Petersen v. Petersen

Decision Date21 April 1981
Citation428 A.2d 1301,85 N.J. 638
Parties, 19 A.L.R.4th 822 Adrienne E. PETERSEN, Plaintiff-Respondent, v. Russell PETERSEN, Defendant-Appellant.
CourtNew Jersey Supreme Court

Gerald Goldman, Clinton, for defendant-appellant (Goldman, Carlet, Garrison, Bertoni & Bitterman, Clinton, attorneys).

Arnold Koenig, Fort Lee, for plaintiff-respondent.

The opinion of the Court was delivered by

HANDLER, J.

We are called upon to consider the validity of an agreement settling the terms and conditions for alimony and support incorporated in a 1966 judgment of divorce. The agreement provides for the automatic escalation or adjustment of such payments in fixed amounts correlated to specific changes in the incomes of the respective spouses. It is the contention of the defendant husband that, insofar as the arrangement requires the automatic escalation of alimony and support payments based upon increases in his net income, this kind of agreement is totally null and void as contrary to public policy and current laws governing the termination of marriages.

I

Russell and Adrienne Petersen were married in New Jersey in 1946. In 1966 divorce proceedings took place in both New Jersey, where the husband resided, and New York, where the marital home was located and the wife resided. The parties voluntarily entered into a stipulation of settlement on June 10, 1966 on the record in open court before the Supreme Court of New York, Richmond County. The divorce proceedings then shifted to New Jersey, where a judgment nisi granting divorce was entered on July 19, 1966 pursuant to the stipulation of settlement.

The judgment incorporates the agreement of the parties. Custody of the children is given to the wife and visitation rights to the husband. The husband is required to pay the mortgage, taxes, insurance, water and sewer rents and repair bills on the marital home. For support the husband must pay $100 weekly, allocating $70 for alimony and $15 for each of two children until they reach majority or become self-supporting. In addition the husband is obliged to pay 1/3 of his net income that exceeds $12,650 per annum. The agreement further provides that the weekly payments for alimony and support are to be reduced by 1/3 of the weekly sum earned or received as income by the wife. 1

In 1976, in addition to providing for the marital home, the husband paid $110 per week for support as a result of the escalation feature of the agreement. In June 1976 the plaintiff brought a motion seeking an order declaring that the retained earnings of her husband's company (allegedly some $380,000 in 1973) are income to her husband for purposes of invoking the escalation clause of the alimony agreement. Defendant by cross-motion requested that the escalation clause be declared null and void.

The Chancery Division granted the cross-motion, holding that such an escalation clause is contrary to the public policy of this State. The Appellate Division reversed and remanded, ruling that there is no per se bar to the use of such an agreement. The court further ruled that the defendant was still entitled to demonstrate that the alimony escalator was unfair and not enforceable according to its terms because of circumstances that had changed since the inception of the divorce agreement. 172 N.J.Super. 304 at 308, 411 A.2d 1165.

II

We have recognized and emphasized repeatedly that matrimonial agreements between spouses relating to alimony and support, which are fair and just, fall within the category of contracts enforceable in equity. Carlsen v. Carlsen, 72 N.J. 363, 370-371, 371 A.2d, 8 (1977); Berkowitz v. Berkowitz, 55 N.J. 564, 569, 264 A.2d 49 (1970); Schlemm v. Schlemm, 31 N.J. 557, 581-582, 158 A.2d 508 (1960). Such agreements are essentially consensual and voluntary in character and therefore entitled to considerable weight with respect to their validity and enforceability notwithstanding the fact that such an agreement has been incorporated in a judgment of divorce. Carlsen v. Carlsen, supra, 72 N.J. at 371, 371 A.2d 8.

The narrow issue before the Court is the applicability of this general doctrine or approach to an escalation clause relating to alimony and child support that is part of a matrimonial agreement incorporated in a judgment of divorce. Recently, this Court, through Justice Pashman in Lepis v. Lepis, 83 N.J. 139, 153-154, 416 A.2d 45 (1980), stressed the desirability and wisdom of supporting voluntary contractual arrangements designed to deal with future contingencies in matrimonial causes, viz :

As a practical matter, spousal agreements have great potential for ensuring the desired degree of stability in support arrangements. Such agreements traditionally have been more comprehensive and particularized than court orders, and thus more carefully tailored to the peculiar circumstances of the parties' lives. In view of the current economic conditions and the changing social structure of the family particularly with regard to women's roles courts, too, should make greater efforts to provide in advance for change. This would enhance the stability of judicially fashioned arrangements and make unnecessary a return to court. (citations omitted).

See also Berkowitz v. Berkowitz, supra, 55 N.J. at 569-570, 264 A.2d 49 (agreement will not be modified because "(a)ll of the alleged 'changed circumstances' were envisioned by the parties and dealt with specifically in the Agreement.")

Accordingly, we approach the spousal agreement in this case with a predisposition in favor of its validity and enforceability. There is no sound reason for considering an escalation clause to be invalid per se. We share the view of the Appellate Division in this case that such a clause may well be an appropriate means for resolving a continuing need for alimony and child support. 172 N.J.Super. at 307, 411 A.2d 1165. 2

An escalation provision that automatically ties increases in support to the net income of the obligated spouse can comport with established principles relating to matrimonial support. As recognized by the Appellate Division here, such escalation clauses are geared to one of the factors which ordinarily justifies modification of alimony or child support payments, namely, change in the net income of the obligated spouse. To the extent that ability to pay is a relevant factor, increases in the net income of the party responsible for alimony and support may be evidential of an enhanced ability to pay. Moreover, while other factors such as the financial status the income and the needs of the dependent spouse must also be considered by a court, a clause dealing with the obligor's earnings is material and relevant in the balancing that goes into the resolution of the support issue. The same common experience that generates a presumption that ability to pay will be enhanced with an increase in earnings makes it reasonable in an inflationary economy to assume that the cost of living and concomitant needs of dependents will rise similarly. Hence agreements dealing with matrimonial support obligations that resort to escalation formulas tied solely to the net income of the obligated spouse are not conclusively or presumptively invalid as a matter of law.

In this case, the agreement contains references to comparative spousal financial ability and need. The alimony and child support clause contemplates not only increases geared to the income of the defendant-husband but also decreases or reductions in such payments to the extent that the plaintiff-wife herself earns income in the future. Ante at 1302-1303. This added contractual dimension adds force to the conclusion that this contract is clearly valid, as well as susceptible of application and enforcement in accordance with prevailing standards under our current matrimonial laws.

III

The enforceability of such a contract implicates much broader concerns than those involved in assessing only its per se invalidity. Even though such clauses are not invalid per se, it does not...

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