This enforcement motion follows defendant's unsuccessful attempt to discharge alimony and maintenance obligations in bankruptcy. As part of her post-judgment application, Eileen Borzillo alleges defendant's ongoing bad faith and seeks attorney's fees for this motion and the bankruptcy proceeding.
In the context of this case, two emerging issues are worthy of a broader dialogue: How to define and apply the "bad faith" counsel fee test established in N.J.S.A. 2A:34-23 as amended (L. 1988 c. 153 § 3); and what protection, if any, can or should be given innocent litigants forced to defend their quality of economic life from unprincipled ex-spouses bent on using bankruptcy to diminish the divorce judgment or the property settlement agreement. See Siegel v. Siegel, 243 N.J. Super., 211, 578 A.2d 1269 (Ch.1990).
After 23 years of marriage, Eileen Borzillo was granted a divorce on the grounds of extreme cruelty. As part of the judgment of divorce entered on May 17, 1990, Eileen Borzillo and Anthony Borzillo entered into a comprehensive property settlement agreement (PSA) in which she waived her interest in his business and IRA for the marital home. Child support was fixed at $210 per week.
As part of the PSA, plaintiff also waived permanent alimony and in exchange, defendant made the following promises: He would pay $100 per week alimony and the $650 monthly mortgage for two years; he would fully assume the $25,500 in credit card debts; he would maintain $100,000 of life insurance for the benefit of plaintiff and the unemancipated child; and he would pay $1250 in counsel fees.
In the original version of the PSA drafted by counsel for the defendant, the credit card obligations were characterized as alimony payments. However, prior to the final hearing, the original language was excised in ink, apparently as a result of opposing counsel's concern for the tax liability his client would incur if such payments were specifically characterized as alimony.*fn1
By November, 1990, the defendant stopped paying the monthly mortgage. When plaintiff sought to enforce this and other
obligations via a motion filed February 4, 1991, returnable February 22, 1991, defendant countered by filing a Chapter 7 petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania in which plaintiff was the primary creditor. The specific relief defendant sought was to have four obligations he agreed to bear discharged: The two years of mortgage payments; the $100,000 of life insurance coverage; the $1250 payment of counsel fees; and the $25,500 credit card debt.
The filing of defendant's petition stayed plaintiff's enforcement action and compelled plaintiff to defend the PSA in the only forum that remained open to her, Bankruptcy Court, resulting in plaintiff incurring $7600 in additional post-judgment counsel fees.
After a full hearing, the Bankruptcy Judge found these obligations to be in the nature of support and alimony and, therefore, exempt from discharge by reason of § 523(a)(5) of the Bankruptcy Code. Borzillo v. Borzillo, 130 B.R. 438 (Bkrtcy.E.D.Pa.1991). The Honorable David A. Scholl, United States Bankruptcy Judge, further found that defendant's actions were inconsistent with past practices relied upon by plaintiff and, generally, mired in bad faith. In regard to the defendant, Judge Scholl noted:
One standard the court may now factor to determine whether a counsel fee shall be awarded is the good or bad faith of either party. See N.J.S.A. 2A:34-23 as amended by L. 1988, c. 153 § 3, and Sheridan v. Sheridan, 247 N.J. Super. 552, 589 A.2d 1067 (Chan.Div.1990). Kothari v. Kothari, 255 N.J. Super. 500, 605 A.2d 750 (App.Div.1992). While prior court decisions did not seem to favor such a per se litmus test. Savoie v. Savoie, 245 N.J. Super. 1, 583 A.2d 762 (App.Div.1990); Darmanin v. Darmanin, 224 N.J. Super. 427, 540 A.2d 913 (App.Div.1988); and Williams v. Williams, 59 N.J. 229, 281 A.2d 273 (1971), the march of superseding policy in this direction is unmistakable though the Legislature appears to have left the defining of such bad faith to the case by case process of judicial review. See N.J.S.A. 2A:15-59.1 (award of attorney fees for frivolous lawsuits), Iannone v. McHale, 245 N.J. Super. 17, 583 A.2d 770 (App.Div.1990), Evans v. Prudential Property and Cas. Inc. Co., 233 N.J. Super. 652, 559 A.2d 888 (Law Div.1989), Sjogren, Inc. v. Caterina Ins. Agency, 244 N.J. Super. 369, 582 A.2d 841 (Ch.1990), N.J.S.A. 2A:34-23(a) (payment of counsel fees by defaulting party in actions to enforce and collect child support) and, of course, N.J.S.A. 2A:34-23 as amended, supra.
As a matter of policy, the awarding of counsel fees for a litigant's "bad faith" or for instituting frivolous litigation is
fundamentally new to our State.*fn2 In the few reported cases to date, our courts have looked to federal rule and case law for guidance. See Iannone v. McHale, supra, adopting "objective" standard, two-prong test of Fed.R.Civ.P. 11: To establish "bad faith" and right to fees, must show other party's improper motive and that litigation was unfounded in fact and law.
New Jersey's adoption of the federal "objective" test -- "reasonableness under the circumstances" Kinee v. Abraham Lincoln Federal Sav. & Loan Ass'n., 365 F. Supp. 975 (E.D.Pa.1973) -- is predicated on our State's historical concern that the right of access to our courts should not be unduly infringed upon and that honest and creative advocacy should not be discouraged. Iannone v. McHale, supra, 245 N.J. Super. at p. 28, 583 A.2d 770.
Though current holdings have mainly dealt with a review of the frivolous litigation statute, the standard adopted and the rationale advanced are equally applicable to similar laws -- such as N.J.S.A. 2A:34-23 -- which also permit "bad faith" as a criteria for counsel fee recovery.
Bad faith is not simply bad judgment or negligence, rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity. It is different from the negative idea of negligence in that it contemplates a state of mind affirmatively operating with furtive design or ill will. Stath v. Williams [174 Ind.App. 369], 367 N.E. 2d. 1120, at 1124 (1977) citing Vickers v. Motte, (1964), 109 Ga.App. 615, 137 S.E. 2d 77.
"Bad faith" has also been defined as an intent to mislead or deceive another, or a neglect or refusal to fulfill some duty or contractual obligation not prompted by some honest mistake as to one's rights or duties, but by some interested or sinister motive. Black's Law Dictionary 127 (5th Ed.1979); ...