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Brandenburg v. Brandenburg

Decided: April 3, 1979.


On appeal from Superior Court, Chancery Division, Passaic County.

Lora, Michels and Larner. The opinion of the court was delivered by Larner, J.A.D. Michels, J.A.D. (dissenting in part).


Plaintiff husband appeals from several aspects of the order for equitable distribution entered in conjunction with a judgment of divorce in favor of both parties pursuant to N.J.S.A. 2A:34-2(d) and 2A:34-7. One facet of plaintiff's appeal asserts error in the inclusion in the assets available for distribution of his stock interest in a business acquired after the separation of husband and wife. The other contentions are focused upon the propriety of the valuation of certain marital assets for the purpose of equitable distribution.


A brief review of the undisputed facts dealing with the marital relationship is essential for the consideration of the eligibility of the stock interest as property subject to equitable distribution.

The parties were married in 1944 and two children were born of the marriage. Sometime in 1965 or 1966 they separated pursuant to a mutual understanding. The husband moved to an apartment in Hawthorne, New Jersey, located in the building where his business was conducted, and the wife remained in the marital home in Montclair with their two daughters. In 1974 the Montclair home was sold and a condominium was purchased for the wife and children in Clifton with funds derived from the sale of the Montclair property and a $15,000 loan made by the husband. Title was taken in the wife's name alone.

They continued to live separate and apart from each other since 1966 and did not cohabit as husband and wife up to the time of trial -- a period of approximately ten years. The husband continued nevertheless to support his wife and

children and returned to the marital home from time to time to visit with his children. On a few occasions when the daughters were home for holidays he would stay overnight, and would also attend special parties or other occasions in which the children were involved. The wife did nothing to discourage the continuance of this close relationship between father and daughters.

The husband had started a business known as Norris Manufacturing Company in Hawthorne in the early 1960s. Apparently it prospered until it became involved in a trade secret litigation, as a result of which a substantial judgment was recovered against the company, forcing it to go out of business. The business was then liquidated in late 1965 or early 1966, with most of the assets taken in satisfaction of the judgment. The wife, who held stock in the company in her name, received $37,500 as her share of the liquidation, and two trusts were set up for the children from the same source. Norris Manufacturing Company was dissolved and thus was no longer a viable business enterprise.

Thereafter the husband became employed as general manager for a newly formed company, known as J.B.L. Corporation. Concededly, at that time he had no propriety interest in that company, and there is no suggestion that J.B.L. Corporation was created by funds or other assets of Norris Manufacturing Company. It was truly a new enterprise and not identifiable with or traceable to Norris Manufacturing Company or its assets.

Plaintiff continued as an employee of this company, and commencing in 1969 or 1970 he started to exercise stock options in J.B.L. and purchased shares of stock through the years so that as of the time of the hearing below he held a 59% stock interest in the corporation, having an estimated value of approximately $470,000.

It is this stock interest acquired after the separation which is the subject matter of the controversy on this issue. The trial judge found that the J.B.L. stock is a marital asset subject to equitable distribution because it was acquired by the

husband "during the marriage." In including its value in the computation of distribution, he relied upon the literal language of Painter v. Painter , 65 N.J. 196 (1974), which holds that property acquired prior to the filing of the divorce complaint is includable for the purpose of equitable distribution*fn1

Subsequent to the decision below the Supreme Court, in Smith v. Smith , 72 N.J. 350 (1977), modified the rule enunciated in Painter. Recognizing that the formulation of Painter was but a pragmatic solution in "an attempt to avoid promulgating an unworkable rule," the court held that the termination date for identification of distributable assets could be determined by the date of a separation agreement, accompanied by a separation in fact.

The key question presented to us is whether the existence of a formal separation agreement is a sine qua non to the application of the modified rule of Smith v. Smith.

In our view the rationale underlying the Smith opinion is that the termination date for the identification of distributable assets is the point of time when it can be said that the marriage is factually dead. Of course, it would be simpler from the viewpoint of judicial economy to utilize a termination date measured by a finite, unequivocal act, such as the filing of the divorce complaint or the execution of a separation agreement. However, in this developing field of equitable

distribution law of this State we do not believe that the Supreme Court intended to set down a conclusive mandate as to date of termination and foreclose the rethinking of the application of the rule where the facts of a particular case warranted it.

The court's anticipation of problems arising in different fact patterns is found in the following footnote (n. 7) to the Painter opinion:

We are under no illusion that what we have said above will provide certain and ready answers to all questions which may arise as to whether particular property is eligible for distribution. We have sought only to implement the legislative intent, as we discern it, by setting forth what we believe should be the general governing rules. Individual ...

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