Equitable Distribution Statute Does Not Apply to Property Acquired During Cohabitation, But Equitable Principles Come to the Rescue

Thieme v. Aucoin-Thieme, 227 N.J. 269 (2016).  Plaintiff and defendant cohabited for eight years, were married for a short time, and then divorced.  Before and during the marriage, plaintiff had been a salaried employee of a consulting business, for which he worked long hours and traveled extensively.  The principals of the business promised to compensate plaintiff for his part in the success of the business if the business were ever sold.  While plaintiff was working hard for the business, defendant (at plaintiff’s insistence) attended to their home and their child, and did not seek employment.  The parties factored into their financial planning the expectation that plaintiff would receive substantial monies if the business were sold.

Three months after the entry of a divorce judgment, the business was sold.  Plaintiff received $2.25 million.  Defendant applied for a portion of that sum.  After a Family Part trial, the judge awarded her equitable distribution, but only as to that portion of plaintiff’s payment that was attributable to the period when the parties were married.  Defendant sought a share of the payment that was attributable to the years when the parties cohabited, but the Family Part denied that.  She appealed, and the Appellate Division affirmed.  Defendant then sought review in the Supreme Court, which today unanimously affirmed in part and reversed in part the decisions below.  Justice Patterson wrote the Court’s opinion.

Justice Patterson invoked two settled standards of review.  In Family Part matters, findings of fact are reviewed deferentially, given the Family Part’s “special jurisdiction and expertise in family matters.”  But the “more exacting” standard of de novo review is called for when the subject is legal conclusions by the Family Part.

“The Legislature has limited the property that is subject to equitable distribution to ‘property, both real and personal, which was legally and beneficially acquired  by them or either of them during the marriage or civil union,'”Justice Patterson said, quoting N.J.S.A. 2A:34-23(h).  She found it “evident” that “during the marriage or civil union” was intended to excluded periods of cohabitation.  The statute had to be enforced according to its terms.  Two Appellate Division cases that defendant cited did not support her argument on this issue.  Thus, the Court affirmed the decisions below to the extent that they ruled that equitable distribution was limited to assets attributable to the period when the parties were married.

But that was not the end of the story.  Defendant had also asserted claims based on equitable principles, such as unjust enrichment, as to which defendant sought a constructive trust.  Justice Patterson cited a number of cases for the principle that the Family Part is a court of equity that must apply equitable principles to mitigate the “strict legal effects of given situations.”  She also reviewed in detail the law governing unjust enrichment and constructive trusts.

On the facts here, the equities called for defendant to receive a share of the monies that plaintiff received from the sale of the business.  The parties had each relied on the prospect of such a payment during their relationship “as they made important decisions for themselves and their family.”

Plaintiff resisted defendant’s suggestion that he work fewer hours and take more of a role at home so that defendant could seek employment herself.  Defendant thus took virtually all the responsibility for their daughter, the maintenance and repair of their home, the payment of bills, and other matters, so that plaintiff could devote himself single-mindedly to his work.  She moved with plaintiff and their daughter to Virginia because plaintiff’s employer wanted plaintiff in Virginia for a business matter.  Plaintiff even recognized defendant’s “great sacrifice” of her “career and educational aspirations” and committed to support her “fully.”

Though the payment to plaintiff came through shortly after the divorce judgment was entered, there was no basis to conclude that plaintiff had defrauded defendant regarding the payment.  But Justice Patterson concluded that, on the facts overall, plaintiff would be unjustly enriched if he were not required to share with defendant a portion of the payment he received that was attributable to a time outside the short marital period.  The Court remanded the case to the Family Part to make an appropriate award, imposing a constructive trust on the monies for defendant’s benefit.

New Jersey’s courts at all levels have a strong commitment to equity.  Today’s decision is but the latest example of that.

 

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