THE EMPEROR HAS NO CLAUSE
by Charles C. Abut
II. PRIOR LAW
III. SPECIFIC ISSUES INVOLVING LEPIS
IV. LEPIS CLAUSES
Are anti-Lepis clauses valid?
V. ADVISING THE CLIENT
In the modern law of New Jersey matrimonial practice, no single decision has had the wide-reaching ramifications of Lepis v. Lepis, 83 N.J. 139 (1980). Since Lepis was decided, the concepts of “modification” and “changed circumstances” have had pervasive effects across a broad spectrum of issues encompassing alimony, child support and equitable distribution.
Until Lepis is overruled, the modification of marital contracts will remain the norm, and must be anticipated to the fullest extent.
For the time being, the following observation bears serious consideration by every prudent matrimonial attorney:
“ ‘[P]eople are not inexorably together in this life’ and ‘[t]here does come a time when people even go beyond the scope of Lepis.’ This may well be correct. However, “nothing ... suggests that the limits of Lepis have been approached.”
Adler v. Adler, 229 N.J. Super. 496, 500 (App. Div. 1988).
II. PRIOR LAW
Until Lepis, a marital agreement was no different than any other contract. “Modification” required a showing of unconscionability, fraud or other well-precedented grounds for contractual avoidance. Schiff v. Schiff, 116 N.J. Super. 546 (App. Div. 1993), certif. den. 60 N.J.139 (1972). Under Schiff, a matrimonial litigant had to demonstrate a “far greater showing of changed circumstances” to modify a marital agreement, and only by convincing the court “that to enforce the agreement would be unconscionable.” Schiff, 116 N. J. Super. at 561.
But, in rejecting the Schiff rule of “unconscionability”, Lepis ushered in a “new age” of post-judgment litigation, in which contractual finality has given way to undefined (and undefinable) notions of “fairness”. In fact, the most sweeping part of Lepis is contained in what may be the most overlooked sentence in New Jersey matrimonial law:
“...contract principles have little place in the law of domestic relations”,
Lepis, 83 N.J. at 148.
Subsequent decisions have not hesitated to embrace the doctrinal sea change first announced in Lepis. For example, Rolnick v. Rolnick, 262 N.J. Super. 343 (App. Div. 1993), rejected the “principle of detrimental reliance” in the matrimonial context.
So, the “look and feel” of marital contracts after Lepis has been succinctly summarized:
“The law grants particular leniency to agreements made in the domestic arena, and likewise allows judges greater discretion when interpreting such agreements.” Guglielmo v. Guglielmo, 253 N.J. Super. 531, 542 (App. Div. 1992).
However, it is precisely this type of “leniency” which has given rise to an irreconcilable conflict between two fundamental axioms of New Jersey matrimonial law.
On the one hand, it is well-established that support and equitable distribution issues are inextricably intertwined: Painter v. Painter, 65 N.J. 196 (1974), Harrington v. Harrington, 281 N.J. Super. 39 (App. Div. 1995), Wolliner v. Wolliner, 132 N.J. Super 216 (App. Div. 1975), affd. 68 N.J. 324 (1975). “Changes in need for alimony are implicated by changes in equitable distribution.” Dotsko v. Dotsko, 244 N.J. Super. 668, 682 (App. Div. 1990).
On the other hand, Lepis is not supposed to apply to equitable distribution, Schwartzman v. Schwartzman, 248 N.J. Super. 73 (App. Div. 1991), relying upon Mahoney v. Mahoney, 91 N.J. 488, 498(1982); Monte v. Monte, 212 N.J. Super. 557, 561 (App. Div.1986); Rosen v. osen, 225 N.J. Super. 33 (App. Div. 1988), certif. den.111 N.J. 649 (1988).
The clash between these competing principles is seen in Rosen, supra. In Rosen, the Appellate Division affirmed the trial court’s denial of an application to prepay an equitable distribution of $375,000. Due to changes in tax law, the payor had lost the right to deduct the interest being paid on a 10 year payout. Since the dependent spouse needed the interest income from the payout, the denial of the modification was affirmed. This was because:
“The provision in the agreement regarding the payment of the $375,000 was a part of a complex distributive scheme of marital assets and as such is entitled to the same finality as any other judgment” (emphasis added) (225 N.J. Super. 36).
At present, no authority has provided any satisfactory answer to the anomaly resulting from a lump-sum settlement paid in exchange for an intended “permanent” release of alimony, only to be met with a “change of circumstance” necessitating a “resumption” of the once thought-to-be discharged alimony. Obviously, such lump-sum settlements (and up-front equitable distribution payments) are fraught with danger, given the possibly unlimited reach of Lepis.
III. SPECIFIC ISSUES INVOLVING LEPIS
1. Bankruptcy: A dependent spouse who incurred substantial legal fees in successfully defeating the payor spouse’s attempt to discharge various marital obligations was entitled to increased alimony, based on changed circumstances,Borzillo v. Borzillo, 259 N.J. Super 286 (Ch. Div. 1992). But in Pellitteri v. Pellitteri, 266 N.J. Super. 56 (App. Div. 1993), the trial court was reversed for refusing to hear the supporting spouse’s application to terminate alimony, based on the alleged “unclean hands” of the spouse who successfully discharged in bankruptcy a property settlement obligation to the dependent spouse. It was held that the bankruptcy filing was a constitutionally protected right. Yet, in Siegel v. Siegel, 243 N.J. Super. 211 (Ch. Div. 1990), the court granted the dependent spouse’s application for increased alimony, specifically as compensation for delayed equitable distribution payments, occasioned by the supporting spouse’s bankruptcy. Nevertheless, the accompanying application for counsel fees was denied.
2. Retirement: Deegan v. Deegan, 254 N.J. Super. 350 (App. Div. 1992):
[T]he trial judge will be required to decide one pivotal issue: whether the advantage to the retiring spouse substantially outweighs the disadvantage to the payee spouse. .... It goes without saying that issues of possible voluntary early retirement and the like should be resolved in the first instance at the time of the divorce in a negotiated agreement. No thoughtfulmatrimonial lawyer should leave an issue of this importance to chance and subject his or her client to lengthy futureproceeding such as we have here. 259 N.J. Super. at 358-359.
See also Dilger v. Dilger, 242 N.J. Super. 380 (Ch. Div. 1990) and Horton v. Horton,219 N.J. Super. 76 (Ch. Div. 1987). But in Silvan v. Sylvan, 267 N.J. Super. 578 (App. Div. 1993), it was held that even a good-faith retirement after age 65 might not relieve an alimony obligation.
3. Disability/illness: In Adler v. Adler, 229 N.J.
Super. 496 (App. Div. 1988), the trial court was reversed for denying the dependent spouse’s application for alimony based on loss of employment due to blindness. The parties’ actual knowledge of a congenital eye disorder at the time of their original agreement was not dispositive.
4. Rehabilitative alimony: In Shifman v. Shifman, 211 N.J. Super 189 (App. Div. 1986), a dependent spouse’s motion to convert rehabilitative alimony into “permanent” status was denied as premature, but the application was not subject to a higher burden of proof. Contra: Avirett v. Avirett, 187 N.J. Super. 380 (Ch. Div. 1982).
5. Cohabitation: Gayet v. Gayet, 92 N.J. 149 (1983); Calcaterra v. Calcaterra, 206 N.J. Super. 398 (App. Div. 1985); Frantz v. Frantz, 256 N.J. Super. 90 (Ch. Div. 1992). In Melletz v. Melletz, 271 N.J.Super. 359 (App. Div. 1994), the court refused to enforce a clause that purported to waive the economic component of Gayet.
6. Remarriage: Wei v. Wei, 248 N.J. Super. 572 (App. Div. 1991) held that a supporting spouse’s remarriage and resulting financial obligations to the “new” family did not constitute changed circumstances under Lepis. But in Narvae v. Freestone, 281 N.J. Super. 484 (Ch. Div. 1995), an obligor’s increased expenses due to remarriage presented a changed circumstance, sufficient to reduce support to the dependent spouse.
7. Inheritance: Weitzman v. Weitzman, 228 N.J. Super. 346, 352 (App. Div. 1988) held that a supporting spouse’s post-judgment inheritance was available for support purposes, even where the parties’ original financial circumstances would have prevented such payments.
8. Maturation of children: A dependent spouse’s application for increased child support was granted and affirmed, where children who were 14, 12, 8 and 5 at time of divorce were 17, 15, 11 and 8 at the time of the Lepis hearing, Chobot v. Chobot, 224 N.J. Super. 648 (App. Div. 1988). In addition, certain orders for child support must be reviewed every three years (N.J.S.A. 2A:17-56.8). But the court has no jurisdiction to effect retroactive modifications of child support (N.J.S.A. 2A:17-56.23a, codifying Ohlhoff v. Ohlhoff, 246 N.J. Super. 1 (App. Div. 1991). Yet, this rule was not applied in Mallamo v. Mallamo, N.J. Super. , 654 A.2d 474 (App. Div. 1995), where it was held that a trial court could retroactively modify a pendente litesupport order.
9. Increased/decreased earnings: Rejecting specific language to the contrary in the parties’ agreement, the trial court properly considered the payor spouse’s joint income with a new spouse, in ruling on the dependent spouse’s motion for increased support, Rolnick v. Rolnick, 262 N.J. Super. 343 (App. Div. 1993). But in Avery v. Avery, 209 N.J. Super. 155 (App. Div. 1986), it was improper to consider the dependent spouse’s post-divorce earnings, in a motion by the payor spouse to terminate support. And in Harrington v. Harrington, 281 N.J. Super. 39 (App. Div. 1995), the dissolution of the payor spouse’s business presented a prima facie case for a support reduction hearing. Also, the supporting spouse in Connor v. Connor,254 N.J. Super. 591 (App. Div. 1992) was permitted to “defer” a property settlement payout, based on the changed circumstance of “reduced cash flow”. Query: was this an impermissible modification of equitable distribution?
10. College: The trial court’s grant of the payor spouse’s motion for a reduction of child support (while the child was attending college, paid for by the payor spouse) was reversed in Zazzo v. Zazzo, 245 N.J. Super. 124 (App. Div. 1990). But in Beck v. Beck, 239 N.J.Super. 183 (App. Div. 1990), the payor ex-spouse was entitled to a hearing on the issue of decreased ability to pay child support while assuming college expenses
IV. LEPIS CLAUSES
Are anti-Lepis clauses valid? During the first decade of Lepis litigation from 1980 to 1990, no reported decisions directly addressed the question. Then, from 1990 to the present date, three published opinions have grappled with the issue, and, not surprisingly, reached three different conclusions. As set forth in the following inconclusive trilogy of cases, the answer appears to be yes and no (at the trial level) and maybe (at the appellate level).
A. “As this court finds no public policy to support prohibiting the inclusion of an ‘anti-Lepis’ clause in a voluntary property settlement agreement, no modification shall be granted.” Finckin v. Finckin, 240 N.J. Super. 204(Ch. Div. 1990).
B. “This court respectfully disagrees with the conclusion reached in Finckin, supra, and, for the reasons set forth below, holds that an ‘anti-Lepis’ clause...is contrary to the public policy of this State...Smith v. Smith, 261 N.J. Super. 198 (Ch. Div. 1992).
C. “There is a conflict between two Chancery Division opinions concerning
whether an anti-Lepis clause is enforceable... Smith v. Smith, 261 N.J. Super. 198 (Ch. Div. 1992), Finckin v. Finckin, 240 N.J. Super. 204 (Ch. Div. 1990)... we must give an equivocal answer to the question of whether an anti-Lepis clause is enforceable. It is both yes and no.” Morris v. Morris, 263 N.J. Super. 237 (App. Div. 1993).
V. ADVISING THE CLIENT
Given the wide-ranging effects of Lepis, matrimonial practitioners must discuss its potential ramifications with the client at the earliest appropriate opportunity. Provide a copy of the opinion to the client, and invite an open discussion of the various parameters, including the impossibility of anticipating all future circumstances. Involve the client in the drafting decisions. This should include a review of the problem addressed in Orgler v. Orgler, 237 N.J. Super. 342 (App. Div. 1989), in the context of a prenuptial agreement. In Orgler, the court invalidated the agreement partly because of what it deemed an unenforceable attempt to release unknown facts. If this principle applies to premarital agreements, it is a fortiori all the more true for postmarital contracts.After McGee v. McGee, 277 N.J. Super. 1 (App. Div. 1994), acquisition and valuation dates may be rolled back to a point years before the actual ceremonial marriage. After Jacobitti v. Jacobitti, 135 N.J. 571 (1994), marital obligations may continue well after the death of the parties. Thus, we must anticipate an increasing degree of pressure on attorneys to provide “airtight” contractual solutions. Clients expect finality, and are entitled to get on with their lives, but traditional principles of contract stability and repose will remain illusory, so long as Lepis continues to leave the courthouse doors ajar.
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