May 11, 2011
LINDA M. GEFFNER, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
RAMI E. GEFFNER, DEFENDANT-RESPONDENT/CROSS-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Ocean County, Docket No. FM-15-948-00-C.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 28, 2011
Before Judges Lisa, Reisner and Ostrer.
This matter comes before us by virtue of plaintiff's appeal and defendant's cross-appeal from certain aspects of post-judgment orders issued by the Family Court.
The parties were married in 1984. They had two children, a daughter who was born in 1987 and is now twenty-three-and-one-half years old, and a son born in 1989, who is now twenty-two years old. The parties separated in November 1999. Plaintiff filed a divorce complaint in January 2000. Defendant is a dermatologist with a very successful practice, yielding high income to him. Until the parties separated, plaintiff was the office manager of the practice. The parties accumulated very substantial assets subject to equitable distribution. Both parties were represented by counsel, and the divorce proceedings were marked by extensive discovery, investigation, and negotiations.
On September 26, 2002, the parties entered into a property settlement agreement (PSA). They were divorced on October 11, 2002, and the divorce judgment incorporated the PSA.
On June 3, 2004, plaintiff filed the motion which began extensive post-judgment proceedings leading up to this appeal. She sought various forms of relief, including setting aside the PSA because of defendant's failure to disclose the expansion of his medical practice shortly before the PSA was entered into. Defendant filed a cross-motion alleging lack of cooperation by plaintiff regarding his efforts to re-establish a relationship with the children, who were then teenagers. On February 23, 2005, the court entered an order directing that a plenary hearing would be held to determine whether defendant "intentionally and improperly excluded or withheld relevant and material facts prior to the settlement of this case." On May 16, 2005, the court entered another order adding as an issue for the plenary hearing plaintiff's "cooperation or lack of cooperation with this court['s] order regarding the children's reunification" with defendant.
The plenary hearing began on September 19, 2005, and continued for forty-four days over a two-and-one-half year period. On January 5, 2009, the court issued a written decision and an accompanying order. We will later set forth the relevant provisions of the order. However, it is fair to say that the appeal revolves primarily around a single provision, namely that the court rejected plaintiff's contention that there was a fraudulently concealed plan of expansion of defendant's medical practice, as a result of which the court declined to reopen the equitable distribution provisions of the PSA.
Plaintiff appeals from specified portions of the January 5, 2009 order. Defendant cross-appeals from specified portions of the orders entered on February 23, 2005 and January 5, 2009. For the reasons that follow, none of the arguments presented by either party provide a basis for reversal. Accordingly, we affirm in all respects.
We need not describe in detail the financial circumstances of the parties at the time of the divorce or the detailed financial provisions in the PSA. A brief summary is sufficient. The marital estate was in the neighborhood of $20 million, and defendant was regularly earning more than $1 million per year in his medical practice. The PSA provided that defendant would pay plaintiff limited duration alimony of $250,000 per year for four years, followed by four more years at $175,000 per year. Real estate assets, which included two homes for personal use and seventeen real estate investment properties, were divided equally between the parties. Defendant received full ownership of the primary marital home in Toms River, and plaintiff received a house on Long Beach Island. The investment properties were divided between the parties, and these properties provided a substantial source of income. Based upon the testimony of plaintiff's appraisal expert, defendant's medical practice was valued at $3.5 million, and plaintiff was awarded a $1 million distributable share of the practice.
Plaintiff was given primary custody of the children. Apparently, defendant was somewhat estranged from the children during the divorce proceedings. The PSA obligated the parties to communicate and cooperate toward the goal of restoring a normal parent-child relationship between the children and defendant. Defendant was obligated to pay $60,000 per year in child support, provide for their children's educational needs, and provide health insurance for them.
In the aftermath of the divorce, plaintiff became aware that several months before the divorce, in the summer of 2002, defendant had acquired another physician's medical practice located in Northfield. At that time, defendant had six offices. Therefore, this expansion added a seventh office. Plaintiff argued that defendant hid from her his plans to expand his practice prior to the settlement by concealing his acquisition of the Northfield office. The acquisition was made by defendant together with the other doctor in his practice, Patricia Tager, who is now defendant's wife. It was these events that triggered the post-judgment proceedings that are the basis of this appeal.
At the plenary hearing, Tager testified that in approximately March 2002, she was considering purchasing the practice of an acquaintance, Dr. Tamara Moss, in Northfield. Tager's employment agreement with defendant's medical practice was scheduled to end on June 30, 2002. She was considering the possibility of disassociating herself from defendant's practice because the divorce proceedings had been going on for a long time and she was concerned about her financial and professional future.
Tager and defendant discussed the possibility of her acquisition of the Northfield practice. She requested defendant's advice regarding its financial viability. Defendant met with Moss' husband and negotiated a price.
On June 3, 2002, defendant and Tager met with defendant's accountants and discussed the possibility of acquiring the Northfield practice. At the meeting, Tager asked whether acquisition of the Northfield practice by her and defendant would cause it to get tied up in the divorce proceedings. Presumably because the valuation date of defendant's practice was set at December 31, 1999, the time of the filing of the divorce, and based upon the valuation methods used in valuing the practice, the accountants were of the opinion that the potential new office would not have to be disclosed. Based on that advice, Tager and defendant decided in late June 2002 that they would purchase the practice together.
On July 1, 2002, defendant and Tager entered into an agreement with Moss for the purchase of the practice for $100,000. Moss did not own the real estate. A bill of sale dated July 31, 2002 transferred the practice to Tager and defendant. Most of the purchase price, nearly $92,000, was evidenced by a one-year promissory note signed by defendant and Tager.
Plaintiff's accounting expert, Joseph Gunteski, testified that he used two methods to value defendant's practice, with a December 31, 1999 valuation date. One method was the capitalization of excess income (or excess earnings) approach. The other was the discounted future benefit stream (or discounted cash flow) approach. The level of growth of the business had no impact on the capitalization of excess income method. The discounted future benefit stream approach projected future income. Gunteski assumed a growth rate of twenty percent per year and informed plaintiff of his projection that defendant's income would increase in the years following his valuation.
Gunteski testified that had he known about the plans to expand the practice, it would have affected the growth rate used in the valuation. However, it would only have impacted his valuation if the plan to expand existed prior to the valuation date. If he had known about the addition of the Northfield office, but that was the only factor different from what was contained in his report, it would not have changed his report, or it would have changed it only minimally.
Each valuation method yielded a value close to the other method, in the neighborhood of $3.5 million. The fact that the two methods yielded very similar results fortified Gunteski's opinion that they were accurate. His rounded off valuation was $3.5 million, and he so advised plaintiff. She believed the value was too low. She believed the practice was growing and would be expanding, more doctors and physicians' assistants would be hired, and multiple additional offices would be acquired.
Plaintiff testified that she and defendant had always planned to expand the practice. She said it was their goal to set up satellite offices, develop them to a stage of productivity, and then further branch out.
At the time of the PSA negotiations, defendant's medical practice was in the midst of upgrading its computer system and had retained Scott Milne to arrange for and install the new system. On April 30, 2002, an employee of the practice, Jerald Schlitzer, wrote to Milne stating that he would explain to Milne what was needed so the practice could "progress by opening additional offices in the 609 and 732 area codes." The letter stated that "Northfield NJ is on our List to open an office."
At no time prior to the PSA did defendant disclose to plaintiff the acquisition of the Northfield office. Plaintiff further argued at the plenary hearing that defendant had failed to disclose certain income draws he took from the practice during the two months between his most recently updated case information statement (CIS), which set forth his income as of July 20, 2002, and the PSA, entered into on September 26, 2002. The CIS listed defendant's year-to-date gross earned income as of July 20, 2002 as $481,527.29. His 2001 gross earned income was listed as $1,082,032.22.
In July and August 2002, several disbursements were made to defendant which plaintiff claimed were wrongfully concealed from her, in violation of defendant's ongoing duty to update information in his CIS. These were as follows: On July 25, 2002, a $133,253.98 check was drawn on defendant's business account and payable to him personally. This check was handwritten, and not computer generated. Three bonus checks, each for $50,000, were paid to defendant on August 24, August 26, and August 31, 2002, respectively. Defendant also received another bonus check of $175,000 on July 27, 2002 to cover federal and state withholding taxes and Medicare taxes.
As we have stated, defendant did not update his CIS to reflect these checks. His CIS reflected year-to-date gross bonuses, as of July 20, 2002, of $70,527.21. However, it is notable that his CIS also reflected gross bonuses for 2001 in the total amount of $332,032.06. Defendant argues that it was well known that his income for 2002 would exceed $1 million, as it had in recent years. Indeed, the negotiations for alimony, child support, and other financial arrangements, were predicated largely upon the analysis of plaintiff's accounting experts, who opined that, in addition to defendant's $1.1 million income in 2001, his professional corporation also had about $700,000 in undistributed income, as a result of which his total cash flow for the year was approximately $1.8 million.
Further, the record contains a letter dated September 25, 2002 from the bookkeeper at defendant's medical practice addressed to defendant's attorney detailing the bonus checks we have described. According to defendant's attorney, the purpose of this letter was to produce updated information as a condition of plaintiff signing the PSA. At oral argument, defendant's attorney represented to us that a copy of this letter was handed to plaintiff and her attorney at the time of signing the PSA on September 26, 2002.
Based upon all of these circumstances, defendant argues before us, as he did before the trial court, that there was no material impropriety in his failure to update the CIS. He contends that these ongoing payments to him from his practice were made in the ordinary course of his practice, were consistent with past experience, and had no effect on the income parameters that undergirded the negotiations leading up to the PSA.
There was also substantial testimony at the plenary hearing regarding the relationship of defendant and the children, and the parties' competing claims about plaintiff's cooperation or lack of cooperation in working toward reunification of the children with their father. For reasons we will discuss, we find it unnecessary to describe any of this testimony. Likewise, we will not set forth the judge's findings on this issue.
In his January 5, 2009 written decision, the judge noted that the primary issue was whether defendant intentionally and improperly excluded or withheld relevant and material facts prior to the settlement. Plaintiff argued that defendant had plans for expanding his medical practice and that he had concealed them from her during the pendency of the divorce proceeding. The court found that defendant had acquired the Northfield office without disclosing it, and intended to hide that fact from plaintiff. However, the court also found that defendant's acquisition of the Northfield office was not part of a pre-determination for expansion. Instead, the acquisition was a "fortuitous" response to several factors: the availability of the Northfield practice;
Dr. Tager's connection with Dr. Moss; the pending termination of Dr. Tager's Employment Agreement; Dr. Tager's considerations of planning her professional future; Dr. Tager and Dr. Geffner's relationship; the continuing uncertainty of Dr. Geffner's Divorce proceedings; and the advice that Dr. Geffner received from his accountants.
Defendant concealed the acquisition because of his belief that it was not relevant to the divorce case, the advice he received from his accountants that the acquisition would have no impact on the value of his business, and "his general attitude that he should give [plaintiff] as little information as possible."
The court acknowledged that defendant was an "aggressive businessman," and it was possible that he "had a generalized intention to consider the possibility of future growth for his practice after the would be divorce concluded." However, the court was not willing to make that finding from the evidence presented. The court reasoned that there "was no definitive, specific or detailed strategy in place" and "generalized, non-specific hopes for the future" could not be the basis for setting aside a property settlement agreement. Thus, there was no fraud because a subjective future intention could not amount to a presently existing or past fact, which was a necessary element of fraud.
Also, Gunteski's discounted cash flow approach already assumed substantial future growth for defendant's business. And, plaintiff did not rely on defendant's statements. She maintained throughout the settlement negotiations that defendant's business was expanding and testified that she thought defendant's income would increase.
Thus, there was no basis to set aside the PSA with respect to the value of defendant's medical practice. Both parties, their attorneys, and the accountants had all relevant and material information concerning valuation.
With respect to the undisclosed income in July and August, 2002, the court found that defendant was attempting to hide these funds from plaintiff during the settlement negotiations. The $133,253.98 check was handwritten, signed by defendant, and made payable to him, not his business. While the bookkeeper testified that the check was needed for payroll for the first two weeks of July 2002, the amount of the check did not match any calculations for payroll for a two-week pay period and the check could not have covered the payroll the bookkeeper said it was needed for because it was not deposited until November 2002.
Thus, the court found that defendant intentionally concealed the sum of $133,253.98 throughout the settlement negotiations. The funds constituted income to defendant because the check was payable to defendant personally, and he had the ability to control the disposition of the funds at the time of the settlement negotiations. The court also agreed that the three $50,000 bonus checks and the $175,000 bonus to cover federal and state withholding taxes and Medicare taxes should have been disclosed.
Defendant's CIS was dated August 19, 2002, but signed and certified on August 30, 2002, and disclosed none of these bonuses. The court found that when the parties were negotiating their settlement in September 2002, the most recent income disclosure by defendant revealed year-to-date gross income of $481,527.29 as of July 20, 2002. However, his paycheck on August 24, 2002, would have revealed year-to-date gross income of $811,608.04, a difference of $330,080.75. Also, a candid disclosure in September 2002 would have revealed two additional $50,000 bonuses and the check for $133,253.98.
Defendant argued that plaintiff could have requested updated income figures before she settled the case on September 26, 2002; however, the court found that defendant signed the case information statement on August 30, 2002, and plaintiff was justified in relying on that recent information. Defendant had a duty to supply plaintiff with the updated information.
The court also found that plaintiff had violated defendant's litigant's rights, and undermined his ability to renew a normal relationship with the parties' son, but found differently with respect to the daughter. The reasons for these findings are unimportant to our disposition of this appeal, and we will say no more on the subject.
Accordingly, the court entered an order on January 5, 2009, which contained the following provisions that are relevant to this appeal:
1. Linda M. Geffner's application to set aside the Property Settlement Agreement between her and Rami Geffner or to reopen their Judgment of Divorce is DENIED, without prejudice. The Court specifically rejects Linda M. Geffner's contention that there was a fraudulently concealed plan of expansion as to Dr. Geffner's medical practice. The agreement of the parties with respect to Equitable Distribution shall be binding.
2. The factual findings set forth in this Court's Opinion dated January 5, 2009 are incorporated herein by reference.
6. Both parties are permitted to file respective motions for relief based upon the factual findings set forth in this Court's Opinion dated January 5, 2009.
Neither party filed motions for relief based upon the court's factual findings. Instead, plaintiff appealed and defendant cross-appealed from that order. At the commencement of the appeal process, representatives of this court questioned the parties about the finality of the January 5, 2009 order, noting that it was "without prejudice," at least in some respects, and that it permitted the parties to seek additional relief. Both parties insisted the order was final and the matter was ripe for appeal. The appeal has proceeded accordingly. The parties have therefore waived their right to seek further relief under the order and are estopped from doing so because they have chosen to treat this decision as final for purposes of appeal. We have accepted the order as a final order, and we dispose of the appeal on that basis.
Plaintiff appeals from paragraphs 1, 2 and 6 of the January 5, 2009 order, which we have set forth above. In particular, she argues:
THERE ARE TWO SIGNIFICANT LEGAL ISSUES CONCERNING THE STANDARD OF REVIEW: (1) AS A MATTER OF LAW THIS COURT SHOULD FIND DIVORCING SPOUSES HAVE A DUTY TO DISCLOSE FINANCIAL INFORMATION PRIOR TO SETTLEMENT AND THE COURT'S REJECTION OF THIS PRINCIPLE
WAS REVERSIBLE ERROR; (2) THE COURT'S VIOLATION OF R. 1:7-4 REQUIRES THIS COURT NOT APPLY THE NORMAL STANDARD OF REVIEW.
GIVEN THE IMPORTANCE OF MARRIAGE AND SOCIETY AND THE RELATIONSHIP SPOUSES HAVE TO EACH OTHER IN A DIVORCE IT SHOULD BE ESTABLISHED THAT SPOUSES HAVE A BROADLY BASED FIDUCIARY DUTY TO EACH OTHER WHEN THEY DIVORCE.
THE COURT'S PRETRIAL RULING REJECTING PLAINTIFF'S ARGUMENT THAT DEFENDANT HAD A DUTY TO DISCLOSE NORTHFIELD IS IN CONFLICT WITH HIS FINDING DEFENDANT BREACHED HIS DUTY TO ACCURATELY DISCLOSE HIS INCOME.
THE LAW SHOULD NOT ENCOURAGE OR REWARD CONCEALMENT; ESTABLISHMENT OF DUTY WOULD ELIMINATE THIS CONCERN.
THE COURT FAILED TO MAKE FINDINGS OF FACT ON CRITICAL ISSUES AS REQUIRED BY RULE 1:7-4. POINT III
THE COURT'S FINDINGS: (1) THERE WAS NOT A SPECIFIC IDENTIFIABLE EXPANSION PLAN; (2) THAT NORTHFIELD WAS NOT PART OF ANY PLAN FOR EXPANSION AND (3) THAT DR. GEFFNER DID NOT MAKE FALSE STATEMENTS ARE UNSUPPORTED BY THE RECORD.
THE FAILURE TO ADDRESS THE EVIDENCE OF A PRE-EXISTING PLAN WAS ERROR.
THE COURT ERRED BY IGNORING THE PARTIES' AGREEMENT THAT THE SETTLEMENT WAS PREDICATED UPON TRUTHFUL AND ACCURATE CASE INFORMATION STATEMENTS.
DEFENDANT'S ACQUISITION OF NORTHFIELD WAS A MATERIAL FACT.
THE COURT'S FAILURE TO APPRECIATE HOW NORTHFIELD'S 2002 REVENUE WAS RELEVANT ON THE VALUATION LED TO REVERSIBLE ERROR; POST FILING EVENTS MAY BE CONSIDERED IN DETERMINING A FAIR RESULT.
THE FAILURE OF THE TRIAL COURT TO EXPLAIN WHY HE REJECTED SUBSTANTIAL EVIDENCE CONTRARY TO HIS FINDING REQUIRES A DIFFERENT STANDARD OF REVIEW; THE RECORD DOES NOT SUPPORT THE CONCLUSION PLAINTIFF FAILED TO COOPERATE WITH RESPECT TO THE COURT ORDERED COUNSELING.
THE COURT'S FAILURE TO ADDRESS DEFENDANT'S REFUSAL TO CALL HIS OWN EXPERT SHOULD HAVE LED TO AN ADVERSE INFERENCE THAT DEFENDANT MISLED PLAINTIFF ON THE GENERAL ISSUE OF EXPANSION.
Point VII requires no discussion because neither party sought relief, and the court granted none, with respect to defendant's relationship with the children. In light of that circumstance, the current age of the children, and our holding that the parties are precluded from seeking relief based upon the court's factual findings in these proceedings, the issue is moot.
The arguments plaintiff raises in Point I and II do not warrant extended discussion. See R. 2:11-3(e)(1)(E). We provide these brief comments.
We reject plaintiff's argument that the court should impose a fiduciary duty on divorcing spouses. "A fiduciary relationship arises between two persons when one person is under a duty to act for or give advice for the benefit of another on matters within the scope of their relationship." F.G. v. MacDonell, 150 N.J. 550, 563 (1997). "The fiduciary's obligations to the dependent party include a duty of loyalty and a duty to exercise reasonable skill and care." Id. at 564. Thus, "the fiduciary is liable for harm resulting from a breach of the duties imposed by the existence of such a relationship." Ibid.
Fiduciaries "appear in a variety of forms and in a variety of contexts. Agents, partners, receivers, trustees, and executors are entrusted in one way or another with the conduct of the affairs or the protection of the rights of another." Balliet v. Fennell, 368 N.J. Super. 15, 22 (App. Div. 2004). In re Niles Trust, 176 N.J. 282, 295 (2003) (quoting Restatement (Second) of Torts, § 874), held that "'[o]ne standing in a fiduciary relation with another is subject to liability to the other for harm resulting from a breach of duty imposed by the relation'" and that "'[a] fiduciary who commits a breach of his duty as a fiduciary is guilty of tortious conduct to the person for whom he should act.'"
Such a relationship simply does not exist between parties who are adversaries in litigation. Like all opposing litigants, divorcing spouses are responsible to look out for their own best interests. Indeed, like all litigants, parties are obligated to comply with applicable court rules, court orders, and discovery obligations. See, e.g., R. 5:5-2(c) (imposing a continuing duty to update CIS with material changes in information).
We have recently held that no fiduciary duty between divorcing spouses has ever been recognized in this State. Tannen v. Tannen, 416 N.J. Super. 248, 262-63 (App. Div. 2010), certif. granted, 205 N.J. 80 (2011). We noted that although divorcing spouses are required to deal fairly with each other, that requirement is not the same as, nor does it require establishment of, a fiduciary duty. Ibid.
We reject plaintiff's argument that the court's factual findings were not supported by the record and that the court failed to adequately explain its factual findings on critical issues as required by Rule 1:7-4. Based upon our review of the record, we are satisfied that the judge's factual findings are supported by adequate, substantial and credible evidence in the record. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974). Accordingly, we have no occasion to disturb those findings. Ibid.
Further, the judge adequately expressed his findings. This was an extremely lengthy hearing, with much testimony from various witnesses. The record also contained voluminous documentary evidence. "Meaningful appellate review is inhibited unless the judge sets forth the reasons for his or her opinion." Salch v. Salch, 240 N.J. Super. 441, 443 (App. Div. 1990). Naked conclusions do not satisfy the obligation imposed on a court sitting without a jury under Rule 1:7-4. Curtis v. Finneran, 83 N.J. 563, 569-70 (1980). "Rather, the trial court must state clearly its factual findings and correlate them with the relevant legal conclusions." Id. at 570. We are satisfied that the judge met this standard here.
The critical issue at the plenary hearing was whether defendant had withheld relevant and material facts prior to the settlement. The court held that nondisclosure of the purchase of the Northfield office was not material because there was no plan of expansion as of December 31, 1999, the valuation date.
The evidence presented supported that finding. Contrary to plaintiff's argument, the court was not required to discuss why it did not accept her evidence that the non-disclosure was material. The court was not required to address all evidence that was presented in this lengthy proceeding. The judge clearly explained the evidence he relied upon to support his decision, and failure to discuss evidence supporting arguments does not, in and of itself, render the judge's findings inadequate under Rule 1:7-4.
Plaintiff's remaining arguments, contained in her point headings III, IV, V, VI and VIII address whether the court erred by denying her motion to set aside the PSA. We will discuss those arguments in Part IV of this opinion.
In his cross-appeal, defendant appeals from paragraphs one, two and three of the February 23, 2005 order. That order was procedural in nature. Paragraph one ordered that a plenary hearing would be held. Paragraph two provided: "If this Court finds that the Defendant intentionally concealed information as to the general allegations contained the Plaintiff's Notice of Motion then this Court will then determine what additional action needs to be taken." Paragraph three set forth a discovery schedule for the contemplated plenary hearing.
We are powerless to grant relief from paragraphs one and three. The discovery and the plenary hearing have already occurred. With respect to paragraph two, no adverse action was ordered against defendant. Therefore, even though the court found that defendant did intentionally conceal some information, no adverse consequences to defendant ensued, and no relief is needed.
Defendant also appealed "as to [the] January 5, 2009 [Order]: Paragraphs 6 (to the extent permitting plaintiff to file any motions to reopen support) and Paragraph 2 as to those factual findings incorporated therewith, which may form the basis for such motions." As we have stated, neither party filed any motions with the trial court after the issuance of its opinion and order of January 5, 2009 seeking relief based upon the court's factual findings. As we have held in this opinion, the parties are now precluded from making any such motions. Therefore, defendant's arguments with respect to the January 5, 2009 order are moot.
Further, defendant's counsel acknowledged at oral argument that the cross-appeal was a protective one. Accordingly, in light of our affirmance on plaintiff's appeal, there is no need for us to address any arguments raised on defendant's cross-appeal.
We now address plaintiff's argument that the court erred by denying her motion to set aside the PSA. Plaintiff advances several bases in support of this argument. We set forth a listing of those arguments, discuss the governing standards of review, and then address each argument in turn:
Plaintiff argues in Point III that the court's findings that there was no specific identifiable expansion plan and that defendant did not make false statements were not supported by the record. In Point IV, she argues that the court erred by ignoring the parties' agreement that the settlement was predicated upon truthful and accurate CISs. In Point V, she argues that defendant's "acquisition of Northfield was a material fact." In Point VI, she argues that the court's failure to appreciate how Northfield's 2002 revenue was relevant on the valuation of defendant's medical practice led to reversible error. In Point VIII, she argues that the court erred by failing to draw an adverse inference from defendant's failure to call an expert witness.
Although she never cites to the appropriate standard, plaintiff is essentially arguing that the court erred in denying her motion to set aside the property settlement agreement. We disagree. We find no mistaken exercise of discretion in the denial of plaintiff's motion.
Under Rule 4:50-1, a party may move for relief from a judgment or order for the following reasons:
(a) mistake, inadvertence, surprise, or excusable neglect; (b) newly discovered evidence which would probably alter the judgment or order and which by due diligence could not have been discovered in time to move for a new trial under R. 4:49; (c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; . . . or (f) any other reason justifying relief from the operation of the judgment or order.
Under Rule 4:50-2, the motion "shall be made within a reasonable time, and for reasons (a), (b) and (c) of R. 4:50-1 not more than one year after the judgment, order or proceeding was entered or taken." Moreover, relief under Rule 4:50-1(f) "is available only when truly exceptional circumstances are present and only when the court is presented with a reason not included among any of the reasons subject to the one year limitation." Baumann v. Marinaro, 95 N.J. 380, 395 (1984).
A motion to reopen a judgment under Rule 4:50-1 "'is addressed to the sound discretion of the trial court, guided by equitable principles.'" In re Adoption of Child of Indian Heritage, 219 N.J. Super. 28, 42 (App. Div. 1987) (quoting Hodgson v. Applegate, 31 N.J. 29, 37 (1959)), aff'd, 111 N.J. 155 (1988). The trial court's ruling will be upheld in the absence of a mistaken exercise of discretion. Ibid. See also Quick Chek Food Stores v. Springfield Tp., 83 N.J. 438, 446 (1980) (holding that motions under R. 4:50-1 "are addressed to the sound discretion of the trial court and will not be disturbed unless that discretion has been clearly abused").
"'Settlement of litigation ranks high in our public policy.'" Nolan v. Lee Ho, 120 N.J. 465, 472 (1990) (quoting Jannarone v. W.T. Co., 65 N.J. Super. 472, 476 (App. Div.), certif. denied, 35 N.J. 61 (1961)). Thus, New Jersey courts "have refused to vacate final settlements absent compelling circumstances." Ibid. "In general, settlement agreements will be honored 'absent a demonstration of fraud or other compelling circumstances.'" Ibid. (quoting Pascarella v. Bruck, 190 N.J. Super. 118, 125 (App. Div.)(internal quotation omitted), certif. denied, 94 N.J. 600 (1983)). The party seeking to vacate a settlement agreement must provide "clear and convincing proof" that the agreement should be vacated. Ibid.
A motion to set aside a final divorce judgment must be founded upon a showing of inequity and unfairness under Rule 4:50-1(f). Rosen v. Rosen, 225 N.J. Super. 33, 36 (App. Div.), certif. denied, 111 N.J. 649 (1988). To determine whether compelling circumstances are present, the court must look to the totality of the facts and on a case-by-case basis. In re Guardianship of J.N.H., 172 N.J. 440, 473-74 (2002). The movant must demonstrate that continued enforcement of the judgment would be "unjust, oppressive or inequitable." Quagliato v. Bodner, 115 N.J. Super. 133, 138 (App. Div. 1971), superseded by statute on other grounds, Comparative Negligence Act, L. 1987, c. 146, as recognized in Reichert v. Vegholm, 366 N.J. Super. 209 (App. Div. 2004).
"[W]here there is a showing of fraud or misconduct by a spouse in failing to disclose the true worth of his or her assets, relief may be granted under R. 4:50-1(f) if the motion is made within a reasonable time." Rosen, supra, 225 N.J. Super. at 37.
If the party seeking to rescind the agreement is not seeking damages, that party needs to establish only equitable fraud. Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619, 625 (1981). An action for fraud may be either legal or equitable in nature. Id. at 624. "In order to prove equitable fraud, a plaintiff must demonstrate a material misrepresentation made with intent that it be relied on, coupled with actual detrimental reliance." Nolan, supra, 120 N.J. at 472. It is not necessary to prove knowledge of the falsity and an intention to obtain an undue advantage, as would be necessary to prove legal fraud. Jewish Center, supra, 86 N.J. at 625.
A. Expansion of Medical Practice
In Point III, plaintiff argues that the record does not support the court's findings that there was no specific identifiable expansion plan, that Northfield was not part of any plan for expansion, and that defendant did not make false statements. She complains that the court never commented on testimony by her or Gunteski that there was a plan for expansion, nor did it address testimony that the new computer system was designed for expansion. She also claims that the court erred by failing to address the evidence that there was a plan for expansion as early as the spring of 2002. As we have stated, the court's findings were supported by competent, credible evidence in the record.
Plaintiff mischaracterizes the court's findings. The court found that there was no plan of expansion as of the date of valuation of the medical practice, December 31, 1999. This finding was well supported by the record evidence. Plaintiff presented no evidence of a specific, detailed strategy of expansion as of December 31, 1999. All of the evidence that plaintiff points to, such as the testimony by her and her expert and the correspondence regarding the new computer system, occurred well after the valuation date, in the spring of 2002. Defendant's statement to Gunteski at the time of valuation that he had plans to grow the business is not evidence of a specific, detailed plan to expand the practice as of that date.
B. Case Information Statements
In Point IV, plaintiff argues that the court erred by ignoring the parties' agreement that the PSA was predicated upon truthful and accurate CISs and refusing to set aside the PSA when it found that defendant's CIS was not accurate. We are satisfied that the court acted within its discretion in denying plaintiff's motion to set aside the PSA based on defendant's inaccurate CIS.
In order to set aside the PSA based on defendant's inaccurate CIS, plaintiff would have had to demonstrate by clear and convincing evidence that enforcement of the property settlement agreement would be unjust, oppressive or inequitable. Nolan, 120 N.J. at 472; Quagliato, supra, 115 N.J. Super. at 138. She has not done so.
The trial court found that defendant's CIS was inaccurate because it did not include information regarding bonus checks he had received in late July 2002. This does not render unjust enforcement of the PSA, considering the totality of the circumstances, including that information about defendant's salary and bonuses the previous year (2001) was included in the CIS. The court reasonably concluded that the negotiations were predicated on defendant's ongoing annual income in excess of $1 million.
C. Acquisition of Northfield
In Point V, plaintiff argues that defendant's "acquisition of Northfield was a material fact." What she is referring to is the first element of fraud, which would justify vacating the settlement under Rule 4:50-1(f). In order to set aside the property settlement agreement based on defendant's fraudulent concealment, plaintiff must prove by clear and convincing evidence that defendant made a material misrepresentation with the intent that it be relied upon, as well as actual detrimental reliance. Nolan, supra, 120 N.J. at 472. She did not do so.
Plaintiff argues that the issue to be addressed at the plenary hearing was whether defendant "intentionally and improperly excluded or withheld relevant and material facts" about the expansion prior to the settlement. Because the court found that defendant intentionally withheld information about Northfield, the issue was limited to whether that information was a relevant and material fact.
The court did not act beyond its discretion in denying plaintiff's motion to set aside the PSA based on defendant's concealment of his acquisition of the Northfield office because plaintiff did not demonstrate the elements of fraud by clear and convincing evidence. R. 4:50-1(f); In re Adoption of Child of Indian Heritage, supra, 219 N.J. Super. at 42 (holding that a motion to reopen a judgment under Rule 4:50-1 is addressed to the sound discretion of the trial court).
Plaintiff did show by clear and convincing evidence that there was a misrepresentation, as defendant acquired the Northfield office prior to settlement but did not disclose that to her. However, plaintiff did not show by clear and convincing evidence that the misrepresentation was material. Gunteski, plaintiff's accounting expert, valued defendant's medical practice as of December 31, 1999, and assumed a growth rate of twenty percent. He testified that plans to grow the medical practice would impact his valuation only if they existed prior to the valuation date. Plaintiff presented no evidence that any such plan existed as of December 31, 1999. Gunteski further testified that even if he had known about the Northfield office, if that was the only factor different from what was in his report, it would not have changed his report or changed it only minimally. Thus, the court's finding that defendant's failure to disclose the expansion of his medical practice was not material finds ample support in the record.
Also, plaintiff failed to show by clear and convincing evidence actual detrimental reliance on defendant's misrepresentation. Nolan, supra, 120 N.J. at 472. Plaintiff told Gunteski that she thought his valuation of the practice at $3.5 million was too low, as she thought the practice was in a growth mode and would be expanding. She believed there would be additional doctors hired, more physicians' assistants, and multiple offices opened. Plaintiff presented no evidence that she actually relied on defendant's representation when negotiating the divorce settlement. Thus, the court's finding that she had not relied on the misrepresentation was also supported by the record.
D. Valuation of Medical Practice
In Point VI, plaintiff argues that the court's "failure to appreciate how [Northfield's] 2002 revenue was relevant on the valuation" of defendant's medical practice led to reversible error. She also argues that "post filing events may be considered in determining a fair result."
When determining what property will be eligible for equitable distribution, the period of acquisition is deemed to terminate the date that the divorce complaint was filed. Painter v. Painter, 65 N.J. 196, 218 (1974). Thus, the general rule is that the valuation date is the date the complaint was filed. DiPietro v. DiPietro, 193 N.J. Super. 533, 538 (App. Div. 1984). "Where there has been fluctuation in the value of a marital asset between the date the divorce complaint was filed and the date of distribution, the driving force behind that fluctuation must be determined so that proper distribution of the asset may be accomplished." Addesa v. Addesa, 392 N.J. Super. 58, 76-77 (App. Div. 2007) (citing Scavone v. Scavone, 243 N.J. Super. 134, 136-37, (App. Div. 1990)). "Where the value of a particular marital asset has increased due to the diligence and industry of the party in possession of that asset, independent of market forces, the increase will normally accrue to that party alone." Id. at 77. However, "[w]here . . . the enhanced value is attributable to market factors or inflation, the increase will generally be divided between both parties." Ibid.
Plaintiff is correct that post-filing events may be considered in determining the value of a marital asset. However, she has not shown that the opening of the Northfield office had any effect on the valuation of the medical practice. Her own expert testified that in his valuation of the practice as of December 31, 1999, he assumed a growth rate of twenty percent for the practice. In addition, he testified that assuming that the opening of the Northfield office was the only factor different than what was in his report, it would not change his valuation, or it would change it only minimally. Plaintiff presented no other evidence that the opening of the Northfield office changed the value of defendant's medical practice.
Therefore, plaintiff did not show that continued enforcement of the agreement would be "unjust, oppressive or inequitable" based on the effect of the acquisition of Northfield on defendant's medical practice. Quagliato, supra, 115 N.J. Super. at 138.
E. Adverse Inference
In Point VIII, plaintiff argues that the court's failure to address defendant's "refusal" to call his own expert should have led to an adverse inference that defendant had misled plaintiff on the general issue of expansion. We reject this argument because any witnesses defendant could have called were also available to plaintiff, and, in fact, plaintiff did call those witnesses to testify.
Our Supreme Court first addressed the inference that may arise from an adversary's failure to call a witness in State v. Clawans, 38 N.J. 162, 170 (1962). In Clawans, a witness in a criminal case had not been called by the State and the defendant asked the court to instruct the jury that it could infer from the State's failure to call the witness that the witness's testimony would have been against the State's interest. Id. at 170. The Court provided guidance as to when it would be appropriate to allow one party to urge a jury to draw an adverse inference against an opposing party, and concluded it would be permissible in both civil and criminal cases. Id. at 170-72.
The Court recently addressed the use of such adverse inferences in State v. Hill, 199 N.J. 545, 559-62 (2009), noting that "[c]are must be exercised because the inference is not invariably available whenever a party does not call a witness who has knowledge of relevant facts." Id. at 561. Instead, an adverse inference is only appropriate where the court has placed on the record its findings:
(1) that the uncalled witness is peculiarly within the control or power of only the one party, or that there is a special relationship between the party and the witness or the party has superior knowledge of the identity of the witness or of the testimony the witness might be expected to give; (2) that the witness is available to that party both practically and physically; (3) that the testimony of the uncalled witness will elucidate relevant and critical facts in issue[;] and (4) that such testimony appears to be superior to that already utilized in respect to the fact to be proven. [State v. Hickman, 204 N.J. Super. 409, 414, (App. Div. 1985), certif. denied, 103 N.J. 495 (1986), quoted in Hill, supra, 199 N.J. at 561-62.]
Plaintiff argues that defendant failed to call his expert to rebut testimony from Gunteski that plaintiff's expert concealed the expansion of defendant's medical practice. However, in order for an adverse inference to be appropriate, the uncalled witness must be within the control or power of only the one party. Here, not only were both of defendant's experts known and available to plaintiff, she in fact called them as witnesses at the plenary hearing. Both Robert Brown and Alan Winters, who worked for the accounting firm hired by defendant to value his medical practice, were called by plaintiff and testified. Thus, it would not have been appropriate for the court to draw an adverse inference against defendant because he did not call his experts to testify, as those witnesses were not solely in defendant's control. Hickman, supra, 204 N.J. Super. at 414.
We are therefore satisfied that plaintiff failed to prove fraud or any other basis that would warrant setting aside the PSA.
Any arguments of either party not specifically addressed in this opinion are deemed lacking in sufficient merit to warrant discussion in a written opinion. Rule 2:11-3(e)(1)(E).
Affirmed on the appeal and the cross-appeal.
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