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Eberhardt v. Eberhardt


September 29, 2008


On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Middlesex County, Docket No. FM-12-226-05D.

Per curiam.


Submitted September 2, 2008

Before Judges Messano and Chambers.

After nearly thirty-one years of marriage, plaintiff Constance Eberhardt and defendant Robert Eberhardt were divorced on May 3, 2005. All financial issues were the subject of a property settlement agreement (PSA) entered into by the parties on March 25, 2004, and attached to the judgment of divorce (JOD). In this appeal, defendant takes issue with those portions of the motion judge's order interpreting specific provisions of the PSA in favor of plaintiff and against him.

The relevant issues were first presented in a post-judgment application filed by plaintiff to enforce various aspects of the PSA. While this resulted in an order granting plaintiff much of the relief she sought, the motion was apparently heard without notice to defendant. Therefore, on April 27, 2007, the judge entertained oral argument on defendant's request for reconsideration. In particular, defense counsel characterized the critical issues as those concerning defendant's "life insurance," his "severance package," and "the mortgages" on the former marital home. The judge reserved decision and ultimately filed an order on May 3, 2007, that resolved the other issues presented, but specifically denied defendant's requested relief without prejudice as to these three issues, and set a date for a future conference on them.

It is unclear whether any conference occurred, though plaintiff in the interim sought clarification of other provisions of the May 3, 2007 order. In any event, each party made further submissions to the judge regarding these three issues, and on August 13, 2007, the judge orally placed her findings and conclusions on the record. An order was subsequently entered on August 14, essentially denying the relief defendant sought. This appeal followed.

Because defendant's arguments on appeal, as they did below, relate to specific limited terms of the PSA, we set forth those relevant portions at length. In section twenty-two, entitled, "Life Insurance," the PSA provides,

The Wife shall be designated as irrevocable beneficiary $750,000 (sic) of all of the Husband's Merrill Lynch life insurance policies or 75% of all policies whichever is greater based on the current value (or greater if they increase). The remainder shall be allocated by Husband as he wishes.

At the time the motion judge considered these provisions, defendant had lost his job at Merrill Lynch, had remained unemployed for some twenty months before finding other work, and no longer maintained a policy of insurance through his former employer. Defendant had obtained a policy of insurance through his new employer with his ex-wife as beneficiary in the amount of $100,000 and claimed he was unable to secure any greater amount of insurance because of his age--he was more than fifty-nine years old at the time--and some prior health problems. Defendant sought the court's declaration that he was in compliance with the PSA's insurance provisions.

In section two, entitled "Marital Home," the PSA provides,

The Husband will relinquish any rights to and shall convey to Wife all of his rights, title and interest in the marital residence.... The Husband shall pay-off one half of the home equity loan that currently has a balance of approximately $100,000.00. The wife shall be solely responsible of (sic) paying off the first [] mortgage in the amount of $85,000. The Husband must pay half of the equity loan prior to the transfer of the Deed to the Wife. If the residence is sold, the Husband's obligation of repayment of the home equity loan stops, and the remainder balance of the home equity will be paid from the proceeds of the sale of the residence.

In section nineteen of the PSA, the parties agreed that

[t]he Wife will be solely responsible for the first mortgage in the amount of $85,000.00. In the event the Wife defaults on the first mortgage payment she may sell the house and pay off all liens on the marital residence. In the event she does not sell within a reasonable time, then the Husband will have the option to assume the mortgage payments and proceed with the sale and upon sale will be entitled to 50% of the net proceeds.

Shortly after the entry of the JOD, plaintiff tendered a proposed deed and other closing documents conveying the home to her for defendant's signature. Defendant refused to execute the deed, believing his continued liability on the first mortgage did not require the transfer unless plaintiff was selling the home. In the interim, each party had been paying down the respective mortgage they were responsible for.

Plaintiff sought to refinance the home. It was her position that defendant was obligated by the PSA to pay off the second mortgage and convey the property to her. Defendant, however, contended that taken together, the two paragraphs dealing with the marital home did not require him to pay off the second mortgage loan unless and until the house was sold. Defendant sought the court's declaration that under the terms of the PSA he was entitled to continue paying off the second mortgage and that he was not required to execute a deed in plaintiff's favor until the mortgages were paid off or the property was sold.

Lastly, in a section entitled "Pension, IRA, and 401K," the PSA provides that "[i]n the event the Husband is terminated from Merrill Lynch for any reason, including any RIF package, the Wife will immediately receive half of any termination benefits." Defendant received a severance package when he was terminated by Merrill Lynch pursuant to a reduction in force plan. In addition to other benefits, defendant received payments that he contended were income and deferred compensation, not termination benefits subject to equitable distribution under the PSA's provisions. Defendant sought the court's approval permitting him to retain the full amount of severance pay.

In her oral opinion, the judge concluded that defendant "now want[ed] the Court to revise the [PSA]." She found no ambiguity in the PSA's provisions regarding the marital home, noting the provisions were "written very plainly. The marital residence is the Plaintiff's. The Plaintiff pays the first mortgage.... The Defendant is to pay off half of the second mortgage." The judge denied defendant's motion and ordered him to execute the deed in favor of plaintiff, and to pay one-half of the balance of the second mortgage within sixty days.

With respect to the severance benefits, the judge again found the PSA to be unambiguous. She referenced "an [eleven]-page" "severance agreement and release" executed by defendant with Merrill Lynch upon his termination. Pursuant to that agreement, defendant was to receive fifty-four weeks of salary, continuation of his health benefits for a period of time, and a modest lump sum payment. The judge noted that the PSA made no distinction among the various types of compensation in the severance package, and therefore she concluded that all the benefits, including the fifty-four weeks worth of salary, was subject to equitable distribution under the PSA and plaintiff was entitled to half of the monies.

Lastly, the judge considered the issue of defendant's life insurance obligations. She noted that defendant conceded that he had $950,000 worth of coverage while employed with Merrill Lynch, and that the PSA only required that he maintain $750,000 of that coverage for the benefit of plaintiff. However, the judge observed that under the severance agreement with Merrill Lynch, defendant was permitted to maintain that life insurance in full effect for some period of time, and, pursuant to the brokerage's employee handbook, defendant could have purchased the insurance at a group rate even after leaving Merrill Lynch's employ. Additionally, had defendant purchased the insurance within thirty-one days of termination, his health conditions would not have disqualified him. In short, the judge concluded that defendant "failed to keep the life insurance coverage that he already had," and "[h]e now doesn't have the requisite coverage because of his own actions or inactions."

The judge made no determination as to the "purpose of the life insurance." However, she concluded defendant had failed to demonstrate any reason for modifying the terms of the parties' agreement, noting defendant provided "no proofs that he tried to get insurance, no proofs that he's uninsurable." Her order denied defendant's request to "find [] [he] ha[d] complied with the life insurance requirement contained" in the PSA. The order imposed no affirmative obligation upon defendant.

Before us, defendant reiterates the arguments raised below. He contends that the life insurance provision of the PSA is "vague and indefinite," and does not relate to "alimony, child support or to equitable distribution and therefore was not made in accordance with N.J.S.A. 2A:34-23 and N.J.S.A. 2A:34-25." He further argues that "a logical reading of the [PSA]" did not require the "the home [to be] transferred presently," "nor should [he] be required to pay-off one-half of the second mortgage immediately." Lastly, he contends that the judge erred in requiring him to pay plaintiff one-half of his severance payments because that "conflicts with the agreement." We have considered these arguments in light of the record and applicable legal standards. We affirm in part, and reverse in part.

The Supreme Court has stated, "[W]hile settlement is an encouraged mode of resolving cases generally,'the use of consensual agreements to resolve marital controversies' is particularly favored in divorce matters." Weishaus v. Weishaus, 180 N.J. 131, 143 (2004)(quoting Konzelman v. Konzelman, 158 N.J. 185, 193 (1999)). "[F]air and definitive arrangements arrived at by mutual consent should not be unnecessarily or lightly disturbed." Smith v. Smith, 72 N.J. 350, 358 (1977). "Consistent with familiar canons of construction, the words of a[] [property settlement] agreement are given their ordinary meaning. In interpreting a contract, [i]t is not the real intent but the intent expressed or apparent in the writing that controls." Flanigan v. Munson, 175 N.J. 597, 606 (2003)(citations and internal quotations omitted).

As to the life insurance provision, we agree with the motion judge that the PSA's language is unambiguous. Defendant's real argument is that the provision makes no sense because forcing him to maintain $750,000 of life insurance for plaintiff's benefit far exceeds any need to insure defendant's performance of his alimony obligations under the PSA, and the insurance proceeds were not part of the equitable distribution scheme. However, absent a significant change in circumstances, Lepis v. Lepis, 83 N.J. 139, 152 (1980), or a demonstration of fraud or unconscionability by the party seeking modification, Addesa v. Addessa, 392 N.J. Super. 58, 74 (App. Div. 2007), we generally will avoid modification of an agreement that the parties have made for themselves.

Here, there was no allegation of that the PSA was inequitable, or the product of fraud or overreaching by plaintiff. Additionally, the judge noted that to the extent defendant was urging a modification based upon a change of circumstances, the loss of his job at Merrill Lynch and his medical condition, he failed to support the request with any evidence demonstrating his inability to actually secure a policy of insurance for the amount contained in the PSA or that he had even attempted to do so. Therefore, we find no error.

While we affirm this portion of the order, we stress that we do not reach any conclusion as to whether defendant can demonstrate sufficient changed circumstances to warrant modification because it is now impossible for him to comply with this provision of the PSA. The motion judge never reached such a conclusion finding defendant's submissions to be inadequate, and we do not foreclose the possibility that defendant may again seek relief upon production of sufficient evidence.

We find nothing ambiguous regarding the transfer of the former marital home to plaintiff. The PSA requires defendant to "relinquish any rights to and shall convey to [plaintiff] all of his rights, title and interest in the marital residence." The PSA contains no date by which this must occur, but we find nothing unreasonable in plaintiff's request to have the court compel defendant to execute a deed in her behalf. The agreement was already more than three years old, and despite plaintiff's informal attempts to have defendant execute the documents, he refused. The PSA continues by requiring defendant to "pay half of the equity loan prior to the transfer of the [d]eed to [plaintiff]." This is precisely what the judge did by ordering defendant to pay this amount within sixty days.

Defendant argues that interpreting these provisions in this manner somehow cannot be squared with section nineteen of the PSA which sets forth what is to occur if plaintiff defaults in her payment obligations under the first mortgage. We find no intractable contradiction between the two provisions.

Section nineteen merely provides a mechanism for indemnifying defendant from any further obligations under the first mortgage, an obligation solely resting with plaintiff according to section two of the PSA. If plaintiff fails to pay the first mortgage, rather than subject defendant to the foreclosure that might naturally follow, the PSA envisioned one of two things occurring. Either plaintiff will sell the house and pay off the mortgage, or, if she fails to do so in a "reasonable time," defendant may assume the mortgage payments and sell the home. Although defendant will have conveyed the property by this time to plaintiff, we see no reason why a court of equity could not compel plaintiff to convey the property back to defendant so that he can sell the home rather than risk foreclosure. Defendant has failed to argue otherwise. In short, there is no inherent contradiction in the terms of the PSA so as to render it ambiguous, and no other basis has been presented that would support modification of its terms.

Lastly, the judge concluded that the PSA's provision requiring plaintiff to "immediately" pay plaintiff "half of any termination benefits" was unambiguous. Because the PSA did not specify that the various components of defendant's termination benefits should be treated differently, the judge everything was a "termination benefit[]" and subject to equitable distribution under the PSA. We would disagree.

As part of his termination benefits, defendant received a modest lump sum payment, which he shared with plaintiff, an opportunity to continue some non-financial benefits, and severance payments representing approximately fifty-four weeks of his salary. These severance payments were spread over five months, from July 2005 to November 2005. These facts are undisputed.

Plaintiff argued that these severance payments were in lieu of bonuses defendant would receive on an annual basis and which no longer were available when defendant lost his position with Merrill Lynch. She also argued that her receipt of one-half of these monies was not duplicative of the alimony she was already receiving.

However, we believe these severance payments were clearly income to defendant representing the accelerated payment of his usual, anticipated, future compensation. As we noted in Reinbold v. Reinbold, 311 N.J. Super. 460, 471 (App. Div. (1998), "[o]nly those benefits to which an employee's entitlement arises out of labors during the marriage are distributable. Severance pay is not such a benefit but is a wage continuation initiative, replacing current and future earnings which would unarguably be the earner's separate property after divorce." Therefore, we reverse that portion of the order that required defendant to pay over to plaintiff one-half of these severance payments.

Affirmed in part, reversed in part. We do not retain jurisdiction.


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