In a Texas family law case, the question arises as to whether there is a fiduciary relationship between the husband and wife that raises the bar for treatment of decisions made and how to account for a breach of this duty upon divorce.
From the American Bar Association Journal: A Maryland appeals court has handed a victory to a partner and former managing principal of Beveridge & Diamond embroiled in a battle with his ex-wife over alleged financial malfeasance during their marriage.
The ruling (PDF) affirms the dismissal of Nancy Lasater’s tort suit against her former husband, Beveridge & Diamond partner John Guttmann Jr. Lasater had claimed that Guttman ran up large debts during their marriage, spending money on ill-advised real estate projects, exotic merchandise, personal adventures and a huge collection of compact discs. Her suit, filed after 25 years of marriage, had claimed conversion, intentional infliction of emotional distress, breach of fiduciary duty and fraud, according to the ruling by the Maryland Court of Special Appeals.
“We decline to open the door to tort suits arising from disagreements over allocation of marital resources when these grievances properly can be remedied in the divorce setting,” the appeals court said an opinion issued on Monday.
Lasater had claimed that Guttmann blamed their dire financial situation on her decision to stop working to stay at home with the kids and that he lied about his status at the law firm, claiming he had become of-counsel. Lasater had worked for 20 years as a lawyer before she left law practice.
The appeals court said the alleged behavior, even if true, does not rise to the level of extreme or outrageous conduct justifying the count of intentional infliction of emotional distress. And a husband and wife are not true fiduciaries, the court said, absent an agreement establishing that relationship.
A Texas divorce court would reach the same result as the case outlined in Maryland, taking consideration for the bad conduct out in the division of the marital estate, but Texas takes a different route to get there.
In Texas, there is unquestionably a fiduciary relationship owed by the spouses to each other and to the management of the community estate. Schlueter v. Schlueter, 975 S.W.2d 584 (Tex. 1998), adopting the opinion of In re Marriage of Moore, 890 S.W.2d 821 (Tex. App — Amarillo 1994, no writ), which underscored the fiduciary relationship owed between spouses and the community estate. Where a spouse mismanages property to the extent that such mismanagement rises to the level of fraud, the fraud is against the community estate and is, therefore, considered a part of the overall just and right division of the community estate between the spouses incident to divorce. The divorce court does not have to divide the community estate equally, but may consider the competing equities in determining a just and right division, even if unequal. Fraud may be one of those equitable considerations. Loaiza v. Loaiza, 130 S.W.3d 895 (Tex. App. — Fort Worth 2004, no pet.).
Thsu, in Maryland, the court determined that there was no independent claim for fraud and the improper actions could be accounted for within the divorce, Texas would reach the same result, just a different route.