Simon Law Group: APPELLATE DIVISION ADDRESSES ENFORCEABILITY OF SETTLEMENT AGREEMENT AS TO COLLEGE IN NEW PUBLISHED DECISION

The Appellate Division’s newly published (precedential) decision in Avelino-Catabran v. Catabran provides another lesson to practitioners and litigants about the language used in settlement agreements and how such language, if unambiguous and without basis to modify, will likely be upheld in matrimonial matters. The specific dispute involved college payments for the parties’ older child and child support, but the importance of this decision stems from the enforceable nature of the settlement agreement itself rather than what portion of the agreement was at issue.

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Here are the relevant facts that you need to know:

The parties were married on June 18, 1993 and divorced on August 14, 2002. A settlement agreement addressing custody and support of the children – 21 and 17 at the time of the appeal – were addressed therein.
The agreement provided that the parties shared joint legal and physical custody of the kids, with mom being designated as the parent of primary residence during the school year and dad during the summer.
The agreement also required dad to pay $137 per week in child support, and the parties seemingly agreed to increase the obligation to $800 per month in 2009.
As to college, the agreement provided that the parties would be equally responsible for “net college expenses – those remaining after the children applied for financial assistance.” The agreement provided:
The minor children shall have an obligation to apply for any and all scholarships, student loans, grants and financial aid that may be available to help defray the cost of each child’s attendance at college. After deductions for scholarships, student loans, grants and financial aid, the parties agree to be responsible for the net college educational costs of the minor children. Net college cost[s] will be split equally by the parties. (language was deleted providing that the parties respective obligations were to be determined pursuant to their respective abilities to pay at that time).
In June 2004, the parties agreed to change the custody and parenting time arrangement, eliminating alternating weekends with the kids living full-time with mom during the school year and with dad during the summer.
In May 2011, the custody and parenting time arrangement was again changed when mom and her new husband moved to Switzerland with the kids. To facilitate the move, dad signed a letter at the time providing that mom had sole custody of the kids “[f]or the duration of, and subject to, their residing in Switzerland.”
After graduating from high school, the oldest child decided to attend NYU starting in Fall 2012. Total cost of attendance was approximately $62,000, but the school offered substantial financial aid (including a large scholarship, a work study offer, and student loans), the total value of which came to approximately $23,000. The package also included PLUS loans worth approximately $39,000, which were defined by the award letter as “the maximum amount . . . . [a] parent may borrow.”
The child accepted the full scholarship, work study, and student loans offered to her. In an email sent at that time, dad asked mom, “how much Parent PLUS Loan should we borrow?” and suggested they borrow approximately $13,000 to cover mom’s share of the balance owed for college. Mom responded by telling dad to “Please borrow this money on behalf of Catherine (the older child)”. As a result, dad accepted the available PLUS loan.
In October, 2012, dad filed a motion seeking to modify child support to reflect a split-parenting arrangement, an order requiring mom to pay half of the child’s net college expenses, and judgment against mom for the amounts due on the PLUS loan and owed to NYU for the Spring 2013 semester.
Mom argued that no funds were owed by her for college costs because NYU provided the child enough financial aid to cover the total expense. Financial documents submitted showed that mom’s gross income was approximately $225,000 annually and dad’s was $113,000 (they each earned $73,000 at the time of the divorce).
In May, 2013, the court entered an order directing mom to contribute to college expenses, but required the parties to submit their financial documents to determine what said contribution should be. It also directed the parties to submit pay stubs and tax returns to determine child support moving forward. In so doing, the court found that the financial aid package did not cover the full college cost, the PLUS loans were available only to mom and dad, and dad had established changed circumstances warranting a child support modification.
Notably, the court found that, based on the above-described emails, mom was aware of the financial aid package and that the loans dad was taking were to cover her share of the college costs. NYU was also deemed an appropriate college choice by the child because of the “employment opportunities offered to NYU graduates” instead of another school preferred by mom.
Mom moved for reconsideration of the trial court’s order. The motions were denied in January 2014.
During the next series of months, the parties submitted various financial disclosures to the court. Mom claimed she could not afford to pay for college, and she had filed for Chapter 11 relief in bankruptcy court approximately six months prior.
In May 2014, the court ordered mom to contribute 50% of the net college expenses. It also modified child support, directing dad to pay $186 per week for the younger child, and mom to pay $281 per week for the older child (resulting in a net payment of $95 per week to dad). In so doing, the court found mom had sufficient resources to contribute to college, considering the requisite legal factors (the Newburgh factors) in so doing, and relied on the language of the original settlement agreement calling for an equal payment obligation.
As for child support, the court, in that same order, found that the children’s respective living arrangements (older child at college and younger child in Switzerland) merited a modification. In so doing, the court relied upon the Child Support Guidelines, Rule 5:6A, and dad’s support proposal (not included in the order). In so doing, the court also attached a Child Support Guidelines Sole Parenting Worksheet for two children in a “split-parenting situation” (for multi-child families where one parent has custody of one or more children, and the other parent has custody of the other children). Support was modified retroactive to October 2012 when dad first filed his motion.
Mom appealed the relevant order.

i. Decision on College Expenses

In affirming the trial court’s finding as to college, the Appellate Court found that the lower court properly enforced the unambiguously written original settlement agreement requiring mom to be equally responsible for the kids’ college expenses because there was insufficient evidence of unconscionability, fraud, or changed circumstances (despite mom’s bankruptcy filing) that would merit a deviation from the agreement. The Court reiterated the obligation of divorced parents to contribute to the higher education of children who are qualified students (notably, the court referenced a general parental obligation to pay – not just for divorced parents, which has been a hot topic of discussion in recent years).

Notably, because the parties agreed on how to pay for college in the settlement agreement, the trial court was not required to apply all of the Newburgh factors in rendering a determination and was simply required to enforce the agreement/contract as written.
As to the PLUS loan, the Appellate Division disagreed with mom’s position that the loan was secured for the child because the child was not eligible to apply for or receive the loan herself. “Therefore, the PLUS Loans cannot be considered a student loan or financial aid available to [the child] for which she had to apply, as contemplated by the parties. The court correctly determined that [mom] authorized the loan and she was responsible for same.“

ii. Decision on Child Support Modification

The Appellate Court affirmed the trial court’s determination (without a hearing) that the older child living at college and spending her time off with dad instead of with mom in Switzerland was a sufficient changed circumstance to merit a support modification. There was also no dispute that the parties’ incomes had substantially changed since the divorce. The Appellate Court, however, agreed with mom’s position that the trial court erred in calculating child support by:

Failing to consider the statutory child support factors as required by Jacoby v. Jacoby when a child lives away from home while attending college (at which point the Guidelines no longer apply);
Failing to properly calculate the support award and issue a clear statement of reasons for same; and
Relying on dad’s use of the Guidelines and its incorporation by reference of dad’s proposed calculation.

Primarily, the trial court failed to calculate the Guidelines-based amount and specifically provide why it was deviating from same in the best interests of the child. “[A] court cannot simply attach a guidelines worksheet in lieu of providing a statement of reasons.” In so holding, the Appellate Court noted, “The court’s statement regarding its abdication to [dad] of its obligation to calculate support did not satisfy its obligation to provide a statement of reasons for its decision.”

Avelino-Catabran provides a useful analysis for practitioners and litigants when it comes to drafting agreements and, in this particular instance, what will and should be included in the college expense portion of same. Most of the agreements I have seen and drafted are largely similar on this topic and, by excluding the PLUS loans (which were not identified in the agreement) from the equation, the Court ensured that divorced parents cannot essentially abdicate their responsibility to provide for a child’s college expenses.

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Robert A. Epstein Robert Epstein is a partner in Fox Rothschild LLP’s Family Law Practice Group and practices throughout New Jersey. He can be reached at (973) 994-7526, or repstein@foxrothschild.com.