On appeal from the Superior Court, Chancery Division, Family Part, Essex County, whose opinion below is reported at 248 N.J. Super. 10 (Ch. Div. 1991).
Before Judges Skillman, Kestin and Wefing.
The opinion of the court was delivered by WEFING, J.S.C. (temporarily assigned)
The parties to this matter were married in September, 1966; they separated in January, 1987, and were granted a final judgment of divorce on December 17, 1991. Defendant has appealed, and plaintiff has cross-appealed, from certain orders entered by the trial Judge during the divorce proceedings and certain provisions of the equitable distribution ordered in the final judgment of divorce.
Two children were born of the marriage, both of whom are now emancipated. When plaintiff filed his complaint for divorce in 1988, the older son was in college and the younger in prep school. The family lived in a large home in South Orange and, during the course of the marriage, plaintiff engaged in several business ventures, one of which was quite successful and the last of which was not. He owned an envelope manufacturing business which he sold in December of 1981. The net proceeds from this sale were slightly in excess of $2,000,000. He invested this sum and supported his family with the income and dividends for the next several years while he investigated other business opportunities.
Plaintiff eventually settled on a foreign automobile dealership, Coast Imported Car, in Toms River. The business was conducted through four separate corporations: Coast Imported Car Corp., Coast Realty Associates, Select Auto Leasing Corp. and Coast Auto Electronics Corp. (all hereinafter referred to as "Coast"). He and his original partner in the venture, Joseph Amore, obtained franchises for the sale and lease of Audi, Volkswagen, Porsche and Mercedes Benz automobiles. At the outset of the venture, plaintiff contributed $200,000 to the enterprise, while the $3,000,000 balance was financed through The First National Bank of Toms River (hereinafter "Bank"). Plaintiff was required to personally guarantee Coast's debts to the Bank. Plaintiff held a two-third interest in Coast while Amore, who contributed no funds, owned the remainder. In January of 1988, when the divorce complaint was filed, the amount of debt guaranteed by plaintiff in connection with Coast, including the floor plan, was in excess of $10,000,000.
Plaintiff entered the automobile business in 1985 and in October of 1987, the stock market collapsed. With it, according to plaintiff, so did the market for high-end luxury imported cars. Plaintiff also contended that the business suffered due to the decline in the dollar, certain adverse publicity associated with Audis and a nationwide decline in the sale of Volkswagens.
In November of 1988, the trial court entered one of the orders at issue here which provided in part:
Both plaintiff and defendant are hereby restrained and enjoined from alienating or encumbering in any manner any of the assets of the parties or either of them, except that plaintiff shall not be restrained and enjoined hereunder from conducting his business known as Coast Imported Cars in the ordinary course and provided that the parties may alienate or encumber any assets upon their mutual agreement in writing or upon further order of this court[.]
After entry of that order, and despite its existence, plaintiff advanced, from marital funds, some $400,000 to Coast. Of that total, $350,000 was advanced in an effort to meet critical cash shortages, and $50,000 was used to pay plaintiff's counsel fees incurred in litigation between himself and Amore.*fn1 Plaintiff's efforts to keep the business going and ultimately to sell it were unsuccessful. In December of 1990, he transferred the business and the realty associated with it to the Bank in exchange for a release of liability. Trial commenced in this matter in January of 1991. By that date, Coast, to which plaintiff had attributed a net value of $1,000,000 on a February 1987 financial statement, had no value.
Defendant's two initial points on appeal revolve around the trial court's refusal, as part of the equitable distribution, to give her a credit of $200,000, or one-half of the marital funds used by plaintiff in the business of Coast, and the trial court's decision that, for purposes of equitable distribution, Coast should be valued as of the time of trial, rather than the date of the filing of the complaint. Both of the trial court's determinations on these issues are contained in Goldman v. Goldman, 248 N.J. Super. 10, 589 A.2d 1358 (Ch. Div. 1991).
We have concluded, upon a careful review of the record and consideration of all the arguments advanced, that the trial Judge's reasoning in both regards was, in the particular situation presented here, ultimately correct. Our affirmance of those holdings should not be construed as permission for one spouse to use marital funds as venture capital with impunity. We think that the trial Judge here correctly recognized that he was confronted with a unique situation and that application of a rigid categorical analysis would have only hindered him in fulfilling his ultimate obligation to effectuate a distribution of marital assets which, overall, was equitable to both parties. The consequence of value fluctuations for purposes of equitable distribution should not, for instance, turn wholly on whether an asset is properly classified as an active or passive asset. Scavone v. Scavone, 230 N.J. Super. 482, 553 A.2d 885 (Ch. Div. 1988), aff'd 243 N.J. Super. 134, 578 A.2d 1230 (App. Div. 1990).
Defendant contends that the result of an affirmance of the trial Judge's action here will be to encourage spouses to pour marital assets into failing business enterprises. We disagree. We note, for instance, that defendant stipulated below that plaintiff did not act with bad faith in making these transfers, and that defendant presented no proof during the course of the trial either that the transfers into Coast were unreasonable ...