January 28, 2008
CATHERINE DOUNIS, PLAINTIFF-RESPONDENT,
MELETIOS DOUNIS/MGG CORPORATION, DEFENDANT-APPELLANT, AND GEORGE DOUNIS, THIRD-PARTY INTERVENOR.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-1074-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued December 4, 2007
Before Judges Coburn, Fuentes and Grall.
This is an appeal from a final judgment of divorce entered following a trial in the Family Part.*fn1 Plaintiff Catherine Dounis filed the complaint in November 2004. Defendant Meletios Dounis filed a counterclaim. Defendant contends that the trial judge erred as follows: allowing defendant's attorney to withdraw ten days prior to trial; identifying and distributing marital assets and debt; fixing alimony and child support; requiring defendant to deposit $25,000 in a trust account held by plaintiff's attorney to secure defendant's obligation to pay child support and alimony; and requiring defendant to contribute to plaintiff's counsel fees. We reverse the counsel fee award and the equitable distribution of credit card debt. We affirm all other determinations, because they are supported by the record and within the boundaries of the judge's broad discretion to control the trial proceedings, fix alimony and distribute marital assets.
The parties were married on September 4, 1983. Plaintiff was twenty-eight years of age, and defendant was thirty-one.
They have two sons; the first was born in 1984 and the second in 1986.
In 1988, defendant and his brother George both worked in a diner. With the goal of purchasing that diner, they formed MGG Corporation (MGG). In 1990, they achieved that goal. Defendant and his brother each own fifty percent of MGG's shares. At first, the brothers leased a parking lot adjacent to the diner, but eventually that lot was purchased, in their father's name, for $110,000. Defendant's father transferred that lot to MGG, for less than $100, before plaintiff filed her compliant for divorce. According to plaintiff, the purchase was made with funds from MGG. According to defendant, his father paid for the lot.
In 1998, MGG recovered $147,226.30 as a consequence of a settlement of a legal malpractice claim. The proceeds were deposited in MGG's account.
In October 2004, defendant received $222,080.67 from the sale of a multi-dwelling residence. He acquired his part-ownership interest in that real estate prior to the marriage and derived income from that asset during the marriage. He deposited the proceeds of the sale in his loan account with MGG and used the money to pay personal expenses such as tuition for the children, attorney's fees and income taxes. The tax due on the $222,080.67 defendant received from the sale of this premarital asset was $23,940 on August 8, 2005.
The diner was the source of the family's livelihood. After defendant and George acquired the diner, they cooked and ran the kitchen. Plaintiff, in addition to caring for the children, also worked in the diner. She served as cashier, hostess, bookkeeper and manager of everything other than the kitchen.
Plaintiff's annual earnings from working at the diner, as reported on tax returns, were consistently between $20,000 and $25,000. She left her work at the diner in 2001 and subsequently took courses and worked in real estate. Between 2001 and 2005, her highest earnings were $13,000.
Defendant's wages from working at the diner, as reported on tax returns, were between $25,160 and $33,650 per year. He acknowledged, however, that he paid personal expenses from the MGG account and took cash from the business. Plaintiff also admitted that she took cash from the diner. In the opinion of defendant's expert forensic accountant, defendant's actual income, including cash, was between $80,000 and $85,000 per year.
According to plaintiff, the family regularly spent $8210 per month or $98,520 per year. For many years, the family lived rent-free in an apartment building owned by defendant's family.
In 1998, however, they purchased a home, which they subsequently renovated. They educated their sons in parochial schools, and both of their sons were attending college at a private university at the time of trial. During the marriage the family took one trip to Greece, where defendant was born, and plaintiff took ten trips to Ireland, where she was born and her parents lived. The parties had two BMW automobiles of similar value. The mortgage on their residence was $128,000. The appraised value of the residence was $459,000. Plaintiff stipulated that the parties accrued credit card debt in the amount of $4465.54 during the marriage.
According to plaintiff, defendant gambled on horse races, at casinos and on sporting events. He went to the Meadowlands frequently, and she enjoyed herself when she went with him. She recalled defendant winning $7020 on one race; those winnings were reported on her tax return because she cashed the ticket for him. Plaintiff asserted that her husband received benefits from the track that were reserved for those who wagered large amounts but admitted that he sometimes made "mind bets" rather than wagers. She testified that the availability of money for family expenses was never an issue until the complaint for divorce was filed.
Defendant disputed plaintiff's account of his gambling habits. He acknowledged regular attendance at horse racing events, where he met with friends, but he denied receipt of VIP treatment based on wagers and claimed that he often made "mind bets" without wagering. In his view, he was always just one step ahead of collectors who sought payment of his personal and business bills.
During the course of the marriage, plaintiff's mother died. Her father transferred ownership of their residence in Ireland to plaintiff, but he continued to occupy the residence. Plaintiff paid nothing as a consequence of the transfer or holding the property.
By the time of trial, the diner was listed for sale. When the judge rendered his decision, an offer to purchase for $920,000 was pending. The balance on the mortgage for the diner was $405,000, and MGG had debts of approximately $157,000, according to defendant. A sale at that price would leave $358,000, prior to payment of real estate commission and taxes, or $179,000 each for defendant and his brother.
Although the complaint for divorce was filed in November 2004, both parties continued to live in the marital residence. On September 30, 2005, the judge granted plaintiff's motion for pendente lite support, directing defendant to pay the carrying costs for the residence, car insurance payments, college tuition for the children and $10,000 toward her counsel fees. On November 4, 2005, the judge found defendant in violation of that order, issued a warrant for his arrest and gave defendant three days to pay tuition and counsel fees as required by the September 30, 2005, order.
George Dounis was granted leave to intervene in this action for divorce. He filed his third-party complaint after defendant indicated his intention to sell the diner.
On January 27, 2006, eleven days prior to the date on which trial was scheduled to commence, the trial court granted defendant's attorney's motion to be relieved as counsel, pursuant to Rule 5:3-5(d). The attorney reported an irreparable breakdown in the attorney-client relationship and asserted that defendant had come to view him as an adversary, did not follow his advice, gave the attorney misinformation about his brother's willingness to sell the diner and failed to pay fees, a total of $32,819, as required by the retainer agreement. Prior to the motion, defendant had written to the judge and expressed his dissatisfaction with his lawyer. Before granting the attorney's motion, the judge questioned defendant. Defendant told the judge it did not make a difference if his attorney withdrew because the attorney had not represented him "right," and he said he did not have the money to get another attorney. When asked if he wanted the attorney to continue, defendant responded: "If he wants to do it, that's fine. If he doesn't, I'll represent myself. It can't be any worse than what it is now."
Concluding that defendant's attorney could no longer effectively represent him, the judge excused the lawyer. In a supplemental statement of findings and conclusions filed with this court, the judge elaborated on his reasons for granting defendant's attorney leave to withdraw. He explained that the case had been pending for 437 days and was not complex, that defendant did not want the attorney to represent him and had breached the retainer agreement by repudiating his assertions about his brother's consent to a sale of the diner*fn2 and failing to pay fees as required by the retainer agreement.
Defendant did not retain another lawyer. He represented himself at the divorce trial, which commenced on February 7, 2006, and concluded on February 10, 2006.
George's claims against plaintiff and defendant were settled on the first day of trial. The consent order requires defendant to pay George $74,000, representing George's share of the proceeds from the settlement of the legal malpractice action filed by MGG and to repay a $35,000 loan secured by a promissory note.*fn3 Pursuant to that consent order, defendant must pay George from his share of the proceeds of the sale of the diner. That order defines defendant's share as the amount remaining after deducting his brother's fifty-percent share of the proceeds and plaintiff's equitable share of that marital asset.
On April 3, 2006, the trial judge filed a written opinion stating his findings and conclusions. The judge's finings on alimony, equitable distribution, child support and counsel fees are summarized below.
The judge determined that the parties' marital standard of living required approximately $100,000 per year. He concluded that plaintiff had the capacity to earn a maximum of $20,000 to $25,000 per year, and defendant could earn, as he had during the marriage, approximately $85,000 per year. Based on the duration of the marriage, plaintiff's contributions to the family and the business, her inability to approximate the marital standard of living without support and defendant's ability to pay support, the judge determined that plaintiff was entitled permanent alimony in the amount of $24,000 per year.
Child support was set in accordance with the judge's conclusion that plaintiff would earn $20,000 and defendant $85,000 per year. When fixing child support, the judge also considered the alimony plaintiff would receive and defendant would pay. The judge concluded that the parents should contribute equally to college costs not covered by available financial aid.
The judge found that it was appropriate to divide the martial assets and debts equally between the parties. The judge reached that determination after considering the parties' respective contributions to the marriage and capacity to earn in the future. Accordingly, the judge concluded that after the sale of the MGG and payment of the business debt, defendant's share of the proceeds would be divided equally between plaintiff and defendant. Following that sale, the marital residence will be appraised by an expert the judge designated. If plaintiff does not have the ability to pay defendant for his fifty percent interest at that time, then the residence will be sold and the proceeds divided equally.
The judge also provided for an equal division of marital debt. He found that plaintiff and defendant should share equally in credit card debt of $6454.97, an amount which exceeded the credit card debt stipulated at the time of trial, $4465.54, by $1989.43.
The judge allocated full responsibility for taxes owed as a consequence of defendant's receipt of the proceeds from the sale of property he acquired during the marriage to defendant. That debt is $26,710.44.
Based on defendant's failure to comply with support orders pending trial and his gambling, the judge required defendant to deposit $25,000 in a trust account to be held by plaintiff's attorney to serve as security for his support obligation.
Plaintiff incurred counsel fees and litigation costs in a total amount of approximately $55,000. By the time of trial, she had paid $8000 and defendant had paid $10,000 toward that bill. The judge found that defendant had a greater ability to pay than plaintiff. He concluded that defendant's shifting position on the sale of the diner and his failure to comply with the pendente lite order added unnecessarily to plaintiff's litigation costs. The judge considered the settlement offers the parties exchanged, which he required the parties to submit for the limited purpose of his allocation of counsel fees, and found that plaintiff's settlement offers were "fairly reasonable" and defendant's were "decidedly less so." He determined that the difference in the reasonableness of the settlement offers weighed in favor of an award of fees for plaintiff. Based on those findings and conclusions, the judge required defendant to pay an additional $25,000 toward plaintiff's fees and costs within thirty days of entry of the judgment.
Defendant raises the following issues on appeal:
I. THE DECISION RENDERED WAS FRAUGHT WITH BIAS AND PREJUDICE AS A RESULT OF COMPOUNDING PROCEDURAL DEFICIENCIES FLOWING FROM DEFENDANT'S ATTORNEY BEING RELIEVED AS COUNSEL ON THE EVE OF TRIAL.
II. PLAINTIFF'S CHARACTERIZATION OF DEFENDANT AS A GAMBLER ADVERSELY AFFECTED THE DEFENDANT'S FINANCIAL OBLIGATIONS WHILE PLAINTIFF'S LACK OF CREDIBILITY WAS IGNORED.
III. THE ECONOMIC DECISION AS TO ALIMONY, CHILD SUPPORT, [EQUITABLE DISTRIBUTION] AND ESCROW FUND AND COUNSEL FEES WERE NOT BASED ON FACTS SUBSTANTIATED BY THE RECORD.
IV. THE COURT ERRED IN INCLUDING SETTLEMENT OFFERS WHEN DECIDING THE ISSUE OF COUNSEL FEES AND ERRED IN FINDING THAT THE DEFENDANT HAD A SUPERIOR ABILITY TO PAY, WHEN HE FOUND HE COULD NOT PAY COLLEGE EXPENSES AND THAT HE AND PLAINTIFF WERE IN FINANCIAL EQUIPOISE.
The arguments presented in Points I, II and III lack sufficient merit to warrant more than the brief comments that follow. R. 2:11-3(e)(1)(E).*fn4
A judge faced with a motion by a litigant's attorney to withdraw from representation must exercise discretion that requires a balancing of complex and competing interests. See Fischer v. Fischer, 375 N.J. Super. 278, 290-92 (App. Div.) (discussing the public and private interest implicated), certif. denied, 183 N.J. 590 (2005); Luedtke v. Shobert, 342 N.J. Super. 202, 214 (App. Div. 2001) (discussing right of self-representation). Given the comments defendant and his attorney made at the hearing on the attorney's motion to withdraw, we cannot conclude that the judge was so wide of the mark as to be mistaken in concluding that the attorney-client relationship was no longer viable and that defendant wished to represent himself. Defendant clearly and unmistakably expressed his dissatisfaction with the lawyer and his willingness to proceed on his own. While we have held that a judge has discretion to require an attorney to return a retainer in exceptional cases so as to permit the client to retain another lawyer, defendant did not ask for that relief or request an adjournment to retain new counsel. See Fischer, supra, 375 N.J. Super. at 291-92. We note that this case, unlike Luedtke, supra, 342 N.J. Super. at 213, did not involve a question of custody and its impact on the best interests of the litigants' children.
The judge's findings concerning defendant's gambling habits are supported by sufficient evidence in the record and are largely based on the judge's assessment of the credibility of the witnesses. As such, those findings are binding on this court. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). Moreover, the judge's consideration of defendant's lack of credibility on the question of gambling in evaluating his testimony on other issues was neither error nor indicative of bias. See Capell v. Capell, 358 N.J. Super. 107, 111 n.1 (App. Div.) (trier of fact may invoke "false in one, false in all" maxim when it finds that a witness was not truthful about a material fact), certif. denied, 177 N.J. 220 (2003). It is apparent that none of the judge's determinations about support, equitable distribution or establishment of a fund to secure support rest solely, or even primarily, upon defendant's gambling.
This court reviews a trial judge's determinations about equitable distribution, alimony, child support and security for payment of support for abuse of discretion. See Caplan v. Caplan, 182 N.J. 250, 271 (2005) (discussing discretionary decision concerning child support where guidelines are inapplicable); Heinl v. Heinl, 287 N.J. Super. 337, 345 (App. Div. 1996) (alimony); Borodinsky v. Borodinsky, 162 N.J. Super. 437, 444 (App. Div. 1978) (equitable distribution); Wertlake v. Wertlake, 137 N.J. Super. 476, 488 (App. Div. 1975) (fund to secure compliance with settlement agreement). Thus, we do not disturb decisions that have reasonable support in the record as a whole and are consistent with the law. See Perkins v. Perkins, 159 N.J. Super. 243, 247-48 (App. Div. 1978).
There is no question that the judge considered the legal standards governing the determinations; defendant's arguments are essentially based upon his disagreement with the judge's factual findings. With the exception of the judge's finding on the amount of credit card debt, which is inconsistent with credit card debt stipulated at trial and unexplained in the judge's decision, the judge's findings are supported by the record and his view of the credibility of the witnesses.
We see no abuse of the judge's discretion in imputing income for purposes of determining alimony and child support; the income imputed is consistent with prior income, as reported on tax returns and explained by defendant's expert, and there was no conflicting evidence about likely income after the sale of the diner. See Storey v. Storey, 373 N.J. Super. 464, 479 (App. Div. 2004). In determining the marital standard of living, the judge relied upon the monthly budget as stated in plaintiff's case information statement. The judge's decision to distribute equally the proceeds from the sale of the major marital assets is not sufficiently wide of the mark to warrant our interference with this discretionary decision. Borodinsky, supra, 162 N.J. Super. at 444.
Defendant argues that the court abused its discretion in requiring him to pay a total of $35,000 toward plaintiff's $55,000 counsel fee. We agree.
"[T]he award of counsel fees in a matrimonial action is discretionary with the trial court and an exercise thereof will not be disturbed in an absence of a showing of abuse." Chestone v. Chestone, 322 N.J. Super. 250, 258 (App. Div. 1999); see Berkowitz v. Berkowitz, 55 N.J. 564, 570 (1970) (same); N.J.S.A. 2A:34-23 (authorizing award of attorney fees). This court may intervene only when the determination is "so wide of the mark as to constitute a mistaken exercise of discretion." Chestone, supra, 322 N.J. Super. at 258. Nonetheless, we must reverse a decision on counsel fees when it is not supported by the record or based on a misunderstanding of the legal standards.
The standards are clear.
[T]he court must consider whether the party requesting the fees is in financial need; whether the party against whom the fees are sought has the ability to pay; the good or bad faith of either party in pursuing or defending the action; the nature and extent of the services rendered; and the reasonableness of the fees. [Mani v. Mani, 183 N.J. 70, 94-95 (2005) (discussing proper application of N.J.S.A. 2A:34-23, and the factors set forth in Rule 5:3-5(c), which incorporates by reference Rule 4:42-9) (emphasis omitted).]
"[B]ad faith for counsel fee purposes relates only to the conduct of the litigation . . . ." Mani, supra, 183 N.J. at 95.
In considering the parties' respective ability to pay fees, the trial court did not give adequate consideration to defendant's significant obligations to pay his own attorney fees, pay alimony and make payments from his share of the marital estate. The following were among the obligations defendant was required to pay from his share of the marital assets: approximately $100,000 owed to his brother; $25,000 to secure his support obligation; approximately $26,000 to the Internal Revenue Service; and a fee for the attorney-in-fact appointed to execute a listing agreement. When defendant's attorney withdrew from representation, defendant owed him over $30,000. From defendant's imputed income of $85,000 per year, he was required to pay alimony of $24,000 per year, child support, and one-half of college expenses not covered by financial aid. Plaintiff had no comparable obligation to make payments from her share of the marital assets and would receive $24,000 in addition to her imputed income of $20,000. Because these facts relevant to the parties' respective ability to pay fees were not addressed, a remand is required to permit the judge to reconsider the award in light of the evidence.
A remand is also required to correct legal error. It was not proper to consider settlement proposals in fixing counsel fees. A judge of the Family Part may consider "the reasonableness and good faith of the positions advanced by the parties" in assessing fees. R. 5:3-5(c)(3). The reference to "positions advanced" should be read to extend to positions asserted in court, not settlement proposals. We have held that "failure to settle disputed claims is not in itself a permissible consideration in assessing a fee." Diehl v. Diehl, 389 N.J. Super. 443, 455 (App. Div. 2006). We further recognize that this court has noted that "'where one party acts in bad faith, the relative economic position of the parties has little relevance' because the purpose of the award is to protect the innocent party from unnecessary costs and to punish the guilty party." Yueh v. Yueh, 329 N.J. Super. 447, 461 (App. Div. 2000) (quoting Kelly v. Kelly, 262 N.J. Super. 303, 307 (Ch. Div. 1992)). That statement, however, cannot be read too broadly and without regard to judicial decisions discussing "bad faith."
In order to avoid discouraging litigation of meritorious claims that may not ultimately prevail, the bad faith sufficient to allow the Family Part to give less weight to the parties' relative need and ability to pay requires more than the assertion of a position later rejected by the court. Kelly, supra, 262 N.J. Super. at 309. There must be litigation conduct that is egregious, unjustified and motivated by bad faith. The rationale is "to prevent a maliciously motivated party from inflicting economic damage on an opposing party by forcing expenditures for counsel fees." Kelly, supra, 262 N.J. Super. at 307. Bad faith and unreasonable conduct has been found where a party has unnecessarily complicated discovery or the trial or unjustifiably increased the cost of the litigation through defiance of court orders resulting in enforcement motions. See Yueh, supra, 329 N.J. Super. at 462 (discussing relevance of failure to comply with discovery and defiance of court orders); Chestone, supra, 322 N.J. Super. at 259 (approving consideration of lack of candor). Where specific conduct such as failure to comply with court orders or unreasonable complication of litigation warrants an award of fees, the fee assessed for that reason should be related and proportionate to the expense incurred as a consequence of that specific conduct. For example, where non-compliance is at issue, an award in the amount of fees incurred to enforce the rights of the non-offending litigant may be appropriate if those fees are reasonable. There is, however, no authority to award or enhance a fee because one party's settlement offer is "fairly reasonable" and the other's offer is "decidedly less so."
The judgment, with the exception of the equitable distribution of credit card debt and the award of counsel fees which are reversed, is affirmed; the matter is remanded.