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Leff v. Leff


March 26, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Hunterdon County, Docket No. FM-10-314-06.

Per curiam.


Argued March 4, 2009

Before Judges Fisher, C.L. Miniman and Baxter.

In this appeal, we review the findings and conclusions reached by the trial judge in construing a settlement agreement in this matrimonial action. We reverse in part and remand for additional findings.

The parties were married in 1981. Four children were born of the marriage; they are now twenty-six, twenty-three, nineteen and seventeen years of age.

Plaintiff Karen Leff filed this action for divorce in 2006, and the parties began negotiating in earnest a settlement of their financial disputes on January 8, 2007. They orally agreed, as a general matter, to equally divide their property subject to certain excepted assets, and reported to the trial court that the matter had settled.

Soon thereafter, counsel for defendant Alan Leff drafted an agreement. According to the judge's findings of fact, upon receipt of the draft agreement, Karen "had second thoughts," which prompted a four-way meeting with the parties and their attorneys on January 27, 2007. At that meeting, three issues --(1) distribution of $125,000 from the so-called Fidelity account, (2) ownership of life insurance policies, and (3) disposition of the children's 529 accounts -- were identified as being in controversy.

When Karen refused to execute the settlement agreement drafted by Alan's attorney, Alan moved for enforcement or, in the alternative, for a Harrington*fn1 hearing. Karen argued in opposition that the lack of an agreement regarding the three items in controversy demonstrated that the parties did not have a meeting of the minds and the case was not settled. The judge scheduled a plenary hearing.

Over the course of seven days in March, April and June 2007, the trial judge heard testimony from Alan, Karen, their attorneys, and Karen's accounting expert. Alan and his attorney testified that a settlement had been reached; as for the three issues, they testified that the parties agreed that Alan was entitled to the extra $125,000 in the Fidelity account, Alan would be entitled to retain ownership of at least one of the five life insurance policies, and any disputes about the 529 accounts would be resolved in arbitration.

After Alan and his attorney testified in support of Alan's contention that a settlement agreement was reached, Karen was called to testify and, as the judge recounted in his written opinion,*fn2 she "[s]urprisingly" agreed that a settlement concluding the litigation had been reached. Her attorney similarly testified. As a result, the judge determined that the Harrington hearing had morphed into a Pacifico*fn3 hearing; that is, the judge concluded he was no longer required to determine whether there was a settlement as to all essential terms, but instead was only required to ascertain the content of the parties' agreement on these three limited issues.

In resolving the three disputed issues, the trial judge found that: Alan failed to sustain his burden of persuading the court that $125,000 of the Fidelity account should be exempt from the parties' general agreement to equally divide all assets; the parties agreed at their January 27, 2007 meeting that Karen would retain ownership of the five insurance policies; and, although the parties agreed to arbitrate disputes regarding the 529 accounts, each spouse should be named the alternate participant in the other's 529 account.

On July 26, 2007, a dual judgment of divorce, which memorialized the agreement and the judge's findings, was entered.

Alan appealed, arguing, with regard to the three issues, that: (1) the trial judge's decision on the $125,000 issue was inconsistent with the parties' agreement and based upon a legal misconception regarding the burden of persuasion; (2) the judge's distribution of the life insurance policies was contrary to the general agreement that non-exempt assets would be equally divided; and (3) the judge did not adhere to the parties' agreement to arbitrate disputes concerning the 529 accounts but instead enforced his own view as to what was most appropriate. Alan also argues that: (4) the judge failed to address Karen's interest in property in Massachusetts; and (5) the judge mistakenly and inequitably ordered him to pay $82,502.45 of Karen's legal fees.

In ruling upon these issues, we recognize that our standard of review requires deference to the judge's fact findings "when supported by adequate, substantial and credible evidence," Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974); a trial judge's "interpretation of the law and the legal consequences that flow from established facts," however, are not entitled to "any special deference," Manalapan Realty, L.P. v. Twp. Comm.of Manalapan, 140 N.J. 366, 378 (1995).


In ruling in Karen's favor on the $125,000 question, the judge determined that it was Alan's burden to prove that the parties' settlement excluded this asset from their agreement to equally divide their assets. As a general proposition, it is certainly true that a party who seeks a finding that a marital asset is immune from equitable distribution has the burden of persuasion. Pascale v. Pascale, 140 N.J. 583, 609 (1995). However, this was not the issue the judge was required to decide.

Alan did not claim the $125,000 in dispute was immune from distribution. He asserted instead that Karen had received $282,500 as pendente lite equitable distributions consisting of $82,500 she took without Alan's knowledge in February 2006, while they were unsuccessfully negotiating a property settlement agreement prior to suit, and another $200,000 he agreed she could use during the litigation, subject to later allocation. On August 4, 2006, an order was entered that froze the assets under Alan's control. Alan claims he was entitled to an offsetting distribution of $282,500 to achieve an equal distribution of assets and that during the later settlement negotiations he agreed to reduce the amount due him by $30,000 to settle a dispute over the adequacy of pendente lite support. He urges that the $252,500 he agreed to accept as an equalizing distribution was the subject of Section IV(A) of the proposed property settlement agreement, which provides:

The parties acknowledge that the general principal [sic] governing this Agreement is that all property, assets and debts acquired by the parties during their marriage shall be distributed equally between them utilizing values as of December 31, 2006, except as may be specifically excepted herein. An inventory of the marital assets and their distributions is attached hereto and made part of this agreement as Exhibit A. It is understood and acknowledged between the parties that an adjustment is reflected in the aforesaid inventory and distribution list to account for certain funds expended during the past year. Specifically, Karen's accounts at Peapack Gladstone Bank and Washington Mutual Bank, amounting to approximately $111,000 and $64,000 respectively (as more specifically set forth in Exhibit A and being the remainder of a total of $282,500 previously utilized by Karen) are allocated to her, and the aggregate sum of $252,500 is allocated to Alan from a Fidelity account maintained solely in Alan's name; from the Commerce Bank money market account and two checking accounts at Commerce maintained solely in Alan's name; from the Ing Direct Savings account maintained solely in Alan's name; eight U.S. savings bonds worth approximately $1070, and the balance of the $252,500 from the money market account maintained in the joint names of the parties at Fidelity (the sum of $252,500 being an offset against the $282,500 utilized by Karen minus the sum of $30,000 of net support for Karen).

Alan argues from this that Karen had obtained her $282,500 share prior to the final settlement, and that to equalize the distribution of marital assets, he was entitled to $252,500 in the form of the above-identified accounts and bonds maintained solely in his name worth about $127,500 as of December 31, 2006, plus approximately $125,000 from the Fidelity money market account maintained in their joint names. We agree that Alan has correctly framed the issue and that the question for the judge was whether Alan was entitled to $125,000 from the Fidelity account to achieve an equal division of these assets.

We make no findings nor need comment further on that point, but remand the matter to the trial judge in order to ascertain whether -- in fact -- Alan is due $125,000 not because that amount was immune from distribution, but because his receipt of that amount is required by the parties' agreement to equally divide the remaining liquid funds.


In dealing with the life insurance policies, the judge properly concluded that the parties' settlement agreement called for the equal distribution of their cash value. The parties do not quarrel with that finding, but instead dispute how ownership of the policies ought to be distributed.

The judge found that the draft settlement agreement, which he found accurately reflected the parties' agreement, "state[d] that all qualified policies will be owned by [Karen]." We conclude that the judge's interpretation of the draft settlement agreement is inaccurate.

The draft settlement agreement, to which the judge alluded, stated that:

There are five (5) life insurance policies on the life of Alan, all nominally owned by Karen, and each having a present cash value. The total cash values of the policies shall be equalized by the parties and the policies shall be distributed to the parties as reflected in Exhibit A.

We gather from this provision that the policies were "nominally owned" by Karen at the time of the agreement but that some distribution other than allowing Karen to retain her nominal interest was intended. The provision referred to the parties' intent to distribute ownership of the policies "as reflected in Exhibit A," yet we cannot find this Exhibit A in the record on appeal nor has its content been revealed to us. We find this significant. If the parties' intent was revealed by this provision, as the judge held, then their full intent cannot be discerned without resort to Exhibit A or knowledge of Exhibit A's content. We are, thus, compelled to conclude that the quoted provision does not entirely reveal the parties' intentions as to the future ownership of the policies.

To be clear, our holding is limited to a rejection as conclusive or persuasive the above-quoted provision of the draft settlement agreement. That provision, upon which the judge solely relied, suggests only that the parties' agreement as to how they would distribute title to the policies was revealed elsewhere.

We thus remand for further consideration and findings on this point.


We agree with Alan's argument that the trial judge mistakenly resolved the parties' dispute rather than adopt the parties' agreement about the 529 accounts.

In this regard, the judge held that it is "clearly closest to their intent that each party serve as the alternate participant to succeed the other upon the happening of the other's death" and ordered that "each party shall designate the other as alternate on the 529 accounts." However, as revealed by his written decision, the judge found that the parties had agreed upon arbitration as "a vehicle for resolving financial disputes regarding the 529 accounts." We agree that the evidence overwhelmingly demonstrates that the parties agreed to arbitrate financial disputes regarding the 529 accounts. For that reason, we reject the finding that the parties did not also intend to submit disputes regarding the naming of alternate participants to arbitration as well; it is arbitration of that dispute which was clearly closest to their intent, not the equitable resolution imposed by the judge.

Accordingly, we vacate the judge's decision to impose on the parties the naming of the other as alternate participant and remand for an amendment of the judgment of divorce to include a provision that requires the arbitration of any disputes, including the naming of alternate participants, regarding the 529 accounts.


Alan argues that the trial judge erred in failing to address Karen's interest in certain Massachusetts property. Alan claims that, in light of the parties' agreement to equally divide assets regardless of how titled, he is entitled to one-half of Karen's one-third share in this property. In response, Karen asserts that the trial judge "properly disregarded defendant's attempted eleventh-hour inclusion of an estate planning gift" from her parents.

The trial judge's opinion makes no mention of this property interest. As a result, we will not take original jurisdiction of the question, or otherwise address its merits, but will rather direct the trial judge to make findings regarding this property interest as well.


Alan lastly argues that we should set aside the counsel fee award in favor of Karen. In light of our disposition of the appeal, we agree that responsibility for counsel fees should abide future events and will, therefore, vacate the counsel fee award. The judge should revisit the counsel fee issues once he has fully disposed of the remanded issues.

Reversed in part and remanded for further findings. We do not retain jurisdiction.

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