June 19, 2013
BARBARA MATLOFF, Plaintiff-Appellant,
ROGER MATLOFF, Defendant-Respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued June 3, 2013
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-15-03.
Jani Wase Vinick argued the cause for appellant (Haber, Silver & Simpson, attorneys; Karin Duchin Haber, of counsel; Ms. Vinick, on the brief).
Tara Schillari Rich argued the cause for respondent (Shapiro, Croland, Reiser, Apfel & DiIorio, attorneys; Ms. Rich, of counsel and on the brief; Jay Rubenstein, on the brief).
Before Judges Fasciale and Maven.
Plaintiff appeals from orders denying her motion to vacate the parties' Property Settlement Agreement (PSA) or, in the alternative, finding defendant in violation of litigant's rights. We conclude that the PSA is not unconscionable on its face, remand for further proceedings to address plaintiff's contention that defendant concealed his income, thereby depriving her of proper support payments, and reverse without prejudice the award of counsel fees.
Plaintiff and defendant married in 1983 and had two children, born in 1987 and 1988. In April 2003, plaintiff filed her complaint for divorce. The parties retained independent matrimonial counsel, who negotiated the terms of the PSA. During the negotiations, defendant provided plaintiff's attorney with a substantial amount of financial information.
During and since the marriage, defendant worked as a financial advisor for Merrill Lynch (now Bank of America), while plaintiff worked in the home and cared for the children. In 2002 and 2003, defendant earned approximately $700, 000 per year. The PSA stated that based on defendant's Total Cash Earnings (TCE) of $711, 320, plaintiff was to receive alimony of $240, 000 and $28, 000 in child support. The PSA contains a formula to allow for support adjustment calculations depending on changes in defendant's income. Plaintiff maintains that defendant repeatedly concealed information pertaining to his income for several years.
In July 2004, the court conducted an uncontested divorce hearing, at which both parties testified that they were represented by independent counsel, had an opportunity to engage in complete discovery, received independent advice during the negotiations, voluntarily entered into the PSA, and understood its terms. On the same day, the judge found that both parties understood the PSA's terms and entered the JOD, which incorporated the PSA.
According to defendant, he provided to the accountant designated in the PSA all of defendant's required financial information. The accountant prepared the yearly calculations regarding any overpayment or underpayment of support for the prior year and the new support amounts for the current year. In so doing, the accountant provided both parties with his support calculations.
According to plaintiff, she never received the amount of support to which she was entitled pursuant to the PSA. She notes that defendant's total cash earnings increased "substantially" from $711, 320 in 2003 to $961, 937 in 2010. Moreover, plaintiff learned that defendant "may have" earned an additional $1 million in 2008.
Plaintiff concedes that as her "support decreased each year, she admittedly did not seek to challenge the support calculations [pursuant to the PSA] in arbitration." She explains that was the case because she "was not provided with" the financial documentation from defendant or the accountant to "assess the correctness of the calculation[, ] even if she had understood the [purported] complicated [PSA] formula." Plaintiff indicated that she never challenged the decreases because she believed defendant when he told her that his income was declining due to market forces. When plaintiff asked the accountant why her support had been declining, he responded that he was simply following the PSA.
Eventually, plaintiff's support totaled less than $60, 000 per year, and she consulted a new attorney who initiated a malpractice action against her matrimonial attorney and the accountant. Plaintiff states that she has obtained discovery in the malpractice action establishing defendant's increasing income over the years, despite his alleged representations to the contrary. Also, plaintiff argues that defendant increased the pay to his sales associate, who is his new wife. Plaintiff contends that the accountant "arbitrarily" decreased the amount of child support she would receive.
In January 2012, plaintiff filed a motion requesting that the court vacate the PSA. Plaintiff contended that the PSA was excessively complicated and invalid, and she sought to reopen discovery and conduct a plenary hearing. Alternatively, she asked the judge to find defendant in violation of litigant's rights for failing to comply with the PSA. In support of her motion, plaintiff submitted her certification dated January 6, 2012. In February 2012, defendant cross-moved for attorneys' fees pursuant to the PSA. In support of his cross-motion, defendant filed his certification dated February 10, 2012, and a certification of the accountant dated February 13, 2012. On February 22, 2012, plaintiff filed her reply certification.
On March 12, 2012, the judge conducted oral argument, and on March 16, 2012, issued an oral decision. Regarding the PSA, the judge found that it
is comprehensive and expresses in excruciating detail the calculation of support . . . . There are step-down provisions. There are definitions for terms of total cash earnings, which does not include deferred compensation, definitions of net earned income, adjustments to alimony and child support on a yearly basis . . ., net earned income, alimony[, ] and child support, which shall be adjusted yearly under a formula, which was proposed by both plaintiff and defendant's attorneys and which went through extensive settlement negotiations. The plaintiff agreed to this formula. She was questioned at length at the time of her divorce hearing. She indicated that she was satisfied with the services of counsel, she understood the agreement. For her to claim now otherwise eight years later is not credible.
As to plaintiff's contention of unconscionability, the judge found that the PSA
was negotiated between excellent and competent, experienced matrimonial attorneys, it provided for checks and balances with regard to the computation. The [PSA] gave substantial equitable distribution benefits to the plaintiff, who now seeks to take the fruits of the equitable distribution for herself and seek to void the rest of the [PSA]. Plaintiff has accepted the benefit of the agreement. She has received approximately $2 million in equitable distribution assets. She should be estopped from challenging same now.
In addition . . ., the [c]ourt does not find that the results of the [PSA] have been unconscionable to the plaintiff. The calculations were provided, the procedures were provided as far as calculations, what was included in calculations, and an arbitration provision with respect to any matters pertaining to the calculations. There was no deceit. There was no misleading of the plaintiff. Thus, plaintiff's application to vacate the [PSA] as to fraud [or] unconscionability is denied.
Then, the judge denied plaintiff's motion in its entirety and, on April 27, 2012, awarded defendant $20, 000 in attorneys' fees pursuant to the PSA. This appeal followed.
On appeal, plaintiff argues that the judge erred by (1) applying the doctrine of laches against plaintiff; (2) concluding that plaintiff's allegations of unconscionability were time-barred because they were not raised within a reasonable time; (3) concluding that there was no deceit or misleading of plaintiff; (4) concluding that the PSA was not unconscionable; (5) barring plaintiff's claim for enforcement of the PSA and discovery; (6) ordering plaintiff to pay defendant's attorneys' fees; (7) concluding that he did not have to consider the factors in Rules 5:3-5 and 4:42-9; and (8) consideration of such factors would require denial of fees. We focus on whether the PSA, on its face, is unconscionable, and the parties' dispute that defendant concealed his correct income amounts.
"Generally, the special jurisdiction and expertise of the family court requires that we defer to factual determinations if they are supported by adequate, substantial, and credible evidence in the record." Milne v. Goldenberg, 428 N.J.Super. 184, 197 (App. Div. 2012). This court owes "particular deference" to the family courts because of their "special jurisdiction and expertise in family matters." Ibid. (quoting Cesare v. Cesare, 154 N.J. 394, 413 (1998)). Such deference will be "disturbed only upon a showing that the findings are 'manifestly unsupported by or inconsistent with the competent, relevant[, ] and reasonably credible evidence' to ensure there is no denial of justice." Ibid. (quoting Platt v. Platt, 384 N.J.Super. 418, 425 (App. Div. 2006)).
"The Family Court possesses broad equitable powers to accomplish substantial justice." Finger v. Zenn, 335 N.J.Super. 438, 446 (App. Div. 2000), certif. denied, 167 N.J. 633 (2001). This court "accord[s] great deference to discretionary decisions of Family Part judges." Milne, supra, 428 N.J.Super. at 197. Such discretion "takes into account the law and the particular circumstances of the case before the court." Ibid. (internal quotation marks omitted). This court, however, will not defer to a family court's decision where the court abused its discretion. See, e.g., State ex rel. J.A., 195 N.J. 324, 340 (2008). "An abuse of discretion 'arises when a decision is "made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis."'" Milne, supra, 428 N.J.Super. at 197 (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)). The family judge's legal decisions are subject to this court's plenary review. Crespo v. Crespo, 395 N.J.Super. 190, 194 (App. Div. 2007).
Family "judges are under a duty to make findings of fact and to state reasons in support of their conclusions." Heinl v. Heinl, 287 N.J.Super. 337, 347 (App. Div. 1996); see R. 1:7-4(a). "'Meaningful appellate review is inhibited unless the judge sets forth the reasons for his or her opinion.'" Strahan v. Strahan, 402 N.J.Super. 298, 310 (App. Div. 2008) (quoting Salch v. Salch, 240 N.J.Super. 441, 443 (App. Div. 1990)). "Naked conclusions do not satisfy the purposes of [Rule] 1:7-4. Rather, the trial court must state clearly its factual findings and correlate them with the relevant legal conclusions." Curtis v. Finneran, 83 N.J. 563, 570 (l980).
We begin by addressing plaintiff's contention that the PSA is unconscionable on its face. In determining whether a contract is unconscionable, courts have focused on two factors: "'(1) unfairness in the formation of the contract; and (2) excessively disproportionate terms.'" Delta Funding Corp. v. Harris, 189 N.J. 28, 55 (2006) (quoting Sitogum Holdings, Inc. v. Ropes, 352 N.J.Super. 555, 564 (Ch. Div. 2002)). "The first factor -- procedural unconscionability -- can include a variety of inadequacies, such as age, literacy, lack of sophistication, hidden or unduly complex contract terms, bargaining tactics, and the particular setting existing during the contract formation process." Ibid. (quoting Ropes, supra, 352 N.J.Super. at 564-65). "The second factor -- substantive unconscionability --simply suggests the exchange of obligations so one-sided as to shock the court's conscience." Ibid. (emphasis added) (quoting Ropes, supra, 352 N.J.Super. at 564-65).
"[A]pplication of the doctrine has always been viewed as controversial, " and "its use has been infrequent." Estate of Cohen ex rel. Perelman v. Booth Computers, 421 N.J.Super. 134, 157 (App. Div.) (internal quotation marks omitted), certif. denied, 208 N.J. 370 (2011); see Guglielmo v. Guglielmo, 253 N.J.Super. 531, 542 (App. Div. 1992) (ordering modification of marital agreement where the attorney who mediated the parties' settlement was related to the husband, the parties did not have independent counsel, and the wife had limited knowledge of what the family's finances were); Addesa v. Addesa, 392 N.J.Super. 58, 69, 72-73 (App. Div. 2007) (finding settlement agreement unconscionable "based on the totality of the circumstances" where wife was not represented by counsel, at husband's urging, wife had no experience in financial matters, and the terms of the agreement clearly did not reflect the stated intent of a fifty-fifty split of the marital estate).
To prevail, a "[p]laintiff must demonstrate unconscionability by showing some overreaching or imposition resulting from a bargaining disparity between the parties, or such patent unfairness in the contract that no reasonable person not acting under compulsion or out of necessity would accept its terms." Howard v. Diolosa, 241 N.J.Super. 222, 230 (App. Div.) (emphasis added), certif. denied, 122 N.J. 414 (1990).
In addressing plaintiff's unconscionability argument, the judge stated that he did
not find that the results of the [PSA] have been unconscionable to the plaintiff. The calculations were provided, the procedures were provided as far as calculations, what was included in calculations, and an arbitration provision with respect to any matters pertaining to the calculations. There was no deceit. There was no misleading of the plaintiff. Thus, plaintiff's application to vacate the [PSA] as to fraud [or] unconscionability is denied.
A fair reading of the PSA, on its face, establishes that the terms are not "so one-sided as to shock the court's conscience." Harris, 189 N.J. at 55. Moreover, plaintiff testified during the uncontested hearing that the terms were fair, and that she understood the terms. We therefore conclude that plaintiff has failed to establish that there exists "such patent unfairness in the contract that no reasonable person not acting under compulsion or out of necessity would accept its terms." Howard, supra, 241 N.J.Super. at 230.
Plaintiff argues that she is entitled to a plenary hearing for the judge to resolve her allegations that defendant attempted to conceal his earnings, thereby decreasing his support payments in violation of the PSA.
Plenary hearings are required when there are "contested issues of material fact on the basis of conflicting affidavits." Conforti v. Guliadis, 128 N.J. 318, 322-23 (1992); see also Tretola v. Tretola, 389 N.J.Super. 15, 20 (App. Div. 2006) (reversing motion on emancipation and requiring a plenary hearing because the court failed to recognize material facts in dispute and evidence beyond the motion papers necessary for resolution of the matter). We conclude that there are sufficiently competing certifications, which require the judge to conduct a plenary hearing and make the requisite findings of fact and conclusions of law. See R. 1:7-4; Guliadis, supra, 128 N.J. at 322.
Here, plaintiff contends that she did not become aware of defendant's fraudulent misrepresentations concerning his earnings until some point after her malpractice action was filed in July 2010 The judge stated that plaintiff "should have known" or been "suspicious" about defendant's earnings Defendant's alleged fraud if believed was concealed for several years thereby potentially impacting on his support obligations
On remand we direct the judge to permit limited discovery regarding the alleged fraud and corresponding decrease in defendant's support payments appoint an accountant to assist the court in determining the amount of defendant's income and support obligations and conduct a plenary hearing
Paragraph 351 of the PSA provides reasonable attorneys' fees for the winning party where one party seeks to but fails to set aside the PSA Given our ruling we direct the judge to reexamine whether to award counsel fees and if awarded to provide sufficient findings of the basis for such fees pursuant to Rule 1:7-4(a) after having conducted the plenary hearing We need not address plaintiff's remaining arguments
Affirmed in part reversed in part and remanded in part We do not retain jurisdiction