The Trial Court Erred In Its Interpretation Of Family Code §§ 1101 And 2107.
In Marriage of Yiu and Liu, Case No. B293754 (2d Dist., Div. 3 July 17, 2020) (unpublished), husband appealed the trial court’s award of attorney fees to his wife under Family Code § 1101(g) and its denial of his requested § 2107(c) sanctions against his wife – arguing the trial court erred in its interpretation of Family Code §§ 1101 and 2107, and the 2/3 DCA agreed.
Section 1101(a) allows a breach of fiduciary duty claim if the breach causes an impairment to the claimant spouse’s existing one-half interest in community property – with 1101(g) providing for an award of attorney fees and costs in addition to 50% of any asset undisclosed or transferred in breach of fiduciary duty. Wife based her claim for fees, under section 1101, on husband’s failure to inform her he had repaid two $35,000 loans to his father from community funds a month before the couple separated. Although wife’s interest in the community estate was not impaired by husband’s loan repayments and she was not awarded 50% of the loan repayments, the trial court concluded it was required to award fees to wife for husband’s breach. Not so, said the appellate panel. Because husband’s breach did not result in impairment to wife’s one-half interest, wife had no claim under 1101(a), and therefore no entitlement to remedies under section 1101(g) – including attorney fees.
As to husband’s sanctions request against wife – he sought $300,000 under section 2107(c) because wife failed to disclose financial accounts and transactions in discovery and at trial. Husband additionally sought fees and costs as sanctions under section 271 based on the same conduct. The trial court denied husband’s request under 2107(c), and awarded $22,000 under section 271 – concluding husband’s section 2107 request was not properly noticed, prepared and presented, and that section 271 was “the appropriate avenue for [husband’s] fees and costs.” The 2/3 DCA disagreed with the trial court’s conclusion. The trial court and parties agreed to bifurcate attorney fees and sanctions issues, the parties followed the briefing schedule set by the trial court, and the trial court had instructed husband that he did not need to file his request as a formal request for order. Because the trial court had summarily denied husband’s section 2107 request, the appellate panel was unable to determine whether husband was prejudiced – whether the trial court would have awarded sanctions under section 2107 and, if it had, whether it would have awarded more than the $22,000 – and reversed and remanded with instruction that the trial court consider husband’s section 2107 motion.
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