JOYCE DAVIS v. ERIC DAVIS

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3.

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

JOYCE DAVIS,

Plaintiff-Respondent,

v.

ERIC DAVIS,

Defendant-Appellant.

_______________________________

October 28, 2016

Argued September 22, 2016 Decided

Before Judges Hoffman, O'Connor and Whipple.

On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Bergen County Docket No. FM-02-2420-13.

Steven M. Resnick argued the cause for appellant (Ziegler & Zemsky, L.L.C., attorneys; Mr. Resnick, on the briefs).

Michael S. Stein argued the cause for respondent Michael S. Stein (Pashman Stein Walder Hayden, attorneys; Janie Byalik, on the brief).

Donald F. Miller argued the cause for respondent WithumSmith + Brown, P.C.

PER CURIAM

Defendant appeals from six Family Part orders dated November 21, 2014, January 13, 2015, January 14, 2015, February 6, 2015, April 24, 2015 and May 12, 2015, arising from the parties' divorce proceeding. For the reasons that follow, we affirm in part, reverse in part, and remand.

The parties were married in 1991 and divorced July 16, 2014. On December 26, 2013, while the litigation was pending, the Family Part judge appointed Michael Stein of the firm Pashman Stein, as fiscal agent to "oversee, implement and monitor" a pendente lite consent order the parties executed on October 17, 2013.

The appointment was ordered to address the parties' complex finances, which included sixteen jointly owned properties in numerous municipalities and states, most of which were held by individual entities, and some of which were co-owned with an unrelated third party. The appointment gave defendant the responsibility of maintaining, renting, and at times, selling these investment properties.

Stein hired an accounting firm, WithumSmith + Brown (Withum), with the court's approval, to analyze the finances of a holding company through which defendant managed the investment properties. In his capacity as fiscal agent, Stein issued orders to establish protocols for the maintenance, preservation, and sale of the marital assets. Stein ordered defendant to open an account giving Stein supervision of the accounts. Following disputes between the parties regarding the management of the marital estate, Stein issued orders to hire independent management companies; designate a litigation trust fund; transfer monies obtained as a result of real estate sales; reimburse marital and child-related expenses; and manage defendant's fee for operating the holding company.

In April 2014, defendant leased one of the investment properties without the consent of plaintiff or Stein. Stein moved for the appointment of a receiver for the investment properties, but ultimately the parties initiated settlement discussions, and asked Stein to serve as their mediator. On July 15, 2014, the parties executed a Property Settlement Agreement (the Agreement), after mediating issues with Stein, and were divorced the next day.

The Agreement contains several clauses pertinent to this appeal. First, the Agreement provides in the preamble

[E]xcept as otherwise set forth herein, this Agreement and the Parenting Plan collectively supersede any and all other orders and agreements entered into at any time prior to the date hereof, including but not limited to consent orders, either executed by the Parties and/or by the Superior Court of New Jersey, Family Part, in connection with the Parties' matrimonial difficulties.

Defendant asserts the "parties agreed that Stein could remain in their matter by private agreement between themselves only." However, the Agreement went on to outline a specific on-going role for Stein.

Shortly after the parties executed the Agreement, defendant initiated a sale of one of the investment properties. Stein learned about the sale on August 15, 2014, after defendant had already accepted an offer and was awaiting a written contract. Plaintiff's attorney informed Stein the proceeds of the sale would be directly deposited in defendant's account.

Stein conceded defendant could proceed with the sale as long as defendant agreed to abide by the terms of the Agreement moving forward. Soon after, defendant negotiated price terms with a potential buyer for another investment property without notifying Stein. On October 8, 2014, Stein moved to compel defendant to comply with the terms of the Agreement and again asked the court to appoint a receiver for the investment properties. Stein also moved for approval of his fees as fiscal agent and Withum's fees as accountants. Defendant disputed Stein's fees, arguing Stein incurred these fees as a self-represented lawyer, and Stein's post-divorce work was not contemplated by the Agreement, thus Stein had no standing to enforce the provisions of the Agreement. Defendant also challenged the reasonableness of the fees.

On November 21, 2014, the Family Part judge issued four orders. The first order granted Stein's application for $88,182.50 for work performed as fiscal agent through August 31, 2014, and authorized Stein to bill for services rendered pursuant to the Agreement. The judge also ordered defendant to reimburse Stein for fees incurred in connection with the motion and ordered Stein to submit a certification for said fees. The second order granted Withum's fees in their entirety, to be paid by plaintiff and defendant. The third order denied defendant's cross-motion for Withum and Stein's fees to be referred to mediation or binding arbitration. The fourth order granted Stein's motion to compel defendant to comply with the terms of the Agreement; ordered defendant be held in contempt if he fails to comply with the terms of the Agreement; prohibited the parties from modifying the terms of the Agreement that required the hiring of professionals; and ordered the parties to hire a receiver.

On January 9, 2015, Stein learned plaintiff and defendant mortgaged the marital home in order to settle a suit brought by defendant's parents after plaintiff and defendant defaulted on a loan from the parents. Plaintiff and defendant agreed to pay defendant's parents directly from the proceeds of the sale of the marital home. The marital home had been sold and was due to close within a few days. In an email plaintiff sent to defendant and later forwarded to Stein, plaintiff asserted she agreed to settle the debt with defendant's parents from the sale instead of the other debts because defendant threatened "severe ramifications" against her.

Stein moved to set aside the mortgage on an emergent basis on January 13, 2015, because the closing on the property was to occur the following day. The Family Part judge set aside defendant's parents' mortgage pending further court order, and ordered the proceeds from the marital home be deposited in Pashman Stein's escrow account because defendant had breached the terms of the Agreement. On January 15, 2015, the Family Part judge also entered an order approving Stein's earlier fee application for $7,385 and approved an $8,255 award for fees in connection with the order to appoint a receiver.

Following the set-aside of the mortgage, the parties drafted a consent order, which proposed reprioritizing the payment of debts and payment from the escrow account in Stein's control; created a new mechanism to repay the debt owed to defendant's parents; attempted to end Stein's tenure as fiscal agent and replace him with an unspecified attorney; and reserved rights to appeal the professional fees that the court awarded to Withum and Pashman Stein. Additionally, the consent order sought the release of funds Stein held in escrow for the parties' real estate broker's commission from the sale of the marital home. The escrow was ordered because defendant refused to pay the broker from the proceeds of the closing.

The Family Part judge found the consent order violated the terms of the court's prior orders forbidding changes to certain terms of the Agreement and on February 6, 2015, ordered the broker's funds remain in Pashman Stein's escrow account, but permitted the rest of the proceeds to be distributed in accordance with the terms of the Agreement. The judge permitted the parties to submit a modified consent order to ensure plaintiff's debt1 was prioritized in the language of the Agreement.

Stein and defendant subsequently attempted to negotiate another consent order to disperse $416,991.02 held in Pashman Stein's escrow account. Stein wanted to disperse $10,000 to help plaintiff pay off credit card debt she accrued during the marriage, as well as $15,640 to offset the amount withdrawn from the account to pay defendant's sanctions for failing to adhere to the terms of the Agreement. Stein also sought to pay the broker's commission from the escrow account. Defendant wanted to transfer the entire sum into his real estate attorney's trust account.

Because the parties could not agree on the allocation for the disbursement of fees to the professionals involved in this case and the amount plaintiff would receive to offset her obligations against those of defendant, Stein filed another motion seeking approval of Pashman Stein's fees; distribution of the rest of the professional fees; authorization for Pashman Stein to retain the disputed broker commission in its account; and the discharge of Pashman Stein from all other duties.

On April 24, 2015, the Family Part judge initially ordered defendant and Pashman Stein to release the real estate commission to the broker and concluded Stein should be paid $27,804.82. The court also approved Stein's application to hold $25,000 in the escrow account pending his final application for fees for work beginning on March 20, 2015, and ordered the remainder of the monies in escrow be transferred to defendant's attorney of choice. On May 12, 2015, the judge relieved Stein of his position as fiscal agent and awarded $3,555.75 in fees for work connected with the April 2015 motion practice. This appeal followed.

On appeal, defendant2 asserts error in the court's award of fees to Stein. In particular, defendant asserts Stein, as the fiscal agent, had no standing to litigate against plaintiff and defendant, and his service as a fiscal agent and mediator created a conflict of interest in violation of the Rules of Professional Conduct. Defendant also asserts the court erred in awarding fees to other professionals without a hearing, denying the parties the right to modify their Agreement, and in appointing a receiver. Defendant also contends the matter should be remanded to a different judge because the judge discredited defendant's statements and exceeded her authority in the enforcement of court orders. We address each argument in turn.

"Findings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998) (citing Rova Farms Resort,Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974)). "Because of the family courts' special jurisdiction and expertise in family matters, appellate courts should accord deference to family court fact-finding." Id. at 413. However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

Turning to the standing argument, Stein was appointed by the trial court as the parties' fiscal agent in the December 26, 2013 order to implement the terms of the parties' October 17, 2013 consent order. Thereafter, Stein's powers as fiscal agent were delineated in the parties' Agreement. The Agreement provides

The husband shall keep the Wife and the Fiscal Agent fully informed as to the status and pending sale of all Jointly Held Properties/Interests including listing price, reductions in pricing, notification of any offers, immediate notification of any sale including all details prior to closing. . . .

The Parties agree that the Fiscal Agent will timely receive and review listing price, reductions, reductions in pricing, all offers, all communications between potential buyers and their agents and sellers and their agents, RESPA and closing documents and all other documents associated with the sale of each Jointly Held Properties/Interests and that all New Proceeds from the sale of Jointly Held/Properties/Interests and that all New Proceeds from the sale of Jointly Held/Properties/Interests shall be placed in a Fiscal Agent escrow account so that the Fiscal Agent can distribute. . . .

The Mediator/Fiscal Agent shall order payment of Professional Fees to each professional in a percentage equal to that professional's then outstanding percentage of total Professional Fees. To the extent that there is a fee dispute to any professional fee, the Mediator/Fiscal Agent will not order payment above the undisputed amount. Any disputed amount will be held in escrow by the Mediator/Fiscal Agent pending resolution between the Party and the Professional or as otherwise resolved through arbitration, mediation, or court order.

After the parties signed the Agreement, Stein took steps to enforce the provisions of the Agreement pursuant to the powers granted to him under its terms, including forcing defendant to submit all business considerations in relation to the investment properties to Stein for his approval. Because the parties incorporated Stein's power into their Agreement, and because the trial judge approved the Agreement, the parties' power to dispute the powers of the fiscal agent are limited.

We have recognized court-appointed fiscal agents maintain "full power and authority to check the propriety of all disbursements to be made or proposed to be made[.]" Roach v. Margulies, 42 N.J. Super. 243, 245 (App. Div. 1956). The appointment of a fiscal agent is an "equitable pendente lite device undoubtedly hopefully contrived to avoid more stringent measures." Id. at 246 (emphasis omitted). The appointment of such agents is grounded in the court's equitable powers, which are "distinguished for their flexibility, their unlimited variety, their adaptability to circumstances, and the natural rules which govern their use. There is in fact no limit to their variety and application[.]" Ibid. (quoting Sears, Roebuck & Co. v. Camp, 124 N.J. Eq. 403, 411 (E. & A. 1938)). The appointment of a fiscal agent is in the discretion of the Family Court. N.J. Realty Concepts, LLC v. Mavroudis, 435 N.J. Super. 118, 123 (App. Div. 2014).

Here, while the appointment of Stein as fiscal agent was initiated in a pendente lite order, Stein's continued authority was incorporated into the Agreement. The parties later proffered a consent order to alter Stein's role, which the court rejected to protect the monies owed to the parties and the professionals in this matter. Despite the parties' assertions the trial judge impeded their "freedom of contract," the trial court's equitable powers includes the power to prospectively prevent contract modification to protect the interests of third parties whose interests are contemplated in the Agreement. Hence, we reject the argument that Stein lacked any authority to enforce the terms of the Agreement as a fiscal agent.

Moreover, the trial court correctly granted Stein fees for performing work in connection with his role as fiscal agent, but we agree with defendant the trial judge improperly awarded fees for work Pashman Stein performed in connection with collecting the fiscal agent fees. Our Supreme Court recently addressed professionals' fees in matrimonial proceedings in Segal v. Lynch, 211 N.J. 230 (2012).

In Segal, a parenting coordinator was appointed by a trial court but also signed a retainer agreement with the parties that outlined her duties, responsibilities, and billing rates. Id. at 236-37. Her duties included appearing at depositions (upon the issuance of a court order), responding to grievances, issuing orders, and drafting reports. Ibid. The parties in Segal raised grievances with the coordinator, obtained a court order compelling her to participate in a deposition, served her with several demands for discovery, and objected to her fees. Id. at 239-40. In response, the parenting coordinator sought legal fees in connection with her work, including her application for fees. Id. at 245-47.

The Supreme Court concluded attorneys appearing on their own behalf are not entitled to recover fees for time spent litigating fee awards. Id. at 263-64. Accordingly, although the Court agreed the coordinator's fees were appropriate insofar as they represented the work spent as parenting coordinator, the fees were inappropriate to the extent they represented the coordinator's time spent attempting to collect her fees. Ibid.

Here there are several instances in which the record is unclear as to how fees were calculated. There is no distinction as to the amount of time Stein spent as the fiscal agent versus the fees he recovered in connection with his motion to compel fees.

Turning to the November 21, 2013 orders, while it is clear the Family Part judge awarded Stein $88,182.50 for work performed in connection with his fiscal agent and mediator roles, it is unclear whether any of the award was related to the collection of fees for Pashman Stein. In the January 15, 2015 order, it is clear $4,127.50 was awarded to Stein as fiscal agent for work performed in connection with his request for the appointment of a receiver; however, the court also awarded $7,385 for Pashman Stein's legal work. Thus, it appears Stein was awarded $7,385 for work connected with his attempt to collect his own fees.

The February 6, 2015 hearing authorized disbursements for professional fees from the escrow account but does not indicate to whom payments are to be made and in what amounts. Several of Stein's motions were to collect fees on behalf of all the professionals who participated in this litigation. The extent to which Stein's work was primarily directed at those professionals, as opposed to recovering his own fees, is unknown.

The April 24, 2015 order authorizes the distribution of $27,804.82, but the percentage of the award for work performed as a fiscal agent, as opposed to engaging in fee collection is not evident in the record.

Because Stein, like the attorney-appointee in Segal, charged the parties for his attempts at collecting fees, such fees are unrecoverable and should be refunded. The Supreme Court has explicitly held that attorneys participating in such litigation are not acting in their appointed role, and thus cannot bill the parties for time spent representing themselves. Accordingly, we reverse the fees the trial court explicitly granted for purposes of compensating Stein for litigating fee recovery, and remand the matter to the trial court to address what other fees Stein recovered in connection with the litigation he brought to recover his own fees.

Defendant next asserts the trial court incorrectly granted fees to Stein and Withum without a plenary hearing. We disagree.

In fee disputes, plenary hearings are only required if one of the parties to the dispute can demonstrate "a genuine issue as to a material fact." Lepis v. Lepis, 83 N.J. 139, 159 (1980). Further, such hearings "should be conducted only when the certifications of counsel raise material factual disputes that can be resolved solely by the taking of testimony." Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 24 (2004). Here, Withum's fees were contested in defendant's certification. The certification essentially details defendant's dissatisfaction with the amount and level of services that Withum provided on behalf of Stein. A review of the certification indicates no disputed issues of fact that require the trial court to take testimony and no questions of credibility were raised in defendant's certification. Defendant presented no genuine issue of fact in his certification that required a plenary hearing.

Defendant asserts the trial court erred in setting aside the mortgage on the marital home with his parents. However, the marital home is no longer in defendant's control because it was sold while this matter was pending before the trial court. This issue is accordingly rendered moot. We also reject defendant's argument regarding Stein's alleged conflict of interest for serving in a dual role. This issue was not raised before the trial court. Ordinarily, we will not consider issues that a party failed to raise in the trial court, and we find no reason to make an exception here. SeeNieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).

Defendant also asserts the trial judge erred in ordering the real estate broker's fees, held in escrow, should be released to the broker. Specifically, he asserts he was denied his right to due process because he was not provided with an adequate platform to argue his position on the issue. Defendant also asserts his case should be remanded to a different trial judge because the trial judge erred by appointing a receiver and "prospectively" ordering to hold defendant in contempt. These arguments are without sufficient merit to warrant discussion in a written opinion. See R. 2:11-3(e)(1)(E).

Reversed and remanded for further findings consistent with this opinion. We do not retain jurisdiction.

1 According to the parties' Settlement Agreement, Article XI delineates the agreed upon marital debt.

2 Plaintiff has not cross appealed but submitted a brief joining in some of defendant's arguments.