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Savage-Keough v. Keough

November 5, 2004


On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Passaic County, FM-16-1525-02.

Before Judges Conley, Lisa and Winkelstein.

The opinion of the court was delivered by: Winkelstein, J.A.D.


Argued October 14, 2004

The issue presented in this opinion is whether defendant husband waived his right to equitable distribution of plaintiff wife's ERISA-qualified stock option plan under the terms of the parties' antenuptial agreement. Defendant argues that ERISA's preemption and antialienation provisions preclude a pension plan participant from denying his or her spouse an interest in the plan, even if the spouse purported to waive that right in a premarital agreement. Plaintiff counters that it is only a participant's survivor benefits, not the pension benefits that constitute marital property for state law purposes, that ERISA prohibits a participant from alienating to the spouse's detriment. The Family Part judge agreed with plaintiff, and found that defendant's antenuptial agreement to waive his rights in plaintiff's pension plan was not precluded by ERISA. We agree and affirm.

These are the facts. On September 5, 1980, the day the parties were married, when plaintiff was thirty-two years old and defendant was fifty, they entered into an antenuptial, or premarital, agreement (the Agreement), in which each party waived his or her interest in certain assets of the other. Before signing the Agreement, each had it reviewed by his or her own attorney.

The parties' assets were listed in Schedule"A" to the Agreement. At the time of the marriage, defendant was the owner and operator of his own sales business while plaintiff was employed as a secretary at Bendix Corporation. Included on plaintiff's schedule were Bendix stocks,"presently owned and to be purchased in the future from payroll deductions." Plaintiff had enrolled in the Bendix Corporation's stock ownership plan on January 1, 1969, when she was twenty-one.

Plaintiff filed for divorce on March 21, 2002. During the twenty-two year marriage, plaintiff acquired significant interest in the plan, which, as a result of corporate mergers, came to be known as the Honeywell Savings & Stock Ownership Plan (the Plan).

Prior to the divorce trial, defendant moved in limine for an order that the Plan was eligible for equitable distribution. Defendant argued that federal law, specifically the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Retirement Equity Act of 1984 (REA) (collectively referred to as ERISA, 29 U.S.C.A. §§ 1001 to -1461), precludes plaintiff from alienating her ERISA-qualified plan under the terms of the Agreement, thereby rendering it subject to equitable distribution.*fn1 Thus, he claimed his premarital waiver of his rights to plaintiff's Plan was unenforceable. The trial judge disagreed. He ruled that the Agreement was enforceable as to the Plan. As a consequence, he concluded that defendant waived his right to have that asset subject to equitable distribution.

The following day, the parties settled the remaining issues and the divorce was uncontested. An amended final judgment of divorce was entered on May 23, 2003. The only issue on appeal is whether the Plan is subject to equitable distribution. In addressing this issue, we first review the law in New Jersey as it affects the equitable distribution of a divorcing party's pension.

The portion of a pension acquired during a marriage is typically an asset subject to equitable distribution. Kikkert v. Kikkert, 177 N.J. Super. 471, 475 (App. Div.), aff'd, 88 N.J. 4 (1981). Although New Jersey enacted the Uniform Premarital Agreement Act (the Uniform Act) in 1988, which governs the contents and enforcement of premarital agreements, see N.J.S.A. 37:2-31 to -41, the Agreement, having been executed in September 1980, is not subject to that act. See N.J.S.A. 37:2-41 (Uniform Act applicable only to premarital agreements executed on or after its effective date). Premarital agreements executed before the Uniform Act are, however, enforceable, so long as they satisfy certain conditions. See e.g., N.J.S.A. 37:2-4; D'Onofrio v. D'Onofrio, 200 N.J. Super. 361, 366 (App. Div. 1985); Nicholson v. Nicholson, 199 N.J. Super. 525, 530 (App. Div. 1985); DeLorean v. DeLorean, 211 N.J. Super. 432, 435 (Ch. Div. 1986).

To be enforceable, an antenuptial agreement signed prior to the passage of the Uniform Act must be voluntarily entered into, not unconscionable, and based on full financial disclosure. DeLorean, supra, 211 N.J. Super. at 436-38. Here, these criteria were undisputedly met. Both parties fully disclosed their assets on the schedule attached to the Agreement, and no allegations of fraud, duress or unconscionability have been raised. In fact, defendant does not dispute that the Agreement was valid when executed. As such, in the absence of an ERISA prohibition, the Agreement is enforceable as written.*fn2 Because this is a purely legal issue, we address it de novo, as we are not bound by a trial court's construction of legal principles. Manalapan Realty, L.P. v. Township Comm. of Manalapan, 140 N.J. 366, 378 (1995)."ERISA was enacted by Congress to protect the welfare of employees and their dependents who depend upon retirement plans." Hawxhurst v. Hawxhurst, 318 N.J. Super. 72, 82-83 (App. Div. 1998). It is remedial legislation"to encourage the creation and growth of private pension[] plans while at the same time protecting the participants of those plans." Id. at 83.

ERISA includes a preemption clause, which provides that ERISA"shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C.A. § 1144(a). This preemption clause establishes the regulation of pension plans"as exclusively a federal concern." Hawxhurst, supra, 318 N.J. Super. at 83 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed. 2d 402, 416 (1981)). ERISA also contains a spendthrift clause, which prohibits participants in the plan from alienating their retirement benefits:"[e]ach pension plan shall provide that benefits provided under the plan may not be assigned or alienated." 29 U.S.C.A. § 1056(d)(1).

It was this antialienation provision that drove Congress to pass REA in 1984. As enacted, ERISA often left women who had significantly contributed to the family's home and financial security unable to obtain any pension benefits upon divorce or the death of a husband. Ablamis v. Roper, 937 F.2d 1450, 1453 (9th Cir. 1991). To remedy this inequity, Congress passed REA"in an effort primarily to safeguard the financial security of widows and divorcees." Ibid. REA required that"all qualified pension plans provide automatic benefits to surviving spouses in the form of a survivor's annuity (Pub. L. No. 98-397, 98 U.S. Stat. 1429 [1984])." Edmonds v. Edmonds, 710 N.Y.S.2d 765, 768 (Sup. Ct. 2000)(citing 29 U.S.C.A. ยง 1055(a)(2)). ERISA was amended by REA"to ensure that a participant's spouse receives survivor ...

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