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Keywords

settlementequitydivorcealimony

plaintiffdefendanttrialmotiondivorcealimony

Related Cases

Petersen v. Petersen, 85 N.J. 638, 428 A.2d 1301, 19 A.L.R.4th 822

Facts

Russell and Adrienne Petersen were married in 1946 and divorced in 1966, entering into a stipulation of settlement that included an escalation clause for alimony based on the husband's income. The husband was required to pay a fixed amount for alimony and a percentage of his income exceeding a certain threshold. In 1976, the wife sought to declare the husband's retained earnings as income for the purpose of invoking the escalation clause, while the husband sought to have the clause declared null and void. The Chancery Division ruled in favor of the husband, but the Appellate Division reversed this decision.

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.

Issue

Is the escalation clause in the alimony agreement enforceable, or is it contrary to public policy?

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.

Rule

An escalation clause in an alimony agreement is not invalid per se, but its enforceability is subject to judicial scrutiny to determine if enforcement would be fair, just, and equitable under changed circumstances.

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.

Analysis

The Supreme Court analyzed the escalation clause within the context of existing matrimonial laws and the principles governing alimony and support agreements. It emphasized that while such clauses can be valid, they must be enforced in a manner that considers the current financial circumstances of both parties. The court noted that the ability to pay and the needs of the dependent spouse are critical factors in determining the fairness of enforcing the escalation clause.

The Appellate Division properly held that the escalation clause was not invalid per se. It ruled, nevertheless, that the clause was not enforceable according to its terms in the absence of an inquiry and determination by the trial court as to whether under changed circumstances the enforcement of those terms would be fair, just and equitable.

Conclusion

The Supreme Court affirmed the Appellate Division's ruling, stating that the escalation clause is not invalid per se but requires a determination of its fairness and equity based on current circumstances before it can be enforced.

Consequently, it remanded the case for such a determination.

Who won?

The wife prevailed in the Appellate Division, which ruled that the escalation clause was not invalid per se and required further judicial inquiry into its enforceability.

The Appellate Division reversed and remanded, ruling that there is no per se bar to the use of such an agreement.

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