California Family Code § 2602 – Deliberate Misappropriation of Community Property

Plain-Language Summary

**What It Is:** Family Code § 2602 lets a divorce court make up for one spouse’s deliberate misuse or hiding of community property assets. In a California divorce, the law normally requires an equal 50/50 split of community property between the spouses. Section 2602 is an **exception** to that rule when one spouse has intentionally committed “calculated thievery” – in other words, taken or spent community property on purpose to deny the other spouse their share. If the court finds that one spouse **deliberately misappropriated** (stole, concealed, or wrongfully squandered) an asset belonging to both spouses, the judge can compensate the innocent spouse.

**How It Works:** Under § 2602, a judge may **award an extra amount or offset** against the offending spouse’s portion of the property equal to the value of what was misappropriated. Practically, this means the wronged spouse could receive more than 50% of the remaining community property to make up for what was taken. For example, if one spouse secretly emptied a joint bank account or sold a community asset and kept the proceeds, the court can credit the other spouse with the value of that money during property division. This ensures a fair outcome despite one party’s bad behavior. The key is that the misappropriation must have been **intentional and without the other spouse’s consent** – mere carelessness or poor investment isn’t enough. California courts have emphasized that a deliberate misappropriation is required, not just negligence or mismanagement. In short, § 2602 allows judges to prevent a dishonest spouse from benefitting from their wrongdoing by adjusting the property split accordingly.

Real-World Examples of § 2602 in Action

Hiding Money in Secret Accounts: Shortly before a divorce, Husband transfers $50,000 of community funds into a hidden bank account in his name only, intending to keep it out of Wife’s reach. In the divorce, the court discovers this deliberate hiding of assets. Using § 2602, the judge can award Wife an extra $50,000 from Husband’s share of other community property (or reduce his share by that amount) to offset the funds he misappropriated. Essentially, Wife will ultimately receive the $50,000 that Husband tried to squirrel away.
Unauthorized Gifts or Transfers: One spouse uses community funds to buy an expensive car for a new girlfriend without the other spouse’s knowledge or any benefit to the marriage. This is a **misappropriation** of community property for a third party. In the property division, the court could charge the value of that car entirely to the gifting spouse’s portion of assets. For instance, if Husband gifted a $30,000 car to someone else, the court can give Wife $30,000 extra from other assets off Husband’s share to make up for that improper gift.
Sale of Assets and Spending Proceeds: Wife secretly sells a valuable community asset (such as stocks or a piece of real estate) and spends the proceeds on herself alone, without Husband’s consent. Under § 2602, the court can find that Wife **deliberately excluded** Husband’s interest by doing so. The judge could then award Husband an equivalent amount from Wife’s portion of the remaining assets. In effect, Husband gets reimbursed through an unequal division of property because Wife already got her benefit by spending the shared asset’s value.
Destroying or Wasting Assets: A spouse intentionally wastes community property – for example, by gambling away large sums of marital funds in secret or deliberately destroying a valuable asset out of spite. If proven intentional, this conduct can be treated as a misappropriation. The court might grant the innocent spouse a larger share of what’s left (or a judgment against the other spouse) equal to the value lost. This way, the innocent spouse isn’t penalized for the other’s deliberate waste of community money.

Notable California Appellate Decisions Interpreting § 2602

In re Marriage of Schultz (1980) 105 Cal.App.3d 846: This case established the high bar for what counts as a deliberate misappropriation. The husband’s mishandling of a debt (failing to show up in court, leading to a default judgment against the community) was penalized by the trial court as if he misappropriated funds. The Court of Appeal reversed, holding that mere negligence or mismanagement is **not** “deliberate misappropriation.” The term means **intentional theft** – “calculated thievery” – not just sloppy or negligent financial handling. Since the husband’s conduct was deemed just carelessness and not an intentional attempt to deprive the wife of assets, the penalty under the predecessor of § 2602 was unwarranted.
In re Marriage of Partridge (1990) 226 Cal.App.3d 120: The wife argued that the husband’s failure to pay certain tax obligations (and attempts to ignore a large tax debt) was a deliberate misappropriation of community funds. The appellate court disagreed. It explained that the “deliberate misappropriation” doctrine allows a court to award a greater share of property to the innocent spouse **only** when one spouse has intentionally deprived the community of an asset. In Partridge, the husband’s conduct – while irresponsible – was aimed at benefiting the community (by hoping to improve finances) and did not permanently deprive the wife of her share. He also offered to shoulder the consequences (tax penalties). Therefore, his actions did not rise to the level of *deliberate* misappropriation, and the trial court was not entitled to make an unequal division of property under § 2602 in that situation.
In re Marriage of Economou (1990) 224 Cal.App.3d 1466: This case illustrates a flagrant misappropriation and the resulting remedy. The husband hid assets worldwide (in California, Georgia, and Greece) and even **absconded with about $1.8 million** in community funds to Europe during the divorce. He defied court orders to return the money and failed to disclose or cooperate, leading the court to enter his default. Evidence at trial showed the husband had **misappropriated over $6 million** of community property for his own benefit. The Court of Appeal upheld an unequal division heavily favoring the wife. It pointed out that under Civil Code § 4800(b)(2) (the predecessor to § 2602), courts need not divide property equally when one party has deliberately misappropriated assets. In Economou, the husband’s willful theft of community assets meant he forfeited the right to a 50/50 split. The wife was awarded a substantially greater share to compensate for the missing money, which § 2602 fully permits in such extreme misconduct. This case confirms that *egregious, intentional deprivation* of community property by one spouse justifies an unequal division in the other’s favor.
Lezine v. Security Pacific Financial Services, Inc. (1996) 14 Cal.4th 56: Although not a divorce between spouses (it involved a creditor), the California Supreme Court’s discussion is relevant. The husband had secretly encumbered a piece of community real estate without the wife’s consent, violating her property rights. In its decision, the Supreme Court noted that the wife was **not without recourse**: she could seek reimbursement or credit for the husband’s improper use of the community asset. The court expressly cited Family Code § 2602 (formerly Civil Code § 4800(b)(2)) as a provision allowing a spouse to recover for the other’s **misuse of community assets**. Lezine thus recognizes § 2602’s role in protecting an innocent spouse when the other spouse’s wrongdoing (here, an illegal transfer of property) harms the community estate. It underscores that a spouse who abuses or misappropriates a community asset can be **surcharged** for that loss under § 2602, ensuring the wronged spouse isn’t shortchanged.

Full Text of Family Code § 2602

“As an additional award or offset against existing property, the court may award, from a party’s share, the amount the court determines to have been deliberately misappropriated by the party to the exclusion of the interest of the other party in the community estate.”

*Nothing on this page should be considered legal advice. For guidance on how the law applies to your specific situation, please consult a qualified attorney.*