Written spousal consents are fixture of most business transactions that
involve married persons. These consents are everywhere, in asset purchase
agreements, stock purchase agreements, leases, beneficiary designation
forms, and real estate transactions. To some clients this requirement
often seems unnecessary and inconvenient, especially when one spouse isn’t
even involved in the business or property that is the subject of the transaction.
In fact, because of California community property laws and the nonconsenting
spouses right to void a transaction a spousal consent is highly recommended.
For an especially striking example of why these spousal consents are so
important we turn to Donald Sterling, disgraced former owner of the Los
Unfortunately for Donald, his fall from grace since being banned from the
NBA for life in 2014 has been full of many interesting legal issues. First,
in 2014, shortly after the release of the recording of his racist comments,
Rochelle H. Sterling, Donald’s wife of more than 50 years, removed
Donald as trustee of the Sterling Family Trust, which owned the Los Angeles
Clippers, and attempted to sell the team to Steven Ballmer. Donald objected
to the sale and refused to sign any of the sale documents. In response,
Rochelle filed a petition in Los Angeles Superior Court to affirm the
sale and her removal of Donald as trustee of the Sterling Family Trust.
The Superior Court sitting in Probate agreed with Rochelle and affirmed
the sale of the Clippers to Ballmer, finding that Donald lacked the capacity
to understand trust transactions and that the trust would be substantially
harmed if the sale did not close.
In a second Sterling case, this time involving lack of spousal consent,
Sterling v. Stiviano, 2017 WL 3083472, filed shortly thereafter, the California Court of Appeal
reaffirmed the right of one spouse to void unauthorized transfers of community
property by the other spouse. In this case, Rochelle filed a lawsuit against
Donald’s ex-mistress V. Stiviano for the return of roughly $2.8
Million in gifts of community property given to her by Donald. Specifically,
Rochelle alleged that Donald had given Ms. Stiviano a 2012 Ferrari automobile
purchased with $240k in community assets, a 2007 Bentley automobile purchased
with $90k in community assets, a 2013 Range Rover purchased with $70k
in community assets, a residential property in Los Angeles purchased with
$1.8 million in community assets; and various cash payments totaling $430k
in community assets. Obviously, Rochelle did consent in writing, or otherwise,
to these gifts.
Rochelle invoked her power as the non-consenting spouse to void the gifts
of community property. Rochelle argued that these gifts constituted an
unauthorized gift of community property in violation of California Family
Code §1100(b), which states “A spouse may not make a gift of
community property, or dispose of community personal property for less
than fair and reasonable value, without the written spousal consent of
the other spouse.” The Court summarizes the well-established California
law on the issue as “[g]ifts made without the consent of the wife
are not void, but are voidable at the instance of the wife.”
Sterling v. Stiviano, 2017 WL 3083472 at 3,
Harris v. Harris, (1962) 57 Cal.2d. 367, 369. With this in mind, Sterling Court affirmed
the trial court’s order that Ms. Stiviano must return all these
gifts to Rochelle for the benefit of the Sterling community.
Obviously, the Sterling spousal consent case was a very clear cut case
because there was no consideration for the transfer and no question that
Rochelle had never consented to these gifts. The typical business transaction
would be a much closer case because generally there would be an argument
that the transaction was for “fair and reasonable value.”
This theoretically provides an exception to the written consent requirement.
However, allowing an important transaction to hang on the assumption the
parties have agreed to a value that is “fair and reasonable”
is far too much of a risk and the consequences far too great. Therefore,
insisting on a written spousal consent for each transaction involving
a married person is the only rational solution.