Fraudulent contract can’t be enforced

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A man who transferred property to his brother to keep his wife from getting any of it in a divorce cannot recover the property after his brother refused to sell it back to him once the divorce was final.

The Wisconsin Court of Appeals on Dec. 23 refused to enforce the contract, because the husband entered into it for the purpose of defrauding the family court.

Stanley N. Jezeski, contemplating divorce from his wife Rosalie, transferred a 20-acre parcel of land to his brother Thomas, to keep Rosalie from getting any share of it.

Under the contract, Thomas agreed to transfer the property back to Stanley after the divorce was final. However, he refused to do so when the time came, and Stanley sued to enforce the contract.

Green Lake County Circuit Court Judge Richard Rehm ruled in favor of Thomas, and Stanley appealed.

In an opinion written by Judge Daniel P. Anderson, and joined by Judge Richard S. Brown, the Court of Appeals affirmed. Judge Harry G. Snyder dissented.

The majority and dissent agreed that the issue was whether a contact created to hide an asset from a spouse and family court during a divorce is enforceable.

However, they disagreed on the appropriate consequences of that holding.

The majority concluded that the appropriate response is to refuse to order that the contract be enforced against Thomas. The dissent concluded that the court should consider the whole contract void, including the initial transfer to Thomas.

The majority noted that sec. 767.127(1) requires full disclosure of all assets in a divorce, and provides that deliberate failure to do so constitutes perjury.

The court thus concluded, “The contract is invalid and unenforceable because it assists Stanley in violating a civil statute to which a penalty is attached.”

Stanley contended that, if the contract is void, the parties should be returned to their pre-contract positions -– thus, he would keep title to the property.

However, the court relied on the general rule that a court will not aid either party to an illegal agreement, unless one of the parties is far more at fault than the other.

Here, the court found that it was Stanley who, as the party initiating the fraud on the family court, was the greater at fault.

“The contract between Stanley and Thomas is void and unenforceable because it assisted Stanley in violating a statute and public policy,” Anderson wrote for the majority. “Because the court does not reward the perpetrator of a fraud upon the court, we affirm the trial court’s decision to void the contract and permit the parcel to be titled in Thomas’ name.”

Before concluding, the majority court recommended that the case be referred to the Green Lake District Attorney for consideration of perjury charges against Stanley, and also noted that Rosalie could seek to have the family court impose a constructive trust on the parcel.

As noted, Judge Snyder agreed that the court should not enforce the contract, but agreed with Stanley that the remedy was to void the entire contract, including the prior transfer to Thomas.

Snyder concluded, “Stanley and Thomas knowingly and intentionally entered into an illegal contract forbidden by law. That being undisputed, I dissent from the enforcement of the real estate contract in any and all respects. The outcome must not favor Thomas, a co-conspirator in the fraud perpetrated against our courts.”

Snyder also disagreed with the majority’s conclusion that Stanley was more at fault than Thomas, instead finding both equally guilty, and recommended that both be prosecuted for perjury.

Finally, Snyder disagreed with the majority in two other respects. First, Thomas did not file a brief with the court; for this reason, Snyder contended that the judgment should have been summarily reversed.

Second, Snyder disagreed with the majority’s dicta that a constructive trust could be imposed on the parcel by the family court, concluding that, by vesting title to the property with Thomas, the majority has effectively removed the parcel from that court’s reach.