July 17, 2012
FILOMENA MORIELLO, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
PIETRO MORIELLO, DEFENDANT-RESPONDENT/ CROSS-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Union County, Docket No. FM-20-472-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 8, 2012
Before Judges Axelrad and Ostrer.
The divorced parties jointly own two income-producing properties pursuant to their 2006 property settlement agreement (PSA). Citing discord with her former husband over the properties' management, plaintiff moved to modify the PSA and partition the properties. Defendant cross-moved for an order appointing himself or a person he selected to manage the two properties. The trial court denied both motions. The parties appeal, and we affirm.
The parties were divorced in 2006 after a marriage of more than thirty years. Pursuant to their extensive PSA made a part of the final judgment of divorce (FJD), they became joint tenants without rights of survivorship of a sixteen-unit apartment building and a rented single family home, both in Elizabeth. The PSA provided that, instead of alimony, plaintiff would receive $3000 a month of the net income from the two properties, with any shortfall covered by defendant. Defendant was entitled to receive the next $3000 a month in net income, and the parties were to split any net income over $6000.
Under the PSA, the parties' adult son Peter Joseph Moriello (PJ) was to serve as property manager, earning a commission of ten percent of gross revenue. The PSA also required the parties to execute irrevocable wills, which they did, providing that if one party predeceased the other as well as PJ, then PJ would inherit the deceased party's interest, but the surviving ex-spouse would retain a lifetime interest in the properties' income. PJ executed an irrevocable will leaving his interest to a surviving parent in the event he predeceased that parent.
The PSA contemplated the possibility that PJ would cease his role as property manager.
In the event PJ renounces his role as manager . . . the parties shall discuss and hopefully agree upon a replacement manager.
In the event they cannot agree, either may make application to the Superior Court of New Jersey for the appointment of a manager or for direction as to how a manager should be selected.
Both parties were represented by counsel in entering the PSA. They acknowledged "the issue of Equitable distribution would be foreclosed from reopening, absent a demonstration of fraud by either of them."
It became apparent shortly after entry of the FJD that PJ was unwilling or unable to manage the properties effectively. Lacking a third-party intermediary to manage the property, the parties experienced significant discord over the properties' management. Plaintiff claimed defendant subjected her to extreme verbal abuse, causing her great stress and emotional turmoil, much as she experienced during her marriage.
Claiming that her emotional distress constituted a changed circumstance, she filed a motion with the court to partition the properties and to require defendant to buy her interest or sell the properties to a third party and divide the proceeds, while retaining his obligation to pay $3000 a month alimony. PJ filed a certification formally renouncing his position as property manager and expressing his willingness to waive his interest in the properties if the court granted his mother's motion.
Defendant opposed the motion and cross-moved to have the court appoint as property manager himself or Sarah Tennenbaum, a professional property manager who also was the wife of defendant's business partner and a co-owner of property with defendant.*fn1
In a March 30, 2011 order, Judge Robert A. Kirsch denied plaintiff's motion to modify the PSA. In response to defendant's cross-motion, the court ordered the appointment of a new property manager, without specifying who it should be. He ordered counsel, on the parties' behalf, to select within thirty days "a neutral and qualified third party" to serve as property manager. In the meantime, the court maintained the status quo, pursuant to which plaintiff maintained the properties' business records and defendant, who was in the construction business, assumed responsibility over repairs and maintenance.
The parties, through counsel, failed to agree on a property manager. Although plaintiff had already filed her notice of appeal, the court entertained a motion by defendant for the appointment of an interim property manager. By order entered September 7, 2011, the court appointed Sarah Tennenbaum to serve as property manager until January 30, 2012, or until disposition of this appeal, whichever first occurred, after which "either party may make application for the appointment of a different Property Manager, or continue the services of Sarah Tennenbaum."*fn2
The record does not include any subsequent orders regarding the property manager.
In his written decision denying plaintiff relief, Judge Kirsch held that the parties' PSA was entitled to respect and should not be modified on the basis of circumstances that the parties' contemplated or could foresee when they executed the agreement. He concluded that the parties envisioned that PJ might cease service as property manager. They provided for the appointment of a replacement, to shield themselves from personal entanglement and acrimony. "The solution therefore lies in appointing a neutral, replacement property manager with respect to the jointly-held properties at issue[.]" The court granted in part defendant's cross-motion by ordering the selection of a new property manager, although the court did not at that point approve appointment of defendant or Ms. Tennenbaum.
Judge Kirsch also rejected plaintiff's argument that she had an absolute right to obtain partition of the properties under Michalski v. Michalski, 50 N.J. Super. 454, 460 (App. Div. 1958), and Drachenberg v. Drachenberg, 142 N.J. Eq. 127 (E & A 1948). He held parties may effectively agree not to partition property, even if their agreement is not expressly stated, so long as their intent is clear, the partition was barred for a reasonable time, and circumstances have not changed so as to make enforcement of their agreement unjust. He found the parties so agreed, and circumstances had not changed to render enforcement unjust.
Plaintiff further argues, in the alternative, that her right to partition the subject properties is "absolute" and "should not be denied in the absence of an explicit agreement not to resort to partition." Michalski v. Michalski, 50 N.J. Super. 454, 462 (App. Div. 1958) (citing Drachenberg v. Drachenberg, 148 N.J. Eq. 127, 134 (E. & A. 1948)). However, this is not an accurate summary of the Appellate Division's holding in Michalski, which reasoned that the "true basis" for the Drachenberg court granting the petitioner's motion for partition was the changed circumstances of the respective parties, the breach of one party's obligations under the agreement, the fact that the agreement was for an unreasonable length of time, and was not binding upon a cotenant who was not party to the agreement. Id. (emphasis added). Moreover, in a subsequent decision citing Michalski, a Chancery Division Judge denied in part the plaintiff's motion to partition the parties' interest in certain securities, which were jointly held pursuant to a property settlement agreement, on the basis that there were no changed circumstances since the agreement, and therefore it was not inequitable to enforce the implied restriction on partition of the securities. Hotchkin v. Hotchkin, 105 N.J. Super. 475, 482-83 (Ch. Div. 1969) (citing Michalski, supra, 50 N.J. Super. at 462).
Judge Kirsch reasoned that the parties implicitly agreed in the PSA not to seek partition, and plaintiff had failed to allege changed circumstances rendering their agreement unjust.
In this case, the PSA de facto restricts Plaintiff's right to partition the subject properties, since it creates joint ownership and a partnership between the parties with respect to the properties, and provides that alimony shall be paid from the rental proceeds on the properties. Plaintiff acknowledges this implied restriction by virtue of her petition to "modify" the "joint ownership provisions" of the parties' Agreement. As set forth above, the Court finds that there are no changed circumstances since the time of the parties' Agreement which warrant modification of the implied restriction on partition. Moreover, the parties could have, but did not include in their Agreement a unilateral right to partition for any cause. The fact that this extensive, comprehensive, and interrelated PSA was the product of intensive negotiations, with legal and other expert review and oversight, induces a strong reluctance in this Court to modify the parties' agreement through the addition of rights and remedies not otherwise provided. Lastly, the implied restriction is not an unreasonable restraint on alienation, since "either the mutual consent of the parties [to partition the properties]" or the death of both of them "could occur at any time." Hotchkin, supra, at 483.
Finally, Judge Kirsch held that plaintiff had failed to demonstrate the "exceptional circumstances" justifying relief under Rule 4:50-1(f). Citing Schwartzman v. Schwartzman, 248 N.J. Super. 73, 77 (App. Div.), certif. denied, 126 N.J. 341 (1991), Judge Kirsch held that plaintiff had failed to demonstrate that enforcement of the PSA would be "unjust, oppressive or inequitable."
Plaintiff asserts the following points on appeal:
RESPONDENT'S REFUSAL TO COOPERATE CIVILLY AND PROFESSIONALLY WITH THE APPELLANT WITH REGARD TO THE MANAGEMENT OF THE PROPERTIES CONSTITUTES A CHANGE OF CIRCUMSTANCES WARRANTING RELIEF TO THE APPELLANT.
FAIRNESS AND EQUITY DICTATES THAT IT WOULD BE UNCONSCIONABLE TO COMPEL THE APPELLANT TO CONTINUE TO BE THE BUSINESS PARTNER OF THE RESPONDENT.
PURSUANT TO RULE 4:50-1(f), APPELLANT IS ENTITLED TO THE RELIEF SOUGHT.
COMPELLING THE APPELLANT TO CONTINUE TO OWN LAND THAT SHE NO LONGER WANTS TO OWN IS A
VIOLATION OF THE APPELLANT'S CONSTITUTIONAL RIGHTS.
Defendant asserts the following point on cross-appeal:
ARGUMENT ON DEFENDANT'S APPEAL
THE COURT ERRED IN NOT APPOINTING DEFENDANT AS REPLACEMENT PROPERTY MANAGER OR SARAH TENNENBAUM AS REPLACEMENT PROPERTY MANAGER, AND/OR IN FAILING TO CONDUCT A FACT HEARING ON THE DISPUTE AS TO THE REPLACEMENT MANAGER.
We affirm substantially for the reasons set forth in Judge Kirsch's cogent written opinion. We add the following additional comments.
Partition is an equitable remedy. Newman v. Chase, 70 N.J. 254, 263 (1976) ("[P]artition is . . . an ancient head of equity jurisdiction[.]"). See also Greco v. Greco, 160 N.J. Super. 98, 101 (App. Div. 1978); Michalski, supra, 50 N.J. Super. at 466; William Dreier and Paul Rowe, Guidebook to Chancery Practice in New Jersey, § II(C) (2008) (Guidebook). "As a practical matter, literal partition is rarely ordered; instead the court more often will direct a sale of the property and a division of the proceeds." Guidebook, § II(C).
The right to partition is not absolute. Newman, supra, 70 N.J. at 264-65; Greco, supra, 160 N.J. Super. at 101-02. It is subject to prior agreement not to partition. Newman, supra, 70 N.J. at 263. Even absent agreement, under appropriate circumstances, "a court should be permitted to exercise its equitable discretion in deciding whether or not to allow the remedy." Id. at 265 (referring to partition sought by transferee of one spouse's interest in family home).
A court may enforce an agreement not to partition if, first, "the intention is sufficiently manifest from the language used . . . even without express use of the word ['partition']," and second, "the restraint [is] not fixed for an unreasonable time." Michalski, supra, 50 N.J. Super. at 462. On the other hand, applying equitable principles, the court may decline to enforce a restraint against partition by applying the same principles governing relief of specific performance of contracts. Id. at 466.
Consequently, the court may withhold enforcement that would be "harsh or oppressive." Ibid. (quoting 4 Pomeroy's Equity Jurisprudence § 1405a, p. 1944 (5th ed. 1941)). Oppression or hardship may arise from unconscionable contract provisions, or from the circumstances affecting the parties. Ibid. A court may decline to enforce a restraint against partition when "the circumstances have so changed that it would be inequitable to deny the partition." Id. at 467.*fn3
In this case, Judge Kirsch, exercising his equitable discretion, determined that the circumstances had not changed sufficiently to warrant overriding the parties' implicit agreement not to partition. In Michalski, supra, the change in circumstances was the deterioration of the parties' relationship, leading to their separation, and litigation, both civil and criminal. Here, there was no substantial change because the parties' relationship had already deteriorated when they decided to become joint owners of property as part of the divorce agreement. Mindful of their incompatibility, they agreed that a third party, either PJ or another person, would manage their jointly-owned, revenue-producing properties. When PJ failed to exercise that role as envisioned, the parties naturally resumed the discordant relationship that led to their divorce. But, as Judge Kirsch observed, the solution was not partition, but utilization of the mechanism the parties had put in place to select a new, independent third party.
We review under an abuse of discretion standard Judge Kirsch's decision to withhold the equitable remedy of partition. See Feigenbaum v. Guaracini, 402 N.J. Super. 7, 17 (App. Div. 2008) ("Decisions concerning [the application of an equitable doctrine] ordinarily are left to the sound discretion of the trial court.") (internal quotation and citation omitted, brackets in original); Pressler & Verniero, Current N.J. Court Rules, comment 4.8 on R. 2:10-2 (2012) (review of trial court decision with respect to equitable remedies subject to abuse of discretion standard). We also afford the Family Part judge deference because of his or her expertise and training. See Cesare v. Cesare, 154 N.J. 394, 413 (1998). We discern no abuse of discretion. See Feigenbaum, supra, 402 N.J. Super. at 17 (abuse of discretion occurs "when a decision is 'made without a rational explanation, inexplicably depart[s] from established policies, or rest[s] on an impermissible basis'") (internal quotations and citations omitted).
Nor do we agree with defendant that we should remand for the trial court to conduct a plenary hearing on the selection of a property manager. The court's March 2011 order that the parties jointly select a property manager has obviously been superseded by the court's subsequent order appointing Sarah Tennenbaum. That order is not the subject of appeal. Therefore we do not address plaintiff's argument that the court lacked jurisdiction to enter it. In any event, the order has expired by its own terms, and we have not be apprised of how the properties have been managed since at least January 2012.
We trust that the trial court will capably address an application from either party for such appropriate further orders as are necessary to enforce the PSA provision governing appointment of a property manager.
Any further discussion of the issues raised in the appeal and cross-appeal is not warranted in a written opinion. R. 2:11-3(e)(1)(E).