Recent Posts in In Spouse/Out Spouse Category
| April 18, 2012 |
| Divorce and Family Law HORROR STORIES - How the System Is Broken! SHARE Yours With Us? |
| Posted By Thurman W. Arnold CFLS |
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Share Your Family Law Horror Story?
I want to thank all of you who write me about the difficult circumstances and horror stories surrounding your divorce and other family law matters, both in and out of divorce court. I receive dozens of emails each month from non-client readers, many who need help and so have questions, many who are merely venting, and many who have deep problems with how the government sponsored system for resolving family law disputes has unfolded and been applied for them, or misused.
I am not able to respond to every email, and for those who really want was is in effect a consultation with me (by seeking detailed answers to complex questions, for instance) I suggest you consider a phone or Skype conference with me or Mike Peterson at my office. I bill $350/hour for those consults and Mike bills at $250/hour.
However, for those who simply wish to have their often tragic stories heard I've decided to open up a portion of my website for posting them. Your experiences may be useful to others, and I imagine others similarly situated will read them with great interest. I think there should be a forum for people to communicate the good and bad of what they've been through.
Therefore, you must understand that I have a busy law practice along with a website that requires my constant attention and so am practically limited in my time and ability to respond or educate people about the law, your options, tactics you might try to change the course of your case or situation, and so on. I may not be able to enter into an ongoing dialogue with many of you, and don't want you to be offended if my responses are truncated, but if you wish to share your situations and experiences and if they are appropriately written, I will post them in a new section of my website that I am creating.
Your stories - if you'd like me to share them with the world for you - shouldn't simply be rants, but they certainly can express the poignancy of your situation. They need to be coherently (but not perfectly) written, not be abusive, respect other's rights to privacy, and provide enough information that a reader can follow them. I will create editorial guidelines as this concept develops. If you wish to have your story posted you will have to give me the rights to use it as I see fit.
Again, I will refine how this will work. For now I will watch to see whether creating such a forum is something the public really desires - both in terms of people sharing their experience as well as others caring to read about them. Hence, this concept is a work in progress.
If this makes sense to you and is something you wish to undertake, send me your stories at twarnold@verizon.net - don't use my on-line intake forms or blog comments because the length is limited in what I receive.
Thurman W. Arnold, III, C.F.L.S. |
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| August 15, 2011 |
| IRMO MARGULIS - Managing Spouse Has BURDEN OF PROOF To Explain MISSING ASSETS |
| Posted By Thurman W. Arnold, C.F.L.S. |
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Marriage of Margulis (8/11/2011) 198 Cal.App.4th 277
Part One
I am always pleased to report cutting edge rulings by our appellate courts, and this is one of the most important decisions in recent years affecting who has the burden of proof to explain what happens to assets that disappear after marriage partners separate, and what the consequences are for managing "in-spouses" who cannot explain what happened to liquid (or other assets) that existed at separation but seem to have evaporated in the meantime. While upon reflection it is hard to imagine how this decision could be news because it makes such perfect sense, the Fourth Appellate District's pronouncements (by the Honorable J. Aronson) are indeed a new extension of existing law - which is why the trial court in this case was reversed.
Special kudos to Attorneys Stephen Temko and Dawn Gray on behalf of the Association of Certified Law Specialists (an organization serving the public interest that I am proud to be a member of) for weighing in with amicus curiae briefs that probably helped to inform the appellate justices in positive ways.
Because this case is important I am going to help it be digested in two gulps - this is Part I.
The root holding of IRMO Margulis is this: 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. It is now clear that managing spouses have the burden of proof to account for missing assets that they controlled.
Family Code section 1100 states that "either spouse has the [right of] management and control of the community personal property, ..., as the spouse has of the separate estate of the spouse."
But when parties separate the more empowered partner often grabs or already manages all the marbles, and then enjoys the advantage of continuing to carry those marbles around and even spending them down until the community property pot is ultimately divided. Without accountability this frequently led to abuses and misappropriations that - in the absence of this new rule - favored that party and facilitates their practical ability to defraud the community property estate, notwithstanding a legal duty per Family Code section 721(b) to account for what went where. Until now. The
Margulis rule is necessary to protect the rights of an "out-spouse" as a matter of basic fiduciary protections.
The facts of the case as set forth in the appellate decision are these (and are reminiscent of the facts of the Davenport decision): Alan and Elaine separated after 33 years of marriage in August, 1996. Alan moved out of the parties' Irvine home and moved to Chicago to start a new job. Elaine remained in the family residence. They owned a home in Palm Desert, California.The marriage yielded two children who are now adults.
During the marriage Alan was the sole working spouse and exercised "complete control" of the couple's finances - sound familiar? This included retirement, bank, and investment account personal property assets. Although Alan moved out in 1996, Elaine did not file for divorce for another six years - in 2002. Five more years passed before Alan even filed a response in those proceedings. Throughout this period Alan paid Elaine just enough, evidently, for her to be satisfied with the financial status quo so that she undertook no steps to move the divorce towards a conclusion. I can only speculate what psychological and emotional dynamics were at play in these people's lives, but infer that Elaine trusted Alan enough that she did not perceive that she needed to take vigorous steps to protect herself. Which gave him free reign for a long, long time.
Once the case did begin to move forward, as often happens when there is a significant power imbalance in relationship, it began to move quickly and that pace certainly further advantaged the husband. Commonly it is the in-spouse who is rushing the case to trial while the out-spouse plays catch-up and the parties, or the in-spouse, play discovery games and hide and seek with assets, disclosures, and backup. Bank accounts are easily susceptible to this type of abuse because they are document intensive, and expensive to evaluate. In and out transactions (deposits in, transfers out) must each be traced in order for forensic experts and the court to know how to characterize and characterize transactions and the flow of cash. Here Alan filed his Response to Elaine's 2002 Petition on February 21, 2007, and the parties found themselves in a pre-trial Mandatory Settlement Conference only six months later. This means that Elaine's team had very little time to prepare since Alan knew where the marbles were but elected not to share their identity and location.
There was a single "smoking gun" in the case which consisted of what became at trial "Exhibit 18." This was a two-page document that was entitled "confidential personal financial statement" for "Alan/Elaine Margulis," dated February 1, 1999. It reflected total assets of $1,305,500. The liquid (i.e., cash) portion amounted to more than half of that number.
At trial Elaine testified that, as the nonmanaging spouse, she had no personal knowledge or records of the value of the accounts at any time. This was the sole extent of her evidence at trial about the status of the assets near the date of separation, and essentially Alan's attorneys argued that this proved nothing. Elaine's attorney responded insightfully that the effect of this document was to shift the burden of proof to Alan to explain and show that he had properly disposed of those assets, or that the stock holdings lost their value as a result of market conditions - as opposed to them having been withdrawn or mismanaged by him or for his sole benefit. But the trial judge disagreed, which set up this reversal in favor of Elaine.
The trial court explained "I don't believe it supports, standing alone [that] your assets listed did, in fact, exist." Wife had no other evidence to prove that they did - hence, without the rule established by Justice Aronson in this case, she would be out of luck. Her proof would have failed on the contested issues, and it did fail at the trial court level. Before this decision the trial court's perspective was a bit shallow but not surprising. It takes bold judges with considerable family law experience to read the sub-text.
Who has the burden of proof on a topic is often key to which party wins or loses on a given issue. This is why Marulis is important to control of asset cases.
Shifting the Burden of Proof
There are two common principles linked to the concept of the "burden of proof." One is the burden of persuasion and the other is the burden of producing evidence. Often if a party cannot produce evidence on a subject that the law imposes a burden upon them to produce in order to prevail, they lose. Irmo Margulis has implications beyond family law.
The Margulis decision observes: "the trial court concluded that Elaine, the nonmanaging spouse who lacked both personal knowledge and records concerning the assets listed on exhibit 18, failed to meet the difficult burden of proving these now missing assets had existed....
The trial court's failure to place the burden of the duty on Alan relieved him of the duty to account for his postseparation management of these assets. Thus, Alan did not have to prove the
amounts
that had been in these accounts or that he had properly disposed of those sums. This lack of accountability poses a risk of abuse and runs afoul of the statutory scheme imposing broad fiduciary duties of disclosure and accounting on a managing spouse." [Emphasis added].
It continued: "Given that 'bedrock concerns' of 'policy and fairness' drive the analysis [citation omitted]
, it is not surprising that a common trigger for burden-shifting is 'when the parties have unequal access to evidence necessary to prove a disputed issue. 'Where the evidence necessary to establish a fact essential to a claim lies peculiarly within the knowledge and competence of one of the parties, that party has the burden of going forward with the evidence on the issue although it is not the party asserting the claim.'....
Concerns over 'unequal access to evidence' [citations omitted]
are particularly pressing in the context of a marital dissolution where financial records can be crucial to ensuring the equal division of property required by Family Code section 2550.... Undoubtedly, in marriages and separations like the Margulis's where one spouse exercised exclusive control over community property, the parties will have vastly
unequal
access to evidence concerning the disposition of that property. When this occurs, fairness requires shifting to the managing spouse the burden of proof on missing assets. Moreover, ..., the statutory fiduciary duties of disclosure and accounting owed between spouses further justify that result."
The Appellate Court goes on to explain why this result is fair in light of the fiduciary obligations between spouses that I have written about so much over the past few years. I will separately blog that portion of the decision.
But as I have been trumpeting now for many months, the appellate courts are working overtime to save the existing California scheme of family law to ensure transparency - it is my opinion long overdue but much appreciated!
For those in-spouses who do act in good faith after separation and the pendency of the marital proceedings, Margulis is a cautionary tale - managing spouses had better keep records of transactions affecting the community property estate and make all required disclosures or find themselves assuming the risk of loss or diminution of the value of those assets.
Please note that the appellate Court's initial decision of August 11, 2011, was modified on August 26 and September 9, 2011. The citation to the modified opinion is Marriage of Prentis-Margulis v. Margulis (2011) 198 Cal.App.4th 1252. I have yet compare the differences in the two decisions.
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| July 30, 2011 |
| Can I CONTINUE My DIVORCE TRIAL? |
| Posted By Thurman Arnold, C.F.L.S. |
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Q. My divorce trial is scheduled for next month. I want to change attorneys - will the case be continued to give a new attorney enough time to prepare my case correctly?
A. Trial continuances are disfavored under the law. Any application to continue a family law trial must be made pursuant to Cal.Rules of Court, Rule 3.1332. It allows for "ex parte" requests to continue trials as well as such applications on noticed motions upon a showing of good cause and in the interests of justice, and lists some examples of what a trial court might properly consider to be "good cause." Subsection (c)(4) includes substitution of trial counsel as a ground
"but only where there is an affirmative showing that the substitution is required in the interests of justice." Courts are highly unlikely to permit more than one continuance without a really good reason, so I hope this is your first request.
Usually when you file this kind of ex parte you should also ask the court, "in the alternative", for "an order shortening time" (OST) for the hearing on the motion" since judges are feeling pressured from the "Elkins" changes in the law and are stretched in their abilities to read ex parte paperwork (usually received by the court the day before or the morning of) at the last moment. Indeed, ex parte applications on all matters except the direst emergencies are being increasingly denied - and they irritate judges. In fact, some judges may sanction a party or their attorney for a clearly improper one.
Whether you seek an OST also depends upon where you are in the procedural timeline - for instance, if the discovery cut-off (including the exchange of any designation of experts per the Code) has not yet occurred but would toll between the date of an ex parte hearing and the date of a hearing on shortened notice per your applicable local rules or by statute, then be sure in your ex parte to include a request that the discovery clock be switched off until the court issues its ruling on the continuance. Otherwise you or your new attorney will need to file a motion to reopen discovery once the case is continued - assuming that important things remained undone - usually the case when parties are switching attorneys on the eve of trial.
In fact, I have seen cases where parties want to change attorneys because the offer that is on the table is at a substantial discount for how much or what agreements the case should reasonably be settled for, but because the weaker party's attorneys messed up the case that party is now at such a disadvantage that they must seriously consider taking the offer or doing worse at trial. Strong, aggressive counsel for a powerful party (usually the "in-spouse") will vigorously try to push the case to its conclusion before you, the "out-spouse," can catch your balance. This is a recipe for disaster. By the way, having good competent divorce counsel from the beginning greatly enhances the likelihood that your case will be fairly settled and that it will not go to trial - that is the goal for any sensible person.
Here are my suggestions:
- See whether the side has done everything the law requires of them in formulating your grounds for "good cause" under Rule 3.1332. If they have and your attorney failed to also comply, this is not good. If neither side did what is required to avoid irregularities, then that is better. If your side did comply but the side did not, that is best and you should point this out in your papers and in oral argument.
- Did the other side comply with all applicable Local Rules regarding trial? For instance, in Riverside County we have local Rule 5.0053 which mandates that a Trial Readiness Conference be set before trial, and at least in Indio that you (or your attorney) sign a form that you understood and will comply with what those rules require. Here is a link to Title 5 of the Riverside County Local Rules for Family Law cases. There may be similar rules in your jurisdiction. Rule 5.0065 discusses ex parte procedures in Riverside County, which generally includes the family law divisions in downtown Riverside, Hemet, Indio and Blythe.
- Draft a declaration that establishes good cause for your request - one that speaks to both justice and procedural issues. Anticipate what prejudice the other side will claim in opposition to your continuance request. Offer to ameliorate it if you can, in advance of the hearing on the ex parte.
- Rule 3.1332(d)(10) permits the court to impose "conditions" if it grants a continuance. These need to be reasonable of course. A frequent condition "no more continuances." Unreasonable requests may be that you are asked to waive a fundamental right that is a key issue in the case itself, i.e., a waiver of spousal support or an agreement that the court will have retroactive jurisdiction at the trial when it does occur to reach back and modify support to the first trial date. Offering to contribute to the other side's attorney fees incurred surrounding the rescheduling may be appropriate under certain facts.
- Before you file your ex parte, be sure to attempt to "meet and confer" with the other side in an effort to obtain a stipulation to continue instead, and in order to discuss how you might minimize their inconvenience and prejudice and to discuss possible reasonable conditions in advance of the hearing that would address those issues. Attach any confirming letters as an exhibit.
- Make your motion as short as possible and author it to read fast - not more than 10 pages including declarations, points and authorities, and exhibits. Judges have no time to read long winded stories.
- Be sure to notice all the parties for the ex parte. For instance, if there has been a Borson motion by either side that attorney (the former, Borson attorney) must also get notice of the hearing and the paperwork at the time you set the hearing.
- Hire your new attorney first and have them make the motion (which is costly in terms of the amount of the retainer they will reasonably require, since if the motion is denied that attorney knows he may be going into a trial that will take immediate emergency hours to come up to speed on).
- If you haven't retained counsel yet and just want to continue a trial "to get counsel," you have a problem. While this excuse might work at the first hearing on an OSC or regular motion, it is unlikely to convince a judge who is managing his trial calender.
Good luck with your new attorney! |
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