August 11, 2010
IRVING D. ISKO, PLAINTIFF-APPELLANT,
ENGELHARD CORPORATION, DEFENDANT, AND KATHE JADOS F/K/A KATHE JADOS ISKO, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-3343-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 4, 2010
Before Judges Skillman, Fuentes and Simonelli.
Plaintiff Irving Isko commenced this action against his former employer, defendant Engelhard Corporation (Engelhard), alleging that it breached its fiduciary and contractual obligation to him by refusing to honor his request to change the payment instructions for a supplemental retirement annuity, which designated his ex-wife, defendant Kathe Jados, as the contingent survivor annuitant. Isko appeals from six orders, including the December 18, 2007 order imposing upon him the burden to disprove that the annuity was an inter-vivos gift to Jados; the July 2, 2008 order awarding Jados counsel fees of $200,000; the July 16, 2008 final judgment; and the October 7, 2008 order denying his motion for judgment notwithstanding the verdict (JNOV), or alternatively, for a new trial. We affirm in part, reverse in part, and remand for further proceedings.
The following facts are derived from the evidence presented at a hearing before the trial court.
Isko, an attorney, began his employment with Engelhard in 1956. In 1981, he became President and Chief Executive Officer, with an employment contract commencing on May 20, 1981 and ending on May 20, 1986.
Engelhard offered its employees a retirement benefits plan that had two components: (1) the "Retirement Income Plan," which was a tax qualified defined benefit pension plan (the Pension Plan), and (2) the "Supplemental Retirement Program," a non-tax-qualified retirement program comprised of two parts, the "Excess Benefit Plan" and the "Supplemental Executive Retirement Plan."
The Excess Benefit Plan is at issue in this case. It provides that an employee may elect that benefits payable to him or her be paid to a beneficiary by filing a written application with the Pension and Employee Benefit Plans Committee (Committee) not less than sixty days prior to the date benefits payable to the employee under the Pension Plan commence to be paid, and that "[n]o employee, spouse, child, beneficiary or other party shall have any interest in amounts due and payable under the Excess Benefit Plan . . . until such amounts are actually distributed[.]" The Plan also provides that the Committee's determination of any question or matter arising thereunder shall be final and binding.
Prior to their marriage on August 1, 1981, Isko and Jados entered into an antenuptial agreement. The agreement provided, in part, that the parties hereto agree that the property listed in Exhibit A attached hereto and any other property . . . shall be and remain the separate property of the party[.]
All property received by a party as gifts, bequests or inheritances (whether received before or during the marriage of the parties) shall be and remain the separate property of the party receiving the property.
[E]ach party hereto waives, releases, relinquishes and renounces any and all rights he or she may otherwise have during the lifetime of the other in such separate property of the other . . . including any right to take any of such separate property of the other by equitable distribution upon the divorce or separation of the parties[.].
Nothing in this Agreement shall preclude either party from making gifts, devises or bequests to the other party, and the waivers herein contained shall not apply to any such gifts, devises or bequests.
In Exhibit A, Isko listed as his separate income "a pension in an annual amount," along with the formula that would be applied to determine the pension amount.
In November 1983, Isko elected the 100% joint and contingent survivor annuity option for the benefits paid under the Pension Plan, and named Jados as the contingent survivor annuitant. The election also applied to the Excess Benefit Plan.
According to Jados, Isko told her in January 1984, that he was retiring. Jados advised Isko that she was pregnant, expressed her concern for how they were going to live, and told him she "wanted to make sure things were taken care of." Isko did not dispute telling Jados that he would receive a "golden parachute," that he would give her the pension, and that Jados thanked him for doing so and said she felt better knowing that if anything happened to him, she would be able to care for their child. The child was born in October 1984.
Isko retired on February 21, 1984. Pursuant to his agreement with Engelhard, he would receive a lump sum payment of the salary remaining under his employment contract and bonuses stocks he would have received had he continued to work until the end of his employment contract. He would also begin receiving benefits under the Pension Plan on May 20, 1986. Engelhard advised Isko that his prior elections for the annuity "will stand unless changed by you prior to June 1, 1986."
In 1983, and again in 1985, Isko executed a last will and testament bequeathing certain property to "my wife [Jados], if she survives me and I am neither divorced nor separated from her at the time of my death." At the time of the 1985 will, Isko compiled a list of his current assets, which indicated that the "non-probate assets which will pass to [Jados]" included "a pension of $155,00 per year and the IRA valued at $2.5 million."
In February 1986, Isko told Jados that because she was getting the pension, she had to sign documents relating to his request for a lump-sum payment from the Pension Plan, which he would place into an Individual Retirement Account. Jados signed the documents confirming her consent to the lump sum payment. In March 1986, Isko submitted a number of documents to Engelhard, including a retirement application, requested the lump sum payment, and confirmed his election of the 100% joint and contingent survivor annuity for the Excess Benefit Plan with Jados as the contingent survivor annuitant.
Isko and Jados also signed and submitted "Payment Instructions" for the Excess Benefit Plan, which Isko had prepared. Those instructions again confirmed Isko's election of the 100% joint and contingent survivor annuity option with Jados as the contingent survivor annuitant, provided that after his death, payment shall be made to her, and indicated that "[t]hese instructions shall remain in force and effect until revoked by a writing filed with Engelhard[.]" Jados signed the Payment Instructions because she understood that since she was getting the pension, she had the right to designate where the payments were to be sent after Isko's death.
Isko gave Jados copies of these documents, and never told her that she would only receive the annuity if they were married at the time of his death.
In April 1986, Isko changed the joint and contingent survivor annuity from 100% to 95%, to which Jados consented in writing. Thereafter, Isko received from Engelhard various pension estimates, including a 95% contingent survivor annuity option, which was calculated based on Jados' date of birth. Isko then confirmed his election, and Jados' consent thereto, to receive $13,337 per month from the Excess Benefit Plan during his lifetime, and for Jados to receive $12,670 per month for her lifetime after his death.
In June 1986, Isko received his lump-sum Pension Plan payment and began receiving his monthly benefit under the Excess Benefit Plan. Once those payments commenced, the Excess Benefit Plan prohibited a change in the election of a contingent annuitant beneficiary, or payment of contingent annuitant benefits to anyone other than the person on whose life expectancy the benefits were calculated.
Seven years later, in January 2003, Jados filed for divorce, prompting Isko to inquire about his pension benefits. In a March 10, 2003 letter, Engelhard responded that
Under the . . . Excess Benefit Plan, you elected the 100% Joint and Survivor Annuity option with a monthly benefit of $13,337. You designated [Jados] as your joint annuitant under this option. At the time of your death, [Jados] will be entitled to receive this monthly payment for the remainder of her lifetime. In the event of a divorce, this designation is not affected. [Jados] remains the designated beneficiary under the Joint and Survivor Annuity option.
There was no written objection to this letter.
In November 2003, relying on the "Payment Instructions," Isko requested that Engelhard change the contingent survivor annuitant under the Excess Benefit Plan from Jados to a trust, with Jados and the parties' child as beneficiaries. Engelhard refused because he did not request a change in form of benefits sixty days prior to the date benefits become payable, and the payments cannot be changed after they commence; "the Plan does not provide for payment under any annuity option to any person or entity other than the participant and the beneficiary upon whose life the survivor annuity is calculated[;]" the identity of the beneficiary becomes fixed at the time benefits commence; the Committee approved the election of the 95% joint and contingent survivor annuity option, not an election pursuant to which a survivor annuity would have been paid to whomever Isko "may from time to time name[;]" and the antenuptial agreement did not affect Jados' rights because Isko elected after the agreement's date to designate her as contingent survivor annuitant.
The divorce trial began in April 2004. Isko testified that "[n]othing has changed" with respect to the annuity, that Jados was still the contingent survivor annuitant. He noted, however, that he could change the annuitant because the pension was listed as his separate property in the antenuptial agreement. He did not disclose that he was attempting to change the contingent survivor annuitant, and had received the March 10, 2003 letter from Engelhard. Jados' counsel countered that the contingent survivor annuity election was irrevocable.
The matrimonial judge and counsel agreed that the issue of the contingent survivor annuity was not ripe for adjudication. Thus, it was not resolved in the matrimonial action. The parties did not raise the issue in their appeals of the final divorce judgment, which was entered on July 2, 2004, and incorporated the antenuptial agreement. After the divorce trial, again relying on the "Payment Instructions," Isko requested that Engelhard change the contingent survivor annuitant to a trust. Engelhard rejected the request for the reasons it had rejected the prior request.
Isko filed a complaint against Engelhard and Jados on December 14, 2004. In January 2005, Engelhard removed the case to the United State District Court for the District of New Jersey, asserting that the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. § 1001, governed Isko's claims. Jados joined in the application. Isko filed a motion for a remand on the grounds that ERISA expressly exempted the Excess Benefit Plan. The court granted the motion and remanded the case to the Superior Court. Isko v. Engelhard Corp., 367 F. Supp. 2d 702 (D.N.J. 2005).
Isko filed a motion in the Law Division for partial summary judgment, seeking a declaration that Engelhard breached its fiduciary duty and its contractual obligation by refusing to honor the change in the Payment Instructions, and that he is entitled, unilaterally and without Engelhard's approval, to remove Jados as the contingent survivor annuitant. In opposition to the motion, Jados claimed that Isko had made an irrevocable gift to her of the contingent survivor annuity.
The trial judge denied the motion but sua sponte granted partial summary judgment to Engelhard and Jados. The judge also sua sponte found that Jados had, as a matter of law, a vested irrevocable interest in the contingent survivor annuity, and the entire controversy doctrine barred Isko from claiming it was revocable because he had not raised that claim in the matrimonial litigation.
Isko appealed, contending, in part, that res judicata applied to Jados' gift claim because the judge in the divorce action found the antenuptial agreement was fair and equitable; that Jados had waived her claim to his retirement benefits; and that the judge erred in applying the entire controversy doctrine to his claim that the contingent survivor annuity was revocable. We affirmed the denial of Isko's summary judgment motion, reversed the grant of partial summary judgment to Engelhard and Jados, and remanded the matter for a plenary hearing to determine Jados' gift claim. Isko v. Engelhard Corporation, No. A-6588-04T3 (App. Div. June 23, 2006). As to the entire controversy doctrine and res judicata, we held that
Isko, who was in the process of attempting to change the payment instructions at the time he testified, was less than fully candid with the court and, presumably, his divorce counsel in failing to advise them of his actions. When he was asked whether he had changed the annuity, he could have advised the court and divorce counsel that he was in the process of changing it and of Engelhard's response. Nevertheless, Isko's counsel made it clear that it was their position that Jados' survivorship interest was revocable, while Jados' counsel took the opposite view. The judge responded, and counsel concurred, that the issue was not ripe until Isko tried to revoke the payment instructions, presumably following entry of the divorce judgment. Had Isko been more forthright, the issue could have been joined at that time.
To be sure, it would have been better to dispose of the question of how to treat the Excess Benefit Plan's survivorship annuity under the prenuptial agreement during the divorce proceeding. At that time, the court could have determined, without joining Engelhard, which had already taken the position that it would abide by a court order, whether it was Isko's separate pension property or a contingent property interest gifted to Jados during the divorce proceedings. If witnesses from Engelhard were necessary, they could have been presented.
Under the totality of circumstances, however, it would be unfair to preclude a claim that both counsel and the court believed was premature at the time it was discussed. We are satisfied that the judge mistakenly relied on the entire controversy doctrine to preclude Isko's claim. We are likewise satisfied that Isko's reliance on res judicata lacks procedural and substantive merit because the issue of his right to revoke Jados' interest in the survivorship annuity was not decided during the matrimonial litigation, but was left for future determination. [Id. slip op. at 16-17.]
Prior to the plenary hearing, Jados filed a motion to transfer the action to the Family Part, or, alternatively, for a ruling that Rule 4:42-9(a)(1) and Rule 5:3-5(c) would apply to the possible award of counsel fees. The parties apparently consented to the action remaining in the Law Division resulting in the entry of an order on August 15, 2007, which provided that "[i]f appropriate" the court "will grant counsel fees and costs" to either Isko or Jados "pursuant to the standards set forth in [Rule] 4:42-9(a)(1) and [Rule] 5:3-5(c), with respect to marital issues."
In a December 17, 2007 order, the trial judge held as follows:
Because of the close family relationship between Mr. Isko and Ms. Jados at the time of the alleged gift, and because writings exist, indicating Mr. Isko's intention to name Ms. Jados as a contingent annuitant beneficiary under the Engelhard Excess Benefit Plan, see Czoch v. Freeman, 317 N.J. Super. 273, 289 ([App. Div.] 1999), the Court hereby finds that there is a presumption that Mr. Isko made an irrevocable inter-vivos gift of the surviving spouse annuity portion of his retirement benefit received pursuant to the Excess Benefit Plan . . . to Ms. Jados; AND
As a result of the presumption . . . above, the burden of persuasion shifts to Mr. Isko to disprove the existence of the inter-vivos gift[.]
The hearing was held in May 2008. Isko again raised the entire controversy doctrine and res judiciata, which the judge rejected based on our opinion in Isko v. Engelhard Corp., supra. Relying on the documents that Isko had submitted to Engelhard, and finding Jados' testimony credible and Isko's testimony not credible, in a comprehensive oral decision rendered May 27, 2008, the judge found that Isko gifted the annuity to Jados in 1986, when he had her sign documents relating to his lump sum Pension Plan payment, and gave her copies; no document indicated that Jados would only receive the annuity if the parties were married when Isko died; the gift was not conditional; Isko never testified that he gave her the annuity as long as they were married; and from 1986 to 2003, he never attempted to change the contingent survivor annuitant. The judge concluded that the elements of a gift were met and that Isko made an unconditional, irrevocable gift of the contingent survivor annuity to Jados.
As to the burden of proof, the judge concluded that "even though I did change the burden of proof, if the burden of proof had remained with [Jados], I would have still made the same findings. The documents and the testimony in this case, the consistent and credible testimony led me ineluctably to only one conclusion."
On May 13, 2008, Jados filed a motion pursuant to Rule 4:42-9(a)(1) and Rule 5:3-5(c) for counsel fees and costs in the amount of $215,000. In a July 2, 2008 oral decision and order, the judge awarded Jados $200,000. The judge found that the fees, except those relating to Isko's claims against Engelhard, were "entirely related to marital issues, because if the [parties] had not been married, this never would have occurred[;]" that Isko gave Jados the contingent survivor annuity when they were married; that the issue arose during the divorce trial; that Jados' position was reasonable and supported by the credible evidence; that Jados did not have the ability to pay; and that the hourly rate charged and counsel's time were reasonable.
The judge entered judgment on July 16, 2008, declaring that Isko had gifted the contingent survivor annuity to Jados, and awarding Jados counsel fees of $200,000. On July 21, 2008, Isko filed a motion for reconsideration of the July 2, 2008 order and for a stay of payment of the counsel fees award. Jados filed a cross-motion for counsel fees connected with the reconsideration motion. In an August 15, 2008 oral decision and order, the judge denied the motion for reconsideration but granted a stay of payment of counsel fees pending the determination of a motion for JNOV or, alternatively, a new trial, which Isko had filed.
In a September 23, 2008 oral decision, the judge denied the motion for JNOV and a new trial, finding there was "no miscarriage of . . . justice here. This pervading sense of wrongness, obvious overlooking of evidence, or a clearly unjustified result in this case." The judge also reiterated that the elements of a gift had been met and were supported by the evidence, and that although she had reversed the burden of proof, "the result would have been the same" if Jados had the burden of proof. The judge enter a confirming order on October 7, 2008, and awarded Jados an additional counsel fee of $7500. This appeal followed.
Isko contends that res judicata and the entire controversy doctrine bar Jados' current gift claim because her marital gift claim was adjudicated in the matrimonial litigation. This contention does not differ substantially from the res judicata and entire controversy doctrine issues raised in the prior appeal, which we rejected. Accordingly, re-litigation of these issues is precluded by the "law of the case" doctrine. Franklin Med. Assoc. v. Newark Pub. Schs., 362 N.J. Super. 494, 512 (App. Div. 2003); Underwood v. Atlantic City Racing Assn., 295 N.J. Super. 335, 339 (App. Div. 1996).
Isko contends that the judge erred in denying his motion for a new trial. He argues that in assessing his credibility, the judge improperly relied on a document and testimony from the divorce trial that she had stricken from the record. Isko also contends that the judge erred in denying his motion JNOV.
A trial judge must grant a new trial if "having given due regard to the opportunity of the jury to pass upon the credibility of the witnesses, it clearly and convincingly appears that there was a miscarriage of justice under the law."
R. 4:49-1. A trial judge is also required to grant a new trial if he or she concludes that his or her erroneous trial rulings resulted in prejudice to a party. Crawn v. Campo, 136 N.J. 494, 512 (1994). A miscarriage of justice is a pervading sense of wrongness needed to justify an appellate or trial judge undoing of a jury verdict . . . which can arise from . . . a manifest lack of inherently credible evidence to support the finding, obvious overlooking or underevaluation of crucial evidence, or a clearly unjust result[.] [Baxter v. Fairmont Food Co., 74 N.J. 588, 599 (1977).]
Applying these standards, we discern no miscarriage of justice.
In order to challenge Isko's credibility, Jados sought to admit the March 10, 2003 letter Isko had received from Engelhard responding to his inquiry about his pension benefits, which he failed to disclose during the matrimonial litigation, and to admit his divorce trial testimony that he "forgot" to find out whether the annuity was irrevocable. Contrary to Isko's contention, the judge did not entirely strike the letter from the record. Isko's counsel agreed that "to the extent that it's only admitted for the state of mind issue . . . [the letter] stays in." Further, in citing the letter in her oral decision, the judge made a finding favorable to Isko, i.e. that the letter was "not evidence of donative intent of irrevocable relinquishment[,]" as it was dated "long after the donative intent was evidenced." Accordingly, no error occurred in the judge's reliance on this document.
As for the divorce trial testimony, Jados' counsel agreed that this testimony would not be admitted. However, in her oral decision, the judge read that testimony from the our prior opinion. Isko v. Engelhard Corp., supra, slip op. at 9-10. She agreed this was improper but concluded that "it doesn't make any difference, because they don't really deal with what I found the [letter] to be evidentiary of;" that "if it was an irrevocable gift it was never going to be a revocable gift." The judge further concluded that "even though [Isko] think[s] that this is the very lynchpin of the entire opinion it is but a very, very small part of the opinion, and has really nothing to do with the events that I pointed out that dealt with me finding that there was an irrevocable gift[.]"
We agree that the judge should not have relied on Isko's divorce trial testimony. However, we conclude that this constitutes harmless error for the reasons the judge expressed, because it formed a miniscule part of the judge's decision, and there is other substantial evidence supporting her conclusion that Isko's testimony lacked credibility.
We decline to address Isko's contention that the judge erred in denying his motion for JNOV because Jados never accepted the contingent survivor annuity as a gift, as evidenced by her failure to list it on her Case Information Statements or mention it during the matrimonial litigation. Isko never raised this issue in his JNOV motion. Alloway v. General Marine Indus., L.P., 149 N.J. 620, 643 (1997); Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
Even considering this contention, it lacks merit. As the judge properly found, Isko actually and symbolically delivered documents to Jados relating to the contingent survivor annuity and her designation as its annuitant, and Jados accepted those documents. In re Dodge, 50 N.J. 192, 216 (1967). Further, the judge found credible Jados' explanation for the omission of the annuity on her CIS.
Isko contends that the judge erred in reversing the burden of proof. Although we agree, we find this constitutes harmless error as well. The judge stated unequivocally that she would have decided the case in Jados' favor even if she had not placed the burden of proof on Isko. More importantly, there is substantial, credible evidence supporting the judge's finding that Isko had made an unconditional, irrevocable inter-vivos gift of the contingent survivor annuity.
Isko's final contention concerns the award of counsel fees. He argues that a fee award was improper because this was not a "family-type" action. Alternatively, he contends that the judge erred in awarding counsel fees for the federal district court proceeding, and for the prior appeal.
A court may not award counsel fees against a party in litigation with certain exceptions. R. 4:42-9(a) One of those exceptions is if the matter is a "family action," and if so, the court can award counsel fees pursuant to Rule 5:3-5(c). R. 4:42-9(a)(1). The court, in its discretion, may make an allowance for counsel fees to a "successful party" on a claim for "divorce, nullity, support, alimony, custody, parenting time, equitable distribution, separate maintenance, enforcement of inter-spousal agreements relating to family type matters and claims relating to family type matters in actions between unmarried persons." R. 5:3-5(c)
We agree for the reasons expressed by the trial judge that this was a family-type action, and an award of counsel fees to Jados was appropriate under Rule 5:3-5(c). We find it noteworthy that in his appellate brief, in arguing the applicability of res judicata and the entire controversy doctrine to Jados' current gift claim, Isko states that this "claim clearly arises out of her former marriage to [him;]" that she should have litigated that claim in the divorce action; and that the gift claim is "undeniably a related subset of her [p]roperty [g]ift [c]laims" in the divorce action.
However, we agree that it was error to award counsel fees for the federal district court proceeding. Only the federal district court can award counsel fees in a proceeding before it, and an application must be made within thirty days after the entry of judgment or order. Fed. R. Civ. P. 55(d)(2)(a) and L. Civ. R. 54.2(a). Also, Jados concedes that there was no basis under the Federal Court Rules for such a fee to be awarded, and Isko prevailed on the removal issue, thus making it inequitable to compel him to pay Jados' counsel fees for that proceeding.
It was also error to award counsel fees for the prior appeal. Ordinarily, "[e]xcept for the limited authority granted to the trial court to determine appellate fees on remand, the trial court and the appellate court must each determine the fee allowance for its own proceedings." Pressler, Current N.J. Court Rules, comment 2 on R. 2:11-4 (2010) (citing Tahan v. Duquette, 259 N.J. Super. 328, 335-36 (App. Div. 1992)). "[D]isposition of a motion or on an order or remand for further trial proceedings, where the award of counsel fees abides the event, the appellate court may refer the issue of attorney's fees for appellate services to the trial court for disposition."
R. 2:11-4. No such referral occurred here. However, we discern no reason why Jados cannot now move before this court for an award of counsel fees for the prior appeal, as a determination that this was a "family-type" action had not been made until after the remand.
Although the judge deducted $15,000 from the counsel fees Jados requested, we are unable to discern from the record what part of that deduction, if any, the judge applied to the federal litigation and the prior appeal, or whether some additional amount should be deducted. Accordingly, we remand for a recalculation of the counsel fee award.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.
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