February 27, 2007
SUZANNE WEISS, PLAINTIFF-APPELLANT,
JAIME WEISS, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-2934-92.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 16, 2007
Before Judges Lintner, S.L. Reisner and C.L. Miniman.
Plaintiff Suzanne Weiss (Suzanne) appeals from a final order dated October 21, 2005, denying in part her post-judgment application in aid of litigant's rights, and a final order dated December 5, 2005, denying her motion for reconsideration of the October 21, 2005, order. We affirm.
Suzanne and defendant Jaime Weiss (Jaime) were married on September 1, 1981. Two sons were born of the marriage, Matthew on December 6, 1982, and Jordan on March 17, 1985. Suzanne and Jaime divorced on May 10, 1994. At the time of their divorce, Suzanne and Jaime entered into a negotiated property settlement agreement (PSA) that disposed of all issues.
As pertinent to the current issues on appeal, the PSA provided for unallocated support in the following manner:
8. The husband shall pay to the wife as and for unallocated rehabilitative spousal support and child support the total unallocated sum of $5,000.00 per month. The spousal support portion of said payment shall terminate (or be suspended) at the earliest of the following occurrences:
a. Ten years from the date of the execution of this agreement.
b. The wife's re-marriage or cohabitation with an adult male with whom she is not related by blood or marriage (as defined by New Jersey statute or case law).
c. The wife's death.
d. The husband's death.
9. All support payments by the husband for unallocated support will be made in cash or personal check, unless otherwise provided by court order.
10. So long as the children are not emancipated and in the event of the occurrence of one of the events causing the termination of spousal support as set forth in paragraph 8, above, the husband shall pay to the wife for the support and maintenance of the unemancipated children of the marriage the sum of $1,500.00 per child per month until said child is emancipated. Emancipation shall be defined as:
a. The death of the child.
b. The marriage of the child.
c. The child entering the armed services.
d. The child attaining eighteen years of age.
Notwithstanding the child attaining the age of eighteen years, however, in the event the child is pursuing a post high school education . . . the child support shall continue and the child shall not be deemed emancipated. However the husband's obligation to pay child support shall terminate no later than the date the child attains his twenty second birthday except in the event of an illness or unforeseen cataclysmic event, or if child has not completed his final school year. In the event of the wife's re-marriage, or upon the expiration of ten years, in the event the husband is still obligated to pay child support, the child support shall be $1,500.00 per month per unemancipated child.
The PSA also addressed the tax consequences of the unallocated support in detail:
11. The wife agrees that she will report on her income tax return the full amount of the unallocated support of $5,000.00 per month ($60,000.00 per annum) provided same is paid by the husband to the wife. The wife understands that the husband shall be entitled to claim a deduction for that payment on his Federal, State and local income tax returns. In return therefore the husband agrees to reimburse the wife for the combined amount of her Federal and State income taxes (only on the unallocated support income) to the extent that same exceeds $3,660.00 per year. The wife's income, other than the unallocated support herein, will not be taken into consideration in calculating the amount of income tax she is obligated to pay. It is the intention of the parties that the wife will be entitled to claim a dependency exemption for the two unemancipated children. . . .
In the event of an adverse tax consequence, the PSA provided a mechanism for adjustment:
20. If, for any reason, deductions by the husband for alimony payments made by him are disallowed, limited, recaptured, or otherwise impaired by action of the Internal Revenue Service, any court of competent jurisdiction, subsequent legislative modification or future court orders, the parties understand and agree that the husband shall be entitled to relief from the terms, provisions, and operations of the support provisions of this agreement provided said relief does not reduce the level of support payable to the wife nor increase the cost of said support to the husband. It is the specific intention of the parties that the tax effect to the husband of the payments made hereunder, be the same upon any subsequent modification of this agreement, or subsequent to any disallowance, limitation, or recapture of the deductions contemplated hereunder. The parties agree to confer and attempt to agree on a modification of support, or, if necessary, to make application to any court of competent jurisdiction for appropriate modification.
In the years subsequent to their 1994 divorce, Suzanne filed four applications in aid of litigant's rights. The first order was entered June 28, 1995, granting Suzanne certain judgments for unpaid equitable distribution, counsel fees, unreimbursed income taxes from years prior to the divorce, and numerous other forms of relief. The next orders were entered on October 25, 1996, finding Jaime in contempt of certain of the provisions of the June 28, 1995, order and awarding counsel and other fees. These orders were affirmed in all respects on appeal. Weiss v. Weiss, A-1952-96 (App. Div. Mar. 26, 1998). Another motion was filed thereafter and was determined by order dated September 17, 1998, as amended on September 30, 1998. The orders resolved the manner in which the various judgments were to be paid by Jaime, as well as other issues. On February 4, 1999, the parties entered into a consent order modifying the PSA and providing for satisfaction of the various orders previously entered in aid of litigant's rights. This consent order extended unallocated support for an additional eighteen months. All outstanding issues, save a dispute over the parties' respective obligations to pay Suzanne's federal and state income taxes for the years 1993 through 1997, were resolved by agreement. No further applications were made to the court for over six years. However, the parties never resolved the tax issues.
Eventually, Suzanne exercised self-help with respect to the tax issues instead of returning to court. Sometime subsequent to the filing of her 2002 tax return, Suzanne unilaterally filed amended tax returns for 2001 and 2002 in which she excluded $36,000 from her income for those two years. Thereafter, she reported only $24,000 in alimony on her tax return for 2003 and thereafter.
On July 28, 2005, Suzanne filed a notice of motion (1) for relief in aid of litigant's rights, (2) for an increase in alimony and child support, and (3) to convert rehabilitative alimony to permanent alimony. Specifically, Suzanne sought relief with respect to alleged failures by Jaime to reimburse her for taxes on unallocated support, to pay the full amount of support, and to pay the balance on her home equity loan. She also sought reformation of the PSA to limit her tax liability to the alimony portion of support. In addition, Suzanne alleged that she was entitled to an increase in rehabilitative alimony under Crews v. Crews, 164 N.J. 11 (2000), and Lepis v. Lepis, 83 N.J. 139 (1980), and to convert it to permanent alimony. She also sought an increase in child support and an award of counsel fees.
All relief was denied except for some outstanding support payments and payment of the home equity balance, and an order to that effect was entered on October 21, 2005. After granting a portion of the relief sought, the judge stated:
Although there was a very famous New Jersey case reported at 164 N.J. Page 11, that Mr. Abramson wants me to address, I do not feel there is significant change from the parties and their lifestyles as Crews would be required to have me do. I find that Mrs. Weiss entered into an agreement represented by counsel knowingly. There was give and take. I find that Mr. Weiss was . . . in the beginning years not real compliant. They had to come back to court. He didn't pay all the equitable distribution as he should. But I find that the application to reform and extend this unallocated support is not warranted, and that all other applications by the plaintiff are denied.
This was very easy in reading the submissions. The submissions on both sides were outstanding. I compliment. But in reading these submissions, there's no question in my mind what we had here. An arm's length negotiated settlement. A consent order in '99. Just because we may have made a bad deal, or took a deal that maybe we should not have taken . . . does not mean that we come in seven, or 13 years later to say, "Wait a minute, let's redo it." There has to be some finality. The rest of the application is denied . . . .
Additionally, the judge specifically found that Jaime had paid his share of taxes on the unallocated support. Suzanne's motion for reconsideration was denied without oral argument on December 5, 2005. This appeal followed.
Suzanne raises the following issues on appeal:
POINT I - DEFENDANT IS LIABLE FOR PLAINTIFF'S INCOME TAXES WHICH WERE ATTRIBUTABLE TO HER REPORTING AS TAXABLE OTHERWISE NON-TAXABLE CHILD SUPPORT OF $36,000.00 PER YEAR SINCE 1994.
POINT II - MODIFICATION OF BOTH THE APRIL 19, 1994 PROPERTY SETTLEMENT AGREEMENT AND FEBRUARY 4, 1999 MODIFICATION ORDER IS WARRANTED AND IT WAS ERROR FOR THE TRIAL COURT NOT TO SO FIND.
POINT III - THE MARITAL STANDARD OF LIVING IS THE MEASURE FOR ASSESSING INITIAL AWARDS OF ALIMONY AND ANY MOTIONS TO MODIFY.
POINT IV - THE COURT WAS REQUIRED TO EXAMINE WHETHER THE PROPOSED JUDGMENT ENSURES THAT THE SUPPORTED SPOUSE WILL BE ABLE TO MAINTAIN THE LIFESTYLE TO WHICH SHE WAS ACCUSTOMED DURING THE MARRIAGE.
POINT V - PLAINTIFF IS ENTITLED TO A SUBSTANTIAL INCREASE IN ALIMONY AND CHILD SUPPORT.
POINT VI - THE TRIAL COURT ERRED IN DENYING PLAINTIFF'S MOTION WITHOUT A PLENARY HEARING AND WITHOUT AN ARTICULATION OF REASONS.
A judge has a duty to make findings of fact and conclusions of law "on every motion decided by a written order that is appealable as of right." R. 1:7-4(a). "Failure to perform that duty 'constitutes a disservice to the litigants, the attorneys and the appellate court.'" Curtis v. Finneran, 83 N.J. 563, 569-70 (1980) (quoting Kenwood Assocs. v. Bd. of Adjustment of Englewood, 141 N.J. Super. 1, 4 (App. Div. 1976)). Moreover, "[n]aked conclusions do not satisfy the purpose of R. 1:7-4. Rather, the trial court must state clearly its factual findings and correlate them with the relevant legal conclusions." Id. at 570.
In this matter, the judge failed to comply with this mandate when he placed his conclusions on the record without making factual findings to support them. In such a case, we may find the facts "pursuant to the constitutional grant of necessary original jurisdiction to appellate courts." Farmingdale Realty Co. v. Borough of Farmingdale, 55 N.J. 103, 106 (1969) (citing N.J. Const. art. VI, § 5, ¶ 3; R. 2:10-5); see also Hammer v. Twp. of Livingston, 318 N.J. Super. 298, 310 (App. Div. 1999); Esposito v. Esposito, 158 N.J. Super. 285, 291-92 (App. Div. 1978). In light of the long-term on-going disputes between the parties and the multiple post-judgment applications to the court, we have determined to exercise our original jurisdiction.
Suzanne asserts that, if the tax savings provisions of the PSA are not reformed to eliminate the contingencies, she cannot report as income the child support component of unallocated support and Jaime cannot deduct it from his taxes. She contends that the PSA language runs afoul of I.R.C. § 71(c)(2)(A), as summarized in 12 New Jersey Practice Family Law and Practice § 53.18, at 266-68 (Susan R. Winters & Thomas D. Baldwin, 1999). Absent reformation of the language, she urges that Jamie will have been improperly deducting $36,000 per year of otherwise non-deductible child support since 1994, providing him with substantial tax savings to which he is not entitled. Concomitantly, Suzanne will have been reporting income which should not have been taxable to her. This is purely a question of law subject to our plenary review. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
This issue has been addressed in Kean v. Comm'r, 407 F.3d 186 (3d Cir. 2005). There, the court stated:
By ordering the payor spouse to make an unallocated support payment taxable in full to the payee spouse, the couple may be able to shift a greater portion of their collective income into a lower tax bracket. Consequently, an unallocated payment order not only frees the parents from restrictive court instructions that dictate who pays for what, but may allow the parties to enjoy a tax benefit at a time when they face increased expenses as they establish independent homes. This advantage could be lost by taxing all unallocated payments to the payor spouse. [Id. at 193.]
Thus, the unallocated support specified in the PSA is not unlawful. Furthermore, in the event of an audit of Jamie's tax returns and a disallowance of any portion of the fully deducted unallocated support, the PSA in ¶ 20 provided a mechanism for providing relief to Jaime, "provided said relief does not reduce the level of support payable to the wife nor increase the cost of said support to the husband." Yet that day has not arrived and Suzanne's concerns in this regard are premature. In any event, however, Suzanne will not be harmed even if there are adverse tax consequences to Jaime. The judge's ultimate conclusion in this respect is, thus, affirmed.
Suzanne next claims that Jaime has refused to reimburse her for the income taxes she has had to pay on unallocated support since 1994. With respect to her contention that Jamie did not reimburse her for her incremental tax liability on the child support portion of the unallocated support, Suzanne asserts that Jaime should have paid $85,871 to her from 1994 forward for excess taxes rather than the $18,953.65 he did pay. She determines this number from a tax analysis prepared for her by an accounting firm, N.L. Fish & Co.
In that analysis, the accountant determined the total taxes Suzanne paid between 1994 and 2000 when she was declaring $60,000 in unallocated support and found that it was $59,468.
He also calculated the total taxes she would have paid from 2001 to 2004 had she continued to declare the full $60,000 in unallocated support and the total was $63,573. Then, the accountant calculated the total taxes Suzanne would have paid had she reported only $24,000 in alimony for the years 1994 through 2000 and determined it to be $11,525. Additionally, he determined the taxes she actually paid for the period 2001 to 2004 and found that it was $25,645. Her accountant then concluded that for the tax years 1994 to 2000 Suzanne paid $47,943 more in taxes then she would have paid if she reported only $24,000 in alimony. He also determined that she would have been required to pay an additional $37,928 in taxes had she reported the full $60,000 for the years 2001 through 2004. Thus, the accountant determined that Jaime owed Suzanne $85,871 for excess taxes less $18,953.65 previously paid, for a net liability of $66,917.35.
Suzanne acknowledged that if Jaime filed amended tax returns for the years 2001 through 2004 in which he reported an additional $36,000 in income, then Jaime would owe her only $47,943 minus $18,953.65 for a net amount of $28,989.35. She also sought an award of interest and penalties on the amounts Jaime owed her because she did not pay her taxes in a timely manner, allegedly as a result of Jaime's violations of the PSA.
In opposition to the relief requested by Suzanne, Jaime certified that he had been paying Suzanne $250 per month toward the taxes she would be obliged to pay on the $60,000 of unallocated support. He averred that her tax liability on that support would have been $6660 per year, that she was to pay $3660 and he paid $3000 to her each year in monthly installments since 1995. Jaime certified that Suzanne had simply failed to pay her taxes from 1992 through 1995 and did not even remit the sums he gave her to the IRS. He, too, had an accountant, William Gerber, CPA, prepare an analysis of Suzanne's tax obligations.
Gerber pointed out that Suzanne's accountant's analysis was flawed because it was predicated on a theory that the PSA limited Suzanne's maximum tax liability to $3660 per year. Rather, the PSA limited Jaime's tax-reimbursement exposure to the difference between the taxes on the unallocated support of $60,000 only and $3660, which was Suzanne's maximum tax responsibility on the unallocated support.
Gerber also noted that Suzanne's accountant's analysis allocated dependency exemptions, credits, and deductions to various components of her income rather than apply all the exemptions, credits and deductions to the $60,000. He urged that this method of calculating Jaime's tax-reimbursement expense had no support in the PSA, which merely required a calculation of income taxes on $60,000 after all exemptions, credits and deductions were taken, the deduction of $3660 from the total amount of income taxes, and payment by Jaime of the balance. He noted that Suzanne never had sufficient withholding deducted from her wages to meet her own tax obligations, and between 1995 and 2002 she never had even $3660 withheld.
Jaime's accountant calculated the taxes due from Suzanne each year from 1995 to 2002 on the $60,000 of unallocated support, and applying the exemptions, credits and deductions she actually took on her federal and state tax returns. From the total tax due, he deducted the $3660 for which Suzanne was responsible, and the remainder was Jaime's yearly tax-reimbursement obligation. Then, his accountant deducted the amounts actually paid by Jaime and determined that Jaime overpaid Suzanne seven out of nine years, resulting in a net overpayment of $6756.
In addressing this issue, the following colloquy, which ensued after the judge stated that "[t]he rest of the application is denied," constitutes the entirety of his decision respecting the issue of tax reimbursements:
MR. A: Judge, there is an issue about outstanding taxes on each party's obligation for reimbursement. That really is at the heart of the motion to begin with.
THE COURT: The motion was denied.
MR. A: [T]here is clearly in the agreement a requirement that Mr. Weiss pay, by way of reimbursement, a certain amount of taxes of Mrs. Weiss. He had been paying voluntarily $3,000 a year, which had been applied unfortunately to penalties that had been accruing since 1992.
THE COURT: I will let my ruling stand based . . . on what I've said.
MR. A: There is a requirement in the agreement for Mr. Weiss to pay the taxes.
THE COURT: And . . . I'll say that he has paid his share. I find he has paid his share.
This bare conclusion was a particular disservice to the litigants and this court. The motion judge should have analyzed the reports presented by the accountants. Although such a failure might seem to require a remand, on the facts before us we conclude that the outcome of the motion on this issue was correct.
The PSA was a fully negotiated document with the attorneys for both parties participating in the crafting of its language. At the time of the divorce, Suzanne was unemployed. When her only income was the $60,000 per year in unallocated support, all the exemptions, credits, and deductions to which she was entitled would have reduced her net taxable income, and in the event she was entitled to any tax credits, the tax thereon. As to the tax due, Suzanne was responsible for $3660, even if that was the total tax due, and Jaime was responsible for the balance, if any. Thus, Jaime was clearly entitled to indirectly benefit from the exemptions, credits and deductions taken by Suzanne on her personal tax return, which is why his contribution toward her taxes was not fixed, whereas, hers was fixed at $3660.
The PSA did not provide, in any manner, for the reallocation of the exemptions, credits and deductions from the $60,000 paid by Jaime to other income earned by Suzanne. Indeed, it specifically provided that "[t]he wife's income, other than the unallocated support herein, will not be taken into consideration in calculating the amount of income tax she is obligated to pay" (emphasis added). Nothing could be more clear, yet Suzanne's accountants blatantly ignored this prohibition in calculating the tax reimbursement they opined she was entitled to receive. An expert opinion without factual support in the record is entitled to no weight at all, In re Yaccarino, 117 N.J. 175, 196 (1989); Buckelew v. Grossbard, 87 N.J. 512, 524 (1981); Rosenberg v. Tavorath, 352 N.J. Super. 385, 401 (App. Div. 2002), and the judge correctly denied this portion of Suzanne's motion.
The balance of the issues raised by Suzanne relate to her claim that she is entitled to an increase in support and conversion of alimony from rehabilitative to permanent. She contends that Crews, supra, mandates a review hearing in every case seeking an increase in support on the ground that support does not permit the dependent spouse to enjoy the standard of living during the marriage.
As a threshold matter, in order to convert rehabilitative alimony to permanent alimony, Suzanne was required to "show such 'changed circumstances' as would warrant relief from the support or maintenance provisions involved." Lepis, supra, 83 N.J. at 157 (quoting Martindell v. Martindell, 21 N.J. 341, 353 (1956)). Where the initial support order was for rehabilitative alimony, if the supported spouse can show that he or she was "unsuccessful in obtaining the kind of employment required for the economic self-sufficiency anticipated at the time of divorce, 'this properly may be viewed as a "changed circumstance" which would justify the continuation of alimony beyond the original termination date.'" Milner v. Milner, 288 N.J. Super. 209, 214 (App. Div. 1996) (quoting Shifman v. Shifman, 211 N.J. Super. 189, 195 (App. Div. 1986)); see also N.J.S.A. 2A:34-23(d) (providing that "[a]n award of rehabilitative alimony may be modified based either upon changed circumstances, or upon the nonoccurrence of circumstances that the court found would occur at the time of the rehabilitative award"). Our Supreme Court addressed this issue in 2000.
It is well recognized that a rehabilitative alimony award is intended to "enable [the] former spouse to complete the preparation necessary for economic self-sufficiency." It is "payable for a terminable period of time when it is reasonably anticipated that a spouse will no longer need support." But "self-support" does not mean some subsistence level; it describes the point at which the supported spouse is deemed to have reached a level at which he or she can support himself or herself in a manner reasonably comparable to the marital standard of living.
When rehabilitative alimony does not work as originally intended, a court may use its equitable power to order an additional alimony award. . . . [Crews, supra, 164 N.J. at 34 (citations omitted).]
In seeking to convert rehabilitative alimony to permanent alimony, the supported spouse must also demonstrate that he or she would have been eligible for permanent alimony at the time of the divorce, as, for example, where the marriage was long-term and the supported spouse "stayed out of the workforce for a period of twenty years to raise their three children." Milner, supra, 288 N.J. Super. at 216 (citing N.J.S.A. 2A:34-23(b)(6),
(8)). Any award of permanent alimony following a period of rehabilitative alimony "would constitute [the] first permanent alimony award, [making] it . . . incumbent upon the judge to consider all of the statutory factors enumerated in N.J.S.A. 2A:34-23(b)(1 to 11) as if deciding the permanent alimony ab initio." Carter v. Carter, 318 N.J. Super. 34, 48 (App. Div. 1999).
As to the quantum of increased support, the supported spouse is required to show the standard of living that the parties enjoyed during the marriage,*fn1 the supported spouse's financial position and needs at the time of the application, and his or her inability to maintain a standard of living reasonably comparable to that enjoyed during the marriage. Crews, supra, 164 N.J. at 24-32. The Crews Court observed that
[i]n Lepis we sought a fair balancing of interests in our approach to modification applications. We held that alimony and support orders define only the present obligations of the former spouses, thereby acknowledging that "[t]hose duties are always subject to review and modification on a showing of 'changed circumstances.'" But to be entitled to a hearing on whether a previously-approved support award should be modified, the party moving for the modification "bears the burden of making a prima facie showing of changed circumstances." Specifically, the party seeking modification of an alimony award "must demonstrate that changed circumstances have substantially impaired the ability to support himself or herself." This . . . must be understood to mean the ability to maintain a standard of living reasonably comparable to the standard enjoyed during the marriage. [Id. 28 (citations omitted) (emphasis in original).]
Such a showing must be made before discovery of the supporting spouse's financial status is permitted and before a court considers that status in deciding whether to modify support. Ibid.
Although Suzanne submitted proofs as to the marital life style during the last two years of this short-term marriage, she did not submit proofs as to each and every statutory element a court is required to consider in converting rehabilitative to permanent alimony. N.J.S.A. 2A:34-23(b); Carter, supra, 318 N.J. Super. at 47-48. She also offered no proofs as to the rehabilitation plan that was the predicate for her agreement to rehabilitative alimony at the time of the divorce or when the PSA was modified in 1999, yet she was required to demonstrate the failure of that plan in order to show changed circumstances. N.J.S.A. 2A:34-23(d); Milner, supra, 288 N.J. Super. at 214; Shifman, supra, 211 N.J. Super. at 195. In particular, she did not demonstrate that she was entitled to permanent alimony ab initio. Carter, supra, 318 N.J. Super. at 48 (citing Heinl v. Heinl, 287 N.J. Super. 337, 346 (App. Div. 1996)). Because the proofs Suzanne submitted were insufficient to make out a prima facie case of entitlement to either increased support or permanent alimony, the judge correctly denied her application.