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Breach of fiduciary duty and how it applies in a divorce

Breach of fiduciary duty and how it applies in a divorce
Hendershot, Cannon & Hisey, P.C.

Fiduciary agreements exist across various types of personal and professional relationships. In the context of family law and marriage, “fiduciary” denotes the responsibility of spouses to act in one another’s interests, financially speaking.

A spouse has a duty in equity and in good conscience to act in good faith with due regard for the parties’ interests. In Texas, courts generally agree that this duty begins when spouses enter into a marriage; however, there is some disagreement on if it extends into an engagement or beyond a divorce. When one spouse acts unlawfully, litigation is sometimes the only path forward.

Breach of Fiduciary Duties

A breach of fiduciary duty is a tort and in family law, the issue commonly deals with the division of marital assets during the divorce. Breach of fiduciary duty, just like other torts, may be asserted in a petition for divorce. For example, such a breach may occur if a divorcing business owner purposely misrepresents the true worth of that business to his or her spouse.

Another example would be excessive transfers to another outside of the community estate, that are not for the benefit of the community estate. Allegations involving community property may be brought as constructive or actual fraud. A finding that one spouse has committed marital fraud or another type of marital tort can have significant ramifications for divorce proceedings.

In addition to fraud, personal conduct can sometimes constitute a breach of fiduciary duty. However, while courts in Texas have consistently held that spouses owe one another fiduciary duties in respect to community property, rulings have been less unified regarding personal behaviors.

Remedies under Texas Family Law

If it is found that one spouse has committed fraud, there are several legal remedies available to the wronged partner. In one case, the court may calculate the total value of the “reconstituted” estate, which is the projected value of marital assets had the fraud not been committed.

Then, this value is divided by what is just and right, with the wronged spouse typically receiving a disproportionately large share of assets, money judgment. The Court may also credit unauthorized expenditures against the breaching party’s portion of the community estate that would otherwise be awarded to that spouse.

Other remedies under Texas family law can include constructive trusts, resulting trusts, and quantum meruit. When claims are brought against a third party, a spouse may seek restitution through the court ordered return of property, money judgment, or credit against community estate that otherwise be awarded to the spouse.

Statute of Limitations

In Texas, claims for a breach of fiduciary duty or fraud must be filed within four years, according to the state’s statute of limitations. Typically, this deadline begins when the “injury” caused by a spouse’s unlawful action occurs. However, a discovery clause may allow this clock to begin ticking starting from when the wronged spouse discovered or should have reasonably learned of the damage.

Aggressive Family Law Attorneys in Houston

If you believe that your spouse has acted fraudulently, you cannot afford to postpone taking legal action. At Hendershot, Cannon & Hisey, P.C., we have years of experience handling breach of fiduciary duty claims across multiple disciplines and types of law. From business partnerships to spousal disputes, our Houston divorce attorneys are capable of handling even the most complex cases.

Are you ready to get started? Call (713) 909-7323 to schedule a consultation or contact us online.

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