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Stefanacci v. Stefanacci


March 23, 2009


On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Ocean County, Docket No. FM-15-403-01C.

Per curiam.


Argued January 29, 2009

Before Judges Parrillo and Lihotz.

Plaintiff appeals from a Family Part order denying his motion for modification of the amount of alimony paid to defendant. The motion judge determined a provision in the parties' Property Settlement Agreement (PSA) precluded modification. Following our review of the record, we conclude the PSA does not clearly express such an intention, and the motion record presents a genuine and substantial factual dispute, requiring a plenary hearing to discern the parties' intent. Accordingly, we reverse and remand to the motion judge for a plenary hearing.

After a twenty-year marriage, the parties filed for divorce. On January 14, 2002, all collateral issues raised by the complaint and counterclaim were resolved and set forth in an oral settlement, which was recited on the record. Each party testified that he and she voluntarily accepted the settlement as fair and equitable. Without passing upon the fairness of the agreement's provisions, the court found the parties desired to be bound by its terms in lieu of proceeding to trial, granted the parties' requests for divorce, and incorporated the provisions of the parties' settlement into a dual final judgment of divorce (DFJOD).

Included in the oral stipulation were these comments regarding plaintiff's obligation to pay defendant alimony:

With respect to the alimony, the husband will pay to the wife the sum of $2,750 per week, as and for the support and maintenance of the wife. The alimony will continue until the happening of the following events:

One, 13-1/2 years from February 1, 2002; cohabitation with a person unrelated by blood or marriage for a period of 120 days; remarriage of the wife or death of the payor, death of the payee.

It is understood that the alimony payments will commence February 1, 2002, and that there will be direct payment by the husband to the wife for the alimony obligations.

If, in the event the alimony stops and the children are unemancipated, then the wife would have the ability to return to the court for an [o]rder by the [c]court for child support under the Child Support Guidelines.

The recital placed on the record did not stipulate a PSA would be prepared and submitted. Nevertheless, three months later, on April 25, 2002, the parties submitted a written DFJOD, which incorporated the terms of a formal PSA signed by each party. Because consideration of the arguments on appeal require interpretation of the terms of the PSA, we set forth the relevant provisions in detail.

Paragraph 1 of Article II of the PSA, entitled "Alimony," addressed the payment of alimony for a limited term as follows:

The [plaintiff] shall pay to the [defendant] as and for alimony, support and maintenance of the [defendant], the sum of $2,750.00 per week. It is agreed and understood between the parties that the aforesaid sum shall commence on February 1, 2002.

It is further agreed that the aforesaid alimony shall continue until the first happening of the following events: (a) the expiration of thirteen years and six months from February 1, 2002; (b) 120 days of cohabitation with a person unrelated by blood or marriage to the [defendant]; (c) remarriage of the [defendant]; (d) death of the payor; or (e) death of the payee.

It is specifically acknowledged that the aforesaid amounts are tax deductible and includible as income to the [defendant].

It is further understood between the parties that the aforesaid alimony sums are being paid to the [defendant] on a term alimony basis and that the [defendant] irrevocably waives any claim for permanent alimony beyond the thirteen and a half (13-1/2) obligation set forth herein.

It is specifically further understood that the [defendant] waives any ability to attempt to modify or extend the aforesaid term before any [c]court of competent jurisdiction.

It is specifically understood that the parties have, in fact, negotiated the aforesaid alimony amount and that the considerations of equitable distribution and various other items in the within agreement have been utilized in an attempt to fashion the quantum of the alimony hereinabove payable. Therefore, it is further agreed that the [defendant] waives any claim to extend the foregoing alimony obligation or to request any increase in the foregoing alimony obligation.

Paragraph 3 of Article II, entitled "Waiver of Alimony," included these provisions:

Beyond the aforesaid alimony provided for in Article II, Paragraph 1, it is specifically understood . . . that both the [plaintiff] and [defendant] irrevocably waive any and all right and claim for alimony and support from the other party, past, present and future. Each party acknowledges that they are adequately provided for and capable of providing for their own support and maintenance, comfort and welfare. Each party recognizes that their income or asset structure may change from time to time even substantially and recognize that such change may have a detrimental effect upon their ability to provide for themselves. In full awareness that such potential change of circumstances may occur, the parties specifically agree that this agreement and especially, but not limited to their respective waivers of alimony, shall continue in full force and effect and shall not be altered or modified by either party or any judicial process notwithstanding that the parties may hereafter experience hardship. The parties have envisioned such change of circumstances and have agreed upon a distribution of their property and assets to contemplate such changes and provide for them. This Agreement shall have firm stability and shall not be subject to modification by reason of any change of circumstances encountered by either or both of the parties.

In 2007, plaintiff filed an application to reduce the amount of his alimony obligation, alleging a substantial change in financial circumstances. Specifically, plaintiff asserted he experienced a $150,000 reduction in his annual income,*fn1 which made it impossible to meet the $143,000 annual alimony obligation and pay other expenses for the children such as health insurance and college costs. Defendant challenged plaintiff's assertion generally, and specifically argued the alimony amount also included payment of her equitable distribution interest in the marital assets retained by plaintiff.

The court adjourned disposition of the motion to allow additional submissions by the parties' financial experts who participated in initial settlement discussions. After reviewing a certification from Robert S. Mohel, C.P.A., on behalf of plaintiff, and a letter from Joseph Gunteski, C.P.A., on behalf of defendant, the motion judge concluded the language of Paragraph 3, recited above, operated as an "anti-Lepis*fn2 clause," precluding modification of the amount of alimony.

The issue for review involves the alimony provisions of the parties' PSA. The interpretation and construction of the agreement is "'a matter of law subject to de novo review.'" Spring Creek Holding Co. v. Shinnihon U.S.A. Co., 399 N.J. Super. 158, 190 (App. Div.), certif. denied, 196 N.J. 85 (2008) (quoting Fastenberg v. Prudential Ins. Co. of Am., 309 N.J. Super. 415, 420 (App. Div. 1998)).

The PSA, viewed as a contract, Petersen v. Petersen, 85 N.J. 638, 642, (1981); Pascarella v. Bruck, 190 N.J. Super. 118, 124 (App. Div.), certif. denied, 94 N.J. 600 (1983), will be enforced to the extent it is fair and equitable. Carlsen v. Carlsen, 72 N.J. 363, 370 (1977). "As a general rule, courts should enforce contracts as the parties intended." Pacifico v. Pacifico, 190 N.J. 258, 266 (2007). "[I]t is a basic rule of contractual interpretation that a court must discern and implement the common intention of the parties." Pacifico, supra, 190 N.J. at 266. To determine the parties' design, we look at the agreement as a whole, not just one sentence. "In other words, integration of an agreement is favored." Savarese v. Corcoran, 311 N.J. Super. 240, 248 (Ch. Div. 1997), aff'd, 311 N.J. Super. 182, (App. Div. 1998); Wheatly v. Sook Suh, 217 N.J. Super. 233, 239-40 (App. Div. 1987). To that end, we consider the terms of the agreement as written, "in the context of the circumstances at the time of drafting and apply a rational meaning in keeping with the 'expressed general purpose'" of the parties. Pacifico, supra, 190 N.J. at 266 (quoting Northern Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953)).

Also implicated by plaintiff's appeal is the courts' "equitable power . . . to modify alimony and support orders at any time," pursuant to N.J.S.A. 2A:34-23, Lepis, supra, 83 N.J. at 145, as well as the parties' desire to waive that statutory right.

In this matter, the parties agreed to provide an award of limited duration alimony (LDA) to defendant. LDA, provided for by N.J.S.A. 2A:34-23(c), allows two standards for modification. First, "the amount of the award may be modified upon a showing of either a change in circumstances or the nonoccurrence of circumstances that the court found would occur at the time of the award." However, "the length of the term may not be modified 'except in unusual circumstances.'" Gordon v. Rozenwald, 380 N.J. Super. 55, 67 (App. Div. 2005) (quoting N.J.S.A. 2A:34-23(c)).

Parties may waive the statutory right to seek modification by including a provision specifically stating such an intention, known as an "anti-Lepis clause." The Chancery Court first enforced an anti-Lepis clause in Finckin v. Finckin, 240 N.J. Super. 204 (Ch. Div. 1990). Judge Krafte determined this type of agreement was not violative of public policy and further [t]he agreement here [was] explicit, with no stipulation as to what factors may contribute to the changed circumstances which may arise at any point in the future. [The parties'] rights and obligations were explained at the time the agreement was entered, both parties were represented by competent counsel, and any rights to modification were waived at that time. Thus, both parties are bound by the specific terms of that agreement. [Id. at 205.]

Contra Smith v. Smith, 261 N.J. Super. 198, 199-200 (Ch. Div. 1993) (holding an anti-Lepis clause was "contrary to the public policy of this State").

In Morris v. Morris, 263 N.J. Super. 237 (App. Div. 1993), this court concluded an anti-Lepis clause could be enforceable provided certain conditions were met by the parties. Specifically, the parties incorporating an anti-Lepis clause into a PSA must do so "with full knowledge of all present and reasonably foreseeable future circumstances" and further must bargain for a fixed payment or establish the criteria for payment to the dependent spouse, irrespective of circumstances that in the usual case would give rise to Lepis modifications of their agreement. Lepis established an approach that courts must take when faced with a request for modification of child support or alimony.

Where the parties have agreed on the amount of support or alimony, Lepis permits later modification to the extent that changed circumstances render the agreed terms no longer "fair and equitable."

To recapitulate, we must give an equivocal answer to the question of whether an anti-Lepis clause is enforceable. It is both yes and no . . . . If circumstances have made the parties' standards unreasonable, they can in extreme cases be modified. In less extreme cases, as here, the payments can be accrued with enforcement conditioned upon the payment of reasonable periodic payments. In short, the court should endeavor to carry out the agreement on a reasonable basis. [Id. at 241, 245-46.]

In summary, following the statutory provisions for LDA, modification of the amount of the award may be sought when either party experiences a substantial change in financial circumstances. N.J.S.A. 2A:34-23(c). Further, if the parties intend to waive the legal right to seek modification they may bargain for that waiver, which must be made with full knowledge of the consequences. Morris, supra, 263 N.J. Super. at 241.

In examining the PSA in this matter, it is evident the provisions for support, alimony and equitable distribution were intertwined and made part of a "unitary scheme." Harrington v. Harrington, 281 N.J. Super. 39, 49 (App. Div.), certif. denied, 142 N.J. 455 (1995). Various agreement provisions discuss this interrelationship. For example, the agreement discusses defendant's right to seek child support in the event of termination of the payment of alimony or, if defendant seeks child support, the provisions of equitable distribution are subject to review.

Neither party refutes the clarity of the modification restrictions placed on defendant in Article II, Paragraph 1. The PSA states defendant "waives any ability to . . . modify or extend the . . . term" of the award and "to request any increase" in the amount.

Plaintiff's right to seek modification was not mentioned. One implication of this omission is it was intentional. The drafter*fn3 chose to mention one circumstance specifically, but not the other, which just as logically could have been mentioned. See e.g., In re Estate of Santolino, 384 N.J. Super. 567, 581 (Ch. Div. 2005) (court applied the principle of inclusio unius est exclusio alterius, which means the inclusion of one excludes the other).

Turning to Paragraph 3 of Article II, we note the clause speaks to other possible alimony claims. Beginning with the modifying phrase, "Beyond the aforesaid alimony provided for in Article II, Paragraph 1," the provision discusses the parties' mutual waiver of other alimony claims, "past, present and future." In light of the common usage and custom attached to the verbiage, this paragraph includes the parties' waivers of those claims "in addition to" or "outside of" the alimony award detailed in Paragraph 1.

In making his determination, the motion judge relied on the last line of Paragraph 3, which states: "This Agreement shall have firm stability and shall not be subject to modification by reason of any change of circumstances encountered by either or both of the parties." This clause immediately followed those sentences discussing the parties' waivers of other possible alimony claims. It did not stand alone. On the face of the document, we cannot agree that this sentence included with waivers of possible alimony claims "past, present and future" was also intended to affect the alimony provided for in the separate preceding paragraph.

Moreover, unlike the document we examined in Morris, supra, this purported "anti-Lepis" provision does not explicitly identify that the alimony obligation is non-modifiable in the event of plaintiff's changed financial circumstances or mention an express waiver of the modification rights granted by Lepis.

263 N.J. Super. at 240. Acceptance of the motion judge's interpretation requires an overall application of this single sentence to all other provisions of Article II, rather than simply limiting its application to the waivers discussed immediately preceding it in Paragraph 3.

For several reasons, we conclude a plenary hearing is necessary to consider the totality of circumstances to discern whether the parties' exercised an informed waiver of the right to modify the amount of alimony. First, as plaintiff correctly points out, the oral settlement placed on the record contained no provision prohibiting modification of alimony. The final hearing included no discussion that an anti-Lepis clause was contemplated.

Second, the record, as now developed, is unclear as to the consideration for the waivers posited in paragraphs 1 and 3 of the PSA. Enforcement of an anti-Lepis clause, as with any waiver of a legal right, must be based on the parties' knowledge of the terms bargained for along with the intended consequences. Morris, supra, 263 N.J. Super. at 241. Plaintiff and defendant offer differing bases for inclusion of the purported waivers in Paragraph 3 of the PSA. Other facts appear at odds with the offered explanations necessitating testimony to discern actual intent.

Third, because the parties' intention is not clear from review of the stated terms of the PSA, even after applying the general rules of construction, additional evidence is necessary to aid understanding of the parties' intended meaning. Not only are the parties' certifications at odds on the scope of a waiver, but so are the certification of plaintiff's expert and the hearsay correspondence accepted by the motion judge supplied by defendant's expert. Trial judges cannot resolve material factual disputes upon conflicting affidavits and certifications. Harrington, supra, 281 N.J. Super. at 47. We reject the motion judge's suggestion that a plenary hearing would be futile in the attempt to resolve this dispute. To the contrary, the actual testimony of the parties and the experts subject to cross-examination would ferret out the parties' understanding and intention. See 5 Wigmore, Evidence, § 1367 at 32 (Chadbourne ed. 1974) ("Cross-examination is beyond any doubt the greatest legal engine ever invented for the discovery of truth.")

We remain mindful that plaintiff bears the burden of proving the parties' intent. Pacifico, supra, 190 N.J. at 269. Further, if following the plenary hearing, the court concludes modification of the amount of alimony was not barred by the PSA, there remains a need to evaluate the parties' respective needs and abilities to pay prior to determining whether modification is warranted. Lepis, supra, 83 N.J. at 152. Even if the PSA provisions are found to preclude modification, the court must analyze whether, under the circumstances presented, enforcement remains reasonable. Morris, supra, 263 N.J. Super. at 245.

Accordingly, we are constrained to reverse the order dated November 2, 2007 and remand for a plenary hearing as to whether the parties' agreement included an anti-Lepis clause prohibiting modification of alimony during the limited term stated in their settlement agreement.

Reversed and remanded.

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