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Hagelin v. Hagelin

December 19, 2007

MARILYN P. HAGELIN, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
v.
REED G. HAGELIN, DEFENDANT-APPELLANT/CROSS-RESPONDENT.



On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-13001-92.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued November 26, 2007

Before Judges A.A. Rodríguez, C.S. Fisher and C.L. Miniman.

In their cross-appeals in this post-judgment matrimonial matter, the parties argue, among other things, whether defendant's alimony obligation should have been terminated, whether it was reduced to an appropriate level, and whether there is support for the judge's award of counsel fees in favor of plaintiff. We conclude there is ample evidence to support the judge's findings and that correct legal principles were applied. We, thus, affirm in all respects except that we will vacate the judge's decision to terminate the alimony obligation on a future date.

I.

For a full understanding of our disposition of these cross-appeals, it is necessary to review in some detail the history of the parties' marriage, the terms of their divorce, and certain events that followed.

The parties were married on September 8, 1962, and had two children, both of whom are now emancipated.

Defendant Reed G. Hagelin (Reed) spent his entire career in the funeral-services business. He served a three-year apprenticeship and thereafter worked full-time at the McCracken Funeral Home until 1970, when he purchased the Gallagher Funeral Home, which he renamed and operated as the Gallagher-Hagelin Funeral Home.

In 1984, Reed formed a business relationship with J. Patrick Growny, which resulted in the merger of the Gallagher- Hagelin and the Growny Funeral Home businesses within two corporate entities: Heritage Funeral Service, Inc. and Heritage Livery Service, Inc. (hereafter collectively referred to as "Heritage"). At the same time of this merger, Reed and Growny purchased the McCracken Funeral Home. The purchase was financed entirely through debt; they borrowed funds for part of the purchase price and the balance was given in the form of personal guarantees. As a result of these transactions, Reed and Growny owned and operated by late 1984, through Heritage, three funeral homes.

Other than what was described as "two little part-time [bookkeeping] jobs" that she held in the early 1980s, plaintiff Marilyn P. Hagelin (Marilyn) was not employed outside of the home during the marriage. Instead, she worked without pay in the aforementioned funeral-services business as "decorator," public-relations and community-contact person, receptionist, and cleaning person.

During the marriage, the family's income was derived from the funeral-services business. From 1970 to 1984, Reed's annual salary, as reported to taxing authorities, ranged between $25,000 and $40,000. His salary increased in 1984, when Heritage began operating the three funeral homes. Between 1987 and 1993, Reed's reported annual salary from the business ranged between $80,000 and $118,000.

However, Reed's reported salary reveals only part of the family's financial picture. During the marriage, the family lived in a ten-room apartment on the second-floor of the Gallagher-Hagelin building, and the funeral-services business paid all of the family's living expenses associated with that apartment during the marriage. Additionally, the business paid for the family's automobiles, automobile repairs and insurance, gasoline, and medical expenses, along with any property taxes, and the business provided funds for the parties' memberships in two country clubs. Also, under the classification of "entertainment," the business purchased a condominium in Hilton Head, South Carolina, and shouldered all its expenses.

As a result, the family enjoyed the benefit of having many living expenses of significant value filtered through and paid by the funeral business. According to Reed, a "fair representation" of the value of the family expenses borne by the business ranged between $100,000 and $110,000 annually --essentially doubling the amount of the income reported to the taxing authorities. Also, through Heritage, Reed was able to utilize a "loan account" to pay other personal expenses. By December 1, 1993, the loan account had a balance due of $1,064,085.94.

During the marriage, the parties also purchased a 6,000 square-foot building, which was located next to the Gallagher-Hagelin building. And Heritage purchased a nearby house and garages; this property (the garage property) was used as garage space for Heritage's vehicles.

II.

The parties separated in February 1988, evidently because Reed was having an affair with Barbara Brady, one of the business's employees. Marilyn continued to thereafter reside in the second-floor apartment in the Gallagher-Hagelin building, while Reed lodged elsewhere.

In 1992, Reed was served with two complaints. The first was Growny's action against Reed for misappropriating funds from Heritage. The second was Marilyn's action for divorce.

A.

Reed settled the litigation with Growny in 1993 by purchasing Growny's interest in Heritage. He financed this purchase by obtaining a $4,000,000 loan. From these loan proceeds, Reed paid $1,750,000 to Growny, $1,500,000 to the bank that had previously financed the purchase of McCracken, $400,000 to the seller of McCracken in satisfaction of the outstanding personal note, $150,000 to Marilyn in partial pre-payment of her anticipated future award of equitable distribution, and $200,000 in professional fees.

As a result of this transaction, Reed retained in his own name or in Heritage's name: Gallagher-Hagelin, McCracken, the Hilton Head property, and the garage properties; Growny became the owner of the Growny Funeral Home.

B.

On December 18, 1995, Reed and Marilyn were divorced pursuant to a judgment that incorporated a property settlement agreement (PSA).

The PSA required that Reed pay $35,000 per year in direct permanent alimony to Marilyn. This "direct alimony" would be increased to $60,000 annually if Marilyn ceased dwelling in the Gallagher-Hagelin apartment. The PSA provided that, other than Marilyn's death or cohabitation, Reed's alimony obligation would be reviewable only upon Reed's reasonable retirement from his funeral-services business "in accordance with case law which exists at the time of his retirement."

The PSA resolved any disputes about the disposition of the parties' marital property. It provided that Reed would receive the real estate owned by Gallagher-Hagelin and McCracken, the business and capital stock of Heritage, the garage property, and the Hilton Head property. Marilyn received the office building, $555,000 in "initial equitable distribution," and $500,000 to be paid later when Reed sold the business. In terms of the value of these assets, Reed received about $2,846,000 in equitable-distribution proceeds, while Marilyn received about $1,423,000.

The PSA also provided that Reed would pay for and maintain a sizable amount of insurance on his life for Marilyn's benefit. At the time of the execution of the PSA, Reed was obligated to maintain a life insurance policy in the amount of $2,000,000. The PSA allowed for reductions in the amount of that death benefit at various times and for various reasons.

When they executed the PSA, the parties executed an employment agreement and an agreement entitled "Statement of Intent -- Explanation of Spousal Support for Interrelated Marital Agreements" (the intent statement). The employment agreement obligated Reed "and/or Heritage" to provide Marilyn with: a salary of $10,000 per year; housing, including all utilities, insurance, repairs, and maintenance, for a period of at least five years on the apartment at Gallagher-Hagelin; medical and dental insurance; payment for unreimbursed medical expenses, not to exceed $2,500 annually; and automobile expenses, not to exceed $500 per month. The intent statement represented the parties' effort to clarify any "ambiguities" in the PSA and employment agreement, which the parties viewed as being "integrated and interrelated." The intent statement restated in abbreviated form Reed's obligations to pay to Marilyn alimony, certain housing expenses, medical and dental expenses, country club dues, and automobile expenses. The intent statement also repeated the PSA's provision that the only event that would compel a review of Reed's alimony obligation is Reed's retirement "in accordance with case law."

III.

In January 1996, about three weeks after entry of the judgment of divorce, Reed married Barbara Brady and moved into her home in Bloomsbury. He continued to work at the funeral-services business.

According to Reed, his business declined in 1997 because fewer people were dying in New Jersey, as well as nationwide, and, consequently, fewer funerals were being conducted. Heritage's income was adversely affected, bills were not being paid, and, by December 1997, creditors were threatening legal action. As a result, the business sought protection under the bankruptcy laws on December 29, 1997.

At this juncture, Reed received offers from several entities to purchase Heritage. He soon elected to sell Heritage to SCI New Jersey Funeral Services, Inc. (SCI). This transaction was memorialized in four separate agreements: (1) SCI purchased the Heritage capital stock and business for $8,000,000; (2) SCI purchased the real property from which Heritage operated Gallagher-Hagelin and McCracken for $1,700,000; (3) Reed promised not to compete with SCI for a period of fifteen years -- within a 30-mile radius of the business locations in Union and Caldwell -- in exchange for $3,100,000, payable in monthly installments over a ten-year period commencing in April 1998*fn1 ; and (4) Reed agreed to provide consulting services to SCI for $60,000 per year for a five-year period commencing in April 1998.

In closing this transaction with SCI, Reed was required to pay off various mortgage debt, unpaid income and property taxes, and counsel fees. In addition, Reed paid Marilyn $825,735.33 in satisfaction of his remaining equitable distribution obligation. He also paid $1,150,000 in satisfaction of an outstanding personal loan that he had obtained through the Heritage loan account. As a result, Reed emerged from this transaction relatively free of debt and with the prospect of a sizable monthly income from the non-competition and consulting agreements; he also retained ownership of the garage and Hilton Head properties. In addition, Reed received $985,000 in cash at the closing with SCI.

The SCI transaction, however, also had the consequence of requiring that Marilyn move from the apartment at Gallagher-Hagelin. In October 1998, she purchased a townhouse in Roseland for $382,500. Pursuant to the intent statement, Reed began paying Marilyn $25,000 more in yearly alimony because she was required to vacate the apartment; as a result, Reed's yearly alimony obligation increased from $35,000 to $60,000.

In May 1998, following the sale of the business, Reed purchased three parcels of undeveloped land adjacent to Barbara Brady's home in Bloomsbury for $700,000. Reed acknowledged that the purchase was for "aesthetic" ...


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