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DOCKET NO. A-4090-12T1







August 21, 2014


Submitted June 17, 2014 Decided


Before Judges Ashrafi and Haas.


On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-0539-08.


Ferro and Ferro, attorneys for appellant (Ralph A. Ferro, Sr., on the brief).


Breslin, Auty & Preziosi, attorneys for respondent (Dominick P. Preziosi, Jr., on the brief).


Defendant-ex-husband, Andrew H.Meyers, appealsfrom aMarch 25, 2013 order of the Family Part denying the release of funds held in escrow pursuant to the Final Judgment of Divorce to pay his delinquent income tax liabilities. He also appeals from an April 16, 2013 order granting plaintiff ex-wife, Michele R. Meyers, attorney's fees for defending against his latest motion to release the escrowed funds. We affirm.

This is the second time that husband has been before us on appeal of a motion to release the escrowed funds, originally $94,921.47, placed in his attorney's trust account in accordance with the divorce judgment.1 The relevant facts of the marriage, the divorce, and the escrowed funds were stated in our prior decision, Meyers v. Meyers, No. A-5529-09 (App. Div. Aug. 8, 2011) (slip op. at 1-6), and we repeat only a summary here.

The parties married in 1968, separated in 2005, and divorced in 2009. They have three emancipated children. During the later years of the marriage, husband's earnings averaged about $140,000 per year. Wife was not employed before 1990, but she earned a college degree and was earning about $84,000 per year as a teacher at the time of the divorce. The parties' assets included a marital residence in New Jersey, a vacation home in New York State, and various retirement and bank accounts.

In 2007, while the divorce was pending, husband withdrew the entire balance of more than $335,000 from his 401K retirement account, resulting in tax liabilities. He also incurred medical expenses, fines, and penalties related to multiple DWI charges in New York and New Jersey. As of the time of the divorce trial in 2009, husband had not filed an income tax return since 2004. After the separation, wife began filing her own income tax returns, declaring her filing status as married filing separately.

The marital home was sold before the divorce trial, and the proceeds were used to pay certain debts of husband. Also, equal shares of $25,000 were distributed to each party to fund the divorce litigation, and the remainder of the proceeds was placed in escrow pending equitable distribution. The parties' New York vacation home was also listed for sale, but did not sell and still has not been sold.

At the conclusion of the divorce trial, the Family Part ruled that the parties were to share equally in the net proceeds resulting from sale of the marital real property, subject to specific allocations of debt. Most relevant to this appeal, the court ruled that husband's responsibilities included all income tax, interest, and penalties due as a result of his liquidating his retirement accounts and for income he had earned after December 31, 2004.

By the Final Judgment of Divorce filed on November 16, 2009, and amended on December 1, 2009, the court established an escrow account in the amount of forty percent of husband's income in the years he did not pay taxes in order to protect wife against the risk of being charged with those liabilities. The court's judgment provided for husband's full portion of escrowed funds resulting from the sale of the marital home, $94,921.47, to be transferred directly to another escrow account held by his attorney for the express purpose of paying his income tax liabilities.

After the divorce judgment, husband pursued an application to release the escrowed funds so he could pay attorney's fees of about $32,000 to his divorce attorney, as well as $2,500 in fees of an accountant who prepared his delinquent tax returns, and husband could have access to the remaining balance of about $43,000 for his personal use. He claimed that the only rationale for establishing the fund protecting wife from the tax liabilities was unnecessary because she could not be held responsible for his tax debt. He also contended there were additional assets from which his tax liabilities could be satisfied, namely, the proceeds from the anticipated sale of the vacation home.

The Family Part denied husband's motion in March 2010, but specified circumstances under which it would consider releasing a portion of the escrowed funds, and allowed husband to supplement his application. Through a certification from his accountant, defendant submitted copies of his tax returns for 2005 through 2007, which had been recently filed. In addition, his accountant declared that he did not need to file a return for 2008 because he had no income that year.

A letter from the IRS indicated that as of April 27, 2010, the amount of federal tax, interest, and penalties that husband owed totaled at least $74,150 for tax year 2005 and $113,689.78 for tax years 2006 and 2007. The total delinquency far exceeded the $94,921.47 placed in the escrow account. The Family Part ultimately denied husband's application to release the funds by order dated July 13, 2010. The court reasoned that the escrowed funds were insufficient to cover the tax debt, husband had not presented legal authority to establish that wife could not be held liable for the debt, and there was no guarantee the eventual sale of the vacation home would cover the debt. In our earlier decision issued in August 2011, we affirmed the Family Part's order. Meyers, supra, No. A-5529-09 (slip op. at 6).

On February 22, 2013, husband renewed his application for release of the escrowed funds. His primary argument was that the three-year federal statute of limitations for collection of delinquent taxes, 26 U.S.C.A. 6501(a), had now run, and so, the IRS could not seek the delinquent taxes from wife. He also submitted a certification of a managing member of a title insurance company essentially stating that, in his experience, the IRS lien imposed on husband would attach to his future share of the proceeds of the sale of the vacation home and not to wife's share.

The Family Part denied the renewed motion by order dated March 25, 2013. The court stated that the amount of taxes currently owed by husband still exceeded the amount held in escrow, and the tax debt could increase because there was no evidence that penalties and interest had been fixed. Furthermore, when the New York vacation home is sold, the parties will have to disclose tax liens that might affect clear title and those liens may or may not influence a buyer's willingness to complete a sale, and thus, they may interfere with wife's interest in the asset. Since the escrow account was created to pay a federal tax lien that remained in place, the court found no reason to release the escrowed funds.

Both parties had moved for attorney's fees on the renewed motion to release the escrow. The court permitted wife to file a certification for attorney's fees pursuant to Rule 5:3-5(c). After reviewing the parties' submissions, the court ordered on April 16, 2013, that husband pay $3,019 to wife to reimburse her attorney's fees for the motion.

On appeal, we defer to the Family Part's findings when supported by the record, see Pascale v. Pascale, 113 N.J. 20, 33 (1988); Brown v. Brown, 348 N.J. Super. 466, 475 (App. Div.), certif. denied, 174 N.J. 193 (2002), and we review its ultimate decision regarding the disposition of marital assets under the abuse of discretion standard. See Borodinsky v. Borodinsky, 162 N.J. Super. 437, 443-44 (App. Div. 1978). "We must determine 'whether the trial court mistakenly exercised its broad authority to divide the parties' property or whether the result reached was bottomed on a misconception of law or findings of fact that are contrary to the evidence.'" Sauro v. Sauro, 425 N.J. Super 555, 573 (App. Div. 2012) (quoting Genovese v. Genovese, 392 N.J. Super. 215, 223 (App. Div. 2007)), certif. denied, 213 N.J. 389 (2013).

Husband argues that the Family Part erred because wife is insulated from his tax liability by having filed separate income tax returns for the years at issue, and because she cannot be liable for his tax debts for years 2005, 2006, and 2007 with the lapsing of the statute of limitations for those tax years. Nothing presented in husband's application, however, is an official disclaimer of wife's potential liability for his tax delinquencies before the divorce judgment was entered. Even if husband is correct that the IRS can no longer collect the delinquent taxes, interest, and penalties from wife, his argument does not warrant reversing the Family Part and releasing the escrowed funds.

The final divorce judgment ordered the creation of an escrow account with the express purpose of paying the tax debt husband owed to the IRS and state taxing authorities. There is no dispute that the he owes the IRS at least $74,150 for tax year 2005 and $113,689.78 for tax years 2006 and 2007. Husband contends he is negotiating a payment plan with the IRS, but he has never produced such a payment plan or a definitive statement from the IRS and state taxing authorities releasing wife. While the total amount that husband will ultimately have to pay has not been determined, it is apparent that he owes more than the $94,921.47 placed in escrow.

Furthermore, the IRS currently has a tax lien on all of husband's assets, which include the parties' jointly owned vacation home. Even assuming that wife cannot be held liable by the IRS, husband's continuing tax delinquency and debt is affecting disposition of a marital asset that was awarded to her in equitable distribution, namely, her one-half share of the anticipated proceeds of the sale of the vacation home. Thus, the Family Part had a valid basis to exercise its discretion and maintain the escrow account until the tax debt is resolved.

Husband also argues that the escrowed funds should be released because his attorney has a valid lien against those funds under N.J.S.A. 2A:13-5, and that the attorney's lien, now about $40,000, takes precedence over the existing federal tax lien.

The New Jersey Attorney's Lien Act, ibid., states that an attorney representing a party in an action "shall have a lien for compensation . . . which shall contain and attach to a verdict, report, decision, award, judgment or final order in his client's favor, and the proceeds thereof in whose hands they may come." While the Act expanded the common law lien, which could only attach to a judgment, the Act is not unlimited. Musikoff v. Jay Parrino's the Mint, L.L.C., 172 N.J. 133, 139 (2002). "For example, there is no authorization for 'an attorney's lien to be asserted for post-judgment legal services.'" Ibid. (quoting Panarello v. Panarello, 245 N.J. Super. 318, 322 (Ch. Div. 1990)). Furthermore, "[a]n attorney's lien is merely a right in the attorney to a lien on any judgment recovered for the attorney's client." Cole, Schotz, Bernstein, Meisel & Forman, P.A. v. Owens, 292 N.J. Super. 453, 460 (App. Div. 1996). If "there is no recovery," then "there is nothing to which the attorney's lien can attach." Ibid.

In this case, the funds placed in escrow were not procured by a judgment or final order in husband's favor. They were only conditionally awarded to husband as part of the equitable distribution. As part of the same judgment on equitable distribution, the court ordered the escrow fund to ensure there would be a resource for husband to pay some of his outstanding tax debt and to reduce the risk that wife would become responsible for the debt.

The statutory language of the Attorney's Lien Act does not refer to an attorney's lien upon assets allocated by the court to pay a client's outstanding debt. See Montefusco Excavating & Contractor Co. v. Cnty. of Middlesex, 82 N.J. 519, 527 (1980) (attorney's lien would not attach to surety funds intended to compensate building contractor's laborers and suppliers); Sauro, supra, 425 N.J. Super. at 576 (funds designated for education of children as part of the Family Part's divorce judgment were not available to be attached by attorney's lien). The fact that the escrow account was created pursuant to an order of the court does not make its funds a judgment or final order in husband's favor.

Husband argues that the Internal Revenue Code generally gives attorney's liens priority over IRS liens. See 26 U.S.C.A. 6323(b)(8); Pine St. Mgmt. (30 Evergreen Place) v. City of E. Orange, 15 N.J. Tax 31, 35 n.1 (Tax Ct. 1995). We make no determination here regarding whether the IRS lien or the attorney's lien has priority. We leave that matter to be resolved in the course of husband's negotiations with the IRS.

For purposes of the issues that are before us, we conclude only that the Family Part's findings and conclusion were supported by the record, namely, that husband's tax liabilities and the disposition of the vacation home have not been resolved, and wife has not clearly and definitively been released from potential liability by the IRS and state taxing authorities. The court's decision to maintain the escrow account was not an abuse of its discretion.

We next turn to husband's contention that the Family Part erred in granting wife's application for attorney's fees. We review an order granting attorney's fees to determine if the trial court abused its discretion. Williams v. Williams, 59 N.J. 229, 233 (1971); J.E.V. v. K.V., 426 N.J. Super. 475, 492 (App. Div. 2012); Eaton v. Grau, 368 N.J. Super. 215, 225 (App. Div. 2004). "We will disturb a trial court's determination on counsel fees only on the 'rarest occasion' and then only because of clear abuse of discretion." Strahan v. Strahan, 402 N.J. Super. 298, 317 (App. Div. 2008) (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)).

Here, we find no abuse of discretion in the trial court's decision to grant wife attorney's fees. The court concluded that husband did not advance any valid basis to release the escrowed funds, and also that he had not yet made an agreement with the IRS to settle his tax liability, making his application premature. Given the deficiencies in the renewed application, and the fact that the husband's arguments in the renewed application largely repeated his earlier application, with the same result, it cannot be said that the modest award of attorney's fees to wife was an abuse of discretion.






1 Husband's brief states that his attorney's trust account now holds $78,179.42 of the escrowed funds. The reason for the depletion of the funds is not given, but wife has not challenged the amount, and we assume that the Family Part permitted the use of the funds that caused the depletion.