YOU MUST UNDERSTAND CRYPTOCURRENCY IF YOU DIVORCE

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Cryptocurrencies are here to stay so you might as well learn about them. If you’re married, it could be financially beneficial to understand any involvement your spouse, with or without you, might have with this new financial asset class.

WHY YOU SHOULD CARE ABOUT CRYPTOCURRENCY

Why should you care about cryptocurrency like Bitcoin? Because cryptocurrency can be very valuable community property and hidden from you when it’s time for you to divorce and divide your community assets.

What is cryptocurrency? Cryptocurrency is a digital cash system without a central authority. It is a decentralized system. Cryptocurrency is digital currency.

In 2018 this relatively new digital cash system known as the cryptocurrency market is expected to reach a total value of $1 trillion. According to data from businessinsider.com, the market cap of all cryptocurrencies stood at over $700 billion on January 3rd of this year.

Keep on reading!

THIRD PARTY JOINED TO DISSOLUTION ORDERD TO PAY ATTORNEY’S FEES

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In another important family law court determination that affects third party’s to marital dissolutions, California’s Second Appellate District has held that a trial court did not err by ordering a third party, who was joined by the dissolution, to pay attorney’s fees of petitioner Wife without first determining whether petitioner was likely to prevail in her action.  The facts involved in the remarkable case of In re Marriage of Bendetti are as follows:

During their dissolution proceedings, Husband and Wife executed a Marital Settlement Agreement (MSA) that resulted in dividing their community property, which included their 50% interest in two restaurants, and ordered Husband to pay spousal support to Wife.  The MSA also stated that the parties’ Partner in the restaurants was willing to buy out their interest for $400,000, by paying off their existing IRS liability and paying the remainder to Husband and Wife in equal shares.

Per the agreement, Partner was supposed to sign a promissory note to Wife for her interest and pay off her share in equal installments over ten (10) years at 10% interest.  Partner was to pay Husband’s share to him in full.

Over the years, Partner failed to sign a promissory note to Wife, but paid her $1,500 every once in a while “to help her out because she had not been treated well in her divorce.”  Meanwhile, Husband failed to make regular spousal support payments.

In 2006, Wife took legal action to recover Husband’s spousal support arrearages.  During that process, she found out that Husband and his second wife (W-2) were parties to litigation over a $750,000 investment they made in another restaurant.  During Husband’s deposition in that litigation, he claimed that he and another Investor agreed to be partners in all of Investor’s California restaurants, but W-2 had signed the operating agreement for the restaurant that was involved in the current suit.

Husband also stated that Partner had paid part of what he owed to Husband from a restaurant that was involved in the current suit.  Husband further stated that Partner had paid part of what he owed to Husband from a restaurant sale by contributing to Husband’s capital contribution to the partnership with Investor.

When Wife learned of all this, she filed a judgment lien in the litigation.  The litigation settled in June of 2007, and W-2 received a $7.25 million payment, “apparently without regard to the lien.”  Within months, Husband paid $271,000 of those funds to Wife for the accrued spousal support arrearages.  Wife then filed a motion, seeking $31,693 for attorney’s fees incurred in recovering unpaid spousal support.

In response, Husband pleaded poverty.  He claimed that his only income was $950 per month from Social Security and that he had no other assets.  In his supporting declaration, Husband claimed that W-2, not he, was the investor in Investor’s restaurants, that he received nothing from the litigation settlement, and that he received no money from Investor’s restaurants.

Wife replied that Husband was the investor in Investor’s restaurants and that Husband had fraudulently transferred his settlement proceeds to W-2.  W-2 filed declaratory relief in July of 2008 from the U.S. District Court, seeking judgment that settlement proceeds belonged to her, but, acting on Wife’s motion, District Court dismissed W-2’s action.

In 2008, Wife successfully moved to have W-2 joined in the dissolution proceedings.  She then filed a complaint in joinder, alleging actual and constructive fraudulent transfers and unjust enrichment, and seeking declaratory relief.  When W-2 filed her demurrer and motion to strike, Wife amended her complaint to delete the cause of action for unjust enrichment, but still sought declaratory relief for actual and fraudulent transfers under the Uniform Fraudulent Transfer Act.

In 2010, Wife filed a motion seeking $223,090 in pendente lite attorney’s fees from Husband and W-2 for fees incurred for spousal support enforcement, defense of W-2’s federal action, and for preparation of pleadings in the current action.  She asked for an additional $100,000 for “work to be performed.”

The family law trial court in Los Angeles noted that Husband and Wife-2 claimed Wife’s suit was a sham, but found no need to deny Wife’s attorney’s fee request simply because her suit might be meritless.  The trial court concluded that Wife needed the fee award to ensure that she could sufficiently fund her suit for the trial court to hear the merits.

Accordingly, the trial court ordered Husband and W-2 to pay Wife $30,000 for fees in opposing W-2’s demurrer and motion to strike, $30,000 for omitted asset motion, $45,750 for legal services involved in W-2’s federal suit, and $26,000 for joinder, meet and confer, and other discovery requests in connection with the current action, for a total of $131,750.  The trial court declined to order fees for work not yet performed.

W-2 appealed, claiming that the family law trial court had erred by awarding fees without requiring Wife to show a reasonable likelihood of success in her suit, and the 2nd Appellate Court of California has affirmed the trial court’s decision, having found that:

1)      California Family Code §2030(d) permits the trial court to order a third party, who has been joined in a legal action, to pay another party’s attorney’s fees;

2)      That the trial court may order a third party joined in an action to pay another party’s attorney’s fees without requiring that fee recipient show a reasonable likelihood of prevailing in her claims against a third party; and,

3)      There was sufficient evidence of the dissolution issues related to W-2 (Husband’s conflicting claims re his involvement and W-2’s receipt of settlement funds) to show that W-2 was connected to the subject of the litigation.

ATTORNEY FEES AS SANCTIONS VALID WHEN FIDUCIARY DUTY VIOLATED

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So you’re thinking of leaving the spouse, and you think it might be a good idea to take a cash advance from the joint family credit card, just in case.  And you want to put the money in your own bank account, sacking the community with the debt, and not telling him about it.  And you think this is a good idea.  And, well…

Maybe you should think again.  That’s because California’s appellate courts have ruled that a trial court erred by not awarding attorney fees as sanctions under Family Code §1101(g) despite the fact it found during a dissolution trial that Wife had violated her statutory fiduciary duty by taking a $24,000 cash advance on a credit card before separation and transferring the funds to her personal bank account without informing her Husband.

The facts of Marriage of Fossum (2011) 192 CA4th 336, 121 CR3d 195 were that Wife, before separating from Husband, took a $24,000 cash advance using a credit card and transferred the funds into her personal bank account without informing Husband.  After the trial for the couple’s marital dissolution, the trial court ordered Wife to reimburse Husband for half the amount charged, but found that Husband was not entitled to an award of attorney fees even though she had violated her fiduciary duty under Family Code §721.

The appellate court reversed the judgment.  Regarding attorney fees, the court of appeal held that Husband was entitled to an award of attorney fees under section 1101(g) as a result of Wife’s breach of fiduciary duty.  Family Code §1101(g) states that its remedies “shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs.”