December 20, 2013
GLORIA GAROFALO f/k/a GLORIA KUTCH, Plaintiff-Respondent,
ROBERT J. KUTCH, Defendant-Appellant.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 3, 2013
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Mercer County, Docket No. FM-11-579-08.
Michael H. Nieschmidt argued the cause for appellant.
Seth A. Kurs argued the cause for respondent (Massar & Kurs, P.A., attorneys; Mr. Kurs, of counsel and on the brief; Christopher G. Hewitt, on the brief).
Before Judges Alvarez and Ostrer.
In this post-judgment matrimonial matter, defendant Robert J. Kutch appeals from the Family Part's January 4, 2013, order denying, without an evidentiary hearing, his motion for various forms of post-judgment relief. The principal issue raised is the interpretation of the provision of the parties' Marital Separation Settlement Agreement (MSSA) that required defendant to bear various carrying costs of the marital home exceeding $2000 a month, for a fixed time period, while it was occupied by plaintiff and her children of a prior relationship. Defendant argued the provision created an alimony obligation. As a result, defendant argues the obligation terminated upon plaintiff's remarriage, see N.J.S.A. 2A:34-25, and plaintiff should be compelled to reimburse payments received from defendant after she remarried and began living with her new husband in the former marital home. The trial court rejected defendant's argument. Following our review of the record and the arguments on appeal, we reverse.
The parties were married on February 13, 1999. It was her second marriage and his first. They separated in December 2006. Defendant voluntarily vacated the family home in West Windsor, relocating to an apartment in Long Branch.
There were no children born of the marriage. Plaintiff had a son and daughter from her previous marriage. The daughter was still attending the local high school after the separation. Plaintiff's son was already attending college.
On March 27, 2007, the parties executed the MSSA. Neither party was represented by counsel. Plaintiff, a high school graduate with no legal training, drafted the agreement, utilizing various sources. Although the parties agreed there were preliminary drafts, they were not produced, nor did either party identify points of negotiation.
Under the MSSA, the parties were to divide the net equity in the marital home, after it was sold. But plaintiff was permitted to remain in the home, and to enjoy exclusive possession, until at least October 2010. At that time, the parties agreed the house would be placed on the market. The parties selected that date to enable plaintiff's daughter to graduate from the local high school and begin college before the family home was sold.
Defendant had purchased the marital home in the spring of 1998 for $242, 000, while the parties maintained a pre-marital romantic relationship. Defendant utilized his personal assets for the downpayment of at least $100, 000. Plaintiff alleged that during the marriage, defendant promised to place her on the deed. After the parties' separation, plaintiff renewed the request and defendant agreed; he stated he believed it would show good faith and enhance prospects for a hoped-for reconciliation. The March 2007 MSSA states that the parties jointly owned the marital home. However, defendant did not actually transfer the deed until April 2007. Shortly thereafter, defendant asserted, plaintiff informed him there would be no reconciliation.
The MSSA allocated the various house-related expenses between the parties. Plaintiff was responsible for utilities, including gas, water, electric, sewer, communications, and minor repairs under $500. Repairs over $500 were to be divided equally.
Defendant was responsible for the following monthly expenses: mortgage payments, $1098.98; real property taxes, $813.34; home owner's insurance, $64; association fees, $165; and umbrella insurance, $28 (roof expenses). Defendant's total obligation was initially $2169.18 a month. Defendant's obligation was set forth in three provisions, one entitled "REAL ESTATE" and subtitled "EXPENSES, MORTGAGE AND MAINTENANCE"; a second section entitled "DEBTS"; and a third entitled "SPOUSAL SUPPORT." The latter two itemized the amounts of the various components of defendant's obligation. We note that the agreement included a general provision that subheadings "exist for convenience and reference only, " and "should not be construed as part of the text . . . nor as having any meaning or creating any obligation or duty by or to any party hereto."
The "SPOUSAL SUPPORT" provision defined the amount and duration of defendant's ongoing obligation during plaintiff's occupancy:
8. SPOUSAL SUPPORT
A. Husband shall pay the Mortgage – 1098.82, municipal taxes $813.34, and Association fees $165.00, Homeowners Insurance $64.00, Umbrella Policy $28.00 and ADT Alarm Company $34.00. The total amount monthly is $2203.16. This amount will be paid by Husband for the next forty-four Months (October 2010) or until the family residence is sold. The family residence will be put for sale in the lateral [sic] part of 2010.
The same section included waivers of alimony. However, the waivers were not entirely mutual. Defendant waived rights to alimony unqualifiedly: "Husband hereby waives all past, present and future rights he might have [sic] otherwise have to require the Wife to provide alimony for support and maintenance." Plaintiff's waiver gave up any claim to support after the house was sold:
At the time of sale of the family residence, and when the settlement agreement is met, (which is that Husband and Wife will subtract balance of mortgage and other household debt from sale price of house and split the remaining balance between both Husband and Wife equally[)], Wife hereby waives all rights that she might otherwise have to require Husband to provide alimony for her support and maintenance after the family residence is sold in 2010.
On the other hand, the provision included an additional sentence mutually waiving any present, as well as future, claim of support. "Similarly it is the intention of this agreement that neither party shall now or hereafter seek alimony or support from the other and that this mutual waiver of alimony is final." (emphasis added).
In a separate section entitled "DIVORCE" and subtitled "FINAL AGREEMENT; NO MERGER, " the parties apparently agreed that if circumstances changed before entry of divorce, they could seek alimony.
Nothing in this Agreement shall be construes [sic] as a relinquishment by either party of the right to prosecute or defend and [sic] suit for divorce in any court of proper jurisdiction. Other than upon a showing of substantially changed circumstances, neither party to any such action shall seek alimony or support contrary to the provisions of this Agreement.
The clause, "alimony or support contrary to the provisions of this Agreement, " reflects that the agreement limited the award of alimony, but does not clearly provide that the MSSA completely barred it.
The same section also includes a paragraph that preserves the parties' agreement, whether or not they remarry. The paragraph states:
Should either of the parties hereto obtain a decree, judgement or order of separation or divorce in any other state, county or jurisdiction, each of the parties hereto hereby consents and agrees that this Agreement and all of its covenants shall not be affected in any way by such separation or divorce, and that nothing in such decree, judgement or order or further modification or revision thereof shall alter, amend or vary any term of this Agreement, whether or not either or both parties hereto should remarry, it being understood by and between the parties that this Agreement shall survive and shall not be merged or altered in any decree, judgement or order of separation or divorce.
When the parties entered the agreement, plaintiff earned between $20, 000 and $23, 000 a year as a school crossing guard. She admitted she would have been unable to remain in the marital home, and maintain the marital standard of living, without defendant's contribution to the roof expenses. Defendant was a licensed pharmacist who had worked at various supermarket pharmacies. He earned about $95, 000 a year.
The MSSA required defendant to maintain a pre-existing $350, 000 life insurance policy, with plaintiff as the named beneficiary, until the house was sold. Plaintiff explained this was intended to secure defendant's obligation (although it provided more security than necessary). The MSSA stated that plaintiff was responsible for paying the life insurance premium, although defendant asserted that he paid the premium some time after he moved out of the house.
In addition to dividing the equity of the home — without crediting defendant for his pre-marital contribution — plaintiff was to receive all the home furnishings. The MSSA provided that the parties would retain their respective retirement accounts. The record does not disclose the value of defendant's retirement accounts, or the value of the coverture portion. Plaintiff possessed a retirement account that defendant estimated ranged between $3000 and $5000. The coverture portion was not disclosed. Each party was to become responsible for their leases on their respective Nissan automobiles.
Plaintiff asserts that the MSSA obliged defendant to pay the identified roof expenses without regard to her cohabitation or remarriage. Within the agreement, she points to a general provision providing that the parties agreed they would be "able to engage in relationships, cohabitation or marriage." She also asserted that she included defendant's payment obligation within a section entitled "SPOUSAL SUPPORT" only because a person in the court clerk's office told her to do so. She noted that the obligation was also set forth within provisions pertaining to the parties' obligations to defray marital debts.
Plaintiff also alleged that in the negotiations, defendant insisted that he did not wish to part with any portion of his retirement assets, and did not want to pay alimony. Plaintiff asserted she obtained defendant's obligation in return for her waiver of any claim to the coverture portion of his retirement savings. Defendant conceded that was a tradeoff in the agreement.
Defendant also conceded that he did not want to force plaintiff's daughter to relocate in the final years of high school, stating he loved plaintiff's children. When asked, "Has [plaintiff] ever sought alimony from you?" defendant answered, "No." He also asserted that he did not want a divorce and hoped for reconciliation. He asserted that plaintiff determined the terms of the MSSA, drafted it, and he did not dispute its terms.
Plaintiff filed her pro se divorce complaint in December 2007. However, two months before she did so, in October 2007, her fiancé moved into the West Windsor home. Defendant asserted he was unaware of the new resident. Plaintiff asserted she did not make any effort to hide her fiancé's residence, but could point to no evidence that she expressly notified defendant. Defendant did not file an answer to the divorce complaint, and consented to a prompt default hearing, which occurred April 17, 2008. Defendant did not appear.
In response to the court's inquiry at the default hearing, plaintiff asserted that she could maintain the marital standard of living under the MSSA. She also referred to defendant's financial obligation in response to an inquiry about alimony. The judge asked, "And does the agreement provide for alimony?" Plaintiff responded, "It's — we have just an agreement for — until the house sells in 2010, and he just pays a certain amount and that's considered — you know." The court then advised plaintiff she would be barred from returning to court to request alimony.
After plaintiff established the cause of action — irreconcilable differences — the court granted a final judgment of divorce. Although the judge stated the final judgment would incorporate the MSSA, the court omitted reference to the agreement in the written judgment. The court noted in its findings that plaintiff stated she could maintain the marital standard of living. The judge did not make findings characterizing the nature of defendant's obligation to pay roof expenses, nor did he address the waiver of alimony.
Plaintiff and her fiancé continued to reside in the parties' former marital home, while defendant paid the roof expenses. On February 6, 2009, plaintiff married her fiancé. Later that year, his teenage son from his first marriage moved in.
Plaintiff did not expressly notify defendant of her impending marriage, nor did she notify him afterwards. However, three days before the marriage, she sent defendant an email characterizing his payment obligations as something other than alimony, and misstating that the trial court affirmatively found the agreement omitted any award of alimony.
Following up with the message I left for you.
Just making sure you understand that I took half the deduction for the mortgage interest and property tax. I filed single head of household. The money you pay for [the marital home] is not an alimony payment.
Based on our final judgment of divorce there is no alimony paid to me. It was waived and all that you were responsible for was a portion of the house. The judge
specifically stated on record that both you and I refused alimony therefore you cannot claim anything that you pay as alimony and I don't claim it as income. Last year we filed jointly so there wasn't an issue. I just wanted to make sure [the accountant] didn't confuse the bills you pay for [the marital home] as an alimony payment.
Also, I am not sure if the stimulus application is mailed to your house and also the homestead rebate application. As like before we will split the [sic]. I will let you know if I get them here and please do the same,
Please let me know that you received this email and understand the contents. We note as well that the MSSA was silent on the allocation of the mortgage interest and property tax deductions, although plaintiff claimed half of them.
Just over a month later, defendant responded, "Yes Gloria, that is understood[.] Thank you very much[.]"
Defendant admitted that he did not deduct as alimony the payments he made to support the house during plaintiff's exclusive residence there. However, he asserted that his accountant told him that he should do so, but he ignored that advice.
Although plaintiff did not expressly notify defendant that she had remarried, she asserted that she indirectly placed him on notice of her relationship by assuming her new husband's surname, and using it on documents that she claimed she shared with defendant. The name Gloria Garofalo appeared on the homeowner's insurance policy renewal certificate that the insurer prepared on March 5, 2009. However, the certificate was addressed to the former marital home. Plaintiff did not certify that she mailed the renewal to defendant, nor whether the insurance was billed separately from the mortgage payment.
Plaintiff also claims notice by a January 27, 2010, garage door repair estimate addressed to plaintiff, by her new name, and her husband. Defendant promptly paid for half the cost, writing a check to Gloria Garofalo. By that time, defendant had relocated to North Carolina. In May 2010, plaintiff sent defendant a check, drawn on a joint account in the name of Gloria Garofalo and Robert Garofalo, and listing the former marital address, which defendant deposited.
Defendant asserted that he did not focus on plaintiff's surname when he wrote those checks and remained unaware of her remarriage.
In June 2010, as the deadline for selling the house approached, plaintiff obtained a real estate appraisal. It stated the property's value at $430, 000. According to plaintiff, the mortgage balance was then $129, 000, leaving at least $300, 000 of net equity at that time. Yet, plaintiff wrote to defendant in North Carolina, offering to buy defendant's fifty-percent interest in the net equity of the home for $75, 000. Plaintiff did not disclose the $430, 000 appraisal, but instead stated she spoke to a good friend who is a realtor who had "given [her] comps" for the neighborhood. In her email she asserted the house was run-down, and needed numerous repairs. She later explained that she offered $75, 000 only as an initial bargaining position, anticipating that defendant would negotiate in response.
Defendant retained counsel and obtained an appraisal of his own, unaware plaintiff possessed one. His appraiser opined the house was worth $450, 000. Defendant declined plaintiff's offer but did not counter-offer. Defendant asserted that around this time, he learned plaintiff had remarried. He stated, "It came to my attention through the appraiser and otherwise that [p]laintiff was remarried and residing with her new husband in the property."
On August 2, 2010, defendant filed his post-judgment motion, asserting that the roof expense obligation was properly characterized as alimony; the obligation terminated with plaintiff's remarriage; and it should have been modified upon plaintiff's cohabitation. He sought reimbursement of excess payments made, as well as attorney's fees. Plaintiff cross-moved for an order denying the motion and for attorney's fees.
After oral argument on October 22, 2010, the court held that the MSSA was ambiguous, denied the parties' requests without prejudice, and ordered a ninety-day period of discovery. Although depositions were completed in February 2011, paper discovery continued at least until the summer of 2011.
Plaintiff vacated the home in November 2011, but insisted that she still maintained exclusive possession, and defendant was barred from entering the property. The parties thereafter differed over the marketing of the marital home. They disputed selection of a real estate agent for several months, not reaching agreement until April 2012. The house was ultimately sold in August 2012 for $457, 000. The parties agreed to disburse part of the proceeds, while plaintiff's counsel retained the balance. Over $125, 000 was distributed to plaintiff, over $119, 000 was distributed to defendant, and counsel retained in escrow $62, 435.76.
In October 2012, defendant filed his second motion for relief, seeking termination of the alleged alimony obligation as of February 6, 2009; and modifying the alimony obligation as of October 1, 2007, the beginning of the cohabitation. He also sought equitable distribution of the house's value as of October 1, 2007, as well as attorney's fees. Plaintiff filed a cross-motion seeking an order denying the requested relief, rejecting the characterization of defendant's payments as alimony, seeking attorney's fees, and claiming a right to receive all the funds remaining in escrow based on claimed credits, interest, costs, and fees. In the alternative, plaintiff sought an order that cohabitation and marriage did not violate the MSSA, and that defendant waived any claim for modification or reimbursement. As another alternative, plaintiff asked the court to deem the MSSA void, reopen discovery, and award plaintiff alimony.
The matter came before a new judge. Counsel for both parties believed there were no genuine issues of fact requiring an evidentiary hearing. After oral argument, the court denied defendant's motion, and denied or dismissed as moot plaintiff's various claims for relief in her cross-motion. The court ordered equal distribution of the escrowed funds.
After reviewing the factual background of the case, the court determined that defendant did not meet his burden to establish that his payments were in the nature of alimony. The court agreed that the MSSA was poorly drafted, but the parties had equal bargaining power. The court found that defendant certainly was aware of plaintiff's remarriage by January 2010 when he wrote a check to plaintiff. The court stated, "The argument was made . . . that the spousal support must be alimony because [it] can't be anything else. And that argument is rejected. It can be something else and it can be different things to different people."
This appeal followed. Defendant renews his argument that the "SPOUSAL SUPPORT" section of the MSSA created an alimony obligation.
We must resolve two principal issues. First, was defendant's financial obligation under the MSSA until the house was sold after October 2010 in the nature of alimony? Second, if it was, did the parties clearly agree that this obligation would survive plaintiff's remarriage? Our analysis is guided by well-settled principles of contract interpretation, as well as the cases and statutes governing the definition of alimony, and the "strong public policy against enforcing support orders on behalf of remarried former wives" or husbands. Ehrenworth v. Ehrenworth, 187 N.J.Super. 342, 347 (App. Div. 1982).
We turn first to a discussion of matrimonial law. In reaching a matrimonial settlement agreement, parties operate against a statutory scheme that authorizes the award of both alimony, N.J.S.A. 2A:34-23(b) (describing forms of alimony and criteria for its award), and equitable distribution of marital property acquired during the marriage, N.J.S.A. 2A:34-23(h); see also N.J.S.A. 2A:34-23.1 (setting criteria for award of equitable distribution). Parties may choose to resolve their marital relationship through reliance on one, or the other, or both. For example, a party may choose to waive or accept reduced alimony in return for a disproportionate allocation of marital assets. Alternatively, a party may opt for a settlement that places greater reliance on ongoing alimony payments.
However, such choices have consequences, based on the law governing the two forms of relief. Generally, permanent or limited duration alimony does not survive the recipient's remarriage. N.J.S.A. 2A:34-25 ("If after the judgment of divorce or dissolution a former spouse shall remarry or a former partner shall enter into a new civil union, permanent and limited duration alimony shall terminate as of the date of remarriage or new civil union except that any arrearages that have accrued prior to the date of remarriage or new civil union shall not be vacated or annulled."); see also Ehrenworth, supra, 187 N.J.Super. at 347. A recipient of permanent or limited duration alimony is required to notify the payor of his or her remarriage in writing. N.J.S.A. 2A:34-25 ("A former spouse . . . who remarries . . . shall promptly so inform the spouse . . . paying permanent or limited duration alimony."). Failure to do so may result in the allocation of attorneys' fees. Ibid. ("The court may order such alimony recipient who fails to comply with the notification provision of this act to pay any reasonable attorney fees and court costs incurred by the recipient's former spouse or partner as a result of such non-compliance.").
Alimony also does not generally survive the obligor's death, N.J.S.A. 2A:34-25, although that result may be tempered by obtaining life insurance to secure the obligation. Ibid.; Davis v. Davis, 184 N.J.Super. 430, 437-38 (App. Div. 1982). Alimony is also taxable to the recipient, 26 U.S.C.A. § 71(a); see also Musico v. Musico, 426 N.J.Super. 276, 284 (Ch. Div. 2012) (noting that an obligee may choose to increase child support and lower alimony payments to lower tax liability), and deductible by the payor, 26 U.S.C.A. 215(a); see also N.J.S.A. 2A:34-23(b)(12) (requiring court, in determining alimony award, to consider its "tax treatment and consequences to both parties").
On the other hand, payments in the nature of alimony have the benefit to the recipient of being non-dischargeable in bankruptcy. 11 U.S.C.A. § 523(a)(5); see also Winegarden v. Winegarden, 316 N.J.Super. 52, 60-62 (App. Div. 1998). However, it is also subject to modification upon a significant change of circumstances of the recipient or the payor. Lepis v. Lepis, 83 N.J. 139, 157 (1980). That may or may not be a benefit to the recipient, depending on the facts.
By contrast, equitable distribution is generally dischargeable in bankruptcy. Schorr v. Schorr, 341 N.J.Super. 132, 137 (App. Div. 2001). It is not immediately taxable to the recipient. 26 U.S.C.A. § 1041; see also Pacelli v. Pacelli, 319 N.J.Super. 185, 197 (App. Div.), certif. denied, 161 N.J. 147 (1999). Once equitable distribution is ordered as part of a final judgment, it survives the recipient's remarriage and death. And, it is not subject to modification based on a change in circumstances. See Mahoney v. Mahoney, 91 N.J. 488, 498 (1982); Schwartzman v. Schwartzman, 248 N.J.Super. 73, 77 (App. Div.) ("[I]t is settled law in New Jersey that, unlike an award of alimony or support, property division or equitable distribution provisions may not be adjusted after divorce to reflect unanticipated changes in the parties' circumstances."), certif. denied, 126 N.J. 341 (1991).
Under certain circumstances, parties may by express agreement counter the consequences otherwise compelled by law. For example, parties may expressly agree that alimony would continue after remarriage, notwithstanding N.J.S.A. 2A:34-25. Ehrenworth, supra, 187 N.J.Super. at 345, 349 (enforcing provision in property settlement agreement that twelve year alimony obligation "'shall be paid to her by the Husband regardless of whether or not the Wife remarries'"). So-called "anti-Lepis" provisions that purport to waive the right to future modification are enforceable under limited circumstances. Morris v. Morris, 263 N.J.Super. 237, 241 (App. Div. 1993) (noting that in return for anti-Lepis provision and stability of future income, an alimony recipient may accept a lower amount).
However, in the absence of clear expressions of intent to the contrary in an agreement, the court is bound to apply the underlying law. The law is a "silent factor in every contract[, and p]arties in New Jersey are likewise presumed to have contracted with reference to the existing law." Camden Bd. of Educ. v. Alexander, 181 N.J. 187, 195 (2004) (alteration in original) (internal quotation marks and citation omitted). Absent an actual agreement to the contrary, parties must be deemed to have contracted in a manner consistent with the law. That includes the statutory mandate of N.J.S.A. 2A:34-25 to terminate alimony upon remarriage.
Parties may not avoid the legal consequences of alimony or equitable distribution by simply relabeling one as the other. See Schorr, supra, 341 N.J.Super. at 137 (stating "courts are not bound by the label which the parties ascribe to any provision" in a property settlement agreement); Winegarden, supra, 316 N.J.Super. at 60 (stating "[t]he labels attached to an agreement . . . are not controlling"); Mendell v. Mendell, 162 N.J.Super. 469, 477 (App. Div. 1978) (in determining whether relief was subject to modification as alimony, court finds "[t]he alimony label did not change the sense and intention of the agreement" to distribute property).
The court will look to the essential nature of the relief in categorizing it. Schorr, supra, 341 N.J.Super. at 137 (stating, in determining dischargeability question under federal bankruptcy law, that a "court must look beyond the label attached to an obligation by a settlement agreement to examine its true nature" (internal quotation marks and citation omitted)); Winegarden, supra, 316 N.J.Super. at 60 (same); Connor v. Connor, 254 N.J.Super. 591, 600-01 (App. Div. 1992) ("[O]ne thing is clear — a substantial portion of the so-called alimony payments were not alimony but equitable distribution."); Mendell, supra, 162 N.J.Super. at 476-77.
We look to the nature of the obligation, the purposes it serves, the consequences of its award, and whether the court has continuing control. Mendell, supra, 162 N.J.Super. at 475. Alimony is "an economic right that arises out of the marital relationship and provides the dependent spouse with a level of support and standard of living generally commensurate with the quality of economic life that existed during the marriage." Mani v. Mani, 183 N.J. 70, 80 (2005) (internal quotation marks and citation omitted). "[A]limony is awarded to defray the expenses of supporting a spouse post divorce whereas, fundamentally, equitable distribution is awarded for recognized contributions that each spouse has made toward the accumulation of property during the time span of the viable coverture." Mendell, supra, 162 N.J.Super. at 475-76. Alimony is in the nature of an annuity; it is an obligation to make periodic payments to sustain the recipient. Id. at 475. We also recognize that equitable distribution may involve the fair allocation of debt accumulated during the marriage. See, e.g., Robertson v. Robertson, 381 N.J.Super. 199, 208-10 (App. Div. 2005). However, "[a]n obligation that serves to maintain daily necessities such as . . . housing . . . is indicative of a debt intended to be in the nature of support." Schorr, supra, 341 N.J.Super. at 139 (internal quotation marks and citation omitted).
Cognizant of these essential attributes, our courts have found that an agreement to pay mortgage, insurance and taxes on a residence post-divorce is in the nature of support or alimony. See Winegarden, supra, 316 N.J.Super. at 60-61 (finding former spouse's assumption of mortgage payments to be non-dischargeable alimony); Loyko v. Loyko, 200 N.J.Super. 152, 157-58 (App. Div. 1985) (same); Burstein v. Burstein, 182 N.J.Super. 586, 595-96 (App. Div. 1982) ("It has heretofore been held that an obligation to pay mortgage payments comes within the broad definition of support."); Colucci v. Colucci, 251 N.J.Super. 73, 83-84 (Ch. Div. 1991) (holding that obligation to pay mortgage, taxes and insurance for the marital home was a support obligation that terminated, pursuant to the agreement's express terms, upon the wife's remarriage).
In Winegarden, supra, the dependent wife received alimony and child support payments that were less than the monthly mortgage payments due on the marital home that she received in equitable distribution, and in which the parties intended she remain with their son; also, the former husband's income was almost three times his former wife's. 316 N.J.Super. at 61. We concluded that those facts supported a finding that the former husband's assumption of the mortgage debt was in the nature of support:
Without the assumption of debts by defendant . . . plaintiff would not have been able to carry out the parties' intent that she and the son reside in the marital home. The payment of the mortgages was simply one component of the obligation of supporting herself and their son.
An imbalance in the parties' relative income is a factor tending to indicate the parties intend the payment of certain marital obligations to be in the nature of support. This appears to be particularly so when the direct support paid by the debtor spouse, with the superior income, is less than the amount needed to provide for one of the major components of support, such as housing.
[Ibid. (citation omitted).]
In sum, to determine whether parties agreed to the payment of alimony, we focus not on the label the parties assigned, but the nature and purpose of the obligation created, as expressed by the parties. This necessarily involves interpretation of the parties' agreement. We review the governing principles of contract interpretation next.
We review de novo the trial court's interpretation of a contract. Fastenberg v. Prudential Ins. Co. of Am., 309 N.J.Super. 415, 420 (App. Div. 1998). Although we apply principles of equity to assure that a matrimonial settlement agreement is fair and just, see, e.g., Petersen v. Petersen, 85 N.J. 638, 642 (1981), we apply contract principles to ascertain an agreement's meaning, see Pacifico v. Pacifico, 190 N.J. 258, 266 (2007) (applying to property settlement agreement the "basic rule of contractual interpretation that a court must discern and implement the common intention of the parties"). "Voluntary accommodations regarding matrimonial differences are highly desirable and make a major contribution to the fulfillment of 'the strong public policy favoring stability of arrangements.'" Petersen, supra, 85 N.J. at 645 (quoting Smith v. Smith, 72 N.J. 350, 360 (1977)).
The "polestar" of contract construction is "the intention of the parties . . . as revealed by the language used, taken as an entirety." Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 301 (1953). "[I]n the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were thereby striving to attain are necessarily to be regarded." Id. at 301. Thus, to discover the intention of the parties, and to determine whether a contract is ambiguous, courts may consider extrinsic evidence offered in support of conflicting interpretations. Conway v. 287 Corp. Ctr. Assocs., 187 N.J. 259, 268-69 (2006). Extrinsic evidence may include the structure of the contract, the bargaining history, and the conduct of the parties that reflects their understanding of the contract's meaning. Subsequent dealings of the parties under the contract may also be considered to illuminate the parties' understanding. Michaels v. Brookchester, Inc., 26 N.J. 379, 388 (1958). "The parties to an agreement know best what they meant, and their action under it is often the strongest evidence of their meaning." Restatement (Second) of Contracts § 202(4) comment g (1981).
At issue is the parties' objective manifestations of intent. See Friedman v. Tappan Dev. Corp., 22 N.J. 523, 531 (1956) ("It is not the real intent but the intent expressed or apparent in the writing that controls."); George M. Brewster & Son, Inc. v. Catalytic Constr. Co., 17 N.J. 20, 32 (1954) ("[T]he quest is for the reasonably certain meaning of the language used, taken as an entirety, considering the situation of the parties, the attendant circumstances, the operative usages and practices, and the objects the parties were striving to achieve."). "[A] contracting party is bound by the apparent intention he outwardly manifests to the other contracting party. To the extent that his real, secret intention differs therefrom, it is entirely immaterial." Cohn v. Fisher, 118 N.J.Super. 286, 291 (Law Div. 1972).
Resolution of ambiguity, if found, is a fact issue. Michaels, supra, 26 N.J. at 388. A contract is ambiguous if it is susceptible to two reasonable alternative interpretations. M.J. Paquet, Inc. v. N.J. Dep't of Transp., 171 N.J. 378, 396 (2002). However, a plenary hearing is required to resolve an ambiguous contract only if, after considering all relevant materials, a genuine issue of fact remains. In re Teamsters Indus. Emps. Welfare Fund, 989 F.2d 132, 135 n.2 (3d Cir. 1993). In the final analysis, the court may not make a "new or better" agreement for the parties than the one they reached. Comm'cn Workers of Am. v. Monmouth Cnty. Bd. of Soc. Servs., 96 N.J. 442, 452 (1984).
Applying these principles, we conclude that defendant's obligation to defray the roof expenses was alimony. We also find no clear provision that such alimony obligation would survive plaintiff's remarriage. We begin with the language itself and then consider the extrinsic circumstances.
The MSSA required defendant to make periodic payments consisting of mortgage, taxes, insurance and association fees for a fixed time period — until at least October 2010, when the house would be placed on the market, but as late as when the house was sold. That was a period of at least thirty months from the date of divorce, assuming a quick sale.
The discrete waivers of alimony support our interpretation. Defendant unconditionally waived "all past, present and future rights" to alimony. On the other hand, plaintiff waived "all rights that she might otherwise have . . . [to] alimony for her support and maintenance after the family residence is sold in 2010." (emphasis added). Implicit in that provision is that there was no waiver while defendant paid the mortgage, insurance and other expenses.
The parties also expressly preserved their right, upon a change of circumstances, to seek alimony before entry of a judgment of divorce. We recognize there was a more general statement that "neither party shall now or hereafter seek alimony." However, the more specific provisions — obliging defendant to pay, and conditioning plaintiff's waiver until the house was sold — take precedence over the more general waiver language. See Bauman v. Royal Indem. Co., 36 N.J. 12, 22 (1961).
In sum, consistent with Winegarden, Loyko, Burstein, and Colucci, we conclude that defendant's obligation constituted alimony.
We also find no provision in the plain language of the agreement that expressly obliged defendant to continue the payments after plaintiff's remarriage. By contrast, in Ehrenworth, supra, the parties' agreement explicitly stated that the alimony "'shall be paid . . . regardless of whether or not the Wife remarries[.]'" 187 N.J.Super. at 345.
The general statement in the MSSA, untethered to the alimony provision that the parties were free to remarry, is not sufficient. Nor is the paragraph that a judgment of divorce obtained in "other" jurisdictions would not alter the parties' agreement, "whether or not either or both parties hereto should remarry, it being understood . . . this Agreement shall survive and shall not be merged or altered in any decree, judgment or order of separation or divorce." The paragraph simply preserved the MSSA itself post-judgment. It did not affect the meaning of the parties' agreement. There is no provision within the agreement expressly extending defendant's obligation beyond plaintiff's remarriage. Given the strong public policy supporting the termination of alimony upon remarriage, Ehrenworth, supra, 187 N.J.Super. at 347, a clear and specific expression of intent is required to override the law.
Extrinsic evidence also supports our interpretation of the agreement. We begin with the "SPOUSAL SUPPORT" heading. We recognize that, pursuant to a separate provision of the MSSA, headings were not to be construed as part of the text. However, the heading is nonetheless extrinsic evidence of the parties' intent. The heading stands on the same footing as would, for example, a letter from plaintiff to defendant during the drafting phase, enclosing what she called the "spousal support" section.
Plaintiff's response to the court at the default hearing also evinces her intent to create a support or alimony obligation. In response to the court's inquiry whether the parties waived alimony, plaintiff responded without a clear affirmation or denial, but instead referred to defendant's payment obligation until the house was sold.
Plaintiff also conceded that she could not afford to remain in the house without defendant's contribution to the house expenses. It was understood she would remain in the house with her youngest child. As in Winegarden, supra, the impact of defendant's contributions, in light of plaintiff's underlying financial circumstances, supports our interpretation that the payments were alimony. 316 N.J.Super. at 61.
It is also of no moment that plaintiff labeled the obligation as something other than alimony in her eve-of-remarriage email to defendant; and that defendant concurred. As we have discussed, we must look beyond the parties' label and determine the true nature of the obligation.
Moreover, we are unpersuaded that defendant's concurrence was a knowing and intelligent affirmation that — regardless of label — his obligation would survive remarriage. Had plaintiff sought to elicit defendant's agreement on that issue, she could have easily done so. She could have notified defendant that she was going to remarry in three days, she intended to live in the house with her new husband, and she expected defendant to continue to bear the assigned expenses. However, she dared not raise that issue head-on. Instead, she omitted any mention of her impending remarriage, and relied on her attempt to label the obligation as non-alimony, evincing her awareness that alimony would not survive remarriage.
Our interpretation is unaffected by plaintiff's insistence that she had no intention of obtaining alimony; defendant's apparent admission that, in negotiating the MSSA, plaintiff never sought payments that were denominated as such; and plaintiff's claim that she contemplated that she would be entitled to the payments after remarriage. Her subjective intent does not alter the meaning of the agreement. She asked for, and received, a flow of payments that constitute alimony under the law.
Finally, we attach little weight to defendant's failure to seek reimbursement of his payments prior to August 2010. Based on our review of the record, defendant perhaps should have been aware of plaintiff's marriage at the end of January 2010, when plaintiff apparently sent him an estimate addressed to her in her married name, and he wrote a check to plaintiff using that name. Plaintiff's argument that defendant must have been aware sooner is unpersuasive; although plaintiff points to the 2009 insurance certificate in plaintiff's new name, there is no evidence she sent it to defendant. Defendant denies knowledge of plaintiff's marriage until June 2010. However, even assuming defendant was aware by late January 2010, his inaction falls short of a clear affirmation of a prior agreement to pay alimony post-marriage. The inaction is equally consistent with a lack of information regarding his rights; the inability to hire counsel; or mere procrastination.
In sum, having reviewed the parties' agreement in view of the governing legal principles and in light of the extrinsic evidence in the record, we conclude that defendant's obligation to pay the roof expenses was alimony, and it terminated upon plaintiff's remarriage. Defendant is therefore entitled to reimbursement.
However, defendant is not entitled to reimbursement of half of that portion of the mortgage payments that resulted in a reduction of principal. As he was entitled to half the net equity in the home upon its sale, reimbursement of that portion of the payments would result in a double recovery.
We also find that defendant is not entitled to reimbursement of the expenses incurred after plaintiff vacated the home in November 2011. At that point, plaintiff effectively refused alimony. She was not being supported by the payments. Rather, the payments were made solely to preserve the marital estate until it could be sold. The parties had agreed that defendant would bear those expenses until the house was sold. On the other hand, plaintiff was required to defray utility costs, and all repairs under $500 and half of repairs over $500. On remand, the court should, upon the presentation of appropriate proofs, calculate the amount of post-remarriage alimony that must be reimbursed to defendant.
We also remand for consideration of defendant's claim for a modification of alimony based on plaintiff's cohabitation with her then future husband, Robert Garofalo, between October 2007 and February 6, 2009. The MSSA did not compel termination of defendant's payments upon cohabitation. Cohabitation may nonetheless constitute changed circumstances warranting modification of alimony, but only when coupled with a change in the recipient's economic needs and circumstances. Reese v. Weis, 430 N.J.Super. 552, 570-71 (App. Div. 2013).
A showing of cohabitation creates a rebuttable presumption of changed circumstances imposing on the alimony recipient the burden of disproving an economic benefit. Ibid. (citing Ozolins v. Ozolins, 308 N.J.Super. 243, 245 (App. Div. 1998)). "Modification of alimony is warranted when either the cohabitant contributes to the dependent spouse's support or lives with the dependent spouse without contributing." Id. at 571.
The record does not reflect that plaintiff presented proofs before the trial court to meet her burden. Although defendant apparently did not obtain discovery regarding plaintiff's financial relationship with her then future husband, it was plaintiff's burden to disprove a benefit. Having determined that plaintiff received alimony, the court on remand shall consider defendant's application for modification of alimony.
Finally, we remand for the court's consideration of the competing claims for attorney's fees in light of our ruling, and N.J.S.A. 2A:34-25.
Reversed and remanded. We do not retain jurisdiction.