We have all heard stories about spouses hiding assets to keep them away from the other spouse during a divorce. In fact, I am sure that many lawyers have even had clients ask how they can do it. Hopefully, the lawyer told them the straight answer -don’t do it – and if you do and get caught, it will be far worse for you.
A litigant named Eric Barzda learned this the hard way as noted in the unreported decision (non precedential) Appellate Division decision released on March 3, 2010.
In this case, in 1996, Mr. Barzda was was going through a divorce proceedings with his former wife. While the divorce was pending and even thereafter, he feared that his wife would assert a claim against property in Hightstown he acquired with his girlfriend, the defendant in this matter. In order to shield this property from a claim from his wife, he transferred his interest in the property to the girlfriend for $1. However, he claimed that there was an oral agreement that he would be a silent partner. He later filed for bankruptcy relief and did not list this property as owned by him in the bankruptcy – obtaining a discharge in what was deemed a no asset case.
In 2006, after the romantic relationship ended, the plaintiff here filed suit seeking his equitable share of the property. The trial court, as affirmed by the Appellate Division, used the concept of judicial estoppel to deny him relief. Judicial estoppel essentially prevents litigants from taking inconsistent positions regarding the same issue/property in different legal proceedings.
In an interesting quote, the Appellate Division said:
Here, plaintiff’s conduct provides almost a textbook example of facts calling for the applicability of judicial estoppel. By his own words, plaintiff attempted to conceal his alleged interest in this real property to mislead his former espouse and frustrate any attempt on her part to seek legal recognition of a potential equitable interest in the property. In furtherance of this scheme, plaintiff deliberately failed to disclose his alleged interest in the petition he filed under oath before the federal bankruptcy court in order to induce that tribunal to give him relief from the legitimate claims of his creditors.
It will be interesting to see if in light of this, the ex-wife goes after him for fraud in the divorce. In any event, the saying "don’t do the crime if you can’t do the time" seems particularly applicable here.