Wednesday, July 27, 2016

A recent decision of the NJ Supreme Court regarding co-habitation and its effects on alimony awards

As discussed in one of my earlier blogs, the laws have recently been changed regarding alimony under N.J.S.A. 2A:34-23. With regard to cohabitation, the statute under sub-section (n) delineated different factors to be considered in deciding whether to discontinue alimony due to cohabitation. One important change in the statute was that the fact that a couple may not actually be limiting together was not sufficient to decide whether cohabitation was occurring. Instead the following factors needed to be reviewed:
"n. Alimony may be suspended or terminated if the payee cohabits with another person. Cohabitation involves a mutually supportive, intimate personal relationship in which a couple has undertaken duties and privileges that are commonly associated with marriage or civil union but does not necessarily maintain a single common household. When assessing whether cohabitation is occurring, the court shall consider the following: (1) Intertwined finances such as joint bank accounts and other joint holdings or liabilities; (2) Sharing or joint responsibility for living expenses; (3) Recognition of the relationship in the couple’s social and family circle; (4) Living together, the frequency of contact, the duration of the relationship, and other indicia of a mutually supportive intimate personal relationship; (5) Sharing household chores; (6) Whether the recipient of alimony has received an enforceable promise of support from another person within the meaning of subsection h. of R.S.25:1-5; and (7) All other relevant evidence. In evaluating whether cohabitation is occurring and whether alimony should be suspended or terminated, the court shall also consider the length of the relationship. A court may not find an absence of cohabitation solely on grounds that the couple does not live together on a full-time basis."

Meanwhile, the Supreme Court has issued a recent decision regarding prior case law that has often been cited in property settlement agreements, Konzelman v. Konzelman, 158 N.J. 185 (1999) which enforced cohabitation provisions without inquiry into the financial needs of the spouse and Gayet v. Gayet, 92 N.J. 149 (1983) which said that the court need to determine whether cohabitation has affected the spouse's existing alimony award.  At the time of the Gayet decision, and following the reasoning of Lepis v. Lepis, 83 N.J. 139 (1980), the Supreme Court held that it was necessary to balance the economic circumstances of the spouse before deciding what effect cohabitation would have on alimony. Gayet at 154. Cohabitation was considered a changed circumstances to be viewed under the terms that Lepis applied in deciding whether to modify alimony or child support awards.

However, the court in Konzelman held that a provision in a property settlement agreement that treats cohabitation as equivalent to remarriage, which statutorily mandates termination of permanent alimony. So under Konzelman, there was no need to inquire into changed economic circumstances of the spouse receiving the alimony. Konzelman at 197. The Supreme Court held that it was important to uphold contractual provisions as long as the courts have done an inquiry into the equitable nature of the provision and the voluntariness of the acquiescence of spouse's agreement.

Following these decisions, the Supreme Court then came out with its decision in Quinn v. Quinn 2016 LEXIS 371 decided on May 3, 2016. This decision continued to uphold that in the absence of a contractual provision a person may modify alimony based upon cohabitation only upon showing a change of circumstances as set forth under Lepis. This case was distinguished from Konzelman due to the fact that in this case, the ex-spouses' termination ended. In its decision, the Supreme Court held that the ending of the cohabitation was not sufficient cause to violate the terms of the agreement, once it was established that a relationship of cohabitation did exist. Of course, the court may inquire as to whether the original agreement was equitable and not based upon any fraud, duress or unconscionability in the original negotiations of the PSA. Quinn, at *36.

It is important that any Property Settlement Agreement reflecting suspension of alimony based upon cohabitation reflect current law. It is also important to have the drafter clarify whether or not alimony will terminate under all circumstances due to cohabitation. Justice Daniel O'Hern dissented in the Quinn decision deriding the majority's decision to form an absolute basis to terminate alimony based upon cohabitation with no inquiry into economic needs and basing its decision on grounds of contract law, while ignoring realities regarding what might be the disparity of the parties when initially entering into a Property Settlement Agreement. As Justice O'Hern mentions, the current revisions in the alimony statutes state that the courts "may" terminate or modify support based upon cohabitation without using the imperative "shall."  He harks back to the economic needs test of Gayet rather than the axiomatic contract principle applied in Konzelman.  He also raises a few other points, such as the fact that the cohabitation bans do not seem to apply to same sex relationships and that there is not a similar requirement on the provider of alimony to avoid cohabitation. In other words, he sees the cohabitation provision as a punishment on the former spouse.

It will be interesting to see whether the new alimony revisions will resolve this issue since it does go back to applying many of the factors cited in Gayet although it does not seem to necessarily apply to negotiated Property Settlement Agreements. Depending upon which side you are on, it is important to discuss this issue with your attorney before signing any PSA if you think this might be an issue.

No comments: