Opinion
DOCKET NO. A-4635-14T2
09-02-2016
L.B., Plaintiff-Respondent, v. H.B., Defendant-Appellant.
Jeffrey W. Goldblatt, attorney for appellant. Respondent has not filed a brief.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Sabatino and Gilson. On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1650-14. Jeffrey W. Goldblatt, attorney for appellant. Respondent has not filed a brief. PER CURIAM
After ten years of marriage, the parties signed a property settlement agreement (PSA) and were divorced in 2014. Defendant, the former wife, signed the PSA, which had been prepared by the attorney for plaintiff, her husband, when she was not represented by her own attorney. The PSA provides, among other things, that (1) defendant waived alimony and equitable distribution for a lump sum payment of $250,000, and (2) plaintiff would be the parent of primary residential custody for the parties' two children.
Given the confidential nature of defendant's and the son's conditions, and to protect privacy interests, we have used initials and do not refer to the parties or the children by name.
Defendant contends that at the time she signed the PSA, and when the judgment of divorce was entered, she was suffering from, and in treatment for, drug addiction and depression. Thus, she contends that she did not understand the PSA and she was acting under mistake, fraud, or duress. Among other things, defendant asserts that she did not know that plaintiff enjoyed an average annual income of over $600,000 for the three years prior to the divorce and, therefore, she did not knowingly or intelligently waive her right to alimony and equitable distribution. When defendant recovered her sobriety, she retained an attorney and moved to vacate the PSA, which had been incorporated into the judgment of divorce. The Family Part denied that motion without holding a hearing in an order entered on May 8, 2015. Defendant appeals that order. We reverse and remand for a plenary hearing.
I.
We discern the facts from the record, noting that plaintiff failed to file any papers on this appeal. The parties were married on April 15, 2004. They have two children: a daughter who was born in May 2005, and is currently eleven years of age; and a son who was born in November 2006, and is currently ten years old. The son suffers from Fragile X Syndrome, is non-verbal, and it is anticipated that he will require special care throughout his life.
The marriage was troubled. Defendant reports she suffered from depression and abused prescription medication. In April 2014, both parties filed domestic violence complaints against the other and obtained temporary restraining orders under the Prevention of Domestic Violence Act of 1991, N.J.S.A. 2C:25-17 to -35. The domestic violence complaints and temporary restraining orders were dismissed by mutual consent and the parties entered into a consent agreement that contained civil restraints. Defendant later pled guilty to violating those restraints.
On May 1, 2014, plaintiff filed for divorce. For most of July 2014, defendant attended a drug rehabilitation program in California. Thereafter, the parties attempted to reconcile, but that effort was short-lived and unsuccessful. On August 10, 2014, the parties signed the PSA. At the time, and as previously noted, defendant was not represented by counsel and the agreement had been prepared by plaintiff's attorney.
The PSA provides, among other things, that (1) the parties are to share joint legal custody of their two children, with plaintiff being the parent of primary residential custody; (2) defendant is to pay $1.00 per month in child support, calculated without regard to the child support guidelines, and plaintiff is responsible for the children's college education; (3) each party waived alimony and agreed that the "waiver of alimony is a non-modifiable waiver regardless of future circumstances of either party and . . . that the provisions of Lepis v. Lepis, 83 N.J. 139 (1980), which permit modifications of alimony in the event of a change in circumstances, are not applicable to the waiver contained in [the] agreement"; (4) each party waived any interest in the other's retirement assets; (5) each party effectively waived all interest in bank accounts, stocks, and bonds owned or controlled by the other party; (6) the parties will sell their marital home and defendant was to be paid $250,000 out of the proceeds "in full satisfaction of any claim the Wife may have for alimony or equitable distribution"; and (7) plaintiff agreed to pay defendant's car payments, car insurance, and medical insurance for two years after the divorce, and to pay for her cellphone expenses for six months after the divorce.
We note that although many of the provisions in the PSA are mutual, the record establishes that it was defendant who was waiving her rights to alimony and equitable distribution since plaintiff had a much higher income and controlled the financial assets. The PSA also acknowledged that the parties were entering into the agreement without the exchange of financial information, case information statements, or discovery. Defendant also acknowledged that she was aware of her right to have legal counsel and she was waiving that right.
On October 20, 2014, a judgment of divorce was entered, which incorporated the PSA. Defendant had received notice of the hearing, but she did not appear. As a consequence, we do not have the preferred record where a neutral judge questions both parties to ensure that they have entered into their property settlement agreement knowingly and intelligently.
On November 13, 2014, defendant signed an untitled one-page agreement to accept $200,000, rather than $250,000, from the proceeds from the sale of the house. The house sold on December 1, 2014, for $680,000, which netted the parties $318,261.55 after all deductions. Defendant used $160,000 of the monies she received to buy a new home.
Following the divorce, defendant admitted that she continued to abuse drugs. Thus, in January 2015, she sought treatment in a rehabilitation program in Florida. She remained in that program until February 11, 2015. While she was in that treatment, plaintiff filed a motion to suspend defendant's unsupervised parenting time and obtain other relief. Although defendant did not appear in connection with that motion, she did send the court a letter dated February 3, 2015, wherein she agreed to complete her treatment. The Family Part granted the plaintiff's motion in an order dated February 20, 2015.
The parties did not provide a copy of that letter in the record on appeal, but the letter is discussed in defendant's certification and the Family Part's decision. --------
On March 31, 2015, defendant, represented by counsel, filed a motion to vacate the PSA and the judgment of divorce. Alternatively, defendant requested discovery and a plenary hearing to examine her alleged grounds for relief from the PSA.
In support of her motion, defendant filed a certification, attesting, among other things, that: (1) during their marriage, she did not work and plaintiff had been the person who financially supported their family; (2) plaintiff was a "commodities trader on Wall Street," but before signing the PSA she did not know his income or what assets he possessed; (3) at plaintiff's urging, she did not consult with or hire a lawyer before signing the PSA; (4) plaintiff assured her that he had her "best interests at heart and would always take care of" her financially; (5) the PSA was prepared by plaintiff's lawyer, she was not given an opportunity to review it before signing the document; rather, she was taken to the lawyer's office and asked to sign the document; (6) at the time that she signed the PSA, she was still suffering physically and emotionally from her depression and drug addiction and plaintiff was "fully aware" of her mental and emotional problems; (7) when she signed the PSA, she was "crying uncontrollably" and "did not know what [she] was looking at"; (8) although defendant acknowledged signing the PSA, she did not understand anything in the PSA and she "would never knowingly sign an agreement waiving all of [her] rights to alimony and [her] share of [the parties'] bank accounts and retirement plans"; (9) after signing the PSA, she was not given a copy of the document; (10) she continued to suffer from and receive treatment for her addiction and emotional problems through February 11, 2015; (11) after she became sober, she "realize[d] [she] was duped by the plaintiff"; and (12) she contacted their accountant, obtained their tax returns, and discovered that plaintiff's income in 2011 was over $485,000; his income in 2 012 was over $801,000; and his income in 2013 was over $629,000; thus, plaintiff's average income for the years 2011 through 2013 was $683,000.
Plaintiff opposed defendant's motion to vacate the PSA. After reviewing the papers submitted by both parties, the Family Part judge prepared a tentative order and written opinion. Counsel for the parties then appeared for oral argument and, after hearing arguments, the judge did not change her ruling. Thus, the judge denied defendant's motion and issued her order and written opinion on May 8, 2015.
In making her ruling, the Family Part judge determined that defendant's motion was "not timely" under Rule 4:50-1. She reasoned that defendant had signed the PSA in August 2014, the judgment of divorce incorporating the PSA was entered in October 2014, and defendant waited an unreasonable period of time to file her motion on March 31, 2015. The judge also reasoned that defendant "ratified the [PSA] when the parties signed the November 13, 2014 Consent Order" and when she sent a February 3, 2015 letter to the court acknowledging that she would comply with the parenting time provisions. Furthermore, the judge reasoned that defendant was barred under the doctrine of laches because she had "received substantial financial benefits from the parties' settlement." Thus, the judge denied defendant's motion without a plenary hearing.
Defendant now appeals.
II.
On appeal, defendant makes four arguments: (1) the Family Part should have conducted an evidentiary hearing concerning her request to vacate the PSA under Rule 4:50-1; (2) the judgment of divorce should be set aside because the terms of the PSA are unconscionable; (3) the Family Part erred in its analysis of Rule 4:50-1; and (4) the award of counsel fees was not justified. Given that there were material disputed facts concerning the circumstances under which the PSA was signed, as well as the questionable nature of a number of the provisions of the PSA, we agree that defendant was entitled to discovery and a plenary hearing. There are several established legal principles that guide our analysis.
First, public policy favors enforcement of settlement agreements. Gere v. Louis, 209 N.J. 486, 500 (2012). Indeed, "[s]ettlement of disputes, including matrimonial disputes, is encouraged and highly valued in our system." Quinn v. Quinn, 225 N.J. 34, 44 (2016). "The prominence and weight we accord such [property settlement] arrangements reflect the importance attached to individual autonomy and freedom, enabling parties to order their personal lives consistently with their post-marital responsibilities." Weishaus v. Weishaus, 180 N.J. 131, 143 (2004) (quoting Konzelman v. Konzelman, 158 N.J. 185, 193-94 (1999)).
Second, only "fair and definitive arrangements arrived at by mutual consent" will be upheld. Ibid. Accordingly, to achieve a settlement, there must be "a meeting of the minds" of the contracting parties. Morgan v. Sanford Brown Inst., 225 N.J. 289, 308 (2016). To be enforceable, a settlement agreement "must be voluntarily made and 'freely entered into.'" Peskin v. Peskin, 271 N.J. Super. 261, 275 (App. Div.) (quoting Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div.), certif. denied, 94 N.J. 600 (1983)), certif. denied, 137 N.J. 165 (1994). Consequently, any marital agreement that is unconscionable or is the product of fraud or overreaching may be set aside by the court. Quinn, supra, 225 N.J. at 47 (citing Miller v. Miller, 160 N.J. 408, 419 (1999)); see also Brundage v. Estate of Carambio, 195 N.J. 575, 601 (2008) (explaining that an agreement must be vacated if "achieved through coercion, deception, fraud, undue pressure, or unseemly conduct, or if one party was not competent to voluntarily consent thereto" (quoting Peskin, 271 N.J. Super. at 276)).
Third, an application to set aside a judgment may be granted if the movant establishes a basis for relief under Rule 4:50-1. Miller, supra, 160 N.J. at 418. Rule 4:50-1 allows for relief where the facts and the equities compel it, particularly in contexts involving distribution of marital assets. "The equitable authority of courts to modify property settlement agreements executed in connection with divorce proceedings is well established. . . . The agreement must reflect the strong public and statutory purpose of ensuring fairness and equity in the dissolution of marriages." Miller, supra, 160 N.J. at 418 (citations omitted).
Rule 4:50-1 provides six grounds for relief, four of which are particularly focused on fairness and equity:
(a) mistake, inadvertence, surprise, or excusable neglect;
(b) newly discovered evidence which would probably alter the judgment or order and which by due diligence could not have been discovered in time to move for a new trial under R. 4:49;
(c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; [or]
. . . .
"The rule is 'designed to reconcile the strong interests in finality of judgments and judicial efficiency with the equitable notion that courts should have authority to avoid an unjust result in any given case.'" US Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467 (2012) (quoting Mancini v. EDS, 132 N.J. 330, 334 (1993)).
(f) any other reason justifying relief from the operation of the judgment or order.
We generally accord "substantial deference" to a trial court's determination to grant relief under Rule 4:50-1, and reverse only if the judge's determination amounts to an abuse of discretion. Guillaume, supra, 209 N.J. at 467. Here, however, the Family Court did not hold a plenary hearing; rather, the court addressed the motion to vacate the PSA on the papers with oral arguments.
With these principles in mind, we conclude that the material issues raised in defendant's certification necessitated a plenary hearing. Jacoby v. Jacoby, 427 N.J. Super. 109, 123 (App. Div. 2012) (explaining that a movant is generally entitled to a plenary hearing where the evidence shows the existence of a genuine issue of material fact that he or she is entitled to relief). Defendant raised material contentions that, if established, could warrant vacating the PSA.
We also conclude that the Family Part's determination that defendant's motion was untimely was premature without a plenary hearing. Defendant filed her motion within one year of the entry of the final judgment of divorce. Rule 4:50-2 expressly allows such a motion to be filed "within a reasonable time," and if based on the grounds under either subsection (a), (b) or (c), the motion imposes a one-year limitation. Given the contentions made by defendant concerning her depression, addiction, and treatment, the current record does not support a finding that the motion was filed beyond a reasonable time.
Turning to the substance of defendant's assertions, she has identified several potential grounds for relief under Rule 4:50-1. Defendant certified that, at the time she signed the PSA, she did not understand what she was doing and was acting by mistake. To support that contention, she pointed out that she was suffering from depression and drug addiction and that plaintiff was well-aware of her condition. She also certified that she was unrepresented and that the PSA was prepared by plaintiff's counsel. These assertions if found to be true at a hearing, could constitute grounds for relief based on mistake under Rule 4:50-1(a).
Defendant also certified that plaintiff had supported her throughout their ten-year marriage and although she knew he was a Wall Street commodities trader, she did not know what income he was receiving during the marriage. That critical factual contention, coupled with the fact that no discovery or exchange of case information statements occurred, raises material issues concerning the equitable nature of the PSA in this case. Here, defendant gave up all her rights to alimony and equitable distribution for what was effectively a lump sum payment of slightly more than $44,000. She was paid $200,000 out of the net proceeds of the marital home, which amounted to just over $318,000. Normally, defendant would have been entitled to $156,000 as her fifty percent share. Thus, she only received approximately $44,000 beyond what she was entitled to receive. These contentions if established at a hearing could justify as exceptional and compelling circumstances warranting relief under Rule 4:50-1(f).
Defendant also certifies that she has no knowledge of how much plaintiff had in bank accounts, stocks and other assets. She also was unaware of what he had in his pension fund. If defendant can establish these assertions at a plenary hearing, they could establish that plaintiff misled defendant because defendant would have received approximately $44,000 as full compensation for alimony and her interests in the bank accounts, stocks, bonds and pension that normally would have been subject to equitable distribution. Such facts, if credibly proven at a hearing, could justify relief under Rule 4:50-1 (a), (c) or (f). Although we agree with the trial judge that courts generally do not rewrite a better contract than the parties negotiated themselves, the record here is indicative of exceptional circumstances that may warrant intervention. See Quinn, supra, at 45-47.
We, therefore, reverse the May 8, 2015 order and remand this matter for discovery and a plenary hearing on defendant's application to open the final judgment of divorce and vacate the PSA.
Reversed and remanded. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION