Divorce & Hidden Money: Suing Your Spouse For Fraudulently Conveying Assets
An asset search may reveal that your spouse is hiding assets from you during your divorce. You might then be able to sue your spouse & possibly others for fraudulently concealing assets. As this 25th post in the “Divorce & Hidden Money” series shows, you may be able to sue on the ground that assets were fraudulently conveyed away from you:
Before leaving New York, the divorcing husband in Skiff-Murray v. Murray¹ fraudulently conveyed his business and former marital residence to his newly created Nevada corporation. Violating a restraining order, the husband next conveyed the residence from his Nevada corporation to his aunt and uncle. The aunt and uncle then mortgaged the residence to a third party.
According to the Court in Skiff-Murray, the divorcing husband had “…made it impossible for plaintiff [the wife] to enforce her judgments for child support arrears or obtain the maintenance, distribution of marital property and counsel fees awarded in the judgment of divorce.” After the divorce was over, the now ex-wife filed a lawsuit against the aunt; uncle & others. The lawsuit alleged the residence had been fraudulently transferred. It asked the Court to set the transfer aside under N.Y. Debt. Cred. Law. §§ 270 – 281, which is the codified version of the Uniform Fraudulent Conveyance Act.
If you are in a pending divorce you may however, add a claim for fraudulent conveyance to your complaint for divorce. Under New York law you could join a person or business entity suspected of fraudulently transferring marital assets to your pending divorce case. This is provided for by N.Y.Civ. Prac. L. & R § 1001(a):
§ 1001. Necessary joinder of parties. (a) Parties who should be joined. Persons who ought to be parties if complete relief is to be accorded between the persons who are parties to the action or who might be inequitably affected by a judgment in the action shall be made plaintiffs or defendants. When a person who should join as a plaintiff refuses to do so he may be made a defendant.
Courts outside of New York also allow a spouse in a pending divorce to sue those who have fraudulently conveyed marital assets. To cite just one example, the Court in Connecticut has indicated a spouse can bring a lawsuit alleging fraudulent conveyances, as part of a divorce case. Gaudio v. Gaudio, 23 Conn. App. 287 (1990) (wife’s claim that husband and third party fraudulently transferred stock can be added to divorce complaint).
¹Skiff-Murray v. Murray, 2005 slip op. 02911(N.Y. App. Div. 3d Dept, June 22, 2005); 17 A.D.3d 807; 793 N.Y.S.2d 243.