NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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-2675-19
KAYVAN KAROON,1
Plaintiff-Respondent,
v.
LISA KAROON,
Defendant-Appellant. _______________________
Submitted April 12, 2021 – Decided May 7, 2021
Before Judges Rothstadt and Mayer.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-1549-19.
Belsole & Kurnos, LLC, attorneys for appellant (Kevin Weinman and Roy E. Kurnos, on the briefs).
Arons & Solomon, PA, attorneys for respondent (Marion B. Solomon and Patricia L. Burris, on the brief).
PER CURIAM
1 Various court orders misspelled plaintiff's name as "Kavon." Defendant Lisa Karoon appeals from a January 29, 2020 order denying
her motion to set aside a marital settlement agreement (MSA) and a February
20, 2020 order awarding fees and costs to counsel for plaintiff Kayvan Karoon.
We affirm.
The facts are based on the testimony and documentary evidence presented
during a January 16, 2020 plenary hearing.
Plaintiff and defendant decided to divorce after nineteen years of
marriage. Prior to filing a divorce action, the couple separated and executed the
MSA. Neither party had counsel during the negotiation and execution of the
MSA. Philip Guarino, an attorney who represented plaintiff's regarding his
business interests and defendant in various personal legal situations, mediated
the matter and prepared several drafts of the MSA, as well as the July 12, 2018
final MSA, a September 7, 2018 addendum to the MSA (addendum), and a
September 19, 2018 Share Transfer Agreement.
On January 11, 2019, plaintiff filed a complaint seeking dissolution of the
marriage on the grounds of irreconcilable differences. Defendant acknowledged
service of the complaint on January 30, 2019, but did not file an answer,
resulting in the entry of default against her. On February 25, 2019, the parties
signed and filed a "final judgment of divorce on consent."
A-2675-19 2 In April 2019, believing she was required to hire an attorney to proceed
with the divorce, defendant retained counsel. On August 9, 2019, defendant's
attorney filed a motion to set aside the default, file an answer and counterclaim,
and extend the time to file a responsive pleading. She also contested the validity
of the MSA, addendum, and Share Transfer Agreement. The judge entered an
order setting aside the default and scheduled a plenary hearing to determine the
enforceability of the MSA and related documents.
I.
At the plenary hearing, the judge heard testimony from three witnesses:
plaintiff, defendant, and Guarino. He also admitted as evidence certain
documents proffered by the parties during the hearing. The judge listed the
documents he considered in his written decision.
A. Defendant's testimony
At the time of the hearing, defendant was sixty-one years old and lived
with her mother in South Carolina. In South Carolina, she worked as "a personal
assistant for elderly people" at a rate of about twenty dollars per hour, six hours
per day, and five days per week, grossing approximately one thousand dollars
monthly. As a breast cancer survivor, defendant worked to qualify for health
A-2675-19 3 insurance and explained she required insurance based on the potential for a
cancer recurrence and other health issues. 2
Defendant explained plaintiff owns a financial securities business and
"invests people's money in stocks and bonds." Prior to owning his own business,
plaintiff worked as a financial advisor for various companies. At plaintiff's
request, defendant never worked during the marriage. Defendant stayed home
and cared for the parties' son, who was born in 1998. According to defendant,
the parties discussed divorce several times during the marriage. Plaintiff
threatened divorce in 2013, 2014, and 2015. In 2015, defendant claimed
plaintiff threatened to kill her before packing his bags, leaving the marital home,
and stating his intent to retain a divorce lawyer. However, plaintiff soon
returned to the marital residence, expressing a desire to resolve the couple's
marital issues.
2 Defendant offered no testimony regarding her current cancer status. Nor did she provide testimony regarding her other health issues. Plaintiff testified defendant had a bilateral mastectomy and reconstructive surgery in 2006 and, as of the January 2019 hearing date, he was unaware of any cancer recurrence suffered by defendant.
A-2675-19 4 The couple remained together until March 2018. At that time, defendant
requested a divorce because she could no longer live in a stressful environment
and stress exacerbated her health condition.
Defendant testified it was plaintiff who suggested using Guarino to
mediate issues related to the dissolution of the marriage. The suggestion was
based on the parties' awareness of the emotional and financial costs associated
with divorce.3 Defendant agreed to retain Guarino because she "wanted it to be
civilized, fair and balanced and [to] keep it simple for [her] son and not stress
him out."
Defendant told the judge she could not remember her first in-person
meeting with Guarino, who lived in France. Defendant believed the two met
face-to-face in "either April or May" and the meeting focused on signing the
MSA so the marital home could be sold by June 2018. Defendant felt pressured
to sign the MSA but did so because the house could not be listed for sale until
the document was signed.
The marital home had a mortgage of $310,000. The house and mortgage
were in defendant's name to protect the asset from lawsuits related to plaintiff's
3 The parties were acutely aware of the toll placed on divorcing families having experienced plaintiff's parents' divorce. Defendant testified plaintiff financed his parents' divorce, incurring nearly $500,000 in legal fees. A-2675-19 5 business.4 The parties used marital funds for the down payment and all home
repairs during the marriage.
Prior to signing the MSA, the parties met with Guarino at plaintiff's office.
Defendant could not remember the exact date but recalled Guarino presented a
written agreement at that meeting. Defendant indicated plaintiff and Guarino
discussed the agreement prior to signing.
Defendant recollected reading a provision in the MSA waiving alimony.
She questioned the provision, stating her entitlement to alimony based on the
length of the marriage. Guarino purportedly responded plaintiff was unwilling
to pay alimony. Defendant also claimed to have discussed alimony with plaintiff
and he responded there was "no way [she was] going to get alimony."
Defendant also told plaintiff and Guarino she was entitled to an interest in
plaintiff's business because she held shares in the business. Guarino explained
plaintiff's business had no value other than plaintiff's sweat equity.
Before meeting in-person, defendant spoke with Guarino on the telephone.
During defendant's direct examination, the judge asked defendant about when
4 Defendant testified all marital assets, including bank accounts, were in her name to protect the assets from creditors seeking to recover money judgments against plaintiff and plaintiff's business. A-2675-19 6 she first began interacting with Guarino. Defendant could not remember dates
or specifics regarding her discussions with Guarino.
Guarino stayed with the parties in the marital home for a several days
before the MSA was signed. Defendant said a face-to-face meeting took place
in plaintiff's office in "March or April" contrary to her earlier testimony that the
meeting occurred in "April or May."
Despite her inability to recall specific details, defendant testified she had
"five minute[] or ten minute" conversations with Guarino, while he was still in
France, regarding the draft MSA. She also acknowledged six or seven drafts of
the MSA were prepared, and Guarino made changes to the document at her
request, including provisions related to the existing car leases, health insurance,
and plaintiff's inheritance. Prior to signing the MSA, defendant told Guarino
several times she "didn't like what [she] saw" in the draft document.
The judge inquired if defendant spoke with Guarino on the telephone prior
to the face-to-face meeting or at any other time and, if so, when. Defendant
responded Guarino "could have called me up and it could have been on the
phone," but she could not recall any specific telephone discussions with the
mediator. According to defendant, her memory is affected by her cancer
A-2675-19 7 treatment and she is unable to remember "intimate details on the date and the
time."5
Defendant did not retain counsel to review the MSA because she lacked
funds to hire a lawyer. Although the couple's bank accounts were solely in her
name, defendant testified she would "never t[ake] money freely on [her] own for
fear of [plaintiff's] behavior or treatment or what would happen to [her] if [she]
did." Defendant feared for her life "[b]ecause [plaintiff] threatened . . . in
December of 2015 that if [she] ever called his mother he would kill [her]."
Defendant also explained when plaintiff became upset with her during the
marriage, he canceled her credit cards, turned off her cell phone, and harassed
and bullied her. Additionally, because she was occupied with caring for the
home and packing in anticipation of moving to South Carolina, defendant was
too stressed to hire a lawyer. According to defendant, neither plaintiff nor
Guarino suggested she speak with an independent legal or financial professional
regarding the MSA.
5 Throughout the hearing, defendant frequently failed to respond to the question presented, including questions posed by the judge. Also, defendant's responses often presented information she wished to impart to the judge rather than answering the specific question, including questions asked by her own attorney.
A-2675-19 8 Throughout her testimony, defendant reiterated feeling constant pressure
and stress regarding the MSA. She emphasized Guarino never reviewed the
MSA with her and, as a result, she failed to understand her legal rights
throughout the mediation process.
Regarding the sale of the marital home, the MSA provided the home was
"to be sold and the proceeds divided equally." In 2018, the remaining mortgage
amount owed on the home was $310,000. Originally, the home was listed for
sale at $700,000 and subsequently reduced to $680,000. There was an interested
buyer at the reduced price, but the buyer failed to tender the deposit money to
proceed with the purchase and no offer was consummated.
According to defendant, instead of selling the marital home, plaintiff
offered to buyout her interest in the home for $240,000 upfront and pay an
additional $10,000 one year later. Defendant was unhappy with the proposed
amount based on the lack of alimony and her financial share of plaintiff's
business. Despite these misgivings, defendant signed the MSA because plaintiff
threatened to make her life "very miserable" if she declined.
Defendant received the agreed upon money from plaintiff, explaining
"[t]he money was already sitting there in [her] name in the bank all along." The
judge asked whether the money used to pay defendant came from funds
A-2675-19 9 belonging to defendant, to plaintiff, or both parties. Defendant maintained she
was paid from her own money in the couple's bank accounts. When cross-
examined on the issue, defendant explained the account from which the payment
was made contained mixture of marital funds from "a long time ago," a
settlement on the marital home, and "some money added into the account that
was in France."
After the transfer of the home, defendant moved to South Carolina.
Defendant used $72,000 of the money she received from plaintiff to pay off the
mortgage on her mother's South Carolina home and add her own name to the
deed. When she left the marital home, defendant took personal belongings,
furniture, and artwork.
Defendant described her relationship with Guarino, referring to herself as
a "serv[ant]" because she cooked and cleaned during Guarino's visits to New
Jersey. When asked about Guarino's personal representation of her in various
legal matters, defendant stated all communications were conducted through
plaintiff. Defendant conceded she wanted "to spend as little as possible on the
divorce," and paid no money to Guarino for his services.
Defendant continued receiving money from plaintiff during the pendency
of the divorce and after the divorce. Pursuant to the Share Transfer Agreement,
A-2675-19 10 defendant received $200 bi-weekly from September 2018 through the end of
2018. In addition, plaintiff allowed defendant to use his credit card, up to $800
per month, until the divorce was final. Plaintiff paid more than $10,000 for
defendant's move to South Carolina. He also paid her cell phone bills and health
insurance and continues to do so. Further, plaintiff paid $2,500 for defendant to
retain her attorney and $48,0000 for the parties' 2018 tax obligation.
Significantly, defendant bore no expenses associated with her son. All expenses
associated with the parties' child are paid by plaintiff.
Defendant testified plaintiff lacked the ability to use his right arm as a
result of a motorcycle accident. She also acknowledged plaintiff suffered from
periodic stomach blockages, requiring past, and anticipated future,
hospitalization. Despite these limitations, defendant stated plaintiff could work
and "never saw him sickly."
Defendant also described the marital lifestyle. The parties lived in a four-
bedroom home, which they renovated during the marriage. Defendant testified
the house was located on a "very nice-sized lot" in a "beautiful neighborhood
with a good school system." During the marriage, the parties drove luxury cars,
traveled, and dined at restaurants. According to defendant, money was never an
issue during the marriage.
A-2675-19 11 Defendant also described her lifestyle since moving to South Carolina,
where she lives in a two-bedroom home with her mother. The home is located
in a gated community with various amenities, including a clubhouse, golf
course, and restaurant. Since moving to South Carolina, defendant has taken
very few trips and lacks her own car. Defendant uses her mother's luxury car
for transportation. Due to health limitations, defendant testified she is unable to
work more than six hours per day, five days per week.
B. Guarino's testimony 6
Since 1982, Guarino has been licensed to practice law in New Jersey. At
the time of the hearing, he worked as a solo practitioner. Guarino first met
plaintiff while representing plaintiff's interest in a commercial lease dispute. He
met defendant through plaintiff and socialized with the couple. In addition to
representing plaintiff, Guarino represented defendant in various legal matters,
including an estate planning matter for defendant's mother. He also represented
the parties' son in legal matters. According to Guarino, he was the parties'
6 Because Guarino resides in France, he testified telephonically. Prior to his testimony, both parties confirmed the voice on the telephone belonged to Guarino.
A-2675-19 12 "family attorney" and occasionally stayed with them when he was in the United
States. Guarino considered plaintiff and defendant to be his friends.
Guarino learned about the divorce from the parties and offered to help "in
any way," eventually acting as a mediator and drafting the MSA. Guarino served
as a mediator "voluntarily for no compensation" and did not request the parties
sign a written agreement for his services.
Guarino testified he acted as a "neutral" and helped defendant, addressing
issues directly with her. He ensured additional safeguards for defendant's
benefits were incorporated into the revised versions of the MSA. Guarino
explained his role to both parties, stating he would act as the mediator and would
not provide legal advice to either party.
Prior to his involvement, Guarino told the judge the parties previously
agreed on a "large game plan," including the following: equal division of the
marital assets; "no alimony because [plaintiff] ha[d] handicaps and didn't think
that he could go on working forever"; and equitable distribution of plaintiff's
inheritance. Guarino explained he dealt with "details such as car leases,
insurance, and that kind of thing." Based on his understanding of the parties'
agreed upon terms, Guarino prepared a first draft of the MSA.
A-2675-19 13 Guarino testified he "went through the [a]greement with [defendant] at
length explaining the various provisions . . . noted her concerns, [and] spoke to
[plaintiff] about the concerns." Her concerns were then "incorporated in a
subsequent draft" of the MSA. Guarino "specifically recall[ed] spending quite
a bit of time with [defendant]," communicating with her in person and on the
telephone "to make sure she understood." He "spent a lot of time trying to
address [defendant's] concerns and going through the [a]greement and the drafts
of the [a]greement and explaining to her clause by clause what everything meant
to make sure she understood and what was in agreement." According to
Guarino, "it was always understood [defendant] wasn't getting alimony," and
she never mentioned alimony to him until she retained an attorney more than six
months after signing the documents.
Based on their communications, Guarino testified defendant understood
the terms of the MSA. Guarino told the judge he wanted "to make sure she was
comfortable with it and understood everything and that she thought it was fair
and that her concerns were allayed, which [he] thought they had been."
Regarding plaintiff's business, Guarino testified defendant "would
relinquish her shares in the company" because plaintiff believed defendant "had
no interest in remaining involved with the business" and she was not involved
A-2675-19 14 in the business during the marriage. Guarino explained the business's value was
limited to plaintiff's sweat equity because "[w]ithout [plaintiff] toiling away and
working, it [wa]s worth nothing." According to Guarino, the business lacked
employees, receivables, inventory, and assets. Guarino prepared the Share
Transfer Agreement, relinquishing any interest defendant had in plaintiff's
business. In return, defendant received $200 bi-weekly from September 2018
through the end of the year.
Guarino testified he was not present when the parties signed the MSA.7
After the parties signed the MSA, Guarino's involvement as the mediator
continued and he drafted the addendum. Guarino was not privy to the parties'
negotiations regarding the sale of the house but was told after-the-fact about
plaintiff's plan to purchase defendant's share of the home. Guarino discussed
the matter with defendant and inserted a clause in the addendum to protect her
"which basically said that if any payment w[as] [sixty] days late, [plaintiff]
would have to immediately cure the arrearage or be obligated to immediately
sell the home and use the proceeds to pay off the mortgage."
7 However, both defendant and plaintiff testified Guarino was present and ran "back and forth between" the parties to discuss the MSA prior to them signing the document. A-2675-19 15 When he learned defendant sought to set aside the MSA, Guarino spoke
with both parties in an effort to resolve the matter. According to Guarino,
plaintiff "was adamant [he and defendant] had an agreement" and believed
defendant was experiencing "emotional issues." Guarino was unsuccessful in
resolving the parties' dispute and concluded the "major" issue involved the
payment of alimony.
When asked whether he acted impartially as the mediator, Guarino
answered affirmatively, indicating there were no issues until April 2019 when
defendant retained an attorney. To demonstrate his impartiality, Guarino
explained he spent most of his time addressing and reviewing the drafts of the
agreement with defendant, "explaining to her clause by clause what everything
meant to make sure she understood" the MSA.
When asked about his prior mediation experience, Guarino testified it was
his first divorce mediation. However, he told the judge he was "no novice," was
"aware of matrimonial law," and previously worked on a divorce case.
Because he was familiar with the parties' financial circumstances, Guarino
did not require the parties to submit a Case Information Statement. He explained
the court rules did not require submission of a Case Information Statement to
participate in mediation. Guarino was questioned at length regarding the
A-2675-19 16 couple's finances and reaffirmed defendant's entitlement to $250,000 under the
MSA.
Regarding alimony, Guarino opined defendant was not entitled to alimony
because plaintiff was handicapped and, in recent years, earned approximately
$70,000. Guarino testified defendant received one half of the parties' assets and
plaintiff's inheritance. He also noted defendant was not obligated to pay any
child support or contribute to college tuition for her son. He denied telling
defendant there was no way she would ever receive alimony because "it was
clear from day one in the [a]greement that there was no alimony" and defendant
"understood that." Guarino also explained to defendant why there was no value
to plaintiff's business. Further, he testified defendant never told him she feared
plaintiff or felt forced to sign the MSA.
Contrary to defendant's testimony, Guarino noted there was no time
constraint related to signing the MSA. To the contrary, negotiations "dragged
on and dragged on," far exceeding the time Guarino anticipated when offering
to assist the parties in dissolving the marriage.
Guarino reiterated notifying both parties he was not their independent
attorney, and they could retain counsel. In fact, he cited Paragraph 25 of the
MSA, which provided:
A-2675-19 17 The parties acknowledge and understand that Mr. Guarino represents neither of them with respect to their domestic dispute and the settlement thereof and that he has acted solely in the role of a mediator. Both during this mediation process and upon completion of the mediation, the parties acknowledge being strongly advised by such mediator to obtain independent legal advice and review of this Marital Settlement Agreement before signing it. The parties understand that they are under no obligation to sign this Agreement at this or any other time and that they can take any extra time desired for additional consultation with independent legal counsel regarding the legality and effect of this Agreement.
C. Plaintiff's testimony
According to plaintiff, when the parties first discussed divorce, defendant
requested half of the house and other items, including payment of her health
insurance. She also expected plaintiff to continue working despite his declining
health and injuries he suffered in a motorcycle accident.8 Plaintiff explained his
ability to continue working is limited as a result of his deteriorating health.
8 Plaintiff suffered internal injuries in the motorcycle accident. Those injuries required seven post-accident surgeries. Anticipating a continued need for surgeries, the doctors inserted a mesh to cover a twelve-inch hole in plaintiff's abdomen. Since implantation of the mesh, plaintiff experienced regular intestinal blockages, requiring six hospitalizations. To return his abdomen to normal, plaintiff requires surgery to remove the mesh. He elected to delay the surgery based on the length of time required for recovery and the reduced success rate for such surgery. A-2675-19 18 Plaintiff testified marital stress contributed to his declining health and his doctor
suggested the parties attend marriage counseling. However, defendant refused
to participate in marriage counseling and requested a divorce. According to
plaintiff, defendant even asked, "when is [Guarino] going to get the papers?"
Plaintiff then sent an email to Guarino with the basic divorce terms and
received a draft MSA a few days later. According to plaintiff, defendant went
back and forth discussing the MSA for about two months until the document
was signed in July 2018. Plaintiff did not consult an attorney prior to signing
the MSA and did not seek or receive legal advice from Guarino.
Subsequent to signing the MSA, the parties listed the marital home for
sale. After reducing the asking price to $680,000, there was only one offer to
purchase the home, which fell through. As a result, plaintiff decided to buy the
house and gave defendant an offer of $250,000, explaining that was the amount
she would have received "between the cash and the equity in the house" minus
a $10,000 discount. Plaintiff explained his calculation assumed the house was
worth $680,000 despite comparable home sales on Zillow at the time, indicating
the house was worth between $580,000 and $590,000.
A-2675-19 19 Upon conveyance of the house, defendant immediately left New Jersey
and took everything, including "the butter tray out of the fridge." Plaintiff
admitted telling defendant she could take whatever she wanted from the house.
Regarding Guarino, plaintiff indicated neither party wanted to spend
money for an attorney since plaintiff's income declined steadily over the years
and defendant was self-employed. He described the relationship between
defendant and Guarino as amicable. According to plaintiff, defendant did not
want alimony because "[s]he wanted to do . . . away with the marriage."
As part of the divorce agreement, plaintiff allowed defendant to use his
credit card up to $800 monthly while she "adjusted to her new life." He also
paid her car expenses until the end of the lease term, cell phone expenses, the
costs associated with her move to South Carolina, health insurance, the couple's
tax obligation for 2018, all expenses related to their son, including his college
tuition, and a $2,500 retainer for defendant's attorney.
Plaintiff testified he came from "old money" as a result of his father's
connections with the Shah of Iran. After his father's death, plaintiff's actual
inheritance was far less than plaintiff and defendant anticipated.9 Plaintiff used
9 The inheritance totaled 200,000 euros. According to plaintiff, the existing exchange rate in United States dollars was about $185,000.
A-2675-19 20 his inheritance money to make the $250,000 payment to defendant. As of
September 2018, when plaintiff agreed to buy the marital home, the Bank of
America account held approximately $210,000. 10 All other accounts held
relatively nominal sums of money. 11
By agreement, the couple's assets were in defendant's name. Plaintiff
explained he feared the couple would lose everything as a result of various
lawsuits against him and his business and his filing personal bankruptcy.
According to plaintiff, defendant was aware of their financial situation and
placed various bank accounts in her name to protect against potential creditors.
Plaintiff described his lifestyle as of the date of the hearing. At age fifty-
four, plaintiff lived with, and provided for, his college-aged son, including the
payment of tuition and related school expenses. Plaintiff maintained the
household, cooked meals for himself and his son, did the laundry, and drove his
10 Plaintiff's inheritance was deposited into the Bank of America account. 11 The couple had an account with $5,000 at Chase Bank and $24,000 held in trust by Guarino from a settlement involving a Marriott timeshare. Additionally, there was a TD Bank account, with an unknown amount of money, retained by defendant. These and other dollar amounts are taken from the testimony adduced at the plenary hearing. We note many of the dollar figures contained in the testimony are unsupported by documents admitted as evidence during the hearing.
A-2675-19 21 son, who was a commuter-student, to and from school. Plaintiff had $3,800 in
his retirement account 12 and health coverage through the Affordable Care Act.
II.
Based on the hearing testimony and documents admitted into evidence13,
the judge issued a January 29, 2020 order and corresponding written decision
denying defendant's motion to set aside the MSA. In upholding the MSA, the
judge explained a marital agreement would be enforceable provided the
agreement was fair, just, and equitable. In determining the MSA was fair, just,
and equitable, the judge focused on the credibility of the testifying witnesses.
The judge found "a significant portion of defendant's testimony
surrounding her version of the events leading to the signing of the Agreement
[wa]s not supported by the evidence." In addition, the judge noted
"[d]efendant's testimony was contradicted by both Guarino and plaintiff on
several important areas." Specifically, the judge believed the testimony of
12 At defendant's request, the parties' son was named the beneficiary on plaintiff's retirement account. 13 The judge included a list of exhibits he considered. Defendant concedes many of the documents included in her appellate appendix were not admitted into evidence and, therefore, not considered by the judge in rendering his decision. We decline to consider documents not admitted as evidence during the plenary hearing. A-2675-19 22 plaintiff and Guarino "that the issue of alimony never arose during the
negotiations, but was only mentioned after the Agreement was signed and the
complaint for divorce was filed by plaintiff."
Nor did the judge find defendant was pressured into signing the MSA
because the house had to be sold by a date certain. To the contrary, the judge
credited the testimony of both Guarino and plaintiff "that the negotiations
occurred over several months" and it was defendant who "was anxious to have
the matter resolved."
Regarding the advice to seek independent legal counsel, again the judge
found credible the testimony proffered by plaintiff and Guarino that defendant
was free to retain her own attorney and advised she should do so because
Guarino was acting as a neutral mediator. In addition, the judge found the
testimony provided by plaintiff and Guarino consistent with the language in the
MSA wherein "the parties acknowledge[d] being strongly advised by [the]
mediator to obtain independent legal advice and review of this Marital
Settlement Agreement before signing it."
With respect to defendant's lack of awareness of the parties' finances and
plaintiff's income, the judge found her testimony "incredulous." Because
plaintiff was a party to several lawsuits during the marriage and filed for
A-2675-19 23 bankruptcy in 2011, the judge explained the parties' assets "including the marital
residence and the bank accounts were placed solely in defendant's name ." He
found "defendant had the 'power of purpose' as she was the signatory" on the
account she used to pay the couple's personal expenses and plaintiff's business
expenses. In addition, the judge noted defendant's awareness of the parties'
finances because the bank statements were addressed to defendant.
The judge reviewed the financial information admitted as evidence during
the hearing.14 Despite having access to all of the couple's financial information,
defendant proffered limited financial evidence during the hearing. Defendant
denied reviewing the couple's tax returns or any other financial documents
during the marriage.
The judge found the couple's "2018 joint tax return, particularly the
Schedule C, Profit and Loss statement show[ed] gross receipts of $594,523 (as
stated on a 1099 form issued by Aegis Capital to plaintiff) and expenses equal
to that amount, netting zero income from plaintiff's business." The 2018 K-1
14 The documents admitted as evidence included the 2018 joint income tax return with attached schedule; the 2017 joint income tax return with attached schedule; the 2017 1099 form from Aegis Capital to plaintiff; and Bank of America account statements from September 2015, November 2016, and February 2018 through September 2018.
A-2675-19 24 schedule15 issued to defendant indicated ordinary business income, reflecting a
distribution in the amount of $116,686, which defendant denied receiving.
Plaintiff's K-1 for the same year reflected his distribution from the business in
the amount of $70,000. The parties' 2017 joint tax return reported a K -1 issued
to defendant for a loss in the amount of $52,245. Defendant failed to produce
any evidence or testimony the income distributions reported on the K -1 forms
were actually distributed to either party. Nor did she provide evidence the
parties' taxable interest in plaintiff's business, as reported in the K-1 forms,
translated into real income.
The judge also found defendant's characterization of plaintiff as
overbearing and threatening not credible. In describing plaintiff's demeanor
during the hearing, the judge noted he was "calm, testified in an even tone, did
not avoid questions, and provided reasonable explanations to questions posed to
him on cross-examination. Plaintiff's physical appearance was far from
threatening . . . . In sum, plaintiff's testimony was believable."
15 A Schedule K-1 is an Internal Revenue Service form that reports each partner's share of a business entity's gains, losses, deductions, credits, and other distributions (whether or not they are actually distributed). The form is used to report the partner's distributive share of the partnership on his or her income tax return. See Internal Revenue Code, 26 U.S.C. §§ 701-704. A-2675-19 25 The judge explained he was unable to observe Guarino's demeanor but
found "his recounting of the events which led to the signing of the [a]greement
r[a]ng true and credible." The judge held credibility findings regarding Guarino
"could be made to support or contradict his testimony from the documentary
evidence and from the fact that the witness is an officer of the court, having an
independent ethical obligation to be truthful."
Contrary to defendant's assertion, the judge found Guarino's testimony
unbiased as he favored neither party. Further, the judge concluded Guarino
displayed no special interest in the outcome of the case. In addition, despite
Guarino's limited experience in the field of family law, the judge determined "he
[wa]s a seasoned attorney and his professional experience was borne out by his
testimony, which was clear, concise and responsive to questions both on direct
examination and on cross examination."
Based on the testimony, the judge determined the parties enjoyed a
"middle-income lifestyle." He also concluded defendant "has been able to
maintain a reasonably similar lifestyle after she accepted the settlement proceeds
and moved to South Carolina," noting she has no obligation to pay child support
or any portion of her son's undergraduate tuition and expenses.
A-2675-19 26 Regarding alimony, the judge concluded "the amount of alimony and the
duration of payment [were] not easily ascertainable and would be the subject of
litigation." Based on plaintiff's "failing health and unsteady earnings," the judge
determined a waiver of alimony would be attractive "in consideration for other
remuneration" and "that is what appears to have occurred." Specifically, the
judge found:
Defendant received one-half of the equity in the marital residence and a considerable amount above that. Although some of the funds paid to her were arguably from marital assets, such as the Marriott settlement, that was the mechanism the parties chose to fund the payment to defendant. Likewise, plaintiff paid a large portion of the monies due to defendant under the Agreement from his inheritance which would have been exempt from equitable distribution.
Finding the MSA was not unconscionable, the judge explained:
[D]efendant actively participated in the negotiations with the mediator, who was not biased in favor of either party. The competent credible evidence presented that defendant did not insist upon alimony or raise the issue of alimony to the mediator during the course of negotiations. Further, contrary to defendant's assertion that she was not familiar with the parties' finances, the court concludes from the evidence that defendant did have access to marital funds and was acutely aware that [plaintiff's] earning capacity was irregular in the past because of several lawsuits, and is tentative in the future due to his health. She was not threatened or coerced by plaintiff. Rather, both plaintiff and defendant desired to dissolve the marriage; and
A-2675-19 27 defendant knowingly and freely waived any right to alimony that she would otherwise be entitled. The evidence does not support defendant's claim that her will was overborn by [plaintiff] and the mediator. Not only did defendant sign the agreement, she accepted the proceeds due to her under the agreement and used them to fund the purchase of an interest in her mother's house in South Carolina. Plaintiff performed his obligations under the Agreement, permitted her to utilize his credit card, and still continues to abide by its terms, paying for defendant's health insurance and cellphone.
In addition, the judge noted the MSA was signed in July 2018 and
defendant received payment under the agreement in September 2018, yet
"defendant did not contest the validity of the [a]greement until several months
later in the Spring of 2019." While the judge remarked defendant "could have
achieved a better outcome had she not signed the [a]greement and proceeded to
litigate the divorce, she also could not have received a better deal [because] there
[wa]s no guaranty of an outcome more favorable to defendant if the Agreement
was not executed."
Based on "the totality of the circumstances," the judge held the MSA was
valid and enforceable. Specifically, he found:
The [a]greement was the product of an arms-length negotiation between the parties and is not unconscionable in its terms. Defendant did not enter into the [a]greement out of necessity or compulsion, nor did the mediator act as anything other than a neutral
A-2675-19 28 party, working with both sides to resolve their financial issues.
After deeming the MSA valid and enforceable, the judge considered
plaintiff's request for counsel fees and costs in enforcing the MSA. Defendant
opposed the motion. In deciding the fee application, the judge applied Rule 5:3-
5(c) and considered the language in the MSA regarding fees and costs. The
judge concluded plaintiff was the prevailing party, entitling him to attorney's
fees. As a result, the judge entered a February 20, 2019 order and accompanying
statement of reasons awarding counsel fees and costs to plaintiff in the amount
of $17,500.
III.
On appeal, defendant renews her arguments the MSA was unfair and
inequitable, and the judge abused his discretion in denying her motion to set
aside the MSA. She also contends the judge's findings were not supported by
substantial credible evidence in the record. Specifically, she claims the judge
incorrectly found she was paid in excess of her share of the marital home, was
not paid with marital assets and did not have an interest in plaintiff's business,
plaintiff's income was unsteady, and her standard of living was comparable to
the marital standard of living. Further, she asserts Guarino was biased based on
A-2675-19 29 his failure to recognize the power imbalance between the parties. In addition,
defendant argues the judge's award of costs and fees was improper. We disagree.
"[A]ppellate courts should accord deference to family court factfinding"
because family courts exercise "special jurisdiction and expertise in family
matters." Cesare v. Cesare, 154 N.J. 394, 413 (1998). Generally, "findings by
the trial court are binding on appeal when supported by adequate, substantial,
credible evidence." Id. at 411-12 (citing Rova Farms Resort, Inc. v. Inv'rs Ins.
Co., 65 N.J. 474, 484 (1974)). "Because a trial court 'hears the case, sees and
observes the witnesses, [and] hears them testify,'" it has a better perspective than
a reviewing court in evaluating the veracity of witnesses. Pascale v. Pascale,
113 N.J. 20, 33 (1988) (quoting Gallo v. Gallo, 66 N.J. Super. 1, 5 (App. Div.
1961)). A trial court's factual findings should only be reversed when they are
so manifestly unsupported by or inconsistent with the competent, relevant and
reasonably credible evidence as to offend the interests of justice. Rova Farms,
65 N.J. at 484 (quoting Fagliarone v. Twp. of North Bergen, 78 N.J. Super. 154,
155 (App. Div. 1963)).
A.
New Jersey "has a strong public policy favoring [the] enforcement of
agreements." Massar v. Massar, 279 N.J. Super. 89, 93 (App. Div. 1995) (citing
A-2675-19 30 Dep't of Pub. Advoc. v. New Jersey Bd. of Pub. Utils., 206 N.J. Super. 523, 528
(App. Div. 1985)). This is particularly true in family actions, where "[t]he law
grants particular leniency to agreements made in the domestic arena" and allows
"judges greater discretion when interpreting such agreements." Guglielmo v.
Guglielmo, 253 N.J. Super. 531, 542 (App. Div. 1992) (citing N.J.S.A. 2A:34-
23).
"Settlement of disputes, including matrimonial disputes, is encouraged
and highly valued in our system." Quinn v. Quinn, 225 N.J. 34, 44 (2016) (citing
Konzelman v. Konzelman, 158 N.J. 185, 193 (1999)). "Marital agreements . . .
are approached with a predisposition in favor of their validity and
enforceability" so long as the agreement is voluntary and deemed "fair and
equitable." Massar, 279 N.J. Super. at 93 (citing Petersen v. Petersen, 85 N.J.
638, 642 (1981)). Our Supreme Court "has observed that it is 'shortsighted and
unwise for courts to reject out of hand consensual solutions to vexatious
personal matrimonial problems that have been advanced by the parties
themselves.'" Quinn, 225 N.J. at 44 (quoting Konzelman, 158 N.J. at 193).
Thus, "fair and definitive arrangements arrived at by mutual consent should not
be unnecessarily or lightly disturbed." Ibid. (quoting Konzelman, 158 N.J. at
193-94).
A-2675-19 31 Alternatively, a "marital agreement which is unconscionable or is the
product of fraud or overreaching by a party with power to take advantage of a
confidential relationship may be set aside." Massar, 279 N.J. Super. at 93 (citing
Guglielmo, 253 N.J. Super. at 541). "The interpretation, application, and
enforceability of divorce agreements are not governed solely by contract law"
but instead derive from principles of equity. Konzelman, 158 N.J. at 194.
In determining whether a marital agreement is fair and equitable, a trial
judge should consider:
[T]he adequacy of the agreement at inception, the presumed understanding of the parties at that time, the reasonable expectation of the parties during the life of the agreement, the manner in which the parties acted and relied on the agreement as well as the previously stated principle that agreements by their very nature carry with them a stability that must be respected at the time of enforcement . . . .
[Glass v. Glass, 366 N.J. Super. 357, 372 (App. Div. 2004) (citing Konzelman, 158 N.J. at 193).]
A trial court must ensure there was no "coercion, deception, fraud, undue
pressure, or unseemly conduct, or if one party was not competent to voluntarily
consent." N.H. v. H.H., 418 N.J. Super. 262, 282 (App. Div. 2011) (quoting
Peskin v. Peskin, 271 N.J. Super. 261, 276 (App. Div. 1994)). If there is no
"unconscionability, fraud, or overreaching in the negotiations of the settlement,
A-2675-19 32 [there is] no legal or equitable basis . . . to reform that parties' . . . ag reement."
Ibid. (quoting Miller v. Miller, 160 N.J. 408, 419 (1999)). Unconscionability is
present when a party's interests are not properly or adequately represented or
there is overreaching by the opposing party. See Quinn, 225 N.J. at 47.
Here, the judge based his findings on the credibility of the witnesses. He
found defendant's testimony throughout the hearing "incredulous." On the other
hand, he found the testimony of plaintiff and Guarino to be consistent and
credible, finding there was no unconscionable, fraudulent, or overreaching
conduct in the negotiation and execution of the MSA. The judge's decision was
based on his credibility determinations, to which we defer, and his finding are
supported by substantial credible evidence in the record.
Defendant's waiver of alimony and relinquishment of any interest in
plaintiff's business did not render the MSA invalid. Defendant wanted to be
released from a stressful marriage and knew the family's finances were unstable.
She also received the parties' monthly bank statements and recognized the funds
in the joint account steadily declined after 2016. In addition, defendant was
aware of plaintiff's deteriorating health and receipt of a significantly smaller
inheritance from his father.
A-2675-19 33 Under the MSA, defendant received $250,000 for agreeing to dissolve the
marriage. The judge found defendant received "one-half of the equity in the
marital residence and a considerable amount above that," and his findings were
supported by the testimony and evidence.
Relying on the testimony and evidence adduced during the hearing, we
accept, as did the judge, the $680,000 reduced sale price as the value for
calculating the parties' interest in the home. 16 Subtracting $310,000,
representing the outstanding mortgage, from the $680,000 listed sale price, the
equity in the marital home totaled $370,000.17 Dividing that amount equally,
the sum of $185,000 represented the party's one-half interest in the marital
home. Thus, the judge correctly concluded the sum paid by plaintiff represented
defendant's one-half share of the couple's assets, including cash and equity in
the home consistent with plaintiff's testimony.18
16 Defendant offered no testimony to support her claim the house was worth $700,000. 17 Because plaintiff agreed to purchase the home, there is no need to subtract a potential brokers' commission. 18 According to the testimony, as of September 2018, there was $210,000 in the Bank of America account, $24,000 held as part of the "Marriott" settlement, and $5,000 in a Chase account.
A-2675-19 34 The judge acknowledged defendant waived alimony and relinquished any
interest in plaintiff's business19 in return for $250,000. However, he found she
reaped other financial benefits from the divorce. For example, defendant has no
obligation to pay any expenses related to her son. Also, above the payment of
$250,000, plaintiff paid for the following: the parties' 2018 tax obligation;
defendant's move to South Carolina; and retainer for defendant's attorney.
Between the date transferring the house and finalizing the divorce, plaintiff
allowed defendant to use his credit card for personal expenses up to $800 per
month. Additionally, under the Share Transfer Agreement, defendant received
$200 bi-weekly from September 2018 until the end of the year. Plaintiff also
pays defendant's medical insurance premiums and cellphone expenses.
Given defendant's receipt of the foregoing financial benefits beyond the
$250,000 payment, it was not unreasonable or unconscionable for her to waive
alimony and relinquish a share in plaintiff's business, especially in light of
plaintiff's declining health and inability to continue earning at the same level as
during the marriage. We agree with the judge's conclusion such payments by
19 To receive equitable distribution of an interest in plaintiff's business, defendant would have been required to retain a forensic accountant. She did not hire an accountant to value the business in connection with the plenary hearing. In fact, defendant did not seek an equity interest in plaintiff's business until she filed this appeal. A-2675-19 35 plaintiff "ma[de] it attractive for a waiver of alimony in consideration for other
remuneration."
Based on the record, we are satisfied defendant was aware of the couple's
finances, urged to retain her own attorney to review the MSA, knew the mediator
did not represent her interests, consulted with Guarino on multiple occasions
concerning the MSA, requested and received modifications to the draft MSA,
and knowingly and voluntarily accepted the MSA. Defendant failed to proffer
sufficient evidence the agreement was unfair, inequitable, or the result of
overreaching or unconscionable actions.
B.
Defendant contends the money she received from plaintiff was marital
property subject to equitable distribution. According to defendant, plaintiff
purchased her share of the marital home using his inheritance which was
commingled with "marital funds and . . . used to pay family expenses" in the
Bank of America account. Defendant claims all of the money in the Bank of
America account constituted marital assets and, therefore, she was not properly
compensated in accordance with the MSA.
Marital assets are subject to equitable distribution upon divorce. See
Genovese v. Genovese, 392 N.J. Super. 215, 225 (App. Div. 2007). Exempt
A-2675-19 36 from equitable distribution is "property, real, personal or otherwise, legally or
beneficially acquired during the marriage of civil union by either party by way
of gift, devise, or intestate succession." N.J.S.A. 2A:34-23(h). If separate
property is commingled, it will be treated as marital property subject to equitable
distribution unless there is "a clearly manifested and unequivocal intent that they
belonged to [one spouse] and would ultimately be returned to [him or] her."
Wadlow v. Wadlow, 200 N.J. Super. 372, 380 (App. Div. 1985).
We reject defendant's argument the judge erred in failing to find plaintiff
used commingled marital assets to pay defendant in accordance with the MSA.
The comingling of the parties' assets was not raised to the trial court and,
therefore, will not be considered on appeal. See Nieder v. Royal Indem. Ins.
Co., 62 N.J. 229, 234 (1973) (quoting Reynolds Offset Co., Inc. v. Summer, 58
N.J. Super. 542, 548 (App. Div. 1959) ("[A]ppellate courts will decline to
consider questions or issues not properly presented to the trial court when an
opportunity for such a presentation is available 'unless the questions so raised
on appeal go to the jurisdiction of the trial court or concern matters o f great
public interest.'")).
Based on the testimony and documentary evidence, as of September 2018
when the house was transferred to plaintiff, the Bank of America account
A-2675-19 37 contained $210,000. After deducting $30,000, which the parties agreed to use
for their son's college tuition, approximately $180,000 remained in that account.
According to the testimony, at least $185,000 in the Bank of America account
represented plaintiff's inheritance to which defendant was not entitled. Because
there were no funds above plaintiff's $185,000 inheritance in the Bank of
America account as of September 2018, plaintiff's use of that account to fund
his payment obligation to defendant was not improper.
Even if the inheritance was marital property, the MSA specified the
parties' agreement on the funds to be used to pay defendant. Paragraph 2 of the
addendum read plaintiff "shall pay [defendant] a total of $250,000, of which
$240,000 shall be paid immediately from cash held at Bank of America, the
Marriott Settlement and cash held at Chase." 20 While defendant may have been
paid with approximately $14,500 of her own money from the Marriott
Settlement and the Chase account, nothing in the MSA prohibited the parties
from voluntarily agreeing to a distribution scheme that deviated from traditional
concepts of equitable distribution. The parties not only agreed upon the amount
20 As of July 2018, when the parties signed the MSA, the account statement from Bank of America reflected the sum of $210,638.22. This amount, plus the $24,000 from the Marriott Settlement and the $5,000 in the Chase Bank account, approximated the $240,000 sum which plaintiff agreed to pay to defendant.
A-2675-19 38 plaintiff would pay defendant, but also agreed which funds would be used to
satisfy the payment obligation, inclusive of plaintiff's inheritance money.
On this record, we are satisfied the parties' agreement to use the Bank of
America account toward satisfaction of plaintiff's financial obligation did not
include commingled marital funds such that defendant was paid with her own
money. In fact, prior to filing her appeal, defendant never claimed the entirety
of the funds in the Bank of America account were marital property.
C.
Defendant also argues the judge's order granting $17,500 in attorney's fees
and costs to plaintiff was improper. Defendant contends the fee shifting
provision in the MSA was unenforceable because it was unfair and
unreasonable. According to defendant, the attorney fee provision benefitted
plaintiff only and discouraged her from challenging the agreement. Defendant
further claims the attorney fee provision was inapplicable under these
circumstances because plaintiff "was not acting to establish or enforce a right
resulting from the Agreement." In addition, she asserts an analysis under Rule
5:3-5(c) supports the conclusion each party should be responsible for payment
of his or her legal fees.
A-2675-19 39 Rule 5:3-5(c) requires a judge consider the following factors in deciding
to award counsel fees in a matrimonial action:
(1) the financial circumstances of the parties; (2) the ability of the parties to pay their own fees or to contribute to the fees of the other party; (2) the reasonableness and good faith of the positions advanced by the parties; (4) the extent of the fees incurred by both parties; (5) any fees previously awarded; (6) the amount of fees previously paid to counsel by each party; (7) the results obtained; (8) the degree to which fees were incurred to enforce existing orders or to compel discovery; and (9) any other factor bearing on the fairness of an award.
[Strahan v. Strahan, 402 N.J. Super. 298, 316-17 (App. Div. 2008) (quoting R. 5:3-5(c)).]
An award of counsel fees should only be disturbed on the "rarest occasion" based
on a "clear abuse of discretion." Id. at 317 (quoting Rendine v. Pantzer, 141
N.J. 292, 317 (1995)).
Here, Paragraph 13 of the MSA provides:
Litigation Fees and Costs. Should any attorneys' fees be incurred in connection with the domestic relations lawsuit to be filed, each party shall bear and pay his/her own attorneys' fees.
If any suit, action or other proceeding (including any proceeding under the U.S. Bankruptcy Code) or appeal from a decision therein is instituted to establish, obtain, or enforce any right resulting from this [a]greement, the prevailing party shall be entitled to recover from the other party. [I]n addition to costs and
A-2675-19 40 disbursements, such additional sums as the court may adjudge reasonable as attorneys['] fees, both in the trial and appellate courts, whether or not such right to attorney fee is established by statute.
The judge relied on the MSA's language in awarding attorney's fees to
plaintiff, finding the agreement did not preclude such an award. To the contrary,
he determined the MSA compelled an award because plaintiff "litigate[d] to
establish, obtain and enforce his rights under the [a]greement." Further, the
judge explained "the attorney fee provision in the [a]greement [wa]s neither
unreasonable, unfair, nor unconscionable," and either party stood to benefit
under that provision in the MSA depending on the outcome of the plenary
hearing.
Beyond considering the language in the MSA governing attorney's fees,
the judge also conducted a Rule 5:3-5(c) analysis. The judge concluded:
Applying the . . . factors, taking into account defendant's limited ability to pay fees to her attorney and to contribute to plaintiff's legal expenses, weighed against the amount charged by plaintiff's attorney, defendant's incredulous position advanced at the hearing, and the favorable outcome to plaintiff, it is fair and equitable that an award of $17,500 for attorney fees and costs be ordered.
We are satisfied the judge did not abuse his discretion in awarding
$17,500 in attorney's fees and costs to plaintiff. Our reading of the MSA does
A-2675-19 41 not preclude plaintiff's ability to obtain fees and costs he incurred litigating the
enforceability and validity of the MSA.
Moreover, the judge engaged in the required analysis under Rule 5:3-5(c)
in awarding fees and costs to plaintiff. His findings were based on credible
evidence in the record regarding the relevant factors, including the parties'
ability to pay, the reasonableness of the parties' arguments, and the parties'
existing financial circumstances.
Defendant's arguments fail to support her claim that the judge's
determinations were so wide of the mark as to result in a clear mistake
mandating reversal. The judge's factual findings and credibility determinations
are supported by the credible evidence in the record, which consisted
predominately of the witnesses' testimony and documents admitted at the
plenary hearing.
Affirmed.
A-2675-19 42