JAMES GERVOLINO v. CHERYL GERVOLINO

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3534-03T36722-04T3

JAMES GERVOLINO,

Plaintiff-Respondent,

v.

CHERYL GERVOLINO,

Defendant-Appellant.

 

Argued May 17, 2006 - Decided June 2, 2006

Before Judges Winkelstein and Sapp-Peterson.

On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, FM-13-1435-02.

Bettina E. Munson argued the cause for appellant (Lomurro, Davison, Eastman & Munoz, attorneys; Donald M. Lomurro, of counsel; Carrie A. Lumi, on the brief).

Dennis M. Galvin argued the cause for respondent (The Galvin Law Firm, attorneys; Mr. Galvin, on the brief).

PER CURIAM

Defendant Cheryl Gervolino appeals from portions of post-divorce judgment orders entered by the trial court on April 29, 2005 and July 12, 2005. On appeal, she raises the following issues:

POINT ONE

THE ALIMONY AND EQUITABLE DISTRIBUTION PROVISIONS OF THE PROPERTY SETTLEMENT AGREEMENT MUST BE VACATED AND MODIFIED BECAUSE THEY ARE INEQUITABLE AND UNCONSCIONABLE TO DEFENDANT AND BECAUSE DEFENDANT SIGNED THE AGREEMENT UNDER DURESS AND WITHOUT THE ADVICE OF AN ATTORNEY.

A. THE TRIAL COURT ERRONEOUSLY FAILED TO SET ASIDE UNCONSCIONABLE AND GROSSLY INEQUITABLE FINANCIAL PROVISIONS IN THE PROPERTY SETTLEMENT AGREEMENT AND REFUSED TO HOLD A PLENARY HEARING TO EXAMINE THE CHALLENGED PROVISIONS.

B. A PLENARY HEARING WAS REQUIRED BECAUSE DEFENDANT DID NOT EXECUTE THE PROPERTY SETTLEMENT AGREEMENT VOLUNTARILY AND SIGNED IT UNDER DURESS AS A RESULT OF UNDUE INFLUENCE AND PSYCHOLOGICAL PRESSURE FROM PLAINTIFF.

C. DEFENDANT WAS UNREPRESENTED WHEN THE AGREEMENT WAS NEGOTIATED AND EXECUTED, WHICH SUBJECTS THE PROPERTY SETTLEMENT AGREEMENT TO HEIGHTENED SCRUTINY AND REQUIRES THAT THE INEQUITABLE PROVISIONS OF THE AGREEMENT BE SET ASIDE.

POINT TWO

THE TRIAL COURT ERRONEOUSLY APPLIED THE DOCTRINE OF UNCLEAN HANDS TO DEFENDANT'S SUBDIVIDING THE MARITAL PROPERTY AND SELLING ONE OF THE SUBDIVIDED LOTS BECAUSE THE TOTALITY OF CIRCUMSTANCES PROHIBIT INVOCATION OF THE DOCTRINE.

POINT THREE

THE TRIAL COURT ERRONEOUSLY APPLIED THE DOCTRINE OF EQUITABLE ESTOPPEL IN DENYING DEFENDANT'S REQUEST TO SET ASIDE CERTAIN PROVISIONS OF THE PROPERTY SETTLEMENT AGREEMENT BECAUSE SHE HAD SUBDIVIDED THE FORMER MARITAL PROPERTY.

POINT FOUR

THE TRIAL [COURT] ERRED IN AWARDING PLAINTIFF COUNSEL FEES IN THE AMOUNT OF $4,500.00 AND IN DENYING DEFENDANT'S REQUEST FOR FEES BECAUSE DEFENDANT IS NOT IN A POSITION TO PAY HER OWN FEES AND BECAUSE SHE DID NOT ACT IN BAD FAITH.

POINT FIVE

THE TRIAL COURT ERRONEOUSLY DETERMINED THAT DEFENDANT'S REQUEST, AS PART OF HER APRIL 1, 2005 CROSS-MOTION, THAT PLAINTIFF PAY SUPPORT ARREARS THROUGH MARCH 1, 2005 IN THE AMOUNT OF $6,409.43 WAS WITHDRAWN.

After reviewing the record in light of these contentions and the applicable law, we reverse and remand for a plenary hearing.

The parties were married on October 28, 1985. They have three children: Katie, born on January 21, 1987; Michael, born on June 28, 1988; and Jaime, born on December 19, 1996. On March 6, 2002, plaintiff James Gervolino filed a complaint for divorce. While the divorce was pending, defendant was taking prescription anti-depressants and using cocaine. She was not represented by counsel in the divorce proceedings. In May 2002, the parties executed a property settlement agreement (PSA). When the parties signed the PSA at plaintiff's attorney's office, it was in the presence of plaintiff's attorney's partner. Consequently, defendant defaulted and did not appear in court on June 18, 2002, when the final judgment of divorce (FJD), which incorporated the PSA, was entered.

Prior to marrying plaintiff, defendant was employed as a secretary. At her husband's request, she left her job to care full-time for the parties' children, working sporadically on a part-time basis. During the marriage, plaintiff supported the family financially, earning approximately $100,000 per year.

Pursuant to the PSA, defendant was given residential custody of the children. The equitable distribution provisions of the PSA provided that "[t]he marital residence . . . shall become the sole property of the wife after the buy out of the husband's interest . . . in the amount of $49,700.00, based on a value of $240,000 and a mortgage pay off of $140,600.00, out of her share of husband's annuity. . . ." The PSA obligated defendant, "within a period of three (3) years from the date of [the PSA] to refinance the mortgage on the marital property to remove plaintiff's name as mortgagor relieving him of any further responsibility on the mortgage or the marital property [would] be listed for sale." In the event the marital residence was sold, defendant agreed to provide plaintiff with a right of first refusal.

Defendant challenges the following provision as unconscionable and unenforceable: "[a]t the time of wife's refinance or sale of the marital home, the residence will be reappraised and any increase in value from the stipulated value of $240,000 shall obligate wife to pay to husband (1/2) of any said increase." She also challenges the provision that required her to waive all rights to her husband's pension, and receive "rehabilitative term alimony of $200.00 per week for three (3) years from date of divorce."

In accordance with the PSA, defendant purchased plaintiff's interest in the marital home for $49,700; in return, plaintiff executed a quitclaim deed conveying his interest in the property to her. Defendant subsequently applied to the local planning board for permission to subdivide the property, and her application was granted in August 2004. With the money she received from the subdivision, defendant paid off the mortgage.

In February 2005, after plaintiff moved for enforcement of the FJD, defendant retained counsel. She opposed plaintiff's motion and cross-moved to vacate certain portions of the equitable distribution and alimony provisions of the PSA and sought payment of support arrears. The trial court granted plaintiff's motion to enforce the PSA and denied plaintiff's cross-motion. The court subsequently denied defendant's motion for reconsideration and awarded plaintiff counsel fees. After plaintiff moved to enforce the counsel fee and equitable distribution orders, the court entered judgment against defendant in favor of plaintiff for $167,500 and awarded plaintiff additional counsel fees. Plaintiff was permitted to file a mortgage against the former marital residence in the amount of the judgment. In yet another order, the court increased plaintiff's child support obligation from $425 to $427 per week. After defendant moved for reconsideration of that order, plaintiff cross-moved for modification of his child support obligation and to enforce his parenting time.

Defendant's primary claims before the Family Part were that she was coerced into signing the PSA, and the PSA was otherwise inequitable and unfair. She sought, among other things, a plenary hearing. In considering defendant's request, the Family Part judge recognized that material facts were disputed, and he acknowledged that defendant had an arguable claim that the PSA was unfair. The record shows, for example, that plaintiff's counsel characterized the argument as "a he said/she said. Almost everything that [defendant] certifies in her application or in her opposition, is denied by [defendant] and vice versa." Indeed, the following colloquy occurred between plaintiff's attorney and the court:

Court: But looking at the nature of her allegations, and the certifications, looking at your certifications in response, from your partner and what have you. . . . On this, in theory, I should not be, at this juncture, if there's material facts in dispute, passing on those, or should I.

[W]hat I'm getting at is . . . that some applications akin to summary judgment . . . that some applications supported by certifications, may create material facts in dispute, but that the certification allegations may somewhat be a sham and hence should not be given credence and that a judge on a motion level can make that determination. . . .

Counsel: You're right.

. . . .

Court: Do I, if you're saying that you have a law partner saying here's what happened. Isn't there still a credibility determination there? [A]ren't you asking me to attribute weight, more weight to what your law partner is saying than what the lady is saying?

Counsel: Yes, I am.

Court: On a motion. Right?

Counsel: Yes.

. . . .

Court: Can I do that on a motion such as this?

Counsel: I think you have the right to rely on anything that's in front of you.

Court: Or do I have to have a hearing?

Counsel: I'm hoping that you don't feel the need to have a hearing, because I think an agreement struck almost three years ago should have weight on its face.

Court: That's why I was more comfortable addressing the issue of estoppel, as a cop out, you see.

The court also appeared to acknowledge some merit to defendant's claim of unfairness of the provisions of the PSA:

[I]t's one of those situations which to me looked like it . . . may not have been necessarily the greatest deal in the world from, on hindsight from her perspective, but then again, we don't upset bad deals, we upset unconscionable deals.

And that was a concern that I had when I looked back at this stuff. If it was a bad deal. I don't know that it was necessarily.

Noting that the provisions in the Agreement regarding the marital residence reflected "a bad deal," the following exchange then took place:

Court: That may not be the best deal in the world. Sounds like a bad deal, not an unconscionable deal.

[Defendant's] Counsel: Well, it doesn't have to be unconscionable, Judge. The law does not require it to be unconscionable to set it aside. The law says you cannot enforce an agreement that is not fair or is inequitable. That's what a court of equity is burdened with. . . .

Court: Then I probably, I misspoke. . . . I will say then perhaps I wouldn't perceive that type of a deal as being unfair or inequitable. . . .

Despite the court's apparent recognition of the disputed facts and the potential unfairness of portions of the PSA, in its accompanying memorandum to the April 29, 2005 order denying defendant's cross-motion, the court said:

It has long been established that he who seeks equity must do equity and that defendant cannot come to court with unclean hands. The Court feels defendant has come to court with unclean hands and that her interpretation of the PSA is not reasonable. . . .

Because the court has found that defendant has not been equitable in her interpretation of the PSA the defendant is equitably estopped from arguing that that PSA was signed under duress, that the signing was involuntary, or that the PSA is unconscionable. . . . In this matter, both plaintiff and defendant signed a property settlement agreement in June 2002. For the past three years, both parties have been complying with certain provisions of the PSA including custody, child support, alimony and certain provisions of equitable distribution. Plaintiff relied on defendant's actions in complying with the provisions of their agreement and led him to believe that defendant would comply with all of the provisions. Specifically, defendant bought out plaintiff's interest in the marital home. In return, plaintiff executed a Quit Claim Deed on April 28, 2003, which conveyed his interest in the marital home to the defendant. Plaintiff relied, to his detriment, on defendant's actions. Defendant is now unwilling to comply with certain terms of the PSA. She is thus equitably estopped from denying the validity of the PSA.

Accordingly, the court denied plaintiff's request to schedule a plenary hearing. Notably, in denying defendant's request for counsel fees at that time, the judge indicated that neither "party is in bad faith" and "there seems to be a genuine dispute regarding the PSA."

Subsequently, in a memorandum accompanying the court's order denying defendant's motion for reconsideration, the court back-tracked on its prior statement that neither party acted in bad faith. The court said:

The Court still believes that the defendant was in bad faith in subdividing the property. The additional information provided, including the letter presented by Peter Falvo, Esq., only further substantiates the Court's belief. The Court interprets that letter to have been an indication to the defendant that the subdivision would go against the PSA, which [is] why it was suggested that the defendant pursue modification of the PSA prior to the subdivision. The defendant can claim that she did not act in bad faith and that all of this was mistaken interpretation but the Court is not persuaded. It is also important to note that all of this information was available at the April, 2005 hearing but defendant chose not to present this information.

Although it is suggested that the plaintiff knew of the subdivision, this does not change the Court's opinion. First, just because the plaintiff had an inclination that the subdivision might take place, does not mean that he knew." Second, even if he did know, he likely presumed that he would still be compensated in accordance with the PSA.

As to defendant's request for reconsideration on the issue of counsel fees, the court indicated that defendant "has been in bad faith at least as to the subdivision and this Motion for Reconsideration."

Against this background, we turn to defendant's issues on appeal. First, we examine the arguments in the first three points of her brief, which are interconnected. We begin with whether the court erred when it equitably estopped defendant from raising her coercion and fairness claims. We address this issue first because the motion judge used the doctrine of equitable estoppel as the primary reason to deny defendant's requests for relief.

"The basic equitable maxim of unclean hands provides that '[a] suitor in equity must come into court with clean hands and . . . must keep them clean after his entry and throughout the proceedings.'" Chrisomalis v. Chrisomalis, 260 N.J. Super. 50, 53-54 (App. Div. 1992) (quoting A. Hollander & Son, Inc. v. Imperial Fur Blending Corp., 2 N.J. 235, 246 (1949)). In other words, "a court should not grant relief to one who is a wrongdoer with respect to the subject matter in suit." Faustin v. Lewis, 85 N.J. 507, 511 (1981). That equitable maxim applies to matrimonial cases, and is discretionary on the part of the court. Heuer v. Heuer, 152 N.J. 226, 238 (1998); Hoefers v. Jones, 288 N.J. Super. 590, 605 (Ch. Div. 1994), aff'd, 288 N.J. Super. 478 (App. Div, 1996).

The doctrine of unclean hands may be considered together with estoppel "to help ensure justice and to protect the integrity of the courts." Heuer, supra, 152 N.J. at 238. The doctrine of equitable estoppel provides that:

Conduct amounting to a misrepresentation or concealment of material facts, known to the party allegedly estopped and unknown to the party claiming estoppel, done with the intention or expectation that it will be acted upon by the other party and on which the other party does in fact rely in such a manner as to change his position for the worse gives rise to an equitable estoppel.

[Chrisomalis, supra, 260 N.J. Super. at 55 (citations omitted).]

The doctrine has been defined as "the effect of the voluntary conduct of a party whereby he is absolutely precluded both at law and at equity, from asserting rights which might perhaps otherwise have existed as against another person who has in good faith relied upon such conduct and has been led thereby to change his position for the worse." Ibid. (quoting Carlsen v. Masters, Mates & Pilots Pension Plan Trust, 80 N.J. 334, 339 (1979)). "[I]n deciding whether estoppel or unclean hands will apply in a particular set of facts the court will appraise the 'total situation' and will weigh the equities of the parties and others affected. . . ." Warrender v. Warrender, 79 N.J. Super. 114, 121 (App. Div. 1963), aff'd, 42 N.J. 287 (1964).

Here, the court estopped defendant from arguing that the PSA was signed under duress, that the signing was involuntary, and that the PSA was unconscionable. The court found that defendant came before the court with unclean hands - that she inequitably and unreasonably construed the PSA. According to the court, defendant did not comply with the PSA because she did not provide plaintiff with the right of first refusal when she subdivided the property and she was unwilling to pay the increase in value of the property with regard to the subdivision. The court based that finding on its interpretation of the PSA and the parties' certifications. The record was inadequate to support the judge's conclusions.

In 2002, defendant purchased plaintiff's interest in the marital home for $49,700; plaintiff's interest was transferred to defendant by quitclaim deed in April 2003. In her certification, defendant indicated "[i]t never occurred to [her] that [she] did not have the right to [subdivide the property] because [she] owned the property." Defendant also certified that she relied on the advice of her attorney in subdividing the property. She submitted a letter from her attorney informing her that she could "go ahead with the sale of the subdivided property."

Defendant contends that based on her understanding of the PSA, and the advice from her attorney, plaintiff's right of first refusal was only triggered if she failed to remove plaintiff's name from the mortgage by refinancing the property and the marital home was listed for sale. Given the language of the PSA, that is not an unreasonable position. As the judge recognized at oral argument, the "[PSA] didn't even contemplate a subdivision." Yet, without the benefit of testimony, he found defendant to have acted in bad faith.

Furthermore, the court did not permit defendant to argue that she signed the PSA under duress or that it was inequitable. The judge said: "Because the court has found that defendant has not been equitable in her interpretation of the PSA the defendant is equitably estopped from arguing that that PSA was signed under duress, that the signing was involuntary, or that the PSA is unconscionable." In other words, the judge avoided a decision on the merits of plaintiff's application he estopped defendant from substantively arguing her claim by making a credibility determination based on the papers. That was error.

"[W]hen there has been moral compulsion sufficient to overcome the will of a person otherwise competent to contract, any agreement made under the circumstances is considered to be lacking in voluntary consent and therefore invalid." Shanley & Fisher, P.C. v. Sisselman, 215 N.J. Super. 200, 212 (App. Div. 1987) (citing Rubenstein v. Rubenstein, 20 N.J. 359, 365 (1956)). To determine whether a contracting party is entitled to be absolved from his or her contractual obligations due to duress, the court is required to look to the "condition of the mind of the person subjected to coercive measures." Ibid. The test for duress is subjective; "[a]ll attendant circumstances, including the age, capacity and relation of the parties, must be considered in determining whether a particular individual has been impelled to act by duress." Id. at 212-13. An individual's direct testimony may prove the state of mind which would induce that individual to act under duress. Rubenstein, supra, 20 N.J. at 368. To assess and challenge that state of mind, examination and cross-examination is required. Shanley & Fisher, P.C., supra, 215 N.J. Super. at 213.

Here, defendant's certification presented a factual issue with regard to her state of mind at the time she signed the PSA. She alleged that at the time she signed it she was using anti-depressants along with cocaine. She was unrepresented by counsel and claims she only understood the provisions of the PSA that gave her custody of her children. She asserts that she believed that if she failed to sign the PSA she would lose her children because plaintiff would expose her use of cocaine. It is also notable that because the FJD was entered by default, defendant was not questioned by the trial court as to whether she understood and believed the provisions of the PSA were reasonable. These circumstances warranted a plenary hearing to determine if defendant signed the PSA under duress.

As to whether the PSA was equitable, the judge appeared to recognize the PSA's facial unfairness where it established that defendant pay plaintiff one-half the increase in value of the property after having already purchased the property from him. The judge referred to the PSA as a "bad deal" for defendant. At a minimum, therefore, defendant was entitled to a plenary hearing to have the court directly address the fairness issues. See Konzelman v. Konzelman, 158 N.J. 185, 193-94 (1998) (property settlement agreement enforced if fair and equitable); Conforti v. Guliadis, 128 N.J. 318, 323 (1992) (it is within the equitable authority of the court to modify a property settlement on remand); Guglielmo v. Guglielmo, 253 N.J. Super. 531, 536, 541-42 (App. Div. 1992) (even though plaintiff sought to set aside property settlement agreement approximately six years after final judgment of divorce, court considered basic principles of fairness of agreement); Dworkin v. Dworkin, 217 N.J. Super. 518, 523-24 (App. Div. 1987) (Like any agreement, a property settlement agreement may be "set aside when it is the product of fraud or overreaching by a party with power to take advantage of a confidential relationship or is unconscionable."); Edgerton v. Edgerton, 203 N.J. Super. 160, 165-66, 174-75 (App. Div.) (on motion by defendant to vacate property settlement agreement almost three years after divorce judgment, where trial court did not determine fairness of agreement, we reversed and remanded for plenary hearing), certif. denied, 101 N.J. 293 (1985); see also Klier v. Sordoni Skanska Constr. Co., 337 N.J. Super. 76, 85-86 (App. Div. 2001) ("at the very least, in light of the conflicting certifications and affidavits the judge should have conducted a plenary hearing); Harrington v. Harrington, 281 N.J. Super. 39, 47 (App. Div.), certif. denied, 142 N.J. 455 (1995) (same); Aarvig v. Aarvig, 248 N.J. Super. 181, 188 (Ch. Div. 1991) (same).

In sum, we conclude that the judge had no basis upon which to estop defendant from arguing her claims of coercion and unfairness. The court must therefore first determine if defendant was, under the specific facts as she alleges, coerced to enter into the PSA. If she was not, the court then must examine the terms of the PSA to determine whether they are fair and equitable. Defendant is entitled to a plenary hearing on these issues.

Next, we turn to point four of defendant's brief, whether the trial court erred in denying her request for counsel fees and in awarding plaintiff counsel fees. Given our decision that the Family Part erred by denying defendant's motions without a plenary hearing, we vacate the counsel fee orders. The court may reconsider the issue of counsel fees upon completion of the remand proceedings.

In the final point of her brief, defendant claims the Family Part failed to address her motion to compel plaintiff to pay support arrears in the amount of $6,409.43. The court's April 29, 2005 order says defendant's request regarding the arrears was withdrawn. Defendant claims it was not withdrawn. Consequently, the court shall consider defendant's support arrears arguments on remand.

Reversed and remanded for additional proceedings consistent with this opinion. We do not retain jurisdiction.

 

On October 21, 2005, another judge ordered an increase in plaintiff's child support obligation to $439 per week and enforced plaintiff's parenting time with the parties' minor child. That order is not on appeal.

In this letter, defendant was also informed that she should "perhaps . . . challenge the [PSA] because it is grossly unfair."

(continued)

(continued)

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A-6722-04T3

June 2, 2006