June 4, 2013
FEMKE DECHESER, N/K/A DERUYTER, Plaintiff-Respondent,
PETER DECHESER, Defendant-Appellant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 14, 2012
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Mercer County, Docket No. FM-11-352-10.
Einhorn, Harris, Ascher, Barbarito & Frost, attorneys for appellant (Bonnie C. Frost and Matheu D. Nunn, on the brief).
Femke DeRuyter, respondent pro se.
Before Judges Lihotz and Kennedy.
Defendant appeals from a post-judgment order of the Family Part granting, in part, plaintiff's motion to enforce litigant's rights arising from a judgment of divorce which incorporated the parties' Property Settlement Agreement (PSA). Defendant argues that the motion court "incorrectly re-wrote the parties' PSA to the sole benefit of plaintiff." We disagree and affirm.
The parties were married on August 29, 1999, and were divorced by judgment entered on October 22, 2010. The judgment incorporated a nineteen-page PSA the parties had earlier negotiated and approved. The PSA specifically addressed the use and disposition of the marital residence, which lies at the heart of the parties' dispute on appeal.
During their marriage, the parties purchased two adjoining condominium units on Spruce Street in Princeton, which they renovated into a single unit and used as the marital residence. The first unit was purchased in 2004 in the name of plaintiff alone and was encumbered by two mortgages and an equity line of credit at the time of the parties' divorce. The second unit was purchased in 2005 in the names of both parties and was encumbered by a mortgage, an equity line of credit and an Internal Revenue Service (IRS) lien at the time of their divorce.
The units, as noted, were owned under separate deeds and no lienholder was ever notified of the parties' renovation of the properties into a single unit. At the time of the judgment of divorce, no payments had been made to any of the lienholders for over seven months.
The PSA provided that defendant "shall occupy the marital residence" and shall be responsible to pay maintenance and operating expenses, including electric and gas, water, cable and lawn care. At the time of the judgment of divorce, the property was listed for sale with a realtor, and the PSA provided that during defendant's occupancy, the premises shall remain "on the market for sale" in plaintiff's discretion. The PSA also stated that rental payments made by a tenant who rented part of the premises shall be "made directly" to plaintiff until the property is "sold, lost, or until the mortgages are assumed by" defendant.
Further, the PSA stated:
7.10 For as long as the property remains listed for sale, [plaintiff] shall have the sole authority to determine what constitutes an acceptable offer for sale. [Defendant] shall have the right to match any offer that is acceptable to [plaintiff] in such a fashion that [plaintiff] would net the same amount that she would under the sale to the third party.
7.11 In the event that there are no acceptable offers for purchase by a third party [defendant] shall have the option to purchase the house at a price that covers all mortgages/liens against the property (including the mortgage to H. Katja DeRuyter), all associated real estate taxes/costs, and any and all transfer of mortgage costs, plus an additional $75, 000 payable to [plaintiff]. If [defendant] exercises this option, he must provide a non-refundable deposit of $40, 000 to [plaintiff]. If [defendant] is not able to assume the mortgages/liens, then the house will remain on the market until sold to the third party. [Plaintiff] shall cooperate [to] the extent necessary to help [defendant] assume the mortgages/liens.
The PSA also required defendant to maintain liability insurance on the premises. In August 2011, plaintiff filed a motion to enforce litigant's rights and for other relief. In her supporting certification, plaintiff stated that the mortgages on the marital residence were approximately eighteen months in arrears, and that the lienholders were threatening foreclosure. Moreover, she asserted the property had been "removed from the market" because the liens exceeded the property's value.
Further, plaintiff expressed concern that the parties had materially breached the terms of the mortgages on the property by converting the two condominium units into a single residence without notice to or consent from the mortgagees. Plaintiff estimated it would cost $17, 650 to convert the property into two separate units and asked the court to order the parties to undertake the work, and share the costs equally. She also proposed that any funds received from a lienholder in return for a deed in lieu of foreclosure be shared equally.
In addition, plaintiff asked the court to order defendant to allow the tenant to reoccupy the property for the academic year starting September 2011. The tenant, a university professor, had moved out May 2011, but expressed interest in returning to the premises for the academic year commencing September 2011. Defendant had changed the locks on the property and refused to allow the tenant to re-enter the residence, asserting that, "[t]here was no agreement [between the parties] for the tenant to return."
Plaintiff also sought an order compelling defendant to pay a PSE&G bill for gas and electric service at the premises incurred after November 1, 2011. Plaintiff sought other relief, as well.
Defendant opposed the motion and filed a cross-motion to compel plaintiff to "cooperate with [his] efforts to renegotiate the outstanding mortgages and liens" on the marital residence. He also sought other relief. In his supporting certification, defendant stated the PSA never contemplated simply deeding the properties in lieu of foreclosure; expressed doubt about plaintiff's estimate of the cost to separate the condominium units; and suggested, "it isn't fair that plaintiff expects me to pay one-half of these costs when she is the one seeking to deviate from the terms of" the PSA.
Defendant added that the lienholders refused to speak to him about "renegotiat[ing] the existing loans" without plaintiff's verbal authorization. He stated that plaintiff ignored his request to contact the lienholders, and he requested the court to order plaintiff to "cooperate" with his efforts to renegotiate the loans. Defendant also asserted that the PSA did not require him to renew the lease with the tenant.
On October 28, 2011, after hearing oral argument from the parties, the motion judge entered an order granting and denying, in part, the parties' motions. We summarize the pertinent parts of the order:
1) requiring defendant to cooperate with the renovation of the marital residence in order to separate the condominium units;
2) requiring the parties to share the renovation costs equally;
3) granting, in part, plaintiff's request to negotiate with the lenders to transfer the condominium units in lieu of foreclosure. Defendant, however, was permitted to "negotiate together" with plaintiff "to effectuate the deed in lieu of foreclosure" conditioned on his cooperation in finishing the renovations;
4) requiring defendant to pay plaintiff $900 per month in rent commencing as of September 2011;
5) requiring defendant to pay half the outstanding PSE&G bill;
6) requiring defendant to pay $4436 in counsel fees incurred by plaintiff on the motion; and
7) denying defendant's cross-motion for fees and for an order compelling plaintiff to cooperate with his efforts to "assume or renegotiate the outstanding mortgages and liens[.]"
The motion judge supported her order in a twelve-page written opinion. The judge stated, in pertinent part:
Defendant wishes to retain his right to buy out the house in an amount sufficient to cover the mortgages and liens, plus pay another $75, 000 to the plaintiff per the terms of their PSA. Additionally, Section 7.11 of the PSA states defendant must provide a non-refundable deposit of $40, 000 to plaintiff if he wishes to exercise his buy-out option. . . . Defendant's attorney admitted defendant does not have the required $40, 000. [D]efendant cannot have it both ways.
The [c]ourt grants plaintiff's request to attempt a deed transfer of the properties and denies defendant's request to assume or renegotiate the mortgages on the properties. The properties are encumbered by $2.75 million in debt. The [c]ourt seriously doubts the defendant could ever assume this substantial burden, inasmuch as he admittedly can't even pay the non-refundable $40, 000 due to the plaintiff if he were to attempt such a feat. He has also certified he could not afford his attorney for this motion and was forced to borrow money to pay the retainer.
Counsel for the defendant argues he should be given this opportunity since it was provided for in the PSA. The court would agree if the defendant was able to meet the requirements of that provision, to wit, pay a nonrefundable $40, 000 to the plaintiff . . . . Defendant is unable to comply with the requirements concerning the nonrefundable payment. As such under the terms of the parties PSA he should not be entitled to attempt to refinance these properties in his name alone.
The current tenant's lease shall remain in effect, with rental payments made directly to the [plaintiff] until the house is sold, lost or until the mortgages are assumed by the [defendant], whichever occurs first.
Plaintiff argues this section permits her to collect rent in exchange for defendant having exclusive possession of the home. As defendant is unwilling to permit the tenant to move back in, plaintiff submits defendant is obligated to pay her $900 per month of rent that she [would have] receive[d] from a tenant. Defendant argues this provision was crafted to accommodate a temporary arrangement . . . .
The [c]ourt grants plaintiff's request for defendant to pay $900 per month in rent. The lease remains in effect until the home is "sold, lost or until the mortgages are assumed by Defendant." None of these triggers has occurred. Since the tenant expressed a desire to return to the property and defendant refused coupled with the fact that the defendant is essentially living at the property mortgage free, coupled with his ability to pay this amount, the court will not disturb the intent of the PSA.
The court has ordered counsel fees in this matter for a number of reasons. First, and foremost it would appear that the defendant's requests compelling plaintiff to cooperate with his efforts to renegotiate the outstanding mortgages and liens against the former marital residence was clearly unreasonable and is simply unattainable. In addition the defendant failed to advise this court that he could not advance the nonrefundable $40, 000 payment to the plaintiff which was a condition on the provision allowing the renegotiation of the mortgages and liens. Defendant admitted he doesn't have the $40, 000 and therefore this request had no merit . . . .
. . . . The plaintiff has been successful with the majority of her application versus the defendant's lack of success on his cross-motion.
This appeal followed.
We begin our analysis with a review of the law applicable to this case. "An agreement to settle a lawsuit is a contract which, like all contracts, may be freely entered into and which a court, absent a demonstration of 'fraud or other compelling circumstances, ' should honor and enforce as it does other contracts." Pascarella v. Bruck, 190 N.J.Super. 118, 124-25 (App. Div.) (quoting Honeywell v. Bubb, 130 N.J.Super. 130, 136 (App. Div. 1974)), certif. denied, 94 N.J. 600 (1983). "Settlement agreements in matrimonial matters, being 'essentially consensual and voluntary in character, . . . [are] entitled to considerable weight with respect to their validity and enforceability' in equity, provided they are fair and just." Dolce v. Dolce, 383 N.J.Super. 11, 20 (App. Div. 2006) (quoting Petersen v. Petersen, 85 N.J. 638, 642 (1981)). See also Lepis v. Lepis, 83 N.J. 139, 153 (1980); Berkowitz v. Berkowitz, 55 N.J. 564, 569 (1970); Schlemm v. Schlemm, 31 N.J. 557, 581-82 (1960).
Marital settlement agreements "'are generally favored by the courts as a peaceful means of terminating marital strife and discord so long as they are not against public policy.'" Dolce, supra, 383 N.J.Super. at 20 (quoting Konzelman v. Konzelman, 158 N.J. 185, 194 (1999)). See also Weishaus v. Weishaus, 180 N.J. 131, 143 (2004)). While incorporation of a marital settlement agreement into a divorce decree "does not render it immutable, nor its terms solely governed by contract law, nevertheless, if found to be fair and just, it is specifically enforceable in equity." Eaton v. Grau, 368 N.J.Super. 215, 224 (App. Div. 2004) (citations omitted).
Further, if the meaning of the agreement is in dispute, "[t]he court's role is to consider what is written in the context of the circumstances at the time of the drafting and to apply a rational meaning in keeping with the 'expressed general purpose.'" Pacifico v. Pacifico, 190 N.J. 258, 266 (2007) (quoting Atl. N. Airlines v. Schwimmer, 12 N.J. 293, 302 (1953)). Nevertheless, if circumstances have changed in such a way that strict enforcement of the agreement would no longer be equitable, a court remains free to alter prior arrangements. Lepis, supra, 83 N.J. at 146-48.
Finally, Family Part orders are always subject to review and modification based upon changed circumstances, even when modification requires overriding the express terms of the parties' PSA. Id. at 146; Dolce, supra, 383 N.J.Super. at 18; see also N.J.S.A. 2A:34-23. The Family Part judge has sound discretion regarding whether or not to allow modification. Larbig v. Larbig, 384 N.J.Super. 17, 21 (App. Div. 2006).
Guided by these principles, we determine that the motion judge neither abused her discretion nor improperly revised the PSA, as argued by defendant. Here, the record shows that at the time of the PSA the parties believed they would be able to sell the marital residence on the open market. However, they have not been able to do so and the liens on the marital residence now appear to exceed its value.
Moreover, the parties did not contemplate that the premises would be foreclosed upon, and did not consider the problems that would arise in a foreclosure action as a consequence of their improvident renovation of two separate condominium units into a single property without notice to, or the permission of, the lienholders on each unit. As the motion judge recognized, that renovation would likely be viewed by the lienholders as an improper compromise of their security, entitling them to pursue damage claims against the parties.
The lienholders are now threatening foreclosure, but may be willing to accept deeds in lieu of foreclosure and forego pursuing a deficiency judgment. It is obvious that such a result could not be achieved if the condominium units remained combined as a single unit. These changed circumstances amply supported the motion judge's order.
Defendant further argues he was entitled under the PSA to deal directly with the lienholders to negotiate an assumption of the loans. This would have been true had he been able to satisfy the condition set forth in the PSA for the exercise of that right: payment to plaintiff of a non-refundable $40, 000. Because defendant concedes he cannot make that payment, he cannot exercise that option. The motion judge did not err in reaching that conclusion.
Also, ordering the parties to each pay for half the renovations was equitable, because the parties will share any proceeds from and protections that are incorporated in an agreement for a deed in lieu of foreclosure. In addition, both parties concede they were aware that the original renovations were done without permission from the mortgagees. Both parties, therefore, must share the benefits and burdens of corrective action.
Defendant further argues that the judge ignored the terms of the PSA in requiring defendant to pay rent, and that a hearing was required. Defendant argues that it was understood that the verbal agreement with the tenant expired when the tenant moved out in May 2011.
The PSA permitted defendant to occupy the marital residence, and required him to pay for maintenance and operating expenses. In addition, the PSA provided "[t]he current tenant's lease shall remain in effect, with rental payments made directly to [plaintiff] until the house is sold, lost, or until the mortgages are assumed by [defendant], whichever occurs first." None of these subsequent events have occurred. In this circumstance, therefore, it is neither unreasonable nor unfair to construe the PSA to permit the continuation of a tenancy or indeed a new tenancy until one of these events occurs
When the tenant left defendant refused to pay rent or allow the tenant to return Although the PSA did not initially require defendant to pay rent he should not be allowed to benefit from his unreasonable failure to permit the tenant access to the property Accordingly it was within the court's discretion to order defendant to pay the rent that would have been paid by the tenant
Finally defendant challenges that motion judge's grant of counsel fees to plaintiff Defendant's arguments however are without sufficient merit to warrant discussion in a written opinion R 2:11-3(e)(1)(E)