July 27, 2012
SHERYL PALMER, F/K/A SHERYL CERUZZI, PLAINTIFF-APPELLANT,
ALEXANDER CERUZZI, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Mercer County, Docket No. FM-11-77-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted January 18, 2012
Before Judges Carchman, Baxter and Nugent.
Plaintiff Sheryl Palmer appeals from the post-judgment Family Part order denying her motion to enforce part of the parties' alimony agreement incorporated into the Dual Final Judgment of Divorce (JOD), and awarding counsel fees to defendant Alexander Ceruzzi. The trial court determined that defendant did not breach the alimony agreement. The court also determined that plaintiff breached a provision in the alimony agreement that required the parties to attempt to resolve certain alimony disputes through negotiation before filing an application with the court. Based upon plaintiff's violation of that provision of the alimony agreement, the court awarded counsel fees to defendant.
We conclude the trial court correctly determined both that plaintiff failed to prove defendant breached the alimony agreement, and that plaintiff breached the provision requiring her to attempt to resolve disputes over alimony through negotiation before seeking judicial intervention. However, the parties' agreement included no provision for the payment of counsel fees by a prevailing litigant, and the trial court cited no other authority for awarding fees to defendant. Accordingly, we affirm that part of the Family Part order denying plaintiff's motion to enforce the alimony agreement, but reverse that part of the order awarding counsel fees to defendant.
Following a twenty-six-year marriage, the parties were divorced on September 15, 2005. The JOD incorporated the parties' agreement concerning equitable distribution, child support*fn1 , and alimony. The following provisions concerning alimony are relevant to this appeal: 8. The parties agree that effective September 12, 2005, the Defendant shall pay the Plaintiff the sum of $35,000 per annum as permanent alimony. This sum is based upon the Defendant having a base salary of $125,000 and the Plaintiff having a base salary of $32,000. It is recognized that the Plaintiff is temporarily without employment. However, the parties agree to enter into this arrangement with the anticipation that the Plaintiff will find employment that produces a comparable salary that she previously earned. Plaintiff reserves the right to make an application for a modification of the imputation of $32,000 per annum if she is unable to find employment within six months of the date of this Judgment. However, at the time of the application, the reasonableness of the imputation shall be reviewed by the court.
12. The parties agree that the Defendant's base salary shall be garnished in the amount of $1,346 per two weeks relative to his alimony obligation. As set forth above, there shall be an additional garnishment of $200 per two weeks relative to child support. This makes the total garnishment $1,546 per two weeks. This shall be effective September 12, 2005. The parties recognize that the account for garnishment is already created.
12.a. The parties also agree that the Plaintiff shall receive as additional taxable alimony a sum equal to 23.5% of the Defendant's future cash bonuses and cash patent payments. This shall commence with any cash bonuses and cash patent awards that Defendant receives from January 1, 2006 forward due to the fact that the Defendant was providing pendente lite support at a rate that considered his bonus receipt at approximately $68,000. In the event that Defendant's cash bonuses and cash patent awards decrease because of an increase in his base salary, the parties shall negotiate through counsel regarding the support provisions and garnishment. In the event that they are unable to resolve the issue, either is free to make an application to the Court.
b. The Defendant shall arrange for the Plaintiff's 23.5% to be garnished directly by Emcore and paid directly to the Plaintiff into an account that she specifies. This garnishment shall not occur via the relevant probation department. The Defendant shall provide proof of the cash bonus and cash patent awards with[in] seven (7) days of his receipt of the cash bonus and cash patent award.
c. The parties recognize that the Plaintiff shall not share in the Defendant's cash bonuses and cash patent awards to the extent that they exceed $68,000 gross, as that was the largest gross cash bonus and cash patent awards that the Defendant received during the course of the marriage. As such, the maximum amount of additional alimony that the Plaintiff may receive relative to the Defendant's receipt of cash bonuses and cash patent award[s] amounts to $15,980.
d. The Defendant shall directly provide his year-to-date pay stub and 1040 at year's end, with W-2 as a form of verification of the cash bonuses and cash patent awards.
e. By way of an example, if the Defendant receives one cash bonus of $15,000 in 2006, the Plaintiff shall receive a garnishment of $3,525 from the Defendant's net proceeds from the cash bonus payment. This amount shall be taxable to her as alimony.
15. In the event that either party brings an application for the modification of alimony in the future, their then-received incomes shall be a relevant factor for the Court's consideration in evaluating their application.
The JOD also required defendant to maintain two life insurance policies, one through his employment in the amount of $150,000, the other in the amount of $200,000; and to provide proof of the policies and authorizations that permit plaintiff to independently verify the existence and amount of the policies.
As noted in the JOD, at the time of the parties' divorce, defendant was employed by a company called Emcore, earned a base salary of $125,000, and received "cash bonuses and cash patent awards."
The parties do not dispute that in 2006 and 2007 defendant paid plaintiff the maximum amount of money that he was required to pay her under the JOD, that is, $35,000 from his garnished wages, plus $15,980 representing the maximum amount (23.5% of $68,000) that he was required to pay based on his bonuses.
During 2007, both defendant's employer and salary structure changed.
In 2007, IQE RF LLC (IQE) acquired Emcore. IQE increased defendant's base salary to $210,000, and agreed to pay bonuses to defendant equal to 25% of his base salary if he "ma[de his] EBITDA figure," that is, "earnings before income[,] tax[es,] depreciation[, and amortization]." If he exceeded his "numbers," he would receive an additional seven percent bonus.*fn2
Defendant received both his base salary and bonuses exceeding $68,000 in 2007. In 2008, he received his $210,000 salary but no bonus. He did, however, receive a bonus payment of $20,930 on March 7, 2008, representing a bonus for exceeding his EBITDA numbers for 2007. For the year 2008, defendant paid plaintiff alimony of $35,000 plus 23.5% of the $20,930 that he received as part of his 2007 bonus. In 2009, defendant received no bonus and paid plaintiff only $35,000 in alimony.
On July 8, 2010, plaintiff filed a "Motion for Enforcement of Litigant's Rights, Modification of Alimony Payment, [and] Counsel Fees." Despite the caption of that pleading, plaintiff's counsel expressly stated during oral argument before the trial court that plaintiff was "not requesting that the amount [of alimony] be modified in any format." Rather, because of defendant's increase in salary, plaintiff sought to compel defendant to pay the full amount of alimony he would have been required to pay in 2008 and 2009 had he received $68,000 in bonuses for those years, even though he earned no bonus.
After confirming that plaintiff was not seeking to modify alimony under paragraph 15 of the JOD, the trial court determined that plaintiff was not entitled to the bonus component of alimony because defendant received no bonus in 2008 and 2009. Noting that plaintiff did not seek an increase in alimony in 2007 when defendant's salary increased to $210,000, the court concluded that "Paragraph 15 . . . should address any of those issues[,] not Paragraph[s] 8 [through] 12[.]"
The trial court also rejected plaintiff's argument that defendant had manipulated his salary and bonuses to avoid paying alimony, reasoning that defendant's receipt of bonuses exceeding $68,000 in 2007, the first year he received $210,000 in salary, refuted the argument that his bonuses in subsequent years decreased because of his salary increase. The court concluded that in 2008 and 2009 plaintiff was not entitled to the alimony component that was based upon defendant's bonuses for those two years.
Lastly, the court awarded counsel fees to defendant, reasoning that the motion may have been unnecessary had plaintiff complied with the provision in the JOD requiring that the parties attempt to negotiate a dispute over the two components of alimony before seeking judicial intervention. The court did not rule on that part of plaintiff's motion seeking to compel defendant to verify insurance information.*fn3
Plaintiff argues that when the JOD was entered, she was entitled to alimony equaling $35,000 plus 23.5% of bonuses earned by defendant up to a maximum of $68,000 ($15,980), or total alimony of $50,980 based on defendant's gross income of $193,000. She contends that she was entitled to receive $50,980 in alimony in 2008 and 2009 because defendant's gross income exceeded $193,000, even without bonuses. Plaintiff maintains that defendant was obligated to pay $50,980 in alimony even if his salary increased and his bonuses decreased, provided that he continued to earn at least $193,000 per year; and that the agreement included two alimony components "to provide a distinct mechanism for the payment of alimony."
Addressing the language in the JOD that requires the parties to attempt to negotiate the provisions of the garnishment if defendant's cash bonuses and cash patent awards decrease because of an increase in base salary, plaintiff alleges that defendant manipulated his salary structure to avoid paying the bonus component of alimony. She also argues that defendant made no attempt to negotiate.
Defendant responds that the terms of the parties' agreement, incorporated into the JOD, contradict plaintiff's argument. He argues that the terms of the agreement are clear, that plaintiff was not entitled to the bonus component of alimony in either 2008 or 2009 because he received no bonus in either year, and that plaintiff must make an application to the court based on changed circumstances or pursuant to paragraph 15 of the JOD if she desires to effectuate a modification of alimony.
Our review of Family Part decisions is limited. Family courts have special expertise in family matters and "appellate courts should accord deference to family court factfinding." Cesare v. Cesare, 154 N.J. 394, 413 (1998). We should not disturb the family court's exercise of sound discretion because "[j]udicial discretion connotes conscientious judgment, not arbitrary action; it takes into account the law and the particular circumstances of the case before the court." Higgins v. Polk, 14 N.J. 490, 493 (1954). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
When parties enter into an agreement concerning their obligations upon dissolution of their marriage, the agreement is contractual in nature and is subject to general principles of contract interpretation. See Pacifico v. Pacifico, 190 N.J. 258, 265-66 (2007). "At the same time, 'the law grants particular leniency to agreements made in the domestic arena,' thus allowing 'judges greater discretion when interpreting such agreements.'" Id. at 266 (citing Guglielmo v. Guglielmo, 253 N.J. Super. 531, 542 (App. Div. 1992)). Nonetheless, when parties undergoing a dissolution of their marriage consensually agree to resolve marital controversies, "'fair and definitive arrangements arrived at by mutual consent should not be unnecessarily or lightly disturbed.'" Konzelman v. Konzelman, 158 N.J. 185, 193-94 (1999) (quoting Smith v. Smith, 72 N.J. 350, 358 (1977)). "[S]ettlement agreements, if found to be fair and just, are specifically enforceable in equity." Id. at 194.
In the case before us, the parties' alimony agreement was arrived at by mutual consent, is clear, and is consistent with the purpose of alimony. "[T]he goal of a proper alimony award is to assist the supported spouse in achieving a lifestyle that is reasonably comparable to the one enjoyed while living with the supporting spouse during the marriage." Tannen v. Tannen, 416 N.J. Super. 248, 260 (App. Div. 2010) (internal quotation marks and citations omitted), aff'd o.b., 208 N.J. 409 (2011). The parties' lifestyle during their marriage was based upon, among other things, defendant's salary and his bonuses when he received them. In the proceedings before the trial court, defendant averred that he did not receive many bonuses during the parties' twenty-six-year marriage, and the $68,000 bonus he received "just prior to the divorce" was an anomaly. Plaintiff offered no evidence to refute those assertions. Thus, the parties' marital lifestyle was primarily dependent upon their salaries.
In view of those considerations, the trial court properly concluded that the alimony agreement consisted of separate components that were not interrelated. If, as the trial court correctly concluded, plaintiff wanted to modify the amount of alimony linked to defendant's salary, she should have made an application under Paragraph 15 of the JOD. That provision expressly provided that, upon such an application, the parties' "then-received incomes shall be a relevant factor for the
[c]court's consideration in evaluating their application."
The trial court also properly rejected plaintiff's assertions that defendant had manipulated his salary and bonus structure to avoid paying alimony. Significantly, defendant received a bonus in excess of $68,000 during the first year of his salary increase, a combination of events suggesting that he did not manipulate a change in salary structure to avoid paying alimony to plaintiff. More significantly, plaintiff did not establish the basis for defendant's bonuses before 2007. The consequence of that omission was that the court had no basis to determine whether defendant would have received bonuses in 2008 and 2009 under his pre-2007 compensation package.
Indisputably, plaintiff had the right to ascertain the basis for defendant's bonuses, both before and after his salary structure changed. The parties' agreement provided a mechanism to obtain such information: the provision requiring the parties to "negotiate through counsel" in the event defendant's bonuses decreased because of an increase in his base salary. That provision certainly would have enabled plaintiff to inquire about the basis for defendant's bonuses. Plaintiff failed to comply with that requirement. In view of that omission, the court properly rejected plaintiff's arguments premised on the absence of such information.
In short, the parties entered into an alimony agreement with two components: one based on defendant's salary, the other based on his bonuses. The parties also agreed upon two methods for modifying alimony. First, if defendant's bonuses decreased because of a salary increase, the parties would negotiate and resort to judicial intervention only if the negotiations proved unsuccessful. Second, plaintiff could apply for modification of alimony under Paragraph 15 of their agreement, and the parties' "then received incomes [would] be a relevant factor for the
[c]court's consideration in evaluating their application." Plaintiff complied with neither provision. Consequently, the court properly rejected plaintiff's application.
Although the trial court did not address plaintiff's application to compel defendant to verify that he had maintained life insurance in accordance with the parties' agreement, we see no need to address that issue. Defendant verified the existence and amount of the policies in the pleadings he filed in opposition to plaintiff's motion. Moreover, the JOD required defendant to authorize plaintiff to verify the life insurance policies. Plaintiff has the right to obtain such authorization if she is dissatisfied with defendant's averments concerning the policies.
We turn to the award of counsel fees. The court awarded counsel fees to defendant because plaintiff "effectively sidestepped [the] mandatory step" of attempting to negotiate a resolution. The court explained that the "motion was one, unnecessary, and two, does not comport with the parties' agreement relative to what should have taken place, namely the obligation to negotiate whereupon I would only think all these proofs could have been submitted and perhaps you would have come to the same conclusion."
New Jersey generally follows the American Rule that "precludes a party from recovering counsel fees from his or her adversary . . . ." In re Estate of Lash, 169 N.J. 20, 30 (2001). See also Pressler & Verniero, Current N.J. Court Rules, comment 1 on R. 4:42-9 (2012) ("[T]he New Jersey Supreme Court has remained committed to the so-called American rule[.]"). Nevertheless, a litigant can recover counsel fees if the recovery is authorized under the terms of a contract, by a court rule, or by statute. Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 440 (2001). Rule 4:42-9(a), entitled "Actions in Which Fee Is Allowable," provides that except in the actions enumerated in the Rule, "[n]o fee for legal services shall be allowed in the taxed costs or otherwise[.]" The Rule permits a fee allowance in family actions "pursuant to [Rule] 5:3-5(c)."
R. 4:42-9(a)(1). The award of fees is also authorized by statute in certain instances. See, e.g., N.J.S.A. 2A:34-23 and -23a.
Here, the trial court did not award fees pursuant to any court rule or statute, and the parties' agreement included no provision for counsel fees for breach of the agreement. Because the agreement did not provide for counsel fees, and because the court did not base its decision to award fees on any court rule or statutory authority, the part of the court's order awarding fees must be reversed.
Defendant cites four cases and a court rule to support his argument that the award of counsel fees was appropriate. The cases are distinguishable and the rule is inapplicable. Two of the cases cited by defendant, Rendine v. Pantzer, 141 N.J. 292 (1995), and Furst v. Einstein Moomjy, Inc., 182 N.J. 1 (2004), involved statutory fee awards. In the case before us, the court did not state that it was awarding fees under a particular statute, and defendant has cited no statute in support of his fee application.
In the third case cited by defendant, Packard-Bamberger, supra, 167 N.J. 427, the Supreme Court held that "a successful claimant in an attorney-misconduct case may recover reasonable counsel fees incurred in prosecuting that action." Id. at 443. The Court's holding was a logical extension of its holding in Saffer v. Willoughby, 143 N.J. 256 (1996), that a client may recover reasonable expenses and counsel fees as consequential damages for attorney malpractice. Packard-Bamberger, supra, 167 N.J. at 444. No such claim is asserted here.
In the fourth case, Strahan v. Strahan, 402 N.J. Super. 298 (App. Div. 2008), the award of counsel fees was made under the authority of Rule 5:3-5(c). As we have previously pointed out, the trial court did not award counsel fees in this case under that Rule.
Lastly, defendant claims he is entitled to counsel fees under Rule 1:10-3, which permits a court, in its discretion, to make an allowance for counsel fees to a party prevailing on a motion to enforce litigant's rights. That Rule, however, permits the court to make an allowance for counsel fees "'to a party accorded relief.'" Jersey City Redev. Agency v. Clean-OMat Corp., 289 N.J. Super. 381, 405 (App. Div.) (quoting Rule 1:10-3), certif. denied., 147 N.J. 262 (1996). "[T]he phrase 'party accorded relief' . . . clearly confines the right to award counsel fees to 'successful movant[s].'" Ibid. (quoting Pressler, Current N.J. Court Rules, comment on R. 1:10-3
(1996)). Here, defendant was not the movant and was not accorded relief.
In summary, we reverse the trial court's award of counsel fees because the court did not award the fees pursuant to any rule or statute, and because the JOD did not provide for the award of counsel fees in the event of a breach of one of its provisions.
We affirm paragraph 1 of the September 17, 2010 Family Part order dismissing plaintiff's motion, but reverse paragraph 2 awarding counsel fees to defendant.
Affirmed in part and reversed in part.