Like the Lochness Monster – A Rare Doctrine of Unclean Hands “Citing”

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The Family Court in New Jersey is a court of equity.  Accordingly, old, if not ancient “equitable principles” or maxims are supposed to apply.  One such maxim is that he who seeks equity must do equity.  Over the course of nearly 30 years in practice, I have argued that the court must apply equitable principles many times but have found that they are often honored in the breach.  In particular, I have argued that “unclean hands” should prevent a litigant from getting relief from a court.  The doctrine regarding unclean hands is basically that no one should be able to benefit from their own wrongdoing.  And while frequently I have seen courts rightfully, enforce orders, judgments and agreements, I have rarely seen courts cite the doctrine as a basis for the decision, even when I have briefed it.

However, like Haley’s Comet or the Lochness Monster, on January 24, 2022, there was an infrequent citing to the doctrine of unclean hands in the unreported (non-precedential) decision in the case of Pesot v. Puleo.   In this case, at the time of the parties’ divorce in 2008, the Husband agreed to pay the wife a lump sum payment of $1,015,000 in exchange for her waiving any interest she had in his investment in a hedge fund.  Payments were supposed to be made $100,000 at the time that the “marital h ome is under a fully-signed contract for sale and the mortgage contingencies have been met.”  The rest was supposed to be paid out of the proceeds of sale of the home.  If there was a shortfall in the proceeds, then the remainder was to be paid within 36 months, depending on the amount of the shortfall, plus 5% interest.

After the divorce, the husband failed to comply with this aspect of the parties Marital Settlement Agreement (MSA) resulting in numerous enforcement motions and the entry of four judgments against him – all of which remained unpaid.  In a 2016 motion granting the wife’s motion to enforce the judgment, the trial judge rejected the husband’s claims that a “downturn in his business” should excuse him from “paying [Wife] the balance of the equitable distribution” she was owed.”  The court cited the law for the general principle that while alimony can be modified upon a showing of changed circumstances, equitable distribution may not.  The husband never appealed the 2016 Order.

In an attempt to collect on the judgment, in 2020, the wife served an information subpoena, which is a too available to judgment creditors to learn of the assets, etc. of a judgment debtor. After the husband failed to respond, the wife moved to compel an answer, which the court granted. The husband failed to comply and once again, the court issued another order on September 11, 2020 finding him in violation of litigant’s rights and requiring him to respond to the subpoena.

Rather than respond, Husband moved to modify the MSA, claiming it “… was no longer equitable given the respective financial circumstances of the parties. Specifically, plaintiff again claimed he was experiencing financial difficulties while defendant had married a wealthy individual.”  He also claimed that the MSA was the product of fraud, an argument that was previously denied in 2016.  The trial judge denied his motion finding that “… neither “[t]he relationship between defendant and a third-party” nor “the fact that plaintiff  allege[d] . . . he ha[d] fallen on hard times financially” was relevant “to the validity of the MSA.””  To the extent that these issues were already argued and rejected in 2016, the trial court found that they were barred from being relitigated on the grounds of res judicata (i.e. that the issue has already been decided) or laches (you waited too long to pursue relief.)  The motion to enforce the information subpoena as granted, again.

The Appellate Division affirmed the decisions of the trial court, noting that the majority if the arguments were without sufficient merit to warrant discussion in a written opinion.  However, they added the following nugget regarding the doctrine of unclean hands:

The doctrine of unclean hands denies relief to a wrongdoer. Borough of Princeton v. Bd. of Chosen Freeholders of Mercer Cnty., 169 N.J. 135, 158 (2001). “[W]hile general iniquitous conduct will not operate to bar plaintiff from relief by reason of unclean hands, iniquitous conduct relating to the particular matter or transaction to which judicial protection is sought will
operate to bar relief.” Pollino v. Pollino, 39 N.J. Super. 294, 299 (Ch. Div. 1956). “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.” Rolnick v. Rolnick, 290 N.J. Super. 35, 45 (App. Div. 1996) (citations omitted).

….Additionally, given plaintiff’s contumacious conduct, the doctrine of unclean hands is another ground for denying relief to plaintiff.

Clearly, it seems that both the trial court and the Appellate Division had enough of the husband’s delays and recalcitrance.  The case is also, sadly, an example of how someone can avoid their obligations for more than a decade.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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