We previously blogged in 2014 about Marsico v. Marsico, where the trial court barred a litigant from appearing and testifying in a divorce matter through a designated power of attorney, which appointed the Husband’s daughter from a prior relationship as his “true and lawful attorney-in-fact”, with broad powers to “institute, prosecute and defend any actions or proceedings brought in any court,” Ultimately, the daughter was prohibited from acting on the Husband’s behalf. As noted in the linked blog post, the Court expressly excepted those situations where the litigant has already been judicially declared incompetent and unable to act on his or her own behalf. In those circumstances, the Court would have appointed a legal guardian, or a guardian ad litem (“GAL”), rather than the principal unilaterally appointing an agent of his or her own choosing.

The exceptions noted by Judge Lawrence in Marsico were at issue in D.M.C. v. K.H.G., a precedential Appellate Division decision decided on February 22, 2022. The appeal followed the Wife’s denied Motion to vacate a Final Judgment of Divorce (“FJOD”), set aside a Property Settlement Agreement (“PSA”) and essentially re-open the entire divorce matter pertaining to alimony and equitable distribution. The history of the matter provides important context before diving into the Appellate Division’s ruling.

In or around 2000, the Wife was diagnosed with several mental health issues including, but not limited to, bipolar disorder, manic type, schizophrenia and paranoia. Between 2000 and the filing of the Complaint for Divorce (“CFD”) by the Husband in April 2016, the Wife had been hospitalized as a psychiatric inpatient. One of these occasions was a direct result of having been served the CFD and her accompanying breakdown. In September 2016, by consent, Defendant was appointed a GAL who had full access to all information regarding Defendant’s “situation” but permitted Defendant to revoke the appointment at any time.

By October 2016, a Case Management Order (“CMO”) was entered permitting both parties to retain their own forensic, financial experts to perform business evaluations, cash flow analyses and asset tracings. In February 2017, a pendente lite (“PL”) Order was entered awarding Defendant $4,100 per month in support. Following this Order, the GAL was appointed as attorney-in-fact for Defendant (more on that in our prior blog posted linked above). Defendant was ordered to undergo additional psychiatric evaluations, the GAL was required to accept Social Security Disability (“SSD”) payments on behalf of Defendant, and establish an account to deposit SSD and PL payments for her use.

Following this Order, the GAL filed an Order to Show Cause to the Probate Court seeking to grant co-guardianships to the parties’ two (2) adult children, who were 28 and 26 years old at the time.

On October 16, 2017, the Probate Court entered a judgment determining that Defendant was, indeed, incapacitated. The children were to be full participants in their parents’ divorce, as two (2) doctors opined that Defendant did not have the cognitive capacity to make decisions for herself.

A subsequent Order was entered by the Family Part which denied Plaintiff’s request for a downward modification of PL support, denied Defendant’s request for counsel fees, expert fees and a litigation fund. The GAL was ordered to continue serving as the GAL. Following this Order, the co-guardian children terminated the Wife’s expert and retained new divorce counsel.

All counsel, guardians and the GAL participated in an Intensive Settlement Conference with the Court. The matter eventually settled on January 25, 2018, when a FJOD was entered which incorporated the parties’ PSA. The GAL was dismissed from her role the same day.

The PSA, in relevant part, provides the following:

  1. Plaintiff to continue paying $4,100 per month in PL support until such time as the marital residence sold;
  2. At the time of the sale, Defendant was to receive a $61,500 tax-free, lump sum, alimony buy-out (which was to be included in the equitable distribution monthly payment discussed below);
  3. The financial arrangements were based upon Plaintiff’s cash-flow of $97,731 in 2016 from his expert’s report, his cost of insurance post-judgment of $1,500 per month, and Defendant’s receipt of pension and SSD benefits of $60,036 per year;
  4. The parties each mutually waived their right to seek alimony beyond the lump-sum buyout, and indicated that they would not be able to live a lifestyle commensurate with the marital lifestyle;
  5. The marital residence was to be sold and the proceeds to be split equally;
  6. Defendant was to receive 40% of Plaintiff’s 70% interest in three (3) commercial real estate properties (total value of $790,551);
  7. Defendant was to receive 30% of Plaintiff’s 52% interest in a tavern (total value of $270,400);
  8. Three (3) loans receivables were divided in an equitable manner, with Plaintiff retaining certain monthly payments to pay for costs of the marital residence pending sale, Defendant receiving 50% of the principal balance plus a payment of $2,800 from another, and Plaintiff retaining the third note while Defendant received her 30% share ($24,668.50) and a payment of $2,467;
  9. Defendant was credited for 100% of a $50,000 loan to the parties’ son;
  10. Retirement accounts were equalized, Plaintiff was credited for 50% of the difference, or $134,017, and Plaintiff waived his interest in Defendant’s Teachers Pension and Annuity Fund (TPAF);
  11. In total, each party was receiving approximately $919,789 in equitable distribution, with Defendant’s share to be paid over a 180 month period in equal installments of $4,945.84 following the sale of the marital residence, which was secured by a stock pledge agreement and a mortgage against one of the commercial properties owned by Plaintiff;
  12. An irrevocable trust was established naming Defendant as beneficiary and the parties’ children as remainder beneficiaries and trustees; and
  13. The typical boilerplate language of each party retaining all other assets, debts or properties in their individual names was included, as well as each party being responsible for their own counsel and expert fees, and an acknowledgement that the PSA was entered into after full disclosure of income, assets, liabilities, expert reports, discovery and waiver of further discovery.

In February and April 2019, over a year after the divorce, Defendant retained two (2) additional evaluations. Each of the new doctors opined that she had returned to mental capacity and could make decisions for herself. Defendant obtained an additional evaluation in September 2019, from one of the original doctors, who agreed that she had returned to mental competency but expressed reservations that she is at risk of relapsing. Following her application to the Probate Court, the guardianship for Defendant was terminated in December 2019.

Defendant then filed a post-judgment application in the Family Part in November 2020. She sough to vacate the FJOD and PSA, schedule a plenary hearing for alimony and equitable distribution, set discovery schedules and modify alimony and equitable distribution based upon changed circumstances (i.e., she returned to mental competency).

By way of Certification, Defendant highlighted that the parties’ children should have never been involved in the divorce because they were partial towards Plaintiff’s financial influence and control. To support this statement, she stated (without proofs) that the children were negotiating settlements for assets they stood to inherit and, in any event, Plaintiff was continuing to finance their lifestyles at the time. She also certified that the alimony and equitable distribution provisions discussed above were grossly inequitable because Plaintiff retained the vast majority and left her with “nothing.” This was supported by a claim that Plaintiff’s income was low and unsupported by any Case Information Statement (“CIS”). Additionally, Defendant claimed that the income figures utilized were those proffered by Plaintiff’s expert while her own expert opined to something entirely different. She was requesting “at least $5,000 per month” of open durational alimony in this application. Importantly, Defendant did not attach any current CIS to this filing, which is required by Rule 5:5-4(a) – an issue we have similarly blogged about.

Defendant’s Certification continued, claiming the equitable distribution payment over 180 months as patently unfair; that the equalization of retirement accounts was unjust; and that she is entitled to exactly 50% of all marital assets – not the specific carve outs of lesser percentages that made their way into the PSA.

Plaintiff’s opposition was lengthy. He provided his own Certification which claimed his income had diminished following the COVID-19 pandemic and a fire at the tavern. Additionally, he noted his income was based upon the parties’ tax returns and, in fact, included Defendant’s own income. The assets which Defendant claimed were undervalued were the subject of multiple expert’s analyses and formal appraisals. In further support of his opposition, Defendant provided a Certification from the parties’ daughter.

The daughter certified that she had no financial influence by Plaintiff. She explained many of her decisions made jointly with her brother, including why the original divorce attorney was fired. Specifically, she was concerned that Defendant’s delusions and paranoia were being taken advantage of by that attorney.

The GAL also provided a Certification in support of Defendant’s Cross Motion. In short, she confirmed that Defendant was unable to participate in the litigation and described the vast participation she had in the matter in protecting Defendant’s interests in the divorce.

By way of a Reply Certification, Defendant accused the GAL of only wanting to make money. She accused the daughter of contacting her nurse practitioner and therapists to embarrass her, and provided a text message from the daughter in which the daughter referred to her mother as “selfish, self-centered, [and] horrible[.]” From Defendant’s perspective, this was evidence that the daughter was not acting in her best interest.

During oral argument at the trial court, the Judge determined the settlement process was fair. Additionally, the Judge saw no issue with the children being appointed as co-guardians simply because they stood to inherit any assets as contingent beneficiaries. Further, there was no finding that the children were inappropriately financially influenced by Plaintiff, nor was the GAL simply because Plaintiff paid her funds from marital assets. That Plaintiff’s expert’s figures were utilized was not considered grounds to undue the PSA. Finally, the Judge did not find that Defendant’s return to competency was grounds to undue the entire divorce as there was evidence she may relapse and her return to competency was contemplated by the PSA.

Defendant then filed her appeal of that denied Motion. In her appeal, she claimed that the trial court erred in denying the motion to vacate as there were clear showings of inequity and unfairness; abused its discretion in failing to grant the motion; abused its discretion as the appointment of the children was unfair and unjust; abused its discretion as the equitable distribution scheme discussed above was based on Plaintiff’s clearly partial expert and did not consider her own; and, the Court erred in failing to find her return to competency as a substantial change in circumstances warranting a modification of the PSA based upon her prima facia showing of same.

The Appellate Division initially relied upon the language of Rule 4:50-1 in noting that motions to vacate judgments, or agreements, are not an opportunity to change your minds about a consent judgment or reopen because the settlement is less advantageous now or rethink the effectiveness of prior legal strategy. Rule 4:50-1(f) expressly provides that the invocation of the Rule is meant for “exceptional circumstances” where enforcement would be unjust, oppressive, inequitable or unconscionable. To the latter, substantive unconscionability is defined as being so one-sided, that it would “shock the Court’s conscience.”

In reviewing the record before it, the Appellate Division found that there was no proof provided to support the claim that the children were partial or under Plaintiff’s financial control or manipulation. To the contrary, the Appellate Division found that the children took prudent measures to control the costs of litigation and settled the matter with the assistance of two (2) attorneys, the GAL and the divorce attorney.

As for the equitable distribution scheme which Defendant believed was patently unfair, the Court determined that it is fairly common to utilize one party’s experts to resolve matrimonial matters. There was nothing indicating the valuations were done incorrectly. The Appellate Division noted that much of the equitable distribution was a compromise whereby Plaintiff retained the risk of collecting the loans receivable, for example, and yet still provided Defendant with her share of the assets. Even more, the requirement that payments be made into a trust were appropriate given Defendant’s mental health issues at the time.

Regarding alimony, the Appellate Division determined that this too was a compromise that considered the equitable distribution scheme. Moreover, it found the alimony aspect of this matter to be fair given the parties’ ages, separate households, and Defendant’s then-need for long-term care. To this end, the PSA contemplated Defendant’s return to capacity and the Appellate Division recognized that she can now manage her own finances. As for Defendant’s request to modify alimony, since she failed to provide the trial court with an updated CIS and the parties’ PSA contained a non-modification provision (often referred to as anti-Lepis clauses), the trial court’s decision to deny Defendant’s request was affirmed.

Overall, the Appellate Division’s holding was two-fold as it relates to guardianships:

  1. Appointment of party’s adult child to serve as guardian in divorce under Rule 4:26-2(a) does not, in itself, render subsequent settlement unconscionable; and
  2. There needs to be clear misconduct by guardians that led to an unconscionable settlement.

Therefore, the Appellate Division affirmed the trial court’s decision insofar as it found no basis to disturb the parties’ FJOD and PSA. While the facts certainly gave Defendant reason to reconsider the outcome, they were not enough to meet her very significant burden of overturning the FJOD and PSA (and essentially restarting their divorce).

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