Edward R. Weinstein, Esq.

Remember: Sometimes You Only Get One Bite At The Apple!

When it comes to the division of your assets in a divorce, that is. Under New Jersey law certain orders relating to alimony, child support, child custody, and parenting time may be modified upon a showing of changed circumstances. Therefore, you and your lawyer may return to a New Jersey Family Court to have these types of issues reviewed.

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However, Court Orders from the Family Part of the Superior Court of New Jersey regarding equitable distribution of assets are not subject to change absent fraud, misconduct and the like (and even then you have only one year to seek such relief). That is another reason that you should only hire an attorney with a law firm that only handles divorce cases because, as the saying goes, you only get one bite at the apple.

In Rosen v. Rosen, Arthur G. Rosen appealed an order of the Superior Court of New Jersey, Family Part of Essex County that denied his motion to modify the property settlement agreement incorporated into the final judgment of divorce with his ex-wife, Milly Sue Rosen. The New Jersey Appellate Division affirmed the order of the Family Part.

Arthur and Milly Sue got divorced in 1981. They incorporated a detailed property settlement agreement into their final judgment of divorce, which required Arthur to make a $ 375,000 lump sum payment to Milly Sue on August 1, 1991, subject to 11% annual interest on the amount payable quarterly to her. The property settlement agreement further stipulated that if Milly Sue remarried, the annual interest rate would increase to 14%. There was no language in the property settlement agreement, that allowed Arthur to prepay all or part of the $ 375,000 amount before the August 1, 1991 payment date.

Up until April 1987, Arthur had been making his quarterly interest payments on time. However, on May 1, 1987, he filed a motion in an Essex County Family Part court to amend the equitable distribution portion of the property settlement agreement to allow him to prepay the $ 375,000, because the revisions to the federal tax laws in 1986 would no longer allow him to claim the $ 41,250 interest payments he made every year as deductible, or fully deductible. Milly Sue challenged the motion, and filed an affidavit by a certified public accountant that noted Arthur’s obligation of $ 375,000 was completely collateralized through his profit-sharing plans, and as a result was similar to AAA bonds that yielded, as of May 19, 1987, 6.75% on average. The accountant further contended that for Milly Sue to yield $ 41,250 on AAA bonds, she would have needed a $ 611,111 investment. The motion was denied by the judge, who stated that there was no legitimate reason to modify the property settlement agreement, and that the proposed prepayment that Arthur requested would substantially change the agreement without some sort of consideration being paid to Milly Sue for that change. Arthur appealed the decision.

On appeal, Arthur argued that the judge abused his discretion by denying the motion, and that the stated reasons the motion judge used to support the decision were not supported by the record. Arthur relied on the paramount 1980 Supreme Court of New Jersey case of Lepis v. Lepis, and claimed that a change in the federal tax law was a valid change in circumstance that warranted a modification of his property settlement agreement. The New Jersey Appellate Division did not agree.

The appellate panel explained that while it was true that Lepis v. Lepis, recognized that “changes in federal income tax law” are one of the changes in circumstances that may warrant a modification, the New Jersey Appellate Division interpreted Lepis v. Lepis, to apply the changed circumstances standard to modification child support and alimony obligations. The appellate panel did not believe that the changed circumstances standard applied to terms in a property settlement agreement relating to equitable distribution. Furthermore, New Jersey Statute 2A:34-23 gives Family Part courts the power and authority to effectuate the equitable distribution of property only when a final judgement of divorce is entered. Conversely, the same statute states that orders for alimony can be modified and altered “from time to time as circumstances may require.” This is to reflect any unanticipated changes that may occur. That said, there is no language in the law that authorizes the modification of equitable distribution orders when circumstances change.

In Rosen v. Rosen, the language in the property settlement agreement relating to the payment of $ 375,000 was a part of a complicated distribution structure of marital property, and therefore was entitled to the same conclusiveness and finality as any other judgment that applies to Rule 4:50-1, according to which relief from a judgement may be allowed for certain specified reasons. Under New Jersey case law, such equitable distribution provisions, in property settlement agreements have been held as binding as long as there was no fraud, misconduct, or unfairness shown.

Still, New Jersey courts have allowed for the modification of property settlements agreements according to the catch all provision in Rule 4:50-1, paragraph (f), that allows for the modification of property settlement agreements for “any other reason justifying relief,” when the moving party has made a showing of unfairness and inequity. A showing of misconduct or fraud by a spouse who fails to divulge the actual worth of his or her assets as also been held as proper basis for relief to be granted under Rule 4:50-1(f) as long as the motion is filed within a reasonable period of time. Ultimately, a motion filed under paragraph (f) of Rule 4:50-1 is reviewed under the sound discretion of a Family Part judge.

In Rosen v. Rosen, Arthur failed to establish a showing to modify the property settlement agreement under any of the factors enumerated under Rule 4:50-1, including paragraph(f). Arthur did not allege any occurrence of fraud or mistake in the fashion by which the assets were divided under the equitable distribution section of the property settlement agreement. There was no argument that the property settlement agreement signed in 1981 was equitable and fair. Actually, the property settlement agreement was beneficial to Arthur because he benefited from the ten year payment deferral while the predominant interest rate in 1981 and 1982 surpassed twenty percent, and he was only obligated to pay eleven percent to Milly Sue.

Furthermore, according to Milly Sue’s accountant if Arthur prepaid the $ 375,000 owed in the property settlement agreement, and Milly Sue invested the money in AAA bonds, she would only yield 6.75 % annually, compared to the 11 % she received under the property settlement agreement. She would actually need close to $ 611,111 to produce the $ 41,250 she currently received. Moreover, she would only receive payments every six months, rather than the quarterly payments she received under the property settlement agreement. It was true that a prepayment would benefit Arthur due to the revisions in the federal tax laws, but it would also cost Milly Sue a significant amount of money based on the present interest levels. Both Milly Sue and Arthur bargained for, and mutually agreed to the 10 year delay of payment, and Milly Sue alleged that, at the time of the agreement, she structured her financial planning based on an expectation that the 11 % annual yield, to be paid quarterly, would stay constant over a 10 year period.

The New Jersey Appellate Division was satisfied that allowing prepayment would be a significant change in the equitable distribution scheme agreed to by both Milly Sue and Arthur, and therefore would be unfair under the circumstances. Therefore, the order of the Family Part was denied.

If you or a loved one is facing a divorce, our law firm invites your inquiry.