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Orr v. Orr


February 8, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Morris County, Docket No. FM-14-892-03.

Per curiam.


Argued January 5, 2010

Before Judges Wefing and Messano.

Plaintiff Michele Orr appeals from the August 26, 2008 order of the Family Part that 1) denied her cross-motion seeking reimbursement of counsel fees pursuant to the provisions of the parties' property settlement agreement (PSA); and 2) denied her request for counsel fees in responding to defendant Sean Orr's motion seeking modification of his child support obligations.

She also appeals from the judge's subsequent order of November 5, 2008 that denied her motion for reconsideration. For the reasons that follow, we reverse and remand the matter for further proceedings consistent with this opinion.

Plaintiff and defendant were divorced on May 18, 2004. The PSA incorporated in the judgment contained the following language regarding "DEBTS":

From the date of this Agreement, neither party shall contract any indebtedness nor incur any liability for which the other party may be held responsible, except as in this Agreement provided. Each party agrees to indemnify and reimburse promptly the other for any sum that he or she may pay by virtue of a violation of this provision.

Each party shall be responsible for any and all debts incurred by that party subsequent to the parties' separation except as set forth herein. Further, each party shall retain any debt associated with any asset to be retained by that party except as set forth herein. . . . Each party indemnifies and holds the other party harmless regarding his/her debts. [(Emphasis added).]

The equitable distribution provisions of the PSA provided that defendant would retain a business, Champion Pools, "a limited partnership" he "acquired . . . during the course of the marriage[,] . . . free from [any] claim of [plaintiff]."

In May 2008, defendant moved for modification of his child support obligations and other relief. In his certification, defendant alleged that as a result of a failed business venture, he was forced to close Champion Pools and declare bankruptcy, from which he was discharged by court order on February 29, 2008. Defendant's motion requested oral argument.

Plaintiff opposed the motion and cross-moved for various relief; she too requested oral argument. In particular, plaintiff sought an order compelling "[d]efendant to reimburse [her] in the approximate amount of $12,000 representing legal fees incurred from 2007 to 2008 when she was forced to defend herself in court as a result of [d]efendant's forging her signature on a personal guaranty of a loan to his business . . . ." In her certification, plaintiff alleged that after defendant filed for bankruptcy in June 2007, she was "sued by Textron Industries (Textron) . . . because [defendant] had forged [her] signature as a guarantor on a loan for $90,000" from Textron to Champion Pools. Attached to the certification were loan documents, apparently executed in 1998, evidencing defendant's loan agreement with Textron, one of which was a personal guarantee purportedly signed by plaintiff. She claimed that this was a forgery and was done by defendant without her knowledge.

Plaintiff alleged that she incurred in excess of $12,000 in legal fees protecting her interests in the bankruptcy proceedings and defending herself in a separate suit Textron filed against her. Plaintiff cited the provisions of the PSA outlined above, and sought reimbursement of her legal expenses, as well as counsel fees incurred in opposing defendant's motion and in furtherance of her cross-motion.

In the written statement of reasons that accompanied the August 26, 2008 order, the judge noted she had decided the applications "on the papers because the parties' submissions [we]re clear . . . and oral argument would not have advanced the Court's understanding of these matters or provided an expeditious resolution of the parties' disputes." In denying plaintiff's request for reimbursement of legal fees, the judge reasoned,

[P]laintiff's request for reimbursement of counsel fees relating to her defense of the claims made against her by defendant's creditors in his bankruptcy is misguided. Although the PSA requires the parties to indemnify and hold each other harmless for violation of certain provisions regarding debts, the provision identified by plaintiff pertains to the representation that "from the date of this Agreement, neither party shall contract any indebtedness nor incur any liability for which the other party may be held responsible . . . . The parties signed the PSA on . . . May 18, 2004. The debt that plaintiff defended against in the bankruptcy action was incurred in 1998.

Therefore, this Court has no basis on which to award counsel fees.

The judge further denied plaintiff's request for counsel fees associated with defending against defendant's motion and pursuing her cross-motion. In this regard, the judge considered some of the factors listed in Rule 5:3-5(c), specifically the financial ability of plaintiff, the financial ability of defendant, and "the good faith or bad faith of the parties."

Plaintiff moved for reconsideration, again requesting oral argument. In her supporting certification, plaintiff pointed out that the PSA required each party to indemnify the other for "any debt associated with any asset to be retained by that party . . . ." She argued that the Textron debt was directly related to a loan made to Champion Pools, an asset solely retained by defendant in equitable distribution.

Defendant opposed the motion, cross-moved for counsel fees, and requested oral argument. He contended that plaintiff's counsel fees were "incurred in a bankruptcy action entirely separate and apart from this matrimonial action[,]" and any request for reimbursement "should have been properly made to the bankruptcy court . . . ." He further contended that the PSA obligated him to indemnify plaintiff "despite the bankruptcy action[,]" and he advised plaintiff and her counsel he would do so while the bankruptcy action was proceeding. Defendant claimed that he ultimately directed his lawyer to "defend [p]laintiff's interests regarding any exposure to Textron," and that he ultimately settled the claim for $2500 without any payment from plaintiff. Defendant therefore argued that plaintiff's choice to retain counsel and intervene in the bankruptcy action was "unreasonable" and unnecessary, and he should not be required to reimburse her for the legal fees.

Defendant further argued that plaintiff's application "mischaracterize[d] the language of the PSA and s[ought] to imply new terms . . . ." He contended that "[p]laintiff's counsel fees from the bankruptcy action were voluntarily incurred by [p]laintiff . . . subsequent to the parties' 2004 separation." Moreover, defendant argued plaintiff's counsel fees were not "part of the debt associated with Champion Pools."

In her reply certification, plaintiff noted that during the bankruptcy proceedings, defendant refused to enter into a "[s]tipulation incorporating and continuing in full force and effect all matrimonial orders . . . ." Furthermore, she noted that not only was she required to intervene in the bankruptcy proceedings, she was also sued personally by Textron in the separate Law Division action based upon the forged guarantee. As a result, defendant, who was not named in that complaint because of the pending bankruptcy, was in no position "to protect [her] interests[,]" and her need to retain personal counsel was obvious. She further noted that her attorney informed her that she could not make any request for counsel fees in the bankruptcy proceedings.

Without oral argument, the judge denied plaintiff's motion for reconsideration by way of an order executed and filed on November 5, 2008; the identical language contained in the judge's prior order as to why oral argument was denied was included in her statement of reasons attached to this order. The judge's reasons for denying the motion for reconsideration were as follows:

Undoubtedly, plaintiff is dissatisfied with this Court's rejection of her prior cross motion requesting various awards of attorneys' fees. Plaintiff . . . has not identified any controlling decision that this Court overlooked in making that determination. Nor has plaintiff demonstrated that this Court's decision rests on a palpably incorrect or irrational basis.*fn1

This appeal followed.

Plaintiff contends that the terms of the PSA are clear and that the "indemnity clause . . . protects [p]laintiff from any liability that could arise from the loan[]" between Textron and defendant. In addition to seeking reimbursement of counsel fees incurred in all the proceedings associated with the Textron loan, plaintiff also argues that the judge erred in denying her request for counsel fees in responding to defendant's initial motion and in prosecuting her cross-motion.

In denying plaintiff's cross-motion, the judge focused solely upon those provisions of the PSA that provided indemnification prospectively, i.e., as to debts incurred from the date of the agreement in 2004 forward; thus, the judge reasoned, plaintiff was not entitled to the relief she sought because the Textron debt was incurred in 1998. In seeking reconsideration, plaintiff specifically brought to the judge's attention the PSA's indemnity provisions we have highlighted above, arguing that the agreement required defendant to indemnify her for any debt associated with an asset equitably distributed to him, in this case, Champion Pools.

"Reconsideration is a matter within the sound discretion of the Court, to be exercised in the interest of justice." D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990); Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 257 (App. Div. 1987)).

Reconsideration should be utilized only for those cases which fall into that narrow corridor in which either 1) the Court has expressed its decision based upon a palpably incorrect or irrational basis, or 2) it is obvious that the Court either did not consider, or failed to appreciate the significance of probative, competent evidence. [D'Atria, supra, 242 N.J. Super. at 401.]

Accord Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996).

Rather than consider the merits of plaintiff's argument, the judge denied the motion for reconsideration finding specifically that it failed to meet the above standard. We think it is clear that plaintiff's motion for reconsideration properly brought to the court's attention those portions of the PSA's indemnity provisions that the judge previously failed to address when she denied plaintiff's cross-motion. Therefore, the motion for reconsideration should have been considered on its merits. We therefore must reverse.

Because the judge failed to consider whether the PSA's indemnity provisions required reimbursement of plaintiff's legal expenses because they arose out of a "debt associated with" an asset retained by defendant, and were reasonably and necessarily incurred to "indemnify" and "hold[] [her] harmless," we specifically decline the opportunity to consider those issues in the first instance. We therefore remand the matter to the motion judge for further proceedings. Plaintiff's request for counsel fees associated with the motion practice that is the subject of this opinion shall abide the eventual resolution of the issues raised.

As a result, we must also address another issue to which plaintiff alludes without seeking specific relief. Both parties sought oral argument of the original motion and cross-motion, as well as the motion for reconsideration and defendant's cross-motion for fees. The judge did not entertain any oral argument, apparently concluding it was unnecessary.

Rule 5:5-4(a) provides that Motions in family actions shall be governed by R. 1:6-2(b) except that, in exercising its discretion as to the mode and scheduling of disposition of motions, the court shall ordinarily grant requests for oral argument on substantive and non-routine discovery motions and ordinarily deny requests for oral argument on calendar and routine discovery motions.

The Rule expresses "a strong presumption favoring argument of motions other than calendar matters and routine discovery applications." Pressler, Current N.J. Court Rules, comment 1.1 on R. 5:5-4 (2010). Litigants should be permitted oral argument on such motions when requested "as a matter both of due process and the appearance of due process." Filippone v. Lee, 304 N.J. Super. 301, 306 (App. Div. 1997); Fusco v. Fusco, 186 N.J. Super. 321, 328-29 (App. Div. 1982).

Here, the motions and cross-motions presented issues that clearly could have benefited from further elucidation by way of oral argument. We discern "no special or unusual circumstance here warranting the court's dispensing with an entirely appropriate request for oral argument of a motion presumptively entitled to argument on request." Filippone, supra, 304 N.J. Super. at 306.

Reversed and remanded; we do not retain jurisdiction.

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