Edward R. Weinstein, Esq.

Immediately After My Divorce I Discovered That My Ex-Spouse Had Assets I Did Not Know About. Is There Anything I May Do?

Well, the answer is, maybe. After decades of practicing divorce and family law here in New Jersey, I have been asked this question countless times. The very first thing I look for is how long ago the divorce was finalized. Under the relevant New Jersey court rule, a person only has up to one year to pursue such a claim. Assuming this is the case, I then analyze the facts to generate a legal opinion as to the likelihood of success of “vacating” the Judgment of Divorce and getting my new client a “second bite at the apple.”

APPLE

The answer to that is dependent on New Jersey Rule 4:50-1. If a party is seeking to have the final judgment reopened, he or she will have to prove one of the following:

(1) There was a mistake, surprise, inadvertence, or excusable neglect;
(2) There was newly discovered evidence that would change the judgment, but could not have been discovered at the time the final judgment was granted;
(3) Fraud or misrepresentation occurred;
(4) The judgment was void;
(5) The judgment was discharged;
(6) Some other reason justifying relief.

Over my career as a divorce lawyer, fraud has been the most frequent argument that I have made to a judge the New Jersey Family court. The landmark case of Kravchenko v. Kravchenko, is an excellent example of this type of divorce litigation. Here, the wife sought to have the final judgment of divorce reopened because she learned that her unemployed ex-husband had spent over $500,000 in cash on a new house, two high-end cars and jewelry within two months of the divorce judgment being granted. Let’s take a look.

In the case, the parties were married in 1981 and divorced in 2004. Two children were born of the marriage. In February of 2004 the husband filed and served his Case Information Statement upon his soon to be ex-wife. At that time, he was working in New York City for the Daily Racing Form and earning approximately $14,167 per month. Yet, once taxes and other deductions were made the husband reported a net monthly income of $8,649. His salary was the only source of income listed on the Case Information Statement. Additionally, the Case Information Statement reflected the combined monthly expenses for him, his wife and their younger unemancipated daughter, which totaled $8,304.

Furthermore, the Case Information Statement identified several assets, which included the following:

(1) Marital home–estimated value of $650,000 with offsetting mortgage and home equity loan totaling $278,000 (2) Checking account–balance of $34,400 (3) Stocks and bonds–worth $62,500 (4) Car in wife’s possession–$20,000 (5) Vacation time share (6) Pension accounts (7) Variable life insurance policy
Moreover, the Case Information Statement revealed the husband’s partnership interest in DRF Acquisition, a company associated with Daily Racing Form. The partnership interest, as of 2003, was valued at $15,000; however, a note offset it for $15,000, which was also revealed. In sum, the husband’s Case Information Statement estimated the parties’ net worth at $545,317.

In April of 2004 the wife filed her own Case Information Statement. Her statement included the following relevant disclosures:

(1) Husband’s gross income–$218,000 (2) Personal income–$0 (3) Monthly expenses (self and unemancipated daughter) –$5,720
(4) Assets–marital home, time share, car

Throughout the litigation process the parties exchanged certain discovery; however the wife never sought discovery into her husband’s interest in the partnership. Once the discovery period expired, the parties executed a Property Settlement Agreement. Pursuant to the agreement, the wife would have custody of the parties’ unemancipated daughter. Furthermore, she was allowed to stay with her daughter in the marital home so long as she remitted 30% of the net equity in the house to the husband if she decided to sell.

In exchange for the higher percentage in the marital home, the wife also agreed to waive her interest in her husband’s pension/retirement plans. Moreover, the wife kept the car and vacation home. Importantly, the settlement agreement did not address the husband’s partnership interest.

The settlement agreement also addressed the issue of support. Since the wife recognized that her husband had recently been laid off and that she intended to go back to work, the husband only had to pay her $30,000 per year in alimony for six years. The parties also waived any right to modify the alimony award, contrary to what New Jersey case law allows. Furthermore, the parties agreed that the husband would pay $1,700 per month in child support and half of the younger daughter’s nursery school expenses.

Moreover, the parties acknowledged that they entered into the settlement agreement willingly, not as a result of coercion, and that they had their respective lawyers review everything before signing. Yet, in August of 2005 the wife filed a motion to vacate the financial terms of the final judgment pursuant to Rule 4:50-1. She alleged that she had learned that her unemployed ex-husband had spent over $500,000 in cash on a new house, two high-end cars and jewelry within two months of the divorce judgment being granted. Therefore, she sought relief pursuant to the rule on the grounds of fraud i.e. that her husband had hidden marital assets from her and was now using them to buy lavish things for himself and his new wife.

The husband acknowledged that he did spend money on the items his ex-wife had listed in her motion to vacate. While he did not expressly state where the money came from that he used to pay for everything, he did acknowledge that he received money from his partnership interest after filing the Case Information Statement, but before the final judgment for divorce was granted. Therefore, the trial court found for the husband, stating that the wife’s attorney should have conducted discovery into the husband’s partnership interest. The wife appealed.

On appeal, the Appellate Division noted that motions to vacate final judgments were rarely granted in New Jersey. However, the Appellate Division believed that the trial court should not have denied the wife’s motion as fast as it did without conducting an in depth analysis into the situation. The court vacated the trial court’s order, remanded the case, and held that the trial court should review the following factual uncertainties:

(1) Whether the partnership interest was a marital asset (in whole or in part)
(2) Whether the husband reasonably anticipated when he filed his Case Information
Statement whether Daily Racing Form would soon be dissolving the partnership and
making large distributions to its investors (3) Whether the wife had any prior discussions with her husband about the upside potential of his partnership interest
(4) Whether the husband had in fact bragged to friends post-divorce about hiding money from his wife

In this case, the wife received a “second bite at the apple” as the case was sent back to the trial court for a plenary hearing (i.e. a trial). Again, it is important to understand that this is extremely rare. Nevertheless, if you were divorced in New Jersey and feel you have proof of undisclosed assets on the part of your “ex” (and it has been less than one year since your divorce, please do not hesitate to contact my office today to discuss your situation. Thank you.