On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Hunterdon County, FD-10-64-99.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Parrillo, S.L. Reisner and Gilroy.
Plaintiff Cheryl Frustieri appeals from a January 19, 2007 order of the Family Part and a March 2, 2007 order denying her motion for reconsideration. We remand this matter to the trial court for further proceedings.
Between October 1987 and May 1998, plaintiff and defendant Lyle K. Rawlings lived together and had two children, Christopher, born January 29, 1988, and Dakota, born October 19, 1994. The parties separated in May 1998. On November 20, 1998, they reached a custody agreement, and the Family Part issued a consent order requiring defendant to pay plaintiff $900 per month in child support for the two children. In December 2000, the parties agreed to reduce the defendant's child support obligation to $650 per month. In the fall of 2006, the parties' oldest son, Christopher, began attending Rutgers University as a full-time student and, therefore, no longer resided with either party during the school year.
On October 25, 2006, defendant filed a motion to increase his parenting time, and to modify child support based on a change in circumstances due to Christopher's attending college. Defendant also alleged that he was paying a disproportionate share of the college expenses.
In connection with the motion, the parties produced the following evidence of their finances. Plaintiff, a registered nurse, works for a pharmaceutical company. In 2006, she received a salary of $69,720 and a $4809 bonus, for a total earned income of $74,529.
Defendant is the president and owner of a subchapter C corporation (C Corp), Advanced Solar Products (ASP), a high growth engineering and construction firm that specializes in the solar energy field. He is also president and one of three trustees of Fully Independent Residential Solar Technology, Inc. (FIRST), a 501(c) non-profit corporation. Defendant has a joint venture in Reaction Sciences, Inc., a research and development startup.
The parties disagreed about defendant's income. The trial court used defendant's September 21, 2006 sworn case information statement (CIS) to determine that defendant's income was approximately $90,000 per year. Defendant earned $99,000 from ASP, according to his pre-amended 2006 W-2 wage and tax statement, with $90,000 as salary and $9,000 as bonus.
As a FIRST employee from the beginning of 1998 through August 2003, defendant received wages from FIRST. However, according to defendant, due to FIRST's "lack of sufficient revenue," defendant had to return those funds by loaning the company $292,900. In his CIS, defendant did not list this $292,900 loan to FIRST even though it is listed in FIRST's 2004 form 990 income tax return, and the same form lists a $10,700 "compensation" to defendant as its president.
In addition to receiving a salary from ASP, defendant rents and resides in an experimental solar home owned by FIRST. He pays only $250 per month, because the house is environmentally friendly and lacks certain amenities.*fn1 On his CIS, defendant did not list income from Reaction Sciences, Inc., a research and development startup, that receives support from ASP.
In the trial court, plaintiff alleged that defendant's CIS understated his 2006 income. Plaintiff cited defendant's year-to-date pay stub as of September 29, 2006, indicating that defendant had earned $91,500 with a calculated year-end total projection of $114,000. In a certification, defendant attested that the September 29 pay stub contained an error and that his 2006 income was $99,000, consisting of $90,000 in wages and a bonus of $9000. In addition, defendant's CIS listed "a one-time bonus of $33,184 in August 2005 to compensate for salary which was foregone in 2003 and 2004." Thus, in 2005 defendant earned $132,184, as reported on his form 1040, but this included a "one-time bonus of $33,184."*fn2
In addition to questioning defendant's reported income, plaintiff raised an issue as to defendant's ownership interest in ASP. Plaintiff alleged that defendant owned 100% of ASP. Defendant, however, contended that he owned a 2/3 interest and that Edward Seliga owned a 1/3 interest in ASP based on a "verbal agreement of ownership" from 2001, in consideration for Seliga's work in building ASP's business and other projects that Seliga brought to ASP. According to defendant, although stock had not been transferred, it will be transferred for $1 based on the 2001 verbal agreement. According to defendant, he and Seliga, as partners, determined his salary. On the other hand, plaintiff contended that defendant was the controlling shareholder with sole decision-making power to alter his compensation at his own discretion.
Defendant did not produce ASP's corporate income tax returns, although he provided some of his personal tax returns. In his reply certification, defendant provided his federal 1040 income tax forms for 2003 reporting $93,960, 2004 reporting $72,751, and 2005 reporting $132,184. He did not include his 2004 Schedule E form to explain a $64,181 loss listed on line 17 of his 2004 form 1040 as "rental real estate, royalties, partnerships, S corporations, trusts, etc." Defendant's amended 2006 form W-2 wage and tax statement indicated that defendant earned $97,612.32 in 2006, while his CIS and September 15, 2006 paystub indicated $90,000 in wages plus $9000 in bonuses. Defendant did not provide any form 1120 corporate tax returns from ASP in 2004 to explain the $64,181 loss on his 2004 individual income tax return, nor in 2005 to clarify a $4121 loss. He did provide a 2003 Schedule E form from the Sunspace Builders and Developers, Inc., a S-Corp, to explain a $7268 pass-through loss, that was listed on line 17 of his 2003 federal 1040 income tax forms. In his CIS, defendant did not claim any credit for the 2004 loss of $64,181 and asserted that his losses, including the 2003 loss, were therefore irrelevant for determining child support.
Plaintiff also asked the trial court to impute 4% interest on defendant's business checking account that held $165,000. Defendant kept those funds in the account as retained income of the business. The court rejected plaintiff's contention that defendant should be required to place the money in a higher-earning investment, reasoning "[t]hat's assuming you are going to put all that money into a CD . . . [and] [t]hat's an absurd assumption."
In an order dated January 19, 2007, the trial judge determined child support, based on the Child Support Guidelines, to be $107 per week for Dakota; required the parties to pay for Christopher's college education in proportion to their respective incomes with plaintiff paying 45% and defendant paying 55%; required the parties to pay unreimbursed medical expenses in excess of $250 per child in proportion to their incomes: 45% - 55%; required the parties to pay Christopher's auto insurance in proportion to their incomes: 45% - 55%; denied plaintiff's request for a $20,000 retainer for attorney fees; denied plaintiff's request for discovery of defendant's corporate records; denied plaintiff's request to compel defendant to obtain life insurance; and denied both parties' requests for counsel fees and costs.
In the Final Memorandum of Decision on Motion, dated January 19, 2007, the judge addressed Dakota's child support:
The defendant states that his 2006 salary was $90,000 plus a $9,000 bonus. The Court will generally base a party's income on recent pay stubs or tax returns. The defendant's statements regarding his 2006 salary are more up-to-date than his 2005 tax return. Thus, the Court will take the defendant' certified statements as information regarding his current income. Thus, child support was calculated based on $99,000 income for the defendant in 2006. The Court is satisfied with the defendant's explanation of the reduced rent he pays for his residence, i.e. that because of its environmentally friendly built, the house lacks certain amenities. The Court will, thus, not count the reduced rent as in-kind-income for purposes of child support. There are no specific allegations regarding improperly deducted items and it appears that the defendant's other businesses (ASP and Reaction Sciences) are not producing income to him at this time. Even the plaintiff simply states that ASP is involved in a high growth industry. There are no specific statements that would lead the Court to believe that the defendant is not being truthful about his total income.
Thus, the Court will calculate child support based on the information provided by the parties. The child support calculation is further based on the plaintiff's annual income of $74,529 ($69,720 in income based on her most recent pay stubs plus $4,809 for a bonus based on performance in 2005 but paid in 2006). The calculation is further based on overnights in accordance with the current arrangements, i.e. 130 overnights with the defendant (2 overnights one week, three overnights the next week). The number of overnights has also resulted in the use of the shared parenting worksheet. Based on these figures, the defendant's child support obligation for Dakota is $107 per week.
The judge then addressed Christopher's child support and college expenses, stating:
The Child Support Guidelines do not apply to Christopher who is over the age of eighteen and is attending college away from home. At this time, the parties present no clear picture of how much time Christopher will spend at home, or at whose home he will spend his time away from school. The Court cannot make a determination at this point. However, in general the Court finds it appropriate that the parent with whom Christopher regularly spends his time away from school, be ...