Mismanagement
of Community Assets and the Duty of Full
Disclosure Upon Request
Mismanagement
of community assets by one spouse alone,
entitles the other to reimbursement and
an accounting. The other spouse can enforce
this remedy even during marriage under Family
Code § 1101.
Family
Code § 1101 addresses the problem
of mismanagement of community property assets
during marriage by setting interspousal
disclosure and accounting rules. The spouse
who has the primary management and control
of a community business “may act alone
in all transactions, but shall give prior
written notice to the other spouse of any
sale, lease, exchange, encumbrance or other
disposition of all or substantially all
of the personal property used in the operation
of the business”.
Insofar as the duty to act in good faith,
the managing spouse has the duty to make
full disclosure, upon request, of community
property assets and liabilities. Family
Code, section 1101(a) provides a remedy
during marriage “for breach of the
duty imposed by Family
Code §§ 1100 or 1102 that
results in a substantial impairment to the
claimant spouse's present undivided one-half
interest in the community estate”.
An action under 1101(a) may be brought without
filing a petition for dissolution, legal
separation, or nullity, but must be brought
during marriage “within three years
of the date a petitioning spouse had actual
knowledge that the transaction or event
for which the remedy is being sought occurred”
An action may also be brought in conjunction
with a dissolution, legal separation, or
nullity proceeding, or upon the death of
a spouse.
The duty of good faith dealings, with accompanying
obligations of accounting and disclosure,
continue after separation until the marital
property is finally divided. Family
Code § 1100(d).
With
few exceptions, in transactions 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.
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