Management and Control of Separate and Community Property

Question 1

What is the rule re: management of separate property?

Answer 1

Each spouse has EXCLUSIVE management and control of SP

NOTE –> quasi-CP is treated as SP for the purposes of management and control

Question 2

What is the general rule re: management and control of community property?

Answer 2

In General –> Subject to certain exceptions, each spouse has equal management and control of CP.

EFFECT –> Either spouse acting alone may buy, sell, spend, or encumber all CP

Question 3

What is the special rule with regards to community real property?

Answer 3

BOTH spouses must join in executing any instrument by which community real property is sold, conveyed, or leased for more than 1 year.

Question 4

What happens if CP realty is titled in one spouse’s name, and that spouse misrepresents his marital status to an innocent transferee?

Answer 4

• non-consenting spouse has 1 years in which to bring action to void transfer
• transfers to good faith purchasers are PRESUMED valid.
• Non-consenting may overcome this presumption by demonstrating that she did not in any way consent to, or participate in the transfer
• She may then void conveyance and must refund purchase price

Question 5

What is non-consenting spouse’s right to void security interest in CP?

Answer 5

Non-consenting spouse may void any security interest in CP granted to a creditor by the other spouse (except for a family law attorney’s real property lien)

HOWEVER –> the underlying debt remains in tact

Question 6

What is the general rule re: control/management of COMMUNITY personal property?

What are the exceptions?

Answer 6

General Rule –> Either spouse may act alone

1. Personal Belongings Exception
2. Business Exception
3. Bank Accounts

Question 7

What is the personal belonging exceptions to the general rule re: control/management of community personal property?

Answer 7

The dwelling or CP household furnishings or clothing of a spouse or minor children may NOT be transferred without WRITTEN CONSENT of other spouse.

• Non-consenting spouse may void such a transfer in its entirety at any time:
  1. during or after the marriage; AND
  2. need not return transferee’s purchase price

Question 8

What is the “business exception” to the general rule re: control/management of community personal property?

Answer 8

A spouse who is operating a business that is ALL or SUBSTANTIALLY ALL community personal property has PRIMARY (rather than sole) management and control of the business.

THUS –> managing spouse may act alone in all transactions, BUT must give PRIOR WRITTEN NOTICE of any sale, lease, or exchange of ALL or SUBSTANTIALLY ALL of the personal property used in the business.

IF NOTICE IS NOT GIVEN –> nonmanaging spouse has a remedy ONLY IF the behavior SUBSTANTIALLY IMPAIRED her 1/2 interest in the community estate

NOTE –> non managing spouse MAY NOT void the transfer

Question 9

What is the “bank account exception” to the general rule re: control/management of community personal property?

Answer 9

• A bank account in the name of a married person is held for the exclusive benefit of that person, and is free from control or lien of any person other than a creditor
• Bank is held harmless against all claims by the depositor’s spouse

Question 10

In General, what are the two major limitations on managerial power over CP?

Answer 10

1. Gifts of CP require written consent

2. Fiduciary duty and mismanagement of CP

Question 11

What is the rule re: gifts of CP?

Answer 11

A spouse may NOT make a gift of community personal property without the written consent of other spouse.

NOTE –> non-donor spouse may ratify gift through separate writing

Question 12

With regards to gifts of CP, what is non-consenting spouse’s right to revoke?

Answer 12

Non-consenting spouse may revoke gift in its entirety during donor’s lifetime

Question 13

With regards to gifts of CP, what is non-consenting spouse’s right once donor dies?

Answer 13

Once donor dies, non-consenting spouse or her estate MAY RECOVER her 1/2 interest in the unauthorized gift against donee or donor’s estate

Question 14

What is the general rule re: fiduciary duty and mismanagement of CP?

Answer 14

Each spouse must act in HIGHEST GOOD FAITH and FAIR DEALING with respect to other spouse in management and control of CP.

Question 15

What standards apply to mismanagement of CP by managing spouse?

Answer 15

gross negligence, reckless conduct, or deliberate dissipation or destruction of property are actionable

Question 16

What is the managing spouse’s duty to account with regards to CP?

Answer 16

Spouse must provide any info concerning CP as is REASONABLY NECESSARY for exercise of spouse’s rights

Question 17

What is managing spouse’s duty to secure consent?

Answer 17

The managing spouse has a duty to secure consent of, or consult w non-managing spouse before:

1. making a gift of CP
2. conveying or encumbering community personal property used in the family hold, including clothing;
3. selling, leasing or otherwise disposing of substantially all of then personal property used in a CP business;
4. conveying encumbering or leasing community real property

Question 18

When does non-managing spouse have a claim for breach of fiduciary duty against managing spouse?

Answer 18

There must be:

1. a BREACH of fiduciary duty; that
2. SUBSTANTIALLY IMPAIRS non-managers interest

SEE ALSO –> statute of limitations

Question 19

In addition to breach of fiduciary duty, what remedies does non-managing spouse have?

Answer 19

1. may seek order for accounting;
2. may seek order for reformation of title to reflect non-manager’s interest

NOTE –> these two remedies are available even if managing spouse is doing a good job

Question 20

What is SOL for claim of breach of fiduciary duty by non-managing spouse against managing spouse?

Answer 20

1. Action must be brought within THREE years after date non-managing spouse had ACTUAL KNOWLEDGE of the act of which she complains; OR
2. at spouse’s death; OR
3. in conjunction with divorce

Question 21

What is spouse’s criminal liability for damaging CP or SP of other spouse?

Answer 21

Spouse may be criminally liable for INTENTIONALLY damaging CP or SP of other spouse