KENT M. DAVIS v. JAMELIAH YOUNG DAVIS

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2188-04T12188-04T1

KENT M. DAVIS,

Plaintiff-Appellant,

v.

JAMELIAH YOUNG DAVIS,

Defendant-Respondent.

_____________________________________________

 

Argued November 14, 2005 - Decided

Before Judges C.S. Fisher and Yannotti.

On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-1908-02.

Kent M. Davis, appellant, did not partici-pate in oral argument.

Lorane L. Posner argued the cause for respondent.

PER CURIAM

Because the Family Part judge mistakenly characterized as alimony, to avoid its discharge in bankruptcy, appellant's obligation to make a $45,000 lump sum payment to his wife -- when that obligation was clearly defined by the unambiguous property settlement agreement (PSA) as her share of equitable distribution -- we reverse.

The parties were married on September 1, 1996. They are the parents of two children: Dylan (born on February 21, 1998) and Hunter (born on July 17, 2001). Problems developed during their marriage, eventually leading to this divorce action. The parties amicably resolved their disputes and entered into a PSA on June 3, 2003. A judgment of divorce, entered on October 9, 2003, incorporated the PSA and recited the Family Part judge's finding that the parties had voluntarily entered into the PSA.

Among other things, the PSA required plaintiff Kent Davis (Kent) to make a lump sum payment of $45,000 to defendant Jameliah Young (Jameliah). When the judgment of divorce was entered four months after execution of the PSA, it required that Kent provide certified funds in the amount of $36,400 -- we assume the remainder of the $45,000 lump sum payment -- by October 31, 2003. On October 30, 2003, Kent filed a Chapter 13 petition in bankruptcy with the United States Bankruptcy Court for the District of New Jersey. By operation of law, 11 U.S.C. 362(a), Kent's obligation to make the $36,400 payment fell into abeyance.

Jameliah quickly, and successfully, moved in the bankruptcy court for an order lifting the automatic stay for the purpose of permitting her the right to seek, in the Family Part, a redefining of the PSA. Following the bankruptcy's judge lifting of the stay, the parties appeared before the Family Part judge who determined, without benefit of an evidentiary hearing, that the $45,000 payment should be "characterized as non-dischargeable alimony." The judge's oral decision was placed on the record on March 12, 2004, an order memorializing this decision was entered on November 29, 2004, and Kent thereafter filed this appeal.

Federal law governs whether a matrimonial obligation is exempt from discharge pursuant to 11 U.S.C. 523(a)(5); it requires, in order to avoid discharge, that the creditor (here, Jameliah) persuade that the obligation in question actually constituted "alimony, maintenance or support." In re Gianakas, 917 F.2d 759, 761-62 (3rd Cir. 1990). That determination "depends on a finding as to the intent of the parties at the time of the settlement agreement." Id. at 762. Federal and state courts have concurrent jurisdiction over such a dispute. Winegarden v. Winegarden, 316 N.J. Super. 52, 59 (App. Div. 1998).

The Court of Appeals for the Third Circuit described the manner of ascertaining the intent of the parties, in this setting, in the following way:

First, the court must examine the language and substance of the agreement in the context of surrounding circumstances, using extrinsic evidence if necessary. . . . Because the language of the agreement alone may not provide a sufficiently conclusive answer as to the nature of an obligation, the second indicator to which we must look to assist in ascertaining the parties' intent is the parties' financial circum-stances at the time of the settlement. . . . Third, the court should examine the function served by the obligation at the time of the divorce or settlement.

[Id. at 762-63.]

Our initial inquiry, then, is whether the "language and substance" of the PSA "alone . . . provide a sufficiently conclusive answer as to the nature" of the $45,000 lump sum payment. In other words, Gianakas's three-part test first requires a determination as to whether the PSA is ambiguous. If it is, then there must be resort to extrinsic evidence, but, if not ambiguous, the agreement should be enforced as written. In examining the PSA's content, let alone the particular provision that imposed Kent's obligation to pay $45,000 to Jameliah, we can find no ambiguity. This lump sum payment represented Jameliah's share of equitable distribution, and not alimony, maintenance or support.

On the whole, the PSA unambiguously declared the rights and obligations of the parties. They agreed to share joint legal custody of the children, and to adhere to a well-defined parenting time schedule. Kent agreed to pay Jameliah $215 per week in child support in accordance with a child support guidelines worksheet attached to the PSA. The PSA also divided the parties' obligation to pay for day care -- 73% by Kent and 27% by Jameliah.

The record indicates the presence of a significant obligation for unpaid federal and state income taxes. In that regard, the PSA stated that Kent would be "solely responsible for all taxes, penalties and interest owed, if any, on his personal Federal and State Tax Returns from 1996 to 2002," and would also "indemnify and hold [Jameliah] harmless as to same."

The PSA unambiguously memorialized the parties' mutual waiver of alimony:

No alimony shall be payable by either party to the other at this time, nor shall either party seek in the future the payment of any alimony from the other. The parties acknowledge and agree that this Agreement was entered into after due and considerate deliberation, that they have considered their present and future needs and that they specifically represent to each other that they will not seek alimony from the other. The parties hereby expressly waive any right that they may have against each other to receive any alimony at this time or any time in the future. The parties hereto further acknowledge and agree that the terms of this agreement and the payments set forth herein are in full and complete satisfaction of all claims for support, maintenance or alimony that one may have against the other. The parties agree and intend that the terms of this Agreement shall be final. The parties have envisioned and considered any and all foreseeable and unforeseeable events occurring to either of them. The parties have specifically considered increases or decreases in the cost of living, increases or decreases in their income, their loss of or inability to secure employment, any prospective changes in employment, the subsequent acquisition or loss of assets by either of them, the dissipation (whether negligent or not) of assets received by each of them as and for equitable distribution in this matter, and any other event or events which may or do change the quality of their economic life.

The equitable distribution provisions expressed Jameliah's waiver of her interest in two entities, Diamond Kuts, LLC and Brooklyn Vineyards, Inc. Kent agreed to be solely responsible and to hold Jameliah harmless for the debts, taxes, penalties and interest of those businesses. Jameliah also waived her interest in the former marital home in South Orange; Kent agreed to be solely responsible for the debts, taxes, penalties and interest owed on this property. The parties agreed that Jameliah would retain all the pension rights emanating from her employment with the Newark Board of Education.

As is relevant to the present matter, we lastly observe that the PSA described Kent's equitable distribution obligation in the following way:

In full and final satisfaction of the Wife's equitable and other interest in Diamond Kuts, LLC, Brooklyn Vineyards, Inc. and the [former marital home], within ninety (90) days of the signing of this Agreement, the Wife shall receive a one-time lump sum payment of $45,000. . . . Said lump sum payment shall not be dischargeable [in] any bankruptcy proceeding brought hereinafter by the Husband it being the intention of the parties that such lump sum payment shall be considered non-dischargeable under the Bankruptcy Code.

By utilizing this language, the parties evinced an unmistakable intent that the $45,000 payment represented Jameliah's share of the two businesses and the marital home that Kent would thereafter retain.

It is the PSA's clarity about all the resolved facets of this matrimonial dispute that differentiates it from the cases cited by Jameliah in support of the Family Part judge's holding. In Gianakas, for instance, the property settlement agreement contained the debtor's obligation to pay alimony for a limited period of time, and also required the debtor's conveyance of the marital home to his ex-wife. And, while the ex-wife agreed to pay the first mortgage on the former marital home, as well as a mortgage that encumbered an attached garage, the debtor assumed responsibility for the second mortgage on the former marital home. Upon the filing of the bankruptcy petition, the parties disputed whether the debtor's agreement to make the second mortgage payments constituted an obligation that was in the nature of alimony, maintenance or support. Because the agreement did not clearly define that obligation as either equitable distribution or alimony, and because the obligation itself did not provide a clear understanding of its proper categorization, the court of appeals recognized that the parties' intent could not be ascertained without resort to extrinsic evidence.

The matter at hand is also unlike our decisions in Schorr v. Schorr, 341 N.J. Super. 132 (App. Div. 2001) and Winegarden, supra, 316 N.J. Super. 52. In Schorr, the settlement agreement described a lump sum payment as equitable distribution. We affirmed the trial judge's determination that this obligation was actually in the nature of alimony, maintenance or support, because, unlike the case at hand, the agreement in Schorr expressly stated that the debtor "recognize[d] that Wife is relying on all of Husband's payment and indemnification obligations to her hereunder for her support and maintenance, regardless of the characterization of a particular obligation as support, alimony, equitable distribution or otherwise." Id. at 136 (emphasis added). And, in Winegarden, we recognized that the debtor's agreement to indemnify and hold his ex-wife harmless from certain debts constituted support or maintenance because the specific alimony obligation could not adequately support the ex-wife if she was also rendered liable for those debts in a manner not anticipated by the settlement agreement. 316 N.J. Super. at 61. In both Schorr and Winegarden, as in Giamakas itself, the lack of certainty about the language of their agreements required consideration of the other two Gianakas factors.

Unlike the circumstances in those cases, the PSA in question in this matter is not ambiguous. Jameliah expressly and unequivocally waived alimony. This is not surprising; considering the circumstances, and particularly the short duration of the marriage, it seems unlikely she would have been awarded alimony if the issue had been tried and adjudicated. Within the context of equitably distributing marital property, the parties also unambiguously agreed that Kent would retain the two businesses, as well as the marital home, which was either in or teetering on foreclosure. In exchange for her interest in those assets, Jameliah was to receive $45,000. To now argue, in the face of these clear manifestations of their intent, that Kent agreed to a $45,000 lump sum alimony payment defies logic.

Jameliah urges that the PSA's statement that the $45,000 payment would not be dischargeable in bankruptcy suggests their intent that the payment should be viewed as "alimony, maintenance or support." We reject that contention. In the context of the great weight of the other provisions of the PSA, and in light of the clarity of all the other provisions, the phrase contained in the PSA that the parties intended this obligation to be non-dischargeable in bankruptcy represents only wishful thinking. Nowhere in the PSA is there any indication that this lump sum payment was for Jameliah's support or maintenance, as was the case in Schorr. The inclusion of this hopeful statement cannot alter the true meaning of the parties' PSA as revealed by what is contained within its four corners.

In the final analysis, we reject Jameliah's arguments because they are anchored to a belief that courts are free to ignore the plain and unambiguous statements used by parties to describe their agreements and are, therefore, authorized to rewrite agreements upon the filing of a bankruptcy proceeding. While it is true that courts need not slavishly adhere to the labels chosen by the parties to describe their obligations, we cannot adopt what Jameliah suggests -- a process in which those labels, and the clear statements to which they are appended, may be freely discarded in favor of a reconstitution of the parties' rights and obligations based upon circumstances that were entirely predictable and actually considered.

It is plainly apparent that, when they entered into the PSA, the parties understood the concepts of alimony and equitable distribution. By mentioning their intentions about the dischargeability of a particular obligation, they demonstrated their understanding about the impact of a bankruptcy filing. Notwithstanding, the parties declared -- in an agreement drafted by counsel -- that the $45,000 lump sum payment represented Jameliah's share of equitable distribution. That the parties accurately labeled this obligation is demonstrated by its stated purpose: to reimburse Jameliah for her interest in two businesses and the marital home. In sum, when the parties spoke about the division of their assets, they correctly used the term "equitable distribution" and so defined the nature of the $45,000 payment. And, when the PSA spoke of support, Jameliah expressly, unambiguously and without reservation waived any right or entitlement to alimony.

Despite these clear expressions, the Family Part judge found that the parties intended the $45,000 payment to be limited duration alimony. Because this finding is untethered to the PSA, and, indeed, stands in stark contract to the unambiguous PSA, it cannot support the order in question.

Contrary to what Jameliah argues, Gianakas does not suggest that a property settlement agreement's terms are irrelevant. Instead, Gianakas describes the first factor as requiring consideration of "the language and substance of the agreement in the context of surrounding circumstances, using extrinsic evidence if necessary." 917 F.2d at 762 (emphasis added). The second and third factors relate to the "extrinsic evidence" that may be necessary in interpreting the language and substance of an ambiguous agreement. As stated in Gianakas, a court may need to turn to the second factor "[b]ecause the language of the agreement alone may not provide a sufficiently conclusive answer as to the nature of an obligation." Ibid. The clear meaning of this statement of federal law is that when the agreement does provide a sufficiently conclusive answer it is that answer which must govern disposition of the dispute. If not, then we can see no limit to the rewriting of property settlement agreements when impacted by a bankruptcy filing. Indeed, by utilizing a process through which an agreement's labels and symbols are ignored, what would prevent a court from concluding, for example, that when the parties stated that one would pay the other $45,000 they really meant $90,000? We find no support in 11 U.S.C. 523(a)(5) for application of the loose standard urged by Jameliah.

Here, the PSA provides a clear and unmistakable description of the nature of the $45,000 lump sum obligation that should not have been overturned by resort to speculative allegations about some other hidden meaning. Since that is all Jameliah provided in support of her contention that the obligation should not be discharged, we conclude that she failed to sustain her burden of demonstrating that this $45,000 lump sum obligation constituted "alimony, maintenance or support," and that the Family Part judge mistakenly failed to enforce the PSA as written.

Reversed.

 

Jameliah contends that this one sentence ("The parties hereto further acknowledge and agree that the terms of this agreement and the payments set forth herein are in full and complete satisfaction of all claims for support, maintenance or alimony that one may have against the other") should be interpreted as memorializing the parties' intention that the $45,000 payment (i.e., "the payments set forth herein") was in satisfaction of "all claims for support, maintenance or alimony." This is a misreading of the sentence's obvious intent since it was intended to convey that the other promises contained in the PSA constituted the contractual consideration for the waiver of alimony. The inclusion of this sentence, typical of alimony waiver provisions, was to bar a later contention that a party's waiver of alimony could not be enforced because of the lack of consideration.

Because our holding is based on the absence of ambiguity in the PSA, i.e., the first Gianakas factor, we have not reached the question of whether application of the other two Gianakas factors would support the conclusion reached by the Family Part judge, although we question, on this record, how findings about the parties' intentions could have been accurately ascertained in the absence of an evidentiary hearing.

(continued)

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A-2188-04T1

December 7, 2005