August 23, 2013
TAMER SEVINTUNA, Plaintiff-Respondent/ Cross-Appellant,
PINAR TOSUN, Defendant-Appellant/ Cross-Respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 12, 2013
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-1804-07.
Nicholas R. Doria argued for the appellant/cross-respondent.
Robert T. Corcoran argued the cause for respondent/cross-appellant (Helen K. Glass, attorney; Mr. Corcoran, Karen M. Venice and Kevin W. Ku, on the briefs).
Before Judges Harris and Hayden.
Defendant Pinar Tosun appeals from a January 27, 2012 Family Part order denying her request for additional discovery into plaintiff Tamer Sevintuna's assets, and plaintiff cross- appeals from the judge's denial of his request for counsel fees. We reverse and remand for further proceedings in accord with this opinion.
The parties were married in 1994 and have three children. On February 13, 2007, plaintiff filed for divorce, and the parties conducted extensive discovery over the next three years until the trial began.
Sometime in 2005, plaintiff's business, Future Technology Associates (FTA), was awarded its first contract with the New York City Department of Education (DOE) to service computer-based financial and accounting systems. In 2009, FTA's contract was renewed. Shortly thereafter, the renewed contract came under the scrutiny of a newspaper, which soon published news articles questioning the size of the contract and suggesting FTA committed numerous fraudulent contract violations. Due to these allegations, the New York City School District Special Commissioner of Investigation (the SCI) began to investigate FTA's performance of the contract.
Meanwhile, the divorce trial started in September 2009, and several days of hearings occurred. The trial then was adjourned repeatedly for settlement conferences. Eventually, the parties resolved all issues through settlement and codified their agreement in the Marital Settlement Agreement (MSA) dated June 7, 2010. The trial judge entered a dual final judgment of divorce on the same day, which incorporated the MSA.
Paragraph 15 of the MSA stated as follows:
The parties have engaged in discovery, including business valuations and cash flow analyses, exchanges of documents and interrogatory responses and third party discovery by subpoenas. Both parties further warrant and represent they have disclosed to each other, directly, through counsel or forensic accountants, all material information that would potentially affect this Agreement. Each party is relying to their detriment upon the accuracy of these representations in accepting the terms and provisions of this Agreement. In the event it is later determined by a court that either party has breached the representations upon which each relied, all legal and equitable remedies available to the other party under law may be utilized, including but not limited to the relief that would otherwise be available under New Jersey Rule of Court 4:50-1(f) or any comparable rule of court or case law in a court of competent jurisdiction.
Paragraph 18 stated that the contract between FTA and the DOE, which totaled $42 million from August 2009 to July 2012, was the only contract from which plaintiff or FTA had any right or ability to derive income. Additionally, it provided "that no third party (including any individual, partnership or corporation) with the exception of [FTA] is holding any property or assets on his behalf in any locale or form." In Paragraph 35, both parties acknowledged that the SCI was investigating plaintiff and plaintiff's business.
The DOE terminated the FTA contract effective May 31, 2011. On September 28, 2011, the SCI issued a final report of the investigation finding that FTA had committed fraud beginning in 2006. The contract required all work to be done at a DOE site in Brooklyn. According to the report, FTA, in direct violation of the contract, subcontracted the work to at least sixteen other companies, including companies in Turkey and India. Of importance here, the SCI found that plaintiff and his business partner set up a company in Turkey named Krono, in which plaintiff had a 60% ownership interest. The report alleged that, using Turkish consultants paid through this company, plaintiff and his partner fraudulently billed at least $6.5 million to the DOE over a four-year period.
The report further alleged that throughout the investigation plaintiff and his partner concealed ownership of Krono and several other companies related to FTA. According to the report, one such company, Mera Consulting, L.L.C. (Mera), was established at plaintiff's instruction to pay consultants' salaries and it invoiced about $14.1 million from FTA over the course of 23 months. While plaintiff had no ownership interest in Mera, he had signature authority on Mera's bank accounts. Although the SCI sent its final report to the District Attorney's and U.S. Attorney's Offices, to date no criminal charges have been filed against plaintiff as a result of the SCI investigation.
Two months later, on November 28, 2011, defendant filed a post-judgment order to show cause application, seeking, among other relief, additional discovery into plaintiff's assets and reopening of equitable distribution to include assets "subject to equitable distribution in the parties' divorce and which were not disclosed by plaintiff." The trial judge denied defendant's request for emergent relief and converted the application into a motion. Plaintiff filed a cross-motion for dismissal of defendant's motion and an award of attorney's fees.
After hearing oral argument, the judge issued an order denying defendant's requests for additional discovery into plaintiff's assets and reopening equitable distribution as to previously undisclosed assets. The judge stated the following:
I agree with plaintiff in this case. I don't believe that there has been new evidence under [Rule] 4:50, or the withholding of evidence that occurred during the trial, which would warrant this Court to reopen discovery, and in effect conduct a new trial of this matter.
I find that the plaintiff did in fact disclose the information contained in the certification regarding the other companies. I find that the basis for the defendant's application, again, does not rise to the level of new information, or any new discovery, or new information that would compel this Court to reopen the equitable distribution and permit her to conduct additional discovery, including depositions and third-party discovery.
The judge also denied both parties' requests for counsel fees. Both parties appealed.
On appeal, defendant raises the following issues for our consideration:
POINT I: STANDARD OF REVIEW
POINT II: THE TRIAL COURT ERRED BY FAILING TO MAKE ADEQUATE FINDINGS OF FACT, AS REQUIRED BY COURT RULE 1:7-4, TO SUPPORT ITS ORDER DENYING DEFENDANT'S MOTION FOR A PLENARY HEARING TO CONDUCT ADDITIONAL DISCOVERY.
POINT III: AN APPELLATE COURT IS NOT BOUND BY A TRIAL COURT'S FACTUAL FINDINGS WHEN THEY ARE UNSUPPORTED BY ADEQUATE, SUBSTANTIAL AND CREDIBLE EVIDENCE.
POINT IV: CONTESTED GENUINE ISSUES OF MATERIAL FACTS CANNOT BE DECIDED ON THE BASIS OF CONFLICTING CERTIFICATIONS ALONE AND REQUIRE A PLENARY HEARING.
POINT V: DEFENDANT'S MOTION, ALTHOUGH PERCEIVED BY THE TRIAL COURT AS ONE ONLY MADE UNDER R.4:50-1(b) (NEW EVIDENCE), IT CAN AND SHOULD BE TREATED AS SEEKING ALL THE RELIEF WHICH R.4:50-1 CAN PROVIDE, INCLUDING SUBSECTION (f).
Plaintiff raises the following argument on cross appeal:
POINT [I]: THE TRIAL COURT ABUSED ITS DISCRETION WHEN IT FAILED TO MAKE ADEQUATE FINDINGS OF FACT, AS REQUIRED BY COURT RULE 1:7-4 AND COURT RULE 5:3-5(c) IN SUPPORT OF ITS DENIAL OF THE PLAINTIFF'S REQUEST FOR AN AWARD OF COUNSEL FEES AND COSTS.
This appeal does not require us to resolve the merits of defendant's motion to reopen the equitable distribution portion of the MSA. Rather, we need only consider the threshold question of whether the record sufficiently raises genuine issues that warrant further discovery and, depending on what the discovery reveals, a potential plenary hearing on defendant's motion. We are persuaded that given the SCI's allegations that since 2006 plaintiff committed massive fraud involving millions of dollars, a deeper examination of those transactions is required before the motion to reopen equitable distribution is decided on the merits.
Unlike judgments for alimony, support, or custody, which are subject to the continuing jurisdiction of the Family Part and determined under a changed circumstances standard, relief from equitable distribution provisions in a judgment of divorce are subject to Rule 4:50-1. Eaton v. Grau, 368 N.J.Super. 215, 222 (App. Div. 2004). Rule 4:50-1 provides:
On motion, with briefs, and upon such terms as are just, the court may relieve a party or the party's legal representative from a final judgment or order for the following reasons . . . (b) newly discovered evidence which would probably alter the judgment or order and which by due diligence could not have been discovered in time to move for a new trial under R. 4:49; (c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party . . . (f) any other reason justifying relief from the operation of the judgment or order.
The Rule "'requires proof of exceptional and compelling circumstances' as it is '[d]esigned to balance the interests of finality of judgments and judicial efficiency against the interest of equity and fairness.'"
Eaton , supra, 368 N.J.Super. at 222 (citation omitted).
We recognize that motions to set aside final judgments under the Rule are only to be granted "sparingly." Pressler & Verniero, Current N.J. Court Rules, comment 1 on R. 4:50-1 (2013). Nevertheless, the Rule does allow for relief where the facts and equities compel it, particularly in the context of equitable distribution of marital assets. "The equitable authority of courts to modify property settlement agreements executed in connection with divorce proceedings is well established. The agreement must reflect the strong public and statutory purpose of ensuring fairness and equity in the dissolution of marriages." Miller v. Miller, 160 N.J. 408, 418 (1999) (internal citations omitted).
Here, the judge found that there was no showing of newly discovered evidence. Although a party seeking relief under subsection (b) must do so within one year after the judgment was entered, a motion filed pursuant to subsection (f) "has no such time limitation except that it must be made 'within a reasonable time.'" Palko v. Palko, 73 N.J. 395, 397-98 (1977) (quoting R. 4:50-2). Further, "a motion under (f) is addressed to the discretion of the trial court. That discretion is a broad one to be exercised according to equitable principles, and the decision reached by the trial court will be accepted by an appellate tribunal in the absence of an abuse of its discretion." Id . at 398 (quoting Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966)).
Our review of the record satisfies us that defendant has made a sufficient showing under both subsections (b) and (f) to warrant discovery. Defendant has offered "exceptional and compelling circumstances" in the form of the newly-discovered information alleged in the SCI report. Eaton, supra, 368 N.J.Super. at 222. While we decline to speculate as to the veracity of the allegations in the report, the information contained within it deserves, at least, some further scrutiny. The question is whether heretofore undisclosed financial transactions or assets, if known at the time of the MSA, would have significantly altered the plaintiff's financial position for the purpose of determining equitable distribution.
Plaintiff's argument that the parties agreed in the MSA to conduct no further discovery is unpersuasive. The parties eschewed further discovery and entered into the MSA relying on the accuracy of the information supplied by the other party in discovery. Now, information developed by the SCI potentially undermines the information's veracity. The judge's failure to allow further discovery based on this new information was a mistaken exercise of discretion.
As a result, the parties should have been permitted to engage in discovery under limitations imposed by the Family Part judge. We decline to order a hearing at this time. The SCI report merely raised allegations, and did not itself establish facts sufficient to alter the parties' settlement agreement. After additional discovery has been conducted, if the newly garnered material warrants it, defendant may move for a plenary hearing. Accordingly, we reverse and remand for the purposes of further discovery. The order denying counsel fees is also reversed. Plaintiff can, if he wishes, seek counsel fees in the trial court, following the remand proceedings.
Reversed and remanded for further proceedings. We do not retain jurisdiction.