Managment and Control of CP Flashcards
When did each spouse earn the right to equally manage and control the CP?
January 1, 1975.
What is the definition of ‘equal’ for purposes of control of CP?
Equal means that both spouses must participate in those decisions regarding major property transactions.
What are the exceptions to the equal management and control rule?
- Bank accounts
2. Gifts to third parties
How can a bank account limit the equal management and control rule?
CA code stipulates that bank accounts can only be accessed by the spouse whose name is on the account.
How can gifts to third parties limit the equal management and control rule?
- Written consent required: CA courts prohibit gifts OR the disposal of community personal property for less than fair and reasonable value unless the other spouse has given written consent. Equitable defenses of laches, estoppel, unjust enrichment, waiver or ratification may apply.
What are the non-gifting spouse’s options for avoiding unauthorized gifts during marriage?
If one spouse improperly gifted or disposed of community personal property for less than fair or reasonable value without the other spouse’s written consent, then the non-consenting spouse has the right to either:
- Ratify the gift, or
- Recapture: revoke the gift and sue to recover
NOTE: this rule only applies to gifts to 3rd parities, not b/t spouses, which are governed by the transmutation statute.
What are the non-gifting spouse’s options after the donor’s death (so not during marriage) for dealing with unauthorized gifts?
After the death of the donor spouse, the non-consenting spouse has the right to:
- Ratify the gift, or
- Void the gift up to 1/2 value of the gift.
What is the community business exception to the equal management and control rule?
CA courts give ‘primary’ management and control to “a spouse who is operating or managing a business or an interest in a business that is all or substantially all community personal property.”
Is the managing spouse required to give notice before encumbering/selling/etc the community business?
Yes; the managing spouse must give “prior written notice to the other spouse” for major actions such as ‘any sale, lease, exchange, encumbrance, or other disposition of all or substantially al of the personal property used in the operation of the business.”
What happens if the managing spouse of a community business does NOT give proper notice before a major action on/re the business?
If the managing spouse fails to give prior written notice, then the validity of the transaction will not be adversely affected, but the non-managing spouse can seek remedy (such as breach of fiduciary duty or ordering of an accounting) if the managing spouse has ‘substantially impaired’ the non-managing spouse’s CP interest.
Does the equal management and control rule apply to community real property?
Yes; However, both spouses must join in executing any instrument by which that community real property or any interest therein is leased for longer than a year, is sold or otherwise conveyed or encumbered.
what does equal mean for purposes of the equal management and control of community REAL property?
As with personal property, equal means both spouses must participate in decisions regarding major transactions.
What happens when one spouse makes a major transaction regarding community real property without the proper consent of the other spouse but the property is only one spouse’s name? (the name of the spouse selling)
A presumption arises that the transaction is valid as long as the purchaser in good faith did not that the spouse is married.
Innocent spouse has one year to file an action if the conveying spouse misrepresented their marital status. If the rogue spouse is encumbering the property, not selling it, then the non-consenting spouse can void the security interest in the real community property, but it does not eliminate the underlying debt secured by the encumbrance.
When one spouse unilaterally encumber community real property?
To pay the attorneys during a divorce! A spouse is permitted to seek adequate representation in dissolution proceedings by encumbering their interest to pay attorney fees.
How does the equal management and control rule play out during divorce proceedings?
Even during divorce proceedings, the spouses’ fiduciary duty to each other continues until the date the community or quasi-community property asset is distributed.
Generally, initiating divorce proceedings include a temporary restraining order from messing with CP or quasi-CP, though exceptions are allowed for transactions in the usual course of business or for the necessities of life.
