Full, honest, and complete disclosure is a critical part of divorce in California. Family Code section 2100 explicitly calls for “full and accurate disclosure of all assets and liabilities” because doing so furthers the sound public policy of “the reduction of the adversarial nature of marital dissolution and the attendant costs…”

Divorcees often ask about the legal consequences of concealing assets in a divorce case. Under California law, doing so is an express breach of fiduciary duty and the penalties can be severe. There is no better example of this than the result in the Marriage of Rossi case, where Wife tried to hide over a million dollars in lottery winnings she received before separation.

In Rossi, the Wife contributed to a lottery pool with her co-workers. In late December of 1996, the lottery pool hit the jackpot and Wife’s share was $1,336,000. The next month, Wife filed for divorce. She never disclosed the lottery winnings to her husband and she used her mother’s address to receive checks and other information from the California Lottery so as not to tip Husband off. The parties signed a settlement agreement and judgment was entered on April 7, 1997.

In May of 1999, Husband received a letter to his home address asking if Wife was interested in a lump-sum buy-out of her lottery winnings. This was the first he had heard of Wife winning the lottery.

Within days, the parties were back in court. Husband sought an award of 100 percent of the lottery winnings under Family Code section 1101(h), which requires the trial court to award 100 percent of an undisclosed asset if the failure to disclose constituted “oppression, fraud, or malice.”

Family Code section 1101(h) reads as follows:

“(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.”

Civil Code section 3294 reads, in relevant part, as follows:

“(a) In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.

(c) As used in this section, the following definitions shall apply:

(1) “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.

(2) “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.

(3) “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.”

The trial court found that Wife’s actions in intentionally failing to disclose her lottery winnings constituted fraud and awarded 100% of the lottery proceeds to Husband. The Court of Appeals affirmed and agreed with the legal reasoning of the trial court.

In addition, the Court of Appeal noted that the trial court could have imposed attorney’s fees on Wife as an additional sanction under Family Code section 1101(h), but it was in the Court’s discretion not to do so. The Court of Appeal also noted that if the trial court found there was a breach of fiduciary duty, but that breach did not rise to the level of “oppression, fraud, or malice,” the trial court would have been required to award attorney fees to the injured spouse under those circumstances.

It is important that you understand your fiduciary duties to your spouse and your rights when your spouse breaches these duties. The attorneys at Bickford Blado & Botros are experienced and well-versed in these issues. Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.

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