SUPREME COURT AFFIRMS KAY DECISION - ESTATE OF LITIGANT WHO DIES DURING DIVORCE CAN MAKE EQUITABLE CLAIMS
Previously, I blogged on the Appellate Division's reported (precedential) decision in Kay v. Kay. The New Jersey Supreme Court granted Certification and the decision was rendered on January 6, 2010. In a per curiam decision (i.e. no one specific Supreme Court Justice authored the opinion), the Appellate Division decision was affirmed for substantially the reasons set forth in Judge Grall's appellate opinion.
To reiterate what this case is about, the Appellate Division held that when the estate of a spouse who died while an action for divorce is pending presents a claim for equitable relief related to marital property, the court may not refuse to consider the equities arising from the facts of that case solely on the ground that the estate may not assert equitable claims against the marital estate sounding in constructive trust, resulting trust, quasicontract or unjust enrichment. In that case, the husband died basically penniless and the wife had assets in excess of $650,000 at the time.
The Appellate Division and now Supreme Court held that when the estate of a spouse who died while an action for divorce is pending presents a claim for equitable relief related to marital property, the court may not refuse to consider the equities arising from the facts of that case solely on the ground that the estate may not assert equitable claims against the marital estate sounding in constructive trust, resulting trust, quasicontract or unjust enrichment. This case rejects the holding in Krudzlo v. Krudzlo, a reported trial court opinion from 1990.
The basic rule was that a divorce case abates and no equitable distribution can be had when a spouse dies during the pendency of divorce. However, there is a Supreme Court case called Carr v. Carr that created equitable remedies for a surviving spouse that would otherwise get nothing where the assets were all held by the other spouse and the rights to equitable distribution and an elective share are unavailable under the law. This case provided a remedy for what was called the "black hole."
The Krudzlo case held that the estate of a dying spouse could not assert claims for equitable relief against a surviving spouse.
In Kay, there husband died. At the the time of his death, he had limited assets in his name, insufficient even to pay his legal fees and burial expenses. On the other hand, it was asserted that the wife had more than $650,000 in assets. It was also asserted that the wife dissipated marital assets, diverting them to her own name and her daughter.
Given that the court's seek fairness and equity, the Appellate Division held that it was inappropriate to have a blanket rule preventing the estate from making equitable claims. The Court did not decide the underlying merits of the claim, however. The estate will have the ability to make a claim to prevent the unjust enrichment of the surviving spouse.
The Supreme Court opinion added further important observations. First, the claim raised here was not only for equitable distribution, but also that marital assets had been wrongfully diverted from one spouse to the detriment of the other. Second, the spouse who died was attempting to pursue that claim before his death. The estate was seeking to continue claims raised before death which "should not be extinguished lightly."
Further, just as Carr dealt with the innocent spouse that had no statutory remedy, so does this decision - essentially closing the black hole as to the spouse who died. Clearly, this case reflects and fair and equitable result and prevents an alleged wrongdoer from being unjustly enriched.
