for a support set aside as a) actual fraud; b) perjury; and c) lack of notice.
a) Fraud - this occurs when 1) the defrauded party is kept in ignorance or 2) in some manner other than their own lack of care or attention was fraudulently prevented from fully participating in the proceeding. This set aside ground is different from perjury. It applies to a situation, for instance, where you were told that your spouse was not seeking certain orders and so you failed to attend to the hearing only to learn later that in your absence much broader relief was requested than represented. It also applies any time information is provided by the other side that was materially false and when you relied on that false information not knowing that it was false (for instance, a party fails to disclose another job, much higher earnings, or property).
b) Perjury - where the other side has simply lied outright under oath in their Income and Expense Declaration or in the supporting verified application. Be sure to allege fraud as well since a perjurious statement is often a fraud.
c) Lack of Notice - this generally applies to situations where the other side claims you received notice of the proceedings but in fact you were not served. This can be difficult to prove where a proof of service was filed with the Court which itself is perjurious (i.e., your husband's best friend he claims he hand delivered to the documents to you on a day you were in New York).
This section applies equally to orders which were way too high based upon any of the above grounds as those that were way too low.
Family Code section 3691 will not help you in situations addressed in Family Code section 3692, where your support order was merely unfair or subsequent circumstances caused the order to be excessive or inadequate. Section 3692 is your first argument in defending a support order set aside motion.
In any of the above cases, you must file your motion within six months of the time you discovered or reasonably should have discovered the fraud, perjury, or reasonably adequate notice of the order.
Thurman W. Arnold, III
California Family Law Attorney
|
|
| Continue reading "What Are My Rights When I Believe My Spouse Committed Fraud in Their Income & Expense Statement?" » |
|
| Permalink | Comments(0) |
| |
| April 07, 2010 |
| Am I LIABLE for my husband's GAMBLING DEBTS? |
| Posted By Thurman Arnold |
|
Q. My husband won't stop gambling. Am I liable for his gambling debts?
A. The community property that the two of you own is liable as to satisfy his gambling obligations, assuming there is any left. Whether you are liable to the Indian Casino or Las Vegas hotel beyond your share of the community depends upon whether you have an independent contractual relationship with them - i.e., a line of credit in your name.
As between you and your husband, unless you consented to his gambling he may owe you (if your separate property is somehow attached to satisfy the debt) or to the community estate a reimbursement or indemnification right.
If he is a professional gambler and this is his "work" the outcome would be different. The outcome may also depend on whether the community benefited from the gambling, i.e., if winnings were used to support the community, then a court may deem it fair to share the obligation as to "losings".
This right of reimbursement would similarly exist if he squandered money on drugs, or prostitutes, and so on - assuming you can prove it and trace the money! The question is whether you consented and ripens when you can establish that his conduct violated fiduciary duties owing you. One never knows, however, how a judge will treat this on a case by case basis but the law if moving towards greater accountability.
If his gambling does amount to a breach of fiduciary duties owing you as a result of your marriage or domestic partnership, you have substantial remedies. Try our search at the top right of the page to learn about those topics.
Thurman W. Arnold III |
|
| Continue reading "Am I LIABLE for my husband's GAMBLING DEBTS?" » |
|
| Permalink | Comments(0) |
| |
| January 17, 2010 |
| What are interspousal FIDUCIARY DUTIES? |
| Posted By Thurman Arnold |
|
Q. I keep hearing the phrase "interspousal fiduciary duties". What does it mean?
A. Few areas of California divorce and family law is changing as rapidly, or is having as great an impact upon property division and support obligations, as is interspousal fiduciary duties.
Until the mid-1970s lesser "good faith" standards were imposed upon married persons which had consequences to usually only in extreme situations of self-dealing by one spouse or domestic partner. These standards have since morphed into much higher level "confidential duty" and "fiduciary duty" standards.
On January 1, 1994 Family Code section 721 became operative. That was revolutionary, but widely not understand, for the next 10 years. Section 721 has since been revised, extended, and expanded by statutory amendments and judicial decisions, and this continues.
The penalties for violating a fiduciary duty can be severe. Many attorneys, and some judges, are behind the curve in understanding the nuances of the obligations imposed by FC section 721 and related statutes. This ignorance places clients at financial risk in the course of dissolution or legal separation litigation. Indeed, it opens the door to the litigation continuing or re-emerging long after Judgment if breaches of fiduciary duty are discovered or alleged downstream. Having a lawyer who understands this developing area of the law will make or break some litigants, today and for years to come.
Fiduciary duty rules help to balance economic power in marriage and divorce. One reason people roll our eyes when the topic of "divorce" comes up is who doesn't know someone who out cheated, or got cheated by the other spouse, in matters of support or property division? There are lawyers who pander to clients who want to cheat their spouse or domestic partner. Americans share a cultural mythology that these attorneys charge the highest fees and if they can out-cheat the other spouse and their attorney, they deserve them.
The accountability that the law of fiduciary duties add to the dissolution mix is a useful tool for combating marriage fraud by the other spouse. If society favors the party with more money or power over the weaker party, it will become increasingly unglued.
Fiduciary Duties Described
In financial and property transactions with third parties and each other, spouses owe one another important statutory duties that create huge responsibilities and pitfalls. As between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. "This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other." Family Code section 721(b).
The essence of the "fiduciary relationship" is that the parties are treated under the law as though they do not deal with each other on equal terms because one person (typically the managing spouse) in whom trust and confidence is reposed and who accepts the trust and confidence is in a superior position to exert influence over the dependent party. A presumption of undue influence arises whenever either party benefits from the transaction over the other, however innocuous the circumstances may seem. Breach of fiduciary duty is to some extent a strict liability offense, meaning if it occurs consequences may be set in motion that run the course to an expensive end.
In 2002 Family Code section 721 was amended to expand this confidential fiduciary relationship and impose the same rights and duties as applies to nonmarital business partners under the California Corporations Code, and includes but is not limited to:
(1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying;
(2) Rendering upon request true and full information of all things affecting any transaction which concerns the community property.
(3) Accounting to the spouse, and holding as trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the community property (i.e., all property acquired by a married person during the marriage).
While Section 721 does not mention Registered Domestic Partners, it applies to them as well.
One major consequence is that transactions which benefit only one spouse may be set aside by the other, either before or during a divorce proceedings.
As a practical matter for divorcing couples, this means:
a) If one party has benefited over the other in a transaction involving money or property and thereby gained an advantage during the course of the marriage, the law presumes the advantage was gained through undue influence exerted on the part of the benefited party, and the transaction is presumed invalid and can be set-aside;
b) The burden of convincing a Court that a set-aside should not occur then shifts to the advantaged spouse;
c) All this can occur without regard to good or bad intent on the part of the advantaged spouse (i.e., actually intending to defraud as opposed to merely being sloppy). Either way the law declares the transaction to be the result of "constructive fraud". Once the Court finds constructive fraud the transactions can be set aside, the benefited party can be ordered to pay restitution to the other and to disgorge any profits they alone received, title may be reformed to include both parties' names, or the property may be held in trust for both on a present and go-forward basis rather than in the name of the one alone. If there is an actual fraudulent intent, the remedies to the injured spouse are more severe.
The fact that parties have separated or that a dissolution or legal separation is pending does not end the parties' fiduciary responsibilities. Family Code section 1100(e) continues those same duties "until such time as the assets and liabilities have been divided by the parties or by a court."
Remedies for breach of the fiduciary duty as described in Family Code section 721, and section 1100, include an amount equal to one-half of the value of any asset undisclosed or transferred in breach of fiduciary duty, plus attorneys fees. This includes inadvertent or unintentional violations. Family Code section 1101(g). Where a court comes to believe a spouse acted intentionally to defraud the other spouse, the Court "shall" award 100% of the value of what should have been disclosed, or what should not have been transferred, to the innocent spouse! FC section 1101(h).
If you have a business, or investments in real estate or simply a family residence, and certain transactions have occurred, you may have a problem. If you are a dependent spouse, regardless whether the other party intended to cheat you, you may have important entitlements and remedies.
This is one of the most complicated, emerging areas of California family law. Do not go it alone! In every dissolution and legal separation case, regardless whether either party has an attorney, each party must exchange a Preliminary Declaration of Disclosure, and unless expressly waived, a Final Declaration of Disclosure. If these documents contain errors, misinformation, or are incomplete the consequences can be financially devastating because an entire settlement or judgment may later be set aside. These documents sit as leverage tools and landmines for years to come.
TWA
http://www.ThurmanArnold.com
|
|
| Continue reading "What are interspousal FIDUCIARY DUTIES?" » |
|
| Permalink | Comments(0) |
| |
|
|
|
|