The Duty of Disclosure and In re Marriage of Rossi: A Cautionary Tale
From the moment a dissolution action is filed in California, both spouses have a continuing duty to disclose all assets and liabilities along with all income and expenses. This duty applies automatically, and whether the information is requested by the other party or not. In 2001, Denise Rossi learned this the hard way when the court awarded her husband 100% of her over one million dollar lottery winnings. (In re Marriage of Rossi (2001) 90 Cal.App.4th 34). Ms. Rossi won $1,336,000 in a lottery pool and shortly thereafter filed for divorce. She never told her husband about her lottery winnings and failed to disclose the funds in any of her required disclosures. She even went so far as to consult with lottery officials about how to keep her husband from learning about the prize. Judgment was entered in the divorce case without Mr. Rossi learning about the lottery winnings. Two years later, Mr. Rossi inadvertently received a letter regarding the winnings. He then filed a motion to set aside the divorce judgment and sought an award of 100% of Ms. Rossi's winnings. The court found that Ms. Rossi's failure to disclose the winnings constituted fraud, oppression and malice and awarded Mr. Rossi 100% of the winnings.
It is the public policy of the State of California to ensure fair and sufficient child and spousal support awards and to achieve a fair and proper division of community assets and liabilities. The California Family Code states that in order to promote this public policy, "a full and accurate disclosure of all assets and liabilities in which one or both parties have or may have an interest must be made in the early stages of proceeding...together with disclosure of all income and expenses of the parties. Moreover, each party has a continuing duty to immediately, fully, and accurately update and augment that disclosure to the extent there have been any material changes so that at the time the parties enter into an agreement for the resolution of any of these issues...each party will have a full and complete knowledge of the relevant underlying facts. Family Code §2100.
As demonstrated in In re Marriage of Rossi above, failure to comply with disclosure requirements with regard to property, can result in punitive damages, including an award of 100% of a concealed asset. Failure to comply with disclosure requirements, with regard to spousal and child support orders can also result in significant court sanctions including paying the other party's attorney fees and costs.
It is important to remember that simply disclosing the existence of an asset or obligation is not sufficient. The spouse who is in a better position to obtain records or information regarding an asset or obligation has an obligation to acquire and disclose this information, even if the other party has not made a formal discovery request.
Given the importance of the duty of disclosure and the consequences of noncompliance with the duty, it would be wise to consult with an attorney who is familiar with the disclosure requirements. At Mello & Pickering, LLP, we can advise regarding what disclosures are required and help gather the information which must be disclosed. Call us today to set up a phone consultation or a one hour consultation at our offices at (408) 288-7800.