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Orihuela v. Orihuela


December 17, 2007


On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Morris County, Docket No. FM-14-1441-01.

Per curiam.


Submitted November 26, 2007

Before Judges Sabatino and Alvarez.

This matter arises out of a series of post-judgment rulings by the Family Part in 2006 concerning the terms of a 2003 divorce entered into between plaintiff, Michelle Orihuela ("the mother"), and defendant, Walter Orihuela ("the father"). The issues before us are exclusively financial in nature.

Initially on this appeal, the father had sought review of the Family Part's denial of his motion to modify parenting time with the parties' four children and also to reduce child support relating to the ongoing costs of a nanny. The father subsequently withdrew his appeal. The mother, meanwhile, filed a cross-appeal. She principally challenges the Family Part's continued imputation to her, for purposes of calculating child support, of $97,000 in annual income, an amount the parties had agreed to in their divorce judgment. The mother also contests the Family Part's denial of her application for counsel fees.

After carefully considering the points raised on the cross-appeal, we affirm the Family Part's post-judgment determinations. We do so substantially for the reasons set forth in Judge Thomas Manahan's written statement of reasons dated June 1, 2006, as amended on June 9, 2006.

The following facts and circumstances bear upon the discrete issues before us. The parties were married in 1989. They have four children: twin daughters who are presently thirteen, and two sons who are respectively ages fourteen and ten. During the marriage, the father worked as a pharmaceutical sales representative, while the mother cared for the children and did not work out of the home. The youngest child has special needs that have required the services of a nanny.

Primarily as the result of an inheritance from her grandmother, the mother individually owns a substantial portfolio of stocks and bonds. At the time of the divorce proceedings in 2003, her stock portfolio was worth approximately $1.5 million. It is undisputed that these investments were not marital property and were not subject to equitable distribution. In addition, the mother owned various bonds then worth about a half million dollars. All told, at the time of the divorce, the mother had a portfolio worth approximately $2 million.

The parties were both represented by counsel in negotiating their Amended Final Judgment of Divorce ("FJD") entered in court on May 21, 2003. Among other things, the parties agreed that the mother would retain primary residential custody of the children, with the father having parenting time on a schedule consistent with the terms of an earlier written agreement reached by the parties in January 2003. The parties further agreed to divide equally their assets held in a joint investment account. It was also agreed that the mother would buy out the father's interest in the marital residence. Both parties waived alimony.

With respect to the central issue before us, the father and mother agreed in paragraph 2 of the FJD that "[f]or purposes of child support, a [sum of] $97,000.00 [in] annual income will be imputed to each party." That common $97,000 income figure was derived from applying an agreed-upon 4.85% annual interest rate to the mother's $2 million investment portfolio. Although the father was unemployed at the time of the divorce judgment, the parties agreed that he had the capacity to earn an equivalent amount of $97,000 in the job market, having previously earned as much as $119,000 in 2000.

Applying the State Child Support Guidelines to that common $97,000 income figure, and taking into account the special costs of the nanny and other child care expenses, the parties determined in the FJD that the father would pay the mother $1,990 monthly in child support. The parties further agreed to have the ongoing need for the nanny and other issues of child support reexamined in two years, after the exchange of pertinent financial data.

In support of her cross-motion filed with the Family Part in February 2006, the mother contended that the income formula that she had agreed to in the FJD in May 2003 was inaccurate and unfair. She asserted that she had to liquidate $202,000 of her investment portfolio in order to fund the buyout of the father's interest in the marital home. She also contended that the actual performance of her investment portfolio since the May 2003 divorce had proven to be less than the 4.85% annual rate that she had acceded to in her negotiations with the father, with most of her holdings yielding annual dividends of only 1.8% to 2.0% percent, and some of them paying no dividends at all. The mother also claimed that she would face severe tax consequences if she liquidated the entire portfolio and reinvested it in higher-yielding financial instruments. Consequently, the mother sought an increase in child support, seeking to substitute for the agreed-upon $97,000 income figure specified in the FJD the average of her actual investment income for calendar years 2003, 2004 and 2005, or approximately $40,000 annually.

In opposing the mother's motion to reduce child support, the father attested that the 4.85% return rate in the FJD had been the product of negotiations, using then-prevailing rates for long-term corporate bonds. The father noted that his own expert had advocated that a higher rate of 5.5% be applied to the mother's portfolio, and that the parties had compromised by adopting the 4.85% rate. The father also noted that the mother was formerly a certified dental hygienist and a teacher, and thus had the ability to supplement her investment income substantially if she returned to the work force. The father also reported that his own income had not rebounded to the extent the parties had anticipated at the time of the FJD. The father argued that the mother should not be permitted to renegotiate the FJD. He contended that, if anything, his child support obligation should be reduced, not increased, because his own income had not reached $97,000 and the nanny for the youngest child allegedly was no longer needed.

Upon considering these assertions, Judge Manahan declined to alter the parties' common $97,000 annual earnings imputation. Additionally, the judge found that the costs of a nanny were still justified, given the ongoing special needs of the youngest child, coupled with the fact that his other siblings are still unemancipated and too young to care for him.

In addressing the mother's request to reduce her own imputed income, Judge Manahan reasoned as follows:

In regard to the income of the parties, the [c]court rejects the argument raised that the income imputed to [the mother] at [the] time [of the FJD] was in error. At the time she entered into the agreement she was represented by counsel. She also must have understood what was going to be provided to the defendant by way of equitable distribution and the source of funds that would be required to buy-out defendant's interest in the marital home. In sum, the plaintiff argues that it was a "mistake" to agree to an imputation of income on her part. A matrimonial agreement may be reformed, when, through a common mistake or the mistake of one party accompanied by fraudulent knowledge of the other, it does not express the real agreement of the parties. Capanear v. Salzano, 222 N.J. Super. 403 (App. Div. 1988). Herein there was no common mistake nor was there a mistake of the plaintiff that was accompanied by the fraudulent knowledge of the defendant. [Emphasis in original deleted.]

Applying these principles, the judge continued:

The [c]court does not find any basis for modification of the agreement based upon mistake nor was it argued or would the [c]court find that the agreement was unconscionable nor that it was the product of fraud or duress. The [c]court may not write a better agreement for a party than that which they have entered into themselves. See[] Pascarella v. Bruck, 190 N.J. Super. 118, [124-25] (App. Div. []), [c]ertif. denied, 94 N.J. 600 (1983).

The judge likewise rejected the father's attempt to have his own annual earnings capacity diminished:

Concerning the [father's] claim of reduction in income, the [c]court finds that as late as 2004 the [father] stated that his income was $90,000. Notwithstanding his present claim that he is unemployed and that his income should be recalculated to $52,000, the [c]court, without making a finding of voluntary underemployment without good cause, finds that the [father] has assets sufficient to him to provide support to his children which is his obligation. Monmouth County [Div. of Social Servs.] v. [G.D.M.], 308 N.J. Super. 83 (Ch. Div. 1997). The [father] has the burden of showing substantial and permanent changed circumstances before he is entitled to a modification of a support award. Lepis v. Lepis, 83 N.J. 139 (1980), Bonanno v. Bonanno 4 N.J. 268 (1950). As the Bonanno Court pointed out, temporary unemployment is not a basis upon which to modify child support. Bonanno at 275. Further, in determining child support, it is the law of New Jersey to consider the assets and other financial circumstances of the parties in addition to their income. Connell v. Connell, 313 N.J. Super. 426 (App. Div. 1998). See also[] Rolnick v. Rolnick, 262 N.J. Super. 343, 359 (App. Div. 1993).

Consequently, the judge reaffirmed the father's child support obligation by applying the current state guidelines to $97,000 in income for each party. That calculation produced an order on June 9, 2006, setting the father's child support obligation at $323 weekly, independent of his share of the costs of the nanny.

As we have repeatedly stated, the scope of our review of fact-sensitive determinations by Family Part judges is limited. Cesare v. Cesare, 154 N.J. 394, 411-12 (1998). See also Pascale v. Pascale, 113 N.J. 20, 33 (1988). Given the Family Part's special expertise, appellate courts must accord particular deference to the trial judges' findings in family cases, and to the conclusions that logically flow from those findings. Cesare, supra, 154 N.J. at 412-13.

In this case, we are satisfied that Judge Manahan's decision to leave intact in 2006 the $97,000 imputed income amount for both parties, consistent with what they had bargained for in the FJD, was supported by the record and consistent with the law. We specifically concur with Judge Manahan that the mother failed to present sufficient grounds to set aside the income figure under R. 4:50-1. The mother did not assert that she had been defrauded by any misrepresentations of her former spouse. Any mistake about the financial and tax consequences that would result from her agreement to buy out the father's interest in the marital home was plainly unilateral. The record does not otherwise justify rewriting the bargain that the parties, both of whom were represented by counsel, had negotiated and presented to the court. Eaton v. Grau, 368 N.J. Super. 215, 222 (App. Div. 2004) (noting, in a post-judgment matrimonial context, that "[a] trial judge's decision whether to allow or deny . . . relief on one of the six specified grounds in Rule 4:50-1 should be 'left undisturbed unless it results from a clear abuse of discretion'") (citations omitted); see also De Caro v. De Caro, 13 N.J. 36, 44 (1953).

Even if she is not entitled to relief under R. 4:50-1, the mother contends that the motion judge still should have reduced her imputed income because of an alleged change of circumstances. See Lepis, supra, 83 N.J. at 146. She relies upon the fact that her actual returns for 2003 through 2005 on her investment portfolio were much less than $97,000. She notes that her portfolio is mainly invested in the stocks and bonds of Fortune 500 companies that do not spin off large dividends, and that she should not be forced to bear the tax consequences and financial risk of converting her holdings to investments with higher rates of return.

In Miller v. Miller, 160 N.J. 408, 425 (1999), the Supreme Court instructed that courts may apply, for purposes of calculating support in a matrimonial case, the average annual rate of return for long-term corporate bonds in imputing a former spouse's ability to earn income on investment assets. Although the former spouse may "choose to diversify [her] investment portfolio over many different types of investment options," ibid., the Court endorsed "the imputation of a more reasonable income from those investments by applying the average historical rate on A-rated long-term corporate bonds." Id. at 426. We discern no reason to depart from those concepts here. We also note that the mother's focus on the limited dividends paid on her Fortune 500 holdings overlooks the appreciation in the market values of those investments that may well have ensued since May 2003, and that such appreciation could also be another source of after-tax income if the gains on those instruments were realized. In sum, we are satisfied that the motion judge had ample reason to deny the mother's claim to reduce her income capacity.*fn1

We briefly turn to the mother's argument that the Family Part erred in denying her an award of counsel fees incurred in responding to the father's motion and in pursuing her own cross-motion. In deciding the merits of those various applications, the judge denied counsel fees to the mother, without prejudice. However, the record reflects that in a subsequent order in January 2007 following an enforcement application, Judge Manahan did agree to award counsel fees to the mother, subject to the submission and review of her attorney's certification of services.*fn2 Given that chronology, along with the mother's lack of success on the imputation issue, the parties' continued equivalent abilities to earn income, and the fact that the mother still has assets in excess of $1 million, we detect no misapplication of discretion by Judge Manahan in deferring any award of counsel fees to a later point in this ongoing litigation. The record does not demonstrate that the mother was entitled to fees for the 2006 proceedings under the standards of Williams v. Williams, 59 N.J. 229, 233 (1971) and R. 5:3-5(c).


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