When one spouse solely controls and manages a relationship with a third party who manages community property after the couple separates, that spouse has the burden of proof to show what happened to the property if it is missing at the time of trial. The same rule also applies to missing separate property. That was the ruling this week in a case decided by the California Court of Appeal entitled Marriage of Dadashian (2024) 2024 DJDAR 4582.
In Dadashian, a published decision decided by a unanimous three justice panel, the wife (“Laleh”) had transferred money to and from her native Iran through a process called “Havaleh.” Havaleh is a group of individuals who cooperate in transferring or receiving money to and from Iran as intermediaries without direct wire transfers, so as to avoid international sanctions. Laleh relied on her brother, Ali, who lived in Iran, to conduct her financial affairs in that country.
Laleh and the husband, Ramin, were married in 2001, and they separated in October, 2013. The parties then went to trial for 17 days, beginning on March 4, 2019 and ending on July 23, 2020.
The evidence was that in 2007, while in Iran, Ramin inherited $170,000.00 from his father. (Inheritance money that is not comingled is separate property under California law.) He apparently gave the money to Laleh who gave it to Ali, ostensibly to invest in Iranian real estate.
The next year, 2008, the couple withdrew between $130,000.00 and $150,000.00 from a home equity line of credit (“HELOC”) and gave the money –once again—to Ali. According to the judge, this transaction was done with the knowledge of both parties.
When the parties separated in 2013, Ramin realized that the file folder containing all of the records of the Iranian investments was missing. Laleh told Ramin that there was “no more money in Iran.”
Throughout pretrial procedures, Laleh was unhelpful and denied knowing anything about the two transactions. She also –without notice—obtained a $1.5 million judgment against Ramin for a dowry she claimed he owed her. The dowry had the effect of precluding travel to Iran by Ramin because he would be arrested.
Under existing law – namely Marriage of Prentis-Margulis & Margulis (2011) 198 Cal.App.4th 1252 - the burden should have fallen on Laleh to show what happened to the money, or else she would have been charged with receiving those funds in the division of the parties’ estate. But the trial judge held that Margulis did not apply because the money from the inheritance were invested in Iran during the marriage and not post-separation; Margulis did not apply in the first instance because the inheritance funds were separate property, not community; Laleh played a minor role in overseeing the funds; and the HELOC loan had been forgiven by the lender and written off.
However, the appeals panel found that Lelah did indeed control the assets in Iran. Related to this, Laleh cited no evidence that her husband “had meaningful access to her brother or even any communications with her brother about the control or disposition of the assets, nor that (he) had any meaningful access to records for the Iranian accounts or investments apart from information obtained from her brother.” Accordingly, the opinion reads, “[a]lthough Margulis did not involve a third-party money manager, its rationale rests on the fiduciary and statutory duties between spouses, which are equally applicable here.”
Therefore, the Court ordered a new trial on the community property issue. The Court did likewise with the inheritance matter, even though that involved separate property. The Court held that Margulis applies even if the property involved is separate. The justices affirmed that “[t]he fiduciary duties imposed by Family Code section 721 apply to separate property”.
The Dadashian case was cited for publication, meaning that it is precedent on trial courts throughout California.