October 2010

Matrimonial attorneys are often involved with drafting Marital Settlement Agreements which include arrangements for custody and parenting time.   We are also called upon to review Judgments of Divorce and Orders entered by various judges throughout the state concerning such matters. 

 

My experience is that the often-used term “joint custody” is misunderstood and therefore, misapplied.  The result is an unsatisfactory definition which fails to define the rights and responsibilities of the parents, leaving such issues to be resolved by costly, time-consuming and divisive litigation. 

 

So, what does “joint custody” really mean?  For example, does it have to do with parental decision-making, parenting time or both?  In parental decision-making, does the term create a distinction between major decisions and routine decisions concerning the children?  Standing alone, “joint custody” does nothing to resolve such issues, much less create a mechanism for resolution if a dispute arises.  Moreover, if called to do so, a court will often defer to the custodial parent regarding such matters, thereby leaving the other parent dissatisfied with the result. 

 

Consider the difference between the obligation of divorced parents to “confer” regarding their children, as compared to their obligation to “agree”.  Under the first scenario, a parent of primary custody is under no obligation to reach any agreement with the other parent and will proceed on the basis of what he or she believes is in the best interests of the children, thus leaving the other parent to seek legal relief by issuance of restraining order or the remedy.  Conversely, requiring parents to “agree” changes the paradigm significantly.  While two parents can still disagree, presumptions in favor of the custodial parent are substantially lessened and in some cases eliminated.

 

If “joint custody” is intended to encompass parenting time, is it any more helpful?  The answer is no since without a schedule, including weekends, holidays, school recesses and other important occasions and events, it leaves such matters “up in the air” and ripe for controversy.  A good rule is to be specific with regard to parenting schedules, to include exact times, locations, etc.

 

Thus, phrases like “liberal and reasonable parenting time”, are a recipe for trouble since the absence of detail will lead to misunderstandings, disagreements, disappointments and in some cases, a litigation to establish that which should have been fashioned in the first place.

 

Although some clients say, “don’t worry, we can work that out later”, what is the likelihood that they will be able to do so as each moves on with their lives, establishes new priorities and starts new families?  There is a saying that “the devil is in the details” but with regard to joint custody, the “devil” is the absence of details.  The losers in such cases are the children who are placed in the middle of parental disagreements while leaving their voices unheard.  The key to avoiding such problems is to recognize the importance of carefully drafted language with regard to joint legal custody (parental decision-making), residential custody and parenting schedules which will serve to avoid future problems of interpretation and enforcement.

Stealing from the minority shareholder or the corporation itself is a form of actionable oppression. Sometimes shareholders simply steal. More often than not, the bad actor will employ a number of techniques in order to covertly steal from the corporation. One widespread technique used by dishonest shareholders is the false inflation of expense accounts. Another technique is to place a relative (usually the majority shareholder’s) spouse or children on the company’s payroll at regular salaries even though those people never actually perform services for the company. 

 

A number of remedies are available to rectify stealing. First, if the honest shareholder is seeking to purchase the stock of the dishonest shareholder the Court possesses the equitable powers to apply discounts. Those discounts could reduce the purchase price by 25% to 50%. Second, the injured shareholder may be awarded compensatory damages, attorneys’ fees and costs. Third, the law abiding shareholder’s expert could present opinion testimony as what the company may have been worth if the theft had not occurred. In other words, the expert could “normalize” the company’s financial records to reflect the true cash flow of the company. That, in turn could result in a higher valuation. Finally, if a party was able to prove stealing or fraud during the course of the litigation, the Court could remove the dishonest shareholder and appoint a receiver to manage the day to day affairs of the company. N.J.S.A. 14A:12-7(2), (3), (4), (5), (6) & (7).

On September 7, 2010, the NJ Department of Environmental Protection (DEP) adopted amendments to its Costal Permit Program Rules, Costal Zone Management regulations and Flood Hazard Area Control Act Rules to facilitate the development of wind turbines and solar energy facilities.  Some highlights of these amended and supplemented rules follow below.

Coastal Permit Program Rules
Under the amendments to the Coastal Permit Program Rules, wind turbines may be installed without having to obtain a CAFRA permit provided that they (1) are placed on or structurally attached to a legally existing building; (2) stand less than 200 feet high; (3) are not larger than 2,000 square feet in cumulative “rotor swept area” (such term being defined at N.J.A.C. 7:7-1.3, as amended); and (4) utilize a freestanding monopole structure for any portion of the tower of the wind turbine that is higher than 100 feet above the ground surface.  Solar panels may be installed without a CAFRA permit, as well, provided that they meet certain specified conditions.  The amendments to the Coastal Permit Program Rules also create new general permits and permits-by-rule for the wind and solar power installations.

Coastal Zone Management Regulations
The amendments to the Coastal Zone Management regulations allow for, among other things, the erection of wind turbines on the pier in Atlantic City provided that their height shall not exceed 200 feet and provided further that “[t]here shall be no occupancy above the 100-foot elevation.”  These amendments also significantly revise the Coastal Zone Management regulations governing energy facility use.  Under these revised regulations, which are codified at N.J.A.C. 7:7E-7.4, “[t]he construction of electric generating facilities using renewable forms of energy, such as solar radiation, wind, and water . . . is conditionally acceptable provided that such facilities do not significantly detract from scenic or recreational values, and for wind energy facilities, comply with” a host of requirements related to the minimization of adverse effects upon birds and bats (and upon marine organisms where the facility is located in tidal waters).

For example, among other protective measures, the amended regulations for energy facility use restrict the location of wind turbines that are higher than 200 feet or have a cumulative rotor swept area larger than 4,000 square feet to areas identified on the DEP’s Large Scale Wind Turbine Siting Map and require performance of pre- and post-construction monitoring “[i]n order to establish the flight patterns and distribution of avian species and bats and impacts of the operation of these facilities on these species.”

Flood Hazard Area Control Act Rules
Finally, under the Flood Hazard Area Control Act Rule amendments, there is now a new permit-by-rule for “the placement of one to three wind turbines.”  This new permit-by-rule is codified at N.J.A.C. 7:13-7.2(b) and requires, among other things, that (1) each wind turbine shall be less than 200 feet in height and if higher than 120 feet “the tower shall be a freestanding monopole,” (2) the rotor swept area shall be no greater than 2,000 square feet, (3) no site disturbance shall occur within a floodway or “within 25 feet of any top of bank or edge of water,” (4) no portion of any wind turbine shall be situated within an area designated as threatened or endangered species habitat on the DEP’s Landscape Maps, except as otherwise expressly provided, (5) no lighting shall be placed on or directed at any wind turbine, except for lighting required by the Federal Aviation Administration and shielded ground level security lighting, (6) no construction activity shall constitute a “major development, as defined at N.J.A.C. 7:8-1.2,” (7) no vegetation within a riparian zone shall be cleared, cut or removed, except where previous development or disturbance has occurred and (8) all vegetated areas temporarily disturbed within a riparian zone shall be replanted with indigenous, non-invasive species upon completion of work.

The names set forth on a deed may not always reflect the interests of all parties in the real property.  One such interest is a possessory one of a spouse to joint possession in property occupied as a couple’s principal matrimonial residence.  This type of interest is a statutory creation. N.J.S.A. 3B:28-3 provides that during life every married individual shall be entitled to joint possession with his spouse of any real property which they occupy jointly as their principal matrimonial residence and to which neither dower nor curtesy applies.   The effect of this statute is that title to property acquired by only one spouse on or after May 28, 1980 and occupied by both spouses as their principal matrimonial residence cannot be transferred without the consent of both spouses.  All other real property owned solely by either spouse which is not their principal matrimonial residence may be transferred without the consent of the other spouse.
 

This right of joint possession cannot be released, extinguished or subordinated without the consent of the spouse who is entitled to joint possession, except by judgment of a court of competent jurisdiction.
 

Pursuant to subsection b. of N.J.S.A. 3B:28-3, the right of joint possession may be released, subordinated or extinguished by either spouse by means of a premarital agreement, separation agreement, or other written instrument.  Subsection c. provides that the right of possession shall be extinguished by the consent of both parties, the death of either spouse, by judgment of divorce, separation or annulment, by other order or judgment which extinguishes same, or by voluntary abandonment of the principal matrimonial residence.
 

The right of joint possession may be subject to a mortgage lien. N.J.S.A. 3B:28-3.1 provides that the right of joint possession is subject to the lien of a mortgage, irrespective of the date when the mortgage is recorded, provided:
    a. The mortgage is placed upon the matrimonial residence prior to the time that title to the residence was acquired by the married individual; or
    b. The mortgage is placed upon the matrimonial residence prior to the marriage; or
    c. The mortgage is a purchase money mortgage; or
    d. The parties to the marriage have joined in the mortgage; or
    e. The right of joint possession has been subordinated, released or extinguished by subsection b. or c. of N.J.S. 3B:28-3.
 

Thus, if the principal matrimonial residence is being refinanced during the marriage, even if title to the property is in the name of only one spouse, the mortgage will have to be executed by both spouses.
 

For real estate in New Jersey acquired by a married person prior to May 28, 1980, a life estate interest was provided by means of dower for the wife and curtesy for the husband.
 

The statutory rights of dower and curtesy gave the non-owning spouse a right to a life estate in one-half of the real property owned by the other spouse at the time of that spouse’s death.  N.J.S.A. 3B:28-1.  Dower and curtesy interests were created upon the acquisition of the property by a spouse in that spouse’s name only – or upon the date of the marriage between the two spouses, whichever date was later – until May 28, 1980, the date dower and curtesy were abolished by the New Jersey Legislature (N.J.S.A. 3B:28-2).  Property acquired on or after May 28, 1980 is not subject to dower or curtesy, nor is property acquired before that date by an unmarried person who later married on or after May 28, 1980. Unlike the right of joint possession, all real property owned by a spouse individually, not just the principal matrimonial residence, was subject to dower and curtesy. 
 

In those situations where dower and curtesy interests still exist, the non-owning spouse must sign the deed conveying the property for the owning spouse to be able to convey clear title to a purchaser.

The New Jersey minority oppression statute provides redress when “those in control have acted fraudulently or illegally, mismanaged the corporation, or abused their authority as officers or directors or have acted oppressively or unfairly toward one or more minority shareholders in their capacities as shareholders, directors, officers or employees.” N.J.S.A. 14A:12-7(c). Hence, a majority shareholder’s conflict of interest which negatively affects the minority shareholder’s rights could constitute unlawful minority oppression.

 

Sometimes the majority shareholder will drain corporate profits by having other companies perform services for the corporation under unfair contracts. For example, in my last minority oppression trial, my client alleged that his company was renting extremely valuable and sought after commercial real estate to another company owed by the majority shareholders at below market rents. In that case, it was alleged that the majority shareholders voted in favor of a lower rent which benefitted their interests in the other company to the detriment of my client and his company. In other words, it was the alleged conflict of interest that constituted mismanagement or unfairness which brought it within the purview of the minority oppression statute.
 

Rachel Lilienthal Stark, Shareholder in Stark & Stark’s Banking & Financial Services Group, will present a seminar as part of the Mercer County Bar Association’s Xtreme CLE program. The seminar entitled, The ABCs of Commercial Real Estate Transactions and Closings, will take place Wednesday October 27, 2010 from 8:00 – 10:00 AM at the Conference Center at Mercer County Community College in West Windsor, New Jersey.

Ms. Stark will join Kris P. Muse, SVP of the Bank of Princeton, and Bruce M. Sattin, Esq.  as they discuss the ABCs of commercial transactions and closing. The seminar will also feature a discussion on how to structure the deal, obtaining commercial financing, and documenting and closing commercial loans and transactions. For additional information, including registration information, please visit the Mercer County Bar Association’s website.

Thomas S. Onder, Shareholder in Stark & Stark’s Bankruptcy & Creditor’s Rights Group, will present a seminar as part of the Mercer County Bar Association’s Xtreme CLE program. The seminar entitled, Bankruptcy for Non‐ Bankruptcy Attorneys, will take place Wednesday October 27, 2010 from 10:30 AM – 12:30 PM at the Conference Center at Mercer County Community College in West Windsor, New Jersey.

 

Mr. Onder will join the Honorable Kathryn C. Ferguson, U.S.B.J., and Graig P. Corveleyn, Esq. as they guide the non‐bankruptcy attorney through the twists and turns of the bankruptcy process. For registration information, please contact the Mercer County Bar Association.

Common interest community associations should be aware that the New Jersey Municipal Services Act ("MSA") provides a protection from unit owners being "double taxed" for various fees and services for common elements.  Each homeowner in all New Jersey municipalities pays taxes towards services like garbage and recyclables collection, road obstruction removal, street lighting and snow removal.  Additionally, homeowners who live in condominiums and/or homeowners associations may be required to pay for those same services themselves, usually through monthly maintenance fees, HOA fees, special assessment fees, or condo fees paid directly toan association to provide those services.  The MSA protects those owners and communities from paying twice for those services; it gives the local municipality the option of either providing the services directly to the association’s owners, or offering reimbursements of equal value to the association or owner for all expenses relating to garbage collection, street lighting, and snow removal.  Aside from these specific services, associations are generally only entitled to the same reimbursements for services that other homeowners in the municipality are provided. 

 

Although the MSA was enacted over 17 years ago, many associations are still unaware of the protection that is available to them.  For example, unit owners in a Dover, New Jersey condominium have tried to enter into an alternative dispute resolution by sending a petition to the mayor of Dover to obtain a monthly reimbursement of nearly $800 for trash removal services.  Although the Township of Dover is offering to provide curbside garbage pickup for each of the 69 owners twice a week, the owners of the building argue that fitting 69 garbage cans in front of the building would be a logistical and health nightmare.  Both the association and the municipality are unaware of the requirements of the MSA, the rights that it affords to homeowners and the municipalities responsibilities thereafter. Associations and homeowners in this and similar situations  should know that they have the  right to sue the town and force the municipality to either provide the required services directly, or provide the entitled reimbursements.

 

Receiving notice that a unit owner has filed for Chapter 13 Bankruptcy Protection is not the end of a Homeowner’s Association, Cooperative or Condominium Association’s (collectively referred to as the "Association") rights to receive unpaid Association fees. However, action must  be taken by the Association quickly in order to preserve its rights in the bankruptcy proceeding. A proof of claim should be filed to ensure that the amount of the pre-bankruptcy debt, including all arrearages, are properly documented. If a proof of claim is not filed, the Association may lose its right to receive payment on account of its pre-bankruptcy claim.
 

Under the Rules of Court, an objection to confirmation of a Chapter 13 plan must be filed with the court and served within a defined time period. A properly filed proof of claim that asserts a claim that is greater than the scheduled amount of the claim or the amount of the claim designated in the plan by the unit owner, serves as an objection to confirmation as to the amount of the claim. The trustee will confirm the plan based upon the higher amount set forth in the proof of claim, but that is not the end of the matter. The unit owner has sixty days to challenge the amount of the Association’s claim by filing a motion with the court. Thus, the Association must take affirmative action to secure its rights at the time notice of a Chapter 13 petition is received and during the confirmation proceedings. The Association must also monitor the case for sixty days following confirmation of the plan in case the unit owner decides to challenge the Association’s claim.
 

Stark & Stark’s Bankruptcy Group has filed numerous proof of claims in Chapter 13 matters and has monitored the claims process from start to finish. To ensure that your Association is protected, contact us as soon as notice of the filing of a Chapter 13 case is received.
 

 

A Pompano Beach condominium in Florida successfully sued Wells Fargo, arguing that they purposely delayed foreclosure proceedings on a condominium unit for more than a year.  As a result, the condominium was awarded title to the unit free and clear of the original mortgage amount.  The unit in question was previously sold to the association at sheriff’s sale following the condominium’s own foreclosure.  Despite the default on mortgage for over a year, Wells Fargo had yet to initiate foreclosure.   Condominiums and homeowners associations across the country suffer financial losses caused by owners who, prior to vacating their property after being foreclosed upon, opted for a strategic default mortgage  and stopped paying their HOA fees, monthly maintenance fees, special assessment fees, and/or any other condo fees for common elements.  After the association’s foreclosure, the unit is owned by the common interest community, typically, following a sheriff’s sale, with that association often unable to sell the unit because it is usually worth much less than the original mortgage, which remains on the unit.  Mortgage foreclosures are often taking over two (2) years because of court backlogs, lender inefficiencies and/or lender attempts to work deals with original mortgage owners in lieu of foreclosure.  Despite association consternation, lenders contend that a prolonged foreclosure is due to the lender trying to help owners who find themselves in a financial bind due to the bad economy.  The associations reject that contention with respect to units that have already been abandoned by the owners, as the lenders are not negotiating and/or settling with an owner(s) that vacated the unit and no longer has any practical interest in the property.  

In the Pompano Beach case, the owner purchased the unit in January 2006 and executed a mortgage for $184,400.  By April, 2009, the owner had fallen behind in the payment of 11 months worth of HOA fees, maintenance fees, special assessment fees, and other condo fees, owing about $5,500 in regular and special assessments.  At that point, the association filed a foreclosure, taking title to the unit in January, 2010.  By then the owner owed more than $9,000 in unpaid monthly maintenance fees.  Had Wells Fargo filed a foreclosure against the original owner for the default mortgage and completed the process, about $5,800 of unpaid condo fees on the unit would have been owed to the association as required by state law.  In Florida, lenders are liable for up to 12 months of unpaid maintenance fees or 1 percent of the original loan amount, whichever is less.  Here, the value of the unit is about $32,500 – about $150,000 less than what is owed on the original mortgage.  The association strategized that Wells Fargo would either foreclose on the loan and pay its share of unpaid monthly maintenance fees or, instead, agree to release its mortgage.  

This approach is just another example of the need for associations to strategize and be creative when trying to ensure their financial health in the face of a troubled economy and real estate market.