June 26, 2008
DENISE L. EVANS, PLAINTIFF-APPELLANT,
JEFFREY E. STEFFENS, DEFENDANT-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Hunterdon County, Docket No. FM-10-223-96.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted June 3, 2008
Before Judges Grall and Chambers.
Plaintiff Denise L. Evans and defendant Jeffrey E. Steffens were divorced in 1997. The final judgment incorporates the parties' property settlement agreement (PSA). Plaintiff appeals from a provision of a post-judgment order that reduces child support in accordance with the terms of the PSA. Because the PSA does not address all of the changed circumstances that warrant modification of child support in this case, we reverse and remand for further proceedings. Lepis v. Lepis, 83 N.J. 139, 153, 157-59 (1980). Plaintiff also appeals from a second provision of the same order, which offsets amounts owed by defendant for health and life insurance against his overpayments of child support. Plaintiff contends that the offset is the equivalent of a retroactive modification of child support prohibited by N.J.S.A. 2A:17-56.23a. We disagree and affirm that portion of the order.
The parties married in 1991. There were two children born of their marriage; the first was born in 1992 and the second was born in 1994. The parties separated in 1996 and divorced in November 1997. Defendant's earnings at the time of the divorce are not in dispute on appeal. According to defendant, he was earning approximately $1,500,000 per year in 1997. Although plaintiff asserted that defendant was earning less at the time of her motion, on appeal she accepts defendant's figure, $1,500,000.
The PSA provides for defendant to pay child support as follows:
Effective with the date of the signing of this Agreement and continuing thereafter, Husband shall pay directly to wife the sum of $50,000 per annum ($4,166.66 monthly) as and for child support for the benefit of the parties two children. The aforesaid payments shall be made in monthly installments (on the first day of each month) until the older [child's] graduation from high school (anticipated to occur in June 2010). Immediately thereafter, husband's child support obligation shall drop to $30,000.00 per annum ($2,500.00 monthly) until [the younger child's] graduation from high school (anticipated to occur in June 2012). The aforesaid child support payment shall be made by husband in monthly installments payable on the first day of each month. Thereafter, husband's direct child support obligation shall cease.
In addition to cash support in the amount of $50,000, the PSA required defendant to pay the following: alimony in the amount of $50,000 for a term set to expire on May 10, 2009; the balance of the mortgage on the marital residence, the home in which plaintiff and the children were to reside (as part of plaintiff's share of equitable distribution); the loan on the lot adjacent to the marital residence (as part of plaintiff's share of equitable distribution); the real estate taxes on the properties for a term of five years (as part of plaintiff's share of equitable distribution); contributions to a trust fund for the education of the children; the cost of the children's health insurance; all medical expenses for the children; premiums for a $400,000 policy of insurance on his life owned by plaintiff; and the cost of funding an irrevocable life insurance trust in the amount of $800,000.
Shortly after the divorce, the family suffered an unexpected and tragic loss. In January 1998, their eldest child died of a rare disease.
Following the child's death, defendant did not seek a reduction in child support. According to plaintiff, he chose not to seek modification and agreed to continue to pay $50,000.00 for "the maintenance and benefit" of their youngest child. According to defendant, he continued to pay the full child support amount because he "wanted to give plaintiff the opportunity to grieve before revisiting the issue" and because she was paying the cost of health and life insurance. The PSA permits written modification of the agreement, and there is no evidence that the agreement was so modified.
After January 1998, defendant continued to pay $50,000 per year, the support due for two children under the PSA. Although defendant reduced the support payment for November 2006, on plaintiff's objection, he subsequently paid the full amount due for that month and the months thereafter. In addition, defendant paid the full cost of their youngest child's private school education, without resorting to funds in the educational trust or seeking any contribution from plaintiff, and professed his intention to continue paying that expense. He also paid for the child's summer camp and claimed he would do so in the future. Although defendant did not memorialize his agreement to pay these additional expenses in any written document, plaintiff did not dispute the fact that defendant had made the payments.
In June 2007, plaintiff filed a post-judgment motion seeking an order compelling defendant to continue child support payments in the amount of $4166.66 per month, $50,000 per year. Plaintiff contended that she relied upon defendant's agreement to provide child support in that amount in order to give their youngest child the lifestyle enjoyed during the marriage. She also noted, without quantifying the difference, that the carrying costs on her home and her living expenses had increased since the divorce. Plaintiff did not seek a determination of child support in accordance with the present needs of the parties' youngest child and the parties' present income and assets; she simply sought a continuation of the child support amount set for two children in the PSA.
In addition to an order compelling defendant to pay child support at the rate of $50,000 per year, plaintiff sought an order compelling defendant to reimburse her for the incremental cost of health insurance retroactive to 1998 and life insurance retroactive to 2002. Plaintiff contended that she was owed a total of $25,211.18 for these payments, $21,491.18 for the child's health insurance and $3720 for life insurance premiums and the life insurance trust.
Defendant filed a cross-motion seeking a reduction of child support "as contemplated by the terms of the" PSA. In support of his cross-motion, defendant stressed that he was willing to continue his voluntary payments for private school and camp. Apart from professing his intention to continue to pay the cost of private school and camp, defendant, like plaintiff, did not seek a determination of child support in accordance with the present needs of the parties' youngest child and the parties' present income and assets; he simply sought a continuation of the child support at the reduced amount set for one child in the PSA.
Defendant, who owns his own business, acknowledged some increase in his income since the time of the divorce. In 2005 he earned $1,673,000, and he estimated that his tax return for 2006 would reflect earnings of $1,550,000.*fn1
The trial court denied the relief plaintiff requested and granted defendant's request to reduce child support to $30,000. The court's findings and conclusions are set forth in the order.
The court concluded that the PSA, in part quoted above, provided for a reduction in child support -- from $50,000 to $30,000 -- when support for only one child was required. The court determined that defendant's continued payment for the parties' deceased child were more than adequate to reimburse plaintiff for payments she made toward health and life insurance in a total amount of $25,211.18.
Plaintiff raises two issues on appeal:
I. THE TRIAL JUDGE ERRED BY REDUCING DEFENDANT'S CHILD SUPPORT OBLIGATION TO $30,000 PER YEAR ON THE BASIS OF THE ELDER CHILD'S DEATH IN 1998.
II. THE TRIAL JUDGE ERRED BY RETROACTIVELY MODIFYING THE DEFENDANT'S CHILD SUPPORT OBLIGATION SO AS TO GIVE A CREDIT TO THE DEFENDANT FOR HEALTH AND LIFE INSURANCE COSTS PAYABLE BY THE DEFENDANT IN YEARS PAST.
The standards governing modification of child support are clear. Parental agreements on child support will be enforced if the terms "remain fair and equitable" and are consistent with the best interests of the child. Lepis, supra, 83 N.J. at 149, 157. Where the parents' agreement provides for circumstances alleged to be changed, it is ordinarily not equitable and fair to modify an arrangement that the parties have deemed appropriate. Id. at 153. Nonetheless, when changed circumstances warrant modification of any part of an agreement on support, including a provision addressing change in circumstances, courts may not distinguish between support fixed by a judicial decree and child support fixed by consensual agreement. Id. at 149-53, 153 n.6. The party seeking a modification of support has the burden of establishing change warranting modification. Id. at 149, 158. That burden can be met in several ways: by establishing "circumstances [that] render all or a portion of support received unnecessary," id. at 153; by demonstrating that increased needs and expenses for the child are not met by present support, see id. at 157; or by demonstrating that a substantial and non-temporary increase in the income or assets of one or both of the parents requires modification to permit the child to share in the good fortune of both parents, Isaacson v. Isaacson, 384 N.J. Super. 560, 579 (App. Div.), certif. denied, 174 N.J. 364 (2002); Zazzo v. Zazzo, 245 N.J. Super. 124, 130 (App. Div. 1990), certif. denied, 126 N.J. 321 (1991). If there is a prima facie showing of a change in circumstances warranting modification of support, then discovery and, if necessary, a hearing to resolve any material factual dispute must follow. Lepis, supra, 83 N.J. at 157-59.
Before applying these principles to the facts presented on any application for modification, it is important to identify the nature of the request in terms of the controlling legal principles. In this case, defendant sought a reduction in child support on the basis of the provision of the PSA that called for a reduction from $50,000 to $30,000 when the oldest child graduated from high school. Plaintiff sought to modify the PSA so as to continue child support at the rate set in the agreement for two children. Neither party focused on the child's best interest under current circumstances. The following changes in circumstances were apparent: the death of one of the parties' two children long before his anticipated graduation from high school; increased need for support based on the child's enrollment in private school and camp; and defendant's increased ability to pay child support, which was inferable from his payment of tuition and camp fees without dissipating funds held in trust for the child's education and without contribution from plaintiff.
In terms consistent with the guidance provided in Lepis and subsequent decisions recognizing a child's right to share in a parent's good fortune, the parties' respective applications presented the following questions. Defendant's request required the court to consider whether the $20,000 reduction provided in the PSA applied following the untimely death of the parties' child and, if so, whether enforcement would be fair, equitable and consistent with the best interest of the parties' second child under the present circumstances. Id. at 153 & n.6. In contrast, plaintiff's application to continue support at $50,000 required the court to consider whether any increase in defendant's income or increased expenses and needs of the child warranted a continuation of support at the level the parties had set for two children. Id. at 157; Zazzo, supra, 245 N.J. Super. at 130. In addition, the court had an obligation to the child beyond selecting between the two support amounts suggested by the parties; even when the parties agree on appropriate child support, the court must ensure that the child's best interests are protected. Ordukaya v. Brown, 357 N.J. Super. 231, 237-41 (App. Div. 2003) (discussing the court's obligation on motion to modify an agreement on child support); see R. 5:6A (requiring an explanation where child support guidelines apply and an agreement provides for child support in a different amount); Caplan v. Caplan, 182 N.J. 250, 272 (2005) (discussing determination of appropriate child support in cases where, as here, parental income exceeds the amount covered by the child support guidelines); Isaacson, supra, 348 N.J. Super. at 579-85 (same).
There is no question that the tragic loss of one of the parties' two children was sufficient to establish a prima facie case of a change in circumstances warranting modification of child support. The change in the number of children in need of support permits an inference that a portion of the total support adequate for two children is no longer necessary. See Lepis, supra, 83 N.J. at 153.
Although defendant established a prima facie case warranting a reduction of support, the evidence did not establish that a reduction in the amount of $20,000, without additional contributions for private school and camp, was appropriate. Several facts lead us to that conclusion.
The PSA set $20,000 as the appropriate reduction in support under a different circumstance, the first child's completion of high school. Nonetheless, it provides persuasive evidence of the parties' view of the amount of support appropriate for one child.
There was evidence of an increased need for additional support. That evidence, however, was limited to expenses related to private school and camp.
As noted above, the measure for appropriate child support is the best interest of the child and the parents' ability to meet the child's expenses. Caplan, supra, 182 N.J. at 268-70. Here, there was evidence that plaintiff and defendant agreed that private school and summer camp are in this child's best interest. By voluntarily electing to pay these costs from his income and assets, defendant demonstrated his ability to pay the expenses. This evidence, without more, was sufficient to establish a prima facie case that child support should be increase beyond $30,000 to permit the child to attend private school and camp. In setting child support at $30,000 without addressing payment of private school and camp, the trial court overlooked this evidence.
Plaintiff, however, did not establish a prima facie case of increased need for support beyond the cost of private school education and camp. Nor did she produce evidence adequate to indicate a significant increase in defendant's income warranting additional support, beyond $30,000 and the cost of private school and camp. Plaintiff provided no information that would permit any court to compare the child's expenses at the time of the divorce with current expenses. See R. 5:5-4(a). And, defendant's increase in income was not so substantial as to compel the conclusion that $30,000, plus the additional cost of a private school education and camp, was insufficient to permit the child to share in his father's good fortune. See Caplan, supra, 182 N.J. at 267-68; Isaacson, supra, 348 N.J. Super. at 580-85. Defendant's income was $1,500,000 in 1997 and $1,673,000 in 2005. The difference is not significant.
For the foregoing reasons, we conclude that it was error to fix support at $30,000 at this point in the proceeding without considering the cost of private school and camp. There was undisputed evidence that both were in the best interest of this child and that defendant had the ability to pay the expenses. The trial court should have required the parties to exchange discovery and subsequently set child support at an amount appropriate under these circumstances.
We reject plaintiff's claim that equity precludes a prospective reduction in child support because defendant voluntarily paid more child support than he was required to pay for a period of nine years. The trial court did not address this claim, but the materials submitted on the motion include nothing that would permit a court to conclude the equitable doctrine of estoppel or laches bar modification. There is no evidence that plaintiff took any action to her detriment or the detriment of the child in reliance upon defendant's continued payment of child support in the amount of $50,000 per year, and defendant did not seek reimbursement for overpayments, a result that likely would not be equitable.*fn2 See Knorr v. Smeal, 178 N.J. 169 (2003) (discussing the elements of equitable estoppel); Lavin v. Bd. of Educ. of City of Hackensack, 90 N.J. 145, 152-53 (1982) (discussing the appropriate application of the equitable doctrine of laches); L.V. v. R.S., 347 N.J. Super. 33, 39 (App. Div. 2002) (same).
We also reject plaintiff's claim that the trial court's decision to deny her request for reimbursement of health and life insurance costs amounted to a retroactive modification of child support prohibited by N.J.S.A. 2A:17-56.23a. The PSA did not require defendant to pay child support in the amount of $50,000 for one child; his obligation to pay support in that amount ended in January 1998, when he was no longer obligated to support two children. When the obligation to support has ended, termination of support as of that date is not prohibited. See Bowens v. Bowens, 286 N.J. Super. 70, 73 (App. Div. 1995) (noting that modification of child support to the date of emancipation is not a retroactive modification of child support prohibited by N.J.S.A. 2A:17-56.23a because the support obligation is terminated as of the date of emancipation); Mahoney v. Pennell, 285 N.J. Super. 638, 643 (App. Div. 1995).
In this case, the trial court denied reimbursement for health and life insurance that plaintiff voluntarily paid on the ground that defendant had voluntarily paid $20,000 per year for several years after that obligation ended. This was not a retroactive modification of child support due for this child. Rather, it was an equitable resolution of a dispute that had no negative impact on this child's support.
Affirmed in part; reversed in part and remanded for discovery and further proceedings.