April 4, 2008
PATRICIA A. SULLIVAN, N/K/A PATRICIA ARNOLD, PLAINTIFF-RESPONDENT,
JAMES J. SULLIVAN, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-514-97.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 5, 2008
Before Judges Axelrad and Sapp-Peterson.
Defendant, James J. Sullivan, appeals from the March 22, 2007 order of the Family Part judge denying his motion to modify an August 26, 2002 consent order executed by defendant and plaintiff, Patricia A. Sullivan, related to defendant's child support obligations. The Family Part judge determined that our decision in Morris v. Morris, 263 N.J. Super. 237 (App. Div. 1993) was dispositive and concluded that a modification was not warranted. We affirm.
Plaintiff and defendant were married on July 3, 1989. Two children were born of the marriage: J.S., born on January 10, 1990; and B.R.S., born on April 30, 1992. In March 1997, the parties entered into a property settlement agreement (PSA) that was incorporated into the final judgment of divorce (JOD) granted by the court on April 2, 1997.
Under the PSA, defendant's monthly alimony and child support obligation was $7,000, with $2,000 of that amount designated as alimony, terminable upon plaintiff's remarriage, while the remaining $5,000 represented child support. Additionally, the agreement required that defendant pay for the children's unreimbursed medical expenses, extracurricular activities, college or vocation school costs and other necessary costs. Further, under the PSA, defendant agreed to contribute $700 per month toward plaintiff's mortgage until the emancipation of the children, at which time the $700 would increase to the actual amount of the mortgage payment.
Although the record does not reflect the dates of remarriage, both parties remarried. Following plaintiff's remarriage, the parties revisited defendant's child support obligations. To that end, the parties executed a consent order dated August 26, 2002 that modified defendant's child support obligations. At the time the parties executed the consent order, defendant's annual income was between $135,000 and $177,254.
The consent order provided that defendant would pay $5,500 per month in child support and, upon the emancipation of J.S., the older of the two children, monthly child support would be reduced to $4,000. The fixed child support amount now included defendant's obligation to pay for the children's unreimbursed medical expenses, extracurricular activities and the $700 monthly contribution towards plaintiff's mortgage. Finally, both parties agreed to share their children's college costs based upon their respective earnings.
In addition to the specific obligations of each party, the consent order contained the following provision, commonly referred to as an anti-Lepis*fn1 clause:*fn2
The parties agree that a critical part of the consideration for the plaintiff's compromise on the support obligation is the defendant's waiver of any and all rights that he may have to seek a reduction in his obligations, including any reduction that he might otherwise seek as a result of the filing of his tax returns and any resulting tax liabilities, as well as any reduction that he might otherwise seek due to debts in his business (about which he testified on May 15[,] 2002) and any other reason that he might have to seek a reduction based upon a change in circumstances. Thus, the parties' agreement is that $5,500 per month will be paid until [J.S.] is emancipated and $4,000 per month will be paid until [B.R.S.] is emancipated and these amounts are not changeable by the defendant for any reason whatsoever.
On November 9, 2006, defendant filed a notice of motion to modify the parties' August 26, 2002 consent order or, alternatively, rescind and/or reform the consent order. Defendant alleged that there had been a change in his financial circumstances, claiming that his 2006 annual income was $87,450, which called for modification of the consent order. In his certification submitted in support of the motion, defendant stated that his financial situation had deteriorated. He explained:
11. At the time of the entry of this Consent Order, I was in the business of residential home construction, and I operated under two different names. The companies were Sullivan Development Corporation, LLC and Mechanics and Design, LLC., but essentially they were the same company. These were small companies in the sense that I generally only constructed one or two houses at a time, and generally over the course of 16-24 months per home. Generally, the homes were moderately expensive, in the seven-figure range, and when they were completed the profit I earned was generally my income for the year.
12. I was able to make a good living, but  having so much of my financial security invested in one or two homes  at a time created a very small margin for error in the event there was a problem with the payment. In September 2005, my financial circumstances plummeted as a result of three different contracts for which I was not paid.
13. In 2005, I was working on three projects, the Sasso residence at Deputy Minister Drive, Colts Neck, McGraner in Middletown Township, and Veilleux, a residence in Holmdel, New Jersey. For all three of these projects, the buyers have not paid me substantial sums, which have totally bankrupt[ed] me professionally and personally.
14. The lack of these three payments have totally destroyed my business.
Plaintiff filed a notice of cross-motion on December 20, 2006. In the cross motion, plaintiff requested that the court order that (1) child support arrears owed by defendant be satisfied out of any business proceeds collected by defendant, (2) defendant make a lump sum child support payment of at least $25,000 to plaintiff within two weeks, (3) defendant pay a $150,000 judgment previously entered against him and in favor of plaintiff, and (4) defendant pay counsel fees and court costs incurred by plaintiff concerning this matter. On January 19, 2007, the Court entered an order suspending the bench warrant issued for defendant's arrest for failure to pay child support.
The court conducted oral argument on the motion on March 16, 2007, and reserved decision. Six days later, in an oral decision, the Family Part judge denied defendant's motion, stating,
I will deny the application of [defendant] to vacate the consent order. I'm satisfied that there should not be a modification at all. This is not a situation that requires either the exchange of financial information or the necessity of a plenary hearing. The Court makes this decision applying [Morris v. Morris, 263 N.J. Super. 237 (App. Div. 1993)], which I think is dispositive.
As to the cross[-]motion, I will fix arrears in the total amount of $255,362.80. That amount represents the $105,362.80 in current child support arrears, plus the additional $150,000 awarded by Judge Waldman on June 25th of 2004.
The Court in adding by way of judgment the decision of Judge Waldman will protect that judgment in the event of a bankruptcy filing by [defendant] so that this particular debt would not be dischargeable. I'm satisfied neither side should be awarded counsel fees.
With regard to a portion of the cross[-]motion filed by [plaintiff's attorney] on behalf of the plaintiff, I'm satisfied that the relief that asks for the immediate payment of the judgment that had earlier been entered by Judge Waldman has to be denied. On the record that is in front of me, I cannot make a finding that the defendant has the current capacity to pay the sum of $150,000.
I am satisfied that the remainder of what is sought in the cross[-]motion is sustainable by [defendant] presently, and amongst other things, will direct a lump sum payment on arrears in the amount of $15,000.
That amount is to be paid within [sixty] days of the order that I will sign today Defendant filed a Notice of Appeal on May 4, 2004. Plaintiff did not file a cross-appeal.
On appeal, defendant contends that the trial court misapplied its discretion in failing to hold that the anti-Lepis clause contained in the consent order was no longer fair and equitable. He argues that he demonstrated a prima facie showing of a permanent and substantial change in circumstances. Specifically, defendant urges that the record established that since the execution of the consent order, he had experienced the loss of more than fifty percent of his total household income, which should have been considered by the trial court in deciding whether to modify the consent order. He asserts that the court should have taken into consideration the needs and abilities of both parties, including the fact that he is remarried and has another child for whom he is also financially responsible. Finally, he claims the court failed to place its reasons for denying relief on the record.
In Lepis, supra, 83 N.J. at 145, the Supreme Court noted that "the equitable power of the courts to modify alimony and support orders at any time is specifically recognized by N.J.S.A. 2A:34-23[.]" The Court stated that "as a result of this judicial authority, alimony and support orders define only the present obligations of the former spouses. Those duties are always subject to review and modification on a showing of changed circumstances." Id. at 146. (internal quotations omitted) (citations omitted). Without offending the dictates of Lepis, in Morris, supra, we noted that "parties can with full knowledge of all present and reasonably foreseeable future circumstances bargain for a fixed payment or establish the criteria for payment to the dependent spouse, irrespective of circumstances that in the usual case would give rise to Lepis modifications of their agreement." 263 N.J. Super. at 241.
In Morris, we discussed the conflict between two Chancery Division decisions that took different positions with respect to the enforceability of anti-Lepis provisions in agreements: (1) Smith v. Smith, 261 N.J. Super. 198 (Ch. Div. 1992), where the court held that an anti-Lepis clause, which precludes the exercise of a court's equitable power to review and, where appropriate, to modify support obligations in response to changed circumstances, is contrary to the public policy; and (2) Finckin, supra, 240 N.J. Super. at 206, where the court concluded that public policy does not preclude the use of an anti-Lepis clause in a property settlement agreement. We expressed our agreement, in part, with both decisions:
To some extent, we agree with both decisions. As correctly stated in Smith, the parties cannot bargain away the court's equitable jurisdiction. However, as determined in Finckin, the parties can with full knowledge of all present and reasonably foreseeable future circumstances bargain for a fixed payment or establish the criteria for payment to the dependent spouse, irrespective of circumstances that in the usual case would give rise to Lepis modifications of their agreement. Lepis established an approach that courts must take when faced with a request for modification of child support or alimony.
Where the parties have agreed on the amount of support or alimony, Lepis permits later modification to the extent that changed circumstances render the agreed terms no longer "fair and equitable." [Lepis, supra, 83 N.J. at 148-49.]
With this approach, we concluded in Morris, supra, that an anti-Lepis provision is enforceable absent unforeseeable and extreme circumstances that render the continued enforcement of the agreement unreasonable or unjust. 263 N.J. Super. at 241. Enforcement of an anti-Lepis clause is particularly appropriate where the agreement addresses the very situation that the payor spouse subsequently raises as changed circumstances. Id. at 245-46.
Here, based upon the anti-Lepis language in the consent order, the parties contemplated that circumstances could arise in the future that may result in a downward change in defendant's income. The agreement expressly stated that defendant waived "any and all rights that he may have to seek a reduction in his obligations[.]" The consent order recited non-exclusive examples of income-reducing events that nonetheless would not result in a modification of the agreement: "resulting tax liabilities, as well as any reduction that [defendant] might otherwise seek due to debts in his business . . . and any other reason that he might have to seek a reduction based upon a change in circumstances." The last sentence of the anti-Lepis clause reiterates the clear intent of the parties, namely, that the amounts of child support to be paid "are not changeable by the defendant for any reason whatsoever."
Moreover, when plaintiff executed the consent order, she gave up her previously bargained-for entitlement to additional support for unreimbursed medical expenses, extracurricular activities and the $700 monthly mortgage contribution payment. She also agreed to share in the costs of their children's higher education. Similar to the example we illustrated in Morris, supra, plaintiff accepted a reduction in defendant's financial obligations in exchange for the guaranteed child support payment of $5,500 that the consent order provided. Id. at 243.
In denying defendant's motion, the Family Part judge found that there was a defined quid pro quo leading to the consent order of August 26, 2002.
Because there was a give and take involved, particularly with the former wife picking up burdens as it related to her income being a source for calculation of college expenses, a reduction in the amount she would receive for extracurricular activities and medical expenses, there was clear bargaining here and a give 'em up from the plaintiff's quarter.
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. Consequently, we are convinced that unless those findings "are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice," Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974), we will not disturb a trial judge's findings that are adequately supported by the record. Id. at 483-84.
In our view the language of the consent agreement reflects the parties' consideration that defendant may experience a reduction in income in the future and expressly intended that such a reduction was not a basis upon which to seek modification of the agreement. The consent order explicitly provides: "The parties agree that a critical part of the consideration for the plaintiff's compromise on the support obligation is the defendant's waiver of any and all rights that he may have to seek a reduction in his obligations[.]" This language is broad enough to include a situation, such as exists here, where defendant experiences a decrease in his income.
Under these circumstances, since defendant agreed to the benefit of the decrease in his child support obligations, he is obliged to accept the burden that accompanied it, particularly where both he and plaintiff, by the language of the agreement, anticipated such circumstances. It may well be that the parties understood that defendant, as a self-employed residential builder, would experience both good and bad economic times and that the fixed amount of child support reflects the give and take on their part in light of this economic reality. We are therefore satisfied that there is substantial credible evidence in the record to support the Family Part judge's findings and those findings are entitled to our deference. Cesare, supra, 154 N.J. at 412-13. Finally, contrary to defendant's contention, those findings were clearly set forth on the record. R. 1:7-4(a).