Good Faith and Fair Dealing

Good Faith and Fair Dealing in Marriage and Divorce

How would you decide the divorce of Gregory* and Diane? They had been married for several years. Gregory refinanced several properties that they owned together without telling his wife. This resulted in a loss of the community’s equity in the properties. During the marriage Gregory often forged her name on documents and when caught, admitted in writing that he did it. Diane filed for divorce. Should Diane get reimbursed her for her losses? What about Gregory’s punishment? Should he be sanctioned for his failure to include Diana in the transactions?

The courts, applying Family Code sections 1101(h) and 721(b) stated that in transactions between themselves, spouses owe one another a fiduciary duty. Gregory’s forgery and refinances harmed Diane. The court ordered Gregory to pay Diane for her losses as well as $100,000 in sanctions. By law, when the fiduciary duty is ignored, a spouse is entitled to 50 percent of the value of the asset. If the breach of the fiduciary duty is proven by clear and convincing evidence, the spouse is entitled to 100 percent of the asset.

During marriage and even during divorce, spouses owe each other a fiduciary duty. A fiduciary duty often is required when people are entrusted to act on another person’s behalf. For example a guardian would have a fiduciary duty towards a minor, a financial advisor towards a client, a business partner towards another partner. The fiduciary duty requires the utmost good faith and fair dealing with the other person. When a person acts on behalf of another, all of his or her actions should be done as if acting in someone else’s best interest.

FC 1101(h): Remedies for the breach of the fiduciary duty by one spouse, as set forth in Sections 721 and 1100, when the breach falls within the ambit of Section 3294 of the Civil Code shall include, but not be limited to, an award to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset undisclosed or transferred in breach of the fiduciary duty.

FC 721(b): Except as provided in Sections 143, 144, 146, 16040, 16047, and 21385 of the Probate Code, in transactions between themselves, spouses are subject to the general rules governing fiduciary relationships that 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 that 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 that concerns the community property.

If you need a divorce lawyer in the Orange County area to discuss a family law matter such as breach of a fiduciary duty or any other dissolution issue such as child support, custody, transmutation, spousal support, or property division, contact Treviño Law, Inc. Conveniently located off of the 5 and 405 freeway at Lake Forest.

Although the posting of this information can be considered free legal advice for an Orange County divorce, it does not guarantee a result. There may be other circumstances that play a significant role in any dissolution which may alter the outcome of a divorce. A divorce lawyer will be knowledgeable about the significance of facts. Those factors should be reviewed and argued by a family law attorney in Orange County.

Please note that this legal advice does not establish a family law attorney-client relationship. This is a legal advertisement for Treviño Law, Inc, an Orange County family law firm.

*These are actual facts and first names are taken from an opinion that has been made public.

The court may sanction a spouse for the breach of a fiduciary duty.

The court may sanction a spouse for the breach of a fiduciary duty.

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