March 20, 2008
MICHELE SEAVER, PLAINTIFF-RESPONDENT,
PHILIP R. SEAVER, JR., DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, FM-07-15163-94.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 11, 2007
Before Judges Skillman and LeWinn.
Defendant appeals from an order of the Family Part denying his application to terminate or modify his alimony obligation. Following a two-day plenary hearing, the trial judge rendered a decision, memorialized in an order of March 22, 2006, denying defendant's application in its entirety. By order of June 6, 2006, the court awarded plaintiff $9,873.50 in counsel fees. This appeal followed.
On appeal, defendant raises the following arguments:
POINT I: THE ORDERS APPEALED FROM ARE NOT SUPPORTED BY COMPETENT CREDIBLE EVIDENCE AND REPRESENTS [SIC] A SHARP DEPARTURE FROM REASONABLENESS
POINT II: THE COURT'S USE OF IMPUTED INCOME THEORY IS INAPPROPRIATE IN THIS CASE
POINT III: THE COURT'S AWARD OF COUNSEL FEES TO PLAINTIFF WAS AN ABUSE OF DISCRETION
Upon thorough review of the record, we conclude the trial judge's decision must be reversed and the matter remanded to the Family Part for further proceedings.
The following factual background is pertinent to our decision.
The parties were married in 1975 and had three children, all of whom are now emancipated. Following a four-day trial, the judge issued a lengthy decision and, on December 10, 1996, entered a final judgment of divorce; on June 13, 1997, the judge entered an amended supplemental dual final judgment of divorce, supported by a supplemental decision. In determining alimony, the judge found that defendant, a cardiothoracic surgeon, had average gross annual income of $315,000. The judge imputed $45,000 gross annual income to plaintiff, a registered nurse, whom he deemed to be underemployed. Based upon those incomes, plaintiff was awarded permanent alimony of $5,833 per month ($70,000 per year).
On December 6, 2003, defendant filed a motion to terminate or modify his alimony obligation. He claimed that changes in his employment situation, as well as certain medical ailments, left him unable to meet his alimony obligation to plaintiff and to support his new wife and the three children of his re-marriage. Defendant also sought to increase the amount of income imputed to plaintiff.
On January 23, 2004, the trial court entered an order finding defendant had made "a prima facie showing of changed circumstances to warrant discovery on his ability to pay spousal support[.]" The judge also ordered a plenary hearing that was subsequently held on October 24 and December 1, 2005.
Defendant testified that his downturn in employment was triggered in 2003 by the termination of his service as Medical Director of Trinity Medical Center (Trinity), in Illinois (where he then resided). This termination was initially rendered effective September 30, 2003; however, defendant stated that he remained employed until January 21, 2004, when Trinity signed a contract with a new surgery service. Defendant presented evidence of the termination agreement and the release he negotiated with Trinity, under which he was prohibited from performing cardiothoracic surgery within a twenty-mile radius of the county in which Trinity is located for a period of one-anda-half years.
Defendant testified, with supporting documentation, about his efforts to secure a new position in his field of cardiothoracic surgery following his termination from Trinity. He stated that he began searching for new employment in September 2003 because he was aware of his impending termination.
Starting in 2003, defendant testified, a technological advancement in the form of a medical device known as a "stent" was gaining increasing use among cardiologists to open blocked arteries, thereby reducing the need for cardiothoracic surgery to address that problem. As a result, according to defendant, both the number of positions in the field of cardiothoracic surgery and the revenues generated by those surgeons were significantly reduced.
On January 30, 2004, defendant accepted what he considered an "interim position" as a medical director in the Illinois Department of Corrections (the Department). His salary in that position was $165,000 annually. However, he stated that he continued to look for another position during this employment, and that he searched more than one hundred "options."
Defendant also raised his physical health as a "changed circumstance" warranting relief. In June 2004, defendant underwent shoulder surgery to repair a torn rotator cuff. He testified that, shortly after the operation, the surgical site became infected and he was hampered in his ability to perform his job with the Department, resulting in reduction of his work schedule to part-time in August 2004. The shoulder injury fully healed by December 2004, but at that time defendant began suffering from a bleeding ulcer which required hospitalization.
In August 2004, defendant contracted to open a franchise of a company called Vein Centers for Excellence (VCE), in New Jersey. He decided to move from Illinois to New Jersey because of his current wife's family connections here. He opened his office in November 2004, and was engaged in this business at the time of the plenary hearing. Defendant described the business as a "procedure-based office practice for the treatment of varicose and spider veins[.]" He employs one full-time nurse, one part-time nurse, and an administrative assistant.
Defendant presented the testimony of Mike Stillman, the Chief Operating and Financial Officer of VCE. Stillman testified that the parent company provides administrative assistance including billing, collections, accounting, tax and payroll services, training, and technical management and support for the individual franchised centers. The initial start-up fee for these services is $50,000 plus 15% of the first $750,000 in revenues collected by the individual office. Because of the amount of debt associated with opening and equipping an office, based upon the historical growth of the more established franchises, Stillman opined that defendant should not expect to draw any salary during his first year of operation and should anticipate receiving approximately $150,000 in salary in the second year of operation. He acknowledged that his data was limited to the twenty VCE offices in existence at the time, the oldest of which had only been operating for three years.
Stillman testified that defendant had accumulated $172,487 in debt in 2004 and, as of December 1, 2005, had accumulated an additional $117,739 in debt. He stated that defendant's losses were commensurate with typical losses in newly opened franchises; he suggested defendant not draw a salary until 2006 when, Stillman predicted, the franchise would become profitable.
Defendant also presented Edmond Provder who was qualified as an employability and earning capacity expert. Provder opined that defendant's decisions to stop practicing cardiothoracic surgery and to open a vein practice were reasonable. He estimated that defendant's potential income from the practice would be $150,000 per year. These opinions were derived from his interviews with defendant, review of documents defendant provided to him, and review of prevailing wage statistics.
Provder acknowledged that he was unaware of the specifics of defendant's VCE practice, including the number of procedures he performed each month and the fees charged. He was aware that defendant had been medically cleared to resume his duties as a surgeon following his shoulder surgery.
Defendant also submitted documentation of his then-current financial circumstances. In 2004, his gross earned income was $100,841.21. In 2005, defendant claimed no income from his VCE franchise; he reported unearned disability income of $59,500. His most recent case information statement, dated November 4, 2005, claimed monthly expenses totaling $17,779 for himself, his current wife and their three minor children.
Plaintiff testified as to her financial situation and submitted a supporting case information statement into evidence. As of October 12, 2005, the date of her statement, plaintiff was working full-time, earning a gross annual salary of $62,400.
In his decision, the trial judge rejected all of defendant's claims for relief. He held both parties to the same income levels imputed in the divorce judgment: $315,000 to defendant and $45,000 to plaintiff.
First, the judge concluded that defendant had failed to prove any change of circumstances based on his medical history. He found that the medical evidence showed defendant's treating doctors had cleared him to perform surgery. The judge noted defendant's testimony that he had applied for numerous cardiothoracic surgery positions notwithstanding his supposed medical limitations.
The judge disposed of the second aspect of defendant's claim of changed circumstances, namely the reduced number of comparable surgical positions due to technological changes in the profession stemming from increased use of the stent device, with the following statement: "What Mr. Provder did not provide was any evidence as to the technological advances in cardio and thoracic surgery, which defendant claims led to the demise of his earning potential, nor was any credible evidence presented as to Dr. Seaver's ability to perform as a cardio vascular or thoracic surgeon."
Nowhere in his decision did the judge evaluate defendant's testimony and supporting documentary evidence as to his job search in his field of cardiothoracic surgery. The judge's only reference to defendant's job search efforts was in connection with his assessment of defendant's medical evidence, noted above.
In addressing defendant's ability to meet his living expenses, the judge opined that defendant's current wife, also a registered nurse, could earn $83,200 gross annual income. This was based upon defendant's testimony that his wife, who works part-time, earns $40.00 per hour; therefore, if she worked a forty-hour work week, her gross earnings would be $83,200.
As for plaintiff, the judge made no analysis of her current earnings and living expenses. Rather, the judge stated:
Plaintiff's underemployment really has no bearing on whether defendant has met his financial obligations and has no bearing on whether defendant has shown a substantial change in circumstances that would warrant a downward modification of his alimony obligation because plaintiff has been underemployed since the Final Judgment of Divorce. Plaintiff's underemployment does not support defendant's present application because based on the court's previous decision to impute income to the plaintiff, the Court when it determined the baseline for defendant's spousal support obligation took into account plaintiff's underemployment.
The judge concluded that, since "plaintiff's income was imputed at the time of the entering of the Final Judgment of Divorce, imputing income to her at the same position would have the same net effect on defendant's spousal support obligation."
We conclude that the trial judge improperly assessed the record before him, and failed to consider the established legal principles governing spousal support modification applications.
The trial judge primarily addressed only the "changed circumstances" claim related to defendant's medical condition. The judge clearly rejected defendant's claimed medical limitations, as was well within his discretion to do, based upon his assessment of the evidence presented. We do not disturb those findings and conclusions.
However, the judge engaged in no meaningful analysis of defendant's other claims that (1) based on technological changes in his surgical field and the unavailability of positions similar to his former employment, he was unable to find a comparable position; and (2) plaintiff's income had increased.
We recognize that the decision as to "[w]hether an alimony obligation should be modified based upon a claim of changed circumstances rests within a Family Part judge's sound discretion." Larbig v. Larbig, 384 N.J. Super. 17, 21 (App. Div. 2006). However, we are compelled to reverse and remand those trial court decisions that fail to address adequately the nature of the "changed circumstances" claims presented, and do not properly apply the controlling legal principles to the analysis of those claims. See, e.g., Stamberg v. Stamberg, 302 N.J. Super. 35 (App. Div. 1997).
A very specific analysis is required where, as here, the change in the supporting spouse's income is occasioned by a change in his employment situation. The downward spiral of defendant's earnings began with his severance from Trinity. The parties stipulated that "the reason[s] for the severing of the relationship between Dr. Seaver and Trinity [are] not relevant to the plenary hearing and the Court's ultimate decision." In view of the parties' stipulation, we are compelled to assume that defendant's change in employment was involuntary.
Defendant's documentary evidence of his search for a comparable surgical position included advertisements from various medical/surgical journals for the types of positions he sought, as well as his letters to potential employers and their responses. Between November 11, 2003, and March 1, 2004, defendant sent applications to more than sixty potential employers, all to no avail. He also documented numerous email inquiries submitted as late as July 2005. He also testified that, because he now lacked hospital privileges, he was precluded from earning income as an expert witness as he had previously done.
The judge rejected defendant's new employment with VCE as the basis on which to assess his earning potential. Rather, the judge based his income imputation to defendant upon the United States Department of Labor Wage Statistics statement that "surgeons," generally, with "over one year in their specialty were projected to earn an average salary of $282,504[.]" Because defendant had "much more than one year of experience in his specialty," the judge found it would be "a very short stretch to impute to him income of $315,000 per year." The judge stated:
Based on the evidence presented or lack thereof, this Court is convinced that defendant could resume his activities as a cardiothoracic surgeon, or could have entered any number of surgical specialties without the assumption of the incredible costs associated with Dr. Seaver's choice to pursue an entirely new business. (Emphasis added).
Other than his rejection of defendant's claimed medical limitations, the judge did not explain what "convinced" him that defendant could work as a cardiothoracic surgeon; nor did he make clear what other "surgical specialties" defendant could have entered without incurring costs comparable to those connected to the VCE franchise. As noted, the judge made no assessment of defendant's testimony and documents evidencing his search for a comparable surgical position after Trinity.
The trial judge never made an express finding that defendant was unjustifiably underemployed of his own volition. The tenor of the judge's decision may imply such a belief on his part. However, in the absence of an evidence-based finding of such unjustifiable voluntary underemployment, imputation of defendant's prior income was improper. This is the clear mandate of Dorfman v. Dorfman, 315 N.J. Super. 511, 516 (App. Div. 1998):
The flaw in imputing [the previously earned] annual gross income to defendant is the lack of a finding by the motion judge that defendant was, without just cause, voluntarily underemployed. Such a finding is requisite, before considering imputation of income. Underpinning the basis of every support order is the proposition that the payor has the "ability to pay" the amount set, or agreed to. Inherent in a finding of "underemployment" is the notion the obligor is intentionally failing to earn that which he or she is capable of earning.
Dorfman involved an accountant who, following termination by his firm, accepted a lower-paying position as an accountant after making a good faith effort to find comparable employment. We have concluded that such an obligor who makes that showing demonstrates that he or she is working at capacity in employment consistent with skills and experience; stated differently, that obligor establishes that he or she is not voluntarily underemployed in the new job. In such cases, absent evidence undermining the supporting spouse's proofs, there is no need for further inquiry and alimony should be recalculated based on current financial circumstances. This conclusion is mandated by a well-established principle, i.e., support orders are based on the obligor's ability to pay. In contrast, where a layoff is followed by a shift to a job that does not draw on prior skills and experience, the obligor must explain that choice with reference to other options explored and efforts to find work with comparable pay. [Storey v. Storey, 373 N.J. Super. 464, 472 (App. Div. 2004)(emphasis added; citations omitted).]
Plaintiff presented no "evidence undermining [defendant]'s proofs" of his futile search for a comparable surgical position. For his part, defendant "explain[ed]" his choice to open the VCE franchise "with reference to other options explored and efforts to find work with comparable pay." Under these circumstances, the trial judge's summary rejection of defendant's "proofs" on these issues was improper.
In Storey, supra, 373 N.J. Super. at 468, a supporting spouse changed careers after involuntary termination from the employment on which his alimony obligation was initially based. We identified the following factors as relevant to the reasonableness and relative advantages of a career change . . . the reasons for the career change (both the reasons for leaving prior employment and the reasons for selecting the new job); disparity between prior and present earnings; efforts to find work at comparable pay; the extent to which the new career draws or builds upon education, skills and experience; the availability of work; the extent to which the new career offers opportunities for enhanced earnings in the future; age and health; and the former spouse's need for support. [Id. at 470 (emphasis added).]
Thus, assuming defendant involuntarily ended his employment at Trinity, the court still must engage in an analysis of the factors set forth in Storey, supra, 373 N.J. Super at 471. Because of the "competing interests implicated by a career change resulting in reduced income . . . [e]ach case requires a careful evaluation of 'reasonableness' and 'relative advantages' under the totality of circumstances." Id. at 472.
Where, as here, a supporting spouse presents unrebutted evidence of his or her inability to obtain a position with earnings comparable to the original level, the court must then determine the income he or she is now earning or could earn. Because the trial judge did not follow the mandate of Dorfman, supra, nor did he undertake analysis of the evidence vis-à-vis the Storey factors, we remand this matter for further proceedings.
On remand, the judge must also examine and address the current level of plaintiff's need for alimony. Storey, supra, 373 N.J. Super. at 470. As noted above, plaintiff testified that her current gross annual salary is $62,400. This is $17,400 higher than the $45,000 imputed to her at the time of divorce and, implicitly, re-imputed to her in the judge's decision.
Plaintiff's monthly living expenses totaled $6,783 for herself alone. This included items such as: $100 for her automobile license and registration that, at trial, she admitted was an erroneous figure and should be "probably [$]45"; $175 commuting expenses, that included taking the train to New York City to visit her sister, and was in addition to $350 for fuel and oil used in driving her car to work; $500 for food for herself, compared to $700 for herself and two children as she had claimed in a 2002 statement; $200 for restaurants; $150 for hair care; $150 for entertainment; $300 for gifts; and $350 for savings/investment, while also incurring $250 for legal fees and $500 on a tax bill. Plaintiff acknowledged she had no supporting documents for most of her expenses, and that she made a "guesstimate" as to those expenses.*fn1
Even assuming, however, that plaintiff's monthly expense figure is accurate, it may well be she no longer needs $5,833 monthly alimony. During trial, as plaintiff was reviewing her case information statement in response to defendant's cross-examination, the judge stated that he would "take judicial notice" that plaintiff's income "certainly does not . . . satisfy fully or partially the standard of living that she had while she was married."
However, the judge undertook no analysis of plaintiff's current financial situation vis-à-vis her present need for alimony. While plaintiff may not be financially self-sufficient, nonetheless the increase in her earnings may well reduce the amount of alimony she needs. Defendant expressly raised this claim as a "changed circumstance" warranting modification. He is entitled to have the judge address it with a meaningful factual analysis and proper application of the controlling legal principles.
In his decision, the trial judge stated: "When assessing whether a modification of support should be granted the Court must assess the dependent spouse's need in light of the baseline standard of living as set forth in the Final Judgment of Divorce. Walles v. Walles, 295 N.J. Super. 498 [(App. Div. 1996)]." In that case we noted: "It is . . . clear that the original judgment establishing alimony creates the standard of living of the supported spouse. Courts look at this figure in addressing future applications for modifications of the judgment based upon allegations of changed circumstances." Id. at 512.
In Walles we affirmed the trial court's decision reducing the defendant-husband's alimony obligation based on the "changed circumstance" of a decrease in his earnings. There, the trial judge "analyzed the former income of defendant, he looked at the budget of plaintiff, and he examined the funds available to both parties. Based on these factors, the judge reduced the amount of alimony[.]" Id. at 513 (emphasis added).
Here, the trial judge gave no meaningful consideration either to "the budget of plaintiff" or to "the funds available to both parties." Rather, he focused exclusively on defendant's financial situation and earning capacity. Thus, while citing Walles in his decision, the judge failed to follow its guidelines. On remand, he shall consider the factors we found to justify the support modification in that case.
In Stamberg, supra, 302 N.J. Super. at 42, we remanded the matter to the trial court to address the supporting spouse's claim of a changed circumstance based upon an increase in the supported spouse's income. We noted that where a supporting spouse claims that "the combination of the changes in his finances for the worse and his former wife's for the better constituted a change of circumstances . . . the judge erred in effectively ending the inquiry with [the supporting spouse's] income." Id. at 43. We recognized that: "Lepis[ v. Lepis, 83 N.J. 139 (1980)] does not stand for the proposition that a prima facie showing of changed circumstances by an applicant must relate solely to his or her own finances." Id. at 42.
Finally, we address the issue of counsel fees. N.J.S.A. 2A:34-23 directs a court considering a counsel fee application to consider "the factors set forth in the court rule on counsel fees, the financial circumstances of the parties, and the good or bad faith of either party." Rule 4:42-9(a)(1) allows counsel fee awards in family actions pursuant to Rule 5:3-5(c), which provides:
[T]he court in its discretion may make an allowance, both pendente lite and on final determination, to be paid by any party to the action, including, if deemed to be just, any party successful in the action, on any claim for . . . alimony . . . . In determining the amount of the fee award, the court should consider . . . the following factors: (1) the financial circumstances of the parties; (2) the ability of the parties to pay their own fees or to contribute to the fees of the other party; (3) the reasonableness and good faith of the positions advanced by the parties; (4) the extent of the fees incurred by both parties; (5) any fees previously awarded; (6) the amount of fees previously paid to counsel by each party; (7) the results obtained; (8) the degree to which fees were incurred to enforce existing orders or to compel discovery; and (9) any other factor bearing on the fairness of an award.
The award of counsel fees is left to the sound discretion of the trial court. Williams v. Williams, 59 N.J. 229, 233 (1971).
The trial judge based his counsel fee award on his findings that (1) plaintiff was successful on the merits; (2) defendant acted in bad faith by making no alimony payments for a substantial period of time; and (3) defendant had the financial ability to contribute to plaintiff's fees.
Because we conclude there was merit to defendant's application, to the extent the court relied upon plaintiff's success on the merits and defendant's ability to pay as justification for the fee award, we reverse that award and remand it for reconsideration as well. We make no judgment as to the propriety of a counsel fee award upon final disposition of this matter on remand.
Reversed and remanded. We do not retain jurisdiction.