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Ward-Gallagher v. Gallagher


August 13, 2010


On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Union County, Docket No. FM-20-0960-09G.

Per curiam.


Argued June 8, 2010

Before Judges Lihotz and Ashrafi.

Defendant Stephen Manus Gallagher appeals from a Family Part order denying his motion to vacate a default Final Judgment of Divorce (FJOD) entered April 6, 2009, based on the complaint of plaintiff Mary Josephine Ward-Gallagher. Defendant contends he was not served with the complaint and had no notice of the divorce proceedings. Additionally, defendant seeks to set aside a May 21, 2008 marital settlement agreement (MSA), incorporated into the FJOD, alleging it was executed under duress and is otherwise unenforceable because of fraud and its unconscionable terms.

On appeal, defendant argues the motion judge erred in denying his request without benefit of a plenary hearing to determine disputed facts.

Based on our review of the arguments presented, in light of the record and applicable law, we conclude the trial court erred in failing to conduct an evidentiary hearing to determine whether defendant was properly served with the complaint for divorce. Accordingly, we reverse and remand.

The parties were married in a civil ceremony on March 16, 1988, which they confirmed in a subsequent religious ceremony in June 10, 1989.*fn1 The day before their civil ceremony, plaintiff requested that defendant execute an ante-nuptial agreement designed to protect her $212,250 in pre-marital assets, which had been accumulated predominately through her ownership in a family real estate development business.

Plaintiff owned fractional interests in five properties with her relatives. Pursuant to the pre-nuptial agreement, the parties waived all claims to "property owned prior to the marriage" by the other. During the marriage, many of plaintiff's originally held real estate interests were sold and the proceeds reinvested in other properties. Also during the marriage, defendant independently formed East Commercial Construction Company (ECCC), which performed construction and maintenance work on realty owned by plaintiff and her family. Defendant contends plaintiff's family and he combined their business efforts for the betterment of all family members and that he worked for the real estate entities without compensation throughout the marriage.

Sometime after the Fall of 2007, plaintiff discovered defendant had engaged in an extra-marital affair, from which a child was born. At this time, the parties had been married nearly twenty years and the total of their accumulated assets exceeded sixteen million dollars.

On February 29, 2008, plaintiff insisted the parties execute a post-nuptial agreement. Plaintiff explained to defendant that she wanted to protect her pre-marital assets from possible future claims made on behalf of defendant's newly born child. In the February 2008 agreement, defendant waived "his potential right to share in the real estate and other related assets accumulated by [plaintiff] before and during the marriage with her [f]amily [m]embers." In exchange, plaintiff waived any right, title or interest in defendant's corporation, ECCC, and in real property situated in Ireland valued at $1.6 million, which defendant received from his mother and re-titled to the parties jointly.

Defendant asserted that when plaintiff presented him with the February 2008 agreement, he expressed a desire to consult counsel. Plaintiff's attorney provided the names of three attorneys with whom he might consult. Defendant chose a name from the list and hired counsel to review the proposed February 2008 agreement. After his review, the attorney sent defendant a letter advising that its execution was "contrary to [his] legal and financial interests" and would unfairly require him to "give up approximately $4,350,000, not counting any further increases [in] the value of the real property" interest held by plaintiff. Specifically, counsel stated the February 2008 agreement sought "to make the $15.13 million in real estate held by your wife her separate property" and required defendant to waive any right of inheritance in plaintiff's estate, including the taking of an elective share.

Defendant asserts he never received his attorney's letter, as plaintiff frequently intercepted his mail. Defendant admits he executed the February 2008 agreement in an effort "to preserve [the] marriage," but claimed he did so without benefit of counsel's advice. Defendant supports this contention by noting plaintiff attached the original letter to her certification in opposition to his motion.

In early June 2008, plaintiff presented defendant with a draft of the MSA, which differed in pertinent respects from the February 2008 agreement. The MSA provided that each party waived any future right to alimony. Moreover, it stated the legal rights enunciated in "Lepis v. Lepis, 83 N.J. 139 (1980), and Crews v. Crews, 164 N.J. 11 (1999), shall not apply to any post-judgment application made to the court seeking financial support." It additionally required the transfer to plaintiff of the entirety of the parties' joint interest in Ward & Gallagher Realty, LLC, which owned the apartment building where the parties resided. The MSA allowed plaintiff, at her discretion, to require defendant to vacate the marital residence upon thirty days notice. Finally, defendant retained his corporate entity ECCC and the Ireland realty, while plaintiff retained all investments held with her family.

Defendant again sought counsel's advice. In a July 8, 2008 letter, counsel told defendant not to sign the MSA. The correspondence discussed plaintiff's alleged claim that she needed the MSA because she wished to obtain a "divorce in name only." Counsel explained defendant should assume "the day after [he] sign[ed] the agreement, [his] [w]ife w[ould] sue for divorce and that the divorce will be [] 'real'[.]" Counsel also sent correspondence to plaintiff's attorney expressing similar concerns.

Defendant argues he relied on plaintiff's assurances and executed the MSA "to preserve our marriage." The parties signed the MSA in July 2008. Plaintiff's counsel attested to her signature, but defendant's signature is not notarized.

On December 30, 2008, plaintiff filed a complaint for divorce seeking to incorporate the MSA into a FJOD. Plaintiff's counsel mailed a copy of the summons and complaint, along with an original and one copy of an acknowledgment of service, to defendant at the marital residence. Defendant alleges he never received the correspondence or the documents. Plaintiff's counsel did not send the materials to defendant's attorney. Defendant explained that on January 15, 2009, plaintiff included an acknowledgment of service in a pile of business papers she requested he sign. He admits the signature on the acknowledgment is his. In support of his theory of how he came to sign the acknowledgement, defendant asserts he never executed a document before a notary public, yet a notarial seal appears attesting to his execution. Defendant believes plaintiff intercepted her attorney's letter transmitting the summons and complaint, used deception to obtain his signature on the acknowledgement, secured notarization without his presence and proceeded in the divorce action as an uncontested matter after securing a default on March 9, 2009.

The final hearing, attended by plaintiff alone, was held on April 6, 2009. The court entered a FJOD incorporating the MSA.*fn2

The following day, plaintiff's counsel purportedly mailed defendant a copy of the FJOD and MSA, sending the documents to the marital residence, which defendant again asserts he never received.

To support his contention that plaintiff engaged in a pattern of deceptive conduct to defraud him of his equitable share in the marital assets, defendant attached records showing the parties' participation in ten ninety-minute marriage counseling sessions in April and May 2009, after the entry of the FJOD. Throughout these sessions, defendant certifies plaintiff acknowledged to the therapist he "was entitled to one-half of what [they] acquired together." At no time did plaintiff mention she had obtained a FJOD. In June 2009, defendant was locked out of the family business and plaintiff ordered him to vacate their marital condominium, which he believes is worth $3,000,000. When defendant consulted new counsel in June of 2009, he first learned of the divorce.

Defendant filed the motion to vacate the FJOD pursuant to Rule 4:50-1(f). Much of the court's opinion centers on defendant's request to set aside the MSA, which we find secondary to the initial question of whether defendant was properly served with the complaint for divorce. In this regard, the court stated:

Finally, [d]efendant alleges that the Acknowledgment of Summons and Complaint were not properly notarized. Defendant claims that he executed the Acknowledgment... on January 15, 2009 when [p]laintiff brought him the summons and complaint. He claims that he signed it in [p]laintiff's presence and then she brought it to a notary public after he signed....

A general appearance of an acceptance of the service of a summons, signed by the defendant's attorney or signed and acknowledged by [] defendant... shall have the same effect as if the defendant had been properly served. R. 4:4-6. A technical defect in the required acknowledgment can be subsequently cured. [citation omitted] If, however, the defendant denies the validity of his purported signature an evidentiary hearing is required. [citation omitted]

Here, [d]efendant does not deny the validity of his signature [and] the court will not order an evidentiary hearing on the issue.

An order was entered on October 15, 2009. This appeal ensued.

"A motion under Rule 4:50-1 is addressed to the sound discretion of the trial court, which should be guided by equitable principles in determining whether relief should be granted or denied." Housing Auth. v. Little, 135 N.J. 274, 283 (1994) (citations omitted). Generally, the trial court's determinations are not disturbed "unless [they] represent[] a clear abuse of discretion." Ibid.

Relief from a judgment is appropriate "in situations in which, were it not applied, a grave injustice would occur." Id. at 289. An evidential hearing must be provided if the request for relief under the Rule is premised on contested material facts. See Nolan v. Lee Ho, 120 N.J. 465, 474 (1990); Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 474-75 (App. Div. 1997); Wolkoff v. Villane, 288 N.J. Super. 282, 286 (App. Div. 1996); Pressler, Current N.J. Court Rules, comment 3 on R. 4:50-1 (2010).

Defendant's moving papers make clear he requested relief from the judgment on two independent bases. First, he sought the FJOD be set aside because he was not served with the complaint for divorce. Second, he sought to vacate that portion of the judgment incorporating the MSA, which he alleged was procured by plaintiff's fraud and was otherwise unconscionable based upon an inequitable distribution of marital assets.

Following our review, we are persuaded by defendant's argument of error resulting from the Family Part's denial of his request for a plenary hearing to discern whether he was properly served with the summons and complaint for divorce. Absent proper service, the FJOD is void and must be vacated to allow defendant the opportunity to contest the factual support for plaintiff's complaint, including any issues surrounding whether the MSA was procured by fraud or duress or is unenforceable as unconscionable.

Due process mandates that service of process provide "'notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.'" Davis v. DND/Fidoreo, Inc., 317 N.J. Super. 92, 97 (App. Div. 1998), (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865, 873 (1950)), certif. denied sub nom. Davis v. Surrey Downs/Fidoreo, Inc., 158 N.J. 686 (1999). Although not all defects in service of process rise to the level of a constitutional deprivation, Rosa v. Araujo, 260 N.J. Super. 458, 462-63 (App. Div. 1992), certif. denied, 133 N.J. 434 (1993), a finding that service was sufficiently ineffective is a jurisdictional defect, rendering judgment void. City of Passaic v Shennett, 390 N.J. Super. 475, 486 (App. Div. 2007); Sobel v. Long Island Entm't Prods., Inc., 329 N.J. Super. 285, 293 (App. Div. 2000); see also Rule 4:50-1(d).

"The primary method of obtaining in personam jurisdiction over a defendant in this State is by causing the summons and complaint to be personally served within this State pursuant to R[ule] 4:4-3[.]" R. 4:4-4(a). That Rule in turn provides:

Summonses shall be served, together with a copy of the complaint, by the sheriff, or by a person specially appointed by the court for that purpose, or by plaintiff's attorney or the attorney's agent, or by any other competent adult not having a direct interest in the litigation. If personal service cannot be effected after a reasonable and good faith attempt... service may be made by mailing a copy of the summons and complaint by registered or certified mail, return receipt requested, to the usual place of abode of the defendant or a person authorized by rule of law to accept service for the defendant[.] [Rule 4:4-3.]

In the event substituted forms of service are used, such as mailing a copy of the summons and complaint, personal jurisdiction is acquired "only if the defendant answers the complaint or otherwise appears in response thereto, and provided further that default shall not be entered against a defendant who fails to answer or appear in response thereto." R. 4:4-4(c). "A general appearance or an acceptance of the service of a summons, signed by the defendant's attorney or signed and acknowledged by the defendant... shall have the same effect as if the defendant had been properly served." R. 4:4-6; see also R. 5:4-3(a) (permitting a defendant in a family action to file an acknowledgement of service in lieu of an answer).

Here, defendant admits his signature appears on the acknowledgment of service; however, he disputes signing the document with knowledge that it related to plaintiff's complaint for divorce. Defendant insists plaintiff obtained his signature by presenting the document among a stack of other business documents, which he regularly and routinely signed at her request.

In reviewing this record, we determine the parties' pleadings present contradictory facts. Defendant asserts that he knew nothing of the complaint for divorce, while plaintiff states he was aware of her desire to amicably dissolve their marriage and consented to each step in the process.

Defendant's position is grounded on the fact that he and plaintiff continued to reside in the same residence. It is undisputed defendant was not personally served with the complaint for divorce, as required by Rule 4:4-4. Instead, plaintiff's attorney merely mailed the summons and complaint by first class mail (not certified or registered mail pursuant to Rule 4:4-3) to the marital residence. Counsel also did not notify defendant's attorney, with whom he had dealt in June and July 2008.

Although defendant does not challenge the authenticity of his signature as a basis to vacate the default judgment, see Intek Auto Leasing, Inc. v. Zetes Microtech Corp., 268 N.J. Super. 426, 433-34 (App. Div. 1993) (vacating default where the authenticity of defendant's signature was contested and service was not authorized), we conclude he should be afforded the opportunity to prove the circumstances surrounding his execution of the acknowledgement of service, including the contention that there was no notary and that plaintiff deceptively obtained his signature.

Defendant argues he was unaware of the divorce hearing and never received the summons and complaint because plaintiff wrongfully intercepted his mail. The motion judge apparently found these statements fanciful. Our review determines they appear supported by plaintiff's unexplained possession of confidential communications from defendant's attorney, which she attached to her pleadings.*fn3 Additionally, the mere execution of an acknowledgement of service, unaccompanied by the complaint for divorce, under circumstances that insinuate deception may not properly withstand the rigors of a due process inquiry. Further, proofs surrounding the allegation that defendant never signed the document in the presence of a notary, yet the acknowledgement of service bears a notarization, may shed light on the candor and credibility of the parties.

Determination of these contested issues of material fact cannot be gleaned from the review of competing affidavits. Wolkoff, supra, 288 N.J. Super. at 286. Instead, they must be discerned following a hearing that allows the court to assess the parties' demeanor and credibility. Conforti v. Guliadis, 245 N.J. Super. 561, 565 (App. Div. 1991), aff'd as modified, 128 N.J. 318, 322-23 (1992).

In the remand hearing, we note plaintiff must first prove the manner of service of the summons and complaint, as neither authorized form of personal or constructive service provided by the Rules was utilized. Intek Auto Leasing, supra, 268 N.J. Super. at 433. Although not stated in the record, we assume plaintiff's counsel somehow received the acknowledgement of service and actually filed it with the court. The manner of receipt of that acknowledgement may also need to be revealed. Defendant bears the burden of rebutting the presumption raised by his execution of the acknowledgement of service, presumably by providing proofs of the manner in which his signature was secured, as well as his claim that he never learned of the divorce litigation.

Secondary to the service of process issue is defendant's challenge to the enforceability of the MSA. Based upon our determination regarding the service of process claim, we decline to examine this issue in detail. However, we offer these brief comments regarding the legal issue of enforceability if the court rejects the claims of invalid service.

Sustaining the enforceability of the MSA on a general finding of enforceability of the post-marital agreement is misplaced. Generally, mid-marriage agreements are unenforceable as they are "inherently coercive," entered into "before [a] marriage los[es] all of its vitality and when at least one of the parties, without reservation, wanted the marriage to survive." Pacelli v. Pacelli, 319 N.J. Super. 185, 190-91 (App. Div), certif. denied, 161 N.J. 147 (1999). The public policy supporting enforcement of a pre-nuptial, as opposed to a post-nuptial, agreement is that one party remains free to walk away before the marriage takes place. So too, property settlement agreements prepared in contemplation of divorce are enforceable as they assume the parties stand in adversarial positions and negotiate in their own self-interest. Id. at 189-90, 195.

Examination of the enforceability of the MSA must independently turn on whether defendant can successfully prove his acceptance was procured by fraud, overreaching, duress, or coercion: the agreement's terms were fully disclosed and accepted, and its terms are not unconscionable. Rogers v. Gordon, 404 N.J. Super. 213, 219 (App. Div. 2008) (quotations omitted); see also Guglielmo v. Guglielmo, 253 N.J. Super. 531, 541 (App. Div. 1992) (acknowledging property settlement agreement that is the product of fraud or overreaching or is unconscionable may be set aside); Dworkin v. Dworkin, 217 N.J. Super. 518, 523 (App. Div. 1987) (same).

Addressing these bases, the legal concept of duress is based upon the "unreality of the apparent consent" of a consenting party. Rubenstein v. Rubenstein, 20 N.J. 359, 366 (1956). When there has been moral compulsion sufficient to overcome the will of a person otherwise competent to contract, any agreement made under such circumstances is considered involuntary and, therefore, invalid. Id. at 365. "In determining whether a contracting party is entitled to be absolved from his [or her] contractual obligations due to duress, the court must... look to the condition of the mind of the person subjected to coercive measures." Shanley & Fisher, P.C. v. Sisselman, 215 N.J. Super. 200, 212 (App. Div. 1987). "'The question is whether consent was coerced; that is, was the person complaining induced by the duress or undue influence to give his consent, and would not have done so otherwise.'" Ibid. (quoting Rubenstein, supra, 20 N.J. at 366). "[T]he test for duress is subjective, rather than objective, and does not turn on whether the duress is of 'such severity as to overcome the will of a person of ordinary firmness.'" Id. at 212-13 (quoting S. P. Dunham & Co. v. Kudra, 44 N.J. Super. 565, 570 (App. Div. 1957)). All the attendant circumstances must be considered. Id. at 212. In addition to considering the subjective mindset of the complaining party, the pressure imposed must be wrongful. Rubenstein, supra, 20 N.J. at 367. "The act or conduct complained of... [must be] 'so oppressive under given circumstances as to constrain one to do what his free will would refuse.'" Ibid. (quoting First State Bank v. Fed. Reserve Bank, 219 N.W. 908, 909 (Minn. 1928)); see also Segal v. Segal, 278 N.J. Super. 218, 223-24 (App. Div. 1994) (finding such agreements void and incapable of ratification).

Defendant has offered proofs that plaintiff and her counsel represented "the divorce was in name only," suggesting the MSA was just another mid-marriage agreement. Without more, we draw no conclusions about whether these facts, if shown, suggest the existence of a scheme to defraud defendant or third parties. Also, the parties' factual contentions concerning the value of assets and equitable claims for interests in assets titled to the other party can be determined after examination of all evidence, including an assessment of the witnesses' credibility under the sanctity of an oath and tested by cross-examination. See 5 Wigmore on Evidence § 1367 (stating cross-examination is the "greatest legal engine ever invented for the discovery of truth"); see also Tancredi v. Tancredi, 101 N.J. Super. 259, 262 (App. Div. 1968) (holding that where the disposition of the proceedings "hinges upon factual issues and credibility" a plenary hearing is warranted).

Accordingly, we reverse the order and remand for a hearing to discern whether proper and effective service of the complaint for divorce was made.

Reversed and remanded.

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