California Court Finds Community Property Omitted From Divorce Judgment

mortgage-and-money-2-963935-m.jpgDividing up marital assets, or “community property” as it is known in California, is an extremely important part of any divorce proceeding. In addition to identifying, characterizing, and valuing such assets, both spouses must be confident that they have tallied the entire lot of marital property. In some cases, either intentionally or otherwise, parties may fail to disclose certain assets during this stage of the proceeding. Unfortunately, it is not uncommon for spouses to try to conceal or disguise would-be marital assets, thereby depriving the other spouse of their rightful financial interests. For this reason in particular, if you are considering a divorce, it is critically important that you contact an experienced San Diego family law attorney as soon as possible who will work diligently to assess your case and protect your rights.

California law serves to protect spouses from the concealment or non-disclosure of marital property. Under Section 2556 of the Family Code, a party may file a post-judgment motion or action with the court to obtain adjudication of any community estate asset or liability omitted or not adjudicated by the judgment. This means that once a court issues a divorce judgment, the parties have a continuing right to ask the court for help if they find or become aware of community assets that should have been (and were not) allocated in divorce.

In a recent California case, In re Marriage of Colman, the couple got married in 1970 and divorced in 2007. They entered into a marital settlement agreement (the “MSA”) setting forth a division of their community assets and ordering the husband to pay the wife spousal support of $1,500 per month. Three years later, the wife filed an order with the court, seeking, among other things, the division of omitted assets under Section 2556. She alleged that the MSA misrepresented the husband’s financial interest in a particular company. For example, the wife claimed that the company owed the husband more than $100,000 in loans as of the date of separation, and that he purchased a home during the marriage for a woman he later married.

In response, the husband filed a motion to reduce his spousal support payments to “zero,” arguing that there was a material change in circumstances. He also sought to enforce a provision of the MSA requiring the wife to transfer ownership of a New York property to him. The husband denied any wrongdoing with respect to his interests in the company and claimed that he could not find employment, that his parents provided him with income via a trust that was intended to support him personally, and that he depleted his investment and retirement accounts.

The trial court ruled in favor of the wife, finding that a deferred salary owed to the husband by the company at the time of the divorce was an “omitted asset” under Section 2556. The court pointed out that he knew he was entitled to the money and failed to disclose it. Furthermore, his ownership interest in the company was 86 percent (and not the 42 percent he claimed). The court also denied his request to reduce the spousal support payments, noting that he did not show a change in circumstances to warrant the modification. Significantly, the court pointed out that the husband “seriously manipulated his assets to create a fiction of financial distress.” The husband appealed.

The court of appeals affirmed the decision, concluding that the evidence before the lower court supported its ruling that the husband manipulated his assets, creating an appearance of greater financial problems than existed. The court also pointed out that the husband’s use of his family trust funds – while married to his wife – to purchase his current wife’s family home evidenced his wide flexibility to use assets, more than he admitted to at trial. The court refused to reduce his spousal support payments and affirmed the lower court’s award of attorneys’ fees to the wife. While this is an unpublished opinion, and courts may not rely on or cite to it in future cases, the underlying legal concepts are important to consider when involved in a divorce action.

It is important to keep in mind that an experienced family law attorney would work to protect a client’s interests in accordance with the state family code. Roy M. Doppelt has been representing parties involved in family law disputes for more than 20 years. Doppelt & Forney serves clients throughout Southern California, including San Diego, Encinitas, La Jolla, and Chula Vista. For a free consultation, contact Doppelt & Forney through our website, or give us a call toll-free at (800) ROY IS IT (769-4748).

Related Blog Posts:

State Laws Vary on the Division of Marital Property in Divorce

California Courts Retain Jurisdiction to Allocate Community Property After Divorce Judgment

Without a Transcript, Court Has Limited Authority to Review Spousal Support Decision