VALERIE BROCKEN v. JOHN BROCKEN

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-2180-08T12180-08T1

VALERIE BROCKEN,

Plaintiff-Respondent/

Cross-Appellant,

v.

JOHN BROCKEN,

Defendant-Appellant/

Cross-Respondent.

_______________________________________________________________

 

Argued January 4, 2010 - Decided

Before Judges Lisa, Baxter and Alvarez.

On appeal from the Superior Court of New Jersey, Chancery Division - Family Part, Essex County, Docket No. FM-07-1354-06.

Leonard A. Peduto, Jr. argued the cause for appellant/cross-respondent (Kozyra & Hartz, LLC, attorneys; Mr. Peduto, of counsel and on the brief; Betsy W. Bresnick, on the briefs).

Amy Kriegsman argued the cause for respondent/cross-appellant (Weinberger Law Group, LLC, attorneys; Ms. Kriegsman and Bari Zell Weinberger, on the briefs).

PER CURIAM

Defendant John Brocken appeals from an order entered on November 14, 2008 that denied his motion for relief from judgment. He sought to vacate one of the key provisions in the parties' judgment of divorce (JOD), claiming that his ex-wife, plaintiff Valerie Brocken, had engaged in fraud and misrepresentation. We agree with defendant that neither laches, res judicata nor waiver, upon which the judge relied in refusing to grant defendant relief from judgment, justify the judge's refusal to analyze defendant's claim on the merits. We reverse the denial of defendant's motion for relief from judgment and remand for a plenary hearing, the scope of which we describe later in this opinion.

On the cross-appeal, we reject plaintiff's contention that the Family Part erred when it denied her request for counsel fees. In light of our conclusion that plaintiff misrepresented the status of the property at issue, and thereby forced defendant to file a motion, she was not entitled to counsel fees. We therefore reject the claim plaintiff advances in her cross-appeal.

I.

Plaintiff Valerie Brocken and defendant John Brocken were married on October 8, 1994. Prior to the marriage, in September 1990, defendant won $98,354 in the Florida Lottery. After federal income tax was withheld, defendant received a check in the amount of $78,683. Defendant immediately invested his lottery winnings in an investment account with Smith Barney in an account bearing the number 576-12. Throughout the marriage, defendant maintained account 576-12 in his name only and actively managed it. Plaintiff had no role in the investment decisions affecting the account. The account remained titled in defendant's name throughout the marriage and was never used for any joint marital purpose. Other than defendant's Florida Lottery winnings, the only other contributions to the account were a $1,000 gift from defendant's parents in May 2003 and the sum of $7,500, which represented one half of the parties' refund from their joint 2004 income tax return. The balance of the refund was deposited in the parties' joint bank account.

On December 16, 2005, plaintiff filed a complaint for divorce. Defendant did not file an answer or enter his appearance to be heard on any of the issues raised in plaintiff's complaint. Therefore, in accordance with the provisions of Rule 5:5-10, plaintiff served defendant with a notice of proposed equitable distribution and final judgment.

The notice included the proposed hearing date, a statement of the value of each asset to be distributed, and a proposal for distribution of each.

Notably, because the parties were still residing together at the time that the divorce proceedings were pending, plaintiff mailed a copy of the Rule 5:5-10 notice of equitable distribution to defendant at the marital residence. Although the record is not entirely clear, it appears that when the notice arrived in the mail, plaintiff placed it in defendant's "inbox." He later "repackaged" it and sent it back to plaintiff's counsel, apparently never opening it.

On June 30, 2006, in anticipation of the upcoming default hearing, plaintiff filed a Case Information Statement (CIS), in which she listed defendant's individually-held Smith Barney 576-12 account as a joint asset. In particular, on page seven of the CIS, litigants are instructed to list all "Family Assets and Liabilities." The document requires the litigant to complete five columns: "Description," "Title to Property (HWJ)," "Date of purchase/acquisition," "Value. Put * after exempt," and "Date of Evaluation Mo/Day/Yr."

In completing the "Description" column of the form, plaintiff listed two Smith Barney accounts, one of which is the account in question. In the "Title to Property" column, she answered "J," for joint, next to both. As to account 576-12, this was unquestionably a blatant and significant misrepresentation, as the account was not titled jointly, but was instead titled only in defendant's name. Plaintiff left blank the column "Date of purchase/acquisition." Although plaintiff also left blank the "Date of Acquisition" for all other assets on her CIS, leaving the column next to the account in question blank was a far more serious omission, as it denied the judge the information that would have caused him to consider whether the account was an exempt asset. If plaintiff had listed an acquisition date of September 1990, the judge would have realized that the funds in the account were acquired prior to the marriage. Plaintiff also failed to place an asterisk in the "Value" column, which is required when an asset is exempt from distribution.

In plaintiff's notice of equitable distribution dated June 30, 2006, which she filed with the court, was the statement "[t]he parties have the following joint or individual accounts, which shall be equally divided within [thirty] days." Below the introductory statement, plaintiff listed defendant's Smith Barney 576-12 account together with the parties' joint Smith Barney 573-17 account without ever specifying that the 576-12 account was acquired before the marriage.

On August 15, 2006, the Family Part conducted the Rule 5:5-10 default hearing. In her testimony, plaintiff requested that the judge divide each of the Smith Barney accounts equally, half to herself and half to defendant. Plaintiff did not explain, and the judge did not ask, whether those accounts were jointly or individually held, nor was there any discussion of whether either of the accounts consisted of property acquired before the marriage. The judge entered a divorce judgment on a default basis, and divided the property as plaintiff had requested. Specifically, the judge awarded plaintiff half of the Smith Barney 576-12 account, which consisted of defendant's Florida Lottery proceeds that he acquired before the marriage.

More than two years later, on October 14, 2008, defendant moved to vacate the portion of the JOD that awarded plaintiff half of the value of the Smith Barney 576-12 account, and to compel her to disgorge the funds she had

received from the 576-12 account. Plaintiff filed a cross-motion for counsel fees.

The Family Part heard oral argument on both motions on November 14, 2008. Without making any findings of fact, the judge denied defendant's motion to vacate the distribution of the 576-12 account. Instead, the judge merely wrote "Denied on the grounds of estoppel, waiver, and res judicata as more fully set forth in plaintiff's opposition papers." The judge also denied plaintiff's request for counsel fees.

After receiving defendant's notice of appeal, the judge issued an opinion, see R. 2:5-1(b), explaining that "[d]efendant's request to vacate the part of the Judgment of Divorce pertaining to the Smith Barney accounts was denied because (1) defendant's claims were barred by res judicata, waiver, laches and collateral estoppel; and (2) even "[a]ssuming arguendo that defendant's objections were not barred, his claim is without merit because the property was a marital asset and subject to equitable distribution." As to the latter ground, the judge held that the 576-12 account lost its exempt status when the $7,500 income tax refund was deposited into the account in 2004.

On appeal, defendant argues: 1) the court erroneously denied his motion because plaintiff's intentional misrepresentation of the character of the Smith Barney 576-12 account entitled him to relief; 2) there was no credible evidence that the account in question was ever a joint asset; 3) the judge's reliance on res judicata, waiver, laches and collateral estoppel was error; and 4) the deposit of $7,500 from a joint income tax return into an account that is exempt from equitable distribution does not convert such exempt asset into joint marital property.

Plaintiff urges us to affirm the November 17, 2008 order. She argues that defendant had an obligation to file his own CIS, review the July 2006 proposed notice of equitable distribution and the August 2006 JOD, and that his failure to do so was inexcusable. She further maintains that any "emotional paralysis" he suffered when she filed for divorce should not excuse his delayed response to the proceedings at issue. Last, she contends that the certification defendant filed on April 4, 2007 in opposition to her own April 2007 child support enforcement motion demonstrates that defendant was aware of the issue concerning the 576-12 account, at a minimum, in April 2007. Therefore, she argues, his delay until 2008 in moving for relief from judgment constitutes a waiver of his right to relief.

On her cross-appeal, she maintains that the Family Part erred when it denied her request for counsel fees, because defendant having brought four applications in a two and one-half

month period is an "obscene" abuse of process.

II.

We begin our analysis by turning to the bedrock principles of matrimonial law. Although N.J.S.A. 2A:34-23 requires a judge to "effectuate an equitable distribution of the property . . . which was legally and beneficially acquired by [the parties] or either of them during the marriage," property owned by a spouse "at the time of marriage will remain the separate property of such spouse." Painter v. Painter, 65 N.J. 196, 214 (1974). "[I]n the event of divorce, [such property] will not qualify as an asset eligible for distribution." Ibid. Thus, the only property eligible for distribution is that which is acquired after "the marriage ceremony has taken place." Id. at 217. Where, as here, a matrimonial litigant seeks relief from judgment, he or she must satisfy one of the six grounds specified by Rule 4:50-1, which provides, in relevant part, that the court may relieve a party from a final judgment or order for the following reasons: "(a) mistake, inadvertence, . . . or excusable neglect; . . . (c) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; . . . or (f) any other reason justifying relief from the operation of the judgment or order." Applications for relief from equitable distribution in a JOD are subject to the provisions of Rule 4:50-1. Eaton v. Grau, 368 N.J. Super. 215, 222 (App. Div. 2004).

Although a party seeking relief under subsection (c), alleging fraud or misrepresentation, must do so within one year after the judgment was entered, Palko v. Palko, 73 N.J. 395, 397 (1977), a motion filed pursuant to subsection (f) "has no such time limitation except that it must be made 'within a reasonable time.'" Id. at 397-98 (quoting R. 4:50-1). "[A] motion under (f) is addressed to the discretion of the trial court. That discretion is a broad one to be exercised according to equitable principles, and the decision reached by the trial court will be accepted by an appellate tribunal in the absence of an abuse of its discretion.'" Id. at 398 (quoting Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966)).

An entirely separate provision, Rule 4:50-3, addresses "fraud upon the court." Its provisions are considerably broader than those of Rule 4:50-1. Entitled "Effect of Motion," Rule 4:50-3 provides:

A motion under [Rule] 4:50 does not suspend the operation of any judgment, order or proceeding or affect the finality of a final judgment, nor does this Rule limit the power of a court to set aside a judgment, order or proceeding for fraud upon the court or to entertain an independent action to relieve a party from a judgment, order or proceeding.

[(Emphasis added).]

Thus, when fraud is committed upon the court, Rule 4:50-3 allows relief to "be obtained 'without limitation as to time.'" Tara Enters., Inc. v. Daribar Mgmt. Corp., 369 N.J. Super. 45, 52 (App. Div. 2004) (citation omitted). Equitable principles guide the inquiry and no preordained time limitations are applicable. Von Pein v. Von Pein, 268 N.J. Super. 7, 15 (App. Div. 1993) (holding that one party's material misrepresentation of existing facts for the purpose of evading equitable distribution entitled the other spouse to reopen the fraudulent judgment even though she did not seek to do so for more than two years after the divorce was granted).

Judgments obtained by default are entitled to less finality than those resulting from a contested proceeding. Morales v. Santiago, 217 N.J. Super. 496, 505 (App. Div. 1987). Judgments obtained by default are "more vulnerable to being set aside." Ibid. "[T]he opening of default judgments should be viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div. ), aff'd, 43 N.J. 508 (1964).

Our review of the record satisfies us that defendant made a sufficient showing under either subsection (f) of Rule 4:50-1 or under Rule 4:50-3 to warrant a hearing on his claim. It is evident that plaintiff concealed from the judge during the default hearing the true status of the Smith Barney account in question. By failing to disclose the undisputed fact that the account in question was owned by defendant prior to the marriage, managed by him exclusively, never used for marital purposes, and never titled in any name other than defendant's, she denied the judge the opportunity to declare the asset exempt from distribution. Moreover, plaintiff's CIS contained a glaring misrepresentation of fact when she listed the 576-12 account as "joint" marital property.

In so doing, plaintiff may well have committed a fraud upon the court. That being so, defendant was not required to file his motion for relief from judgment within any particular period of time. Von Pein, supra, 268 N.J. Super. at 15. Instead the judge was required to apply equitable principles in deciding whether defendant's motion was timely. In making that determination, the judge was obliged to also recognize that motions to vacate default judgments, such as this one, must be viewed "with great liberality." Marder, supra, 84 N.J. Super. at 319.

The judge's reason for concluding that defendant's application should be denied, because defendant had waited too long to assert his right to relief, was flawed. None of the doctrines upon which the judge relied were applicable here. We turn first to res judicata, which bars a party from relitigating in a second action the same controversy that was fairly litigated and determined in the prior litigation. Culver v. Ins. Co. of N. Am., 115 N.J. 451, 460 (1989). That doctrine is inapplicable when, as here, a party files a direct challenge to a judgment and seeks relief, such as in a motion brought pursuant to Rule 4:50-1. Ibid. Thus, the judge erred when she concluded that defendant's claim is barred by res judicata.

The judge's reliance on the doctrine of laches was equally mistaken because the doctrine only applies when the party asserting laches demonstrates substantial reliance, to his or her detriment, on the other party's delay in asserting a right to relief. Lavin v. Bd. of Educ. of Hackensack, 90 N.J. 145, 153 (1982) (observing that application of the doctrine of laches to bar relief will turn, "more often than not, . . . on whether a party has been misled to his harm by the delay"). Here, plaintiff never asserted that she changed her behavior or relied to her detriment on defendant's inaction. Thus, a substantial component of the doctrine of laches is missing.

Last, the judge erred when she concluded that defendant waived his right to object to the equitable distribution of his exempt asset. Waiver only applies where a party has intentionally relinquished a known right. Knorr v. Smeal, 178 N.J. 169, 177 (2003). Here, the record does not support a finding that defendant knew any earlier than April 2007 that plaintiff had misrepresented the status of the Smith Barney 576-12 account. Nor does the record support a finding that his delay from 2007 to 2008 is compatible with an intent to relinquish his rights. Thus, waiver was as inapplicable as laches and res judicata.

Moreover, laches and waiver are equitable defenses, which are not available to those who, like plaintiff, come before a court of equity with unclean hands. Goodwin Motor Corp. v. Mercedes-Benz of N. Am., 172 N.J. Super. 263, 271 (App. Div. 1980). Here, plaintiff's misrepresentation of the true status of the 576-12 account in her CIS, and her failure to disclose to the judge during the default hearing that the funds in the account were owned by her husband long before the marriage, are the very factors that should have caused the judge to refrain from applying the equitable doctrines of waiver and laches, especially in light of any showing of detrimental reliance by plaintiff.

We recognize that defendant waited more than a year, from when he first learned in April 2007 that plaintiff had obtained a distribution of the 576-12 account, until October 2008, to file his motion. Part of that delay was attributable to amassing the voluminous document trail from 1990, when he won the lottery, to 2005, when the divorce complaint was filed, to establish the asset's exempt status. While we agree that defendant could have moved with greater dispatch, we do not view the delay as sufficiently egregious to warrant the judge's refusal to consider his claim on the merits. See Von Pein, supra, 268 N.J. Super. at 9-10, 14-16 (reopening a fraudulent JOD after six years).

In light of plaintiff's deliberate misrepresentation in her sworn CIS, her failure to disclose the status of the 576-12 account in her sworn testimony at the default hearing, the fact that the judgment in question was the result of a default rather than a contested hearing, and plaintiff having suffered no detriment by reason of defendant's delay in seeking relief from judgment, the judge's refusal to consider defendant's claims represents a mistaken exercise of discretion. "'Equitable principles are the guide in . . . determin[ing] whether in the particular circumstances justice and equity require that relief be granted or denied. . . . Perjurious testimony alone . . . may be a ground for relief as a fraud upon the court in a proper case.'" Id. at 15 (quoting Shammas v. Shammas, 9 N.J. 321, 328 (1952)).

Here, equitable principles, and the distinct possibility of plaintiff having committed a fraud upon the court, see R. 4:50-3, entitled defendant to a plenary hearing.

III.

Last, we address the judge's conclusion that even if the investment account in question had originally been exempt from equitable distribution because it was acquired by defendant prior to the marriage, it nonetheless lost its status as an exempt asset when one half of the parties' 2004 income tax refund was deposited into the account. The judge's conclusion is premised upon a finding that defendant intended to make an interspousal gift to plaintiff of the entire 576-12 account merely because he deposited a relatively small sum, $7,500, into an exempt asset. In so ruling, the trial judge erroneously failed to recognize that proof of an interspousal gift requires evidence of unequivocal donative intent on the donor's part, actual or symbolic delivery of the gift's subject matter, and the donor's absolute and irrevocable relinquishment of ownership. Dotsko v. Dotsko, 244 N.J. Super. 668, 674 (App. Div. 1990).

In Dotsko, we concluded that one spouse did not intend to make an interspousal gift merely because he temporarily deposited an exempt cash asset into the parties' joint account. Id. at 676. Here, the record does not support the trial judge's conclusion that by depositing the relatively small sum of $7,500 of joint assets into an account worth nearly $250,000, defendant intended to alter the character of a previously exempt asset. Missing from the record was any evidence of the unequivocal donative intent that Dotsko requires. The judge appears to have concluded that the deposit of the $7,500 check, without more, irrevocably altered the character of the previously exempt asset. Such conclusion was plainly erroneous. Ibid. We thus reject the judge's conclusion that even if laches, waiver and res judicata did not apply, the asset was nonetheless subject to equitable distribution once defendant donated a portion of the parties' income tax refund into his exempt investment account.

IV.

For the reasons we have already discussed, the denial of defendant's motion for relief from judgment was a mistaken exercise of the judge's discretion. We thus reverse the order under review and remand for a plenary hearing.

During that hearing, the judge should take testimony on the subject of the 576-12 account to determine whether any events altered its exempt status. If the judge determines that the asset was, and has remained, exempt from distribution, she shall modify the JOD accordingly. The judge shall have the authority to award defendant interest if she sees fit to do so. The judge shall not apply principles of laches, waiver or res judicata, as such doctrines are inapplicable here. If either party wishes to seek alteration of any portion of the equitable distribution provisions of the JOD, an appropriate motion may be filed, and the court may consider it. We intimate no view on this latter subject.

V.

On plaintiff's cross-appeal, we conclude that her claim to

counsel fees lacks sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

 
Reversed and remanded on defendant's appeal. Affirmed on the cross-appeal.

There are a number of other digits in the account number, but defendant refers to only the last five in order to maintain the security and privacy of his investment.

Plaintiff did not include an account number, but the value of "$272,866," clearly refers to 572-16. Plaintiff agrees that this listing refers to the account in question.

Of course, plaintiff's listing of the asset as jointly-owned likely caused the judge to view such questions as unnecessary.

The judge presiding over the Rule 5:5-10 default hearing was not the same judge who decided defendant's later motion for relief from judgment.

The other three motions filed by defendant pertained to parenting time issues and plaintiff's proposed relocation to California with the parties' children.

The $7500 deposit was approximately three percent the size of the 576-12 account at the time the $7,500 was deposited.

(continued)

(continued)

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A-2180-08T1

January 19, 2010