July 15, 2011
TERRY ANDREWS, PLAINTIFF-RESPONDENT,
CLIFFORD S. ANDREWS, III, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Union County, Docket No. FM-20-000178-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically argued February 3, 2011
Before Judges Fuentes, Gilroy and Ashrafi.
This appeal from post-judgment orders requires us to determine whether the Family Part erred in reforming a provision for equitable distribution in the parties' divorce settlement agreement on the ground of mutual mistake. The parties had agreed that plaintiff Terry Andrews would promptly receive the proceeds from the sale of stock held in a privately-owned bank. Two years later, the sale still had not occurred, and the stock had no market or discernible value.
Defendant Clifford Andrews III appeals from an order of the Family Part reforming the settlement agreement and requiring that he pay half the designated value of the bank stock to plaintiff, plus interest from the time she filed the post-judgment motion. He also appeals from an order denying his motion for reconsideration and requiring that he pay attorney's fees. Finding no legal error or abuse of discretion in the Family Part's orders, we affirm.
Plaintiff-wife and defendant-husband were married in 1988 and divorced in 2007.*fn1 They have four children, all minors at the time of the divorce. During the marriage, they enjoyed a prosperous lifestyle. Their 2005 income tax return listed more than $3,000,000 in earned and unearned income for the year.
Husband's Case Information Statement (CIS) filed in 2007 reported total gross assets of nearly $19,000,000. Wife's CIS listed joint monthly expenses of $44,000. The divorce required disposition of numerous assets acquired during the marriage, including the marital home, a beach house, several vehicles, and many stocks, mutual funds, and investment accounts.
With the aid of their attorneys, the parties entered into a Support and Property Settlement Agreement, which was in turn incorporated into a Dual Final Judgment of Divorce entered on May 23, 2007. The settlement agreement granted to Wife sole legal and physical custody of the four children, and to Husband liberal parenting time. Several paragraphs of the agreement explicitly provided that equitable distribution of the parties' assets was intended to substitute for any obligation of Husband to pay child support or alimony. With the exception of future college expenses and unreimbursed medical expenses of the children, Husband was expressly relieved from any current or future application for child support or alimony based on an understanding that the assets distributed to Wife would provide the income she needed to maintain the children's and her economic status and lifestyle.
Paragraph twenty-seven of the agreement listed eighteen accounts and securities with a total value of more than $4,100,000 as assets to be retained by or conveyed to Wife exclusively. Among the eighteen assets was a listing for 62,000 shares of stock with a stated value of $1,085,000 in privately-owned Lydian Bank. Two notations accompanied the designation of the asset: the words "sale directed on 5-18-07" written alongside the listing, and a footnote that stated "Salesman has been directed that the proceeds be promptly wired to the Wife." None of the other listed assets included any similar notation or footnote.
Two years after the divorce, the parties disputed Husband's alleged failure to reimburse some medical expenses of the children. In July 2009, Wife filed a motion to enforce litigant's rights. Besides seeking medical reimbursement and other relief, Wife's motion sought an order: "Enforcing ¶ 27 of the parties' Agreement and directing defendant to immediately cause the sale of the Lydian Bank stock, which sale he represented was directed on May 18, 2007." Husband opposed the motion, declaring that he had fulfilled his obligation under the settlement agreement and that the Lydian Bank stock had lost its value in the recent economic downturn.
Oral argument was held on the motion, and subsequent attempts to mediate a resolution failed. After several adjournments, the Family Part held an evidentiary hearing in April 2010 "limited to the issue of the Lydian Bank stock." Three witnesses testified - Wife, Husband, and William Decker, who was the president of Lydian Bank at the time of the divorce.
Wife testified it was her understanding at the time of the settlement agreement that she would be receiving two homes and $4,000,000 in liquid assets. She stated she and her attorneys had determined she needed that amount in liquid assets to continue supporting herself and the four children. As to the Lydian Bank stock, she understood she would be getting proceeds from the sale of that stock rather than receiving the stock itself. She "believe[d] that the sale had been directed[,] past tense," and she was "expecting to receive proceeds." She testified the $1,085,000 value of the stock was taken from a statement of Lydian Bank reporting the value of their shares as of the end of 2005.
Wife did not recall a telephone call being placed during the settlement meeting to William Decker regarding sale of the bank stock. She had not spoken to Decker on that date or at any later time about the sale. She testified that once she became aware that the stock had not been sold, she spoke to an investor relations representative at the bank sometime in June or July 2007. The representative advised her the stock would "be put on the sell list."
The stock remained unsold at the time of the hearing three years after the divorce. Wife testified she did not pursue the matter earlier because the settlement agreement was intended to be "in stone" and she did not think she could "go back to court." When she approached her attorney about the medical expenses dispute, she was advised to seek enforcement of the Lydian Bank sale as well.
Husband testified about the parties' acquisition of the Lydian Bank
stock through a series of investments in private banks associated with
Decker. He testified that Wife must have been aware that stock in a
privately-held bank could not be sold on the open market. When asked
what was meant by the notation "sale directed on 5-18-07," Husband
said a call had been placed to Decker at the time of the settlement
conference directing him to sell the stock, and that Wife and the
attorneys were present during the call. Decker stated over a speaker
phone that a large number of Lydian Bank shares had just been
purchased by the bank earlier that month and agreed that the parties'
shares would be listed for sale at $17.50 per share.*fn2
Husband believed the stock would sell because of the earlier
sale that month but not necessarily at the price the shares were
Husband testified Wife never informed him that the stock had not sold until she filed her motion in July 2009, but he also stated he "was probably a little bit bitter" following the divorce and the parties "did not really speak after that day." He stated, if Wife had informed him rather than speaking with an investor relations representative, he would have "most assuredly" helped her by "call[ing] up either . . . the CEO of the company or Bill Decker . . . the top two guys at the bank" and inquiring as to what price might result in sale of the stock.
William Decker testified he has known the parties since 1989. Decker explained the methodology for valuing investors' privately-held shares as reflected in the bank's yearly statements. Audited financial statements and the bank's income and book value would establish the per share value, which was discounted because the stock could not be sold on the open market.
Decker remembered the phone call in May 2007 directing that the shares be sold. He recalled that a substantial number of shares had been traded a few weeks earlier, and he agreed that the price set was $17.50 per share. After the phone call, he directed a bank representative to put the Andrews' shares on the list for sale. He testified he did not suggest that the stock could actually be sold at the requested price or immediately at that time. While Decker could recall being on the speaker phone during the call and hearing attorneys speaking on Husband's end, he could not say whether Wife participated in the conversation.
Based on this testimony and the documents in evidence, the Family Part announced its decision both orally and in writing, ultimately concluding that the parties had made a mutual mistake about the marketability and value of the Lydian Bank stock at the time of entering into the settlement agreement. The court stated:
The [settlement] document itself is strong evidence that both parties had the specific intent that Mrs. Andrews would get the proceeds of the Lydian Bank stock that had been directed on 5/18/07 "promptly wired" to her. There was no indication that there would be any delay or difficulty in the sale of the stock immediately.
Thus, both parties and the nonparty witness all believed as of May 18, 2007, that the stock had a particular value and was immediately marketable.
In sum, both parties honestly believed at the time of the settlement agreement and the divorce they had an asset worth $1.085 million and that this particular asset was being sold immediately with the cash being wired to Mrs. Andrews. Neither party was fraudulent or deceptive during these events.
If, in fact, the stock cannot be sold because it has no value and did not have a value when they entered into the settlement agreement, both parties were mistaken in thinking that the total value of their marital estate was $1.085 million more than it actually was.
The court also determined that Wife's delay in seeking to enforce the sale did not cause any prejudice to Husband since no evidence had been presented that the stock could have been sold earlier.
Speaking next of the remedy, the court applied equitable principles to reform paragraph 27 of the settlement agreement with respect to distribution of the Lydian Bank stock. The court stated:
[A]ssuming the Lydian Bank stock has zero value, Mrs. Andrews should not bear the burden of the $1.085 million mistaken belief that they both had. To put it simply, the marital estate was worth $1.085 million less than both of them thought it was when they entered into the property settlement agreement. Therefore, each party . . . should bear this loss equally.
In its order of May 4, 2010, the court entered judgment against Husband for $542,500, which is half of the $1,085,000 value, with interest running "from the date of this motion's filing, 7/28/09, onward at the rates specified in Rule 4:42-11." The court further denied the award of counsel fees to either party, and denied Husband a stay of the judgment pending appeal.
Husband filed a motion for reconsideration, arguing "that there was no mutual mistake, that the Court exceeded the scope of the hearing, and that the [settlement agreement] as reformed was inequitable and contrary to the intent of the agreement." The court heard argument and denied the motion for reconsideration by order dated July 9, 2010. Finding that "the arguments presented were properly considered at the time of the underlying decision of this case," the court granted Wife's cross-motion for attorney's fees in the amount of $8,897.50. This appeal followed.
Initially, we reject Husband's argument that the Family Part's judgment should be subject to plenary review on appeal because it involved interpretation of contract terms. There was no genuine dispute regarding the meaning and intent of the parties with respect to equitable distribution of the Lydian Bank stock. Their intent was made clear by the language used in the written document and the testimony of the witnesses, which the court found to be credible from both sides of the dispute. The unique notations appended to the listing of the Lydian Bank stock in the settlement agreement showed the parties' intent was to have that stock sold immediately and the proceeds of the sale promptly transferred to Wife. The intent was to provide about $1,085,000 in cash to Wife from sale of the stock. Although Husband correctly argues that he did not guarantee the stock could be sold for that amount and at that time, he does not credibly dispute the parties' intention. There was nothing ambiguous about the terms of the agreement or intent of the parties that required contract interpretation.
Our standard of review requires that we defer to the trial court's finding of facts as to the parties' intent and subsequent events so long as they are "supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998). Applying that standard of review, we reject Husband's contention that the court's finding of mutual mistake was not based on substantial credible evidence in the record.
Citing Bonnco Petrol, Inc. v. Epstein, 115 N.J. 599, 608-09 (1989), Husband asserts that a finding of mutual mistake requires that both parties are in agreement when they attempt to reduce their understanding to writing, but the writing does not express the understanding correctly. He contends that he was not proceeding at the time of the divorce under a mistaken belief that the stock would be immediately sold for the $1,085,000 asking price.
This argument misstates the basis of the court's finding of mutual
mistake. The court found that the parties intended to
provide $1,085,000 in cash proceeds to Wife but mistakenly thought
that their intent could be accomplished by the prompt sale of the
Lydian Bank stock. There was no intent to distribute the Lydian Bank
stock to Wife as an investment asset. The court's finding of fact in
that regard was amply supported
by the insertion of the quoted
notations into the settlement agreement and by the testimony of the
parties and Decker concerning the events that occurred at the time of
Our standard of review also requires that we defer to the discretion granted to the Family Part to decide issues pertaining to division of marital assets. See La Sala v. La Sala, 335 N.J. Super. 1, 6 (App. Div. 2000), certif. denied, 167 N.J. 630 (2001). Although a settlement agreement of the parties should be enforced according to its terms, the court has a legal duty to interpret and apply that agreement as intended by the parties.
In that regard, we find no merit in Husband's argument that the trial court erroneously imposed a new term for the parties' settlement agreement and made a better contract for Wife than she had entered. Recently in Sachau v. Sachau, 206 N.J. 1, 5 (2011), our Supreme Court again acknowledged that divorce settlement agreements are contractual in nature and should be enforced as the parties intended. The Court also stated, however, that "'[t]he law grants particular leniency to agreements made in the domestic arena' thus allowing 'judges greater discretion when interpreting such agreements.'" Ibid. (quoting Guglielmo v. Guglielmo, 253 N.J. Super. 531, 542 (App. Div. 1992)).
The Court discussed its prior decision in Pacifico v. Pacifico, 190 N.J. 258 (2007), as providing the framework for analyzing the intent of the parties regarding equitable distribution. Sachau, supra, 206 N.J. at 6-8. Similarly to Pacifico, the parties' agreement in Sachau provided for sale of the marital home in the future and division of the proceeds. A dispute arose about the entitlement to the sale proceeds because the home was not offered for sale until many years after divorce. The Court held that in circumstances where "the judgment of divorce was silent regarding" the disputed issue, "it fell to the court to supply that omitted term." Id. at 9 (citing Pacifico, supra, 190 N.J. at 266).
Here, the parties' agreement was silent as to the eventuality that the Lydian Bank stock could not be promptly sold at the time of the divorce. The court in effect supplied an omitted term of the agreement by holding that each party bore one-half the risk of the stock remaining unsold. Since there was no dispute about the value of the stock at the time of the divorce, the court fashioned an equitable remedy by which Husband would replace that asset conveyed to Wife with a cash payment of one-half its value. Each party would also continue to hold beneficial ownership of the stock and, if the stock were to sell in the future, the parties would benefit equally from its sale.
Our Supreme Court has noted that "[t]he equitable authority of courts to modify property distribution, alimony, and support orders issued in divorce cases is well established," and that "[m]arital property settlement agreements involve far more than economic factors and must serve the strong public and statutory purpose of ensuring fairness and equity in the dissolution of marriages." Conforti v. Guliadis, 128 N.J. 318, 323 (1992) (internal quotation marks and citations omitted). "Even when a divorce order incorporates agreements reached privately between the parties, such orders can be modified in light of all the facts bearing on what is equitable and fair." Ibid. (internal quotation marks and citations omitted).
"It is well settled that courts of equity will reform a written contract, where, owing to mutual mistake, the language used therein did not fully or accurately express the agreement and intention of the parties." S.P. Dunham & Co. v. 26 E. State St. Realty Co., 134 N.J. Eq. 237, 245 (Ch. 1943) (quoting Philippine Sugar Co. v. Philippine Islands, 247 U.S. 385, 38 S. Ct. 513, 62 L. Ed. 1177 (1918)). In this case, the trial court's decision to reform the agreement only as to the Lydian Bank stock was an equitable remedy within its power and discretionary authority. By ordering that remedy, the court avoided the wholesale rescission of the settlement agreement.
In applying the abuse of discretion standard of review, we do not substitute our own judgment for that of the trial judge. Cosme v. Bor. of E. Newark Twp. Comm., 304 N.J. Super. 191, 202 (App. Div. 1997), certif. denied, 156 N.J. 381 (1998). We will not disturb a remedy devised by the judge in the face of the parties' mutual mistake that is within the range of discretion granted to the Family Part.
Husband also contends that the court's judgment was "arbitrary, capricious and unfair" because "[t]here was no evidence in the record of the parties' current financial circumstances." Had Husband presented evidence in the course of the lengthy motion hearings that his financial circumstances at this time made the court's equitable remedy unjust, we might find some merit in the argument that further proceedings should have been conducted. But no proofs were presented, including in Husband's motion for reconsideration, that his current financial circumstances make reformation of the agreement as ordered an unjust remedy.
For the same reason, the trial court did not abuse its discretion in holding the hearing before the parties could conduct financial discovery. Despite several adjournments of the hearing, Husband apparently made no attempt to obtain discovery that he now argues would have been relevant to the court's fashioning of a remedy. We conclude the trial court did not abuse its discretion in relying on the evidence in the record before it that Husband had ample financial resources to substitute payment in cash for one half the value of the Lydian Bank stock.
Husband argues further that Wife's delay of more than one year in filing her motion precluded the remedy imposed by the court. He contends that the court converted Wife's motion to enforce litigant's rights into a motion to set aside the Final Judgment of Divorce under Rule 4:50-1(a) for "mistake," and that such a motion must be brought within one year of the judgment under Rule 4:50-2. However, Rule 4:50-1(f) authorized the court to adjudicate the motion and modify the judgment of divorce so long as the application was made within a reasonable time. See Edgerton v. Edgerton, 203 N.J. Super. 160, 173 (App. Div.), certif. denied, 101 N.J. 293 (1985). "Because . . . inter- spousal agreements are enforceable only in equity, they are subject to the court's power to exercise continued supervisory control." Id. at 171.
Moreover, the parties' agreement on equitable distribution was a substitute for child and spousal support, which are not subject to the restrictions of Rule 4:50-1 or -2. Child support is an entitlement of the child that cannot be waived by the parent through a divorce agreement or judgment. See Dolce v. Dolce, 383 N.J. Super. 11, 18-19 (App. Div. 2006); Patetta v. Patetta, 358 N.J. Super. 90, 94 (App. Div. 2003). Agreements on spousal support are subject to modification upon a showing of changed circumstances and are not restricted by time limitations of the court rules. See Lepis v. Lepis, 83 N.J. 139, 149 (1980). The trial court did not err in reforming the agreement despite the passage of more than one year from the date of the judgment.
Husband argues next that the trial court's ultimate finding of mutual mistake and reformation of the agreement was outside the stated scope of the plenary hearing and therefore violated his right to due process. He contends he was not given any notice that the court was considering modification of the agreement since Wife had not asserted mutual mistake in her motion or sought the remedy of reformation.
Husband was on notice, however, that Wife was seeking payment of $1,085,000 from him in lieu of the stock sale. Not only did her notice of motion to enforce litigant's rights seek that relief as an alternative to sale of the Lydian Bank stock but it also generally sought "such other relief as the Court may deem just and equitable." The hearing and the court's remedy were within the scope of Wife's motion.
Furthermore, Husband was not precluded from presenting evidence relevant to an appropriate remedy or to demonstrate that he should not be required to pay cash to Wife two years after the divorce. Also significantly, Husband's motion for reconsideration was a further opportunity to demonstrate the asserted inequity of the court's remedy and provided ample due process to Husband.
We reject Husband's argument that Wife's claim should have been barred by the doctrines of equitable estoppel and laches. He asserts her inaction when the stock had not been sold promptly after the divorce resulted in its losing value because of the worldwide economic downturn of 2008 and that her delay should not cause him loss of his equitable distribution. He contends he also lost investments because of the economy, and he arranged his financial affairs based on the understanding that he would not have to pay cash to Wife.
We need not restate the principles applicable to the doctrines of equitable estoppel and laches. See, e.g., Knorr v. Smeal, 178 N.J. 169, 178 (2003); Carlsen v. Masters, Mates & Pilots Pension Plan Trust, 80 N.J. 334, 339 (1979); Chance v. McCann, 405 N.J. Super. 547, 567 (App. Div. 2009); Chrisomalis
v. Chrisomalis, 260 N.J. Super. 50, 55 (App. Div. 1992). Here, the trial court appropriately found no evidence that Wife had acted in bad faith to the detriment of Husband, or that he had been prejudiced by her inaction. In particular, Husband presented no evidence that the stock could have been sold at a particular price at any time since the divorce. Cf. Clarke v. Clarke ex rel. Costine, 359 N.J. Super. 562, 570 (App. Div. 2003) (equitable defenses of waiver, laches, and equitable estoppel did not bar wife's application for alimony arrears from ex-husband's estate despite twenty-three years of inaction in seeking payment).
Finally, the trial court did not abuse its discretionary authority in awarding attorney's fees to Wife for the expenses of responding to Husband's motion for reconsideration. See Eaton v. Grau, 368 N.J. Super. 215, 225 (App. Div. 2004). The court applied the factors listed in Rule 5:3-5(c) and concluded that reimbursement of attorney's fees only for that motion was warranted because Husband had not presented any new information or legal authority that the court had not previously considered. Defendant's arguments about the ability of the parties to pay their litigation expenses and the absence of a finding of bad faith on his part would be more persuasive with respect to attorney's fees if his motion for reconsideration had not merely retread the same ground that the court had covered in its earlier decision.