Conforti v. Guliadis

• Decision Date: 23 June 1992
• Citation: 128 N.J. 318,608 A.2d 225
• Parties: Maria CONFORTI (formerly Guliadis), Plaintiff-Respondent, v. George GULIADIS, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 318

128 N.J. 318

608 A.2d 225

Maria CONFORTI (formerly Guliadis), Plaintiff-Respondent, v. George GULIADIS, Defendant-Appellant.

Supreme Court of New Jersey.

Argued Nov. 18, 1991.

Decided June 23, 1992.

Nicholas R. Doria, Englewood Cliffs, argued for defendant-appellant (Sassano & Doria, attorneys).

Vincent M. Salvatore, Englewood Cliffs, argued for plaintiff-respondent.

The opinion of the Court is delivered by

HANDLER, J.

In conjunction with their impending divorce, George Guliadis and Maria Conforti (formerly Guliadis) entered into a property settlement agreement. The agreement included a lease that was executed separately. When the couple divorced, the property settlement agreement and accompanying lease were incorporated into the final divorce judgment. Five years after the divorce judgment, Conforti sought reformation of the lease, contending that it was based on mutual mistake and was unfair as written. This case requires the Court to determine the standards that govern the enforceability of a lease executed as part of a property settlement agreement incorporated in a judgment of divorce. That determination requires consideration of whether those standards should be resolved by principles of matrimonial law applicable to the modification of judgments of divorce or principles of contract law applicable to the reformation of lease agreements.

I

Plaintiff Conforti and defendant Guliadis were married on December 30, 1979. Together they owned and operated a business, the Garden State Deli, at 1207 Anderson Avenue in Fort Lee. The couple also owned the building in which the business was located, a two-story structure with retail space at street level and two apartments on the second floor. The couple's only child, a daughter, was born just over three years after they were married.

Conforti and Guliadis were divorced by a judgment entered on June 25, 1984. Incorporated into the final divorce judgment was a property settlement agreement in which each party waived any alimony claim against the other. Pursuant to the agreement, Conforti transferred her interest in the building to Guliadis and Guliadis transferred his interest in the delicatessen to Conforti. In addition, Conforti paid $20,000 to Guliadis, apparently because the delicatessen was worth more than the building which housed it. Custody of the daughter was awarded to Conforti, and, as stipulated in the property settlement agreement, Guliadis pays twenty-five dollars per week in child support.

Paragraph 3C of the property settlement agreement provided that Guliadis would lease the retail space occupied by the delicatessen to Conforti for fifteen years, and that Conforti would receive a five-year option to renew. The agreement and the accompanying lease were signed on the same day.

A rider to the lease provided that Guliadis could terminate the lease if he sold the building. The rider also gave Conforti the right of first refusal. The rider provision stated:

2. It is further agreed that this Lease shall be subject to termination at any time in the event that Lessor shall desire to sell the demised premises and shall have a bona fide offer for the purchase thereof. In such event Lessee shall have the option for a period of __________ tion [sic] from Lessor to meet the terms and conditions of such offer. If Lessee fails to accept the terms and conditions of sale during the said _____ day period, [sic] the option shall be of no further force and Lessor shall be free to sell the premises to third persons.

On May 19, 1989, approximately five years after the parties signed the property settlement agreement and the accompanying lease, Guliadis's attorney sent Conforti a letter informing her that his client had received a bona fide offer of $850,000 to purchase the building. The letter warned Conforti that if she failed to execute her right of first refusal, Guliadis would sell the building and terminate her lease.

On August 24, 1989, Conforti filed a petition and order to show cause in the Chancery Division, Family Part. She sought, among other things, deletion of the provision in the rider that purports to terminate the lease upon sale of the building. She alleged that the termination provision was inconsistent with the property settlement agreement as a whole, that it was inserted as a result of mutual mistake, and that enforcing it would be unfair. In the alternative, she claimed that if Guliadis actually had intended the provision to read as it did, he induced her to agree to it through fraud. Guliadis filed a certification which denied Conforti's allegations. According to Guliadis, the termination provision accorded with the parties' intent, Conforti understood the provision and its implications, and the provision was consistent with the property settlement agreement read as a single unit.

The trial court denied Conforti's application for a plenary hearing. It declared that in the event that she failed to exercise her right of first refusal within sixty days, Guliadis would have the right to sell the building and terminate the lease. The court viewed Conforti's application as both a motion pursuant to Rule 4:50-1(f) for relief from judgment of divorce and as a complaint for equitable reformation of the lease. It ruled that relief would not be granted under Rule 4:50-1(f) because the five years that had elapsed since the lease was executed were more than the "reasonable time" permitted under the Rule. The court denied Conforti a plenary hearing on her equitable claim because her certifications did not present the "clear and convincing proof" required for equitable reformation. The court concluded that the sufficiency of Conforti's proofs could be assessed solely on the basis of the parties' certifications and that no further taking of evidence was needed.

Conforti appealed from the trial court's denial of a plenary hearing and the Appellate Division reversed. 245 N.J.Super. 561, 586 A.2d 318 (1991). The Appellate Division did not dispute that Conforti would have to prove her case by clear and convincing evidence. Id. at 566, 586 A.2d 318. Conceding that Conforti's claim ultimately might fail, a majority of the Appellate Division said that the claim should not have been dismissed solely on the basis of the papers presented. Id. at 566-67, 586 A.2d 318. It explained that "a holding which authorizes a trial court to decide contested issues of material fact on the basis of conflicting affidavits, without considering the demeanor of witnesses, is contrary to fundamental principles of our legal system." Id. at 565, 586 A.2d 318. The dissenting judge agreed with the trial court that a plenary hearing was not required. 245 N.J.Super. at 567, 586 A.2d 318. The Appellate Division also unanimously agreed with the trial court that Conforti's application under Rule 4:50-1(f) had not been brought within a reasonable time. Having found that her only viable claim for relief was an equitable claim for reformation of the lease, the court remanded the case to the Chancery Division, General Equity, rather than to the Family Part where the case had originated.

Guliadis appealed as of right on the issue of whether a full evidentiary hearing is required to decide a motion for equitable reformation of a lease that was executed as part of a property settlement agreement and which is incorporated into a final divorce judgment. We now hold that a hearing is required in those circumstances and that the adjudication of that issue should be undertaken by the Family Part of the Chancery Division.

II

The equitable authority of courts to modify property distribution, alimony, and support orders issued in divorce cases is well established. We have recognized that marital property is distinctive, Carr v. Carr, 120 N.J. 336, 346-49, 576 A.2d 872 (1990), and that property settlement agreements entered into in anticipation of divorce reflect the unique nature of the marital enterprise. Rothman v. Rothman, 65 N.J. 219, 229, 320 A.2d 496 (1974); Gibbons v. Gibbons, 174 N.J.Super. 107, 112-13, 415 A.2d 1174 (App.Div.1980), rev'd on other grounds, 86 N.J. 515, 432 A.2d 80 (1982). Marital property settlement agreements "involve far more than economic factors" and must serve the strong public and statutory purpose of ensuring fairness and equity in the dissolution of marriages. Rothman, supra, 65 N.J. at 229, 320 A.2d 496; see Peterson v. Peterson, 85 N.J. 638, 644, 428 A.2d 1301 (1981). Even when a divorce order incorporates agreements reached privately between the parties, such orders can be modified "in light of all the facts" bearing on what is "equitable and fair." Smith v. Smith, 72 N.J. 350, 360, 371 A.2d 1 (1977). Thus, "contract principles have little place in the law of domestic relations." Lepis v. Lepis, 83 N.J. 139, 148, 416 A.2d 45 (1980).

In this case, although plaintiff seeks modification of what appears to be a standard lease for retail space, the lease was but one component of a much broader agreement encompassing a host of domestic issues that arose when Conforti and Guliadis ended their marriage. Consequently the lease must be viewed within the framework of the judicially-sanctioned allocation of marital property and cannot be viewed merely as a conventional property transaction. Equitable distribution of marital property is "intimately related to support," and "[t]he power to distribute property equitably should be exercised to relieve the strain of total reliance on support payments for financial security." Id. at 154-55, 416 A.2d 45; see Smith, supra, 72 N.J. at 359-60, 371 A.2d 1 (noting that the question of support is "inextricably interrelated with the question of equitable distribution," and that courts have "the utmost leeway and flexibility in determining what is just and equitable in making allocations of marital assets."); cf. Innes v. Innes, 117 N.J. 496, 505, 569 A.2d 770 (1990) (construing N.J.S.A. 2A:34-23, as amended, L. 1988, c....