The Three Ds Of Divorce: Disclose! Disclose! Disclose!

Divorcing couples have a number of obligations towards one another, including the duty to abide by the full and complete disclosure requirements outlined in the Family Code. Both husband and wife have an obligation to disclose all material facts and information regarding the existence, characterization, and valuation of all assets and debts.

California courts were recently called upon to visit the issue of a spouse‣s failure to disclose, in the case of Marriage of Feldman (2007) 153 Cal.App.4th 1470. The court was asked to review Elena Feldman‣s request for attorney fees and sanctions against her husband Aaron Feldman, on the grounds that Aaron had failed to disclose several financial transactions during their divorce proceedings, including the purchase of a home and $1 million bond, and the existence of a 401(k) and several other investments.

There are a number of Family Code sections setting forth each spouse‣s disclosure requirements and they include section 721(b), which imposes upon each spouse the duty to fully disclose all assets and debts, as well as imposes an obligation to “provide equal access to all information, records, and books that pertain to the value and character of those assets and debts…”

These duties and obligations exist between spouses while they are married and continue until the date on which all assets or liabilities are actually distributed. Under Family Code section 2102 each spouse has a spontaneous and voluntary duty to provide to the other spouse information and documents relating to “all activities that affect the assets and liabilities of the other party.”

Remedies for failure to abide by the disclosure requirements, include an award of fees, as well as an award to the other spouse of 50 percent of any asset that is undisclosed.

These duties obligate both spouses to provide information even if the other spouse does not ask for it. In Feldman, Aaron provided answers to discovery and even completed a Schedule of Assets and Debts listing most of the assets, but he left out a few and the trial court found his conduct frustrated the policy of law which promotes settlement. The trial court awarded Elena $140,000 in fees and ordered sanctions in the amount of $250,000. Aaron, of course, did not like the trial court‣s decision and appealed.