November 2, 2007
MARY K. HAWLEY, PLAINTIFF-RESPONDENT,
EDWARD J. LEVINE, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, FM-13-0861-00-B.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 22, 2007
Before Judges Parrillo and Sabatino.
Defendant, Edward J. Levine (the "ex-husband") appeals an order of the Family Part dated January 22, 2007. The order denied the ex-husband's application to modify spousal and child support payable to his former spouse, plaintiff Mary K. Hawley ("the ex-wife"). We remand for a plenary hearing, particularly as to the continued reasonableness of imputing to the ex- husband, as determined at the 2001 divorce trial, $170,000 in annual earnings capacity.
The parties were divorced on August 10, 2001 after a four-day trial. The ex-wife was awarded primary residential custody of the parties' two children, one of whom is now age twenty-one and the other who is now eighteen. The ex-wife and the children continue to reside in New Jersey. The ex-husband relocated to Staten Island, New York, and has remarried.
The ex-husband is a physician who has been licensed in the State of New York since 1986. A major issue at trial, one which continues to divide the parties, concerns his earnings capacity. Prior to 1998, the ex-husband was earning about $200,000 per year through his practice with Heartland Medical Services. However, his income potential became hampered after March 1998, when he was arrested and charged with participation in an illegal scheme to sell prescription drug samples to a drug company representative. He pled guilty in September 1999, was fined $20,000, and was sentenced to five years probation and six months house arrest. The New York Medical Review Board then revoked his privilege to bill Medicare or Medicaid for ten years. The ex-husband subsequently was discharged by Heartland in June 2000. After that, he opened his own medical clinic in Staten Island and also started a laser hair removal business.
His then-girlfriend, now his present wife, worked at the clinic without pay.
At the time of trial in 2001, the ex-husband was working full time in his new medical practice. The practice had been operating at a loss, but was expected to grow despite its inability to bill Medicare and Medicare for patient reimbursements. The laser hair business, meanwhile, was only generating about twelve patients per month.
After considering the proofs and financial projections as they existed at the time, the trial judge imputed $170,000 in annual earnings to the ex-husband. Based on that imputed income, the trial judge set alimony in the Final Judgment of Divorce ("FJD") at $2600 per month and child support at $1735 per month. The judge phased in those support obligations gradually through July 2002, in recognition that it would likely take some time for the ex-husband to develop his new practice. The FJD also provided for equitable distribution of the marital assets, the ex-husband's parenting time with the children, attorneys fees and other matters not germane to the present appeal. The ex-husband appealed the FJD's awards of alimony, child support and counsel fees, all of which we sustained in a per curiam opinion. Levine v. Levine, No. A-0483-01T2 (App. Div. Jan. 8, 2003).
In the six years since the FJD was entered on July 2, 2001, the ex-husband has unsuccessfully attempted several times to have his support obligations reduced by the Family Part, based upon alleged changes in circumstances. Meanwhile, his combined support obligation has risen, as the result of cost of living adjustments in the child support, to $4559 per month, or over $54,000 per year. The ex-husband has repeatedly failed to pay the monthly sums due, typically paying his ex-wife and children only $800 monthly. Consequently, his support arrears mounted to over $127,000 as of January 2007.
The ex-husband's chronic non-payment and under-payment of support, as well as his non-compliance with certain other court directives, prompted the ex-wife to file several motions for enforcement. One of those applications resulted in the issuance of a bench warrant for the ex-husband's arrest in November 2006, which was vacated when he supplied the ex-wife with copies of certain requested financial records.
According to tax returns and other financial documents produced by the ex-husband, since 2001 he has earned nowhere near the $170,000 projected for him in the FJD. Instead, his records reflect that he earned about $120,000 in 2002 and $138,000 in 2003, although the ex-husband contended that those figures represent his business's gross receipts, and that his net income for those years was much lower. The records further show that he earned $48,500 in 2005 and only $41,346 in 2006. The ex-husband contends that his earnings have been seriously curtailed by the restrictions imposed on his medical license by New York authorities, forcing him to rely upon patient copays and direct billings. The ex-wife, meanwhile, contends that the ex-husband has the ability to earn higher sums, notwithstanding his practice restrictions. She suspects that he is understating his true earnings. She notes that much of his current practice is derived from cash payments, that he pays a $650 weekly salary to his present wife, and that at one point he drove a late-model Mercedes convertible when picking up the children at her home. The husband countered that the Mercedes was leased not by him, but by his present wife, and that she performs gainful services in the practice.
The January 22, 2007 order before us resulted from a motion filed by the ex-husband in December 2006, not long after the November 2006 bench warrant had been vacated. His motion sought (1) a finding of changed circumstances and that the original obligation amount was no longer "fair and equitable"; (2) a finding that the ex-wife had orally agreed to a reduction in alimony; (3) a recalculation of child support based on the passage of more than three years since the original support order; (4) the appointment of a forensic accountant, at the exhusband's expense, to review the ex-husband's medical practice and income; (5) an "ability to pay" hearing based on the result of that review; and (6) the suspension of all support obligations pending the results of the accountant's report.
In support of his motion, the ex-husband certified that he was in debt over $180,000, principally due to owing more than $178,000 in back taxes. He also asserted that, although he works over sixty hours each week, he has not reaped net income above $70,000 in any year since the divorce. The ex-husband further contended that he had sold all of his available assets to try to satisfy his past obligations.
The ex-wife replied with a cross-motion, seeking a denial of the ex-husband's requests for relief and also seeking another warrant for his arrest based on his continued failure to pay. The ex-wife particularly objected to his request to retain a forensic accountant, in light of the fact that he had paid nothing to her in alimony and child support since a $1000 payment in late September 2006. She asserted that after making two $1000 payments in September, the ex-husband had paid nothing further up through January 2007. At the same time, he was paying $800 per month in rent to his current wife, with whom he lived, plus her weekly salary.
On January 19, 2007, after hearing the arguments of counsel but no testimony, the court denied the ex-husband's motion in all respects. The motion judge initially noted that the exhusband's motion was procedurally deficient, because he had failed to supply the court with copies of the FJD and his original Case Information Statement ("CIS") from 2001, as required by R. 5:5-4(a). Nonetheless, the judge addressed the substantive issues in several respects.
First, the judge found that the ex-husband had not acted in good faith in filing his motion because he had paid nothing toward his support obligations since September 2006. After briefly touching upon other factors, including whether the exhusband's alleged change in circumstances was voluntary, and whether it was permanent or temporary, the judge returned to the issue of the ex-husband's credibility. The judge found that the ex-husband had not demonstrated "any reasonableness or any other fundamental advantages other than his own personal security." The judge further criticized the ex-husband for making rent payments to his present spouse, totaling $9,448 in calendar year 2006, while paying only about $9,600 that year to his children and former wife. The judge found that the ex-husband should not be permitted to "tie up" funds for a forensic accountant, which instead should be applied to his support obligations.
As a result of his findings, the motion judge entered a judgment against defendant for $127,219, the amount he was in arrears as of January 2007. The judge also issued a bench warrant for the ex-husband's arrest, with a purge amount of $127,219 and a minimum release amount of $1,250. The judge also suspended the ex-husband's passport, but decided against suspending his medical license in its entirety as a condition of non-payment.*fn1 The ex-husband's request for a stay pending appeal was denied, as was a subsequent emergent application he made to this court for interim relief.
On appeal, the ex-husband argues that the court erred in (1) denying him a plenary hearing based on a prima facie showing of changed circumstances; (2) declining to recalculate child support after more than three years had passed; (3) rejecting the appointment of a forensic accountant at the ex-husband's expense; and (4) declining to conduct an evidentiary "ability to pay" hearing before re-issuing a bench warrant.
We have fully considered the arguments advanced by the ex-husband, and the counter-arguments presented by the ex-wife, in light of the limited record before us. Although we share the motion judge's perception that the ex-husband has severely failed to give appropriate priority and attention to his support obligations, we are also satisfied that genuine and material factual issues exist that require an evidentiary re-evaluation of the parties' financial circumstances. Specifically, a plenary hearing should be conducted expeditiously to determine whether the ex-husband, now six years after the 2001 divorce, has the realistic ability in 2007 and in the foreseeable future to earn $170,000 in imputed annual earnings.
It is well recognized that our courts have "broad equitable powers . . . to review and modify alimony and support orders at any time." Weitzman v. Weitzman, 228 N.J. Super. 346, 353 (App. Div. 1988), certif. denied, 114 N.J. 505 (1989); see also N.J.S.A. 2A:34-23. In making such assessments, we are guided by the Supreme Court's holdings in Lepis v. Lepis, 83 N.J. 139 (1980). First, the moving party must make a threshold prima facie showing that "changed circumstances have substantially impaired the ability to support himself or herself." Id. at 157. In considering a proffer of changed circumstances, it is often necessary for the court to delve into the financial status of both parties. Id. at 158.
When a prima facie showing is made under Lepis, the court next must determine if a plenary hearing is warranted. Id. at 159. To obtain such a hearing, the moving party must "clearly demonstrate the existence of a genuine issue . . . [of] material fact." Ibid. In making this determination, the court should look to the certification and supporting documents of the parties. Ibid.
Once the plenary hearing stage is reached, there is no firm rule governing when an existing support obligation has ceased to be "'equitable and fair'"; rather, courts will assess several factors dependent on the nature of each case. Lepis, supra, 83 N.J. at 153 (quoting Smith v. Smith, 72 N.J. 350, 360 (1977)). These factors include whether the change in circumstance is temporary or permanent; whether the change was voluntary; whether it was motivated by bad faith or a desire to avoid payment; and whether the change in circumstance renders the payor former spouse unable to pay. See Larbig v. Larbig, 384 N.J. Super. 17, 23 (App. Div. 2006) (finding a reduction in income to be temporary); Kuron v. Hamilton, 331 N.J. Super. 561, 572 (App. Div. 2000) (finding that the good faith of the movant is "but one ingredient" to consider); Deegan v. Deegan, 254 N.J. Super. 350, 355 (App. Div. 1992) (finding that a voluntary change such as retirement may still warrant a modification). Courts cannot fairly undertake this balancing of equities when they lack sufficient evidence in the record to do so. Deegan, supra, 254 N.J. Super. at 354.
Here, we are satisfied that the tax returns, financial records, certifications and other documents in the record are prima facie indicia, sufficient under the Lepis standard, to suggest that the ex-husband has sustained an adverse change in his financial circumstances, in contrast to the rosier earnings that were forecasted for him at the divorce trial six years ago in 2001. Recognizing that the ex-wife strongly disputes that seeming decline in her former spouse's financial condition, and that she legitimately decries his failure to heed his obligations without first obtaining relief from the courts, we conclude that a full-blown plenary hearing is needed to sort through those genuine and material factual issues.
The record before us clearly traces the sad history of this litigation and the ex-husband's repeated failures. What the record lacks is a fresh evidential analysis of the ex-husband's ability to sustain an income of $170,000, given his significant licensure restrictions and the apparent failure of his solo practice to reap the gains that were hoped for at the time of the FJD in 2001. If the ex-husband's sworn certifications and tax returns are believed, (1) he has not been able to earn annual income close to $170,000 in six years, despite working full time, (2) he has liquidated his assets to pay off creditors and still owes almost $180,000 in back taxes, and (3) he has lived a reasonable lifestyle and has been forced to rely upon his new spouse to try to make ends meet.
We recognize that the ex-husband's poor track record of compliance with court orders and various findings at his trial regarding his lack of candor were significant to the motion judge's denial of his most recent request for relief. To be sure, a party's lack of good faith is a relevant factor to consider in deciding requests to modify support awards. See Kuron, supra, 331 N.J. Super. at 571. However, it should not be the sole determinative factor in obtaining relief. Id. at 572 (finding that good faith "is but one ingredient in determining whether the payor can be deemed to have acted reasonably with regard to his or her support responsibilities"); see also Dilger v. Dilger, 242 N.J. Super. 380, 387 (Ch. Div. 1990) (holding that the question of whether voluntary early retirement qualifies as a change in circumstance should not be decided on good faith alone). When determining whether there has been a sufficient change in circumstances, the issue of good faith "is concerned less with the specific conduct that has led to the reduction in income and more with why the payor has adopted his or her course of action." Kuron, supra, 331 N.J. at 571-72.
Here, the record contains no expert opinion, no witness testimony subjected to cross-examination, and no corresponding detailed judicial findings by which we can meaningfully review, on a substantive basis, the denial of the ex-husband's motion for modification. It makes no sense for support arrears to continue to mount in this case if the obligor's realistic ability to pay them, and over $54,000 in annual support, is in substantial doubt. Although we regret the protraction of this matter, both for the parties and for the trial court, a plenary hearing must be conducted to gain an updated picture of the status quo, and a realistic forecast for the near future.*fn2 See Storey v. Storey, 373 N.J. Super. 464, 468 (App. Div. 2004); Deegan, supra, 254 N.J. Super. at 354.
We also decline to hold that such a hearing should be denied on procedural grounds under R. 5:5-4(a). Although the exhusband's motion rightly should have contained copies of the FJD and his old CIS from 2001, their absence from the motion filing was not central to the issues here, given that the parties did not dispute the support terms actually specified in the FJD and the fact that the trial judge had imputed $170,000 in earnings capacity to the ex-husband. This is not a situation, as often arises in other contexts, where the court has been materially burdened in assessing a Lepis motion because the movant neglected to supply the underlying FJD and the CIS forms that had preceded its entry.
For these reasons, we remand this matter to the Family Part for an expedited plenary hearing, to be completed within forty-five days of our opinion. On remand, the Family Part has the discretion to reassess whether the appointment of a forensic accountant would be sufficiently helpful to the court in its economic analysis to warrant the drain such an expert's fees would have upon the parties' assets. Our disposition does not foreclose ongoing enforcement measures, provided that if any bench warrant is executed, the court must conduct, upon request of the obligor, an ability to pay hearing consistent with Pasqua v. Council, 186 N.J. 127 (2006) and Administrative Directive No. 18-06 (issued August 29, 2006).
Remanded for a plenary hearing consistent with this opinion. Jurisdiction is not retained.