Hidden Assets

If assets are discovered after final divorce that were not disclosed during the divorce action, all is not lost. New Jersey offers a mechanism for recovery of such assets for distribution. If properly and timely applied, a motion can be brought to obtain relief from the final judgment of divorce and modify it to include these discovered assets.

There are several grounds available for relief under this provision:

1. mistake, inadvertence, surprise, or excusable neglect;

2. evidence just discovered that would have made a different result, but it cannot be something that could have been discovered earlier enough to have requested a new trial under R. 4:49;

3. misconduct of the other party such as fraud or misrepresentation;

4. if the order or the judgment is, for various reasons, void;

5. reversal or vacateur of a prior order on which this judgment or order is based, or the release, satisfaction or discharge of the order, or simply that the order is no longer fair; or

6. any other reason that justifies relief from the judgment. N.J.S.A. Rule 4:50-1.

Under (a), (b) and (c) above, action must be taken within one year of the final judgment of divorce in NJ, otherwise, under (d), (e) and (f), the motion for relief must be made within a reasonable time. R. 4:50-2.

The Appellate Court’s decision in the case of Zuba v. Zuba provides insight into application of this rule in the context of undisclosed assets.

After 31 years of marriage, the Zubas divorced in January, 2011. In December, 2010, the parties entered into a property settlement agreement (PSA), incorporated into the final judgment of divorce. The PSA, in part, stated, “(t)he parties represent that each of them has candidly and fully disclosed to the other all of their income, assets and liabilities as of the execution of this agreement.” Mr. Zuba may not have done so.

About a year after the divorce was final, Mr. Zuba told a Ms. Grinfelds, in whose home he resided after the divorce, that he had not disclosed his ownership of real property in Costa Rica or his bank account in Belise. Ms. Grinfelds provided this information to Ms. Zuba in the December 2012/January 2013 timeframe.

In September, 2013, Ms. Zuba brought a motion for relief from the judgment of divorced based upon the information provided by Ms. Grinfelds as to the undisclosed assets. Mr. Zuba heartily presented his position that Ms. Grinfelds lacked credibility and her statements were false.

There was no hearing on the matter, just motion papers and oral argument upon which the lower court made a decision that it could not determine if there “was a factual dispute,” that Ms. Zuba failed to make a prima facie case of fraud and she failed to meet her burden of proof necessary for the relief she requested.

The Appellate Court disagreed and sent the matter back to the court to allow Ms. Zuba the opportunity to pursue discovery. The higher court found it unreasonable to place the burden of proof on the party from whom the assets had been hidden to prove the existence of those assets absent discovery, thus ordered a discovery period to seek the evidence necessary. Further, the higher court was not looking at the issue of fraud in the action, but rather the “catch-all” provision at section (f) of Rule 4-50.1 shown above.

The court made no determination of whether Ms. Zuba’s case had merit, merely that she was entitled to discovery to determine if the undisclosed assets existed. If so, then a plenary hearing would be required. The parties ultimately settled the matter.

When a spouse fails to disclose assets in a divorce action that are later discovered, there is a way to re-open the judgment of divorce to seek, find and divide those assets.

If you need to discuss assets not reported in a prior divorce in NJ that have been discovered, call the Law Offices of Peter Van Aulen for a consultation at 201-845-7400.