New Jersey Family Law Blog

What is a Constructive Trust ?

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Following on from previous blog posts on "What is a Plenary Hearing?", "When to make a Motion for Reconsideration?", "When to Appeal?" and "When is a child emancipated In NJ?", I thought it might be interesting to write about what is a constructive trust and when this might be used in a family law matter ?

Justice Cardozo wrote many landmark opinions and was one of the leading jurists of the twentieth century.  In 1919, while a judge on the New York Court of Appeals (New York State's highest court), he wrote the following definition of a constructive trust that is still good today:

"A constructive trust is the formula through which the conscience of equity finds expression. When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain beneficial interest, equity converts him into a trustee."

Beatty v. Guggenheim Exploration Co., 225 N.Y. 38, 122 N.E. 378, 386 (1919)(Cardozo, J.).

The purpose of a constructive trust is to "prevent unjust enrichment and force a restitution to the plaintiff of something that in equity and good conscience [does] not belong to the defendant." Flanigan v. Munson, 175 N.J. 597, 608 (2003). "Constructive trusts are invoked to prevent unjust enrichment or fraud."  Carr v. Carr, 120 N.J. 336, 351 (1990). It is an equitable remedy that courts have the authority to impose when the facts justify such action.  Flanigan, supra, 175 N.J. at 608.

In Flanigan, grandparents made a claim on behalf of their deceased daughter's children that a constructive trust for the benefit of the children should be placed on the insurance proceeds paid to their daughter's second husband.  The New Jersey Supreme Court held that the decedant's failure to name her children as beneficiaries on the insurance policy was a wrongful act and that the second husband had been unjustly enriched by his receipt of the insurance money.  Flanigan v. Munson, 175 N.J. 597 (2003).

In order to consider whether a constructive trust is warranted, New Jersey courts have adopted a two-prong test, imposing a constructive trust:

1. Where a party has committed a wrongful act and
2. The wrongful act results in a transfer or diversion of property that unjustly enriches the recipie

Id. at 608 (citations omitted).  The "wrongful act" need not be fraudulent to result in a constructive act, a mere mistake is sufficient for these purposes.

Last  year the New Jersey appellate division considered the case of Kay v. Kay, where the executor of the estate of George Kay (who died while his divorce was still pending) sought a constructive trust against the deceased’s wife and her daughter, to prevent unjust enrichment if they retained property belonging to the deceased that should otherwise belong to the estate.

At the time of Kay’s death the parties had already sold the marital residence, with the proceeds held in escrow pending equitable distribution upon finalization of their divorce. Additionally, while the divorce was pending, Kay was pursuing a claim that his wife had diverted marital assets.

In a published opinion, the appellate division held that the estate of a spouse who dies while a divorce action is pending may present an equitable claim over property that could lead to a constructive trust being imposed. Kay v. Kay, 405 N.J. Super. 278 (App. Div. 2009).

On appeal, this decision was affirmed by the New Jersey Supreme Court earlier this year. The Court upheld the right of the executor of an estate to intervene and continue a divorce action in order to recover diverted assets from the surviving spouse, including the right to seek a constructive trust to prevent unjust enrichment.

“[D]epriving the estate of the opportunity to pursue its claim for relief would not serve the policy of promoting equity and fair dealing as between spouses.”

Kay v. Kay,  __NJ__ (2010). A constructive trust is, therefore, a powerful equitable remedy, and its use should be considered by family law attorneys in appropriate circumstances.

At the recent Family Law Symposium run by New Jersey Institute for Continuing Legal Education (NJ ICLE), Frank Louis suggested that a constructive trust could be used to avoid unjust enrichment where there is a palimony claim, but no agreement in writing to make the promise enforceable under current New Jersey law. Seeking the relief of a constructive trust could be a way to prevent the unjust enrichment that would otherwise occur.

Given that New Jersey family courts are courts of equity, it is an interesting argument.  However, it remains to be seen whether a family court would impose the equitable remedy of a constructive trust in such circumstances given that the New Jersey Legislature has enacted S-2091 with the specific purpose of preventing oral palimony claims. No doubt a case will reach the courts and a future appellate opinion will consider this innovative legal argument. 

A family court judge does not have the authority to place preconditions on the filing of post-judgment motions

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In a published appellate decision issued on February 3rd this year in Parish v. Parish, the appellate division issued an important opinion on the limits of the authority of family court judges. In this case, the motion judge issued an order that the parties must first conduct a four-way settlement conference before all future post-judgment motions could be filed.

The appellate division, with a dissent by Judge Ashrafi, held this to be an abuse of discretion absent a pattern of vexatious, frivolous or harassing litigation.  In dissent, Judge Ashrafi did not find the order unreasonable, overly burdensome, unfairly prejudicial nor a violation of due process since it did not fundamentally restrict access to the court, only placed a precondition on it.

A dissent by an appellate division judge is rare as it gives an automatic right of appeal to the New Jersey Supreme Court. Judges use their position to encourage settlements and dispute resolution, so this is an important case that discusses the limits of their authority.

Listen to my audio podcast discussing this decision:

Audio Podcast on Parish v Parish

Do you have a constitutional right to parenting time with your children ?

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That is the question that jumped out to me when I read the June 5, 2009 unpublished appellate decision in Cole v. Cole.  In this case, the father of three young children brought a motion for a change of custody following repeated denials of court ordered parenting time, allegations of parental alienation and concern about the welfare of his children living in a home where there was substantial smoking. The trial court judge denied the motion and request for a plenary hearing. 

On appeal, the appellate panel concluded that the father had failed to show sufficient changed circumstances such that a "genuine and substantial issue" regarding custody existed. The opinion went on to say "[i]f indeed, parenting time is being denied, enforcement remedies should be sought." 

What enforcement remedies did the appellate panel have in mind ? Money damages do not compensate for lost parenting time and it is not something that can ever be replaced. The U.S. Supreme Court has stated that being a parent is a fundamental liberty right protected by the U.S. Constitution, so in the case of divorced parents why does a constitutional right to parenting time not follow ?  If you take that line of argument why shouldn't the default standard for parenting time following a divorce be equality i.e. 50/50 unless the situation of the parties or the age of the children dictates otherwise ? 

Child psychologists have shown that children benefit from having two parents in their lives, so in cases where there is a repeated pattern of parenting time being denied to one parent, children are being harmed as a result.  At some point this must raise a "genuine and substantial issue" regarding the health and welfare of the children that justifies a plenary hearing on the issue of custody.   

I hope that at some point the New Jersey Supreme Court will accept a case that addresses this issue. The Court only hears cases that present questions of general public importance.  Whether divorced New Jersey parents have a constitutional right to parenting time and the appropriate remedies for infringement of those rights is a case I would like to see heard.

Judges must tell those convicted of domestic violence contempt about their right to appeal

The New Jersey Judiciary has just issued a directive to judges that requires them to put on the record the fact that they have advised anyone convicted of violating a domestic violence restraining order ("Domestic Violence Contempt") that they have the right to appeal and that this has to be done within 45 days.

The directive also includes a copy of the "Appeal Rights Form" that informs a defendant about their rights.

Violation of a temporary or final domestic violence restraining order is something to be taken seriously. Not only can a conviction lead to six months in prison, but under N.J.S.A 2C:25-30, the court must impose a 30 day sentence for a second conviction.

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Brodeur must pay $500,000 a year in alimony until 2020

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I previously wrote a blog post about the divorce of NJ Devils star, Martin Brodeur who in 2007 succeeded on appeal in having a judgment of divorce overturned that required him to pay $500,000 a year in permanent alimony.  The appellate division in Dubois v. Brodeur decided that a seven year marriage was too short for permanent alimony and instead he was ordered to pay limited duration alimony.  The case was remanded back to the Essex county trial court to determine how many years he should pay.

Brodeur sought to tie his alimony obligation to the continuation of his NHL career with an end to payments in 2012.  His ex-wife, Melanie Dubois sought payment until 2024 when the parties' youngest child graduated from college.  The judge decided that payment of $500,000 a year in limited duration alimony should end in 2020 when the youngest child graduated from high school and his ex-wife was no longer a full-time child caretaker.

The parties appealed and in a March 19, 2009 unpublished decision, the appellate division upheld the trial court's decision on the length and amount of limited duration alimony, even though this was longer than any previous reported case in New Jersey.  The appellate opinion noted that "the parties always agreed that plaintiff would serve as the full-time caretaker of the children. In order to do so, she requires financial support and defendant earns sufficient income to effectuate the plan."

On the issue of what happens when Brodeur retires as a hockey player, the appellate opinion commented that "nothing precludes a motion to reduce the amount of alimony once defendant retires and his post-retirement employment and income is known."

This decision breaks new ground as to the possible length of a limited duration alimony award in New Jersey: almost fifteen years from the entry of the judgment of divorce in 2005 to the end of secondary education for the parties' youngest child in 2020.  However, the facts and financial situation in this case are unique, so it is not a decision that is likely to set a precedent for others.

Calculating child support for high income earners – the Three Pony Rule.

Image via WikipediaThe August 26, 2008 published appellate opinion in Michael Strahan’s divorce raises the question of how much child support should be paid by high-income earners?

After a divorce trial, Strahan in January 2007 was ordered to pay $214,745 a year in child support for two young children, representing 91% of their $235,984 support needs. On appeal, the appellate division reversed this decision and remanded the child support calculation back to the trial court, finding that the Judge failed to “make an analysis of the reaonableness of the “needs” claimed by defendant [Jean Strahan] on behalf of the twin toddlers.”

The amount claimed by Strahan's wife as child support "needs" included all the mortgage expenses, taxes, utilities, car expenses on her Case Information Statement. In reality only a percentage, if any, should have been allocated to the children. Citing Loro v. Dell Colliano, 354 N.J. Super. 212, 225-226 (App. Div), certif. denied, 174 N.J. 544 (2002), the appellate division noted that while the law is not offended if the custodial parent receives some incidental benefit from expenses paid by child support, they should not be the primary beneficiary. Jean Strahan had waived the right to receive alimony in her pre-nuptial agreement, and child support was not intended as a substitute for this.

Other expenses in the $235,000 child support “needs” over which the appellate opinion expressed concern include $27,000 for clothing the twin toddlers (who apparently required a new outfit every time they saw their father), $36,000 listed for children’s equipment and furnishings without any explanation of what this covered, and $30,000 for landscaping without any explanation as to why the children needed this. However, it is the custodial parent who bears the burden of establishing the reasonableness of the child support expenses claimed. Accardi v. Accardi, 369 N.J. Super. 75, 88 (App. Div. 2004).

On the issue of child support, the appellate opinion concluded that the trial court:

“failed to make the specific findings of fact necessary to sustain its decision as to the amount of supplemental child support. The trial court had merely accepted the children’s “needs” as they appeared on her Case Information Statement."

So how do courts set the child support for high income earners? If parents earn a combined net income in excess of $187,200, a Judge can order the payment of supplementary child support in addition to the amount indicated by the New Jersey Child Support guidelines. In deciding the supplementary amount, in Strahan's case $200,000, the Judge must consider the statutory factors set forth in N.J.S.A. 2A:34-23(a), the most important of which is (1) Needs of the Child.

“Judges must be vigilant in providing for the ”needs” consistent with the lifestyle without overindulgence.” Isaacson v. Isascson, 348 N.J. Super. 560, 583 (App. Div.), certif. Denied, 174 N.J. 364 (2002). The litmus test of what is reasonable is the Kansas “Three Pony Rule” which states that “no child, no matter how wealthy the parents, needs to be provided [with] three ponies.” Id. at 583 (quoting In re patterson, 920 P.2d 450, 455 (Kan. App. 1996).

What this means is that a Judge has a lot of discretion in determining what the reasonable needs of a child are, but even children of high income parents can only sleep in one bed at night, and a common sense test needs to be applied to what is being claimed on their behalf. In Strahan’s case some over-reaching appears to have occurred and his child support will be lower than the $214,745 a year he was originally ordered to pay.

When to Appeal ?

If you are thinking about a making an appeal, then the following post may be of interest to you.

An appeal as a matter of right is allowed from all final judgments or orders so long as this is made within 45 days of the entry of the order of judgment. This means that you can appeal post-judgment motions which are considered final, but cannot appeal interim relief such as pre-divorce “pendente-lite” motions that are not yet final until the divorce.

The role of the appellate court is to “determine whether the result could reasonably have been reached by the trial court based on the evidence, or whether it is clearly or unjustly distorted by a misconception of the law or findings of fact that are contrary to the evidence.” Perkins v. Perkins, 159 N.J. Super. 243, 248 (App. Div. 1978). An appeal is not a second opportunity to re-argue the case and is not something to be considered lightly.

Firstly it is costly and while hard to generalize, you could expect to pay an experienced appellate advocate $5,000 to $10,000 plus the filing and transcript costs. Secondly, while the appeal is pending, and it takes about a year before a decision is reached, none of the issues on appeal can be modified by the lower court. So for example if you were appealing a child support order and wanted to bring a motion for changed circumstances to modify it during the pendency of the appeal, this would first require the granting of a motion for a limited remand by the appellate division.

Some bring an appeal to gain greater understanding, others out of frustration at the judge’s decision or to make the other party incur further expense. However, “[m]ore than a feeling of dissatisfaction is needed to fuel an appeal. It is a mistake for parties to seek satisfaction in this court simply because it has eluded them in trial court. The advantage sought here is apt to be illusory.” Perkins, supra, at 248. An experienced appellate lawyer should be able to offer a sense of the merits and chances for success in a case based on the applicable appellate standards of review.

The possible illusory nature of appeals may stem from a lack of understanding of the limited review an appeal affords. A guide to the standards of review on appeal can be obtained on the New Jersey Judiciary web-site. If you are truly interested in winning on appeal then there are three key questions to consider:

1. Did the trial judge make findings of fact?
A trial judge must make findings of fact and state conclusions of law. New Jersey Court Rule 1:7-4. The judge is required to put these findings on the record either orally or in writing. After the appeal is filed, a trial court judge has the opportunity to provide the appellate division with a supplemental opinion. Frequently in the case of a motion, the judge will review the file and amplify their opinion in more detail as a result.

The trial judge must clearly state the factual findings and relate those findings to relevant legal conclusions "so that the parties and the appellate courts may be informed of the rationale underlying [the] conclusion." Esposito v. Esposito, 158 N.J. Super. 285, 291 (App. Div. 1978). "Naked conclusions do not satisfy the purpose of R. 1:7-4.” Curtis v. Finneran, 83 N.J. 563, 570 (1980). The scope of appellate review of a trial court's fact-finding function is limited and is not to re-try the case, but consider whether the judge made findings of fact and whether they were reasonable based on the evidence. Deference is also given by the appellate division to the factfinding undertaken by the family court due to their specific expertise in this area. Cesare v. Cesare, 154 N.J. 394, 413 (1998). However, failure to make findings of fact by the trial judge is grounds for a remand.

2. Are the findings of fact supported by substantial credible evidence ?
If a trial court judge has made findings of fact, then the general rule is that these are binding on appeal when supported by adequate, substantial, credible evidence." Cesare, supra, 411-12. This means that if the judge reviewed exhibits or case information statements and then made specific findings of fact, or if a judge holds a plenary hearing and takes into account the credibility of the witnesses when giving their testimony, the appellate division will be bound by the judge’s findings. This does not mean that another judge might not have decided it differently, only that the role of the appellate division is not to re-try the case or rehear the motion de-novo on appeal when they don’t have the benefit of hearing the witnesses and reviewing the exhibits.

A case that highlights this is the unpublished decision in Osworth v. Ehlers, A-0060-05T5 (App. Div. July 14, 2006). Here after reviewing certifications, case information statements and limited testimony, the motion judge made findings of fact that the only way someone could afford the assets and lifestyle they had, must be by undeclared cash from the businesses they were involved with. Based on the deference the appellate division places on fact finding supported by substantial credible evidence, the motion judge’s decision was affirmed.

If the trial or motion judge made findings of fact then they are binding on appeal when supported by adequate, substantial, credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974).

3. In any discretionary decision, was the trial judge reasonable ?
The other main area that frequently appears in family appeals is whether the judge abused their discretion in deciding a particular matter. Family part judges have considerable power to exercise their discretion in how to equitably decide a case and balance the fairness to the parties and best interests of the children. Discretionary decisions come into play in the amount of an alimony award or how to allocate assets during equitable distribution. Another example of this frequently seen in post-judgment motion practice is the allocation of counsel fees, which is entirely at the discretion of the judge. See Salch v. Salch, 240 N.J. Super. 441, 443 (App. Div. 1990). The applicable standard of review by the appellate division of discretionary decisions is whether the allocation falls within a reasonable exercise of the trial judge's discretion. See Borodinsky v. Borodinsky, 162 N.J. Super. 437, 444 (App. Div. 1978).

As an example, in awarding counsel fees a judge has to take into account the factors set forth in R. 5:3-5(c) and the test set forth in Williams v. Williams, 59 N.J. 229, 233 (1971). The second part of the Williams test requires the party against whom counsel fees are awarded to have the ability to pay. Therefore, a judge would abuse their discretion if they awarded counsel fees against a party who did not appear to have the ability to pay. An example of this occurred in the unpublished decision in E.I. v. L.I., A-0589-04T1 (App. Div. June 29, 2006) where there was a significant imbalance in income between the parties, but there was an award of counsel fees against the wife who had the lower income and may not have had the ability to pay. The appellate division remanded this decision for further review by the trial court.

Conclusions
The purpose of this post is to highlight some of the questions that need to be considered when answering the question when to appeal? If you can answer “yes” to the three previous questions then your chances of prevailing on appeal may not be as high as you might like. This brief discussion of appellate practice does not cover all the grounds for appeal e.g. when the judge erred in his interpretation of the law. An experienced appellate attorney should be consulted to review the unique facts of any case and provide legal advice on the merits of an appeal.

A motion judge’s decision that is arbitrary and not based on controlling legal principals will be reversed

The appellate division is required to give deference to a family judge’s findings of fact, however in today's unpublished decision in Miller v Miller, the motion Judge’s decision was reversed because it was “arbitrary” and “controlling legal principles were also ignored.”

In Miller, a family judge placed a restraining order on the mother’s boyfriend’s interaction with her minor children due to allegations that he had spanked the children. However, despite a DYFS investigation subsequently concluding that the spanking allegations were unsubstantiated, the motion judge refused to lift the restraining order.

It is not uncommon for there to be competing versions of events and different stories that take place in family proceedings. Where this occurs, a plenary hearing is required. As the appellate opinion notes,

“A court may not find a fact material to the disposition of a motion by selecting among competing versions of events or various opinions about the best interest of children reported in affidavits. If the affidavits submitted on a motion are sufficient to raise a genuine factual issue, "disputes implicating the welfare of a child and involving conflicting contentions . . . must be submitted to a plenary hearing." Fusco v. Fusco, 186 N.J. Super. 321, 329 (App. Div. 1982).

It is all too easy for a motion judge to cherry pick through competing certifications to find evidence that supports his or her frame of reference. In this case, the only evidence of spanking was the hearsay of the children contained in DYFS reports, and if the Judge had wanted to accept this as evidence then he needed to provide an opportunity for testimony and cross-examination i.e. a plenary hearing.

Bearing in mind that DYFS came to conclusion the allegations were unsubstantiated, it is unclear why the motion judge did not accept their report ? The appellate opinion goes on to conclude that in addition to a lack of substantial, credible evidence, the motion judge also ignored several controlling legal principles. Indeed, in a footnote the opinion concludes that the court lacked jurisdiction to enter the restraining order in the first place, since the mother’s boyfriend was never made a party to any action.

As a reflection of the weakness of the motion judge’s decision, the appellate panel did not even remand for a hearing or further testimony but reversed the decision.

"Take me up on appeal"

In the recent unpublished decision in Gordon v. Levick, A-5656-04T2 (App. Div. July 13, 2006), the plaintiff attempted to point out to the motion judge that there was insufficient backup to defendant's support claim of $56,287.52 for tuition, school, camp, clothing and unreimbursed medical expenses only to be told “I’m not gonna let you interrupt…. take me up on appeal.”

‘Where there are factual disputes, the moving party bears the burden of proof to demonstrate that the expenses she is claiming are both legitimate and reasonable. A mere listing of the purported expenses, without more, is insufficient. An evidentiary hearing is necessary under such circumstances before a motion judge can make a fair and reasonable determination on the disputed issues. ”

Accardi v. Accardi, 369 N.J. Super. 75, 87 (App. Div. 2004).

The motion judge in Gordon v. Levick asserted that all the expense issues had been previously addressed in a prior order, however the appellate division disagreed and citing Accardi, remanded for a plenary hearing to explore the factual issues in dispute as to what had in fact been paid and what was owed by the plaintiff.