I Won a Palimony Judgment, But I Can’t Collect

By Angelo Sarno, Esq posted 12-15-2014 15:24

  

Originally published in New Jersey Family Lawyer Vol. 35, No. 2/December 2014

I Won a Palimony Judgment, But I Can’t Collect

by Angelo Sarno and Jill Turkish

            Times are changing. People are marrying later in life. Most families today are two-income households. People are more career driven. Premarital agreements are being used more than ever. With the recent statute changes, the same concepts behind premarital agreements and then some are now being applied to non-married cohabitants in martial-type relationships with a promise to care and support the other. As a result, cohabitation agreements have gained increasing popularity as more unmarried individuals seek support from former partners.

 

            The idea that unmarried couples could owe one another some type of support upon dissolution of their relationship was first examined in the case of Marvin v. Marvin.1 In Marvin, the parties had lived together for seven years, without ever getting married.2 When their relationship ended, Michelle Marvin alleged that during their relationship Lee Marvin had orally agreed to provide her with financial support for the duration of her life.3 The court decided the oral agreement between the parties could be enforced based on a contract theory.4 The court logically held that, as in any contract, unmarried adults are free to structure their finances and property as they choose, so long as their agreement is voluntary and not based on the performance of meretricious services.5 The court, however, made clear that its decision did not attempt to denigrate the institution of marriage or give cohabiting partners the same rights as married spouses.6

            The first case in New Jersey recognizing palimony agreements was Kozlowski v. Kozlowski.7 There, the court relied on Marvin and held that “agreements made by adult non-marital partners which are not explicitly and inseparably founded on sexual service are enforceable.”8 The court noted that most palimony agreements are made orally to accommodate for the fact that promises to provide support generally arise through spoken agreements and conduct.9 Furthermore, if a contract is found to have been formed, the court may award a lump sum payment calculated by the amount of the promised support and the recipient’s life expectancy.10 This formula requires a calculation of the support level required by the person seeking palimony. In Kozlowski, Irma Kozlowski received a one-time lump sum judgment in an amount predicated upon the present value of the reasonable future support Thaddeus Kozlowski promised to provide her with, and it was computed by reference to Irma Kozlowski’s life expectancy.11 New Jersey took it one step further in Devaney v. L’Esperance,12 which held that cohabitation is not a necessary element of a claim for palimony, but there must be some “marital-type relationship” to support the cause of action.          

Fast forward from the 1970s. In 2009, the New Jersey Legislature amended the statute of frauds to provide that in order to be enforceable, palimony agreements must be in writing and made with the advice of counsel for both parties.13 In the recent case of Maeker v. Ross, the Supreme Court concluded that Beverly Maeker’s claim for palimony was not barred because the Legislature, in passing the 2010 amendment to the statute of frauds, did not intend to retroactively void oral palimony agreements that predated its enactment.14 The Supreme Court reasoned that, for retroactivity purposes, the appellate court erred in focusing on the date the cause of action accrued rather than the date the oral contract was formed.15

While palimony and alimony awards or judgments may appear to have a similar result, there are major differences in the implications for each. The only real thing they have in common is the word “alimony.” They are very different things in reality. In bankruptcy proceedings, for example, the discharge of palimony agreements is treated differently than the discharge of alimony.16 Domestic support obligations are non-dischargeable in bankruptcy proceedings.17 Pursuant to 11 U.S.C. § 523(a)(5), a debt cannot be discharged in bankruptcy if it is one owed for a “domestic support obligation.”18 The Legislature has made clear this includes debts owed:

***

To a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree or other order of a court of record or property settlement agreement, but not to the extent that (A) such debt includes a liability designated as alimony, maintenance, or support, unless such liability is actually in the nature of alimony, maintenance, or support.19

***

In other words, if a debtor files for bankruptcy, some debts may be forgiven, but those obligations that provide support to a former spouse or child must still be paid by the debtor.

Bankruptcy court is not a court of equity like family lawyers are accustom to. Many courts have said it is often difficult to determine which obligations constitute alimony, support or maintenance.20 While courts have made clear that federal bankruptcy law governs which support obligations are in the nature of alimony, state law can also be considered for guidance.21 The ultimate test is whether the obligation is for the purpose of providing maintenance for or support of a spouse or child.22 So does a palimony award fit this test? One could clearly argue it does.

Federal courts previously have looked to the parties’ intent in determining whether the obligation is alimony or support.23 Intent can be determined by an examination of: 1) the language of the agreement and its meaning under the circumstances, in conjunction with any necessary extrinsic evidence, 2) the parties’ financial situation at the time the agreement was made, and 3) the purpose of the obligation at the time of the settlement.24 The parties’ label of a provision within a support agreement is not dispositive of whether or not the obligation created is in the nature of alimony or support.25 Similarly, the fact that a support obligation is payable to a third party is also not dispositive of the issue of dischargeability.26 Debts assumed as part of an equitable distribution scheme are not usually considered alimony or support, and thus in certain circumstances may be dischargeable in bankruptcy.

Despite how creative family lawyers can be, since bankruptcy court is a court of law, the answer is that unlike alimony, palimony agreements are dischargeable in bankruptcy proceedings.27 In In re Doyle, for instance, the parties lived together for five years in a home owned by the plaintiff.28 Kathleen Niermeyer alleged that during the relationship the pair acted as a married couple.29 James Doyle convinced the plaintiff to take out a $50,000 second mortgage on her home for use in his business, which he promised to pay.30 Upon dissolution of the relationship, Niermeyer sued Doyle for support.31 The court entered a stipulated judgment of the parties, providing that Doyle would be responsible for paying the second mortgage each month.32 Thereafter, Doyle filed for bankruptcy and sought discharge of the stipulated judgment.33

In a thorough decision, the bankruptcy court examined both the federal bankruptcy law and state common law in deciding the judgment should be discharged.34 The federal bankruptcy law, 11 U.S.C. § 523(a)(15), specifies that a duty is not dischargeable if it is one owed to a “spouse, former spouse, or child of the debtor.” Accordingly, the court stated that Niermeyer is not included as a creditor owed under the federal statute, as she is neither the spouse nor child of Doyle.35 The court declined to broaden its interpretation of the federal law because those cases that had expanded its scope did so only in situations involving “family duties.”36 In addition, the court examined state common law in support for its holding.37 Relying on Marvin, the court stated any support owed as a result of a non-marital relationship is based on “contractual obligations and not from an inherent right to such obligation.”38

The difference in treatment between palimony and alimony agreements in bankruptcy proceedings stems from the nature of each support obligation. Alimony arises based on a familial relationship, while palimony arises, in contrast, from a contractual duty. Alimony arises from the legal duty of a husband to support a wife.39 The Legislature clearly intended for those with a familial relationship to the debtor to benefit from the exception, not those with whom the debtor has entered into contracts. Although discharge of debts in bankruptcy proceedings allows the debtor to start anew, those who may be dependent on the debtor, however, such as a spouse or child, should not suffer because of the debtor’s bankruptcy.40 While those receiving palimony may argue otherwise, the duty created by a contract, which includes a palimony agreement, is different than that created by marriage. There is no duty to provide support in a non-marital relationship outside the voluntary entrance into a contractual agreement.

While most individuals attempt to equate palimony agreements to alimony, and thereby prevent their judgments from being discharged in bankruptcy proceedings, the Legislature has made clear that the two are very different for purposes of bankruptcy. The bankruptcy law says that support is non-dischargeable if it is owed to a spouse, former spouse or child.41 Those parties attempting to liken palimony to alimony in bankruptcy proceedings cannot succeed because they are plainly not a spouse, former spouse or child. The federal statute further supports the contention that alimony is based on a familial relationship, unlike palimony.

Furthermore, the marital relationship has traditionally been a protected institution, while non-marital relationships receive no such security. Courts that have provided palimony to non-marital partners have made it clear their decisions are not meant to trivialize the institution of marriage.42 Nor is it the intent of courts to provide rights typically preserved for married couples to those that are unmarried.43 Clearly, the New Jersey Legislature’s amendment to the statute of frauds requiring palimony agreements to be in writing further supports the contention that palimony agreements are based solely on contractual obligations, not on any other legal obligation to provide support.44

Thus, when evaluating these surviving claims, the first question to ask is whether there is a viable claim. Part of that answer must consider what assets exist to satisfy any adjudicated award. Winning the case only to collect a paper judgment that is subject to discharge is not an ending anyone wants to hear about.

Angelo Sarno is a partner in the law firm of Snyder & Sarno, LLC. Jill Turkish is an associate of the law firm of Snyder & Sarno, LLC.

Endnotes

1.     Marvin v. Marvin, 18 Cal. 3d 660, (Cal. 1976).
2.     Id. at 665.
3.     Id. at 666.
4.     Id. at 665.
5.     Id.
6.     Id. at 684.
7.     Kozlowski v. Kozlowski, 80 N.J. 378 (1979).
8.     Id. at 385.
9.     Id. at 384, citing Martin v. Campanaro, 156 F. 2d 127, 129 (2 Cir.), cert. den. 329 U.S. 759, 67 S. Ct. 112, 91 L. Ed. 2d 654 (1946).
10.   Id. at 388.
11.    Id.
12.     Devaney v. L’Esperance, 195 N.J. 247, 248-49 (2008).
13.     N.J. Stat. Ann. § 25:1-5(h).
14.     Maeker v. Ross, 2014 N.J. LEXIS 910 (N.J. Sept. 25, 2014).
15.     Id. at 30-31.
16.     In re Doyle, 70 B.R. 106, 109 (B.A.P. 9th Cir.).
17.     11 U.S.C. § 523(a)(5).
18.     Id.
19.     Doyle, 70 B.R. at 107.
20.     Stein v. Fellerman, 144 N.J. Super. 444, 449 (App. Div. 1976).
21.     Loyko v. Loyko, 200 N.J. Super. 152, 156 (App. Div. 1985).
22.     In re Romeo, 16 B.R. 531, 535 (Bankr. D.N.J.).
23.     Id. at 536.
24.     In re Gianakas, 917 F.2d 759, 762-63 (3d Cir. 1990).
25.     Id. at 763; Loyko, 200 N.J. Super. at 156.
2
6.     Loyko, 200 N.J. Super. at 156.
27.     Doyle, 70 B.R. at 109.
28.     Id. at 107.
29.     Id.
30.     Id.
31.     Id.
32.     Id.
33.     Id.
34.     Id. at 109.
35.     Id. at 108.
36.     Id. at 109.
37.     Id. at 107.
38.     Id. at 108.
39.     Id. at 109.
40.     Id. (citing In re Balthazor, 36 B.R. 656, 658 (Bankr. E.D. Wis. 1984)).
41.      11 U.S.C. § 523(a)(5).
42.      Marvin, 18 Cal. 3d. at 684.
43.     Doyle, 70 B.R. at 108.
44.     N.J. Stat. Ann. § 25:1-5(h).

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