California Court Reviews Jurisdiction over Marital versus Separate Property

corporate-seal-1239702Under established California law, family courts are authorized to divide community (or marital) property between the divorcing spouses. Such property may include any number of items, including the family home, investments, retirement benefits, and any other assets accumulated during the marriage. Not included in this division are items that have been identified or characterized as separate property, belonging to each spouse independently. Distinguishing between community and separate property assets can have a tremendous impact on the outcome of a divorce proceeding. In order to protect your property rights, you are encouraged to contact a local San Diego family law attorney who has extensive experience representing parties in divorce proceedings.

In some cases, a couple’s marital separation agreement (or “MSA”) will address their individual rights to property after the divorce. It is important to pay close attention to such a division, since the language of the MSA can have the effect of foreclosing a court’s jurisdiction over any items identified as separate property. In a recent California case, the wife sought to enforce the MSA (among other requests for relief) as it related to various corporate claims. In this case, the parties were married in 1996 and separated in 2009, and the court entered a judgment of dissolution in 2010 as to status only. In 2011, the court further issued a judgment on certain remaining issues, incorporating the parties’ MSA.

According to its terms, the ex-spouses identified certain assets as “separate” property. Each spouse retained a percentage of ownership in two different companies. The MSA further stated that each party would cooperate in efforts to sell both corporations. After a year or so, neither of the companies had been sold. The wife filed an action seeking various relief, including a court order enforcing the MSA by requiring the parties to work together to list and market both corporations. Among several other rulings, the trial court concluded that it did not have jurisdiction to order the sale of the businesses, pointing out that such an order would change the material terms of the MSA and judgment. The court asked the parties for further briefing on the issue of what relief is available to enforce the judgment provision requiring the parties to cooperate in efforts to sell the companies.

The court of appeals reviewed whether the court had jurisdiction over the wife’s corporate law allegations. Under California law, it is well established that a court’s jurisdiction over the parties’ separate property is “quite limited.” In fact, it seems that in order to obtain relief affecting separate property interests, one must file an independent civil action. The court concluded that by entering into the MSA and confirming their stock holdings in the corporations as separate property, the wife’s allegations based on the applicability of corporate principles to her separate property required the filing of a separate civil action.

Clearly, the court determined that it was not authorized to rule on the particular matter addressed here, due to the characterization of the corporate assets as separate property. This case illustrates the need to understand the ramifications of entering into a marital settlement agreement and identifying community and separate assets and debts. Any action relating to the dissolution of a marriage may have long-lasting financial implications for the parties involved.

It is important to protect your interests by consulting with an experienced family law lawyer as early as possible in the proceedings. Roy M. Doppelt has been representing parties in divorce matters for more than 20 years. His office serves clients throughout Southern California, including in 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).

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