Matthews, Seidman and Horn. The opinion of the majority was delivered by Horn, J.A.D. Matthews, P.J.A.D. (concurring). Seidman, J.A.D. (dissenting).
Defendant Karl R. Mey appeals from an order supplementing a judgment of divorce. The principal issue is the eligibility for equitable distribution of corpus which became available to defendant husband during marriage as a beneficiary under a testamentary trust created before the marriage. N.J.S.A. 2A:34-23. A secondary issue is, assuming said corpus is eligible, whether the trial judge erred in the manner of distributing the assets between the parties.
Defendant was the beneficiary of a testamentary trust created under the will of his grandfather, who died in 1960 when defendant was 12 years old. The corpus of the trust was a farm consisting of approximately 47 acres on which defendant, his mother and his brother and sister resided.
Defendant's mother was designated as trustee. Under the terms of the will the property or the proceeds of the sale thereof was to be held in four separate trusts for the benefit of each of the three children, all of whom were then minors, and their mother. Discretion was given to the trustee to invade the corpus in order to make advances for the care, support, maintenance and education of the beneficiaries. She was also directed to accumulate the income for herself, individually and as guardian of her children, and to apply so much of it as might be necessary for the same purposes.
The will further provided that as each child attained the age of 21 the accumulated income from such child's share of the trust would be paid over, and such child would then continue to receive the income until attaining the age of 25, at which time such child's share of the principal would be distributed to him or her. However, if any child should die before attaining the age of 25, his or her share was to be distributed per stirpes to such issue as might then be living, or, if none was living, should be divided equally among the beneficiaries of the other trusts. Upon distribution to the youngest child, the mother would then be entitled to take the share of the trust estate assigned to her.
Shortly before his marriage defendant had become 21 and had been paid approximately $40,000 in accumulated income. He continued to receive income from his share of the trust until he reached the age of 25 in October 1972, at which time he was married. Prior to that time he was not entitled to receive his share of the corpus.
The parties were married on November 16, 1968. They had no children. On September 24, 1974 plaintiff wife filed a complaint for divorce on the ground of extreme cruelty. The divorce judgment, which included a distribution of marital assets, was entered on March 25, 1975. Subsequently on July 8, 1975, an order was entered vacating "[a]ll elements of the judgment heretofore entered in the
matter * * * with the exception of the dissolution of the marriage and the award of counsel fees * * *," giving exclusive possession of the former marital residence to plaintiff and further ordering that following discovery the parties were to be afforded a plenary hearing as to the issue of equitable distribution.
After the hearing pursuant to said order the judge determined that the corpus received by defendant was eligible for equitable distribution. He held that the control date for equitable distribution is "the date that the person is entitled to receive whatever is left to him." Defendant appeals from the order, which, reflecting the trial judge's views, required defendant to pay to plaintiff the sum of $20,000.
The principal issue is novel. The "equitable distribution" statute is comparatively new and the law construing it is still developing. The pertinent language of the last paragraph of the statute is:
Defendant contends that, contrary to the trial judge's determination, he acquired the property, that is, the subject proceeds of the corpus, before his marriage. The acquisition, he says, occurred when his grandfather died and his trust estate came into being; that from that time he became entitled to, i.e. , "acquired," an "interest" in the estate which was merely held for him until he reached age 25, at which time he "happened to be married." He relies particularly on Painter v. Painter , 65 N.J. 196 (1974), wherein Justice Mountain, speaking for the court, said (at 217) that " all property, regardless of its source, in which a spouse acquires an interest during the marriage shall be eligible for distribution * * *."
Thus, he argues that it follows that in a case such as the instant one, where defendant's interest in the corpus vested upon his ancestor's death, he acquired that interest before he was married and therefore it was exempt.*fn1 We do not agree.
As we view Painter , the quoted phrase was written in the context of a discussion of whether any spousal assets were to be excluded by reason of their source, i.e. , earned as against gift or other sources. That part of the discussion concentrated on the meaning of the word "acquired." It did not include the meaning of the phrase "legally and beneficially" in connection with the word "acquired." Justice Mountain expressed the court's realization that the "general governing rules" set forth in the opinion would not provide all the answers to the myriad of problems which could be anticipated. So "[i]ndividual problems must be solved, as they arise, within the context of particular cases." Painter, supra , n. 7 at 218.
As will be noted, other cases following Painter were concerned with the meaning of "legally and beneficially." We find that generally their interpretations accord with our own view of the meaning and intent of that phrase.
It is settled that the concept of vesting of property interests is "clearly in no way relevant to the question of effecting an equitable distribution * * *." Stern v. Stern , 66 N.J. 340, 348 (1975). The court, however, intimated that not all "future interests may qualify as 'property' within the meaning of N.J.S.A. 2A:34-23." Id. at 349. This constituted a recognition by the court that not all "property" was eligible. The court's language suggests to us that what property was eligible depended purely on
whether it qualified as such within the phrase "legally and beneficially acquired."
We cannot treat "legally and beneficially" as surplusage. If it were, concededly all property, regardless of whether it was legally and beneficially acquired, would be considered as "acquired" when a spouse became entitled to an interest -- as is contended here by defendant. "Property" projects broad forms of ownership. As stated by defendant, "it is obvious that many different forms of ownership are included [within the meaning of the word], such as absolute ownership, beneficial ownership, defeasible ownership, joint ownership, ownership subject to a reversion, etc. "
N.J.S.A. 1:1-2 states that the enumerated words and phrases thereunder, when used in any statute,
[u]nless it be otherwise expressly provided or there is something in the subject or context repugnant to such construction * * * shall have the meaning herein given to them.
Personal property. "Personal property" includes goods and chattels, rights and credits, moneys and effects, evidences of debt, choses in action and all written instruments by which any right to, interest in, or lien or encumbrance upon, property or any debt or financial obligation is created, acknowledged, evidenced, transferred, discharged or defeated, in whole or in part, and everything except real property as herein defined which may be the subject of ownership.
Real estate; real property. The words "real estate" and "real property," include lands, tenements and hereditaments and all rights thereto and interests therein.
But we must give effect to the phrase "legally and beneficially." Webster's Third New International Dictionary (1971) defines "legal" as "conforming to or permitted by law." It defines "beneficial" as "receiving or entitling one to have or receive in one's own right and for one's benefit an advantage, use or benefit * * *." In the sense of these definitions we regard the phrase "legally and beneficially," as did the trial judge, to mean that the spouse acquires the property within the intention of N.J.S.A.
2A:34-23 when he or she acquires a title which carries with it the effective power to control or use or enjoy. Cf. Packard-Bamberger, etc. v. Oakland Boro. Council , 87 N.J. Super. 92 (App. Div. 1965).
We perceive no cogency in defendant's further argument that before the marriage date defendant might have sold his interest for an actuarially discounted price, "in which [event] the issue at hand would never have arisen since no distribution would have been made to the husband during the marriage." We are not called upon to deal with that situation. That he might have sold his interest is not equivalent to a right to use or enjoy the trust corpus.
Gauger v. Gauger , 132 N.J. Super. 89 (Ch. Div. 1975), aff'd 138 N.J. Super. 366 (App. Div. 1976), certif. granted 70 N.J. 524 (1976), contrary to defendant's belief, does not provide a "most compelling analogy" for his view. It provides additional support for the trial judge's ruling. That case held that real estate acquired as joint tenants by the husband and his mother in 1941, before the former's marriage, was not eligible for distribution under the statute although the mother died during the marriage.
The principal theme of defendant's argument that Gauger furnishes such analogy is that it demonstrates that although the husband's "future interest in his mother's joint interest could have been defeated, inter alia , by his prior death * * *," nevertheless the court held that he had acquired the property before the marriage. This argument overlooks the real basis for the decision, which is that the husband's right to the beneficial use of the jointly held property commenced with the grant to him and his mother, not with the death of his mother. Babbitt v. Day , 41 N.J. Eq. 392 (Ch. 1886); 48 C.J.S. Joint Tenancy § 7 at 930. The Appellate Division, in affirming, said: "The trial judge found for defendant since he concluded that defendant acquired his entire interest in the realty in 1941." 138 N.J. Super. at 367 (emphasis supplied).
In Pellegrino v. Pellegrino , 134 N.J. Super. 512 (App. Div. 1975), the husband's contributive share in a pension fund was held to be eligible for allocation under the statute, since it was refundable to him "should he resign or be dismissed prior to qualifying for a benefit." He had the legal right to resign and to enjoy the use of the fund. Tucker v. Tucker , 121 N.J. Super. 539 (Ch. Div. 1972), was held to be factually inapposite because "[t]here the husband made no contributions to the private employer's incentive compensation and pension plan and consequently had no right of withdrawal before retirement." 134 N.J. Super. at 516. (emphasis supplied).
White v. White , 136 N.J. Super. 552 (App. Div. 1975), held that the husband's interest in a pension plan to which he "made no contribution * * * and consequently had no right of withdrawal" was not eligible. The plan in that case gave the husband the right to receive retirement income in the future, contingent upon either (1) becoming totally and permanently disabled, or (2) voluntarily terminating his employment (having attained the age of 40 and completed at least ten years of service), receiving a pension starting as early as age 55, or (3) retiring between the ages of 55 and 65.
Blitt v. Blitt , 139 N.J. Super. 213 (Ch. Div. 1976), involved a husband's noncontributory pension and profitsharing plans, but considered as one plan by the court. The judge held that one-half of the full contribution to the plan which was made by the husband's employer was eligible, "had vested" (i.e. , that "defendant had an absolute right to $24,500 as of the date the complaint was filed"), and "[t]his plan, despite its noncontributory aspect, is quite similar to the plan considered in Pellegrino v. Pellegrino, supra , which specified that 'These moneys are returnable to the member should he resign or be dismissed prior to qualifying for a benefit.'" At 217.
We agree with the statement of the court in Blitt v. Blitt , in commenting upon the Pellegrino decision as follows:
* * * Hence, it is quite clear that the propriety of subjecting the proceeds of the plan to distribution was based not on the source of the contribution but rather the nature of the interest and defendant's control over it. * * * [139 N.J. Super. at 218 emphasis supplied]
Kruger v. Kruger , 139 N.J. Super. 413 (App. Div. 1976), held retirement and disability benefits which the husband "has become irrevocably entitled to receive for the balance of his life constitute assets subject to equitable distribution to the extent that his entitlement thereto is based ...