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Lilly v. Lilly


June 25, 2007


On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Burlington County, Docket No. BUR-FM-03-1179-99.

Per curiam.


Submitted June 6, 2007

Before Judges Yannotti and Messano.

Defendant Sean Lilly appeals from an order entered by Judge Jeanne T. Covert on April 21, 2006, which denied defendant's motion for a reduction in child support. We affirm.

Plaintiff and defendant were married on September 15, 1990, and three children were born of the marriage. The parties separated on or about February 1, 1998, and plaintiff filed a complaint for divorce. A final judgment of divorce was entered in the matter on February 6, 2002. The parties' property settlement agreement (PSA) was incorporated in and made part of the judgment. The PSA provided in pertinent part that the parties shall have joint legal custody of the minor children of the marriage, and plaintiff was designated as the primary residential custodial parent. The PSA further provided that, so long as plaintiff is the primary residential custodial parent for the children, defendant will pay $744 per week in child support. According to the PSA, that amount was based on defendant "having income from all sources of $191,000 per annum, and [plaintiff] having income from all sources being in the amount of $45,000 per annum."

On or about August 30, 2005, defendant filed a motion for a reduction of child support and certain other relief. In a certification submitted in support of the motion, defendant acknowledged that at the time of the divorce and the execution of the PSA, his income from all sources was $191,000 per annum. Defendant said that the sources of income included invested funds, salary, and monies from the sale of a family business. Defendant asserted that the business was no longer active, and the only business asset remaining was an investment account from which certain expenses were paid, including defendant's salary and the cost of his children's medical insurance coverage. Defendant stated that, at the time of the divorce, the account contained more than $1.4 million of invested funds. Defendant maintained that he agreed to the payment of child support of $744 per week based on his receipt of income from the invested funds.

Defendant added that, in the years since the "child support aspect" of the PSA "was originally negotiated," the balance in the business investment account had declined from $1.4 million to about $419,000. Defendant asserted that, according to Merrill Lynch, he lost more than $900,000 from August 2000 to July 2005, "solely due to market depreciation." Defendant said that the net income from the business account was then about $10,000 per year. Defendant also stated that he was earning net income from his employment of $1,155.83 every two weeks. Defendant asserted that his total gross income from the investment account and his wages was about $60,000, which resulted in net income of approximately $40,052.00.

Defendant added that he also has certain IRA accounts but had made no contributions to those accounts since the divorce. In addition, defendant has accounts with Vanguard and Merrill Lynch that also have been "reduced significantly." Defendant claimed that his ability to meet his child support obligation "creates an impossible situation." He said that he could not continually invade the principal of his accounts in order to pay child support because this would make it impossible to contribute to the children's future expenses and college costs.

Plaintiff opposed the application. Plaintiff submitted a certification in which she stated that during the marriage, defendant had been employed in a family-owned textile machine business and earned about $300,000 to $400,000 per year. Plaintiff said the business was sold in 1999, and since that time defendant had not sought comparable employment. According to plaintiff, defendant did not work for more than two years after the divorce but thereafter obtained "entry level secretarial/clerk" positions in which he earned a salary below "his earning capacity."

Plaintiff additionally stated that at the time the parties entered into the PSA, defendant acknowledged annual income of $191,000, which was all "unearned income" from the business. Plaintiff asserted that she believed defendant had sufficient funds to continue to pay the $744 per week in child support that had been agreed to in the PSA. Plaintiff noted that defendant was living "the same lifestyle he lived during [the parties'] marriage." Further, defendant had admitted that he still had $400,000 in one of his investment accounts. She stated that defendant could pay his child support with the money from that account for ten years before the funds would be depleted. Plaintiff maintained that defendant had not established changed circumstances that would warrant a modification or reduction in his child support payments.

In January 2006, defendant submitted to the court a report prepared by Robert P. Wolf (Wolf), Ed.D., M.B.A, a vocational expert. In his report, Wolf addressed plaintiff's claim that defendant was voluntarily underemployed. Wolf concluded that defendant was "not under-employed in his present vocational setting and did not voluntarily choose to minimize his earnings and economic value."

Plaintiff's counsel responded to the report in a letter brief dated January 10, 2006, in which counsel stated that the report did not support defendant's motion because the only changed circumstance since defendant signed the PSA was that defendant was working. Counsel asserted that changed circumstances had not been established because, at the time the PSA was entered into, defendant was not working and was relying upon his investment accounts to support his lifestyle and make the agreed-upon payments. Counsel asserted that it was foreseeable that if defendant "lived off" his investments, those accounts would be reduced and despite the reduction, defendant "has sufficient assets to pay his child support obligation."

Defendant's motion was heard on January 20, 2006. The judge entered an order on that date, denying the motion without prejudice. Defendant was ordered to submit proof that his business investment account had declined due to market conditions. The order stated that, "Such proof shall consist of, at the very least, monthly statements from Merrill Lynch for the period in question, including any cash withdrawals from the account." The judge further ordered plaintiff to provide proof of her income, and required plaintiff to divulge "her complete financial and employment circumstances to" defendant.

Plaintiff responded in a certification dated February 26, 2006. Defendant submitted a report dated March 3, 2006, from his accountant Bruce R. Mulford (Mulford), in which Mulford concluded that defendant's business investment account had a balance on April 1, 2000 in the amount of $1,372,282, and a balance of $406,645 as of December 31, 2005. Mulford opined that the reductions were "primarily due to market conditions and were not the result of any unwarranted or frivolous expenses or expenses not appropriate to the structure of the holding company." In briefs submitted to the court, defendant asserted that plaintiff had not furnished sufficient financial information so that the court could evaluate plaintiff's financial situation and ability to meet her shelter expenses.

The judge entered an order on April 21, 2006, denying defendant's motion without prejudice. The judge found that defendant had not demonstrated a significant change in circumstances beyond his control that would warrant a modification of his support obligation. The order included the following findings:

Defendant had an obligation to invest his money safely to guarantee the support of his children which he could easily have done at the time of the [final judgment of divorce] when the [business investment] account contained over $800,000 and his child support obligation was set at approximately $3,000 per month. In fact, [defendant] can still guarantee all future child support payments out of his investment income even at this juncture and that is just from this one account without even touching his additional investment assets totaling over $700,000. Defendant failed to take steps to guarantee that he would be able to pay his child support obligation and instead watched the account depreciate by 60% in the time span of [four] years.

The judge noted that the "greatest depreciation" in the business investment account had occurred in 2000, 2001, and 2002, which was prior to the entry of the final judgment of divorce. The judge additionally observed that the value of the account had not substantially changed in the following three years and had "actually increased" in 2004-2005.

The judge further found that defendant had established that his prior salary was a "direct result" of the family business and it was unlikely that defendant would earn "similar income" in the future. However, the judge noted that defendant's support obligation had been based as much upon his investment accounts as on his ability to earn a salary. The judge observed that the family business had been sold before the final judgment of divorce was entered. Consequently, "there was nothing unanticipated about [defendant's] loss of earnings from that business in 2002 when he entered into this agreement."

Defendant appeals and argues: 1) he presented a prima facie case establishing changed circumstances that warrants a reduction in his child support obligation; and 2) the court erred in its analysis and application of the relevant criteria in Lepis v. Lepis, 83 N.J. 139 (1980), for evaluating applications for modification of child support based on changed circumstances. We have carefully reviewed the record in light of these contentions and the applicable law. We are convinced that there is no merit in defendant's arguments and therefore affirm substantially for the reasons stated by Judge Covert in the order appealed from. We add the following brief comments.

Child support orders are always subject to review and modification based on a showing of changed circumstances. Lepis, supra, 83 N.J. at 146. However, the party seeking such a modification has the burden of making a prima facie showing of changed circumstances warranting relief. Id. at 157. Furthermore, "[w]hen the movant is seeking modification of child support, the guiding principle is the "best interests of the children." Id. at 157 (citing Hallberg v. Hallberg, 113 N.J. Super. 205, 209 (App. Div. 1971)).

Here, defendant's application for a change in his support obligation was based primarily upon the reduction in value of his business investment account but, as the judge noted in her findings, the account experienced its greatest decline before defendant agreed to pay child support of $744 per week. As the judge pointed out, it was clear when the parties entered into the PSA that, because defendant was no longer working in the family business, his support obligations would be met for the most part by defendant's investment income. The record shows that the value of defendant's investments had not changed substantially since the final judgment was entered. Moreover, as the judge aptly noted, despite the losses in the business investment account, defendant has sufficient assets to continue to meet his support obligations.

In short, there is ample support in the record for the judge's determination that defendant failed to present a prima facie case of changed circumstances that warrant a modification of his support obligations. Because the judge's findings are supported by adequate, substantial, credible evidence, they are binding on appeal. Cesare v. Cesare, 154 N.J. 394, 411-12 (1998) (citing Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974)).

Furthermore, as stated previously, when a motion is made to reduce child support, the court must be guided by the "best interests of the children." Lepis, supra, 83 N.J. at 157. In this matter, defendant sought a reduction in child support but, in his application, never addressed how such a reduction would be in the best interests of his children.



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