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Innes v. Innes

Decided: January 17, 1990.


For affirmance in part, reversal in part -- Chief Justice Wilentz and Justices Handler, Pollock and Garibaldi. For concurrence in part, dissent in part -- Justices O'Hern and Stein. The opinion of the court was delivered by Garibaldi, J. Stein, J., concurring in part and dissenting in part. Justice O'Hern joins in this opinion. O'Hern, J., concurring in part and dissenting in part. Justice Stein joins in this opinion.


We hold today that payments generated by pension benefits that were previously equitably distributed are not "income" for purposes of reconsidering the pensioner's alimony obligations. Our decision is based on the recent amendment to N.J.S.A. 2A:34-23, the pre-existing case law and the specific language of the parties' agreement.

After thirty-one years of marriage, Frank T. Innes, plaintiff, filed a complaint for divorce on October 8, 1982. The ground for the complaint was the continuous separation of Innes and his wife-defendant, Nita L. Innes, since June 2, 1974. A Dual Judgment of Divorce was entered on March 26, 1984. The judgment incorporated the terms of a property-settlement agreement reached between the parties.

The agreement required plaintiff to pay defendant $650 per month in alimony and $100 in child support directly to the unemancipated daughter of the marriage. Three other children born of the marriage were emancipated at the time of the divorce. Plaintiff also agreed to maintain defendant as beneficiary on a life-insurance policy with a face amount of $50,000.00.

The agreement also disposed of the parties' two major assets, the marital home and the husband's pension. Defendant could live in the former marital residence until March 1, 1985, when the house would be sold and the net proceeds divided equally between the parties. Plaintiff agreed to pay defendant an equitable (distribution) share of his pension, $19,000, less forty percent of the value of the defendant's existing pension. Plaintiff was to pay defendant this money from the proceeds of the sale of the marital home. The agreement also contained a

provision that stated: "Except as otherwise set forth herein each of the parties hereby waives and relinquishes all rights to participate in the assets including pension funds of the other party."

The marital home was sold in 1985; the plaintiff received $39,028.70 and defendant received $74,042.52. The difference between the amounts, $35,000.00, is attributable to the cash settlement paid to defendant representing the value of the plaintiff's pension plan.

On June 14, 1985, the plaintiff was unexpectedly fired by his employer. He was sixty-one years of age at the time of his termination. His monthly income was reduced from $2,054 to $879, which he received in unemployment compensation. After his discharge plaintiff made every effort to find new employment but was unable to do so.

Unable to procure a new position, plaintiff filed a motion for an order terminating alimony on June 28, 1985. Defendant filed a Notice of Motion for Aid to Litigant on December 4, 1985, based on plaintiff's failure to pay alimony pursuant to the divorce decree. On December 31, 1985, the trial court denied the motion to terminate alimony but entered an order finding that plaintiff had failed to comply with the divorce judgment. Plaintiff appealed both orders, and on May 7, 1986, the case was remanded to the trial court for reconsideration because plaintiff asserted a change in circumstances after the entry of the two orders.

In December 1985, when his unemployment benefits ceased, the plaintiff elected to receive social-security benefits of $622 per month. In April 1986 the plaintiff elected to receive his pension benefits. At that time he also purchased a $24,000 annuity from the College Retirement Equity Fund using the proceeds he had received from the sale of the marital home. The monthly income from the pension, $720.00, and the annuity, $160.00, totalled $880. He also received approximately $139.00 in income from other savings. He had assets of $19,580.

Defendant, who was disabled, had moved to Florida by the time of the hearing. She received monthly income from the University of Pennsylvania of $420.00, disability social-security benefits of $280.00, and approximately $400.00 per month from a cash management account. She had approximately $68,000.00 in assets.

The trial court determined that plaintiff's termination of employment constituted a change in circumstances sufficient to result in a modification of the alimony award. Accordingly, the trial court reduced the alimony from $650 to $550 per month, beginning April 1, 1987, and required plaintiff to pay the defendant $100 per month toward the arrearage until it was paid in full, and $1,200 for defendant's counsel fees. In making its decision, the trial court considered the fact that the cost of living had increased, plaintiff's income had decreased, and plaintiff had paid $200 per month to his daughter while she was attending college.

Plaintiff appealed, contending that in determining alimony the trial court should not have considered the income he received from his pension and annuity. Including that income, he argued, constituted an inequitable form of "double-dipping," inasmuch as it flowed from assets that had already been equitably distributed. He relied on D'Oro v. D'Oro, 187 N.J. Super. 377 (Ch.Div.1982), aff'd, 193 N.J. Super. 385 (App.Div.1984), which prohibits such consideration. The Appellate Division reversed and remanded, 225 N.J. Super. 242 (1988), because the trial court had made no findings concerning the parties' circumstances in establishing the alimony award. However, the Appellate Division rejected plaintiff's argument that his pension and annuity should not be considered in determining alimony. In its holding it specifically rejected the D'Oro rule. Id. at 247. Judge Long dissented from so much of the decision as held that pension and annuity payments were income for the purposes of determining alimony. Id. at 248-50. She found that

[plaintiff] and defendant divided the pot of marital assets at the time of the divorce. In so doing, defendant took her share of plaintiff's pension in a lump sum. Plaintiff now receives his share of the pension periodically. Periodicity does not change the nature of the transaction or the character of the pension payments as assets and not income. This is not a situation in which a distributed asset generates or throws off income. In that event, the income would clearly be a part of the post-judgment alimony base. Here, the pension payments sought to be tapped by defendant as alimony are plaintiff's equitable share of the marital asset; as such they are not includible in the calculation of available income for an alimony award. It is not the fact that the pension is not income. Simply stated, no asset, however derived, should be considered part of the income available for alimony purposes. [ Id. at 248-49].

The recent amendment to N.J.S.A. 2A:34-23, which codifies the holding in D'Oro, had not been enacted when the Appellate Division decided the case. Accordingly, neither Appellate Division opinion discussed the applicability of the amendment to this case.

Plaintiff filed an appeal of right pursuant to Rule 2:2-1(a)(2).


In divorce actions, courts may award alimony "as the circumstances of the parties and the nature of the case shall render fit, reasonable and just . . ." N.J.S.A. 2A:34-23. The basic purpose of alimony is the continuation of the standard of living enjoyed by the parties prior to their separation. Mahoney v. Mahoney, 91 N.J. 488, 501-02 (1982). The supporting spouse's obligation is set at a level that will maintain that standard. Lepis v. Lepis, 83 N.J. 139, 150 (1980). Although the supporting spouse's current income is the primary source considered in setting the amount of the award, his or her property, capital assets, and "capacity to earn the support awarded by diligent attention to his [or her] business" are also proper elements for consideration. Bonanno v. Bonanno, 4 N.J. 268, 275 (1950).

Plaintiff is applying for a modification of the initial alimony award due to changed circumstances. After initial alimony awards have been made, courts may modify alimony orders "as circumstances may require." N.J.S.A. 2A:34-23.

The party seeking modification has the burden of demonstrating a change in circumstances warranting relief from the support or maintenance obligations. Lepis v. Lepis, supra, 83 N.J. at 157; Martindell v. Martindell, 21 N.J. 341, 353 (1956). One "changed circumstance" that warrants modification of the alimony order is an increase or decrease in the supporting spouse's income. Lepis v. Lepis, supra, 83 N.J. at 151; Martindell v. Martindell, supra, 21 N.J. at 355.

When an alimony order is reviewed, the primary factors assessed to determine whether the former marital standard of living is being maintained are: "the dependent spouse's needs, that spouse's ability to contribute to the fulfillment of those needs, and the supporting spouse's ability to maintain the dependent spouse at the former standard." Lepis v. Lepis, supra, 83 N.J. at 152. Other criteria include whether the change in circumstance is likely to be continuing and whether the agreement or decree explicitly provided for the change. Ibid. Temporary circumstances are an insufficient basis for modification. Bonanno v. Bonanno, supra, 4 N.J. at 275 (temporary unemployment not sufficient).


In this case we do not decide whether plaintiff's alimony payments should be modified. The modification of alimony is best left to the sound discretion of the trial court. Hence, we remand the case to the trial court to determine whether there were changed circumstances, and if so, whether there should be a modification of alimony. The issue before us is whether the trial court in determining whether plaintiff's alimony payments should be modified may consider plaintiff's pension payments.*fn1

We hold that it may not. Our disposition of this issue is governed by the recent amendment to N.J.S.A. 2A:34-23, pre-existing law, and the specific language of the parties' agreement. The amendment reads, in relevant part, as follows:

When a share of a retirement benefit is treated as an asset for purposes of equitable distribution, the court shall not consider income generated thereafter by that share for purposes of determining alimony. [ L.1988, c. 153, § 3.]

It is axiomatic that in construing a statute one first considers its plain language. Kimmelman v. Henkels & McCoy, Inc., 108 N.J. 123, 128 (1987); Renz v. Penn Cent. Corp., 87 N.J. 437, 440 (1981); Sheeran v. Nationwide Mut. Ins. Co., Inc., 80 N.J. 548, 556 (1979). The plain language of the pertinent amendment provides that income from pension benefits that have been treated as an asset for equitable distribution purposes (those benefits reflecting work during the marriage partnership) is not to be considered in determining alimony. Conversely, under the amendment income from pension benefits earned after the marital partnership has ended may be considered. This interpretation is substantiated by Senate Judiciary Committee, Statement to Senate, No. 976, which provides "that when a share of a retirement benefit is treated as an asset for purpose of equitable distribution, the income generated by that share only is not to be considered in determining alimony." (Emphasis added).

Although the legislative history underlying the amendment is sparse, the statute sets forth no new position and simply codifies and embodies the holding and policies of the decision in D'Oro v. D'Oro, supra, 187 N.J. Super. 377. There, consistent with Kikkert v. Kikkert, 177 N.J. Super. 471, 477-78 (App.Div), aff'd o.b., 88 N.J. 4 (1981), a wife received a one-third share of the present value of her husband's pension. The D'Oro court

reasoned that "it would be inequitable for [her] to be able to include his pension income twice for her benefit, first for a share of equitable distribution, and second for inclusion in his cash flow determination of an alimony base." 187 N.J. Super. at 379; accord Staver v. Staver, 217 N.J. Super. 541, 547 (Ch.Div.1987) (portion of pension payments flowing from benefits earned after divorce may be considered in determining changed circumstances, but those attributable to benefits earned during the marriage and subject to equitable distribution may not).

The D'Oro holding also was based on the court's decision to promote the immediate-offset method of pension distribution. 187 N.J. Super. at 377. That method was encouraged in Kikkert, supra, 177 N.J. Super. at 478, to avoid the "continued strife and hostility" that arises from long-term and deferred sharing of financial interests. We recently reaffirmed that policy in Moore v. Moore, 114 N.J. 147, 162 (1989). As Judge Long acknowledged in her dissenting opinion in the instant case, the policy favoring the immediate offset method will be eviscerated if the majority opinion of the Appellate Division is adopted because

[most] thoughtful matrimonial lawyers will advise their clients in continuing alimony cases to await the receipt of the pension for distribution at which time both spouses will receive their share in periodic payments. This will obviate the possibility that the dependent spouse will tap the asset twice. * * * [Also], it will contravene the plain language of Kikkert encouraging such settlements. [225 N.J. Super. 242.]

Here plaintiff's entire pension was treated as an asset for purposes of an immediate offset equitable-distribution award. This distribution was consistent with Moore v. Moore, supra, 114 N.J. at 162, and Kikkert v. Kikkert, supra, 177 N.J. Super. at 477. Nothing in the record suggests that merely a portion of plaintiff's pension was considered marital property subject to equitable distribution. Therefore, the recent amendment immunizes plaintiff's pension from consideration in alimony-modification determinations.

This result is consistent with the legislative intent underlying the recent amendment. Although that specific amendment was first proposed in 1985, further amendments to N.J.S.A. 2A:34-23 and other modifications of New Jersey family and matrimonial law were addressed in the early 1980s by the New Jersey Commission on Sex Discrimination. In amending N.J.S.A. 2A:34-23, the Legislature relied to a great extent on the Commission's findings. In recommending amendments to New Jersey's marriage and family law, the Commission on Sex Discrimination in the Statutes stated that its two-fold purpose was to recommend appointment of more women to commissions, boards, and agencies, and to conform all statutes and regulations to a standard of sex-neutral language. Sex Discrimination in Marriage and Family Law: New Jersey Commission on Sex Discrimination in the Statutes (2d Report, Sept.1981) at i-ii. In the introduction, the Commission reported that it found the New Jersey marriage and family-law statutes "contained many subtle forms of discrimination reflecting stereotypical attitudes towards men's and women's roles." Id. at 2.

The recommended amendments support the Committee's expressed goal of neutralizing any language that supports sexual stereotypes. For example, N.J.S.A. 2A:34-13, the statute regarding the age at which a party can bring a matrimonial action, previously allowed a man of eighteen years and a woman of sixteen years to do so. The amended statute reads a "person" of sixteen years, eliminating the gender-based age requirement. N.J.S.A. 9:6-3 states that when a parent or guardian abuses a child, the abuser may be required to pay a monetary penalty to the wife, guardian, custodian, or trustee of the child. The recommended amendment would eliminate the silent assumption that the husband or father would normally be the abusing parent, and substituted "non-abusing parent" for "wife." The Commission also recommended changing N.J.S.A. 9:2-4, regarding parental rights to custody, to eliminate the mother's preference as custodial parent, and make custody rights completely equal between the parents.

Thus, the amendments proposed by the Commission were designed to remove discrimination against women and men, and to make the rights of mother and father, or wife and husband, equal in the eyes of the law. Similarly, the amendment at issue, designed to avoid double-dipping, reflects the Legislature's intent to follow the Commission's recommendation that husbands and wives be treated equally under the law.

In holding that the recent amendment applies to the instant case, we also hold that it is applicable to both initial alimony orders and modifications of earlier alimony awards. We find no support for the position of our dissenting colleagues that the amendment applies only to initial orders and not to modifications of alimony. The plain language of the amendment, the canons of statutory interpretation, and preexisting principles of matrimonial law undermine their contentions. Prior to the recent amendments to N.J.S.A. 2A:34-23, we stated that "[the] equitable power of the courts to modify alimony and support orders at any time is specifically recognized by [that statute.]" Lepis v. Lepis, supra, 83 N.J. at 145. "As a result of this judicial authority, alimony and support orders define only the present obligations of the former spouses. Those duties are always subject to review and modification on a showing of 'changed circumstances.' " Id. at 146. We affirmed in Gibbons v. Gibbons, 86 N.J. 515, 525 (1981), the well-established principle that any orders pertaining to alimony or other support may be revised and altered by the Court from time to time as circumstances may require. We recognized both in Lepis and Gibbons that such authority flows from a section of N.J.S.A. 2A:34-23 (alimony "[orders] so made may be revised and altered by the Court from time to time as circumstances may require. . . ."). The Legislature's failure to remove or limit that provision when it recently amended N.J.S.A. 2A:34-23 confirms the Legislature's intent that the recent amendment applies not only to an initial alimony award but also to a modification of alimony based on changed circumstances.

Moreover, the plain language of the amendment states that it "takes effect on September 1, 1988, and shall apply only to orders and judgment entered after that date," and extends its reach to any order, including a modification of an original order that is entered after September 1, 1988. L.1988, c. 153, § 9. Indeed, a contrary conclusion would violate well-established canons of statutory interpretation: avoid constructions that render any part of a statute inoperative, superfluous, or meaningless, Abbotts Dairies v. Armstrong, 14 N.J. 319, 328 (1954); Paper Mill Playhouse v. Millburn Township, 95 N.J. 503, 521 (1984), or lead to absurd results, State v. Gill, 47 N.J. 441, 445 (1966). Given the nature of marriage, divorce, and aging in our society, parties usually obtain a divorce before they are retired and begin receiving pension benefits. Accordingly, disputes about pension income as it relates to alimony will almost always occur after the parties are divorced. More importantly, the statute is tailored to apply primarily where an immediate payout of the pension has been made before income is generated. The ill the statute is designed to remedy is subsequent consideration of income generated by that portion of the pension that had previously been considered for purposes of equitable distribution. Hence, the issue of double-dipping will most frequently occur in the context of an application for alimony modification rather than an initial alimony award.

Nor are we persuaded that the recent amendment should not apply to plaintiff's request for alimony modification because the final judgment of divorce and initial award of alimony were rendered prior to the amendment's enactment. As previously discussed supra at 503, such a finding would be inconsistent with the language of the amendment and the authority of the courts to constantly review and alter alimony awards as circumstances change. Our dissenting brethren would freeze the divorce agreement and provide that regardless of whether a newly-enacted statute is curative, merely reflective of preexisting law, or consistent with the expectations of the parties, the modification of alimony must be determined by law in effect at

the time the final judgment of divorce and initial award of alimony was entered.

Their contention is inconsistent with common-law principles governing retroactive application of legislation. See Gibbons v. Gibbons, supra, 86 N.J. at 522-25; Rothman v. Rothman, 65 N.J. 219 (1974). When N.J.S.A. 2A:34-23, the equitable-distribution statute, was enacted, one of the first questions this Court confronted was whether the statute was to be retroactively applied or applied only prospectively. In Rothman v. Rothman, 65 N.J. 219 (1974), we held that the statute was to be retroactively applied because that interpretation was necessary to make it workable and give it its most sensible interpretation. Specifically, in Rothman v. Rothman, supra, 65 N.J. at 223-24 (footnote omitted), we held:

Momentarily ignoring constitutional compulsions, and viewing the issue simply as one of statutory construction, we find ourselves unable to believe that the Legislature intended its grant of power to undertake an equitable distribution of marital assets to apply solely to property acquired on or after the effective date of the act. Were this construction to be adopted, it would, in each case, become necessary to determine the date of acquisition of each asset acquired during marriage, often a difficult if not impossible task. A further question would arise should the particular property interest under consideration, though acquired after the effective date of the act, have been purchased with, or received in exchange for, money or other property owned before that date. Moreover, if defendant's contention were adopted, it has been estimated, apparently without exaggeration, that the full effect of the statute would not be felt for at least a generation.

To make this amendment workable and to give it its most sensible interpretation, it must be applied to modification of alimony orders that were entered prior to the effective date of the amendment. The dissents' proposed prospective application would result in a court in each case undertaking a painstaking review of the prior negotiations resulting in the initial alimony award and equitable-distribution settlement. Additionally, the full effect of this amendment would not be realized for a long period of time.

Moreover, N.J.S.A. 2A:34-23 as amended does not represent new law but is merely reflective of preexisting law. Gibbons v.

Gibbons, supra, 86 N.J. at 524. A review of the criteria listed in N.J.S.A. 2A:34-23 discloses that the statutory language merely sets forth the well-established guidelines that courts have understood and embraced for years in considering the needs and circumstances of the parties in determining appropriate alimony and equitable-distribution awards. Commission on Sex Discrimination Report, supra, at 26-27.

Additionally, the amendment also is consistent with the reasonable expectations of the parties. The test of expectation is whether the parties relied on prior law to their detriment, such that retroactive application would cause a "deleterious and irrevocable" result. Gibbons v. Gibbons, supra, 86 N.J. at 523-24. At the time the property-settlement agreement was incorporated in the dual judgment for divorce, both the Kikkert and D'Oro decisions had been rendered. Indeed, the parties followed those decisions. Defendant received in equitable distribution a lump-sum payment for plaintiff's pension, which they both recognized was an asset and to which defendant relinquished her right. That is clear from the language of their agreement: "Except as otherwise set forth herein each of the parties hereby waives and relinquishes all rights to participate in the assets including pension funds of the other party.' (Emphasis added).

The dissents' suggestion that the Legislature intended the double-dipping amendment not to apply to consensual property-settlement agreements but only to court decrees is equally unpersuasive. In Lepis v. Lepis, supra, 83 N.J. at 149, we specifically found that there is "no reason to distinguish between judicial decisions and consensual agreements when 'changed circumstances' call for the modification of either." Likewise, we see no reason why the unfair policy the Legislature intended to prohibit by the amendment is not equally applicable to consensual agreements and court decrees. Moreover, the distinction between the two is meaningless. Indeed, most parties negotiate the terms of a property-settlement

agreement, which is then incorporated in the divorce decree by the Court. Hence, most property-settlement agreements are voluntary and incorporated in a court decree.

Evidently, our dissenting brethren do not like the amendment and want the Court to alter the Legislature's enactment. Under Justice Stein's alteration, the double-dipping prohibition would be "presumptive" rather than a clear rule, post, at 534. This, however, is not the amendment the Legislature enacted. Moreover, such a proposal not only flies in the face of the plain meaning of the statute but it is vague, unworkable and creative of further complications in an already confused area of the law.

Applying the recent amendment codifying the pre-existing law is consistent with the Legislature's intent, the remedial policies underlying the pre-existing law at the time of its enactment, namely, avoiding "double-dipping" of retirement benefits and encouraging the immediate-payout method of retirement benefits, and the clearly-expressed expectations of the parties.*fn2


The final issue we must address involves the trial court's consideration of the annuity payments. The recent amendment concerning retirement benefits is not applicable to plaintiff's annuity. We agree with Judge Long's dissenting opinion and hold that such payments are not "income" for purposes of determining changed circumstances insofar as they reflect principal rather than "income generated by the $24,000 plaintiff received in distribution. . . ." 225 N.J. Super. at 250. Had the plaintiff shoved the $24,000.00 in a friend's mattress and asked that friend to start sending him $200.00 a month, there is no question that those payments could not be considered "income" for purposes of altering an earlier alimony award. The same is true of the portion of the annuity payments that reflect return of the principal. On the other hand, income generated by the principal and given to the plaintiff on a monthly basis is "income" for purposes of determining "changed circumstances." That portion of the payment constitutes an increase in his income and aggregate resources. Thus it is eligible for inclusion in the calculus used to arrive at a modification of the alimony award. Lepis v. Lepis, supra, 83 N.J. at 151; see Martindell v. Martindell, supra, 21 N.J. at 355.

As previously stated, we do not decide whether plaintiff's alimony payments should be modified. That question is best left to the sound discretion of the trial court. In each case, the court must closely examine the circumstances of both parties. The court must make a complete and thorough analysis of the incomes, income capacities, and general financial circumstances, including assets and income, of both parties in reaching its conclusion. Depending on the parties' circumstances a court

may award a spouse a disproportionate share of the other spouse's actual income.

What the trial court can no longer do, however, is determine alimony by considering income generated by a retirement share that has been equitably distributed, either at the time of divorce or when it considers a modification application. The Legislature has concluded that it is inappropriate to make equitable distribution of a retirement benefit and then consider that distributed share for purposes of determining alimony. As did the court in D'Oro, the Legislature found "double-dipping" of this asset to be improper.

Hence, we hold that payments generated by pension benefits that had been previously equitably distributed are not income for purposes of alimony modification. Further, we hold that annuity payments purchased with the proceeds of an equitable-distribution award also are not "income" for that purpose to the extent that they reflect return of the principal as opposed to income generated by the principal.

Accordingly, the Appellate Division judgment is affirmed in part and reversed in part and the cause remanded for further ...

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