By way of a constructive trust. As the divorce here in New Jersey is not yet complete, it would be unfair if all assets went to the deceased spouse’s estate. However, the New Jersey Supreme Court has directed divorce lawyers in our state that this would be inherently unfair to the surviving husband or wife. This New Jersey divorce attorney determined that the following case is not only an interesting story, but also goes on to explain how a constructive trust ensures that the surviving souse is protected.
In Carr. V. Carr, Joyce Carr filed a complaint for divorce against her husband Thomas Carr, but he passed away before the trial date, which terminated the pending divorce. From his death arose the issue of whether his wife, Joyce, had a right to either equitable distribution of the marital property under New Jersey divorce laws, or an elective share of her now deceased husband’s estate as per probate law. The Family Part and New Jersey Appellate Division that neither option provided her with an interest enforceable against the marital assets held legally by her husband. Therefore, the Supreme Court of New Jersey was tasked with reviewing the situation and deciding if Joyce was entitled to any relief at all.
The Supreme Court of New Jersey concurred with the Family Part and New Jersey Appellate Division that Joyce was not entitled to equitable distribution under New Jersey Statute 2A:34-23, because her pending divorce action terminated when her husband died. Similarly, she was also not entitled to an elective share of Thomas’s estate because they had separated before he died. However and again, The New Jersey Supreme Court did that Joyce was entitled to equitable relief in the form of a constructive trust. A constructive trust is created by a court whenever title to property is held by a person who, in fairness, should not be permitted to retain it. The court employs the constructive trust as a remedial device to compel the defendant to convey title to the property to the plaintiff. It is a passive, temporary arrangement, in which the trustee’s sole duty is to transfer the title and possession to the beneficiary.
Thomas and Joyce Carr got married on December 9, 1966. Joyce was a housewife, and Thomas owned a engineering firm. After seventeen years of marriage, Thomas left Joyce in June 1983. Joyce filed a complaint for divorce based on desertion on July 29, 1984, and requested the equitable distribution of the marital assets, alimony, and counsel fees. The case dragged on over years, and the trial was finally set for August 19, 1987. However, Thomas could not appear in court that day due to illness and hospitalization. He died five days later, and left his entire estate to his children from a previous marriage.
Joyce then filed an order to designate the executor of Thomas’s estate as a defendant, bar the distribution of his estate, continue pendente lite support payments, and to schedule a hearing to resolve the alimony, equitable distribution, and counsel fee issues. The Family Part heard her claims and held that the divorce and claims for equitable distribution and alimony were terminated by Thomas’s death, and therefore terminated the pendente lite support Joyce was receiving. The Family Part did however allow Joyce to pursue alternative remedies, and prevented the executor of Thomas’s estate from distributing the assets of estate to the designated beneficiaries, and granted Joyce’s motion for attorney’s fees.
On appeal, the New Jersey Appellate Division affirmed the Family Part’s decision in a unanimous decision. The appellate panel held that the Family Part court was correct in holding that Joyce was precluded from relief from the equitable distribution and elective share probate statutes, but that equitable relief was still available to her.
The equitable distribution statute, New Jersey Statute 2A:34-23 states that the court may issue equitable distribution awards where a judgment of divorce is entered. Therefore, the Supreme Court of New Jersey held that the lower courts were correct to conclude that N.J.S.A 2A:34-23 only authorizes the equitable distribution of marital property when a marriage ends by a divorce. In Carr the marriage did not end by divorce, but rather by death. A pending divorce terminates when one of the litigants dies. Thomas’s death terminated the status of marriage in the divorce action. Therefore, Joyce technical never got a final judgement of divorce from Thomas, and as a result not entitled to equitable distribution.
The Supreme Court of New Jersey also agreed with the lower courts that the elective-share provision in New Jersey Statute 3B:8-1, the probate code, did not afford Joyce with relief either. The New Jersey Legislature modified the Uniform Probate Code §§ 1-101 to 8-102. The new version included a section that provides that a surviving spouse has a right to an “elective share” or in other words a forced share of the spouse’s estate if he or she becomes “disinherited.” It states that if a married person dies after May 28 1980, the spouse that survives has a right to take an elective share of one-third of the decedent spouse’s estate.
There are, however, some circumstances where a surviving spouse is not entitled to an elective share, such as: if the surviving spouse and decedent are living in separate homes, or if the surviving spouse and the decedent have stopped cohabiting because of a judgment of divorce, or from circumstances that could give rise to a cause of action for divorce. Therefore, when the spouses are no longer living together, the elective share provision prevents a surviving spouse from such an entitlement.
Early drafts of the elective share law stated that disentitlement would only occur if divorce litigants had been living apart and had gotten a judgment of divorce as well. These early drafts were more similar to the Uniform Probate Code U.P.C. § 2-201(a), in which only a final judgment of divorce could disentitle a surviving spouse from an elective share. However, the committee changed the “and” in the early draft to an “or”. As a result, a separation can disentitle a surviving spouse from an elective share of the decedent spouse’s estate even if they never technically got a divorce.
Therefore, the Supreme Court of New Jersey concurred with the reasoning and legal conclusions of the Family Part and New Jersey Appellate Division. Joyce was not entitled to equitable distribution under New Jersey Statute 2A:34-23, because her pending divorce action terminated when her husband died. Similarly, she was also not entitled to an elective share of Thomas’s estate because they had separated before he died. The only thing left for the Supreme Court of New Jersey to decide if there was any judicial relief at all that Joyce was entitled to.
The Supreme Court of New Jersey explained that the guiding principle behind both the equitable distribution statute and the probate code, is that a spouse has a right to acquire in marital assets due to mutual efforts during the marriage that led to the creation, acquisition and preservation of such assets. This equitable principle has its roots in concepts of common decency, fairness, and good faith. In exercising their authority, courts should give effect to public policy, and mold the law to represent the societal values underpinning such public policy. As such, the Supreme Court of New Jersey held that marital assets do not loses their basic nature as property acquired through the joint enterprise of both spouses during the marriage, merely because one spouse dies while a divorce is still pending.
In Carr the Supreme Court of New Jersey suggested a constructive trust as equitable remedy that would be appropriate in this case. In the 1919 New York Court of Appeals case of Beatty v. Guggenheim Exploration Co., the famed Justice Cardozo defined a constructive trust as a formula used to express “the conscience of equity.” He stated that “when property has been acquired in such a circumstance that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee.” A constructive trust is used to prevent fraud or unjust enrichment. A constructive trust orders the person who would otherwise be unjustly enriched to transfer the property to the intended party. Therefore, the Supreme Court of New Jersey affirmed the judgment of the New Jersey Appellate Division, and remanded the case for a new trial consistent with their opinion.