Divorce and Equitable Distribution Ordered After Spouse’s Death to Prevent Unjust Enrichment and Fraud

New Jersey appeals court holds that divorce and equitable distribution of marital assets may be ordered after the death of one spouse to prevent unjust enrichment and fraud. Estate of Beltra v. Beltra

Plaintiff Milagros Beltra filed for divorce from her 34 year marriage to defendant Enrique Beltra. Plaintiff was terminally ill and passed away 6 months later, prior to the entry of a final judgment of divorce. Plaintiff’s executor, the parties’ oldest son, moved to be substituted in the divorce acion. The Family judge granted the motion and the Estate of Milagros Beltra was substituted in the divorce lawsuit.

A 5 day trial was held to determine the equitable distribution of the assets acquired during the marriage. At the conclusion of the trial, the judge entered a final judgment dividing the couple’s assets and liabilities equally.

Defendant appealed. The appellate court vacated the final judgment, concluding that the entry of an equitable distribution order following plaintiff’s death was contrary to the general principle that death ends a divorce action. However, since the estate claimed that there was evidence of unjust enrichment and fraud because defendant allegedly secreted assets, and since equitable distribution can be ordered after death to prevent unjust enrichment and fraud under New Jersey law, the appellate court remanded the matter back to the trial court for further review.

On remand, the trial judge first found that secreting assets would be an exceptional circumstance requiring the imposition of equitable relief after death to prevent unjust enrichment. Thereafter, the trial judge issued an order “determin[ing] that exceptional circumstances exist that warrant the granting of the equitable relief to [p]laintiff’s estate.” The judge also imposed a constructive trust to protect the estate’s interest in the assets held by defendant.

Defendant appealed from that order, challenging the facts found by the judge allegedly supporting the court’s finding of exceptional circumstances justifying the imposition of equitable relief including a constructive trust and the division of the parties’ assets, notwithstanding the fact that the plaintiff’s death prevented the entry of a final judgment of divorce.

In the second appeal, the appeals court held that, under New Jersey law:

[I]f warranted by the evidence, a court may impose a constructive trust and apply principles of quasi-contract to prevent unjust enrichment where equitable distribution under the statute becomes unavailable due to the death of one spouse prior to entry of a judgment of divorce. … [E]quitable relief may be invoked to promote fair dealing between spouses by ensuring that marital property justly belonging to the decedent will be retained by the estate for the benefit of the deceased spouse’s rightful heirs and by preventing unjust enrichment of the surviving spouse. … [T]he Family [Court] must protect the right to claim marital assets in a matrimonial action [which] … should not be extinguished lightly or prematurely simply because a party passed away before the divorce was final.

The appeals court noted that a claim that defendant “secreted” marital assets was included in plaintiff’s divorce complaint. Plaintiff’s estate also asserted that the divorce was not finalized because defendant intentionally delayed the proceeding because he knew plaintiff would soon pass away. After reviewing the evidence presented to the trial judge, the appeals court held that the evidence adequately supported the trial judge’s findings that defendant diverted marital assets and his conduct justified the conclusion exceptional circumstances required equitable remedies to prevent unjust enrichment.

The case is attached here – Estate of Beltra v. Beltra

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