February 10, 2012
C.L.H., PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
C.B., DEFENDANT-APPELLANT/ CROSS-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1156-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 7, 2011 -
Before Judges Fuentes, Harris and Koblitz.
Defendant C.B. appeals from a July 16, 2010 post-divorce judgment order enforcing a 2007 agreement made between the parties. He also appeals a November 17, 2010 order denying his motion for reconsideration. C.B. maintains that the 2007 agreement is invalid because plaintiff C.L.H. procured it through overreaching and duress and because the resulting terms of the agreement are unconscionable. Additionally, C.B. argues that the court abused its discretion in affording C.L.H. greater relief than the 2007 agreement anticipated without conducting a hearing or requiring an accounting of monies actually owed to C.L.H. Finally, C.B. claims that the motion judge wrongfully denied his affirmative requests for relief without explanation.*fn1
We conclude that the motion judge failed to develop a record sufficient to determine the validity of the 2007 agreement and did not conduct the required fact-finding on C.B.'s affirmative claims. We reverse and remand for further proceedings.
C.L.H., who holds a juris doctor, and C.B., who holds a doctoral degree in education, were married in New York on December 28, 1993. Three children were born of the marriage.
The parties separated in 2004 and entered into a property settlement agreement (PSA). The PSA indicates that C.L.H. was represented by counsel, but that C.B. was not. The PSA was prepared in New York and contains a New York choice of law provision. On July 14, 2005, the parties obtained a default judgment of divorce in New York, which incorporated the PSA. The PSA established shared joint custody of the parties' unemancipated children and provided that their primary residence would be with C.L.H. The PSA also awarded C.B. ownership of the Lake Placid condominium unit and his TIAA-CREF account, after C.L.H. received her marital share.
The PSA provided for no alimony obligation as to either party, but it imposed a child support payment schedule upon C.B. At the time, he had an annual income of $146,000 from university employment; C.L.H. had an annual income of $15,288. The PSA required C.B. to pay $35,781 in child support per year. This schedule was to continue until April 2005, when C.B. was expected to begin employment at a different university at an annual salary of $175,000. His child support obligation was then scheduled to increase to $44,083 per year. The agreement also stated that the parties would each provide a pro rata share towards the children's college expenses.
C.B. had been dealing with ongoing substance abuse problems and mental health issues. Although he participated in rehabilitation, he was deemed disabled by the Social Security Administration as of July 13, 2005, based on "affective mood disorders." Due to C.B.'s disability, C.L.H. began to receive monthly social security disability (SSD) payments for their three children in the amount of $374 per child, or $1122 total. C.B. was terminated from his new university employment in October 2005.
On October 28, 2005, C.B. signed a limited power of attorney to permit C.L.H. access to his TIAA-CREF account for the limited purpose of paying his living and medical expenses. C.B. claims he did not consent to a withdrawal by C.L.H. on February 6, 2006, in the gross amount of $232,579.11. C.L.H. received the net amount of $186,295. C.L.H. claims the withdrawal was for amounts owed to her by C.B., including costs for child care, C.B.'s storage unit, his insurance coverage, rent, and maintenance of the Lake Placid residence.
Dr. Chunilal H. Kasagra, C.B.'s personal physician, issued a report on March 17, 2006, which stated that C.B. was being treated for severe depression and suicidal ideation, and that C.B. had relapsed with alcohol. Dr. Kasagra concluded that C.B. could not function in either a part-time or full-time employment circumstance. However, the report also indicated that C.B. remained capable of "making decisions on his own behalf." Another psychologist, Dr. Christopher Williamson, who evaluated C.B. on behalf of the New Jersey Department of Labor, Department of Disability Determination Services (DDDS) indicated in a report dated March 25, 2006, that C.B. was extremely depressed, but was "cognitively competent to handle his own funds at the present time . . . ." A functionality capacity assessment performed by DDDS on April 30, 2006, also revealed that C.B. was "unable to sustain concentration, pace or persistence at this time."
On May 31, 2006, in a fit of anger, C.B. choked C.L.H. in front of the children outside the Lake Placid residence. He thereafter confronted the police with a loaded shotgun. C.B. was arrested and charged criminally. He pled guilty to criminal contempt, and on March 20, 2007, was sentenced to a five-year probationary period, having already completed a six-month term in prison and a half-way house. A final restraining order was also issued in C.L.H.'s favor against C.B.
On June 8, 2006, approximately eighteen months after the plaintiff moved to New Jersey, a consent order was entered registering the New York judgment of divorce in New Jersey and providing New Jersey with continuing exclusive jurisdiction. This order provided that "[t]he parties shall enjoy all rights and be held to all obligations of the State of New Jersey, as if the [j]udgment of [d]ivorce herein reference[d] had been filed and entered originally in the State of New Jersey."
On January 17, 2007, two months prior to C.B.'s sentencing, the parties executed an amendment to the PSA that, among other things, (1) granted C.L.H. sole custody of the three children;
(2) permitted the children to change their surname from their father's to their mother's;*fn2 (3) transferred title of the Lake Placid condominium from C.B. to C.L.H. to enable the "purchase [of] similar accommodations in or around the Monmouth County, NJ area," which was to serve as C.B.'s "primary residence;"*fn3 (4) granted C.L.H. a power of attorney for C.B.'s retirement accounts during his period of unemployment so that C.L.H. could use the funds "for child support purposes if necessary," and also prohibited C.B.'s access to these accounts without C.L.H.'s permission; (5) called for C.B. to execute a new power of attorney allowing C.L.H. to "handle all our legal, financial insurance, tax and business matters;" and (6) called for C.B. to reimburse C.L.H. for certain expenditures made on his behalf. C.B. entered into this agreement without the advice of counsel.
Although the facts surrounding this dispute are contested, both parties agree that, in exchange for C.B.'s signing the 2007 agreement, C.L.H. agreed to submit a letter on his behalf to the New York district attorney requesting leniency in his upcoming sentencing for the May 2006 assault. C.B. alleges that this agreement was procured by duress. The motion judge indicated that no such letter requesting leniency from C.L.H. was produced in the trial court. C.B.'s appendix, however, contains a copy of the letter.
In March 2010, C.L.H. filed an application to enforce certain provisions of the 2007 agreement. C.B. filed an application objecting to the agreement's enforcement and seeking alternative forms of affirmative relief. After reviewing the parties' certifications, the motion judge entered an order on July 16, 2010, enforcing the 2007 agreement as a valid contract entered into voluntarily and knowingly by the parties. This order provided for the following relief: (1) granting sole custody of the three children to C.L.H.; (2) allowing the children to change their names; (3) granting C.L.H. power of attorney over C.B.'s TIAA-CREF retirement account to use the funds for child support purposes; (4) granting C.L.H.'s request to sell the Lake Placid residence and use the proceeds for the children's future support needs and college costs, and requiring C.B. to vacate the premises; (5) requiring C.B. to pay C.L.H. monies owed; (6) ordering C.B. to transfer ownership of his two life insurance policies to C.L.H.; and (7) allowing C.L.H. to sell items kept in a joint storage unit and to stop payments on the unit. The judge did not consider C.B.'s requests for affirmative relief because they were made in response to C.L.H.'s motion, rather than by filing a formal cross-motion.
C.B. filed a motion for reconsideration of the July 16 order under Rule 4:49-2. He sought to vacate the July 16 order, and to modify and recalculate his child support obligation. In his decision denying C.B.'s motion, the judge found that no confidential relationship existed between the parties, and thus no undue influence was placed upon C.B. by C.L.H. The judge also rejected C.B.'s argument that the agreement was procured under duress, explaining that C.B. did not produce any evidence of C.L.H.'s alleged coercive behavior, which purportedly included threats of criminal prosecution and incarceration if C.B. did not sign the 2007 agreement. Finally, the judge determined that C.B. had not proven that he was mentally incapable of contracting at the time he signed the agreement. The judge therefore found the contract was valid and enforceable.
The judge denied C.B.'s application for reconsideration in its entirety and again did not address his requests for affirmative relief. The judge also granted enforcement of the July 16 order, ordered C.B. to vacate the Lake Placid residence within forty-eight hours, and allowed a wage garnishment against C.B.'s social security earnings if it was determined that he had taken disbursements from his TIAA-CREF account. We granted C.B.'s motion for a stay pending appeal.
Spousal agreements are presumed valid and enforceable. Peterson v. Peterson, 85 N.J. 638, 642 (1981). However, agreements will only be enforced if they are "fair and just." Id. at 642; see also Guglielmo v. Guglielmo, 253 N.J. Super. 531, 541 (App. Div. 1992). Furthermore, settlements "must be voluntarily made and 'freely entered into.'" Peskin v. Peskin, 271 N.J. Super. 261, 275 (App. Div.) (citation omitted), certif. denied, 137 N.J. 165 (1994). "A spousal agreement may be reformed when it is 'unconscionable,' 'it is the product of fraud or overreaching by a party with power to take advantage of a confidential relationship,' or when, due to 'common mistake  or mistake of one party accompanied by concealment of the other, the agreement fails to express the real intent of the parties[.]'" Addesa v. Addesa, 392 N.J. Super. 58, 66 (App. Div. 2007) (internal citations omitted) (alterations in original); see also Miller v. Miller, 160 N.J. 408, 419 (1999).
Confidential relationships are not limited to situations where the parties share a legal or fiduciary relationship, but can be found where "the relations between the [contracting] parties appear to be of such a character as to render it certain that they do not deal on terms of equality," stemming, for example, from "dependence or trust justifiably reposed," where the result is such that an "unfair advantage is rendered probable." Pascale v. Pascale, 113 N.J. 20, 34 (1988) (citations omitted) (finding a confidential relationship that gave rise to a presumption of undue influence existed between father and son where the father had delegated financial and legal affairs to his son "[n]otwithstanding [the father's] competence and vigor"); see also Albright v. Burns, 206 N.J. Super. 625, 635 (App. Div. 1986) ("[a] fiduciary relationship may be deemed to have existed between [nephew and uncle] by reason of their closeness, family relationship, entrustment, the granting of the power of attorney and [the nephew's] promises that he would provide for his uncle.").
In cases where such confidence or inequality reasonably exists, "the burden of proof is thrown upon the person in whom the confidence is reposed and who has acquired an advantage, to show affirmatively not only that no deception was practiced therein, no undue influence used, and that all was fair, open and voluntary, but that it was well understood." In re Estate of Fulper, 99 N.J. Eq. 293, 302 (1926); see also Pascale, supra, 113 N.J. at 39 (finding that, where a "father did not have independent counsel in transferring to his son, with whom he had a confidential relationship, substantial assets, the transfer of which did not render the father destitute," the son had successfully rebutted the presumption of undue influence by proving that his father "understood the consequences of what he was doing").
A contract should be deemed invalid where "there has been moral compulsion sufficient to overcome the will of a person otherwise competent to contract . . . ." Shanley & Fisher, P.C. v. Sisselman, 215 N.J. Super. 200, 212 (App. Div. 1987) (citing Rubenstein v. Rubenstein, 20 N.J. 359, 365 (1956)). The central question is "whether consent was coerced" by the other party's wrongful behavior. Id. at 212-13 (quoting Rubenstein, supra, 20 N.J. at 366). This analysis requires a subjective inquiry into the state of mind of the person claiming to be the victim of coercion. Id. at 212.
"A court of equity will enforce a contract between husband and wife if it is not unconscionable to do so and if the performance to be compelled is not contrary to public policy." Minkin v. Minkin, 180 N.J. Super. 260, 262 (Ch. Div. 1981) (citations omitted). A contract will be held unenforceable if it was "procured by fraud or falsehood," or if such enforcement would produce "great hardship or manifest injustice." Schiff v. Schiff, 116 N.J. Super. 546, 561 (App. Div. 1971); see also Guglielmo, supra, 253 N.J. Super. at 542, 549 (holding a property settlement agreement unconscionable where the wife was represented by an attorney who was a relative of her husband, and the resulting agreement did not include "substantial assets" and mandated "support payments which [were] dreadfully inadequate").
Here, C.B. did not have independent counsel and signed an agreement that, on its face, left him with no substantial assets. By the terms of the 2007 agreement, C.B. agreed to relinquish control of his finances, retirement accounts, and his home, as well as custody of his children. C.B. gained nothing in return for this agreement, aside from the letter of leniency C.L.H. was to send to the District Attorney. Given the one-sided character of the 2007 agreement, its enforcement could well result in both great hardship and manifest injustice to C.B. See Schiff, supra, 116 N.J. Super. at 561.
In the July 16, 2010 order, the motion judge granted "[C.L.H.]'s application to sell the Lake Placid [c]ondominium, pay [C.L.H.] all amount due and owing to her . . . and permitting her to use the funds for the children's future support needs and college costs." C.B. claims that this relief went beyond that contained in C.L.H.'s request to enforce the 2007 agreement because that agreement called for the sale of the condominium only as a means to facilitate the "purchase [of] similar accommodations in or around the Monmouth County, NJ area," which was to serve as C.B.'s "primary residence." We agree that the motion judge thus afforded relief beyond the plain language of the 2007 agreement.
Furthermore, the motion judge did not specify the reasons why he thought C.L.H. was owed monies. A full accounting and hearing on the issue of arrears was never conducted. The only mention in the motion judge's opinion about child support payments and arrears was that "from the facts that are presented, it is unclear whether support has been overpaid or in fact there are arrears." See Strahan v. Strahan, 402 N.J. Super. 298, 309-12 (App. Div. 2008) (concluding that the court made insufficient findings regarding the appropriate amount of supplemental child support).
C.B. further argues that C.L.H. was entitled to exercise her power of attorney over his TIAA-CREF Account only for child support purposes, and that the $232,579.11 she withdrew on February 6, 2006, was both in excess of his child support obligations and was not proven to be used only for child support purposes. Although C.L.H. submitted a spreadsheet to the court that she claimed accounted for the expenditures, C.B. maintains that C.L.H. never provided a complete accounting and he contests some of the debts cited. C.B. further asserts that the trial court should have determined whether he was in arrears regarding child support before authorizing this withdrawal.
Additionally, C.B. argues that he overpaid his child support because C.L.H. had been receiving SSD benefits since 2005, and thus she was not entitled to withdraw $232,579.11 from the TIAA-CRF Account. See Herd v. Herd, 307 N.J. Super. 501, 505 (1998) (discussing that a payor is entitled to a credit for non-means-tested payments, such as social security disability, made to the custodial parent on behalf of the children); see also Pressler & Verniero, Current N.J. Court Rules, comment 1.3.2 on R. 5:6A (2012).
C.L.H. admits that the funds withdrawn were not used solely for child support, but were also used to pay expenses incurred by C.L.H. on C.B.'s behalf. Although neither party sought a plenary hearing, where there are genuine issues of material fact, a trial judge should hold such a hearing to aid in their resolution. Segal v. Lynch, 417 N.J. Super. 627, 642 (App. Div. 2011) (citing Harrington v. Harrington, 281 N.J. Super. 39, 47 (App. Div. 1995)), certif. granted on other grounds, 207 N.J. 190. On remand, the enforceability of the 2007 agreement and the financial balance between the parties must be further explored by the judge through such a hearing. Furthermore, C.B. should also be afforded the opportunity to file a cross-motion should he wish to do so.
Reversed and remanded. We do not retain jurisdiction.