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Fattore v. Fattore

Superior Court of New Jersey, Appellate Division

February 5, 2019

MARGARET FATTORE, Plaintiff-Respondent/ Cross-Appellant,
v.
FRANK FATTORE, Defendant-Appellant/ Cross-Respondent.

          Argued January 16, 2019

          On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Mercer County, Docket No. FM-11-0224-97.

          David Perry Davis argued the cause for appellant/cross-respondent.

          Howard L. Felsenfeld argued the cause for respondent/cross-appellant (Felsenfeld & Clopton, PC, attorneys; Howard L. Felsenfeld, on the briefs).

          Before Judges Alvarez, Nugent, and Mawla.

          OPINION

          MAWLA, J.A.D.

         Defendant Frank Fattore appeals from a February 25, 2017 order, which required him to indemnify plaintiff Margaret Fattore for the loss of her share of equitable distribution of defendant's military pension, which was waived as a result of his receipt of disability benefits. Plaintiff cross-appeals and asserts the trial court should have granted her request for alimony to replace the value of her lost pension benefit. Pursuant to the United States Supreme Court decision in Howell v. Howell, U.S., 137 S.Ct. 1400 (2017), we hold a trial court may not indemnify a payee spouse when the payor spouse waives a military pension and receives veteran disability retirement benefits. However, a court is free to treat the pension waiver as a change in circumstances and may award the payee alimony or modify it. We reverse and remand the trial court's order for further proceedings consistent with this opinion.

         The following facts are taken from the record. The parties were divorced in 1997, following a thirty-five-year marriage. At the time, both parties were fifty-five years of age. The terms of the parties' divorce were memorialized in a six-page consent dual final judgment of divorce.

         The judgment included a mutual alimony waiver, which reads as follows: "Plaintiff and defendant each hereby waive alimony as to the other party now and in the future." As to equitable distribution, the judgment provided defendant would retain the former marital residence located in Hamilton, and the mortgage obligation associated with it, and pay plaintiff $55, 000 as her share of the equity. The parties agreed to retain all bank accounts, automobiles, and credit card debt in his or her own name without a credit, offset, or liability to the other.

         The judgment also divided the parties' pensions. Plaintiff, who had been employed as an operating room nurse in a hospital, had earned a modest pension. The parties agreed defendant had a fifty percent interest in the marital coverture portion of her pension, which had "been offset against the equity in the marital home." Defendant was serving full time in the Army National Guard when the divorce occurred and had also accumulated a pension. The parties' judgment divided the marital coverture portion of the military pension equally as follows:

Plaintiff shall be entitled to receive fifty percent . . . of defendant's military pension which was accumulated during the marriage . . . via a [q]ualified [d]omestic [r]elations [o]rder [QDRO] to be prepared by attorneys for plaintiff. Plaintiff shall not be entitled to any post-judgment, pre-retirement cost of living increases related to said pension.

A QDRO of defendant's military pension was completed in 1999. Defendant continued to serve in the Army, following the divorce, until he became disabled in 2002. At the time, defendant was able to collect his pension and disability benefits without any impact upon the pension payout. Defendant also received social security benefits. At some point, defendant opted for disability benefits, which he could receive tax free.

         The record reflects plaintiff never contacted defendant to inquire whether the pension was in pay status and defendant assumed she had received her share of the benefit. Although the parties share children and grandchildren, they had little communication during the intervening years since the divorce. In 2010, plaintiff contacted the office of the Army charged with administering the pension to inquire why she had not receive any payments. The response was as follows:

Please be advised that a portion of [defendant's] pay is based on disability. Therefore, it cannot be divided under the USFSPA [Uniformed Services Former Spouses Protection Act, 10 U.S.C. §1408]. The disability amount is used as an authorized deduction. In this case, when the disability amount is deducted from his gross pay along with the survivor benefit portion, there's nothing left for the community property.

         In 2016, plaintiff filed a motion to compel defendant to compensate her for her share of the military pension. The court conducted a plenary hearing over two days and considered the parties' testimony. The trial judge made oral findings and signed the February 25, 2017 order.

         The judge accepted defendant's testimony his disability forced him to retire. She found defendant's monthly income to be as follows: military disability retirement $3400; VA disability benefits $3100; and social security $1800. Only the social security was taxable. The judge also noted defendant had remarried and his wife was gainfully employed. The judge credited defendant's testimony he did not intentionally seek to deprive plaintiff of her share of the pension, by seeking disability benefits because neither he nor plaintiff knew of the applicable federal law. Nevertheless, she found the circumstances worked an unfair result. The judge stated:

[D]efendant took an incredibly unreasonable position, in that, looking at the statute per se, a QDRO could not be implemented whereby . . . plaintiff could no longer receive her [fifty] percent of the coverture value of . . . defendant's military pay, because now it's been converted to [one-hundred] percent non-taxable VA benefits that are exempt.
That doesn't mean that she loses the interest. Even . . . defendant, when questioned . . . by this [c]ourt . . . didn't think it was fair, and neither does the [c]ourt.

         The trial judge also rejected defendant's argument plaintiff had "sat on her rights" and was barred from seeking relief, because plaintiff had "limited funds" and could not hire counsel in 2010. The judge noted plaintiff had retired in 2013, and had to move out of Mercer County because her social security and pension totaled $22, 848 per year. According to plaintiff's testimony, a condominium she had purchased in a more affordable area had lost nearly one-half of its value. The judge noted plaintiff had a "bare bones budget" of $39, 540 per year, which still exceeded her income and required she sell assets to meet her needs. Conversely, the judge found defendant had "tax free income of over $80, 000 per year" and "his budget is only $74, 436 [per year]." These figures did not include his wife's earnings.

         As a result, the judge appointed a pension appraiser "to determine the value of plaintiff's coverture interest in . . . defendant's pension at the time the parties executed their . . . judgment of divorce." The judge ordered

[i]n the interim, . . . defendant shall pay directly to . . . plaintiff the sum of $1800 per month, to be paid in a lump sum by the first of every month . . . . This payment is not to be considered an alimony payment as suggested by [plaintiff's counsel], [although] that could be a course that this [c]ourt could take but, rather, it's an equitable distribution payment and, ...

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