JOYCE ADELMAN v. NEIL ADELMAN

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-5474-02T15474-02T1

JOYCE ADELMAN,

Plaintiff-Appellant,

v.

NEIL ADELMAN,

Defendant-Respondent.

_________________________________________________

 

Argued November 15, 2005 - Decided March 7, 2006

Before Judges Payne and Miniman.

On appeal from Superior Court of New

Jersey, Chancery Division, Family Part,

Essex County, FM-7-12632-92.

Bruce M. Pitman argued the cause for

appellant (Pitman, Pitman, Mindas,

Grossman, and Lee attorneys; Heidi V.

Rivkin on the brief).

Elliot H. Gourvitz argued the cause for

respondent.

PER CURIAM

In this post-judgment matrimonial matter, the former wife, plaintiff Joyce Adelman, appeals from orders of a judge of the Family Part denying her motion to enforce the obligation of her former husband, defendant Neil Adelman, to pay attorneys' and court-appointed accountants' fees incurred in connection with the parties' divorce.

The parties were married on January 28, 1975 and divorced on June 2, 1995. They had four children, Philip, Eric, Steven and Michelle, all of whom were minors at the time of the divorce.

Payment of the fees that are the subject of this appeal was addressed in Article VI-B of a property settlement agreement (PSA) entered at the time of the divorce, which provided that the husband would pay 60% both of the wife's counsel fees and the court-appointed accountants' fees and that: "These fees are not dischargeable in any bankruptcy or receivership proceeding as they are in the nature of support." Exhibit D to the PSA, setting forth these fees, stated as follows:

James A Yudes, Esq., approximately $75,000.00

Bruce M. Pitman, Esq., approximately $40,000.00

J. H. Cohn & Company, approximately $15,000.00

Courter, Kobert, Laufer, Purcell and

Cohen, P.A., approximately $ 5,000.00

However, in hearing testimony, the wife stated that she had paid Yudes $50,000, Pitman $30,000 and Cohn $2,000 out of the proceeds of the sale of the marital residence. She had earlier paid attorney retainers of $15,000. Thus, her total expenditure was conceded to have been $97,000, of which the husband owed $58,200. Payment was to be made either upon sale by the husband of a house in Short Hills where he had previously maintained his practice of internal medicine or by payment of 25% of the balance by June 2, 1996, 37.5% by June 2, 1997 and 37.5% by June 2, 1998. The husband was required to pay interest on the outstanding balance at the rate of 4% per year. Foreclosure proceedings on the Short Hills house precluded payment by the former method.

Additionally, the PSA provided in Article III for the payment of fixed-term alimony and child support by the husband to the wife in terms that we have paraphrased as follows:

A. October 1, 1995 to September 30, 1997 - $42,000 per year, allocated $25,000 alimony and $17,000 child support;

B. October 1, 1997 to September 30, 1999 - $48,000 per year, allocated $25,000 alimony and $23,000 child support;

C. October 1, 1999 until the date Eric commenced college $52,000 per year, allocated $25,000 alimony and $27,000 child support;

D. Upon Eric commencing college and until the husband attained the age of 60, $42,000 per year, allocated wholly to alimony.

The PSA further provided that it was the intention of the parties that the total support amounts set forth in the preceding paragraphs "shall never fall below the total amounts specified in each of those years. For example $42,000.00 per year between October 1, 1995 to September 30, 1997, regardless of whether the Children are residing with the Wife."

Some time in 1996, the husband filed a petition for bankruptcy in a Texas court. He claims to have listed a debt to the wife in connection with this bankruptcy. Papers relating to the bankruptcy are not a part of the record on appeal, and appear not to have been introduced before the Family Part judge. However, the wife has admitted that she received notice of the proceeding and was listed as a creditor, but that she did not participate in the bankruptcy action because she lacked the funds to retain an attorney. The husband received a discharge, although its exact terms have not been disclosed.

In the meantime, the husband, who had moved to Texas within a week after the divorce and had remarried, had failed to provide security for his various support obligations as required by the PSA and had failed to pay either the attorneys' and accountants' fees or his full obligation for alimony, support and other payments on behalf of the children. As of January 1997, there were two judgments for past-due child support and alimony against the husband and in favor of the wife in a total amount of $35,291.

In February 1997, the husband informed the wife of a potential settlement of a personal injury action instituted by him, and he stated:

If you are willing to reduce your claim by half I will sign the offer and you should see funds within thirty days. If you choose to be greedy I will not sign and let it go to litigation. It is up to you.

Just prior to that time, the wife, apparently aware of the potential for settlement, had caused a Writ of Execution arising from her two judgments to be served upon the husband's personal injury attorney, Jerry Friedland.

On March 3, 1997, the wife's counsel responded to the husband's correspondence in a letter to Friedland. In that letter, the wife's counsel gave his understanding that the gross amount of the settlement was to be $80,000, of which the husband would net $53,000. Counsel then enumerated the husband's unfulfilled support obligations, stating:

Dr. Adelman has not paid [wife] any support of significance in months. In 1996, of the total support due her of $42,000.00, she was paid $18,000. 00 In 1997, to date, she has received one check for approximately $1,416.00.

Accordingly, my client will insist upon the full payment of the judgments rendered in her behalf, and which were the subject of the Writ of Execution that was levied upon you. That amount totals $37,709.28.

Additionally, Mrs. Adelman intends to seek the turnover of the remaining balance to her representing continuing arrears in support.

The March 1997 letter does not make reference at all to any outstanding obligation by the husband to pay attorneys' and accountants' fees in percentage installments due on June 2, 1996, 1997 and 1998.

The personal injury action was settled. A release from the wife to Friedland (not the husband), dated March 18, 1997, contained language releasing all claims against him up to the present, and then stated specifically that the wife was releasing "any claims that arise only from a levy upon funds coming into releasee's [Friedland's] possession on behalf of Neil Adelman which levy occurred in or about January 1997 by the Essex County Sheriff's Office." The release stated further:

This is not a release nor a vacating of any judgment on behalf of Joyce Adelman against Neil Adelman which judgments of record remain in full force and effect subject to a credit reduction by reason of the payment to Joyce Adelman of one-half of the net proceeds of the settlement, in the amount of $26,616.00.

The release, likewise, made no reference to any outstanding attorneys' and accountants' fees.

Thereafter cross-motions were filed by the parties in the matrimonial action. The husband raised issues relating to custody of the parties' child, Eric, and the wife's move to Florida. Additionally, he sought a retroactive termination of alimony because of the wife's cohabitation for a period with Vincent Bulger. In her cross-motion, the wife sought enforcement of the husband's obligations under the PSA, including the payment of attorneys' and accountants' fees. A hearing on the extent of the reduction of the wife's economic dependency as the result of her cohabitation was ordered pursuant to Gayet v. Gayet, 92 N.J. 149 (1983). Additionally, in an order dated June 12, 2002, prior to the date of that hearing, the court further provided:

The plaintiff's application to compel the defendant to pay the sum of $72,184.00 as and for his share of plaintiff's counsel fees and accountant fees which are due her from him pursuant to Article VI, Section B of the parties' Property Settlement Agreement arising from the original divorce litigation be and is reserved and shall be addressed as part of the Gayet hearing scheduled to commence on August 21, 2002.

The Gayet hearing occurred in August and September 2002. In an opinion dated January 28, 2003, the Family Part judge, among other things, denied the wife's claim for attorneys' and accountants' fees, finding that it had been settled when the wife had accepted a portion of the proceeds of the husband's personal injury action. Nonetheless, the judge awarded the wife $40,000 in attorneys' fees as the result of the husband's intransigence in connection with the PSA. An order to that effect was entered on February 24, 2003.

The wife moved for reconsideration, and at that time, produced the release that she signed in connection with the personal injury settlement. Following argument, on May 9, 2003, the judge again ruled against the wife stating in an oral decision that not only was further recovery barred by the settlement, but also as the result of the husband's discharge in bankruptcy and the wife's failure to perfect her claim in that proceeding.

The wife has appealed from the court's February and May 2003 orders. On appeal, she claims that the court erred in finding that recovery of the attorneys' and accountants' fees was barred by the settlement and by the discharge in bankruptcy, and that the husband's failure to disclose to the bankruptcy court that he had signed an agreement acknowledging that his payment of legal fees was in the nature of support and non-dischargeable constituted a fraud on the court.

I.

Our standard of review in this case requires us to accept the factual findings of the trial court if supported by sufficient credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974). We owe particular deference to the trial court in matters such as these in which the court's expertise in family matters plays a role in the decision-making process. Cesare v. Cesare, 154 N.J. 394, 413 (1997).

Nonetheless, we do not find the evidential support in the record that is required for our affirmance of the court's conclusion that the wife's claim for attorneys' and accountants' fees was barred by the 1997 settlement between the husband and wife, which required an equal distribution of the proceeds of the husband's personal injury recovery in partial satisfaction of outstanding judgments for support in the wife's favor, or by the release of claims by the wife against the husband's personal injury attorney Friedland, given at that time. We base that conclusion on three factors.

First, as we have noted previously, there is no evidence in the record that the judgments that the wife had obtained prior to February 1997 related to anything other than the husband's failure to pay the full $42,000 in yearly child support and alimony payments due at the time. No testimony was offered that the judgments were entered in connection with the husband's default on any obligation to pay attorneys' and accountants' fees, and there is no reference in any of the correspondence or other documents utilized at the hearing to that element of the husband's debt. Discussions at the time of the settlement related solely to the judgments.

Second, we find it significant that the writs of execution issued as the result of the judgments for arrears in support were served on attorney Friedland, and the release of claims was given to him, not the husband. Although when the settlement was reached in 1997, N.J.S.A. 2A:17-56.23b, establishing the priority of judgments for child support and requiring their payment prior to distribution of the proceeds of a settlement or judgment, had not yet been passed, Friedland was nonetheless constrained in his ability to disburse the settlement proceeds by the writs served upon him. It is evident from the text of the release that was executed by the wife in favor of Friedland that it was designed to protect Friedland from liability as the result of the disbursement of one-half of the settlement to the husband, despite the existence of the writs. Nothing in the release purports to release the husband from his obligations under the PSA or the judgments. Further, the release itself cannot be read to encompass any claim for attorneys' and accountants' fees, since those fees were not the subject of the writs served upon Friedland, he had no obligation to satisfy those fees out of settlement proceeds without further authorization from the husband, and he had no need for the protection of a release in this regard.

Third, we note that in March 1997, at most one-quarter of the husband's payments for attorneys' and accountants' fees would have been due. We find no evidential basis for the position that the wife relinquished her rights to payments under the PSA that were not required until June 2, 1997 and June 2 1998, respectively.

As a consequence, we do not accept as factually supported the court's conclusion that the execution of the release in favor of Friedland by the wife on March 18, 1997 bars her claim against her former husband in the proceedings under appeal.

II.

Upon reconsideration, the court found that recovery by the wife was also barred as the result of her failure to participate in the Texas bankruptcy proceedings filed by the husband in 1996 and by his discharge from liability in that proceeding pursuant to 11 U.S.C.A. 524(a)(2).

A discharge of obligations to a former spouse by a petitioner in bankruptcy is governed by two sections of the Bankruptcy Code, 11 U.S.C.A. 523(a)(5) and (15), which provide:

A discharge under section 727, 1141, 1228(a), 1228(b) or 1328(b) of this title does not discharge an individual debtor from any debt --

* * *

(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record, . . . or property settlement agreement . . .

* * *

(15) not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record . . . unless --

(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or

(b) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor[.]

In a bankruptcy proceeding, a debt to a former spouse must be listed in the schedule of creditors' claims, 11 U.S.C.A. 521(1), and if unlisted, it may be excepted from the debts that are discharged pursuant to 11 U.S.C.A. 523(a)(3). This section provides that a debt is not discharged by bankruptcy if it is

neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit--

(A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or

(b) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeablity of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request[.]

In Heselton v. Maffei, 374 N.J. Super. 184 (App. Div. 2005), we invalidated the discharge of an obligation of a former husband to save his former wife harmless and indemnify her against any claims arising out of loans against the marital premises, contained in a PSA, when the husband had failed to list the wife as a creditor in the bankruptcy proceedings, but listed her instead as a codebtor on a Citicorp loan secured by the property. We found:

Although plaintiff [wife] received a copy of defendant's bankruptcy petition, the petition did not list defendant's indemnification obligation to plaintiff as a debt he was seeking to discharge or identify plaintiff as one of his creditors. The petition only listed plaintiff as a codebtor on defendant's obligation to Citicorp. Thus, the petition did not afford plaintiff reasonable notice that defendant's indemnification obligation could be discharged in his bankruptcy proceeding.

At the time of defendant's bankruptcy petition, plaintiff's relationship to defendant was significantly different from that of a commercial enterprise whose sole connection with a debtor is a creditor-debtor relationship. By virtue of the parties' property settlement agreement, defendant assumed a variety of obligations to plaintiff, including, most significantly, the obligation to support the parties' children, which was not dischargeable in bankruptcy, 11 U.S.C.A. 523(a)(5). Defendant's identification of plaintiff as a "codebtor" on his obligation to Citicorp did not give her reasonable notice that defendant did not consider his indemnification obligation for that debt to be a component of his child support obligation or in lieu of alimony and thus non-dischargeable under 11 U.S.C.A. 523(a)(5) but instead some other kind of debt that was subject to discharge under 11 U.S.C.A. 523(a)(15). Moreover, defendant's failure to give plaintiff adequate notice that he considered his indemnification obligation subject to discharge deprived her of the opportunity to present evidence and legal argument to the bankruptcy court relevant to whether this obligation satisfied one of the two alternative conditions of dischargeability set forth in 11 U.S.C.A. 523(a)(15).

[Id. at 193-94 (footnote omitted).]

We thus found that the wife's receipt of the husband's petition did not give her reasonable notice that she was required to file an objection to preserve her claim, and that the receipt of general information regarding the debtor's bankruptcy petition did not give rise to any obligation on her part to enquire further about the court's action. Id. at 194-96; see also Hoffman v. Hoffman, 157 B.R. 580 (E.D.N.C. 1992), aff'd o.b., 998 F.2d 1009 (4th Cir. 1993), upon which we relied.

In the present case, the wife has acknowledged that she received notice of the bankruptcy proceeding, which she asserts she lacked financial resources to contest, and the husband claims that she was listed as a creditor therein. Thus, the facts may differ from those in Heselton. However, the record on appeal is devoid of any documents or other evidence that relate to the bankruptcy proceeding, including the contents of the husband's filings, the extent of notice provided to the wife, and the terms of the husband's discharge. We find the testimony in the present matter to have been insufficient to otherwise establish what occurred.

As a result, we are unable to determine whether our decision in Heselton provides grounds for a similar ruling in the present case that the husband's discharge in bankruptcy does not bar the claims by the wife that are the subject of this appeal. A further hearing must occur to establish the necessary foundational facts for a legal determination by the Family Part judge of the issues thus raised.

Reversed in part and remanded for further proceedings in accordance with this opinion. Jurisdiction is not retained.

 

As the result of the imposition of contractual simple interest, the figure had increased to $75,724.84 as of January 10, 2003.

These judgments also have not been included in the record.

As we have noted, the release was not produced by the wife until the motion for reconsideration. However, the court permitted argument with respect to it, and we do as well, finding it to provide additional evidential support for conclusions we have reached on the basis of the hearing record.

We reject the husband's argument that the wife's motion in 2002 for payment of the attorneys' and accountants' fees due pursuant to the PSA was barred by laches, finding no prejudice to the husband occasioned by the wife's delay, which we find to have been justified by the changing conditions of the husband's health and economic circumstances. County of Morris v. Fauver, 153 N.J. 80, 105 (1998).

We note that when the bankruptcy matter was proceeding during an unspecified portion of 1996, some or all of the husband's attorneys' and accountants' fee payment obligations had not matured, giving rise to further questions as to what he disclosed as an allegedly dischargeable debt at the time.

The terms of the discharge are relevant, because if the husband received only a discharge from all "dischargeable debts" as in Weingarden v. Weingarden, 316 N.J. Super. 52 (App. Div. 1998), any failure of the wife to appear in the bankruptcy proceedings, even if adequate notice were given, is not material, id. at 61-62, and the issue of whether the fees she now claims were in the nature of alimony, maintenance or support and thus non-dischargeable under 11 U.S.C.A. 523(a)(5)(B), is properly before the Family Part judge.

(continued)

(continued)

17

A-5474-02T1

March 7, 2006