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Will A Separation Agreement Be Valid In A New Jersey Family Court?

            In my experience as a New Jersey divorce attorney, probably not.  The case below provides two of the primary reasons that the lawyers at our law firm typically do not recommend Separation (a/k/a/ Reconciliation) Agreements: a. failure to make full financial exposure; b. one party is often found to have signed to agreement under duress or due to coercion.  In that case. the Separation Agreement shall be held null and void and all issues ranging from division of assets to alimony are back on the table.

            In Kriss v. Kriss, the parties were married in June 1982 in the Ukraine.  The parties had one child born of the marriage and moved to the United States in 1988.  In 1998, the husband filed for divorce in the Superior Court of New Jersey Family Part; however, the husband withdrew the complaint for divorce a few months later.  After he withdrew, the husband determined that the parties should become financially independent, meaning they should have separate bank accounts and close their joint accounts.  The husband paid the mortgage and other household costs, and the wife paid her own personal costs and for food.  Prior to 2001, the husband worked at several marble and stone businesses.  In 2001, the husband created Krisstone, LLC, which was a construction company specializing in tile and stonework.  The husband owned fifty percent of the company through a separate corporation until 2006 when he became the only owner of the company.  During this time, the wife worked as a bookkeeper. 

            The husband filed a second complaint for divorce in 2003, but the wife begged the husband to drop his complaint so that they could keep their family intact.  The husband agreed to withdraw the complaint for divorce if the wife would sign an agreement that the husband’s attorney prepared without the wife’s attorney’s input.  The agreement stated that the wife had to renounce any interest in Krisstone, LLC and waive alimony if the parties divorced later.  The agreement also stated that the husband would pay for all of the home expenses including the mortgage, utilities, taxes and maintenance.  The wife agreed to sign the agreement without completely reading it and against the advice of her attorney.  Soon after the wife signed the agreement, the husband demanded that the wife pay half of the mortgage as well as home insurance and repair costs.  The wife obeyed with the husband’s demand and the house soon fell into disrepair.  Specifically, the wife’s bathroom did not work for about one year.  The husband filed for divorce a third time in 2011. 

            The wife filed a motion with the court to force the husband to produce his financial records.  The husband then filed a cross-motion to enforce the agreement the wife signed in 2003, which the wife argued was void.  In order to determine if the parties’ reconciliation agreement was enforceable, the trial court judge evaluated and applied the six-factor test established in Nicholson.  When determining whether to enforce a reconciliation agreement, the court should consider: whether the hole in the parties’ marriage was considerable when the promise to reconcile was made; whether the agreement obeyed the statute of frauds; whether the circumstances surrounding the agreement were fair; whether the agreement’s terms were honorable when made; whether the party wishing to enforce the agreement acted in good faith; and whether a change in cirucmstances render enforcement of the agreement unfair.  The wife testified at the plenary hearing that the husband never provided her with any tax returns for Krisstone, LLC.  A plenary hearing is held when there is a dispute of material fact and the judge needs to hear testimony from the parties to resolve the issue.  The husband testified that the agreement was his idea and stated that Krisstone, LLC was very profitable.  He stated that Krisstone, LLC earned millions through commercial projects like shopping malls.  The husband also stated that the parties agreed to orally modify the agreement and that the wife would pay fifty percent of the expenses for the marital home.  The parties agreed to a joint expert report, which valued Krisstone, LLC at $500,000 in April 2004 when the agreement was signed.  The trial judge found that wife’s testimony to be reliable but not the husband’s testimony.  The judge concluded that the alimony waiver and the equitable distribution of Krisstone, LLC were unconscionable.  Additionally, the judge found that the agreement was signed under duress because the wife would have done anything to save the marriage.  The judge found that the husband did not act in good faith under Nicholson, and that the husband violated the part of the agreement that required the husband to pay all the home costs.  Lastly, the judge found that the parties’ circumstances had changed by the time the complaint for divorce was final, which made the agreement unfair under the sixth Nicholson factor. 

            The trial court, under a different judge, ordered the husband to pay the wife $42,000 per year in open durational alimony, which is granted when parties were married over twenty years.  Open durational alimony is paid until the court or parties agree to terminate the obligation.  According to the forensic expert, the husband earned approximately $192,307 per year while the wife earned approximately $70,000.  The trial judge found that the husband had the ability to pay the wife alimony that met her needs.  The judge also rejected the husband’s claim that because the parties paid their own expenses they did not have a marital lifestyle.  Additionally, the court found that the husband’s ownership in Krisstone, LLC was valued at $900,000 as of 2010, and determined that the wife was entitled to $300,000 from the business, which should be credited against what the husband owes the wife for the marital residence.  Lastly, the trial court ordered the husband to pay the wife’s attorney’s fees after reviewing the wife’s billing records and her ability to pay, as well as the husband’s ability to pay.  On March 7, 2016, the judge entered a Dual Final Judgment of Divorce. 

            On appeal, the husband argued that the trial court should have enforced the agreement.  The New Jersey Appellate Division found that the trial judge’s decision was supported by substantial and reliable evidence.  The husband argued that the wife had an attorney when she was given the agreement, but the Appellate Division stated that any advice the wife’s attorney gave was not significant since the value of Krisstone, LLC was not available to the wife.  Similarly, the Appellate Division stated that the wife was not given enough information to waive alimony since she did not know the husband’s income or value of his business.  The Appellate Division also found that the agreement was signed under duress because the wife was intimidated into signing the agreement since the husband was hanging the threat of divorce over the wife’s head; therefore, the wife could not be rational.  Also, the Appellate Division agreed with the trial court and found that the husband did not act in good faith because the husband immediately violated the terms of the agreement after the wife signed by letting the house fall into disrepair and by not paying the total expenses for the house.  The Appellate Division stated that the trial judge’s findings were also supported by credible evidence because the husband assumed sole ownership of his business, which constituted a change in circumstances. 

            With regard to alimony, the Appellate Division stated that there are thirteen factors to evaluate when deciding whether alimony is appropriate, and the amount and duration of said alimony.  The Appellate Division stated that the trial judge’s decision would not be overturned when it was supported by adequate evidence and there was no abuse of discretion.  The Appellate Division concluded that the trial judge’s determinations regarding alimony were correct and fully supported by the facts and law.  The Appellate Division also agreed with the trial court regarding equitable distribution.  The court stated that there are sixteen factors to be evaluated when determining how assets should be divided.  The Appellate Division concluded that the trial court did not abuse its discretion in determining equitable distribution.  The court found that the expert’s report and valuation of Krisstone, LLC was uncontradicted, and the husband failed to provide any additional financial documents to prove the value of his company was only $200,000; therefore, the Appellate Division found that the trial court was correct in determining equitable distribution.  Lastly, the husband argued that the court was wrong to order him to pay the wife’s attorney’s fees.  The Appellate Division stated that reversing the trial court’s decision is only appropriate when the court abused its discretion or the court’s decision are so unfair or unsupported by the evidence that an injustice would result.  Furthermore, the court stated that New Jersey’s statutes clearly indicate when an award of attorney’s fees is appropriate.  The Appellate Division agreed with the trial court and affirmed its decision to award attorney’s fees.  The Appellate Division found that the trial court properly evaluated the necessary factors to determine that awarding attorney’s fees was proper.  Ultimately, the Appellate Division agreed with the trial court and affirmed its decision.