SARA HUTT VS. DAVID HUTT (FM-20-0549-16, UNION COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE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-2117-18T4
SARA HUTT,
Plaintiff-Respondent,
v.
DAVID HUTT,
Defendant-Appellant.
____________________________
Argued January 22, 2020 - Decided August 13, 2020
Before Judges Accurso and Gilson.
On appeal from the Superior Court of New Jersey,
Chancery Division, Family Part, Union County,
Docket No. FM-20-0549-16.
John P. Paone, Jr. argued the cause for appellant
(Paone, Zaleski & Murphy and Hutt & Shimanowitz,
PC, attorneys; John P. Paone, Jr., Catherine Murphy
and Thomas J. Perry, on the briefs).
Brian M. Schwartz argued the cause for respondent
(Schwartz Vinhal & Lomurro Family Law, LLC,
attorneys; Brian Schwartz, on the brief).
PER CURIAM
Defendant David Hutt appeals from a post-judgment order in this
matrimonial action directing him to convey half of the 2017-18 distributions
he received from certain real estate entities to plaintiff Sara Hutt and awarding
her attorney's fees on the motion. He also appeals from the denial of his
motion for sanctions against Sara1 for not filing her motion for her share of the
distributions under seal as required by prior orders.
We find no merit in David's appeal of the denial of sanctions against
Sara and do not address it here. See R. 2:11-3(e)(1)(E). As to the
distributions, we find the terms of the parties' agreements on this issue
ambiguous, rendering the matter incapable of resolution without testimony as
to their meaning. We, accordingly, vacate that aspect of the order compelling
payment of half the distributions to Sara and remand for an evidentiary
hearing. We likewise vacate the order awarding Sara her fees on the motion.
The parties settled their divorce in three partial final judgments,
followed by a marital settlement agreement. In their September 7, 2018 partial
judgment, they agreed to resolve equitable distribution of David's minority
interests in seven real estate entities by establishing a new entity, Hutt
1
Because the parties share a surname, we use their first names here for clarity,
intending no disrespect by the informality.
A-2117-18T4
2
Holdings, LLC, into which David would transfer his interests. David and Sara
would each own half of Hutt Holdings and have an equal entitlement to
income, profits, and distributions and an equal responsibility for any and all
liabilities, including any mortgages, capital calls and income taxes. The
judgment also provides in pertinent part:
Nothing herein shall be construed to limit the right of
either party to seek a credit from the other as it relates
to any capital calls the HUSBAND paid for these
entities pendente lite, and any distributions made in
connection with the HUSBAND’s interest in these
entities pendente lite.
Five days later, the parties entered into a marital settlement agreement
that references Hutt Holdings in paragraph 4.8. The MSA lists the same seven
real estate entities; states that the parties have entered into a partial final
judgment providing for David's transfer of his interests in those entities into
Hutt Holdings, and have executed an operating agreement to form the
company. The MSA also provides that David shall "make diligent effort" to
provide Sara the operating agreements for each of the seven entities; as well as
any notices, letters, emails, accountings or other documents David received in
2017-18 for each entity; and "[a] schedule of all distributions to [David] and
contributions/capital calls made by [David] for 2017 and 2018 year to date
related to each entity."
A-2117-18T4
3
The Hutt Holdings entities are also addressed in paragraph 14.4(c) in the
section of the MSA addressing taxes. That paragraph provides:
[David] has received/will receive the consequence of
operating income or operating loss related to his
interest in the various entities listed in paragraph 4.8,
above. For the tax years 2015, 2016, 2017, and 2018,
the Husband shall be entitled to claim same on his tax
return. For the years 2019 and thereafter, the parties
shall equally divide on their income tax returns any
and all income or losses related to the various entities
listed in paragraph 4.8. Therefore, the Husband shall
provide the Wife with copies of 1099 and K-1 related
to these entities for the years 2019 and thereafter, such
that the Husband and Wife can each declare 50% of
the income and take 50% of the loss on his/her income
tax returns.
The MSA contains the usual clauses that the agreement "contains the
entire understanding of the parties," that "there are no representations,
warranties, covenants or undertakings other than those expressly set forth,"
that each party "waives and relinquishes any and all rights . . . to share in the
property . . . of the other," and "released and discharged . . . the other of and
from all causes of action, claims, rights or demands whatsoever . . . in which
either of the parties ever had or now has against the other," as well as an
express waiver of any claims "to a modification of or adjustment to any of
[David's] pendente lite . . . support obligations pursuant to Mallamo v.
Mallamo, 280 N.J. Super. 8 (App. Div. 1995)." The parties each testified on
A-2117-18T4
4
the record that the MSA and the attached partial judgments represented "a full
settlement of all the issues" of their marriage and that nothing was "left out."
Two months after entry of the divorce, David's lawyer sent Sara's lawyer
a letter containing the schedule of the distributions/contributions and capital
calls for 2017-18 for the seven real estate entities to be transferred to Hutt
Holdings. The parties agree that David received a total of $40,587.67 in
distributions net of capital calls in 2017-18. Sara thereafter filed a motion
seeking half of that sum in accordance with the provision of the September 7,
2018 partial judgment permitting either party to seek a credit relating to
distributions David received from the Hutt Holdings entities pendente lite.
David opposed the motion, claiming the parties' agreement to create Hutt
Holdings was a prospective undertaking to effect equitable distribution of their
assets upon entry of the divorce judgment. He claimed there was no agreement
that Sara would share in his pendente lite income from those entities
retroactively. In support of his argument, David relied on paragraph 14.4(c) of
the MSA, in which the parties agreed that David had received "the
consequence of operating income or operating loss relating to his interest" in
the Hutt Holdings entities and was entitled to claim same on his tax returns for
2015 through 2018, with the parties in 2019 and thereafter equally dividing
A-2117-18T4
5
and declaring all such income or losses. David claimed the clause made clear
the parties had agreed that he was entitled to retain the distributions from the
Hutt Holdings entities in 2017-18 and was thus responsible to pay the taxes on
that income.
According to David, the import of the clause was clear; he received one
hundred percent of the income through 2018, and he paid one hundred percent
of the taxes. When he and Sara began to equally divide that income in 2019,
Sara would be responsible for her share of the taxes. David insisted Sara's
claim to half the net distributions was inconsistent with both paragraph 14.4(c)
and the Mallamo waiver, as it would provide Sara a retroactive adjustment,
pendente lite, while making David responsible for the taxes on Sara's half,
which was not agreed to anywhere.
David also pointed to two prior drafts of the MSA in which Sara
proposed that the parties should equally divide all gains or losses in the Hutt
Holdings entities, first for tax years 2017-18, and when he rejected that, for tax
year 2018. He asserted those negotiations establish that the "credit" Sara
sought was explicitly rejected before the parties signed the MSA.
Sara, for her part, argued that she could not pursue the credit permitted
in the September 7, 2018 partial judgment until David told her how much
A-2117-18T4
6
money was distributed to him during 2017-18, as he was obligated to do by
paragraph 4.8 of the MSA. When he did so two months after the divorce, she
made an immediate claim for her share of the monies. David countered that if
Sara intended to leave open a claim upon entry of the divorce, she needed to
have expressly reserved it in the MSA or on the record and did neither. Sara
countered that she reserved the claim in the September 7, 2018 partial
judgment and inserted in the MSA the provision in paragraph 4.8 that David
supply her with the 2017-18 distribution schedule in order to determine
whether she was entitled to a credit. Sara argued the only point of the
requirement in paragraph 4.8 of the MSA that David produce the distribution
schedules for the Hutt Holdings entities was to permit her to pursue the claim
she reserved in the September 7, 2018 partial judgment.
The judge hearing the motion was familiar with the matter as the parties
had been in litigation for three years and it was the oldest case on the judge's
docket. The judge analyzed both the September 7, 2018 partial judgment and
the MSA "word by word" and did not find "that anything in the marital
settlement agreement changes" the sentence in the partial judgment permitting
"either party to seek a credit form the other as it relates to any capital calls
[David] paid for these entities pendente lite and distributions made in
A-2117-18T4
7
connection with [David's] interest in these entities pendente lite." The judge
stated "that sentence is there because everyone agreed there was some
unknowns in the case and that they were going to leave that issue open." He
found "there's nothing in . . . the subsequent final judgment of divorce that
counters the fact that it doesn't give an absolute right to receive them, but it
certainly gives the right to pursue them, which is what [Sara's] doing today ."
The judge did not address David's argument that the two prior drafts of
the MSA established that the parties intended to, and did, resolve that open
issue in the MSA. Instead, he concluded:
I don't see how it's any different from any other
asset. The parties agreed eventually at the final
judgment of divorce that was part of the marital res.
To the extent that there was anything taken out of it
during the pendency of the litigation, I think she's
entitled to her 50 percent of it.
David appeals, reprising the arguments he made to the trial court, and
adding that it erred in re-writing the parties' MSA to give Sara a better deal
than she negotiated for herself. Sara argues the trial judge had a "feel for the
case" that we don't, that our standard of review requires that we defer to the
judge's "fact-finding," and that the parties' agreement is unambiguous.
This was a settled divorce. The only issue before the trial court, and
now on appeal, is whether the language of the September 7, 2018 partial
A-2117-18T4
8
judgment and the MSA is so "clear and unambiguous" that the parties' intent to
either reserve a claim to seek a credit against the sums David paid or received
on account of the entities in Hutt Holdings during 2017-18, or foreclose one, is
plain. See Quinn v. Quinn, 225 N.J. 34, 45 (2016). Having read the record,
listened to the parties' arguments, and studied the language of their
agreements, we simply cannot divine the parties' intent on this point from
reading the documents.
Those documents can certainly be read to support Sara's position that
this was a reserved claim. But the failure to make the reservation express in
the MSA, and the drafts of that agreement evidencing David's rejection of
Sara's request that they share equally the income and losses for the Hutt
Holdings entities in 2017 and 2018 as they agreed to do in 2019 and going
forward, raises doubts. Sara's explanation in her brief that paragraph 14.4(c)
does not address the reserved claim but instead relates to "a substantial net
operating loss," a marital asset, one hundred percent of which David claimed
on his separate return for 2015, and reflects the parties' "various agreements to
resolve the various issues concerning their tax filings in paragraphs 14.3 and
14.4," may well be true but is not obvious from reading the documents.
David's claim that the drafts and paragraph 14.4(c) of the MSA make plain the
A-2117-18T4
9
parties agreed that he was entitled to keep all of the distributions from the Hutt
Holdings entities in 2017-18, is likewise questionable in light of the inclusion
in paragraph 4.8 that he provide Sara with a schedule of the
distributions/contributions and capital calls for the entities in 2017-18.
"An agreement that resolves a matrimonial dispute is no less a contract
than an agreement to resolve a business dispute." Quinn, 225 N.J. at 45. In
interpreting a contract, it is axiomatic that the provisions are to be "read as a
whole, without artificial emphasis on one section, with a consequent disregard
for others." Borough of Princeton v. Bd. of Chosen Freeholders of Mercer,
333 N.J. Super. 310, 325 (App. Div. 2000), aff'd, 169 N.J. 135 (2001).
Construction of contract language is generally a question of law, unless, of
course, its meaning is unclear and turns on conflicting testimony. Bosshard v.
Hackensack Univ. Med. Ctr., 345 N.J. Super. 78, 92 (App. Div. 2001).
A trial court's role in interpreting a marital settlement agreement is to
discern the common intent of the parties from "what is written in the context of
the circumstances at the time of drafting and to apply a rational meaning in
keeping with the 'expressed general purpose.'" Pacifico v. Pacifico, 190 N.J.
258, 266 (2007) (quoting N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302
(1953)). "[W]hen the intent of the parties is plain and the language is clear
A-2117-18T4
10
and unambiguous, a court must enforce the agreement as written." Quinn, 225
N.J. at 45. But when the parties' intent is not clear from the document and
they ascribe different meanings to ambiguous terms, the court has no
alternative but to conduct an evidentiary hearing "at which the parties'
credibility [can] be assessed and their intentions gleaned." Pacifico, 190 N.J.
at 267.
We think it plain from what we've said about the documents and the
parties' positions on what they mean, that an evidentiary hearing was required.
We do not agree, however, with David that the experienced trial judge
improperly made findings of fact on conflicting certifications. The judge
conscientiously studied the documents, and concluded he could construe them
in the context of the circumstances and apply "a rational meaning in keeping
with the expressed purpose," Pacifico, 190 N.J. at 266, likely with the idea that
he could fairly spare the parties an evidentiary hearing, the combined cost of
which would likely exceed the sum in dispute. We simply disagree that was
possible, especially in light of the drafts of the MSA and the parties'
certifications.
Accordingly, we vacate that aspect of the January 4, 2019 order
directing David to pay Sara half of his net distribution in 2017-18 from the
A-2117-18T4
11
Hutt Holdings entities, and remand for further proceedings not inconsistent
with this opinion. Our resolution likewise necessitates vacating the fee award
to Sara on the motion; any fee award should abide disposition of the hearing.
Vacated and remanded. We do not retain jurisdiction.
A-2117-18T4
12