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Don’t Hide Your Assets During Your Divorce
Why is it critical not to hide your assets in a divorce case?
Hiding assets from a spouse during a divorce is not only a sneaky thing to do it is also illegal. New Jersey family law provides that married people have a legal relationship known as a fiduciary duty from the from the time they get married until at least the moment when they are finally divorced. This duty is the highest standard of trust and confidence that is recognized by New Jersey family law. This fiduciary duty continues through the period of marital separation and, in many cases, until your property is finally equitably distributed.
If you violate this duty and if you hide your assets during your divorce, then you could create a disaster for yourself. Your spouse may get tipped off by source you would never imagine, a piece of junk mail that somehow gets forwarded, the bank statement you mistakenly left in that jacket that was going to the cleaned, or a disgruntled former employee who wants to get even for some slight that occurred on the job.
If you are caught hiding your assets, then a court is almost sure to order you to pay the legal fees and expenses that your ex-spouse incurs in litigating the issue. To make the situation even worse, you can be forced to forfeit the entire disputed asset as a penalty for lying.
And your loss may include more than money alone: Your credibility with the court will be wrecked. As a result, the judge might decide not to believe any of your testimony on the dispute asset. After all, if you were willing to lie under oath in court about one matter, why should you be believed on others? Moreover, if your lawyer learns that you have not told the truth about an important legal matter, he or she may resign from the case.
How can I reopen up my divorce case?
I always receive calls from disgruntled family court litigants complaining that they were "rooked" in their divorce case. Moreover, these callers frequently complain to me that their ex-husband or ex-wife hid a significant portion of their marital assets. If you have reasonable belief that you were defrauded by your ex-spouse then you always have the option to file an application to reopen up your divorce case. The bottom line is that there is an awful lot of fraud that is committed in the family courts. The divorce process is not perfect and it is not always fair. The courts are overwhelmed and they do not have enough manpower to handle their massive caseloads. Consequently, it is not uncommon for a devious spouse to defraud their partner. My advice to all litigants is to "put your dukes up" in your divorce case and fight. Make your spouse verify that his financial disclosures on his CIS are true and correct. Obtain copies of his mutual funds and pension statements. Obtain copies of his last three tax returns. You should always investigate your spouses finances and portfolio as best you can during the divorce process. Don't take it for granted that he is telling you the trust. Take it from me, many divorce litigants lie and cheat in the divorce process all of the time!
Thankfully, there is a court rule that provides relief to divorce litigants who earnestly believe they were "ripped off" in their case. Rule 4:50-1 provides that upon motion with briefs the court may relieve a party from a final judgment or order on the grounds of fraud, misrepresentation, or other misconduct of an adverse party. In the world of family law, this rule may be used as grounds to set aside a final judgment of divorce, which incorporates a settlement agreement.
Any relief provided under Rule 4:50-1 for any reason rests in the sound discretion of the trial court, and is controlled by caselaw and by long established equitable principles. However, the legal standard imposed by the courts imposes a difficult burden on the moving party to set aside a settlement.
There are several ways in which a settlement agreement can be attacked under Rule 4:50-1. The common grounds to try to set aside a divorce judgment are; perjured testimony, material misrepresentations of fact, defective service, improperly procured foreign judgment, and subsequent changes in statutory law. However, to set aside an agreement based on fraud, the facts of the case must carefully spell out a gross inequity.
Rule 4:50-1 also requires proof of exceptional and compelling circumstances, and it is designed to balance the interests of finality of judgments and judicial efficiency against the interest of equity and fairness.
To establish the right to such relief, it must be shown that enforcement of the order or judgment would be "unjust, oppressive or inequitable." A party is entitled to a plenary hearing on his or her motion where the evidence shows the existence of a genuine issue of material fact that he or she is entitled to relief. However, any relief under this rule is granted very sparingly and it is generally fact specific. A trial judge's decision whether to allow or deny such relief on one of the six specified grounds in Rule 4:50-1 will be left undisturbed by a reviewing court unless it results from a clear abuse of discretion.
What is the legal standard to set aside a matrimonial settlement agreement?
In the case of Wiengarten v. Wiengarten, 234 N.J. Super. 318 (1989), the Appellate Division set forth the elements that are required to be proven to set aside a matrimonial settlement agreement. The court held:
In order to obtain judicial relief here she will have to prove that his fraudulent conduct in failing to disclose the true value of the assets was the basis of her decision to accept an agreement which was not fair and equitable.... She also will have to show that she was not otherwise aware of the husband's undervaluation of the assets or that she would have been likely to secure such information but for the husband's actions... Likewise, a crucial inquiry might be whether the wife was aware of the husband's alleged fraudulent conduct at the time she signed the agreement, and communications with her attorney bearing on that issue are certainly relevant to this inquiry. For example, she may have indicated to Diamond that, although she was aware of the potential value of the estate, she had settled because of a desire to amicably resolve their dispute as quickly as possible. Thus, to the extent the attorney's testimony is necessary to the husband's defense and is relevant to the issues raised by the wife's application, if the information sought is not available from another source, the attorney client privilege should be deemed to have been waived... Id. at 327-28.
In simpler terms, the legal test under Rule 4:50-1, requires that the movant establish the following: 1) The fraudulent conduct was the basis of the party's decision to accept an agreement that was not fair and equitable; and, 2) the party seeking relief could not have otherwise discovered the deception because of the fraudulent behavior. This is a very heavy burden. Therefore, your legal paperwork must be top notch if you expect to obtain any decent results.
I have been defrauded by my ex-husband in my divorce case. How can equitable principles assist me to reopen up my divorce case?
Equitable principles are the guide in administering relief to determine whether in the particular circumstances justice and equity require that relief be granted or denied. Equitable remedies are simply judicially imposed remedies to which a party might not otherwise be entitled. The parties behave in such a manner that the court can infer a legal obligation upon which relief can be granted. A substantial part of the common law of quasi-contract and equitable remedies comes from family law cases.
At common law, the husband was responsible for the necessities of his spouse and children. A husband could not legally refuse to provide necessities to his wife and children, and thus he was bound to this duty. If necessary goods or services were provided to his wife or minor children by a third party, then the law made the husband answerable to the provider for the value of the goods or services. The husband could not justly retain the value of the benefit conferred. These types of cases were treated as quasi-contract cases rather that, simply being designated as family law cases. The more recent quasi-contract cases include such family matters as disputes between unmarried cohabitants or disputes between parents about jointly held property or child support.
There are several equitable theories upon which relief can be granted. Equitable relief can be granted on the theory of constructive trust, resulting trust, quasi-contract and unjust enrichment. While each cause of action has distinguishable elements they all have one common element, namely, that a gross inequity would occur if the relief sought was not granted. Indeed, in many cases it appears as though the courts of this state have bent over backwards to grant relief to a petitioner who had no remedy at law, in order to affect a just result. These remedies should be used in conjunction with a request to set aside or reform a final agreement, to put forth the full spectrum of relief that a court can grant to a litigant.
What is an important case that illustrates how a family court can use equitable relief in a case?
An illustrative case is Wajda v. Wajda, 239 N.J. Super. 248 (App. Div. 1989). In the Wajda case, the plaintiff was 15 when she married the defendant, who was 21. They divorced 20 years later, but immediately reconciled and continued to live together as husband and wife without remarrying for nearly 10 years, and then finally separated. The issue that required the consideration of equitable claims was whether retirement benefits acquired during a period of cohabitation after a divorce are subject to equitable distribution under the equitable distribution statute or some other non-statutory equitable remedy. The plaintiff sought distribution of the pension under the concept of "quasi-contract or a contract implied in law, i.e. a constructive contract, which, of course, is not a contract but a formula to prevent unjust enrichment or unconscionable benefit or advantage. It is a legal fiction that rests on the equitable principle that what a person ought to do the law supposes that person to have promised to do, and that person shall not be allowed to enrich himself unjustly at the expense of another." Id. at 255.
The court acknowledged that during the 10-year period of reconciliation, the wife contributed to the welfare of the defendant in every way a wife would have, indirectly contributing to the ability of the husband to earn a pension and annuity through his labors. According to the court, the wife would not have been entitled to the distribution of the retirement funds, since the period in question was prior to the Divorce Reform Act. The court further found that the wife in Wajda could not have relied on the equitable remedies of quasi-contract, resulting trust and constructive trust, to distribute the pension even if the parties had been married.
The court further held:
If equitable remedies were not available to redistribute property acquired during a marriage how can they now be available to redistribute property acquired during cohabitation without marriage? Since the right to the equitable allocation of property acquired during a marriage required an act of the Legislature, there is no jurisprudential basis for a court to reallocate property acquired during cohabitation without marriage. Id. at 256.
Although the court rules clearly provide for relief from a final judgment on the ground of fraud or misrepresentation it is important to emphasize that the vast majority of family part cases are resolved by agreement. To overcome the higher burden of setting aside a negotiated settlement, fraud or misrepresentation it is not likely to be enough depending on the facts of the case.
What are some tips on finding hidden assets?
If you believe that your spouse may be hiding assets, then here are some suggestions about hot to dig for additional information:
In New Jersey, a separation agreement is any legal document signed by both spouses outlining the terms of the separation. Subjects resolved in a separation agreement can include child support, child custody, debt allocation and asset distribution. Notarizing the document ensures its validity, since there is no such case-type in New Jersey that provides for a "legal separation." Spouses wanting child support during the separation period, however, must file a claim with the New Jersey probation department.
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Author: Mary L. Boland, Attorney at Law
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