On appeal from Superior Court, Chancery Division, Family Part, Monmouth County.
Michels, Petrella and Baime. The opinion of the court was delivered by Petrella, J.A.D.
Defendant-appellant Elizabeth Edgerton appeals from the denial by the Chancery Division, Family Part, of her motion brought under R. 4:50-1(f) in which she had sought to modify that portion of a property settlement agreement incorporated in a final judgment of divorce dealing with inherited assets and equitable distribution. Her inherited assets had been considered subject to equitable distribution in the agreement. Defendant argued that because the equitable distribution statute (N.J.S.A. 2A:34-23) had been amended to remove inherited property from distribution and that change had been declared retroactive by subsequent court decision in Gibbons v. Gibbons, 86 N.J. 515, 524 (1981), she was entitled to modify the judgment. We reverse the denial of her motion and remand.
The parties to this appeal were married on June 17, 1967. Two children were born of that union, one in 1968 and the second in 1973. The parties separated in September 1979. After negotiations through their respective attorneys,*fn1 a property settlement agreement dated December 21, 1979 was executed which included provisions regarding the distribution of assets. For present purposes we need not go into all the provisions of the agreement. The following provisions outline how defendant's inherited property was distributed. The inherited property was listed in the agreement and treated as a marital asset subject to equitable distribution. Although under the agreement defendant was to retain her inherited undivided 1/6 interest in the assets of Stallcup Estate Farms in Missouri, variously estimated as having a value of between $180,000
and $1,051,175, she became obligated to make a cash payment to plaintiff. Defendant likewise was allowed to retain her inherited interest in the estate or trust created by Bethel L. Clay and in the estate of Cyrus Anderson. Defendant claimed that her income from the Anderson inheritance was $6,000, and that her income from the Clay inheritance was $20,000. Plaintiff claimed that total cash receivable from the wife's inheritances was actually $65,000. However, defendant asserted that $35,000 of this amount was received after the agreement was signed, and a major portion thereof was used to purchase a house for herself and the children.
The agreement obligated defendant to pay plaintiff $150,000, payable $20,000 upon signing of the agreement, and the balance within five years unless the wife's interest in this Missouri land was sold or transferred, in which event plaintiff was to receive 1/2 of any consideration received by defendant as the result of such sale or transfer. There was no interest on the payments for the first three years, but thereafter any outstanding balance was to bear interest at 9% per annum. In addition, this debt to plaintiff was to be secured by a mortgage on the land in question or other secured instrument acceptable to plaintiff.
On December 31, 1980, Assembly Bill No. 1229 was enacted into law as L. 1980, c. 181. The effect of this statute was to amend N.J.S.A. 2A:34-23 to exclude from eligibility for equitable distribution property acquired by either spouse during marriage by gift (other than interspousal gift), devise or bequest.*fn2 Prior thereto inherited property was considered subject to equitable distribution under our court decisions. See Painter v. Painter, 65 N.J. 196, 214 (1974). On July 8, 1981 our Supreme Court held that the 1980 amendment to N.J.S.A. 2A:34-23 applied retroactively to "all other cases presently on
direct appeal or in which a final judgment has not been entered." Gibbons v. Gibbons, supra, 86 N.J. at 524.
The divorce complaint had been filed by plaintiff herein on March 10, 1981. On July 27, 1981, nineteen days after the decision in Gibbons an "Amendatory Agreement" was entered into which had language acknowledging the parties' prior agreement and that it was binding on them, except as modified by the amending agreement. The amending agreement essentially provided that commencing July 1981, child support would be increased to $1,350 per month.
On the same day that the amending agreement was finalized a hearing was held in what was essentially an uncontested divorce proceeding. The proofs presented were that the plaintiff was entitled to a "no-fault" divorce and that the parties to the action had freely and voluntarily entered into the property settlement agreement and the amendatory agreement.
The transcript of the July 27, 1981 divorce hearing does not indicate that anyone called to the judge's attention that the agreement had included inherited property. There was likewise no mention of the then six month old amendment to the statute or to the then 19 day old decision in Gibbons v. Gibbons, supra. Indeed, the judge said:
Mrs. Edgerton, do you understand that I haven't seen the agreement or the amendment and I'm not making any determination as to whether or not it is a fair agreement or sufficient agreement. Do you understand that?
The witness answered affirmatively and the uncontested divorce proceeded. The judge directed that counsel include in the judgment that "the Court took no testimony and made no findings as to whether the agreement was adequate or sufficient."
The actual divorce judgment was not signed until August 13, 1981. It included a finding that the agreement had been entered into voluntarily, as well as a recital that the court did not ...