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Caplan v. Caplan

January 27, 2005

SANDRA G. CAPLAN, PLAINTIFF-RESPONDENT,
v.
CRAIG CAPLAN, DEFENDANT-APPELLANT.



On certification to the Superior Court, Appellate Division, whose opinion is reported at 364 N.J. Super. 68 (2003).

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this appeal, the Court determines whether the Appellate Division properly required the imputation of income to the defendant husband based on his past income or earning potential, before allocating the child support obligation for each party.

Plaintiff, Sandra Caplan, and defendant, Craig Caplan, were married on April 17, 1988, and had two children - a son born in 1989, and a son born in 1991. The older son is developmentally delayed and suffers from Attention Deficit Hyperactivity Disorder (ADHD), fine and gross motor delays, and oral motor apraxia. Both parties have post-graduate degrees. Sandra was not employed outside the home, but rather attended to the important needs of her children. Craig was employed as a mortgage trader during the marriage.

After the parties filed complaints and cross-complaints for divorce, they entered into a settlement agreement covering all issues except child support and child support-related counsel fees. Those unresolved issues were tried on three separate dates between April and June 2001. Sometime between the execution of the settlement agreement and the conclusion of the trial on the unresolved issues, Craig lost his job. Prior thereto, he had earned between a low of $1,796,326 and a high of $4,615,273 during the last five years of the marriage. A letter outlining the terms of his separation from his employment indicated that Craig would be terminated effective June 30, 2001 and that he would receive a severance package that included a lump sum, continued health care coverage for three months, and job placement services.

On December 28, 2001, the trial court entered a judgment of divorce and the following month decided the child support and related counsel fee issues. Although Craig did not seek re-employment, the trial court found sufficient income from the parties' unearned income for the child support award and prorated child support on the basis of the parties' assets. The trial court ordered that each party pay its own counsel fees.

Both parties appealed. In a published opinion, the Appellate Division disagreed with the methodology the trial court used in computing the child support award. The panel instructed the trial court to: first, determine the reasonable needs of the children; second, before allocating the appropriate share between the parties, consider, in addition to unearned income from investments, the ability of the parties to earn income; third, after determining the respective percentages that each party's net imputed earned and unearned income bears to the total of their combined income, apply those percentages to determine each party's share of the maximum basic child support guideline award for two children; and fourth, subtract the maximum basic child support amount from the court-determined amount of the reasonable needs of the children to determine the remaining support to be allocated between the parties. The panel also reversed the denial of counsel fees to the plaintiff and remanded that issue for further consideration and an analysis of the factors set forth in Rule 5:3-5(c) and Williams v. Williams, 59 N.J. 229 (1971).

The Supreme Court granted Craig Caplan's petition for certification.

HELD: Even when there is sufficient investment income to satisfy a child support award, the court, in determining a party's child support obligation, should impute income based upon the party's past income or earning potential in order to fairly allocate the child support obligation.

1. The Child Support Guidelines were developed to give the court clear economic information in determining initial or modified fair and adequate child support awards. The economic data and procedures of these guidelines attempt to simulate the percentage of parental net income that is spent on children in intact families and assume that the parents are sharing in the child-rearing expenses in proportion to their relative incomes and that those percentages are based on their combined net income (defined as gross income, including all earned and unearned income, less various expenses). The fairness of a child support award is dependent on the accurate assessment of a parent's net income. The guidelines provide that if the court finds that either parent is voluntarily underemployed or unemployed without just cause, it shall impute income to that parent according to the potential employment and earning capacity of that party. (pp. 16-20)

2. Although the trial court's decision to address child support without imputing income under the circumstances here was not unreasonable, the trial court failed to give proper weight to the underpinnings of the guidelines that are based on the total income of an intact family, and it cannot be concluded that it is a fair result only to use unearned income and the underlying assets merely because the income from those assets will satisfy a child support award. (p. 21)

3. The imputation of income to one or both parents who have voluntarily remained underemployed or unemployed, without just cause, will promote a fair and just allocation of the child support responsibility of the parents. (pp. 21-22)

4. In determining whether to impute income, the guidelines instruct the trial court to first determine whether the parent has just cause to be voluntarily unemployed. When a parent is voluntarily unemployed or underemployed, without just cause, income may be imputed to that parent to provide for the child's needs. In this case, the imputation of income to defendant, Craig Caplan, comports with the underpinnings of the guidelines that the children are entitled to share in the total income of an intact family and that defendant's imputed income should be included in the calculation of his child support contribution. (pp. 22-25)

5. Once the trial court determines that income should be imputed, the next step is to determine the reasonable amount of income to be imputed to that party. In performing that function, courts should apply the factors listed in the guidelines as well as any other evidence related to each party's ability to earn income. (pp. 25-26)

6. Although the approach described by the Appellate Division is an appropriate one, it is not the only one available for application by the trial court. In an appropriate case, after assessing the N.J.S.A. 2A:34-23 factors, the trial court may determine that a reasonable approach would be to consider certain categories of expenses that are partially included in the guidelines award and add a portion of those expenses to the maximum guidelines-based award to arrive at a fair child support award. (pp. 26-28)

7. When the total income of the parties exceeds the guidelines, the choice of the methodology to employ in arriving at a child support award is left to the discretion of the trial court. Under either method, the trial court's goal is to calculate a child support award that is in the best interest of the child after giving due consideration to the statutory factors and the guidelines. (p. 28)

Judgment of the Appellate Division is AFFIRMED and the matter is REMANDED for a recalculation of defendant's child support obligation.

CHIEF JUSTICE PORITZ and JUSTICES LONG, LaVECCHIA, ZAZZALI, ALBIN, and RIVERA-SOTO join in JUSTICE WALLACE's opinion.

The opinion of the court was delivered by: Justice Wallace

Argued September 27, 2004

After substantially all of the issues in this matrimonial case were resolved, but prior to the completion of the extended trial of the child support and related counsel fee issues, defendant husband was discharged from his high-income employment position. The trial court found sufficient income from the parties' unearned income for the child support award and prorated child support on the basis of the parties' assets. The Appellate Division disagreed with this approach and concluded that the trial court should have imputed income to defendant before allocating the child support obligation for each party. We hold that even when there is sufficient investment income to satisfy a child support award, the court, in determining a party's child support obligation, should impute income based upon the party's past income or earning potential in order to fairly allocate the child support obligation.

I.

Plaintiff Sandra Caplan and defendant Craig Caplan were married on April 17, 1988. The couple had two children, a son born in 1989, and a son born in 1991. The older son is developmentally delayed and suffers from Attention Deficit Hyperactivity Disorder (ADHD), fine and gross motor delays, and oral motor apraxia.

Both parties have post-graduate degrees. During the marriage defendant was employed as a mortgage trader. His annual earnings for the last five years of the marriage were:

1996:$1,796,326 1997:$2,434,773 1998:$1,093,531 1999:$2,945,454 2000:$4,615,273

Plaintiff, was not employed outside the home.

In January 1998, plaintiff filed a complaint for divorce and defendant filed an answer and counterclaim in March 1998. Through mediation, the parties were able to resolve tentatively all issues with the exception of child support and child support-related counsel fees. They entered into a settlement agreement dated January 30, 2001, which covered the issues of custody, parenting time, equitable distribution, and alimony. Pursuant to that agreement, plaintiff received a lump sum cash payment of $2,075,000, title to the mortgage-free martial home valued at $910,000, the furnishings in the home, and a Mercedes Benz automobile. Plaintiff waived alimony and any claim to the distribution of assets in return for the lump sum payment, and represented that the terms of the settlement agreement would permit her to live at a standard of living reasonably comparable to that achieved during the marriage.

As part of the agreement, defendant retained the Mercedes CLK, the Ford Expedition, and the following assets and listed values:

AssetValve Vanguard NJ Tax-Free Fund$11,834 as of 6/30/00 SSB 80941$2,490,272 as of 7/31/00 401K$296,226 as of 3/31/98 ESPPSold Stock Incentive Plan$134,689 marital value as of 8/31/00 per Kroll Lindquist Avey  $1,159,513 marital value of all plans below marked with (*) as of 3/31/98 per Compensation Resources, Inc. Capital Accumulation Plan*$11,103 marital value as of 8/31/00 per Kroll Lindquist Avey Equity PSP Plan*$7,015,333 marital value as of 8/31/00 per Kroll Lindquist Avey Wealth Builder Option*$4,704 marital value as 8/31/00 per Kroll Lindquist Avey Rizzo & Bauer Escrow Account$62,446.63 as of 12/22/00

On February 8, 2001, the trial court entered a final judgment for custody and parental time in accordance with the terms of the settlement agreement. The unresolved issues of child support and related counsel fees, were tried on April 30, May 2, June 5, and June 13, 2001.

Sometime between the execution of the settlement agreement and the conclusion of the trial, defendant lost his job. The terms of defendant's separation from his employment were outlined in a letter that indicated the parties had been negotiating the terms of the agreement since April 16, 2001, and that due to a reduction in force defendant would be terminated effective June 30, 2001. The letter stated that defendant would receive a severance package that included among other things the sum of $115,384.62, continued health care coverage for three months, and job placement services commencing on the effective date of the agreement.

On December 28, 2001, the trial court entered a judgment of divorce. The following month, the trial court decided the child support and related counsel fee issues. We quote from the Appellate Division decision the pertinent findings of the lower court:

Mr. Caplan was employed by Salomon Smith Barney from July 1987 until June 2001 as a mortgage trader. Mr. Caplan was terminated and a separation agreement signed.

In the agreement, Mr. Caplan was provided with two months compensation after he actually left the trading desk, pre-taX severance pay in the amount of $115,000, and he retained deferred compensation, all of which had been included in the total of his income-producing assets. Mr. Caplan's current unemployment does not adversely affect his ability to support his two sons, Daniel and Jacob.

Mrs. Caplan has not worked outside the home since the minor child Daniel was born, except for a brief period in 1999 when she earned $2,591.

The parties' son Daniel is a special needs child. He is enrolled in a special education program in public school. He has been diagnosed with ADHD.

Mrs. Caplan is a stay-at-home mother who spends her time helping her sons, especially Daniel, with important everyday activities.

****

Mrs. Caplan sold the former marital home for its worth [$910,000] and purchased her new home on Landow Road for $549,000. Her new home is smaller than the parties' marital home.

Mr. Caplan has remained unemployed voluntarily since his termination. He is also living in his home in Maryland.

****

With regard to the Caplans' lifestyle during their marriage, Mrs. Caplan characterized their life together as an "upper-class standard of living" where they lived in a mortgage-free home of 4,000 square feet and drove BMW and Mercedes automobiles.

The Caplans had live-in help, vacationed in Africa, Europe and Mexico and frequented Broadway shows and expensive restaurants according to Mrs. Caplan.

Mr. Caplan characterizes the lifestyle of the parties as 'initially modest,' which in time became upper middle class. On account of his increased earned income, he described this lifestyle as comfortable and pleasant.

While their marriage is at an end, both Sandra Caplan and Craig Caplan acknowledge that their family has been blessed economically, and each recognizes their shared and fundamental responsibilities for the ...


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