January 7, 2008
EILEEN SENDER, PLAINTIFF-RESPONDENT,
PAUL SENDER, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-2179-00.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 5, 2007
Before Judges Cuff and Lisa.
Defendant, Paul Sender, appeals from provisions of a post-judgment order that reduced his child support and alimony obligations and allocated the obligations of him and his former wife, plaintiff, Eileen Sender, for the education expenses of their children. Defendant argues that the judge erred by failing to order greater reductions in defendant's child support and alimony obligations and in allocating an excessive portion of the education expenses to him. We find merit in some of the arguments advanced by defendant and remand for further proceedings.
The parties married on November 15, 1987. Two children were born of the marriage, Kira on April 16, 1988, and Michael on August 18, 1990. Defendant was a medical doctor, licensed to practice medicine in New Jersey and New York. He maintained a private practice in Teaneck.
The parties divorced on November 8, 2000. Pursuant to the Property Settlement Agreement (PSA) entered into at the time of the divorce, defendant agreed to pay $2,000 per month in child support and $3,250 per month in alimony. In 1999, defendant earned $217,000*fn1 from his medical practice, and in 2000, $178,000. Although plaintiff received a small income ($10,000 in 1999) as an employee in her husband's medical practice prior to the divorce, she did not work outside the home (other than occasional part-time employment) after the divorce.
The PSA provided that plaintiff's entitlement to alimony was of limited duration and would end on August 31 of the year in which the younger child graduates from high school. The record does not reveal when Michael will graduate from high school. He will turn eighteen in August 2008. Although an individual of that age would typically graduate from high school in June 2008, plaintiff's attorney suggested at oral argument before the trial court and again in his appellate brief that Michael's graduation will be in 2009.
The PSA provided that the child support obligation was based upon the Child Support Guidelines and that:
The parties agree that child support shall continue at this same rate until the older child enters into college, at which time it shall be renegotiated, with the understanding that it will be less than the Guidelines if HUSBAND is substantially contributing to the college expenses of the older child. Similarly, there shall be further reduction and/or elimination of the child support at the time the second child enters into college.
In the years following the divorce, defendant's income from his medical practice steadily declined. In 2001, he earned $180,000, in 2002, $145,000, and in 2003, $129,000. During this time, as a result of a number of cases in which defendant's care of patients fell below acceptable standards, defendant's license to practice medicine was in jeopardy. Regulatory proceedings in New Jersey resulted in an interim consent order on July 29, 2004 providing for the surrender of defendant's New Jersey license. On September 14, 2005, the New Jersey Board of Medical Examiners suspended defendant's license for a total of five years, of which two years would consist of active suspension, with the remaining three years to be served as probation with the suspension stayed. Although the record does not contain documentation of these proceedings, it appears from a certification by defendant that the active suspension period was from September 2005 to September 2007. Defendant was also ordered to pay a $50,000 fine, which remained due at the time of the trial court proceedings.
When the interim consent order was entered on July 29, 2004, defendant was required to terminate his New Jersey practice. He obtained employment at a hospital in New York on October 1, 2004, but was terminated on February 28, 2005 because the hospital was no longer able to bill for defendant's services, as the health insurance companies no longer permitted defendant to participate in their plans as a result of the surrender of his New Jersey license. In 2004, defendant's split income from two sources ($48,000 from his practice and $30,000 from the New York hospital) totaled $78,000. In 2005, he earned $23,000 from the hospital before he was terminated, and then received $8,000 in unemployment compensation over the next twenty-six weeks, for a total that year of $31,000. Defendant's New York license to practice medicine was revoked on May 30, 2006.
Prior to the regulatory problems with defendant's license, as a result of his declining income, the parties entered into a consent order on September 9, 2003, reducing defendant's child support obligation to $1,543 per month and his alimony obligation to $2,507 per month, effective March 26, 2003.
When defendant became unemployed, he continued paying his child support, but stopped paying alimony. On June 7, 2006, plaintiff filed a motion to enforce litigant's rights. To the extent applicable to the appeal issues, she sought an order requiring defendant to pay outstanding alimony arrears which then exceeded $32,000, imputating income to defendant of $200,000 per year, and requiring defendant to pay 85% of Kira's college expenses for the upcoming school year at the University of Maryland, where Kira was about to matriculate as a freshman. On July 19, 2006, defendant cross-moved seeking, as applicable to the appeal issues, an order eliminating or reducing his alimony obligation, reducing his child support obligation, and imputing income to him of $40,000 per year. He supported the income imputation argument with the report of an employability expert, who concluded that defendant's best option to return to the labor force was to obtain employment in sales, paying $32,000 to $45,000 per year. The expert further opined that after gaining two to four years experience in sales, defendant would be qualified for sales in the pharmaceutical field, which would take advantage of his medical training and experience, where he could earn $50,000 to $70,000 per year.
In her Case Information Statement (CIS), plaintiff revealed that she was then working full-time and earning $40,000 per year. She showed a net worth of $207,000. This did not include the $32,000 receivable for the outstanding alimony arrears, nor did it include any amount for her pension plan, which was entered as "Value not known." Defendant's CIS reflected a net worth of $121,000. This did include as a debt the $50,000 fine payable to the New Jersey State Medical Society, but it did not include a reduction on account of his alimony arrears.
The judge heard oral argument. He declined to order a plenary hearing and decided the matter on the papers. He concluded that defendant demonstrated a substantial change in circumstances to warrant a downward modification of his current support and alimony obligations. Because defendant was unemployed, it was necessary to impute a reasonable amount of income to him. After considering the respective positions of the parties regarding imputation of income, the judge made the following analysis:
Defendant was a licensed physician prior to losing his medical license and holds a Doctor of Medicine (MD). Given his educational and professional background, defendant is capable of obtaining above average employment opportunities.
This Court also considered defendant's past income, median salaries within his field, and the salary of a salesperson in healthcare. Based on defendant's certification, from 1999 to 2002 defendant's net business income was as follows: $217,603 in 1999, $178,240 in 2000, $179,697 in 2001 and $144,980 in 2002. In 2003, based on defendant's tax returns, his business income was $129,166. According to defendant's 2005 tax returns, he reported a gross income of $70,880. Furthermore, based on statistics provided by the U.S. Department of Labor, Bureau of Labor Statistics, a general surgeon earns a median salary of $228,839 if less than two (2) years in a specialty and $282,504 if more than two (2) years in a specialty. According to the New Jersey Department of Labor, a licensed surgeon earns a mean average salary of $195,520. Family and general practitioners earn a mean average salary of $129,750 and physician or surgeons in other areas without specialty earn a mean average salary of $142,948. A sales representative in the healthcare industry earns a mean average salary of $63,230.
Based on the IX-A priorities, this Court shall impute income to the plaintiff for purposes of child support calculations at $145,000 per year. Defendant's child support obligation shall be reduced from $1,543.00 per month to $1,513.60 per month (or $352.00 per week). This decision to is based on the above mentioned findings, the potential employment and earning capacity using the defendant's work history, occupational qualifications, educational background, and defendant's former income.
Defendant's cross-motion seeks a termination in alimony. This Court finds that defendant's spousal support shall be reduced, not terminated, from $2,507.00 per month to $1,880.00 per month based on the fact that the termination provision set forth on paragraph 18b of the parties' Property Settlement Agreement has not been satisfied, defendant's potential to obtain comparable employment outside his field, and defendant's failure to demonstrate his inability to support himself and the plaintiff.
Defendant argues that the judge's imputation of income analysis was flawed. He points out that in the last full year of his medical practice, 2003, he earned only $129,000 and therefore "[i]t is clearly unreasonable to find that there had been a change in my circumstances, and yet to impute greater income to me after loss of my medical license than when I was employed as an internist, my chosen field of work." Defendant argues that the information relied upon by the trial judge in making that decision, particularly the statistics regarding salaries of persons in the medical profession, was "not relevant" to his current situation. Of greatest significance, defendant points out that the judge considered the income earned by surgeons, which is much higher than that earned by practitioners in internal medicine, noting, of course, that he was never a surgeon. And, he points out the inconsistency of considering income earned by physicians generally, during a time when he was prohibited by law from practicing medicine.
A party's obligation to pay alimony and child support is always subject to review and modification based on a showing of "changed circumstances." Lepis v. Lepis, 83 N.J. 139, 146 (1980). The party seeking modification has the burden of showing such changed circumstances as would warrant relief. Id. at 157. One example of a changed circumstance is an increase or decrease in the supporting spouse's income. Id. at 151.
When a supporting spouse brings an application for a downward modification based on a decrease in income, "the central issue is the supporting spouse's ability to pay." Miller v. Miller, 160 N.J. 408, 420 (1999). In such a situation, a court should not only consider the supporting spouse's actual income, but also his or her potential earning capacity. Ibid.; Halliwell v. Halliwell, 326 N.J. Super. 442, 448 (App. Div. 1999). Although requests for modification based on circumstances which are only temporary are generally rejected, Lepis, supra, 83 N.J. at 151, circumstances lasting longer than one year will generally suffice to warrant relief. Kuron v. Hamilton, 331 N.J. Super. 561, 575 (App. Div. 2000).
In imputing income, consideration should be given to an individual's potential employment and earning capacity, in light of the individual's "work history, occupational qualifications, educational background, and prevailing job opportunities in the region." Child Support Guidelines, Pressler, Current N.J. Court Rules, Appendix IX-A to R. 5.6A, para. 12 at 2292 (2008). Imputation may be based on the individual's "former income at that person's usual or former occupation or the average earnings for that occupation as reported by the New Jersey Department of Labor (NJDOL)." Ibid. Of course, the latter provision assumes that no impediment prohibits the individual from engaging in that occupation. Such is not the case here with the medical profession, at least for the two years of defendant's active suspension. See, e.g., Kuron, supra, 331 N.J. Super. at 570 (acknowledging that loss of professional licensure can constitute changed circumstances warranting modification of support obligations).
Decisions to impute income and to modify alimony and child support are left to the sound discretion of the trial court. See Pascale v. Pascale, 140 N.J. 583, 594 (1995); Innes v. Innes, 117 N.J. 496, 504 (1990); Storey v. Storey, 373 N.J. Super. 464, 474 (App. Div. 2004). Such decisions will not be disturbed unless the court's findings are inconsistent with or unsupported by competent evidence. Gordon v. Rozenwald, 380 N.J. Super. 55, 76 (App. Div. 2005); Storey, supra, 373 N.J. Super. at 474-75; Loro v. Colliano, 354 N.J. Super. 212, 220 (App. Div.), certif. denied, 174 N.J. 544 (2002).
We conclude that the judge erred in considering incomes earned by physicians, especially surgeons, as part of the basis for imputing income to defendant at a time when his license to practice medicine was suspended and he was legally prohibited from engaging in that profession. We therefore remand for reconsideration of the appropriate amount of income to be imputed to defendant. We leave to the sound discretion of the trial court what additional evidence shall be received and whether or not there is a need for a plenary hearing. Because the period of active suspension of defendant's license in New Jersey has ended, evidence of his current occupational status and earning capacity should be considered.
We are mindful of the circumstance in this case that this was limited duration alimony, scheduled to end on August 31, 2008 or 2009. The judge made his order for reduction of alimony and child support effective on June 7, 2006, the date plaintiff filed her motion to enforce litigant's rights. Thus, the effect of the order was to reduce for just over two or three years an annual alimony obligation of about $30,000 to about $22,500. We realize that when reducing support obligations, courts should not view the issue as merely a matter of numbers, and more than mere accounting is required in the analysis. Glass v. Glass, 366 N.J. Super. 357, 372 (App. Div.), certif. denied, 180 N.J. 354 (2004). Consideration must also be given to the adequacy of the agreement providing for the support obligation at inception and throughout its history, the presumed understanding of the parties at inception, the reasonable expectations of the parties during the life of the agreement, the manner in which the parties acted and relied on the agreement, and the underlying public policy favoring stability and consensual support agreements. Ibid. See also Dilger v. Dilger, 242 N.J. Super. 380, 388 (Ch. Div. 1990) (consideration should be given to the reasonable expectations of the parties at time of agreement).
Because of the limited duration of the alimony, which was bargained for as part of a comprehensive PSA, plaintiff had a reasonable expectation of receiving nearly $40,000 per year for eight or nine years to assist with her living expenses and to enable her to maintain the marital standard of living. Of course, that expectation was not unqualified, but was dependent upon defendant's continued ability to pay. This is illustrated very clearly by the fact that the parties consented to a reduction in alimony of about $9,000 per year effective two years and four months after the divorce and PSA.
Nevertheless, it is reasonable to infer that plaintiff expected a continuation of the alimony of $30,000 per year for the remainder of the limited duration term and planned her life accordingly. For example, while the children were still young, she chose to be a stay-at-home mother. However, with Kira away at college and Michael approaching the end of high school, plaintiff began a transition into full-time employment, because it would no longer be necessary to be home with the children, and to make up for the upcoming termination of alimony.
Under the unique circumstances presented, in fashioning a fair and reasonable remedy, the court may consider, as part of the overall evaluation, the temporary nature of two key factors: Only about one year remained from the effective date of the alimony reduction order to the lifting of defendant's active medical license suspension, and only about two or three years remained for the alimony obligation from the effective date of the order. Consideration may be given to the ability of defendant to pay accrued alimony arrears after the termination of the alimony obligation and his present ability to meet his obligations from his assets. Nevertheless, while those and other relevant circumstances and considerations may be factored into the overall analysis in fashioning a fair and equitable remedy, the amount of income imputed to defendant during the period of his active suspension cannot find its basis in a profession he was then prohibited from practicing. However, in these unique circumstances, when other relevant factors are considered, the alimony obligation during the period of active suspension is not necessarily controlled exclusively by the amount of imputed income during that time.
With respect to college expenses, the judge ordered the parties to share the costs "based on their respective income[s], plaintiff 30% and defendant 70%." Defendant argues that the judge erred in several respects in reaching this allocation. He argues that the amount of income imputed to him was too high and improperly skewed the allocation. He further argues that the judge failed to take into consideration the assets of the parties, noting that plaintiff's net worth was more than twice his and that plaintiff failed to disclose the value of her pension. He points out that the judge utilized the Guidelines to determine the amount of child support, without considering, as provided for in the PSA, that when the older child enters college, child support shall be recalculated, "with the understanding that it will be less than the Guidelines if HUSBAND is substantially contributing to the college expenses of the older child." Finally, defendant argues that he objected to the choice of the University of Maryland and urged that Kira attend Rutgers University, because under the parties' current financial circumstances, the cost at Maryland was too high. He contends he notified plaintiff of this position far in advance of any choice in college being made. See Newburg v. Arrigo, 88 N.J. 529, 545 (1982).
The trial judge made no findings of fact regarding the provisions in the PSA dealing with the subject, nor did the judge analyze the applicable Newburg factors. Merely setting the percentage allocation in accordance with the parties' income, without consideration of other relevant factors, was inappropriate. Likewise, setting the new child support amount in accordance with the Guidelines, without considering the contribution of the parties to college expenses was also inappropriate.
We accordingly remand for reconsideration of these issues. As with the alimony issue, we leave to the trial judge's sound discretion what additional evidence to receive and the nature of the proceedings to be conducted.
Remanded for reconsideration of the order of October 16, 2006, consistent with this opinion. We do not retain jurisdiction.