Posted on April 5, 2009 by Robert A. Epstein

APPELLATE DIVISION AFFIRMS TRIAL COURT'S DENIAL OF WIFE'S MOTION TO SET ASIDE PROPERTY SETTLEMENT AGREEMENT BASED ON FRAUD

The New Jersey Appellate Division has held that an application seeking to set aside a Property Settlement Agreement (PSA) under Rule 4:50-1 of the New Jersey Rules of Court should be granted "sparingly."  It was this very type of application that formed the basis of the Appellate Division's recent opinion in Heald v. Heald, found here.

The parties were married for 28 years and had 4 children before the Final Judgment of Divorce was entered in November 2006.  They had separated in 2005 and, for a significant period of time, negotiated the terms ultimately encompassed in a PSA, executed in April 2006.  Notably, the parties agreed to use the Husband's 2004 income to determine his support obligations.  The PSA also contained language that the parties were knowingly waiving their right to discovery regarding each other's income and assets.

Within the following months after the FJOD was entered, the Wife filed three post-judgment motions seeking a wide variety of relief pertaining to support and the Husband's business bank accounts and income.  It was the third post-judgment motion that formed the basis of the Appellate Division's opinion.  Specifically, the Wife sought in August 2007 to have the trial court, among other things, increase the Husband's alimony obligation to allow her to regain her marital standard of living.  The trial court, however, denied the Wife's request.

The Appellate Division focused on that portion of the Wife's appeal arguing that the trial court erred by failing to find that the Husband misrepresented his income during the negotiations period preceding execution of the PSA and, therefore, in denying her request for a retroactive increase in alimony.  The Wife specifically wanted the PSA set aside based on the Husband's purported misrepresentation as to his income - namely, that he knew, but failed to disclose during negotiations that his 2005 business income was at least $130,000 higher than his 2004 income, which was used to determine his support obligations in the PSA.  The Wife based this assertion in part on the fact that the Husband deliberately filed for an extension on the joint tax returns to hide this information.

The Appellate Division first noted that relief under Rule 4:50-1 to set aside the PSA is to be granted "sparingly" and, when relief is premised upon a claim of misrepresentation, there must exist clear and convincing evidence of such misrepresentation.  The Appellate Division also noted that the trial court's decision could only be overturned on the basis of a "clear abuse of discretion." 

Under that analytical framework, the Appellate Division concluded that there was insufficient evidence to set aside the PSA.  Specifically, the Court held that the record failed to demonstrate that the Husband ever represented his annual business income for 2005 at $500,000 - a number that was far below the true level of income earned.  Rather, the Court found that the $500,000 was nothing more than a level of income proposed by the Wife's attorney to apply to the Husband during settlement negotiations.  Further, the Court concluded that, as negotiations carried into 2006, there was nothing stopping the Wife from seeking information as to the Husband's 2005 income and nothing unusual about the Husband seeking an extension to file the tax returns since he had done so in the past.

The Appellate Division also found that the Wife was aware that the Husband's income fluctuated on a yearly basis; that it was she who wanted to expedite the negotiations process to bring the proceedings to an end; that the Husband had no duty to update his Case Information Statement pursuant to Rule 5:5-2(c) of the Rules of Court because he had not previously filed one from the Date of Complaint to the date the FJOD was entered; and that the PSA made no indication that the parties intended to use the Husband's current or highest year of business income as a starting point to determine support.  Finally, because the parties waived their right to discovery in the PSA as to income and assets, the Husband's failure to disclose his 2005 income, which the Wife did not even request, did not warrant post-judgment discovery.

Notably, while relief pursuant to Rule 4:50-1 is to be "sparingly" granted, this office was recently granted summary judgment for a client seeking to set aside a PSA based on fraud and unconscionability.  A recent post regarding that victory can be found here.
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Posted on April 2, 2009 by Sandra C. Fava

POST DIVORCE MODIFICATIONS TO AGREEMENTS

When most parties enter into what is commonly referred to as a Property Settlement or Marital Settlement Agreement, they do so with the intention that this is a comprehensive agreement, resolving all the issues and a document that will govern their dealings with an ex-spouse going forward.

Oftentimes people are shocked to learn that some provisions in those agreements can be subject to modifications by a court.  Such is the case of the recent unpublished appellate division matter of Anello v. Anello, Decided March 23, 2009, A-2405-07T3. 

These parties were married in 1982 and divorced in 2002 by way of a dual final judgment of divorce incorporating the terms of their Property Settlement Agreement. ("PSA")  Two children were born of this marriage.  In the PSA entered into by the parties, the husband was entitled to alimony, to which there was a specific and detailed waiver of this right.  Husband waived the right to receive permanent alimony and gave wife a greater share of equitable distribution in exchange for a total and permanent waiver of a child support obligation for both children.  Husband did agree to contribute to college expenses and non-recurring extraordinary events for the children.  Husband's waiver of permanent alimony was expressly conditioned upon his non-payment of child support.

Some four years after the agreement was entered into, husband filed a motion seeking custody of the son, child support, alimony and counsel fees.  The parties entered into a Consent Order resolving this motion, which reserved the issues of child support and alimony pending discovery.

Approximately 7 months later, husband filed another motion seeking child support for the son. This motion was granted, however the trial judge also ordered husband to pay child support for daughter, who remained with wife. About one month later, husband filed a motion seeking alimony. He argued that his obligation to now pay child support for daughter was a change in circumstances that entitled him to alimony per the terms of the agreement. This motion was denied as the trial judge found there was no change in the financial circumstances of the parties demonstrating a need for alimony to be paid.

One month thereafter, husband filed a motion for reconsideration and sought permanent alimony, termination of his obligation to pay child support for daughter, custody of daughter, discovery and for wife to file a CIS. This motion was also denied.

From there, husband filed his appeal arguing that the trial judge overlooked his entitlement to permanent alimony; did not properly read the PSA; failed to find that the change in custody of the son was a change in circumstances; improperly altered the terms of the PSA; and decided the matter without a plenary hearing.

In its opinion, the Appellate Court noted that trial judges are given deference to the issue of alimony, if those findings are supported by substantial credible evidence in the record as a whole. The Court also found that the parties could not waive the children's right to support, thus making that portion of the PSA unenforceable. Therefore, there was no error in the trial court's denial of husband's application to terminate child support for daughter.

As to the issue of alimony, the Court found that the PSA clearly and unambiguously provided that husband waived his right to alimony in exchange for non payment of child support. Thus, his obligation to pay child support for daughter constitutes a change of circumstances making enforcement of the alimony waiver unjust and inequitable. The Court found sufficient evidence of changed circumstances and ordered discovery and a plenary hearing to determine the amount of the alimony award.

EDITOR'S NOTE:  This case re-affirms the basis tenet that agreements regarding support are modifiable  based upon changes of circumstances.  Moreover, agreements are integrated and when two provisions are clearly related to each other and one is modified, it may be possible and/or necessary to modify the other provision too.  ERIC S. SOLOTOFF
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Posted on March 2, 2009 by Robert A. Epstein

APPELLATE DIVISION DENIES EX-WIFE'S CLAIM REGARDING BUY-OUT VALUE OF MARITAL HOME

Recently, in the unreported decision of Pacifico v. Pacifico, the Appellate Division reversed a trial court’s ruling establishing that an ex-wife provided sufficient proof to overcome a presumption established by the New Jersey Supreme Court that “current market value as of the time of the triggering event” should govern the value to which the ex-wife could exercise her option to purchase her ex-husband’s one-half interest in the marital home. 

The parties executed a Property Settlement Agreement in December 1996, which was incorporated into the final judgment of divorce. The PSA provided that the marital residence was to be sold upon the youngest child reaching age 19 and that, at that time, the ex-wife had the first option (and then the ex-husband) to buy-out the former spouse’s interest in the home. If neither party wanted to exercise said option, it was to be sold. Once the youngest child turned 19, the ex-husband filed an application to compel the listing and sale of the property. The ex-wife then filed a cross-motion to buy out the ex-husband’s interest at the value determined by a broker’s market analysis in 1996 – long before the ex-wife application. 

At a plenary hearing in 2004, the trial judge ruled in the ex-wife’s favor and the Appellate Division affirmed. The Supreme Court, however, reversed the determination to apply the 1996 value and remanded so that the trial court could: (1) evaluate the parties’ credibility regarding their intentions at the time the PSA was drafted; and also (2) perform a “close, textual analysis” of the PSA drafts to determine the parties’ “common” intent. Notably, the Supreme Court also held that it was the ex-wife’s burden of proof to establish that her purchase of the ex-husband’s interest in the home should be at the 1996 value and that, should she be unable to do so or her evidence constituted equally sufficient proof merely countering the ex-husband’s position, she would fail. 

The trial court found that the ex-wife fulfilled her burden of proof overcoming the presumption against use of the 1996 value, but the Appellate Division reversed for several reasons including: 

 

(1) the trial court’s failure to make an adverse inference against the ex-wife that her former attorney would have given unfavorable testimony considering the ex-wife’s failure to call the former attorney as a witness;

 

(2) the absence of any proof (documentary or otherwise) that the parties or counsel had discussed use of the 1996 value and, as a result, no evidence of mutual intent as to this issue;

 

(3) the trial court’s failure to consider elimination from both a later version and final draft of the PSA that, at the time of the divorce, the ex-wife would issue to the ex-husband a mortgage in the amount of one-half of the 1996 equity in the home in exchange for him signing a quit-claim deed, as well as the fact that both parties seemingly agreed to eliminate from the PSA that the home would be sold for the “best price attainable;”

 

(4) the inconsistency posed by using the 1996 value for the ex-wife to buy-out her ex-spouse’s interest, but applying fair market value for a third-party sale;

 

(5) the absence of any language in the PSA as to use of the more favorable value, especially if she obtained agreement as to same by taking less alimony, and the court’s failure to consider the parties’ credibility, which would have more heavily considered the ex-wife’s failure to claim that she took less alimony in exchange for use of the 1996 value during four (4) years of prior proceedings (even making a different claim as to same); and

 

(6) reviewing the alimony component in isolation, considering that the ex-wife also negotiated a generous child support component into the PSA and obtained one-half of the ex-husband’s pension.

 

Accordingly, the Appellate Division held that, at best, the parties’ respective proofs were equal, thereby rendering the wife’s application a failure. The later 2003 value of the home for purposes of a buy-out was therefore to be applied.
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