Over the past twenty years of being a practicing divorce lawyer, I have seen many changes in the law. An excellent example is the issue of whether an asset of the marriage (such as the marital home) may be court ordered to be sold while the divorce is has still not been finalized. When I first opened my law firm in 1996, it was extremely rare for a New Jersey Family Court to allow this to happen. However, over the past two decades, I have observed more and more cases wherein the asset is allowed to be sold, pentente lite (Latin for, “pending the litigation”) by way of a court order. I believe this is because more and more intact middle class families are struggling financially more than ever. Then, when a divorce hits the family, money can really get tight. Following please find an excellent illustration of how the law in New Jersey has changed over the years by Elizabeth Rozin-Golinder, Esq., an associate attorney and rising star at the Law Offices of Edward R. Weinstein.
Often times during a divorce parties need additional funds to meet their expenses. A question that may arise is whether or not an asset may be sold during the divorce process to fund the parties’ ongoing expenses.
A court’s power to make a disposition of property prior to the divorce being finalized used to be extremely limited. I believe that many attorneys are of the idea that the power continues to be limited, and as such there are not a large number of applications being made to sell assets pendente lite.
The seminal case regarding the same used to be Grange v. Grange, 160 N.J. Super. 153 (App. Div. 1978), and it was good law until 2005. Although more recent decisions have overruled Grange, compelling the sale assets pendente lite still does not seem easy to achieve.
In Grange, the issue stated was “whether in a matrimonial matter the court may make a pendente lite order relating to equitable distribution of the marital assets and, more specifically, order the sale of the marital dwelling absent the consent of the parties,” id. at 157.
In the Grange matter the martial residence was uninhabited and subject to foreclosure. There was negative equity in the property, thus the trial judge ordered the sale, based on its vacancy and loss. The Appellate Division reversed and indicated that there was no statutory authority for the actions taken by the trial judge.
Since Grange there have been cases that are distinguishable from the restrictive nature of the Grange opinion. For example in Witt v. Witt, 165 N.J. Super 463 (App. Div. 1979), the wife applied for the appointment of a receiver for husband’s interest in the marital residence and for the sale of the same. The main difference in this case and what distinguished it from Grange is that the parties consented to the sale of the residence previously.
Another case that attempted to side step the restrictions set forth in Grange is Samuelson v. Samuelson 198 N.J. Super. 390 (App. Div. 1984). Here the question to be answered was whether a pendente lite distribution of interest monies which were accruing on the proceeds from the sale of the marital residence could be used for support purposes. It should be noted that the Supreme Court Committee on Matrimonial Litigation II opinioned that Grange was unduly restrictive. Thus, the Court in Samuelson held that it would be inequitable to permit the interest in the proceeds to accumulate while the Plaintiff lived as a pauper. The Samuelson court found that Grange was inapplicable and that it had the authority to order support from the interest accumulations on assets that were otherwise distributable as no other source of support was available.
Another case that failed to apply Grange is Graf v. Graf, 208 N.J. Super. 240 (App. Div. 1985). The question here was whether the facts of this case fell within the restrictions imposed by Grange. In Graf, Husband lost his job and failed to provide Wife with support for 20 months. She was forced to use savings to survive however the same were nearly dissipated. Wife sought to sell $4,000 worth of stocks and to use the proceeds as support for her and the children. The Judge is Graf noted that while NJ statutes gave the court broad discretion to make orders that are necessary for maintenance of the parties and children, the power was limited as it applied to distribution of assets. The Graf decision however did side step Grange by relying on the portion of N.J.S.A. 2A: 34-23 that states:
“Pending any matrimonial action or action for dissolution of a civil union brought in this State or elsewhere, or after judgment of divorce or dissolution or maintenance, whether obtained in this State or elsewhere, the court may make such order as to the alimony or maintenance of the parties, and also as to the care, custody, education and maintenance of the children, or any of them, as the circumstances of the parties and the nature of the case shall render fit, reasonable and just…”
Thus, the Graf court differentiated itself from Grange by stating thay they were not dealing with the sale of realty but personalty and that the sale was not one of convenience but necessity, as support and maintenance of a dependent custodial parent and children was involved. The Judge also relied on the Supreme Court Committee on Matrimonial Litigation II report stating that even though the same was not a formal opinion, it clearly and explicitly rejected the Grange holding.
The Pelow v. Pelow, 300 N.J. Super. 634 (App. Div. 1996) case finally allowed the sale of a residence during the divorce. The Court in Pelow made a small distinction from Grange, wherein the sale was to avoid foreclosure, while in Pelow it was for the protection of the spouse and children; an element that was missing in Grange.
Most helpful in helping overturn the Grange opinion has been the R. 5:3-5(c), which allows a trial judge “to sell, mortgage, or otherwise encumber or pledge assets to the extent the court deems necessary to permit both parties to fund the litigation….” Eureka!
Essentially this rule states that despite Grange the Court has the authority to affect property, pendente lite, for attorney fees. This renders the possibility that it may affect marital property for any purpose.
Finally, this murky issue was put to rest by the Supreme Court in Randazzo v. Randazzo, 184 N.J. 101 (App. Div. 2005). In this case the Court has boldly gone where no Court has before. The Court held that “…a trial court has the equitable power to order…a sale [of the marital residence] and, if the circumstances warrant, to order the proceeds be distributed to serve the best interests of the parties,” id. at 102.
The Court in Randazzo of course relied on the language of N.J.S.A. 2A: 34-23 as well as the cases that have come after Grange. The Court monumentally held that:
“…consistent with N.J.S.A. 2A:34-23 and R. 5-3-5, the trial court may exercise its discretion to order the sale of marital assets and the utilization of the proceeds in a manner as “the case shall render fit, reasonable and just…”
The Randazzo Court once and for all expressed disagreement with the Grange decision and granted the authority of trial judges to sell assets pendente lite.
While an application for a sale of assets pendente lite still seems to be very fact sensitive, I do not believe the same would be impossible in our case. The court now has the authority to order such sales when it is “reasonable and just”. This has opened the door for an application to sell assets for purposes of attorney fees. The Court in Randazzo even went so far as to say that in certain cases the proceeds from the sale of assets pendente lite may be used to pay marital obligations. I would argue that tax debt or attorney fees would fall into this category. The same would be at the Court’s discretion on a case by case basis.
If you or a loved one is facing a divorce here in the state of New Jersey, please never hesitate to contact my office to discuss how my team may help you through this difficult chapter of life. Thank you.