When a party in possession of the former marital home fails to refinance the mortgage so as to remove the ex-spouse’s name from the mortgage note, in violation of court order, the court may grant equitable relief

Law Lessons from L.H. v. D.H., Chancery Div., Family Part (Ocean Cnty.) (Jones, J.S.C.) DOCKET NO. FM-15-1571-11, June 5, 2015:

A divorce settlement agreement must be interpreted logically. When a dispute arises as to the application of a marital settlement agreement, a family court may apply basic principles of equity to resolve any existing ambiguities arising from the absence of clarifying language. See Guglielmo v. Guglielmo, 253 N.J. Super, 531, 541 (App. Div. 1992). A court’s goal is to ascertain the intention of the parties which requires consideration of the contractual terms, the surrounding circumstances, and the purpose of the document.

Moreover, the sense of a document may be implied from its object, the nature of the subject matter, the contextual setting, and the provisions of the agreement when read in pari materia. See Shelton v. Restaurant.com, Inc., 214 N.J. 419, 438 (2013) (statutes that deal with the same matter or subject matter should be read in pari materia and construed together as a unitary and harmonious whole). The court finds that the concept of in pari materia logically applies not only as an aid for interpretation of statutes as in Shelton, but also for interpretation of settlement agreements and contractual terms as well.

As noted in the recent case of Cameron v. Cameron, 440 N.J. Super 158 (Ch. Div. 2014), 171-173, the relevance of credit ratings following divorce cannot be overstated. We live in an era of recent and severe economic downturn in the United States. Piscitelli v. Classic Residence, 408 N.J. Super 83, 114 (App. Div. 2009). Benjamin v. Benjamin, 430 N.J. Super 301, 305 (Ch. Div. 2012). Against this backdrop, and pursuant to N.J.R.E. 201(b), a court may take judicial notice, as a matter of indisputable common knowledge, that a positive credit rating and score is one of the most valuable and important assets a party may presently possess. Simply put, a strong credit report and score can enable one with relatively limited assets or income to make substantial purchases which he or she could not otherwise afford. The reason is that a person who has limited resources but high credit can leverage such credit and borrow money for various expenditures. Reciprocally, a negative credit rating and score can have a detrimental and sometimes disastrous effect on a party’s financial health, often crippling the party’s ability to obtain a loan, either at a favorable rate or at all, for significant purchases such as a house, car, school tuition, or other expensive items, while potentially and simultaneously limiting the individual’s healthy financial growth for years. See Cameron, supra, 440 N.J. Super at 171.

The importance of a solid credit report and rating is underscored by both our state and federal governments. According to the State of New Jersey Department of Banking and Insurance official website:

. . . Credit information is used in virtually every aspect of American financial life . . . .Consumer credit is considered when applying for loans to buy home and automobiles. Credit checks are required to get utility, telephone and other services. Few landlords will rent apartments or houses, without ordering a credit report, and credit may also affect an employer’s hiring and promoting decisions.

[ http://www.state.nj.us/dobi/division_consumers/finance/credit_idtheft.htm ]

The State further comments that a credit report is an analysis of one’s credit record which is often used to determine whether additional credit should be extended to a person, as is a measure of such person’s “financial responsibility.” [ http://www.state.nj.us/dobi/division_consumers/finance/credit_idtheft.htm ] A credit score is a single numerical score, based upon an individual’s credit history, which purports to measure an individual’s credit worthiness. The model to calculate one’s score considers many factors, including but not limited to “amount of outstanding debt”, and “negative information” such as “late payments.” [ http://www.nj.gov/dobi/division_consumers/finance/creditreport2.htm ]

Further, in 2003, President George W. Bush signed into law the Fair and Accurate Credit Transactions Act of 2003 (FACTA), P.L. No. 108-159 (2003) as an amendment to FCRA. Under FACTA, every American has the right to a free annual copy of his or her credit report from each of the three nationwide agencies, [ See www.state.nj.us/dobi/division_consumers/finance/credireport.htm: AnnualCreditReport.com is the official site to help consumers to obtain a free credit report from the nationwide agencies. This central site allows one to request free reports once every 12 months. In conjunction with the Federal Trade Commission, the three major credit reporting agencies established the AnnualCreditReport.com website in order to provide consumers with the ability to obtain their credit reports once per year at no cost. See Facts for Consumers, Federal Trade Commission, (March 2008). ] which are Equifax, Experian and TransUnion. A clear purpose of this legislation is to enable consumers to more easily and carefully monitor their credit reports on a reasonably frequent basis, to make certain that there is no erroneous negative information which might wrongfully and detrimentally impact a credit score and creditworthiness, and to take timely action to attempt to rectify same before further damage and economic injury accrues. See Cameron, supra, 440 N.J. Super at 172-73.

Logically, a positive credit rating and score is particularly material following divorce, when there is often a necessity for one to economically rebuild and restructure his or her life. In this vein, marital dissolution may bring substantial risk and vulnerability to one’s credit report as well. For example, when two married parties divorce, and allocate responsibility between themselves for payment of an ongoing mortgage, car loan, credit card balance, or other substantial debt which technically remains in both parties’ names, the creditor is not a party to such an agreement, and therefore not bound by any such private agreement and allocation of responsibility between ex-spouses. As such, regardless of whether divorcing parties ultimately reach a settlement and arrangement as to who will be responsible to repay an outstanding debt to a creditor, the creditor may continue to hold both parties responsible for any unpaid balance, and is not required to follow any unilateral re-allocation of debt established by the co-debtors in their matrimonial litigation.

For this reason, one ex-spouse can easily damage the other ex-spouse’s credit report and score, by either intentionally or unintentionally failing to pay certain debts which are his or her responsibility under the parties’ settlement agreement or judgment of divorce, when the debts have remained in both parties’ names or solely in the name of the other ex-spouse. By way of example, if a married couple has a mortgage in both parties’ names, and if the parties divorce and their settlement agreement permits one party to keep the house and make the monthly payments associated with the debt, repeated late payments or non-payments may decimate the other party’s credit rating. The fact that the breaching party agreed to make all payments in the divorce settlement agreement, and perhaps even agreed to indemnify and hold the other party harmless form liability in the event of a breach, does not change the injury which can be done to an innocent spouse’s credit score when the responsible party fails to make timely payments, and when the creditor then legally reports same as a delinquency on the credit report of the innocent spouse. Damage stemming from a poor credit report may include, but not necessarily be limited to (a) the innocent spouse’s inability to obtain a loan at favorable interest rates, (b) injury to creditworthiness and economic reputation, (c) potential loss of employment opportunities based upon a background check reflecting poor credit; (d) legal fees required to address credit problems. Further, negative marks can stay on one’s credit report for years.

Since equity is a court of fairness, it is possible that, under certain hypothetical circumstances, a court may grant a party relief if he or she has tried to refinance property in good faith but was unable to do so for reasons beyond his or her own control. For example, if a party can prove that plaintiff had suddenly and he or she had become very ill or disabled, and needed additional time to refinance under the circumstances, a court could then theoretically consider equitable remedies other than forced sale of the home under Rule 4:50-1, the granting of additional time to refinance.

At the same time, there is a very strong public policy supporting the development of settlement agreements in family court, as well as enforcement of such agreements to resolve marital controversies and bring stability to resolutions See J.B. v. W.B., 215 N.J. 305, 326 (2013) (quoting Konzelman v. Konzelman, 158 N.J. 185, 193 (1999). Courts may consider the principle that agreements entered into good faith generally “shall be performed in accordance with their terms.” Glass v. Glass, 366 N.J. Super. 357, 379 (App. Div.), certif. denied, 180 N.J. 354 (2004); see Avery , supra, 209 N.J. Super. at 160 (emphasizing strong public policy favoring stability of consensual arrangements for support in matrimonial matters; Petersen v. Petersen, 85 N.J. 638, 645 (1981) (supporting the importance of upholding settlement agreements). Moreover, when an obligation rests on a party to perform a certain act, a court of equity will treat the party in whose favor the act should have been performed as having the same interest and right as if the act had actually been performed. See Goodell v. Munroe, 87 N.J. Eq. 328, 335 (E & A, 1916).

A court of equity may, in its discretion, decline to enforce a settlement agreement when such enforcement may yield and unfair and inequitable results. See Edgerton v. Edgerton, 203 N.J. Super 160, 171 (App. Div. 1985). Every case is fact-sensitive. However, our law is not to be applied in the abstract, but must be considered in light of the facts in an individual case. Hanover Ins. Co. v. Franke, 75 N.J. Super. 68, 74 (App. Div.), certif. denied, 38 N.J. 308 (1962).; McKinley v. Natters, 419 N.J. Super 205, 211 (Ch. Div., 2010). Further, the law should be based upon what is right and just. McDonald v. Mianecki, 79 N.J. 275, 291 (1979); Schipper v. Levitt & Sons, 44 N.J. 70, 90 (1965). 324 (Law Div. 1972), aff’d 62 N.J. 521 (1973).


1) A positive credit rating and score is one of the most important assets a party may have, particularly following divorce, when there is often a necessity for one to financially rebuild his or her life;

2) When a divorcing party breaches an obligation to refinance a mortgage note, and/or subsequently misses or makes late payments on same, such actions may seriously damage the other party’s credit report and score;

3) Even when the responsible party pays the mortgage on time, and there are no missed or late payments, a breach of obligation to refinance or satisfy an outstanding mortgage so as to remove the other party’s name from same is still actionable, and may justify equitable relief in order to protect the other party’s credit rating from present or future damage.

4) When a party in possession of the former marital home fails to refinance the mortgage so as to remove the ex-spouse’s name from the mortgage note, in violation of court order, the court may grant equitable relief, including but not limited to: (a) granting the aggrieved ex-spouse power of attorney to list the and sell the home through a bona fide realtor at a recommended price, and (b) removal of the defaulting party from the home, particularly if he or she obstructs the realtor’s access to the home or any other material aspect of sale.

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