Written by attorney Anthony Payman Azemika

Wife must Pay Attorneys’ Fees for Breach of Fiduciary Duty

A California Appellate Court has ruled that Trial Court erred by refusing to award attorney's fees to Husband under California Family Code Section 1101(g) for Wife's violation of her fiduciary duty (by incurring $24,000 pre-separation credit card debt without disclosing it to Husband) because an award of attorneys' fees is mandatory under that statute. In In re Marriage of Fossum, Husband and Wife lived together for two years before they got married in September of 1994. They separated in November of 2002, and Wife filed for divorce in January of 2003. At their divorce trial, they argued over characterization of their house in Santa Clarita. Wife testified that after she saw the house in 1994, she and Husband decided to buy it. Since Husband had better credit rating, their lender suggested that Husband take the title to the house in his sole name in order to qualify for a better interest rate. According to Wife, they used funds from their joint savings account for the down payment, but Husband promised that if she would quitclaim her interest in the house to him, he would add her name to the title after the loan closed. Wife signed the quitclaim deed on October 17, 1994, and Husband took the title to the house by a grant deed in his sole name on October 27, 1994. On August 16, 1995, Husband quitclaimed the title to the house to Wife and himself as joint tenants. After the deed was notarized, it was recorded on January 28, 1997. In 1998, Husband and Wife discussed refinancing the loan on the house. Wife testified that she and Husband agreed to follow the same procedure regarding quitclaim and adding her to the title as they had used to purchase the house. Wife quitclaimed her interest to Husband in May of 1998, but Husband never seemed to find time to put her name back on the title. By 2002, Wife testified, she and Husband were seeing a marriage counselor and Husband refused to put her name on the title unless she became a "Godly woman and a good Christian wife," who behaved properly and had a "heart. . . free of sin." Wife claimed that after she moved out, Husband told her that he would never put her name back on the title to their home. Husband testified that he did not recall discussing the title with Wife, and that the house was always intended to be his separate property because his separate property funds were used for down payment and his credit was better. He claimed that he couldn't remember agreeing to have the second quitclaim deed recorded and that he had taken Wife's name off the refinance application when he learned that he could qualify for a loan without her. According to Husband, Wife "voluntarily executed the third quitclaim deed." Husband acknowledged that the mortgage payments on the house were made from the parties' community property funds. Trial Court heard additional testimony regarding the $24,000 cash advance on the credit card taken by Wife in early 2002, which was put in her personal bank account without telling Husband. Wife told Trial Court that she needed the funds because Husband would not give her any money to pay the bills. Husband admitted that he had stopped paying Wife's bills, but he claimed that Wife used $13,000 of that money to buy a horse trailer and a car for her son. Husband asked Trial Court to find that the house was his separate property, to award Wife only Moore-Marsden interest in the home, and to award him attorneys' fees under California Family Code Section 1101(g) because Wife breached her fiduciary duty by taking undisclosed cash advance from their credit card. In January 2009, Trial Court found that the parties' home was presumptively community property, and that Husband had failed to rebut that presumption. Trial Court further found that Wife violated her fiduciary duty under California Family Code Section 721 by taking undisclosed cash advance, but declined to award any attorneys' fees to Husband under Section 1101(g), but instead ordered Husband to pay $20,000 toward Wife's attorneys' fees under California Family Code Section 2030 [attorneys' fees award based on the parties' respective income]. Claiming that Trial Court erred by characterizing the parties' home as community property and by refusing to award attorneys' fees under Section 1101(g), Husband appealed the Trial Court's decision. Now, California Court of Appeals has affirmed the Trial Court's decision in part and reversed it in other parts. The Appellate Court has ruled that Trial Court did not err in characterizing the home as community property because Husband failed to present evidence to challenge Wife's testimony, Trial Court did not find Husband credible, and Husband failed to rebut the presumption of undue influence that arose from his gaining advantage over Wife by failing to add her name to the title after the refinance. The Appellate Court has found that Husband was not entitled to reimbursement of separate property contribution to the acquisition of the home because he failed to object to the proposed statement of decision on that basis or to present sufficient evidence of separate property contribution. The Appellate Court has also ruled that Trial Court erred by refusing to award attorneys' fees to Husband under California Family Code Section 1101(g) [remedies for breach of fiduciary duty shall include fee award] because statute makes award mandatory. Therefore, the Appellate Court reversed and remanded the case back to the Trial Court to permit the Trial Court to order an award of attorneys' fees and costs.

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