June 3, 2013
MICHELLE ORR, Plaintiff-Respondent,
SEAN ORR, Defendant-Appellant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted February 25, 2013
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Morris County, Docket No. FM-14-892-03.
Sean Orr, appellant pro se.
Michelle Orr, respondent pro se.
Before Judges Ashrafi and Guadagno.
This is the parties' third post-judgment matrimonial appeal in the last three years. See Orr v. Orr, No. A-2030-08 (App. Div. June 17, 2010); Orr v. Orr, No. A-2702-10 (App. Div. Apr. 18, 2012). On June 17, 2010, we reversed an order denying defendant wife's motion for counsel fees. We remanded the matter for a plenary hearing which was held on April 14, 2011. The judge ordered plaintiff to pay $30, 000 in counsel fees. On appeal, appellant raises the following points:
THE TRIAL COURT COMMITTED ERROR BY AWARDING COUNSEL FEES ON A CONTRACT THEORY WHILE THE INDEMNIFICATION LANGUAGE OF THE PSA DID NOT PROVIDE FOR PAYMENT OF COUNSEL FEES AND COURT COSTS. THE TRIAL COURT ALSO ERRED IN AWARDING THOSE FEES AS A CHILD SUPPORT OBLIGATION.
THE COURT COMMITTED ERROR BY REFUSING TO CONSIDER DEFENDANTS FINANCIAL ABILITY TO PAY LEGAL FEES WHICH ARE APPLIED IN ALL MATRIMONIAL DISPUTES.
THE COURT ERRED BY REFUSING TO ALLOW DEFENDANT TO INTRODUCE EVIDENCE OF CURRENT FINANCIAL SITUATION.
AS A THRESHOLD REQUIREMENT, THE ATTORNEY MUST FILE AN [SIC] CERTIFICATION OF SERVICE IN ACCORDANCE WITH RULE 1.5(a) OF THE RULES OF PROFESSIONAL [CONDUCT].
1. PLAINTIFFS REQUEST FOR LEGAL FEES SHOULD BE DENIED AS HER APPLICATION FAILS TO MEET THE LEGAL CRITERIA FOR SUCH AND [SIC] AWARD.
2. RULE 5:3-5(c) MANDATES THAT PLAINTIFF REIMBURSE DEFENDANT FOR COUNSEL FEES BY PLAINTIFF'S MISREPRESENTATION TO THE COURT BY USING FALSE AND MISLEADING STATEMENTS AS FACTS PLAINTIFF HAS ACTED IN BAD FAITH.
We have considered these arguments in light of the record and applicable legal standards. We affirm.
We repeat the relevant facts from our June 17, 2010 opinion:
Plaintiff and defendant were divorced on May 18, 2004. The PSA incorporated in the judgment contained the following language regarding "DEBTS":
From the date of this Agreement, neither party shall contract any indebtedness nor incur any liability for which the other party may be held responsible, except as in this Agreement provided. Each party agrees to indemnify and reimburse promptly the other for any sum that he or she may pay by virtue of a violation of this provision.
Each party shall be responsible for any and all debts incurred by that party subsequent to the parties' separation except as set forth herein. Further, each party shall retain any debt associated with any asset to be retained by that party except as set forth herein. . . . Each party indemnifies and holds the other party harmless regarding his/her debts.
The equitable distribution provisions of the PSA provided that defendant would retain a business, Champion Pools, "a limited partnership" he "acquired . . . during the course of the marriage . . . free from [any] claim of [plaintiff]."
In May 2008, defendant moved for modification of his child support obligations and other relief. In his certification, defendant alleged that as a result of a failed business venture, he was forced to close Champion Pools and declare bankruptcy, from which he was discharged by court order on February 29, 2008. Defendant's motion requested oral argument.
Plaintiff opposed the motion and cross-moved for various relief; she too requested oral argument. In particular, plaintiff sought an order compelling "[d]efendant to reimburse [her] in the approximate amount of $12, 000 representing legal fees incurred from 2007 to 2008 when she was forced to defend herself in court as a result of [d]efendant's forging her signature on a personal guaranty of a loan to his business . . . ." In her certification, plaintiff alleged that after defendant filed for bankruptcy in June 2007, she was "sued by Textron Industries (Textron). . . because [defendant] had forged [her] signature as a guarantor on a loan for $90, 000" from Textron to Champion Pools. Attached to the certification were loan documents, apparently executed in 1998, evidencing defendant's loan agreement with Textron, one of which was a personal guarantee purportedly signed by plaintiff. She claimed that this was a forgery and was done by defendant without her knowledge.
Plaintiff alleged that she incurred in excess of $12, 000 in legal fees protecting her interests in the bankruptcy proceedings and defending herself in a separate suit Textron filed against her. Plaintiff cited the provisions of the PSA outlined above, and sought reimbursement of her legal expenses, as well as counsel fees incurred in opposing defendant's motion and in furtherance of her cross-motion.
At the remand hearing, plaintiff testified that the pool and spa business was a marital asset which defendant retained in its entirety following the divorce. Beginning in 2007, she was subjected to collection attempts as a guarantor on a $90, 000 note held by Textron. She denied that she signed the guaranty and claimed the signature was a forgery.
Plaintiff retained Richard Trenk as counsel when she was listed as one of defendant's creditors in his bankruptcy. She testified that Trenk had attempted to resolve the matter but defendant refused to cooperate. Trenk then filed a non-dischargeability complaint before challenging the bankruptcy.
Textron filed suit against plaintiff in December 2007 to recover the outstanding balance on the loan. Trenk represented her in both the Textron suit and the bankruptcy matter. He billed a total of $13, 456.17 in legal fees for his representation.
Plaintiff then retained Christopher P. Gengaro to file a motion in the Family Part to recover the attorney's fees paid to Trenk. Plaintiff's original motion was denied, as was her motion for reconsideration. Gengaro then represented plaintiff in her appeal of the family court's decision which led to the remand. Orr v. Orr, No. A-2030-08 (App. Div. June 17, 2010). Plaintiff testified that, as of the April 14, 2011 plenary hearing, she accumulated $21, 529.14 in legal fees owed to Gengaro in relation to the indemnity action.
Trenk testified that he had attempted to resolve the bankruptcy matter expeditiously and at the least possible cost to plaintiff by seeking a reaffirmation agreement from defendant. Defendant refused to execute the reaffirmation agreement. Trenk then requested extensions in order to file a complaint for non-dischargeability. When Trenk filed the complaint before the bankruptcy court, defendant defaulted and a default judgment was entered against him.
Trenk explained that plaintiff was unable to recover attorney's fees for his work before the bankruptcy court because the bankruptcy court lacked jurisdiction to enforce the PSA, the source of plaintiff's indemnification claim. Trenk did succeed, however, in obtaining a reaffirmation agreement from defendant, recognizing defendant's obligation to indemnify plaintiff.
Trenk testified that he made two courtesy adjustments, discounting his fee by approximately $5, 000, and the fees billed to plaintiff were $13, 456.17 (after the adjustments) for his representation in the bankruptcy proceedings and the Textron suit. Trenk testified that most of his fee was attributable to defendant's initial "refusal" to sign the reaffirmation agreement.
Defendant testified that he signed the reaffirmation agreement believing that plaintiff was waiving indemnification of those fees because she did not seek attorney's fees from the bankruptcy court. He attempted to explain the lengthy delay in his signing the reaffirmation agreement by claiming that his attorney took a long time to review the agreement.
Defendant testified that he believed the PSA would protect plaintiff's interests without the reaffirmation agreement, and that he was careful in having the reaffirmation agreement checked before signing it to secure his then-contemplated motion for child support modification.
Defendant conceded that he did not reimburse plaintiff for her attorney's fees in the Textron suit, but claimed, "[s]he never asked me for any help with the Textron matter when she was answering the Textron suit that was presented to her. Had she brought [it] to my attention and tried to work that out with me, I would have definitely considered it." Defendant also claimed that plaintiff was in a better financial situation to pay her own attorney's fees.
Defendant testified that he was not immediately informed of the suit brought against plaintiff by Textron, but attempted to resolve that matter upon learning of it. When asked to produce documentation of these efforts, which he had described as "correspondence back and forth, " he was unable to do so.
Defendant also questioned plaintiff's decision to retain counsel in the Textron suit and suggested that, after answering the complaint, she could have "step[ped] out" and "handed off" the litigation to him.
On May 10, 2011, the Family Part filed an order compelling defendant to pay $30, 000 in attorney's fees to plaintiff as "a support obligation." In a statement of reasons accompanying the order, the judge found the PSA required indemnification and attorney's fees in the event of an enforcement application. The judge found Trenk's testimony was credible and that plaintiff was forced to expend $13, 456.17 in attorney's fees for his representation in the bankruptcy proceedings and the Textron suit. The judge also found defendant's testimony incredible and that his arguments "were confusing, illogical, and not compelling." The judge succinctly set out her findings and conclusion as follows:
A plain reading of the reaffirmation agreement and a plain reading of the PSA are fully consistent with the notion that Defendant had an obligation to indemnify and hold Plaintiff harmless on the Textron liability. She should not have had to retain counsel and incur legal fees to Mr. Trenk to defend against Textron. Moreover, she should not have had to retain Mr. Trenk to defend against a discharge in the bankruptcy court an[d] file an adversary proceeding to insure that Defendant lived up to his obligation under the PSA. Finally, Plaintiff was forced into litigation to enforce the PSA and[, ] pursuant to the terms of that agreement[, ] Defendant is responsible for those fees as well.
Accordingly, Defendant is fully responsible for all of Mr. Trenk's legal bill in the amount of $13, 456.17. He is also responsible for Mr. Gengaro's legal bills in connection with his efforts to secure payment of Mr. Trenk's bill . . . [totaling] $13, 943.00 (exclusive of the bills from Mr. Trenk). Mr. Gengaro also submitted a certification of services for the cost of the plenary hearing.
The judge cited N.J.S.A. 2A:34-23, Rule 5:3-5(c), and the provisions of the PSA, in making the award.
"Because of the family courts' special jurisdiction and expertise in family matters, appellate courts should accord deference to family court factfinding." Cesare v. Cesare, 154 N.J. 394, 413 (1998). Additionally, a family court's findings as to witness credibility are "entitled to deferential respect by the reviewing court." N.J. Div. of Youth & Family Servs. v. H.B., 375 N.J.Super. 148, 172 (App. Div. 2005) (citing Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974)).
"An appellate court will disturb a trial court's determination on counsel fees only on the 'rarest occasions, and then only because of a clear abuse of discretion.'" J.E.V. v. K.V., 426 N.J.Super. 475, 492 (App. Div. 2012) (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)).
Defendant argues that the judge erred in classifying the award of attorney's fees as a "support obligation." Defendant seems to suggest that the terms "support obligation" and "child support" are synonymous. They are not. Defendant's support obligation here is to indemnify plaintiff under the PSA and to reimburse her for legal fees expended in her successful enforcement of the PSA. There was no indication in the family court order or statement of reasons that it viewed the award of attorney's fees as a child support obligation.
Defendant's claim that the judge did not read his brief is not supported by the record. The judge noted that she would consider defendant's brief and review it, although it was untimely filed. Additionally, the court's order indicated that the judge reviewed all papers submitted.
Defendant's argument that the judge erred in finding that defendant was "legally attempting to discharge any obligations" to plaintiff is similarly ungrounded. 11 U.S.C. § 523(a)(5) exempts domestic support obligations from debts dischargeable in bankruptcy. However, "domestic support obligation" is a term of art defined in the bankruptcy code. See 11 U.S.C. § 101(14A). As we have previously explained, "[i]n the bankruptcy setting, it is federal law, and not state law, that determines the nature of the obligations contained in [a] PSA." Larbig v. Larbig, 384 N.J.Super. 17, 26 (App. Div. 2006) (citing Winegarden v. Winegarden, 316 N.J.Super. 52, 60 (App. Div. 1998)). At the plenary hearing, Trenk, an experienced bankruptcy attorney, testified that his representation of plaintiff was necessary because the bankruptcy court would decide the dischargeability of defendant's debts to plaintiff under the PSA.
Defendant's argument that plaintiff's counsel failed to submit certifications of service in compliance with Rule 4:42-9(b) is not supported by the record. Trenk submitted a certification detailing his legal work for plaintiff in relation to the bankruptcy proceedings and the Textron suit. Gengaro submitted a certification detailing his legal work for plaintiff in relation to recovery of Trenk's fees, including all invoices. Gengaro submitted a supplemental certification, again with a copy of his invoice, relating solely to the plenary hearing. These certifications set out each attorney's services, detailing the nature of the work performed and reasonable accounts of the time required to perform such work. See R. 4:42-9(b). Additionally, each certification clearly states what amounts had already been paid and what amounts were pending. See R. 4:42-9(c).
Defendant next argues that the judge abused her discretion in awarding counsel fees. We note that the award of $30, 000 was less that the total amount of $32, 981.67 established by plaintiff's proofs. The PSA expressly provides that defendant will indemnify plaintiff in the event of an action against her on any of his post-divorce assets, including the pool and spa business. The PSA expressly provides that, in the event of an action to enforce the terms of the PSA, the prevailing party would be entitled to recover attorney's fees. To the extent that counsel fees were awarded solely as an enforcement of the PSA and without regard to Rule 5:3-5, such an award is valid as a matter of contract enforcement. See Barr v. Barr, 418 N.J.Super. 18, 31-32 (App. Div. 2011) (citing Pacifico v. Pacifico, 190 N.J. 258, 265 (2007) (noting that "matrimonial agreements are basically contractual in nature"; contracts are read "as a whole in a fair and common sense manner"; and courts will "enforce the contract as written").
With regard to the award of attorney's fees pursuant to court rule, the record indicates that the counsel fees charged to plaintiff were as a result of efforts to enforce the terms of the PSA. There is no indication that any fee was unreasonable. The judge expressly noted that her decision on attorney's fees was shaped by the provisions of Rule 5:3-5(c) and the nine factors for consideration set forth therein. The judge made findings of bad faith on defendant's part, first, in his refusal to sign the reaffirmation agreement and, later, failing to "take the steps to address his obligations to indemnify and hold harmless Plaintiff in the Textron litigation, " requiring plaintiff to amass legal fees in both actions. A party's bad faith weighs heavily into the appropriateness of an award of attorney's fees. See Mani v. Mani, 183 N.J. 70, 95 (2005). Even where a judge found no bad faith, we affirmed an award of attorney's fees for a defendant's "reluctance to participate more fully in settlement negotiations." J.E.V. v. K.V., supra, 426 N.J.Super. at 495. Here, the court's finding of bad faith finds ample support in the record.