JENNIFER MARIANA VS. HENRY MARIANA (FM-18-0573-18, SOMERSET COUNTY AND STATEWIDE) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE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-1240-19
JENNIFER MARIANA,
Plaintiff-Respondent/
Cross-Appellant,
v.
HENRY MARIANA,
Defendant-Appellant/
Cross-Respondent.
_________________________
Argued February 23, 2021 – Decided March 29, 2021
Before Judges Yannotti, Mawla and Natali.
On appeal from the Superior Court of New Jersey,
Chancery Division, Family Part, Somerset County,
Docket No. FM-18-0573-18.
Jennifer R. Haythorn argued the cause for
appellant/cross-respondent (Pellettieri, Rabstein &
Altman, attorneys; John A. Hartmann, III, of counsel
and on the briefs; E. Elizabeth Sweetser, on the
briefs).
Bonnie C. Frost argued the cause for
respondent/cross-appellant (Einhorn, Barbarito, Frost
& Botwinick, PC, attorneys; Bonnie C. Frost, Matheu
D. Nunn, and Jillian P. Freda, on the briefs).
PER CURIAM
In this post-judgment matrimonial action, defendant Henry Mariana
appeals from a September 4, 2019 order: 1) denying his motion to compel
plaintiff Jennifer Mariana to pay certain tax liabilities related to the parties'
investment accounts and his request for attorneys' fees, and 2) granting
plaintiff's fee application. Defendant also appeals from the court's November
9, 2019 order denying his motion for reconsideration. Plaintiff cross-appeals
from that portion of the November 9, 2019 order which denied her application
for additional counsel fees associated with opposing defendant's motion for
reconsideration.
For the reasons that follow, we vacate the September 4, 2019 order and
the November 9, 2019 order, in part, and remand for a plenary hearing
concerning the proper interpretation of the parties' marital settlement
agreement (MSA). Specifically, we conclude additional development of the
record is necessary with respect to the parties' intent regarding their respective
responsibility for state and federal taxes associated with certain investment
accounts. We reject, however, plaintiff's cross-appeal and affirm the court's
decision denying her request for attorneys' fees.
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I.
On December 11, 2018, the court issued a final judgment of divorce
which terminated the parties' nearly twenty-year marriage and incorporated the
terms of the MSA. The MSA, which the parties characterized as "fair, just,
adequate[,] and reasonable," awarded plaintiff $255,000 in lump sum alimony
and also addressed issues related to medical and life insurance, and the
equitable distribution of the marital property and retirement accounts.
The parties acknowledged that the MSA was a final, negotiated, and
integrated agreement and its purpose was to resolve completely "all questions
regarding support and equitable distribution of the assets of the marriage . . . ."
Consistent with that goal, the MSA contained broad and mutual general
releases.
Paragraph 14 addressed the division of five of the parties' investment
accounts, two of which—account numbers 3772 and 4052—are the subject of
this appeal. Paragraph 14 provided:
The assets in the above-listed investments accounts
shall be equally divided "in kind" between the parties
to equalize the potential taxes and/or losses to each
party. The parties shall work with their brokers and/or
a mutually acceptable accountant to divide these
investment accounts "in kind" within ten . . . days of
the date of this [a]greement. The cost of the broker or
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mutually acceptable accountant, if any, shall be
equally shared by the parties.
In paragraph 25 both parties represented that: 1) there are no
outstanding debts in their joint names; 2) they have not incurred any debts or
obligations for which the other may be liable; and 3) if "either party has
incurred such debts or obligations, they shall be solely responsible for them
and, in the event that the other party is called upon to make any payment or
contribution towards the same, they shall indemnify and hold said party
harmless . . . ."
Finally, the parties agreed to file separate 2018 state and federal income
tax returns and acknowledged in paragraph 38 that there may be tax
consequences associated with the equitable distribution of the marital property.
They also acknowledged they could "obtain independent tax advice from
qualified tax accountants or tax counsel" prior to executing the MSA.
Approximately eight months before signing the MSA, defendant
exercised, with plaintiff's knowledge and consent, certain stock options
obtained from his prior employment. Believing that all required taxes were
withheld, defendant deposited the net proceeds in account number 4052 and
purchased mutual funds. The parties thereafter liquidated those investments
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and distributed the funds in account number 4052, along with the remaining
accounts listed in paragraph 14, in accordance with the MSA.
After defendant filed his 2018 state and federal tax returns, he was
advised that he was responsible for additional taxes because his investment
advisor under-withheld taxes related to his exercise of the options. Further,
account numbers 4052 and 3772 had untaxed dividends and capital gains. As a
result, defendant requested plaintiff pay him fifty percent of the assessed tax
liability.
Plaintiff refused defendant's request and he accordingly filed an
application to compel plaintiff to pay her share of the tax liability or to permit
him to make an appropriate reduction in his remaining payment obligations
under the MSA. In support of his motion, defendant certified that "[p]laintiff
and [he] were both unaware that additional taxes and fees would be owed" on
exercising the stock options at the time of the division of the accounts in
paragraph 14. He specifically requested plaintiff pay him $143,909.39, which
allegedly represented her share of the tax liability related to the exercise of the
stock options and the 2018 dividends and capital gains on account numbers
4052 and 3772.
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Plaintiff opposed defendant's application and cross-moved to enforce the
terms of the parties' MSA. In support, plaintiff certified that she did not
understand paragraph 14 to "require[ her] to share in the[] . . . taxes that
[defendant] incurred." She also certified that "[a]t no time when [she and
defendant] were negotiating [the MSA], did [d]efendant advise [her] or [her]
attorney that there would be additional taxes owed as a result of exercising the
. . . stock options."
Plaintiff stated if she had known about "such a potential tax problem
. . . , it would have impacted [her] willingness to make other concessions" such
as her waiver of her right to challenge defendant's alleged improper transfer of
marital assets and her acceptance of a limited lump sum alimony award as
opposed to an open durational award. Finally, plaintiff requested $5,562.50 in
attorneys' fees and costs with regard to her cross-motion, which she supported
with a certification of services.
After considering the parties' submissions and oral arguments, the court
issued a September 4, 2019 order that: 1) denied defendant's request that
plaintiff contribute to the under-withholding or untaxed income on dividends
and capital gains related to account numbers 4052 and 3772, 2) granted
plaintiff's request to enforce certain provisions of the MSA, 3) denied
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defendant's request for attorneys' fees, and 4) awarded plaintiff $5000 in
attorneys' fees.
In the court's corresponding written statement of reasons, it noted that
defendant was assessed additional state and federal taxes associated with
account numbers 4052 and 3772 "because most of the marital assets divided
were attached to his social security number . . . ." The court explained,
however, that it could not determine based on the motion record precisely how
much of the disputed tax liability related to the parties' marital assets.
Relying on paragraph 38 of the MSA, the court found that defendant
exercised the stock options "eight . . . months prior to the execution of the
MSA" and concluded "[d]efendant had ample time to explore all issues related
to tax consequences and to further negotiate based upon the anticipated tax
burden." In this regard, the court explained that the MSA called for the
division of accounts "in-kind" and that defendant "should have known that
taxes would be assessed against him."
The court reasoned that paragraph 14 did not include "language
associated with . . . allocating the tax burden" but instead called for the
division of funds after executing the options. The court found that because
paragraph 14 "called for the division of cash in an account, no tax would be
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assessed to either party on that division and [p]laintiff did not agree to be
responsible for the tax associated with the exercise of the options eight . . .
months prior to the MSA execution." The court concluded that defendant was
precluded from seeking a modification of the MSA, as "[n]othing set forth by
[d]efendant was an unforeseeable consequence or should have been unknown
to him." With regard to counsel fees, the court found defendant breached the
terms of the MSA and awarded fees associated with plaintiff's enforcement
efforts.
Defendant moved for reconsideration and certified that he understood
paragraph 14 to require both parties to be "equally responsible for the capital
gains taxes and taxes on dividends emanating" from those accounts. He
maintained that the parties' intent was memorialized in the language of
paragraph 14 that the investment accounts would be divided in kind in order t o
"equalize the potential taxes and/or losses to each party." He further argued
that at the time of MSA the parties did not know of the embedded 2018 tax
liability associated with their investment accounts.
Plaintiff opposed the application and filed a cross-motion for attorneys'
fees associated with the reconsideration application. As to the intent of
paragraph 14, she certified that contrary to defendant's understanding:
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Paragraph 14 is addressing the "in--kind" distribution
of investments, so that both . . . [d]efendant and [she]
would receive one half of all stocks and other
investments when dividing the accounts. The purpose
of having an "in-kind" distribution is to ensure that in
the future [they] would have similar tax treatment for
the income generated by those assets after the
division. Paragraph 14 is contemplating future tax
consequences associated with the division of these
assets; that is precisely why the [MSA] says, "The
assets in the above-listed investment[] accounts shall
be equally divided 'in-kind' between the parties to
equalize the potential taxes and/or losses to each
party."
In a November 8, 2019 order and accompanying written statement of
reasons, the court denied defendant's motion for reconsideration. The court
interpreted the phrase in paragraph 14 requiring the "assets . . . [to] be equally
divided 'in kind' between the parties to equalize the potential taxes and/or
losses to each party," to mean "that once the parties divide . . . the accounts,
any future sales of the assets would contemplate the future tax consequences
. . . ."
Finally, the court rejected plaintiff's request for counsel fees and
concluded that despite its disagreement with defendant's arguments,
"[d]efendant did not file [the] motion in bad[ ]faith." This appeal followed.
On appeal, defendant contends the court improperly interpreted the MSA
contrary to New Jersey law and erred in failing to require plaintiff to reimburse
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him for fifty percent of the taxes assessed against him with respect to account
numbers 3772 and 4052. Specifically, he argues the court erred by: 1) failing
to "consider the MSA as a whole," 2) not "ascertain[ing] the parties' intent and
effectuat[ing] that intent," 3) failing to "consider ambiguit[ies]" in the MSA, 4)
"ignor[ing] that the record obviously evidenced ambiguity," 5) "inexplicably
constru[ing] paragraph 14 to mean 'future sales' of the assets divided in kind,"
6) finding paragraph 14 "clear and unambiguous" despite "ascrib[ing] a
meaning to [it] different than that of both [defendant] and [plaintiff]," and 7)
failing to hold a plenary hearing. 1 As noted, in her cross-appeal, plaintiff
contends the court erred in refusing to award her attorneys' fees associated
with her reconsideration application.
II.
We begin with an examination of the applicable legal principles. As the
issue before us involves the interpretation and construction of a contract, our
review is de novo. Manalapan Realty, LP v. Twp. Comm. of Manalapan, 140
N.J. 366, 378 (1995); Kaur v. Assured Lending Corp., 405 N.J. Super. 468,
1
We note that defendant filed an application to supplement the record. We
deferred adjudication of the motion in order to consider the motion in the full
context of the arguments on appeal. We now grant the motion and conclude it
does not alter our decision.
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474 (App. Div. 2009) (reviewing the enforcement of a settlement agreement de
novo).
New Jersey has long espoused a policy favoring the use of consensual
agreements to resolve controversies, and "[s]ettlement of disputes, including
matrimonial disputes, is encouraged and highly valued in our system." Quinn
v. Quinn, 225 N.J. 34, 44 (2016) (citation omitted). "An agreement that
resolves a matrimonial dispute is no less a contract than an agreement to
resolve a business dispute" and "is governed by basic contract principles." Id.
at 45.
"Among those principles are that courts should discern and implement
the intentions of the parties," and not "rewrite or revise an agreement when the
intent of the parties is clear." Ibid. (citations omitted). "Thus, when the intent
of the parties is plain and the language is clear and unambiguous, a court must
enforce the agreement as written, unless doing so would lead to an absurd
result." Ibid. (citation omitted). However, "[t]o the extent that there is any
ambiguity in the expression of the terms of a settlement agreement, a hearing
may be necessary to discern the intent of the parties at the time the agreement
was entered and to implement that intent." Ibid. (citing Pacifico v. Pacifico,
190 N.J. 258, 267 (2007)).
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A contract is ambiguous if its terms are "susceptible to at least two
reasonable alternative interpretations." Nester v. O'Donnell, 301 N.J. Super.
198, 210 (App. Div. 1997) (quoting Kaufman v. Provident Life & Cas. Ins.,
828 F. Supp. 275, 283 (D.N.J. 1992)). When a contract is ambiguous in a
material respect, the parties must be given the opportunity to illuminate the
contract's meaning through the submission of extrinsic evidence. Conway v.
287 Corp. Ctr. Assocs., 187 N.J. 259, 268-70 (2006).
We are constrained to remand the matter for a plenary hearing because
the parties' common intent with respect to the tax treatment of the accounts in
paragraph 14 is not readily discernable from the MSA. Further, the parties
submitted conflicting certifications regarding who bore responsibility for the
tax liability related to the accounts listed in paragraph 14.
In this regard, plaintiff certified that the disputed language in paragraph
14 related to any future tax liability incurred as a result of the in-kind
distribution and did not address any retroactive tax liabilities. She further
maintained that in other provisions of the MSA, the parties clearly allocated
their respective responsibilities for taxes and similar liabilities and paragraph
14 contained no such explicit language. Finally, she argued that the MSA was
a negotiated and integrated contract and it would be unfair to require her to
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pay the tax liability associated with accounts numbers 3772 and 4052 as she
forfeited the right to open-duration alimony and to challenge defendant's
alleged improper dissipation of marital assets.
In his competing certification, defendant maintained that the language in
paragraph 14 clearly required the parties to be jointly responsible for
embedded taxes and the use of the word "potential" related to the parties' tax
liability, which at the time the parties' signed the MSA was unknown. He
agreed with plaintiff that other provisions in the MSA addressed the allocation
of tax liabilities but argued those provisions expressed the parties' intent to
share equally any associated tax liability related to the marital assets. He also
contended it would be inequitable to require him to distribute the gross
account values of the investment accounts under the circumstances.
Defendant also disputed that plaintiff had a right to an open duration
alimony award as he was unemployed, and plaintiff was working. Finally, he
denied improperly dissipating marital assets.
In the face of these competing certifications, the court resolved the
disagreement by interpreting the disputed language in paragraph 14 to apply
only to future tax liabilities, stating that "once the parties divide[d] 'in kind' the
accounts, any future sales of the assets would contemplate the future tax
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consequences." In our view, a plenary hearing was required to resolve issues
regarding the parties' intent as to their respective responsibility for the taxes
related to the investment accounts in paragraph 14. We reach this conclusion
because the MSA is not clear and unambiguous on this point and is subject to
two different, reasonable interpretations each supported by the parties'
competing certifications. Indeed, the text of the MSA does not clearly limit
the parties' tax liabilities to "future sales" as the court concluded, or to "the
income generated by these assets after the division" as plaintiff certified.
Finally, because the court's award of $5000 in attorneys' fees was based
in part on defendant's failure to comply with paragraph 14, we vacate that part
of the September 4, 2019 order awarding plaintiff counsel fees. Any fee
request and award may be reconsidered, as appropriate, on remand.
III.
In her cross-appeal, plaintiff contends the court abused its discretion in
denying her request for counsel fees and costs associated with opposing
defendant's motion for reconsideration. Specifically, plaintiff maintains
"[d]efendant has not acted in good faith" and "he is not complying with other
terms of the MSA unless and until the tax issues are resolved." Plaintiff also
relies on paragraph 40 of the MSA which allows for attorneys' fees and costs
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"[s]hould either party fail to abide by the terms of [the MSA]." We are not
persuaded by these arguments.
An award "of counsel fees is discretionary, and will not be reversed
except
upon a showing of an abuse of discretion." Barr v. Barr, 418 N.J. Super. 18,
46 (App. Div. 2011) (citation omitted). Rule 5:3-5(c) lists nine factors the
court must consider in making an award of counsel fees in a family action.
Essentially:
[I]n awarding counsel fees, the court must consider
whether the party requesting the fees is in financial
need; whether the party against whom the fees are
sought has the ability to pay; the good or bad faith of
either party in pursuing or defending the action; the
nature and extent of the services rendered; and the
reasonableness of the fees.
[Mani v. Mani, 183 N.J. 70, 94-95 (2005) (emphasis
removed) (citations omitted).]
Here, the court made a specific finding that defendant's motion for
reconsideration was not filed in bad faith. Further, there was no dispute in the
record that the parties were able to pay their respective counsel fees with
respect to the reconsideration application, each having received approximately
$2 million in marital assets, exclusive of retirement accounts. We are satisfied
that the court did not abuse its discretion in denying plaintiff's fee request.
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Affirmed in part, vacated in part, and remanded for further proceedings
consistent with this opinion. Nothing in our opinion should be interpreted as
an expression of our views of the outcome of the remanded proceedings. We
do not retain jurisdiction.
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