DEBRA JONES-FREEMAN v. WILLIAM FREEMAN, SR

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1756-11T3

DEBRA JONES-FREEMAN,

Plaintiff-Appellant,

v.

WILLIAM FREEMAN, SR.,

Defendant-Respondent.

_________________________________________________

March 19, 2013

Argued March 12, 2013 - Decided

Before Judges Fisher and Waugh.

On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Ocean County, Docket No. FM-15-1676-06C.

Tamara L. Loatman-Clark argued the cause for appellant (The Clark Law Group, LLC, attorneys; Ms. Loatman-Clark, of counsel and on the brief).

Respondent has not filed a brief.

PER CURIAM

In this appeal, we review an award in favor of defendant William Freeman based on a claim that plaintiff Debra Jones-Freeman failed to reasonably dispose of the former marital home following William's default in his obligation to buy out Debra's interest and his failure to make the monthly mortgage payments. We affirm the judge's finding that Debra breached the fiduciary duty she owed William but remand for reconsideration of the amount of the award because of circumstances the judge appears not to have considered.

The parties were married in 2001, separated in 2005, and divorced in 2007. Pursuant to the judgment of divorce entered on March 15, 2007, William was required to purchase Debra's interest in the former marital residence for $42,000 to be paid within thirty days; the judgment also rendered William "fully responsible for the mortgage, homeowner's insurance and real estate taxes." If William failed to make the $42,000 payment in a timely fashion, the judgment required the sale of the property "at the best price obtainable" and the equal division of the net proceeds.

William did not make the $42,000 payment. On May 25, 2007, approximately two months after entry of the judgment of divorce, the trial judge authorized Debra to "sign any and all necessary documents to effectuate and complete a sale" of the former marital residence. William continued to fail to make the mortgage payments, and the mortgagee served notice in November 2007 of its intent to foreclose. Debra again sought the court's aid and obtained an order, entered on June 25, 2007, requiring William to immediately remove himself from the property and permitting Debra to change the locks; the order also permitted, as of July 1, 2007, the reduction of the listing price to $249,000 and additional $10,000 reductions every month the property remained unsold. On January 11, 2008, the judge again ordered William to "pay all sums due on the mortgage."

At some undisclosed point, Debra executed a contract to sell the property to Brian Keller for $305,000; the principal sum due on the mortgage was approximately $171,000. The contract is not contained in the record on appeal, but it is revealed that the closing took place on February 20, 2008. Of great interest to the issues at hand, the HUD settlement statement sets forth reductions from the funds due the sellers at closing that appear unusual, namely: an "excess deposit" of $45,7501 and another payment of $54,050.27 to Nassau Development Group for unexplained reasons. After the payment of other "settlement charges" in the amount of $21,779, the HUD statement represented that Debra received only $12,844.22 in cash.

On August 22, 2008, the trial judge ordered Debra to provide William with "a full and complete accounting as to all funds to which the sellers were entitled with regard" to the sale of the former marital residence, "including the cash to seller of $12,844.22, the escrow for commissions of $18,300.00, the excess deposit of $45,750.00, and the payment to Nassau Development Group of $54,050.27." Ultimately, the judge scheduled a plenary hearing to determine whether or to what extent William was entitled to compensation as a result of Debra's sale of the property. Following a period of discovery, an evidentiary hearing occurred over the course of three days in August, September and October 2011.

During the hearing, the judge heard the testimony of a real estate broker, the closing attorney for the buyer, the closing attorney for the sellers, three other individuals who offered little insight into the issues,2 and Debra. The judge concluded that Debra failed to provide an adequate explanation of why she did not receive the "excess deposit" of $45,750 or why Nassau Development Group was paid $54,050.27. Debra also could not explain what became of the "cash to sellers" of $12,844.22; she testified that she wrote a check for half of that amount to Nassau Development Group at the closing. It was also revealed at the hearing that, although the HUD statement noted that a realtor's commission of $18,300 was to be paid from seller's funds, the commission was later negotiated down to $6420, leaving another $11,880 that Debra either never received or received but could not account for.

After sifting through this evidence, the judge determined that Debra should have left the closing with $12,844.22 (the cash to sellers noted on the HUD statement), $45,750 (the "excess deposit"), and later -- after the commission was negotiated with the realtor -- an additional $11,880. Because Debra could not adequately explain why she allegedly walked away from the closing with nothing, the judge correctly found that Debra was careless in the manner in which she handled this transaction.

In determining the damages due William as a result, the judge reconstructed what would have been a reasonable arms-length transaction. He started with the appropriate determination that the property's value was $229,000 in light of his prior orders and because, as he found, "up until October of 2007 nobody had offered more than that." The judge then held that, with the mortgage payoff of $170,995.73, together with a reasonable attorney's fee and other closing costs and expenses normally borne by sellers in similar transactions, the parties should have netted $42,422.34. Because the judgment of divorce required that the parties equally divide the net proceeds, the judge ordered Debra to pay William $21,211.17.

Debra appeals, arguing:

I. THE TRIAL COURT ERRED IN FINDING THAT MS. FREEMAN BREACHED HER FIDUCIARY DUTY TO DEFENDANT.

II. THE TRIAL COURT ERRED BY REFORMING THE JUDGMENT OF DIVORCE BASED ON THE FACT THAT IT WAS NOT UNCONSCIONABLE OR FRAUDULENT AND BECAUSE THERE WAS NO OVERREACHING BY THE PLAINTIFF IN NEGOTIATING THE AGREEMENT IN THE FIRST INSTANCE.

III. THE TRIAL COURT ERRED BY REFUSING TO PUNISH DEFENDANT FOR FAILING TO COMPLY WITH THE COURT'S ORDER TO PAY THE MORTGAGE, TAXES AND INSURANCE ON THE PROPERTY.

We find insufficient merit in Points I and II to warrant further discussion in this opinion, R. 2:11-3(e)(1)(E), adding only the following brief comments prior to discussing Point III.

The trial judge correctly held that Debra owed William a fiduciary duty when she sought and obtained the right to sell the property. Matrimonial judges are frequently required to direct such a disposition of marital property. Sometimes, a party suffering from the other's recalcitrance will be appointed to dispose of the property, and at other times, the court may appoint a receiver pursuant to Rule 4:59-2(a). In either event, the receiver or the party who undertakes the obligation is held to "a duty to exercise reasonable skill and care." F.G. v. MacDonell, 150 N.J. 550, 564 (1997); Restatement (Second) of Trusts, 174 (1959).

It does not suffice, as Debra argues, that she cannot explain what happened to the so-called "excess deposit," or what happened to the remainder of the commission once negotiated down with the realtor, or what happened to the cash due the sellers at the closing, or what the large payment to Nassau Development Group was for. And Debra cannot avoid the consequences of her carelessness by claiming she relied on professionals who should have protected her interests. If Debra was defrauded or victimized by the negligence or unconscionable conduct of others, then she perhaps possesses a claim or claims to pursue in a separate suit. That does not, however, excuse her primary obligation to William of exercising "reasonable skill and care" when this property was entrusted to her alone to sell. The judge correctly recognized that Debra's inability to explain or account for the cash that was or should have been netted from the transaction constituted a breach of her fiduciary duty and warranted the imposition of an award in William's favor.

Having found Debra failed to act in a reasonable fashion, the experienced judge then ascertained the value of the property, deducted the amount required to pay off the mortgage, deducted other reasonable expenses, and arrived at an amount the parties would have received if an appropriate transaction had occurred. These findings are well-grounded in the factual record and entitled to our deference. Cesare v. Cesare, 154 N.J. 394, 413 (1998).

Point III raises issues that were not clearly argued in the trial court. We agree with Debra that the judge should have considered the impact of William's pre-sale failures to keep the mortgage current. By this we do not mean, as Debra argued in the trial court, that -- because William failed to keep the mortgage current as ordered on multiple occasions -- Debra should not be held liable for the consequences of her handling of the real estate transaction. But Debra was entitled to have William's prior defalcations considered in the calculation of the award ultimately entered in his favor.

For example, the judgment of divorce obligated William to make the monthly mortgage payments. A few months later, in an order dated May 25, 2007, the judge again ordered William to bring the mortgage current; he also ordered that Debra was to be reimbursed from the sale proceeds for any mortgage payments she made as a result of William's default. And an order again directing William to keep the mortgage current was entered less than a month before the closing.

It does not appear to us that William's share of what would have been the net proceeds was appropriately reduced as a result of his failure to make the mortgage payments from the time of the judgment of divorce until the closing of title, and it is not clear whether the award took into account any mortgage payments Debra made prior to the sale or other amounts due to Debra from William that remain unpaid. We remand for the judge's consideration of these circumstances and his determination of whether or to what extent an adjustment of the award entered in favor of William is warranted.

Affirmed in part; remanded in part. We do not retain jurisdiction.

1A separate document further describes this figure. The document, which bears Debra's signature, sets forth her agreement to pay $45,750 to Nassau Development Group "in order to continue in the purchase process" and as a "reconciliation for equity protection against a declining market area and for damage that the property . . . incurred."

2The judge is to be commended for his handling of the hearing in this convoluted matter during which both parties represented themselves.