Category Archives: Divorce

You Can’t Take It With You, But Can Your Spouse?

Yearing, T.By Tadd Yearing, Esq.
tyearing@pashmanstein.com

 

When a party in a divorce action dies during litigation, the right to equitable distribution disappears. This is because equitable distribution is specifically awarded upon final dissolution of a marriage. The courts, however, have allowed exceptions to this principle; crafting equitable relief to prevent clearly unfair results, such as to prevent one party (or estate) from being unjustly enriched or to prevent fraud by one party upon the other.

In the 1990 case of Carr v. Carr, 120 N.J. 336, our Supreme Court reviewed the equitable distribution claim of a wife following the death of her husband. Despite the couple having been married for seventeen years, the husband’s will left the entirety of his estate to his children from a prior marriage. Because there was also divorce pending, the wife’s rights to at least a spousal share of the estate were in question. Reviewing the probate and equitable distribution statutes, the court concluded, “the principle that animates both statutes is that a spouse may acquire an interest in marital property by virtue of the mutuality of efforts during the marriage.” It thus held that, “if warranted by the evidence,” a court can act to prevent unjust enrichment where equitable distribution becomes unavailable because of the death of one party prior to the entry of a Judgment of Divorce.

Twenty years later, the Supreme Court revisited these principles in the case of Kay v. Kay, 200 N.J. 551 (2010). In that case, the roles were reversed somewhat, as the deceased spouse’s estate was seeking relief from the surviving spouse, who was accused of having improperly diverted assets. Once again, the court authorized equitable relief to promote fair dealing and to ensure that, “marital property justly belonging to the decedent will be retained by the estate for the benefit of the deceased spouse’s rightful heirs.”

This brings us to the Appellate Division’s recent unreported decision in Beltra v. Beltra, 2014 WL 8096146, decided just last month. In this case, plaintiff-wife filed for divorce after a thirty-four year marriage. She was subsequently diagnosed with a terminal illness and tragically died six months into litigation, and prior to a final hearing. The estate was permitted to substitute in and the parties had a five-day trial to determine equitable distribution. The trial court’s written opinion was scathing in its assessment of defendant’s behaviors. It noted that defendant’s, “non-verbal actions were extraordinary in demonstrating his lack of candor with the court.” It noted he was “evasive” and that his testimony was “inconsistent.” More still, the trial court found he had made substantial deposits of cash generated from his business into foreign banks, purchased foreign assets with cash payments, and had interests in a number of spin-off businesses – much of which remained undisclosed to the wife/estate even after multiple contempt orders for his failure to disclose.

The trial court entered an award of assets and husband appealed. The appellate division vacated the order and remanded the matter for further findings. Following additional argument from the parties, the trial court specifically noted that exceptional circumstances warranting equitable relief existed and reinstated the original order for distribution. The judge further imposed a constructive trust on defendant’s assets.

Defendant again appealed, this time challenging the trial court’s imposition of a constructive trust, and arguing that because the estate failed to demonstrate “the nature or value of the subject assets,” it was error for the trial court to order distribution.

Unmoved by defendant’s arguments, the Appellate Division noted that, “[t]he facts were so flagrant and defendant’s offered explanation so unbelievable, the [trial] judge reported the apparent unreported income to regulatory and law enforcement agencies.” Moreover, the appellate court called out defendant’s extreme bad faith in arguing wife’s inability to ascertain the value of the assets. It highlighted the fact that because of defendant’s efforts to hide assets, plaintiff provided what information she could obtain. Thus, it was unreasonable to place a burden of proof on the party not having access to evidence to support that burden. Finally, the Appellate Division affirmed the use of a constructive trust to remedy the inequity caused by defendant’s clandestine efforts, and to “protect the right to claim marital assets in a matrimonial action.”

This case is an extreme reminder of the complexities that can arise in matrimonial litigation. The conflicting intersection of estate and divorce law clearly shows the potential for clients to be left in a legal “black hole” of sorts. To the extent that case law has developed to limit the possibility of parties being left without recourse, it is instructive that the Appellate Division first remanded the matter back to the trial court for specific findings in support of its imposition of equitable relief. That is, the ability to avoid this possible black hole is not guaranteed. As a practical matter, then, it is important that the right to relief is not simply assumed because of one party’s untimely death.

While death itself may seem to beg the question of inequity, this is clearly not the case. It is, therefore, critical that the court be presented with an explicit basis on which to find that equitable remedies are necessary to avoid injustice. There are a myriad of scenarios where the interests of justice might suggest leaving the parties “as is,” such as insolvency, or where a surviving spouse must continue to care for an unemancipated child, or where the parties each have substantial independent wealth, to name but a few. On the other hand, where one party acts to obstruct discovery, the Beltra court’s understanding with regard to burdens of proof counsels that the other party should not be penalized for being unable to present proofs beyond that to which they had reasonable access.

As is so often the circumstance in matrimonial matters, the specific facts of any given case matter. While Beltra reinforces important guiding principles for a serious, yet infrequently occurring, situation, more than anything it highlights that ensuring fairness between the parties is what matters most.

 

 

 

The Value of Information in Divorce Litigation

By Robert Kornitzer, Esq.
rkornitzer@pashmanstein.com

Every consultation with a prospective family law client begins with a very similar request from the prospective client “Please tell me what results I can expect, both financial and custodial”.  The financial questions include (but are not limited to) those pertaining to expected results as to payment/receipt of spousal and child support, division of liquid and investment assets, division of retirement assets, division of personal property and the necessity of carrying insurance to secure various obligations.  The custodial questions include (but are not limited to) those pertaining to legal custody, physical custody, relocation of one parent with the children, parenting schedules and parenting dispute resolution.

It is not a difficult task for a family law attorney to spout endlessly as to the statutory and case law pertaining to the above-referenced subjects. In fact, once you get many of us started, like many other professionals, it may be difficult to get us to stop discussing the nuances of our fields of expertise.  But the general knowledge that we can impart upon first meeting a prospective client is relatively meaningless to that client.  Why? Because each client is a unique individual with a unique set of circumstances.  Those unique circumstances create almost a limitless set of possible settlement/trial scenarios that must be explored prior to devising a final strategy.

I am a firm believer that no two sets of litigants (spouses, partners, non-married parents) are alike.  In a divorce, a client and her spouse bring to the litigation an extensive number of variables.  For instance, as to alimony alone, we must explore the ages of each party, the number of years married, the education of each spouse, the earnings of each spouse, the numbers of years in the workforce, the parental responsibilities of each spouse, the health of each spouse, and much more.  As to division of the value of a family business, we must explore the business tax returns, the total benefits derived from the business, the source of funds used to create the business, the involvement of each party in the business, the stability of the business, and on and on.

For each issue to be properly explored it is essential for the attorney to request specific information from the client and it is essential for the client to provide that information to the attorney. The specific information will allow the attorney to tailor advice and create a strategy that is tailored to the client.  Divorce is not “one size fits all”, even though many attorneys do attempt to take a simplistic cookie-cutter approach to divorce litigation.

During the course of litigation, gathering the necessary information takes on an important role towards optimizing the final settlement/trial terms for that client.  But it is also just as important for each attorney and client to understand that not only are each client’s “facts” different, the client’s “wants” are different as well.  It is the combination of maximizing wants based on what the facts have revealed that allows a client to achieve optimal results.