July 1, 2008
TAMALA LESTER, PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
ARTHUR LESTER, DEFENDANT-APPELLANT/ CROSS-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-1490-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued June 2, 2008
Before Judges Parrillo and S.L. Reisner.
Defendant Arthur Lester appeals from a June 4, 2007 order of the Family Part awarding his ex-wife Tamala Lester, $40,500 plus costs, representing her one-half share of the profits of the hypothetical sale of a mutual investment property. Plaintiff cross-appeals from the same order denying her counsel fees. We affirm on the appeal and remand on the cross-appeal.
The relevant facts are as follows. The parties were married on June 10, 1990, and had one child, born May 12, 1995. They separated sometime in 2004, and executed a property settlement agreement (PSA) on January 17, 2005, which was later incorporated into the final judgment of divorce entered on May 4, 2005.
At the time of the divorce, defendant, a physician, was sixty-two years old and president of the medical staff at Clara Maass Medical Center. Plaintiff was forty-six years old and a home improvement contractor with thirty-one years of experience. Sometime after separation, but prior to divorce, the parties entered into a joint venture, verbally agreeing to acquire a "handyman's special" home, renovate and resell it, and split the profits equally between the two, after defendant was credited for funds contributed. Specifically, the parties agreed that defendant would bear the expense of the property's acquisition, repair and improvement, and plaintiff would be the day-to-day project manager, overseeing the renovation. Title to the house was to be held only in defendant's name, not jointly, because, at the time, plaintiff had an IRS lien against her.
Pursuant to this oral agreement, plaintiff located a two-family "fixer-upper" at 5 Doremus Street in Summit, which the parties agreed to convert to a one-family residence. Together with the repairs indicated by a home inspection, the cost of renovation was estimated to range from $74,000 to $120,000,*fn1 and take about three months. In accordance with their plan, defendant purchased the home for $522,900 on February 23, 2005.
Immediately after the closing, plaintiff applied for a building permit to commence construction work. In the meantime, she hired, supervised and directed a cleanup crew and eventually, after gaining permission from the township, a demolition crew. Because she was required to be on-site full time, seven days a week, to supervise the work being done, plaintiff quit her job to take on this new responsibility and did not resume other employment for about two months. Defendant meanwhile paid for all of the clean up and demolition laborers who were needed, as well as any equipment required. Plaintiff herself received no compensation for her efforts.
Once the building permit issued on April 8, 2005, plaintiff's subcontractors immediately began work. From the beginning, the project ran into unexpected problems that increased the estimated cost of renovation. For instance, the house had never been winterized and it was discovered that all the pipes in every bathroom on all three floors had burst, and two boilers and two hot water heaters had cracked. As a result, almost every wall in the house had to be opened, revealing outdated knob-and-tube electrical wiring, that had to be replaced with current BX wiring with individual circuits and a new 200 amp service. "Porcupine leaks" were also discovered, which rendered the heating system ineffective. In addition, repairs to the kitchen were delayed over a month when a Canadian supplier failed to send an integral part of the new cabinets and countertops.
Concerned over mounting carrying costs, defendant listed the home for sale in mid-June 2005 at $825,000 even though renovations were not yet completed. Actually, major repair work was not finished until one month later in July 2005, and minor repairs from a "punch list" were completed in August 2005. The parties stipulated that the total cost of renovations was $172,000. However, even after the work was completed in August, a dumpster remained in the driveway because defendant failed to pay monies owed the dumpster company, and radiators, additional molding, paint cans and old kitchen cabinets remained in the garage.
No offers were made on the home despite the fact that defendant lowered the listing price to $800,000. Its appraised value, as stipulated by the parties, was $775,000. Unbeknownst to plaintiff, defendant removed the house from the market on April 30, 2006, and moved into the residence two weeks later on May 12, 2006, having sold his other residence in West Orange.*fn2
After moving into the Summit home, other problems came to defendant's attention. Construction debris left both in front of and inside the garage had to be removed at a cost of $700. Inside, ninety percent of the old windows did not open, and none had been caulked; the refrigerator was installed without a water pipe so it had no ice; the stove was installed asymmetrically; the kitchen electrical system was incomplete which left three lights inoperative; the heating system failed to heat the second floor; two out of three toilets did not work properly; and the basement had to be redone with a new drain installed. Outside, the sidewalk had to be fixed, which necessitated fixing the driveway; the gutters had to be redone and excess water channeled away from the house to prevent further flooding; and unfinished rails that were installed had already begun rotting.
Despite their agreement that plaintiff was to receive a one-half share of the net equity in the home, plaintiff received nothing upon defendant's occupation of the residence. It was defendant's position that after all the associated costs were considered, including closing costs and real estate commissions on a hypothetical sale of the home, there was no equity remaining to be divided. Plaintiff disagreed and calculated her one-half equity share at $40,500, based on an appraised value of $775,000 less costs of purchase $522,000*fn3 and renovations ($172,000).
Consequently, as part of a motion in aid of litigant's rights filed in the Family Part seeking other relief incidental to the final judgment of divorce*fn4 , plaintiff also sought payment of her one-half equity share, or in the alternative, an order directing the Summit house be listed for sale. She also requested counsel fees. Defendant opposed the application and cross-moved for an order fixing a parenting schedule for the parties' daughter and permitting him to take their daughter on vacation to Florida in December 2006. On the return date after hearing argument, the judge resolved the family law issues*fn5 and then, as to the remaining issue of the Summit residence, scheduled a case management conference for March 1, 2007; denied plaintiff's request to have the property sold without prejudice; established a discovery schedule; and denied plaintiff's request for counsel fees without prejudice.
Following discovery, trial took place on May 17, 2007, at the conclusion of which the judge awarded plaintiff one-half of the $81,000, which he determined to be the equity remaining in the home. First, the judge found the oral agreement to be enforceable and not barred by the statute of frauds. Next, the judge discredited defendant's account that he only agreed to $74,000 in renovation costs and he also refused to find any guaranty on plaintiff's part that the work be limited to only three months. The judge also rejected defendant's claim to credits either (1) for costs he never actually incurred on a "hypothetical sale" of the Summit house, including attorney's and realty transfer fees and real estate commissions, or (2) for costs incurred after he occupied the premises as sole homeowner.*fn6
As for plaintiff, the court found she satisfied her burden of proving "substantial performance": there's no question that she had sweat equity involved in this, whether it's seven days a week until a certain period of time or less, whether or not she took leave from her employment. That was her agreement.
And finally, as to the terms of the agreement itself and its enforceability, the judge concluded:
What I have before me today by stipulation is that there is 81,000 in equity in this home; and that, if the 81,000 in equity, after giving every dollar-for-dollar benefit to the defendant as provided by him in discovery, he would be made whole. And what happens here is she would get $40,000, and he gets a home that is worth 775,000. And at the time he bought it, it was worth 525,000. There is no claim made with regard to whether or not it should be sold. They want the 40,000, and he gets the right to keep the home, as if he were the contract purchaser.
I will not allow a windfall with regard to what occurred here. It would be unjust and unconscionable. There's no doubt there was a contract between the parties; there was an offer and acceptance.
And there's a sufficiently definitive statement as to the performance to be performed by this plaintiff without compensation.
She would be entitled to quantum meruit under a contract such as she has. No evidence has been presented as to what a primary contractor in hiring subcontractors, and what her compensation would have been. If I believe the defendant that there is a negative, and if she brought another claim for quantum meruit based on his allegedly breaching the agreement -- he did by taking it off the market and moving into the property -- that that quantum meruit may have, if she had met her burden of proof, been substantially more than $40,000, as to his indicating that he paid out the subcontractors over a hundred and twenty, plus whatever his costs are to carry this place. As I indicated, he's made whole by getting dollar for dollar for all of those expenses.
Therefore, the [c]court finds that the plaintiff met her burden of proof, she met her cause of action to be paid one-half of $81,000, and a judgment will be entered in her favor for [40,500] plus costs.
On the issue of counsel fees, the court denied plaintiff's request, essentially finding plaintiff's claim to be one for breach of contract, for which counsel fees are not authorized:
As to the claim, I will indicate that it is a contract claim, not related to any family-related issues. So any request for attorneys' fees under 5:3-5(c) are [sic] not permitted under contract cases with regard to -- I have not seen any authority that legal fees in a breach of contract are permitted by either party.
The court, however, did not address plaintiff's claim for counsel fees incurred in advocating the remainder of the relief sought in her enforcement motion.
On appeal, defendant contends plaintiff proved no damages in connection with any breach of the parties' agreement. On cross-appeal, plaintiff argues the court erred in not awarding her counsel fees.
As to the former, we affirm substantially for the reasons stated by the Family Part judge in his oral opinion of May 17, 2007. We add only the following comments.
An agreement "simply for the division of profits derived from the sale of land . . . need [not] be in writing to be valid." Chew v. Markeim, 125 N.J.L. 595, 596 (Sup. Ct. 1941); see also Mitchell v. Oksienik, 380 N.J. Super. 119, 129 (App. Div. 2005) ("[a]lthough the parties had not entered into a written agreement with regard to the purchase of the real property, formal written agreements are not necessary for a joint enterprise to exist."). Here, both plaintiff and defendant acknowledge an oral agreement to buy the Summit house, renovate it, sell it, and divide the profits, thus creating in essence a joint venture.
It has been established that "equity has jurisdiction over issues involving the establishment of a partnership, its dissolution, and for an accounting thereof." Ruta v. Werner, 1 N.J. Super. 455, 459 (Ch. Div. 1948). In fact, "[a]s joint venturers, the parties are entitled to seek a partition of their property when their joint enterprise comes to an end, irrespective of how title is formally held." Mitchell, supra, 380 N.J. Super. at 127-28 (internal citations omitted); see also Crowe v. De Gioia, 203 N.J. Super. 22, 34 (App. Div. 1985) ("[t]he name in which the house was held is essentially irrelevant to an equitable action such as this."), aff'd o.b., 102 N.J. 50 (1986). One equitable remedy available, among others, is a forced sale of the property with division of the proceeds between the parties. Mitchell, supra, 380 N.J. Super. at 128 (citing Swartz v. Becker, 246 N.J. Super. 406, 412-13 (App. Div. 1991)).
In Ruta, the parties, who were unmarried and unrelated, orally agreed to engage as partners in a venture to develop a tract of land, held in defendant's wife's name, as a dump, for profit. 1 N.J. Super. at 457-58. Plaintiff provided the labor while defendant supplied the capital. Id. at 458. The relationship soured and ended with plaintiff never receiving any remuneration for his services, nor any profit from the venture. Id. at 459. In awarding plaintiff an accounting, the court stated: various acts of the parties speak eloquently of an arrangement between them whereby there was created a plan of operations with reference to the land in question under which plaintiff was to contribute his skill, ability and knowledge, together with the use of his bulldozer. On the other hand, it is clear that the defendant contributed some cash, gasoline and oil for the equipment used and also the use of the land in question, albeit title to same was in the name of defendant's wife. That the parties were to share equally in the profits is established without serious contradiction.
There was clearly established by the oral agreement a partnership relation and operations conducted in pursuance thereof. [Ibid.]
In Mitchell, the parties were unmarried cohabitants who purchased a tract of land and built a home thereon with funds from a joint bank account, but took title to the land in defendant's name only. 380 N.J. Super. at 123-24. The relationship ended poorly with plaintiff proceeding with a domestic violence suit against defendant, and the family court eventually ordering a sale of the house or an accounting to plaintiff for one-half its value. Id. at 123, 125-26. On appeal, defendant argued that the court erred in applying equitable distribution principles in ordering the sale of the property. Id. at 126-27. In upholding the chancery judge's order, this court stated:
Our review of the trial court's oral opinion discloses that the court did not apply equitable distribution principles to the case at bar. Rather, the court made factual findings and, within its general equity powers, determined, based upon the facts establishing a joint enterprise, that the parties had equal interests in the real property.
Because the parties' relationship had dissolved, the Family Part of the Chancery Division, in response to a request for relief from either or both parties, justifiably applied its authority to order an equitable remedy, including a division of the assets of the joint enterprise, i.e., the net balance after satisfaction of existing debts and costs. [Id. at 129-130 (emphasis added).]
Here, of course, there is no dispute that the parties agreed to an equal division of the net proceeds of sale. And although there was no "sale" as contemplated -- either forced or otherwise -- the court reasonably considered defendant's occupation of the premises titled in his name to be the equivalent thereof. As such, the only remaining question involved the appropriate credits contractually due defendant, who was claiming offsets for costs not actually incurred and costs incurred after his occupation that would have wiped out any remaining equity in the Summit home.*fn7 The court, in our view, properly rejected these claims and found as fact the actual net equity to be $81,000, for which plaintiff's fair share was $40,500. We are in agreement with this finding.
In this regard, findings of fact by the trial court are generally binding on appeal if they are supported by adequate, substantial and credible evidence. Rova Farms Resort Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). "[W]hen the evidence is largely testimonial and involves questions of credibility[,]" deference is particularly appropriate. In re Return of Weapons to J.W.D., 149 N.J. 108, 117 (1997). A trial judge "has a better perspective than a reviewing court in evaluating the veracity of witnesses" because that judge observes the witnesses and hears them testify. Pascale v. Pascale, 113 N.J. 20, 33 (1988). Clearly, we may "not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice[.]" Rova Farms, supra, 65 N.J. at 484. We may only "exercise [our] original fact finding jurisdiction sparingly and in none but a clear case where there is no doubt about the matter." Ibid.
Here, there is no warrant for our interference with the findings and legal conclusions of the Family Part judge on the breach of contract claim. We are also satisfied that, as a matter of equity, the result reached is eminently sustainable. See Mitchell, supra, 380 N.J. Super. at 131.
We are also in accord with the trial judge's decision denying counsel fees on the "Summit home" issue. Although framed as part of a matrimonial motion before a Family Part judge for which attorney's fees may otherwise be awarded, N.J.S.A. 2A:34-23; Rule 4:42-9(a)(1); Chestone v. Chestone, 322 N.J. Super. 250, 255-56 (App. Div. 1999), plaintiff's particular claim in this instance actually sounded in breach of contract for which counsel fees are not authorized. Although formed while still married, the joint venture was established after the parties' separation and bears none of the usual incidents or characteristics of the marital union. Nor is it dependent thereon. The agreement is not referenced in either the PSA or final judgment of divorce and has no ostensible relationship to the parties' marital status. Indeed, the parties treated the joint venture as contractual in nature and plaintiff seeks remedies associated with its breach. In fairness, she is estopped from now claiming otherwise for purposes of her counsel fee request.
However, the fact that she may not be entitled to counsel fees for prosecuting her claim for breach-of-contract damages does not preclude consideration of her request for counsel fees for those portions of her enforcement action clearly matrimonial in nature. Although discretionary, Rule 4:42-9(a)(1); Williams v. Williams, 59 N.J. 229, 233 (1971); Chestone, supra, 322 N.J. Super. at 256, the record is barren of any reasons explaining the court's exercise of its discretion denying the request for counsel fees in its entirety. We are constrained, therefore, to remand the matter for the limited purpose of reconsidering plaintiff's counsel fee request as it relates to matters in the enforcement action other than plaintiff's breach-of-contract claim.
Affirmed in part; remanded in part.