I Smell a Rat! When A Spouse Cheats the Other Spouse

Wife [W] and Husband [H] married in 1996 in Provo Utah. In 1998, the couple moved to California. A year later, the couple purchased a condominium in El Monte – initially purchased as joint tenants. However, W had very poor credit, and the mortgage company used to purchase the house suggested the condominium be in H’s name only to lower their interest rate. W agreed and signed a quick claim deed over to H after he promised that he would add her name to the property later. The down payment came from their joint bank accounts, and in 2000, the mortgage was paid in full from their joint accounts. Also, all expenses on the condominium were paid for from joint accounts.

Three days before H’s death, W asked him if her name was on the property. H responded that the property was all hers and that she could keep it or sell as she pleased. However, unknown to W, in 2006, H established a trust with his children from a previous marriage as the beneficiaries. After H died, the condominium went into a trust for W’s step children so they could become the owners of the property. In 2016, W sued the administrator of the trust to prevent the step children from receiving the property and for her to receive it instead. She based her argument on Family Code Section 721 that spouses have a fiduciary relationship that imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. H’s actions regarding the condominium and W were in bad faith.

The step children argued that even if everything W said was true regarding the purchase and maintenance of the property and H’s promise to W that the property was in her name too, W’s lawsuit was filed too late to be actionable based on statute of limitations in the California Civil Code of Procedure.

W argued that the California Family Code is the governing law in this cause of action which “…creates a cause of action for breach of fiduciary duty by one spouse against the other for impairment of the claimant spouse’s undivided half interest in the community estate. […The] cause of action may be filed as an independent claim during a marriage; in connection with an action for dissolution of marriage, legal separation, or nullification; or as an independent claim upon the death of a spouse.

The trial court agreed with the step children and applied the law under the Code of Civil Procedure stating the statute of limitations had passed for her filing her lawsuit. W appealed.

The Appellate Court agreed with W stating that the Family Code laws should have been applied and not the Civil Code of Procedure, stating, “…had the legislature intended a particular statute of limitations to apply upon death, it would have so stated.” Instead, the Family Code Section states just the opposite.

The Family Code provides: “(1) Except as provided in paragraph (2), any action under subdivision (a) shall be commenced 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…(2) An action may be commenced under this section upon the death of a spouse or in conjunction with an action for legal separation, dissolution of marriage, or nullity without regard to the time limitations set forth in paragraph (1) …(3) The defense oflaches may be raised in any action brought under this section.” (A plaintiff is subject to a laches defense when there is an unreasonable delay in seeking relief and causes prejudice of other party’s rights to a fair trial.)

Categories: Fiduciary Duty
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