Marital Settlement Agreement Issues Post-Divorce in New Jersey

In a recent New Jersey appellate case, a couple married in 1997 and separated in 2007. The husband sued for divorce in 2010, and the divorce came through in 2013. The divorce judgment incorporated a marital settlement agreement.

The husband appealed a post-judgment order that enforced equitable distribution of the marital home, transferred the obligation to make mortgage payments, and provided the husband with sole responsibility for the couple’s unpaid income taxes. The wife argued it should be affirmed.

The wife had filed the motion at issue in 2015, when she found out the mortgage’s balance was higher than what the couple had understood when creating the settlement agreement. She had also filed a motion after learning there were recorded federal income tax liens on the couple’s home that were more than what the home was worth. Because of these liens, the wife couldn’t close on a home sale contract set for 2015.

The lower court ordered the husband to take back title to the home and pay the wife $75,000 to address the loss she’d faced due to the liens. It also required the husband to pay $75,000 in 15 $5000 installments starting in 2016, plus interest and a counsel fee.

The husband didn’t argue about the amount of the award, but acknowledged he was liable. However, he argued that the judge had failed to consider whether he could pay $75,000 at the rate the court had established. He also argued there should be no counsel fee, since the amount exceeded the actual charges the defendant had been charged.

While married, the husband had worked as a recording artist, performer, producer, and composer. He made money off royalties and profit. The wife helped him during their marriage while he toured. She had no significant earnings. His average income was $211,000 in the four years before they divorced, and her earnings were imputed to be $35,000 per year. The wife’s earnings were imputed to be $35,000 annually. Plaintiff focused on music and entrusted his managers to handle his personal finances and write his checks.

The wife agreed to reduced alimony of $3500 each month for 56 months in exchange for an agreement that they would equitably distribute the property. The wife was to get the marital home and the equity in it free of the husband’s interest. The husband had bought the home before they married, and title was in his name. The couple agreed the home should be valued at $300,000. It had about $70,000 equity and a $230,000 mortgage. The husband told the wife he wasn’t aware of any judgment or lien against the property.

The husband also assumed sole responsibility for his liability for income taxes and promised to indemnify the defendant and hold her harmless regarding his liability. The settlement agreement addressed transfer of the title and responsibility for paying the mortgage from the plaintiff to the defendant. The plaintiff agreed to bring payments current and pay alimony starting in 2013.

The couple didn’t follow the transfer plan. The husband didn’t bring the mortgage current because he hoped to get a loan modification from the bank. He made three trial payments, and on the third payment, a modification took effect. However, the loan modification added $37,584.91 to the principal.

The couple disagreed about why they had to deviate from the payment plan, but the husband didn’t provide information to the wife about what she needed to know to pay the mortgage until later. The wife asked for documentation from the lender and her ex-husband, but the ex-husband didn’t give her that information. She concluded she couldn’t afford the payments and listed the home. She filed a motion to enforce the settlement agreement, and the judge ordered the husband to sign authorizations so that the mortgage lenders could release information.

The wife received and accepted an offer to buy the home. She moved. The tax liens were disclosed by a title search and were $610,197.10. The notices showed the amount was less. The wife asserted that the husband had failed to disclose the liens at the time of the divorce and tried to enforce their equitable distribution agreement, or an order that compelled him to remove recorded liens on the home or retake the deed and pay off the expenses she’d incurred and the amount she’d lost with the sale.

The judge didn’t believe the husband’s denial of knowledge about the tax liens. The judge made an award based on the wife’s lost sale and decided the husband had actual and constructive knowledge about the tax liens at the time of the divorce, and had acted in bad faith with regard to the divorce judgment. The husband appealed.

The appellate court explained the husband had the burden of proof on the issue about whether he was unable to perform the promise to hold the wife harmless under the settlement agreement. However, it found that the award of counsel fees had to be vacated and reconsidered with a complete certification of services that allowed for a proper assessment. The part of the order dealing with counsel fees was vacated, while the rest of the order was affirmed.

If you are considering a divorce in Bergen County, and you are concerned about property distribution, it is important to retain an experienced and aggressive family law attorney to seek an appropriate outcome. Contact the lawyers of Leopold Law at (201) 345-5907 or through our online form. We have attorneys available who can handle all aspects of a divorce.