On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County.
King, Brody and Landau. The opinion of the court was delivered by King, P.J.A.D.
[266 NJSuper Page 58] The Family Part Judge held that the appellant was automatically barred from seeking Lepis v. Lepis, 83 N.J. 139, 416 A.2d 45 (1980), post-judgment "changed circumstances" relief from an alimony order because he had obtained a Chapter 7 bankruptcy discharge of his equitable distribution obligations. We disagree and remand. A Lepis "changed circumstances" decision must be based on all relevant circumstances. A debtor's legitimate recourse to federal Bankruptcy Court cannot perforce bar access to a state court for equitable relief without examination of all pertinent equitable considerations.
Appellant John Pellitteri and respondent Diana Pellitteri married on November 9, 1963. They divorced on July 24, 1989 and executed a property settlement agreement. On February 20, 1992 appellant filed for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C.A. § 727. On July 13, 1992 he was discharged from various debts, including the balance of equitable distribution owed to respondent under the property settlement agreement. The bankruptcy proceeding was unopposed by respondent. In her pro se brief on this appeal she claims that she could not afford counsel in the bankruptcy proceeding.
On June 2, 1992 appellant filed a motion to terminate alimony of $175 a week, vacate alimony arrears which had accumulated over the past nine months, and stop his obligation to maintain life insurance for respondent's benefit. She cross-moved seeking a judgment for the arrears, for the equitable distribution, a wage garnishment, increased alimony, and discovery. After oral argument on August 7, 1992 the Judge denied appellant's motion because he had "unclean hands." The Judge ordered appellant to continue paying alimony, reduced the alimony arrears dating to September 1, 1991 to a judgment of $8,575 and reduced "roof expenses" arrears to a judgment of $1,476.03 but refused to increase alimony or order payment of the equitable distribution obligation which had been discharged in bankruptcy.
At the time of the July 1989 divorce and contemporaneous property settlement agreement appellant, age 51, agreed to pay alimony of $175 a week commencing upon the sale of the marital home in Woodbridge. Up to the time of the sale, respondent continued to live in the home and appellant agreed to pay "roof expenses" (mortgage, taxes, utilities, telephone and insurance). If the marital home was sold for less than $139,000 appellant agreed to pay the difference between the net proceeds of the sale and $139,000. Basically respondent was guaranteed $139,000 from the liquidation and distribution of the marital assets as part of the property settlement. She was to transfer her interest in two
commercial properties which they owned jointly to appellant upon receipt of the $139,000.
Due to the very poor real estate market, the marital home did not sell until May 29, 1992 and the sale price of $154,900 netted only $69,500 for respondent, leaving an outstanding equitable distribution obligation of $69,500, the amount ultimately discharged in bankruptcy. This net was far below the amount the parties thought they would realize on the property when the agreement was negotiated in July 1989.
Appellant has been a real estate agent for ReMax Realty Center in Woodbridge. He claims that the "recent collapse" in the real estate market devastated him economically, greatly reducing his income from sales and rentals, and forced him into the Chapter 7 bankruptcy proceeding. He says that he now cannot afford to pay alimony and that respondent is supported, in part at least, by a male companion.
Respondent relates a different version, one of appellant's mismanagement of his affairs and his improvident dissipation of assets and misrepresentation of income. She denies receiving support from her companion, claims that she has only a very modest income of her own, that she purchased a new home in reliance on justifiable anticipation of the $69,500 which she never received, and that she could not afford to oppose the bankruptcy discharge. The schedule of secured and unsecured creditors listed debts which totalled about $457,000 including respondent's equitable distribution claim listed as $74,000. Of course, we cannot resolve these factual disputes on this appeal.
Appellant urges that the Judge erred in barring his modification application as a matter of law because he had resorted to the bankruptcy court. The Judge had these comments on the situation:
THE COURT: [I]sn't what happened here that your client agreed to pay alimony and agreed to pay a certain amount of money in ...