WENDY A. MURPHY v. PATRICK E. MURPHY

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6521-04T26521-04T2

WENDY A. MURPHY,

Plaintiff-Respondent,

v.

PATRICK E. MURPHY,

Defendant-Appellant.

_________________________________________________

 

Argued September 26, 2006 - Decided November 20, 2006

Before Judges Payne and Graves.

On appeal from Superior Court of New

Jersey, Chancery Division-Family Part,

Monmouth County, FM-13-1021-05A.

Robert L. Penza argued the cause for

appellant (Walder, Hayden & Brogan,

attorneys; Mr. Penza of counsel and

on the brief with Peter G. Bracuti).

Joseph F. Defino argued the cause for

respondent (Jacobowitz, Defino, Latimer,

Fradkin, Comer & O'Toole, attorneys;

Mr. Defino of counsel and on the brief

with Marybeth Hershkowitz).

PER CURIAM

In this post-divorce matter, defendant Patrick Murphy appeals from the court's order of July 15, 2005 denying his motion to set aside a property settlement agreement (PSA) with his former wife, plaintiff Wendy Murphy.

The parties were married on June 27, 1986 and have three unemancipated children. During the marriage, the wife was a homemaker; the husband was a Wall Street specialty broker who earned significant amounts through his trading activities and real estate investments. At some point prior to the drafting of the PSA, the husband and fifteen of his co-workers at the New York firm of Spear, Leads and Kellogg became the subjects of civil and criminal investigations by the New York office of the United States Attorney for violations of the securities laws. Faced with possible indictment, resultant seizure of his assets by the federal government and a potential divorce action, the husband entered into an agreement with the wife to transfer to her all of his assets, estimated as having a worth of $6,800,000 to $9,000,000, in lieu of alimony and child support. Excepted from the transfer was a condominium that was later sold for $625,000 and $7,000 in monthly disability payments to the husband. A PSA was drafted at the husband's direction by the husband's father, a well-known Monmouth County attorney, and after the father had referred the wife to an attorney, on January 10, 2005, the PSA was executed. Although substantial assets were transferred to the wife as a result, the PSA contained a loan provision that stated:

The Wife shall from time to time lend to Husband such monies as may be absolutely necessary to supplement the Husband's income to provide for his needs. Such loans shall be limited to a total of not more than $2,000,000.

It has been stated without contradiction that the purpose of the loan clause was to provide funds to the husband for his use in penny stock trading, thereby permitting him to recover his financial position.

On March 16, 2005, a judgment of divorce was entered that incorporated the PSA into it. Although the court did not take testimony on the merits of the agreement, at the time that the divorce was granted, both the husband and wife testified under oath that the PSA was entered into freely and voluntarily, and that its terms were fair and equitable.

Additionally, the PSA itself recited in its preamble that:

the parties have each had the individual advice of separate counsel of their own choosing, and they are each entering into this Agreement voluntarily and with full knowledge of the income and property of each other;

and

both parties fully understand all of the provisions of this Agreement and believe them to be fair, just, adequate and reasonable and accordingly accept such provisions freely and voluntarily.

Further, Article XI of the agreement, entitled "Independent Counsel - Fairness," provided:

Each party represents and covenants that each has fully disclosed to the other all information pertaining to their respective income and assets. Both the legal and practical effect of this Agreement in each and every respect and the financial status of the parties has been fully explained to both parties by their respective counsel, the parties have read this Agreement in its entirety, they have had the benefit of independent counsel and each of them has voluntarily entered into this Agreement and they consented to assume all of the covenants herein contained, having read the same and having fully understood them and they both acknowledge that it is a fair, just and reasonable Agreement and is not the result of any fraud, duress or undue influence exercised by either party upon the other or by another person or persons upon either and they further agree that this Agreement contains the entire understanding of the parties.

Following the divorce, the threat of criminal indictment lifted when the husband's co-workers were all indicted, but he was not.

As the result of noncompliance by the husband with the terms of the PSA, on April 25, 2005, the wife filed an application for an Order to Show Cause why the husband's accounts at various investment houses and securities firms should not be frozen and why the wife should not be appointed as the husband's attorney-in-fact for the purpose of signing all documents necessary to transfer title of the marital home and for the purpose of transferring into the wife's name the husband's interest in all stocks, bonds, securities, bank accounts, brokerage and investment accounts, and retirement plans. A temporary restraining order was entered that froze the parties' accounts. Thereafter, the husband moved to dissolve the restraints against him and to obtain a plenary hearing to determine the enforceability of the PSA. In his cross-motion, the husband claimed that it would be inequitable to enforce the PSA, the terms of which were unconscionable, procured through fraud and duress, and lacked consideration.

Following argument of the parties' cross-motions, on July 15, 2005, the motion judge entered orders granting the relief sought by the wife and denying that sought by the husband. The husband has appealed, arguing as follows:

THE COURT'S DENIAL OF THE DEFENDANT/ APPELLANT'S REQUEST TO HOLD A PLENARY HEARING WITH RESPECT TO THE ULTIMATE ENFORCEABILITY OF THE PROPERTY SETTLEMENT AGREEMENT, DATED JANUARY 10, 2005, WAS IMPROPER AND AMOUNTED TO AN ABUSE OF DISCRETION AS THERE WAS PRIMA FACIE EVIDENCE SUPPORTED BY THE RECORD, WHICH CALLED INTO QUESTION THE ULTIMATE CONSCIONABILITY OF THE AGREEMENT IN ADDITION TO PRIMA FACIE EVIDENCE OF THE PROCUREMENT OF THE AGREEMENT BY WAY OF FRAUD AND DURESS.

a. The "Property Settlement agreement" dated January 10, 2005 is unconscionable in its terms.

b. The procurement of the Property Settlement agreement of January 10, 2005 was the product of fraud and duress.

c. The Trial court abused its discretion in refusing to hold a plenary hearing with respect to the agreement of January 10, 2005.

We affirm, substantially for the reasons expressed by Judge Daniel M. Waldman in his written opinion, adding only the following comments.

Property settlement agreements that have been knowingly and voluntarily executed by divorcing spouses are "entitled to considerable weight with respect to their validity and enforceability" such that a presumption of validity arises upon appellate review. Petersen v. Petersen, 85 N.J. 638, 642 (1981). Although such agreements can be avoided on grounds of fraud, duress or unconscionability, Guglielmo v. Guglielmo, 253 N.J. Super. 531, 541 (App. Div. 1992), the party challenging the agreement bears the burden of demonstrating that the agreement is unfair and inequitable. Ibid.

In his cross-motion, the husband claimed that his former wife had talked him into the asset transfer manifested by the PSA as a means to fund her long-term extra-marital affair with the husband's best friend, while representing to the husband that "she was a good and loyal spouse who was intent on standing beside [him] during a potential indictment by the U.S. Attorney's Office." Nonetheless, at oral argument of his motion, the husband's counsel admitted that the first version of the PSA, which was not substantially different from the executed version, was drafted by the husband's father, and at the time, the wife was not represented. Further, counsel admitted that the impetus for the agreement was the investigation that had been initiated by the U.S. Attorney for the Southern District of New York. There is simply no evidence to support the husband's claim that the PSA was somehow the product of duress and fraud by the wife. For that reason, Judge Waldman did not abuse his discretion in rejecting the husband's claims without an evidentiary hearing. Palko v. Palko, 150 N.J. Super. 255, 260 (App. Div. 1976) (dissenting opinion of Seidman, J.), rev'd on dissent below, 73 N.J. 395 (1977).

Moreover, during the course of the divorce hearing in this matter, each party affirmed that the PSA was fair, that each had executed it voluntarily and with full knowledge of its content, and that each had the advice of legal counsel. We regard those representations to be binding upon the parties, finding no merit in the husband's argument that the allocation of resources that the parties devised, which relieved the husband of his future obligation to pay significant amounts of alimony and child support and preserved his financial ability to recoup his fortune, was unfair or inequitable. Puder v. Buechel, 183 N.J. 428, 437-39 (2005); Miller v. Miller, 160 N.J. 408, 418-19 (1999).

Affirmed.

 

The decree stated that the PSA "shall not merge with but shall survive this Judgment of Divorce."

(continued)

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A-6521-04T2

November 20, 2006