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Sheridan v. Sheridan

Decided: November 21, 1990.


Herman, J.s.c.


This court is asked to decide whether marital property acquired with funds obtained illicitly and not reported for federal and state taxing purposes is subject to equitable distribution. This question appears to be one of first impression.

This court holds that equity is an impermissible forum for the division of marital property primarily purchased with funds from illegal activities. 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. It is clear our court decisions reinforce this very principle: A court of equity can never allow itself to become an instrument of injustice. Associated East Mortgage Co. v. Young, 163 N.J. Super. 315, 330, 394 A.2d 899 (Ch.Div.1978); nor will equity allow any wrongdoer to enrich himself as a result of his own criminal acts. Jackson v. Prudential Ins. Co. of America, 106 N.J. Super. 61, 68, 254 A.2d 141 (Law Div.1969). In this respect, equity follows the common law precept that no one shall be allowed to benefit by his own wrongdoing. Neiman v. Hurff, 11 N.J. 55, 60, 93 A.2d 345 (1952). Thus, where the bad faith, fraud or unconscionable acts of a petitioner form the basis of his lawsuit, equity will deny him its remedies. Goodwin Motor Corp. v. Mercedes Benz of N.A., Inc., 172 N.J. Super. 263, 411 A.2d 1144 (App.Div.1980).


From an economic perspective the 1977, second marriage for plaintiff, Suzanne E. Sheridan, and defendant, Charles L. Sheridan, was a rags-to-riches affair. According to one family member it was clear to all that ". . . One day we were poor, the next day we were rich . . ." By the time the parties had separated in Sept. 1989, it was back to rags again.

The family's economic rollercoaster ride began in early 1983. Abandoning their Upper Darby, Pa. home to foreclosure and

leaving all their furnishings behind, the Sheridans purchased a house in Oak Valley, Deptford Twp., for $57,000. They paid cash which they took from a paper bag at settlement.

From a safety-deposit box, a shoe box, a dog biscuit box and from other hiding places, more cash withdrawals followed. Occasionally, they even withdrew funds from a checking or savings account, those withdrawals being primarily cash. In all, more than $200,000 was spent on various acquisitions & improvements through 1986. Funds were expended for remodeling and decorating, furniture and appliances, a number of vehicles, vacations, jewelry, gifts for family and others and a 6.5 acre vacant parcel of land in Chester Co., Pa. Including private school tuitions, the family budget for the years 1983 through 1987 easily exceeded $25,000 per annum.

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.*fn1 Each party readily admitted that their expenses and purchases were covered by "other sources . . ."

It was defendant's testimony -- and that of his brother Joseph's -- that on April 21, 1983, the day his mother died, his father called defendant and his two brothers into the family bedroom. From a suitcase, defendant asserts, his father took $317,000 in cash. Being the oldest, he was given $180,000. How his mother, a homemaker, and his father who apparently had little lifetime income and no identifiable savings sources were able to produce such a sum, Mr. Sheridan was never really able to explain. The defendant, however, vehemently denied allegations that cash coming into the marriage was improperly or illegally obtained (prior to or after his mother's death).

In contrast, plaintiff testified that defendant, as an oil-delivery truck driver, conspired with his employer to skim large

corporate and institutional oil deliveries (billing for more oil than delivered). They would then sell the undelivered, excess oil to third parties. Plaintiff's written records entered into evidence, found authentic and credible by this court, show $42,260 in cash deposited in a dog biscuit box and $70,000 more in a shoe box. Her first entry was Jan. 27, 1983; her last entry April 22, 1983, the day after her mother-in-law's death and after which her husband insisted on taking charge of all records and all accounts. Although plaintiff insists her husband never mentioned receipt of any funds from his father, these coinciding events were certainly not a coincidence.

Plaintiff also testified that during this period other cash deposits were made in a P.N.B. safety-deposit box from which her husband later withdrew $51,000 towards the N.J. home purchase. She further testified that the defendant continued to work for his employer until the end of 1986, that he continued to derive substantial, unreported cash from this enterprise. Plaintiff's testimony, which this court finds very believable, was buttressed by other family and friends. These witnesses testified that defendant told them, as well, that he was involved in an oil skimming scheme.

Notwithstanding their testimonial differences, the parties did agree on one point: That no inheritance, gift or income taxes were ever paid or ever declared on any of the above sums.

The court finds as follows:

That the more than $325,000 spent by the parties between 1983 and 1987 for real estate, personalty & annual living expenses, represented a comingling of untaxed, undeclared cash, a portion of which was a parental gift, but far less than the $180,000 defendant asserts; and

That at least $250,000 of the cash shared by the parties was the result of illegal activities; and

That it is impossible to trace -- or to even identifiably segregate -- the funding source of the marital property purchased, initially or now remaining.


Historically, courts of equity have reflected the collective public conscience of what should and should not be done.

Equity involves the obedience to dictates of morality and conscience. The morality of which equity speaks is that of society and not the judge's personal view of right and wrong. Likewise, equity may not disregard statutory law but looks to its intent rather than its form. In re Quinlan, 137 N.J. Super. 227, 348 A.2d 801 (Ch. Div., 1975), mod., remanded other grounds 70 N.J. 10, 355 A.2d 647 (1976). As the ultimate respository, the gatekeeper of that conscience and morality, equity's forum can never be used to promote or condone crime or clearly defined breaches of public morality. IMO Baby M, 109 N.J. 396, 434-41, 537 A.2d 1227 (1988).

Likewise, no court, be it equity or law, will enforce or entertain construction of a contract in a manner incompatible with the laws or public policies of the state. See, e.g., IMO Baby M, supra; Sewerage Auth. v. Util. Auth., 117 N.J. 239, 246, 566 A.2d 186 (1989). Nothing in our law indicates that marriage contracts should be interpreted or construed differently.

The contract of marriage in terms both human and material is afforded great deference and many societal protections. As such it now stands unchallenged that marriage is a social relationship subject in all respects to the state's police power. See, Rothman v. Rothman, 65 N.J. 219, 320 A.2d 496 (1974), citing as additional authority Maynard v. Hill, 125 U.S. 190, 8 S. Ct. 723, 31 L. Ed. 654 (1888):

". . . Marriage, as creating the most important relation in life, as having more to do with the morals and civilization of a people than any other institution, has always been subject to the control of the legislature. That body prescribes the age at which parties may contract to marry, the procedure or form essential to constitute marriage, the duties and obligations it creates, its effects upon the property rights of both, present and prospective, and the acts which may constitute grounds for its dissolution. [ Maynard v. Hill, supra, 125 U.S. at 205, 8 S. Ct. at 726, 31 L. Ed. at 657 (1888)]."

Ibid, Rothman v. Rothman, 65 N.J. at 228, 320 A.2d 496.

When the marriage contract is terminated by death or divorce, public policy as expressed in legislative enactment and amplified by judicial decision, seeks to protect as well those

same marriage interests of the surviving or divorcing spouse. See, e.g., N.J.S.A. 2A:34-23 et seq.; N.J.S.A. 3B:5-3 & 15; Chalmers v. Chalmers, 65 N.J. 186, 320 A.2d 478 (1974); Painter v. Painter, 65 N.J. 196, 320 A.2d 484 (1974); Rothman v. Rothman, 65 N.J. 219, 320 A.2d 496 (1974). However, even the broadest of public policy umbrellas has coverage limits. In the context of this marriage contract, that limit has been reached in this court today.

Our courts have endeavored to give substance to the legislative phrase, "legally and beneficially acquired." Painter v. Painter, supra. It has been an ongoing process. DiTolvo v. DiTolvo, 131 N.J. Super. 72, 328 A.2d 625 (App.Div.1974); Blitt v. Blitt, 139 N.J. Super. 213, 216, 353 A.2d 144 (Ch.Div.1976). And as the majority, concurring and dissenting opinions in Mey v. Mey have demonstrated, it has also been a process subject to much internal court debate. Mey v. Mey, 149 N.J. Super. 188, 373 A.2d 664 (App.Div.1977), aff'd 79 N.J. 121, 398 A.2d 88 (1978).

In May -- though tangential to the majority holding*fn2 -- the word "legal" is defined for the first time in a reported decision. In his majority opinion Judge Horn held that the word "legal" should be defined within the phrase "legally and beneficially" ...

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