Bigstock

In Fattore v. Fattore, the Appellate Division held that a waiver of alimony may be ignored by a court where there has been a substantial and permanent change in circumstances and where the original consideration for the waiver is unavailable because of an unforeseen contingency. This decision took place in the context of federal law which prohibits an ex-wife from receiving any portion of her former husband's divisible military pension when he switches to a non-divisible veteran disability retirement benefit.

After 35 years of marriage, the Fattores divorced in 1997, when they were both 55 years of age. The consent dual final judgment of divorce included a mutual alimony waiver with unambiguous language, “now and in the future.” The parties agreed to a division of assets. The consent judgment provided that the wife was entitled to 50 percent of a pension the husband had earned for his service in the Army National Guard, and that it would be enforced by execution of a qualified domestic relations order or QDRO. After the divorce, the husband continued to serve in the Army, but became disabled in 2002. He collected social security benefits and both pension and disability benefits. He then opted for disability benefits, which were tax-free.

When the wife asked the Army why she was not receiving a portion of her former husband's military benefits despite execution of the QDRO, the official response was that her former husband's pay was based on disability. Under the Uniformed Services Former Spouses Protection Act, 10 U.S.C.A § 1408, the disability pay could not be divided. “The disability amount is used as an authorized deduction.” When the disability amount is deducted from the gross pay along with the survivor benefits, according to the Army, there is no amount available for the community property or the QDRO allocation.

The wife filed a motion in 2016 for compensation for her inability to collect on the pension, and the trial court, after conducting a hearing, found that the husband's disability did, indeed, require his retirement. He was collecting benefits for both disability retirement and veteran disability, as well as social security. His present wife was employed. The judge did not find that defendant intentionally attempted to deny his former wife benefits because he too was unaware of the federal law.

The former wife's circumstances at the time of the hearing were quite modest: her present home, a condominium, had lost value and she maintained a “bare-bones budget” of $39,540 per year, which exceeded her income by approximately $13,000. Defendant, on the other hand, had a tax-free annual income of more than $80,000 on a budget of $74,436 without regard to his present wife's earnings. The trial judge relied on the 2004 Appellate Division decision in Whitfield v Whitfield, where under federal law, the court had affirmed a post judgment order requiring a spouse to compensate his former wife directly for the decrease in his pension caused by his election of disability benefits. The Fattore judge therefore appointed an expert to ascertain the value of the plaintiff's coverture interest at the time of the judgment of divorce, but meanwhile ordered the defendant to pay plaintiff $1,800 per month. The judge noted that strong public policy would not countenance a retiree's “unilateral conver[sion], for his own economic benefit, a portion of his military pension to VA disability and defeat his former spouse's prior equitable distribution award.” In an attempt to indemnify the wife, the trial court characterized the payments as a form of equitable distribution, non-deductible by the husband as the payments were not alimony. The court noted that alimony was a path the court could take, but in this matter the parties had waived alimony. The trial court also awarded the wife $10,000 in attorney fees based on her good faith claim and lack of funds.

Three months after the trial court's decision, the U.S. Supreme Court issued a ruling exactly on point in Howell v. Howell and held that “federal law completely pre-empts the States from treating waived military retirement pay as divisible community property.” According to the Supreme Court, a military pension, subject to equitable distribution, is merely a contingent benefit, not a vested right, and Congress did not want disability benefits to be considered disposable retirement pay. Whether denominated a form of reimbursement or indemnification, the court held, such orders by state family courts would “stand as an obstacle to the accomplishment and execution of the purposes and objectives of Congress. All such orders are thus preempted.” It did not foreclose, however, that alternative calculations for spousal support might be warranted.

The Appellate Division therefore reversed the trial court decision as a matter of law, finding the indemnification remedy unavailable, but recognized that that could not be the end of the discussion in a situation where, after a long term marriage, one former spouse was clearly living in a marginal situation. The husband claimed that “reopening the judgment of divorce and awarding spousal support would be unfair and contrary to well-established case law.” But the Appellate Division accepted the wife's argument that “the disability waiver was a substantial and permanent change in circumstances warranting consideration of an award of alimony” despite the alimony waiver. The issue then became “whether the alimony waiver agreed to by the parties before retirement and disability can withstand the inequity created by unforeseeable circumstances.” The court wrote: “We hold an alimony waiver cannot withstand such a substantial change in circumstances as occurred here, and it is neither fair nor equitable to uphold such a waiver.” The opinion analyzes waiver, the nature of alimony and the courts' power to revise orders of alimony and support, both in a pending matrimonial action and in a post-judgment action, “as circumstances may require.”

The Appellate Division noted that the wife had no doubt waived alimony in consideration of a share of the husband's military pension. At the time of the divorce, the husband's earnings were 34 times greater than the wife's earnings, providing valuable consideration for her waiver of alimony in favor of a later receipt of pension benefits. Therefore the loss of the pension benefits constituted a “substantial and permanent change in circumstances” with the wife unable to meet “the quality of the [former] marital standard of living,” although found to be frugal, without the receipt of alimony.

The case was remanded to the trial court to now analyze the matter not from the standpoint of equitable distribution, but from the standpoint of whether alimony should be awarded in accordance with all the statutory criteria, including age and assets, per N.J.S.A. 2A: 34-23(b)(10) and (11); all that would be foreclosed was “a dollar-for dollar indemnification.” The trial court would also be free to consider an award of counsel fees “to enable the parties to litigate on an even playing field.”

The Appellate Division acknowledged that even permanent waivers of alimony can be re-evaluated by the family court in circumstances where equity requires and there has been a substantial and permanent change in circumstances. Clearly, the facts were very compelling in this matter: the wife, with much lower income at the time of the divorce, had waived alimony in exchange for the promise of a portion of her husband's military pension, which became unavailable; at the time of the post-judgment hearing, the former wife still had a lower income and life style than her former husband who collected two pensions and social security benefits and had a gainfully employed spouse.

This decision reinforces the requirement that spouses have “the obligation to deal fairly with each other” and if they do not, the courts have the equitable ability to step in and, if necessary, even a waiver of alimony can be neutralized by a substantial and permanent change in circumstances. Attorneys should therefore consider that the consideration for a waiver of alimony should be carefully spelled out in any agreement.

We support this decision not only for its ability to find a remedy for a disadvantaged ex-wife, but to clarify the law on waivers of alimony in the face of a permanent and substantial change of circumstances and the availability of counsel fees post judgment.