Sheridan v. Sheridan - 247 N.J. Super. 552, 589 A.2d 1067 (Super. Ct. 1990)

Rule:

A court of equity, as a court of conscience, can never permit itself to become party to the division of tainted assets nor can it grant the request of an admitted wrongdoer to arbitrate such a distribution. A court of equity can never allow itself to become an instrument of injustice; nor will equity allow any wrongdoer to enrich himself as a result of his own criminal acts. In this respect, equity follows the common law precept that no one shall be allowed to benefit by his own wrongdoing. Thus, where the bad faith, fraud, or unconscionable acts of a petitioner form the basis of his lawsuit, equity will deny him its remedies. 

Facts:

From an economic perspective the 1977, second marriage for plaintiff, Suzanne E. Sheridan, and defendant, Charles L. Sheridan, was a rags-to-riches affair. By the time the parties had separated in Sept. 1989, it was back to rags again. In total, more than $325,000 was spent during a 5-year period in which plaintiff was a homemaker and defendant's declared income was less than $20,000. Each party readily admitted that their expenses and purchases were covered by "other sources . . ." Charles vehemently denied allegations that cash coming into the marriage was improperly or illegally obtained. In contrast, Suzanne testified that Charles, as an oil-delivery truck driver, conspired with his employer to skim large corporate and institutional oil deliveries (billing for more oil than delivered). Notwithstanding their testimonial differences, the parties did agree on one point: That no inheritance, gift or income taxes were ever paid or ever declared.

Issue:

Is marital property acquired with funds obtained illicitly and not reported for federal and state taxing purposes subject to equitable distribution?

Answer:

No.

Conclusion:

The court held that, as a court of equity, it was prohibited from distributing marital property that had been primarily purchased with funds from illegal activities. The court credited testimony that Charles derived substantial, unreported income from an oil-skimming scheme. The court noted that it had reported this intentional underreporting of income to the proper authorities, as it was ethically required to do. The court also stayed the distribution of the remaining assets of the marital estate to allow the governmental agencies to intervene in the action. The court awarded plaintiff alimony, taking into consideration her present circumstances, her limited economic potential, the duration of the marriage, Suzanne’s contributions to the marriage as a care-giver, the likelihood that Suzanne would continue to need her income supplemented to maintain even a modest standard of living, and Charles’ earning ability. The court also awarded Suzanne child support. The court awarded Suzanne attorney fees incurred for the prosecution of her support claims and to compel Charles to abide by pendente lite agreements.