Financial Disclosures in Divorce or Legal Separation
In a proceeding for legal separation or dissolution of marriage, each party must serve to the other a Preliminary Declaration of Disclosure (“PDOD”) and a Final Declaration of Disclosure (“FDOD”). Both can be completed using Judicial Council Form FL-140. The FDOD is not required if the petitioner and respondent mutually agree to waive it. The Stipulation and Waiver of Final Declaration of Disclosure (Judicial Council Form FL-144) can be used for this waiver. The respondent need not serve either the PDOD or the FDOD if he or she is defaulted (meaning he or she does not file a Response within thirty (30) days of service of the summons). (See Fam. Code sec. 2103.)
The petitioner must serve his or her PDOD at the time of service of the petition or within sixty (60) of filing the petition, unless the respondent’s location is reasonably unknown and service of the summons and petition is by publication or posting by court order, and the respondent must serve the petitioner with his or her PDOD with the response or within sixty (60) days of filing the response. (Fam. Code sec. 2104(f).) These time periods can be extended by mutual written agreement of the parties.
The FPOD must be served before or at the time the parties enter into an agreement for the resolution of property or support issues other than temporary support, or, if the case goes to trial, no later than forty-five (45) days before the first assigned trial date. (Fam. Code sec. 2105(a).)
To the PDOD, each party must attach “all tax returns filed . . . within the last two years prior to the date that the party served” the PDOD, along with a completed Income and Expense Declaration (Judicial Council Form FL-150) unless one has been served previously and is still current and valid. (Fam. Code sec. 2104(a), 2401(e).) The PDOD must also “set forth with sufficient particularity, that a person of reasonable and ordinary intelligence can ascertain,” the following:
- The identity of all assets in which the declarant has or may have an interest and all liabilities for which the declarant is or may be liable, regardless of the characterization of the asset or liability as community, quasi-community, or separate; and,
- The declarant’s percentage of ownership in each asset and percentage of obligation for each liability when property is not solely owned by one or both of the parties. The preliminary declaration may also set forth the declarant’s characterization of each asset or liability. (Fam. Code sec. 2104(c).)
The FPOD must include:
- All material facts and information regarding the characterization of all assets and liabilities.
- All material facts and information regarding the valuation of all assets that are contended to be community property or in which it is contended the community has an interest.
- All material facts and information regarding the amounts of all obligations that are contended to be community obligations or for which it is contended the community has liability.
- All material facts and information regarding the earnings, accumulations, and expenses of each party that have been set forth in the income and expense declaration.
Typically, in satisfying these disclosure requirements with regard assets and liabilities, a Schedule of Assets and Debts (Judicial Council Form FL-142) is attached to the PDOD and to the FPOD (although other Judicial Council forms are available for use instead).
The importance of these disclosures is emphasized by the requirement that they be signed under penalty of perjury. (Fam. Code secs. 2104(a), 2105(a).) The commission of perjury on the FPOD “may be grounds for setting aside the judgment, or any part or parts thereof . . ., in addition to any and all other remedies, civil or criminal, that otherwise are available under law for the commission of perjury.” (Fam. Code sec. 2105(a).)
Omitted Asset or Liability
In creating the financial disclosure requirements, the California Legislature found that “[i]t occasionally happens that the division of property or the award of support, whether made as a result of agreement or trial, is inequitable when made due to the nondisclosure or other misconduct of one of the parties.” (Fam. Code sec. 2120(b).) The Legislature put it too politely: it not only “occasionally happens” but frequently happens that for one or both litigants, on top of the emotions surrounding physical separation and the break up of what once was a family, a proceeding for divorce or legal separation boils down to one or both parties at least attempting to take as many assets as possible, give as much debt to the other party as possible, and leave undisclosed any community asset worth the risk of not disclosing it. It’s akin to playing poker with an ace up one’s sleeve by “the commission of perjury.”
Here, the risk is a breach of that spouse’s fiduciary duty (see Fiduciary Duties Between Spouses) that impairs the other party’s undivided one-half interest in the community property. This fiduciary duty continues until the asset or liability is divided by the parties in an agreement or by the judicial officer. (Family Code sec. 721, Law Rev. Comm. Comments, Commentary).
Remedies can be sever: Fifty percent (50%) of the omitted asset or its value awarded to the other spouse and include, but not be limited to, one-hundred percent (100%) of the asset or its value if it is proven by clear and convincing evidence that the party’s conduct equated to oppression, fraud, or malice. Under Civil Code section 3294(c):
- “Malice” means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.
- “Oppression” means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. And,
- “Fraud” means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.
Additionally, the judicial officer must, “in addition to any other remedy provided by law,” for a party’s failure to comply with the disclosure requirements,”impose a money sanction [a fine] against the non-complying party “in an amount sufficient to deter repetition of the conduct or comparable conduct, and shall include reasonable attorneys fees, costs incurred, or both, unless the court finds that the noncomplying party acted with substantial justification or that other circumstances make the imposition of the sanction unjust.” (Fam. Code sec. 2107(c).)
The request to set aside that portion of the judgment must be brought within a year the other party reasonably should have known of the perjury. Family Code section 2122 states in part: “(b) Perjury. An action or motion based on perjury in the preliminary or final declaration of disclosure, the waiver of the final declaration of disclosure, or in the current income and expense state shall be brought within one year after the date on which the complaining party either did discover, or should have discovered the perjury. . . .”