When a court divides the assets and debts of a couple as part of a divorce, the court must normally rely on values of the assets that are supplied by the parties. With some assets, such as bank accounts and credit cards, the balances should be easy to determine. However, sometimes people try to hide money in order to deceive the court and gain an advantage. Getting caught can be expensive, as shown the recent case Kirk v. Kirk. (link removed)
Background: Wife discovers concealed property
Husband and Wife were married for a little over 20 years and were divorced on March 26th, 2009. Husband was a farmer, and the court divided many of the assets between the parties based on the values of bank accounts and contracts supplied by Husband. Shortly after the divorce, Wife filed a motion asking the court to adjust the property division because Husband had misrepresented and concealed assets during the divorce hearing. The appellate decision isn’t clear on how Wife came to suspect that Husband had been hiding funds, but the opinion does refer to an “extensive and prolonged period of discovery” that followed wife’s motion. She obviously subpoenaed several of Husband’s business contacts, including his banker and clients.
With the help of an expert, Wife identified the following discrepancies in the information Husband had provided to the court:
- Husband had claimed a bank account balance of $4,406.71. The actual balance was $61,022.04.
- Husband had claimed his assets were worth $1,212,586.94. He neglected to include a Patronage Dividend worth $125,000 and cash on hand of $50,000.
- Husband had claimed he had been paid in full for his 2008 crops. However, Wife found that he received two payments in 2009 for the 2008 crop year. The payments were in the amounts of $29,346.70 for winter wheat and $23,612.50 for the cancellation of a contract for winter wheat.
- Records from Bunge Corporation (a buyer of Husband’s crops) indicate payments in 2008 totaling $110,804.60. These proceeds were not disclosed by Husband.
- Husband had received some payments for open contracts for the 2009 crop year, again by Bunge Corporation. These payments totaled $135,815.35, and were not disclosed by Husband.
- In January of 2009, Husband had received a check for crop insurance in the amount of $64,137. He didn’t deposit the funds until after the trial was over, however.
After review of the evidence, the trial court found that “Husband had willfully and fraudulently concealed his assets prior to the divorce trial through inadequate disclosures in discovery and by failing to comply with local rules.” The court then awarded Wife a judgment against Husband in the amount of $210,183.75, which was half of most of the items above. In addition, Husband had to pay for Wife’s attorneys and experts, although the amount is not included in the appellate opinion. Husband appealed the decision.
Appellate Court: Husband is a liar
The full opinion in this case is 18 pages long, so I’m dramatically simplifying the arguments and analysis for you. In general, the appellate court relied heavily upon rule 26.05 of the Tennessee Rules of Civil Procedure. This rule says that a party must supplement or amend a prior discovery response if the party “knows that the response was incorrect when made,” or the party “knows that the response though correct when made is no longer true and the circumstances are such that a failure to amend the response is in substance a knowing concealment.”
For example, Husband argued that he disclosed the balance of the bank account on January 31, 2009, which was a date separate from the trial. He states that if Wife’s lawyer wanted to know the balance on the date of trial, they should have issued the appropriate subpoenas to gain this information. The Court called this argument “disingenuous” and stated that Husband’s failure to amend his prior answer constituted a knowing concealment.
The Court later stated:
Despite Husband’s arguments to the contrary, the just resolution of domestic disputes involving the financial conditions of the parties is not achieved when litigants take part in gamesmanship instead of seeking the truth. On the contrary, parties and their counsel have a duty to provide truthful information necessary for the trial court to make an equitable distribution of the marital assets.
The appellate court agreed with Wife in most respects and affirmed the decision of the trial court.
The trial court ordered Husband to pay Wife’s fees for her attorneys and experts. The opinion doesn’t say how much this was, but I’m assuming it was pretty hefty based on this quote by the trial court:
Wife is entitled to expert fees and attorney fees. The expert fees and attorney fees are reasonable and were necessarily incurred because of Husband’s disregard for court ordered discovery and his refusal to supplement and/or amend responses to discovery. Husband was not only evasive and incomplete in answering questions, but also misrepresented his assets at the time of trial and subsequently evaded answering questions about his assets until after the original trial in February and March of 2009. Wife was forced to issue subpoenas to banks, including First Citizens Bank and Brighton Bank. Wife was likewise forced to subpoena records from Bunge, an entity which buys farmers crops, and Tipton County Co-op. …
Wife’s lawyer … was required to expend a great deal of time and effort in discovering the Husband’s assets because of Husband’s willful and fraudulent concealment.
This is where Husband gets his reward for his misdeeds. In attorney terms, a “great deal” of time probably means tens of thousands of dollars, in addition to whatever the experts charged.
It can be tempting to try to hide assets and property. Particularly when you feel like the other side isn’t going to go through the time and expense to find those hidden accounts and undeposited checks. However, the potential repercussions for doing so can be significant. The judge could have easily awarded Wife more than the 50% of the assets that were discovered, on top of all of Wife’s attorney and expert fees.
As always, if you are involved in a divorce or other family law matter, contact me to find out how I can help you with your situation.