June 27, 2011
ROSEMARY FERRARO, PLAINTIFF-RESPONDENT,
GUY FERRARO, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1115-98A.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 19, 2011
Before Judges Carchman, Graves and Messano.
Defendant Guy Ferraro appeals from certain portions of the Family Part's order of April 16, 2010 that required defendant to provide plaintiff, Rosemary Ferraro, with $250,000 in certified funds made payable to the parties' two children, and further awarded plaintiff $6722 in counsel fees. We glean the following facts from the record.
Plaintiff and defendant were married from 1988 to 1998 and had two children: Peter, born in 1988, and Gina, born in 1990. On June 6, 1998, the parties executed a property settlement agreement (PSA) providing for joint custody of the children and designating plaintiff as "custodial parent." The PSA obligated defendant to "pay secondary school (private) education costs for the children." Additionally, in section 2.9, the PSA contained the following language:
[Defendant] has established and paid for two zero coupon accounts [(the Accounts)] -Account #71011327 for Gina . . . and account #71D11326 for Peter . . . with Merrill Lynch . . . to meet the post[-]secondary school educational needs of the children -both accounts are in an amount of $125,000.
The marriage was dissolved by final judgment of divorce on August 21, 1998.
Although not necessitated by the language of the PSA, it is undisputed that defendant opened the Accounts, named himself custodian and made them subject to the Uniform Gift to Minors Act (the UGMA), L. 1963, c. 177, since repealed and replaced by the Uniform Transfers to Minors Act (UTMA or the Act), N.J.S.A. 46:38A-1 to -57. See N.J.S.A. 46:38A-57 (repealing the UGMA); and N.J.S.A. 46:38A-53(a) (applying the UTMA to any transfer made after July 1, 1987, that "purports to have been made under the [UGMA]"). When defendant later transferred the Accounts to Morgan Stanley Dean Witter, he again named himself as custodian and made the Accounts subject to the "UTMA/NJ."
It suffices to say that the parties engaged in frequent post-judgment motion practice, much of which is irrelevant to this appeal. In October 2007, defendant moved for a downward modification of child support. In an accompanying certification, defendant claimed that he was in severe financial straits as a result of tax penalties levied against him and the decline in value of his real property.*fn1
Plaintiff responded with a cross-motion seeking, among other things, the denial of defendant's request for modification and an order designating her as "custodian of any accounts in either of the children's names . . . and that Defendant turn over to Plaintiff said accounts immediately." In an attached certification, plaintiff asserted that "[t]hese accounts were started when the children were born and it was always [the parties'] intent that the children would receive these accounts upon turning age twenty one." She also expressed a fear that defendant would "liquidate the accounts and use the money for himself."
In a reply certification dated November 15, 2007, defendant provided his interpretation of the PSA:
[P]aragraph 2.9 . . . clearly states that I established and paid for each of the two zero coupon accounts for our children to meet post-secondary school expenses. There is absolutely no language in our PSA that indicates that those accounts were established for any other purpose . . . . Nor is there any other language that indicates that the . . . remaining balances in the accounts . . . should be turned over to the children if, ultimately, they did not attend post-secondary school or did not utilize all the funds. These accounts belong to me to manage as I see fit and any remaining balance belongs to me. I will use them for the children's college expenses as I agreed. I did not agree to turn over any unused portion. That was not our agreement.
On November 30, 2007, the judge denied defendant's motion for modification and plaintiff's cross-motion. At some point in December, plaintiff closed the Accounts and took the remaining funds for his own use.
Further motion practice ensued throughout 2008 and 2009. While resolution of some issues remained outstanding, plaintiff's counsel informed the judge in a letter dated April 17, 2009, that the parties had "reached a global resolution." As a result, on April 21, 2009, the judge entered a "Consent Order Resolving Outstanding Claims" (the Consent Order).
The Consent Order noted that "the parties hav[e] resolved the outstanding claims either may have (past, present or future) against the other arising out of the Judgment of Divorce, existing court orders, pending motions, or Appellate Division order." Among other things, the Consent Order required defendant to provide plaintiff with $500,000. Furthermore, the parties withdrew all pending motions, or motions previously argued but undecided, and defendant was:
[A]bsolved from any further obligation, past, present, or future, to pay child support to the plaintiff . . . . He is further absolved from any obligation, past, present or future, to pay any existing or future child-related expenses for any unemancipated child (including, but not limited to, health insurance, unreimbursed medical bills and college costs). These are now the plaintiff's obligations.
Nearly one year later, in February 2010, plaintiff filed a motion seeking an order compelling defendant to pay $106,730 in certified funds to each child, these amounts "representing the money [d]efendant removed" from the Accounts, together with an additional $18,270 in interest that would have been earned through December 2010. Among other things, the motion requested that: (1) if defendant failed to produce the funds within seven days of the order, a parcel of real property he owned would "be immediately listed for sale with a multiple listing realtor to be appointed by the Court"; (2) plaintiff be ordered to open a custodial account for Gina within seven days of receiving the $125,000 from defendant; (3) defendant provide plaintiff with information regarding Gina's Morgan Stanley account and the liquidation thereof; (4) the court permit Peter "to use the $125,000 upon his receipt of these funds from Defendant, for his college expenses," with any balance belonging to Peter; (5) plaintiff be permitted to use Gina's custodial account to pay for her college expenses; (6) the court order the balance of Gina's account to be turned over to her at age twenty-one; and (7) the court grant plaintiff counsel fees and costs.
In her certification, plaintiff indicated that Peter, now twenty-one years old, was "in his second year at Brookdale Community College," and Gina, now nineteen, was "a freshman" at the same school. Plaintiff further certified that the Accounts were "opened" when the children "were very small" and were intended to pay for each child's college expenses, with the balance being paid to each child at age twenty-one. Plaintiff alleged that defendant unilaterally closed the Accounts in December 2007 and "appropriated the monies for himself."
Plaintiff also furnished a certification from Joseph M. Donahue, the parties' former accountant, in further support of the motion. Donahue stated that he had filed tax returns on behalf of plaintiff, defendant, Peter and Gina, and described plaintiff and defendant's intention regarding the accounts:
During the years that I filed a joint return for [plaintiff] and [defendant], both [plaintiff] and [defendant] each made me aware on more than one occasion, that they had established custodial accounts for each of the children pursuant to The Uniform Gift to Minors Act . . . . Both [plaintiff] and [defendant] advised me that the "accounts" they established for each of their two children were the property of the children and that the money in the accounts would be turned over to the children upon their reaching the age of twenty one (21).
Defendant filed a cross-motion seeking the denial of plaintiff's motion and the award of attorneys' fees and costs. In an attached certification, defendant asserted that the Consent Order disposed of any issues regarding the Accounts:
[The PSA] does not say that those accounts belong to the children or that the children or the plaintiff are entitled to any funds that are not used for the children's post-secondary school educational needs.
 These are accounts I set up with my own separate funds to ensure that my children's educations would be provided for. They were not intended for any other purpose and were certainly not intended as a gift to the children or the plaintiff.
 By entering into the agreement embodied in the "Consent Order Resolving Outstanding Claims," dated April 21, 2009, I provided amply for my children's educations (they are both students at Brookdale College) and for their support until they become emancipated (Peter is now almost 22 years old and Gina is almost 20).
 The $500,000.00 I paid to the plaintiff less than one (1) year ago is more than enough to cover two (2) years at Brookdale, two (2) years at a four (4) year college and child support.
Defendant further explained that plaintiff was aware that he removed the monies in the Accounts prior to entering into the Consent Order:
Never once did the plaintiff raise the Merrill Lynch account as an issue in any of her motions or at any of our numerous Court appearances . . . in 2008 and 2009, despite the fact that she says in [her certification] that she knew that I had closed the accounts on December 17, 2007. . . . [P]laintiff admits that she learned from John E. Ekdahl . . . of Morgan Stanley in January 2009 that I had closed the accounts.
 This pre-dated the agreement embodied in the "Consent Order Resolving Outstanding Claims," dated April 21, 2009 by more than three (3) months. When we agreed that I would pay the plaintiff $500,000.00 to settle all claims, the plaintiff knew that the accounts had been closed. She knew that I regarded any funds not used for educational expenses as mine, at least as far back as November 2007 . . ., when I filed my Reply Certification . . .
In a reply certification, plaintiff claimed that "[t]he children's accounts were not something which belonged to [her] which [she] could bargain away by way of settlement and negotiation." Plaintiff "did not perceive then, nor d[id] [she] perceive now, [d]efendant's outright theft of the children's accounts as being part of the 'global settlement' or part of the $500,000 [she] was paid by way of the 4/21/09 Consent Order." According to plaintiff, "the mere fact that [d]efendant opened the children's accounts as UGM accounts (which he did voluntarily) stripped [d]efendant of ownership of the money."
Regarding defendant's claim that plaintiff was estopped from asserting this claim because her earlier motion in 2007 had been denied, plaintiff noted:
It would have been impossible for me to have made the same request in 11/2007 that I am making now, i.e.[,] the return of the children's money, as Defendant had not yet stolen the money from the children's accounts in 11/2007. In 11/2007 I was attempting to have Defendant removed as custodian of these accounts and attempting to gain control over the accounts so that Defendant could not steal the children's money.
After considering oral argument, the judge concluded:
Under the [UGMA] the money is paid into the child's account. It is irrevocable payment. That money belongs to the children. To the extent that there was an agreement between the parents with regard to resolving all claims, and there was no specificity to that in the Court's opinion that there was going to be specificity that was going to cover this kind of interpretation, that the defendant wants to make, he's the one that would have insisted that it be more specific. That this was included within the agreement. And that is not the case at all.
These are rights of the children. The mother could not even waive it if she chose to, legally. So the money has to be reinstalled into the children's accounts.
The judge ordered defendant to pay a total of $250,000 to plaintiff within thirty days; denied plaintiff's request to force a sale of defendant's properties if he failed to comply; granted plaintiff's request to permit Peter to use his $125,000 for college expenses, and keep the remainder; and granted plaintiff's request to open and fund a custodial account in Gina's name with plaintiff as custodian, and further permitted the release of any funds in that account to Gina upon reaching age twenty-one.
The judge also awarded plaintiff counsel fees:
At the outset the issue the Court has to consider is the ability of one party to pay their own counsel fees, as well as counsel fees of the other. In this case, I'm satisfied with regard to [defendant] that he has the ability to pay counsel fees on both sides. He has the ability certainly to pay his own, and [plaintiff], although she has that same ability, based on the agreement that the parties had in the settlement of this account, nevertheless, the Court still considered the second prong, and that is the good faith of one side or the other in opposing or advancing any aspect of the litigation.
In this case, I'm satisfied that the defendant . . . with regard to the dissipation of [the Accounts], as well as his opposition to this [motion], did act in bad faith. And that [plaintiff] had to act in good faith in order to pursue the rights of her children under these circumstances.
Citing Rule 5:3-5(c), the judge noted that plaintiff was "success[ful] in her application in this regard." The judge awarded plaintiff $6722 and entered the order under review.
This appeal followed. We granted defendant's motion for a stay pending our decision.
Defendant raises the following issues for our consideration:
THE TRIAL COURT ERRED IN ORDERING THE DEFENDANT TO PAY $250,000 BECAUSE THE ISSUE WAS RES JUDICATA.
A. The Trial Court Erred In Ordering The Defendant To Pay $250,000 Because The Issue Was Barred By The Doctrine Of Collateral Estoppel.
THE CONSENT ORDER DATED APRIL 21, 2009 RESOLVED ALL ISSUES, PAST, PRESENT AND FUTURE AND, THEREFORE, CONSTITUTES AN ACCORD AND SATISFACTION.
THE PLAINTIFF IS ESTOPPED FROM SEEKING PAYMENT OF $250,000 FROM THE DEFENDANT BECAUSE SHE INDUCED HIS RELIANCE ON THE FACT THAT PAYING $500,000 TO HER IN ACCORDANCE WITH THE CONSENT ORDER WOULD RESOLVE ALL ISSUES FOR ALL TIME. HIS RELIANCE CAUSED HIM TO CHANGE HIS POSITION TO HIS FINANCIAL DETRIMENT.
THE TRIAL COURT'S FINDING THAT DEFENDANT ACTED IN BAD FAITH WHICH RESULTED IN A COUNSEL FEE AWARD TO PLAINTIFF IS NOT SUPPORTED BY THE RECORD.
THE TRIAL COURT MADE NO FINDINGS OF FACT THAT THE DEFENDANT HAD THE FINANCIAL ABILITY TO PAY $250,000 WITHIN 30 DAYS AND TO PAY THE PLAINTIFF'S COUNSEL FEES.
THE TRIAL COURT ERRED BY REFORMING THE PARTIES' CLEAR AND UNAMBIGUOUS AGREEMENT.*fn2
We have considered these arguments in light of the record and applicable legal standards. We reverse and remand for further proceedings consistent with this opinion.
I. We first consider the nature of the Accounts and defendant's right to liquidate their assets. Regardless of whether plaintiff's or defendant's interpretation of Section 2.9 of the PSA is correct, we agree with the Family Part judge that defendant was not entitled to liquidate the Accounts and that plaintiff was entitled to enforce her children's rights to those assets.
The UTMA allows for the "transfer by irrevocable gift to . . . a custodian for the benefit of a minor." N.J.S.A. 46:38A-8. For securities, such a gift occurs when the transferor registers the property in his or her own name, "followed in substance by the words: 'as custodian for ......................... (name of minor) under the New Jersey Uniform Transfers to Minors Act.'" N.J.S.A. 46:38A-19(a)(1). Any transfer so made "is irrevocable, and the custodial property is indefeasibly vested in the minor." N.J.S.A. 46:38A-24.
Once the gifted property is delivered, "acting in a custodial capacity, [the custodian] has all the rights, powers, and authority over custodial property that unmarried adult owners have over their own property." N.J.S.A. 46:38A-31. The custodian has the responsibility to "[c]ollect, hold, manage, invest, and reinvest custodial property." N.J.S.A. 46:38A-26. However, custodial property must be at all times kept "separate and distinct from all other property in a manner sufficient to identify it clearly as custodial property of the minor." N.J.S.A. 46:38A-29.
Although the UTMA invests the custodian with discretion to "pay to the minor or expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor," N.J.S.A. 46:38A-32, such a payment or expenditure "is in addition to, not in substitution for, and does not affect any obligation of a person to support the minor." N.J.S.A. 46:38A-34; see also Colca v. Anson, 413 N.J. Super. 405, 416 (App. Div. 2010) ("A child's assets may not be used to fulfill a financially able parent's support obligation."); Cohen v. Cohen, 258 N.J. Super. 24, 30-31 (App. Div.) ("[A] custodian who is also a parent cannot properly use assets of a UGMA account to defray the parent's legal obligations to a child if the parent is financially able to support the child."), certif. denied, 130 N.J. 596 (1992). Unless the terms of the gift expressly state otherwise, the custodian must "transfer the custodial property to the minor or to the minor's estate upon the earlier of" (1) "[t]he minor's attainment of 21 years of age"; or (2) "[t]he minor's death." N.J.S.A. 46:38A-52(a),(c).
If the custodian is suspected of violating his fiduciary obligations, the minor's guardian, legal representative, or adult relative "may apply to the court to remove the custodian for cause and to designate a successor custodian." N.J.S.A. 46:38A-47. These individuals may also "apply to the court for . . . [a]n accounting by the custodian." N.J.S.A. 46:38A-48(a).
It is clear that the Accounts are subject to the UTMA. As a result, defendant's initial gift creating the Accounts was "irrevocable," and title thereafter was "indefeasibly vested" with Peter and Gina. N.J.S.A. 46:38A-24. Neither plaintiff nor defendant had the right to divest the children of that property, notwithstanding any particular interpretation of the PSA's terms.
We further note that plaintiff's motion specifically asked that defendant remit $250,000 "payable to" the children, not to herself. Plaintiff had the right to bring such an action on Gina's behalf pursuant to N.J.S.A. 46:38A-24. We further note that the order requires plaintiff to place the money in a "[c]ustodial account" for Gina's college expenses, and thereafter, to remit the balance to Gina when she turns twenty-one.
Peter had already reached age twenty-one, and, pursuant to the statute, the proceeds of the account, had they not been removed by defendant, were payable to him. The judge ordered the monies be paid over directly so that Peter may use them to defray his college expenses, the balance then being remitted. In each instance, the judge's decision was consistent with the UTMA's overall scheme, and we find no error in his conclusion that the Accounts should be replenished.*fn3
II. That is not, however, the end of our inquiry. We turn to the specific points defendant has raised on appeal.
(A) Defendant's first and sixth points are without sufficient merit to warrant extensive discussion. R. 2:11-3(e)(1)(E). We add only the following brief comments.
Defendant argues that plaintiff's motion was barred by res judicata or collateral estoppel because her 2007 motion to be appointed custodian of the Accounts was denied. "[T]he doctrine of res judicata provides that a cause of action between parties that has been finally determined on the merits by a tribunal having jurisdiction cannot be relitigated by those parties or their privies in a new proceeding." Velasquez v. Franz, 123 N.J. 498, 505 (1991) (citing Roberts v. Goldner, 79 N.J. 82, 85 (1979)). "Collateral estoppel," also known as "issue preclusion," is a "'branch of the broader law of res judicata which bars relitigation of any issue which was actually determined in a prior action, generally between the same parties, involving a different claim or cause of action.'" Tarus v. Borough of Pine Hill, 189 N.J. 497, 520 (2007) (quoting Sacharow v. Sacharow, 177 N.J. 62, 76 (2003)).
Here, plaintiff's 2007 motion did not seek an order compelling defendant to replenish the Accounts. Indeed, at the time the motion was brought, the monies were in the Accounts. Plaintiff's subsequent motion that led to the challenged order was not barred by res judicata or collateral estoppel.
Defendant asserts in Point VI that the "order constituted a reformation of the" PSA and an abuse of the judge's discretion. "The basic contractual nature of matrimonial [settlement] agreements has long been recognized." Pacifico v. Pacifico, 190 N.J. 258, 265 (2007) (citing Harrington v. Harrington, 281 N.J. Super. 39, 46 (App. Div.), certif. denied, 142 N.J. 455 (1995)).
As a general rule, courts should enforce contracts as the parties intended. Similarly, it is a basic rule of contractual interpretation that a court must discern and implement the common intention of the parties. The court's role is to consider what is written in the context of the circumstances at the time of drafting and to apply a rational meaning in keeping with the "expressed general purpose." [Id. at 266 (citations omitted) (quoting Atl. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953)).]
In this case, the judge decided plaintiff's motion solely by application of the UTMA without regard to the competing interpretations of section 2.9 of the PSA. In fact, as we explain below, because the decision was made without regard to any context provided by the PSA or the parties' contentious post-judgment motion practice, we must remand the matter for further proceedings.
III. Defendant asserts in Point II that the Consent Order constituted an accord and satisfaction of all outstanding issues between the parties, including replenishment of the Accounts. He contends that pursuant to the express terms of the Consent Order, the $500,000 payment he undisputedly made to plaintiff at the time "absolved [him] from any obligation, past, present or future, to pay any existing or future child-related expenses for any unemancipated child (including, but not limited to, health insurance, unreimbursed medical bills and college costs)," making "[t]hese . . . now . . . plaintiff's obligations."
"The traditional elements of an accord and satisfaction are the following: (1) a dispute as to the amount of money owed; (2) a clear manifestation of intent by the debtor to the creditor that payment is in satisfaction of the disputed amount; (3) acceptance of satisfaction by the creditor." A. G. King Tree Surgeons v. Deeb, 140 N.J. Super. 346, 348-49 (Cty. Dist. Ct. 1976); accord Loizeaux Builders Supply Co. v. Donald B. Ludwig Co., 144 N.J. Super. 556, 564-65 (Law Div. 1976). "'An accord and satisfaction is an agreement which, upon its execution, completely terminates a party's existing rights and constitutes a defense to any action to enforce pre-existing claims.'" Gunter v. Ridgewood Energy Corp., 32 F. Supp. 2d 166, 183 (D.N.J. 1998) (quoting Nevets C.M., Inc. v. Nissho Iwai Am. Corp., 726 F. Supp. 525, 536 (D.N.J. 1989), aff'd sub nom., Appeal of Nevets C.M., Inc., 899 F.2d 1218 (3d Cir. 1990)). "[A]n accord and satisfaction requires a clear manifestation that both the debtor and the creditor intend the payment to be in full satisfaction of the entire indebtedness." Zeller v. Markson Rosenthal & Co., 299 N.J. Super. 461, 463 (App. Div. 1997).
Defendant contends, and plaintiff concedes, that she knew the Accounts had been depleted in January 2009, while resolution of various motions and cross-motions were pending, and several months before the parties executed the Consent Order. Defendant further argues that he paid $500,000 to plaintiff pursuant to the Consent Order in full resolution of any and all claims, past, present and future, regarding the support of the children. Defendant cites to the admittedly very broad language of the consent order in this regard.
Plaintiff argues, as she did below, that the Consent Order only resolved claims between the two parties, not claims that the children had to the monies in the Accounts. Plaintiff further contends that $500,000 was a reasonable amount paid by defendant to resolve all the pending claims, including claims regarding the equitable distribution of certain real estate and child support arrearages, without regard to replenishment of the Accounts. Thus, even though the language in the Consent Order was quite broad, plaintiff had not asserted claims on behalf of the children and the Consent Order was not, therefore, an accord and satisfaction.
Unfortunately, the judge did not directly address these competing versions of the intended scope of the Consent Order. Instead, he simply noted that the Consent Order did not specifically mention the Accounts.
The record before us does not adequately explain what issues were actually pending when the Consent Order was entered. While the Consent Order does not specifically mention the Accounts, it quite clearly "absolved [defendant] from any further obligation, past, present, or future, to pay child support to the plaintiff," including "college costs," the stated raison d'etre for section 2.9 of the PSA. Under the Consent Order, "[t]hese [we]re now . . . plaintiff's obligations."
Whether the Consent Order and the $500,000 defendant paid to plaintiff were intended to "absolve" defendant of the obligation to replenish the Accounts and, instead, placed that burden upon plaintiff, or whether replenishing the Accounts was never contemplated at the time the Consent Order was executed, cannot be resolved on this record.
We therefore remand the matter to the trial judge for resolution of this disputed issue.*fn4
Lastly, in Points IV and V, defendant argues that the judge erred in awarding counsel fees to plaintiff because he "made no findings of fact" regarding defendant's ability to pay, and because the judge determined that defendant had "acted in bad faith." Given our earlier conclusion that a remand is necessary, any determination regarding an award of counsel fees pursuant to Rule 5:3-5(c) should abide the outcome of that hearing.
Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.