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Mendelsohn v. Mendelsohn

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 10, 2008

KAREN MENDELSOHN, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
ELIEZER MENDELSOHN, DEFENDANT-RESPONDENT/CROSS-APPELLANT, AND HERBERT HEFLICH, MARILYN HEFLICH, MARC HEFLICH, LONG TERM CARE MANAGEMENT, INC. ASSISTED LIVING MANAGEMENT, INC., EAST BRUNSWICK ASSISTED LIVING, L.L.C., FANWOOD ASSISTED LIVING, L.L.C., (A/K/A THE CHELSEA AT FANWOOD), WARREN ASSISTED LIVING, L.L.C., AND FLORHAM PARK ASSISTED LIVING, L.L.C., DEFENDANTS.
TUSCHAK-JACOBSON, INC., A NEW JERSEY CORPORATION, EAGLE ROCK CONVALESCENT CENTER, INC., A NEW JERSEY CORPORATION, AND REGENT CARE CENTER, INC., A NEW JERSEY CORPORATION, PLAINTIFFS,
v.
LONG TERM CARE MANAGEMENT CO., LONG TERM CARE MANAGEMENT CO., INC., ELIEZER MENDELSOHN, AND HERBERT HEFLICH, DEFENDANTS/THIRD-PARTY PLAINTIFFS,
v.
FRANKLIN UNIVERSAL BUILDING CORP., MEDFORD CONVALESCENT AND NURSING CENTER, INC., BROWERTOWN ASSOCIATES, INC., AND JACOB PINELES, THIRD-PARTY DEFENDANTS.
LONG TERM CARE MANAGEMENT COMPANY, A NEW JERSEY PARTNERSHIP, ELIEZER MENDELSOHN, AND HERBERT HEFLICH, PLAINTIFFS,
v.
JACOB PINELES, RICHARD PINELES, ANN PINELES, KAREN MENDELSOHN, EAGLE ROCK CONVALESCENT CENTER, INC., T/A WEST CALDWELL CARE CENTER, TUSCHAK-JACOBSON, INC., T/A FRANKLIN CONVALESCENT CENTER, REGENT CARE CENTER, INC., BROWERTOWN ASSOCIATES, INC., T/A PROSPECT HEIGHTS CARE CENTER, ANJAC INVESTMENT CORP., AND LOWELL FEIN, DEFENDANTS.
REGENT CARE CENTER, INC., A NEW JERSEY CORPORATION, TUSCHAK-JACOBSON, INC., A NEW JERSEY CORPORATION, EAGLE ROCK CONVALESCENT CENTER, INC., A NEW JERSEY CORPORATION, AND MEDFORD CONVALESCENT AND NURSING CENTER, INC., A NEW JERSEY CORPORATION, PLAINTIFFS,
v.
FANWOOD ASSISTED LIVING, L.P., LONG TERM CARE MANAGEMENT CO., HERBERT HEFLICH, AND ELIEZER MENDELSOHN, DEFENDANTS.
REGENT CARE CENTER, INC., A NEW JERSEY CORPORATION, MEDFORD CONVALESCENT AND NURSING CENTER, INC., A NEW JERSEY CORPORATION, TUSCHAK-JACOBSON, INC., A NEW JERSEY CORPORATION, AND EAGLE ROCK CONVALESCENT CENTER, INC., A NEW JERSEY CORPORATION, PLAINTIFFS,
v.
NEW JERSEY POST ACUTE NETWORK, INC., A NEW JERSEY CORPORATION, DEFENDANT.
JACK KAPLOWITZ, STANLEY WEISS, RICHARD PINELES, GARY AND JANE LEVINE, MARGARET BAXTER AND ANN PINELES, DERIVATIVELY ON BEHALF OF HEFSON ENTERPRISES LIMITED PARTNERSHIP, MENHEF ENTERPRISES LIMITED PARTNERSHIP, AND/OR LIVINGSTON CARE CENTER LIMITED PARTNERSHIP, AS THEIR INTEREST MAY APPEAR, PLAINTIFFS,
v.
LONG TERM CARE MANAGEMENT CO., LONG TERM CARE MANAGEMENT CO., INC., ELIEZER MENDELSOHN, HERBERT HEFLICH, RAKRAM COMPANY, INC., HERBEL G.P. LIMITED PARTNERSHIP, I.L.G.P. LIMITED PARTNERSHIP, AND HEL G.P., INC. DEFENDANTS.

On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, FM-07-464-96.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 5, 2008

Before Judges Parrillo, S.L. Reisner and Baxter.

Plaintiff Karen Mendelsohn appeals, and defendant Eliezer Mendelsohn*fn1 cross-appeals, from a Dual Final Judgment of Divorce dated February 21, 2006, entered after a very lengthy trial.

We have reviewed the voluminous record including the transcripts, and with the exception of two issues, we affirm the decision of the trial court, substantially for the reasons set forth in the trial judge's cogent oral opinion set forth on the record on January 8, 2003, and his comprehensive and equally cogent sixty-one page written opinion dated December 16, 2005.

As to the two issues on which we part company with the trial court: we conclude that the trial judge, now retired, mistakenly exercised discretion in awarding plaintiff only 25% of the parties' active assets; we exercise our original jurisdiction to award her 30% of those assets. We also conclude that the court made a mathematical error in calculating plaintiff's share of the couple's marital bank accounts, other than the Bear Stearns account; again we exercise original jurisdiction to correct the error. We remand to the Family Part for the limited purpose of issuing an amended judgment consistent with this opinion.

I.

The primary disputes in this case revolve around a series of nursing homes which Elie was involved in managing and in which the parties owned percentage shares. The divorce complaint was filed in July 1995. However, because the nursing homes were also the subject of an extensive and bitterly-fought commercial litigation involving Karen and Elie, Karen's father Jacob Pineles, and numerous other parties, the divorce trial was delayed for several years until the commercial case was settled.*fn2

This appeal cannot be understood without a fairly detailed discussion of the family's business interests, in which Karen's father played a significant role. However, before discussing the nursing homes, we briefly outline the parties' lifestyle over the course of their twenty-year marriage.

A. Background

Plaintiff, born in 1951, and defendant, born in 1946, were married in 1976, and had two daughters both of whom were emancipated at the time of trial.*fn3 Karen has a Masters degree in mathematics and worked as a budget coordinator for about three years; however, with Elie's agreement, she left the workforce before the birth of the parties' first child, and, except for occasionally teaching aerobics classes, she did not work thereafter. Elie has a Masters degree in hotel administration from Cornell.

B. Lifestyle

During the first few years of their marriage the parties lived in a studio apartment in New York City, and then moved to one-bedroom apartments in New Jersey. Plaintiff's parents paid for the parties' furniture. In 1981, plaintiff's parents moved out of their three-bedroom home in Clifton, and gave plaintiff and defendant the house and all of the furnishings. The parties completely renovated the house in 1987, and later sold it for approximately $340,000.

Plaintiff was primarily responsible for managing the household and caring for the children. She transported the children to their numerous activities, organized social activities, arranged for tutoring and summer camps, assisted with homework and was active in the girls' private schools, volunteering as a class mother and becoming involved with the parents' association.

Plaintiff cooked, cleaned, maintained the house, and supervised the various household help employed by the parties, including au pairs, nannies, and live-in and daily housekeepers. The parties also hired individuals to do yard work, snow removal, painting, and other home maintenance. Plaintiff handled many of the social arrangements for the family, planned vacations, and hosted parties for family and friends. She did not, however, work in the nursing homes, nor did she make any direct contributions or show any interest in the businesses.

In September 1992, the parties purchased a 10,000 square foot home in North Caldwell. They purchased new furniture, drove expensive cars, vacationed in Israel, Hawaii, Aruba, Puerto Rico, California, and New Mexico, frequently ate at expensive restaurants, spent thousands of dollars a month on clothes, and joined an expensive country club. They also purchased a vacation home in Florida, which they sold prior to trial, and spent about $90,000 for their older daughter's bat mitzvah.

Defendant moved out of the marital home in April 1995, and plaintiff filed for divorce in July 1995. From 1995 to 2002, defendant paid plaintiff more than $1.2 million in support. Plaintiff also received $2500 per month in distributions from the parties' West Caldwell nursing home.

C. Nursing Homes and Assisted Living Facilities

In November 1976, five months after the parties were married, defendant began working for plaintiff's father, Jacob Pineles, an established builder and developer of nursing homes. Defendant worked as an assistant administrator for Franklin Convalescent Center (Franklin), also referred to as Tuschak-Jacobson, Inc., a facility in which Pineles held a 66.67% interest. It was undisputed that Pineles was instrumental in bringing defendant into the nursing home business.

In 1977, defendant obtained his nursing home administrator's license, and took over the operation of the Franklin facility, where he substantially increased profits. As a result, Pineles decided to expand. Defendant assisted Pineles in obtaining the certificate of need (CON) from the Department of Health (DOH) for the expansion, worked on the design of the building and performed the necessary administrative tasks, including hiring new personnel. Pineles, who had experience as a developer, and defendant, who had management experience, then began looking for more sites. Pineles and defendant had a close relationship at that time and even shared an office.

In the late 1980's, Pineles, assisted by defendant, developed three other senior care centers: West Caldwell Care Center, Regent Care Center, Inc. (Regent), and Browertown Associates (Browertown). Defendant assisted Pineles by obtaining zoning approvals and CONs, and worked on the design, decor, furnishings, and equipment for the facilities. Once the centers opened, defendant was responsible for operation and administration, including implementing procedures, hiring personnel, marketing, and negotiating contracts. Pineles, who owned 50% of West Caldwell, gave Elie and Karen a 16.23% interest in the business. According to defendant, the ownership interest was compensation for his "sweat equity."

Shortly thereafter, Pineles, who owned 25% of Regent, gave the parties a 15% ownership interest in that facility. However, according to defendant, Richard Pineles, plaintiff's brother, complained that his father was favoring defendant, and as a result Pineles gave defendant's interest in Regent to Richard. At that point, defendant realized that in spite of his close relationship with Pineles, he had to develop his own business.

At approximately the same time, defendant and his friend Herbert Heflich, who also owned and operated nursing homes, discussed going into business together. Defendant and Heflich formed Long Term Care Management, Co., Inc. (LTCM), a limited liability company, owned equally by defendant through Elcare, Inc. and by Heflich through Hefcare, to manage the nursing homes. In 1988, the two men, assisted by Pineles, acquired Bey Lea, a nursing home under construction in Toms River.*fn4 Because defendant lacked the cash to fund the acquisition, Pineles paid plaintiff and defendant's capital contribution, and then gifted the ownership interest to them.

Defendant and Heflich structured ownership of Bey Lea through general and limited partnership agreements, because they wanted to maintain control over the business while at the same time limiting their personal liability exposure. To that end, the limited partners held ownership interests in the facility and received profit distributions in direct proportion to their interests. The limited partners had no management authority over the day-to-day operation of the business, and in exchange, their liability exposure was limited to the amount of their investment. As limited partners, plaintiff and defendant, jointly, and Heflich, individually, each held an 18.72% ownership interest in Bey Lea. Ten other limited partners, but not Pineles, held varying smaller percentages of interest.

Management control of Bey Lea was held by the general partner, RAKRAM GP, Inc., a corporation owned equally by defendant and Heflich. RAKRAM was also a limited partner, and it held a 1.03% ownership interest. As general partners, defendant and Heflich exercised the powers authorized under the partnership agreement, including, among other responsibilities, hiring personnel, developing and implementing budgets, maintaining bank accounts, conducting marketing, entering into contracts, borrowing funds, hiring suppliers, and hiring professionals including attorneys and accountants. They also were authorized to enter into an agreement with a management company, subject to approval by a majority of the limited partners. As a result, defendant and Heflich, through their business entities, entered into a three-year management contract with LTCM. Heflich testified that he and defendant decided to manage the nursing homes through LTCM because it afforded them tax benefits and additional "corporate shielding." The day-today management services rendered by defendant and Heflich through LTCM were somewhat distinct from the services they rendered as general partners.

In 1989, defendant and Heflich acquired Laurelton, a nursing home under construction in Bricktown. Although Pineles provided defendant and Heflich with advice on the contract negotiations, Pineles was not directly involved in the negotiation of the deal, nor did he provide financing. Ownership was structured similarly to Bey Lea, except the parties added a third tier. The first layer general partner in Laurelton was HERBEL, a partnership controlled by defendant (40%), Heflich (40%) and BRICK GP, Inc. (BRICK) (20%). BRICK, the general partner of HERBEL, was owned equally by defendant and Heflich. As general partners, defendant and Heflich retained management control over the day-to-day operation of the facility, and through their business entities, they entered into a three-year management agreement with LTCM. HERBEL was also a limited partner, and thus, defendant and Heflich jointly held a 27.5% ownership interest in Laurelton.

In 1992, defendant and Heflich acquired Inglemoor, an existing nursing home in Livingston. The land and building were leased, not owned by the business. Ownership was structured in the same manner as Laurelton.

Like Bey Lea and Laurelton, defendant and Heflich retained management control over the day-to-day operation of Inglemoor, and through their business entities, they entered into a five-year management agreement with LTCM. Several witnesses confirmed that defendant and Heflich had an active role in management of the three facilities; these included David Kostinas, a consultant, Barbara Fyfe, assistant administrator of Laurelton, and Lowell Fein, administrator of Regent.

In 1994, LTCM entered into three five-year management contracts with the senior care centers controlled by Pineles: West Caldwell, Regent, and Franklin. Plaintiff and defendant held a 16.33% interest in West Caldwell, but had no ownership interest in Franklin or Regent. The separate management agreements for the six facilities (West Caldwell, Regent, Franklin, Bey Lea, Laurelton, and Inglemoor) provided that in compensation for its services LTCM would receive a management fee equal to a percentage of the gross revenues of the facility, plus expenses. LTCM received fees equal to 3% of gross yearly revenues from West Caldwell, Regent, and Franklin.

In late 1994, defendant and Heflich, through LTCM, investigated developing senior assisted living facilities. Pineles did not invest in the new venture because he believed that the assisted living business was too "risky," since assisted living services were not guaranteed by government insurance reimbursement. After the divorce complaint was filed, defendant and Heflich eventually developed a series of assisted living facilities. However, because the trial judge ultimately determined that the facilities were not assets subject to equitable distribution, a decision plaintiff has not appealed, no further discussion of these facilities is required.

Meanwhile, on September 3, 1996, Pineles, whose relationship with defendant had cooled when plaintiff filed for divorce, cancelled the West Caldwell, Regent, and Franklin, contracts with LTCM, although plaintiff and defendant continued to receive profit distributions from West Caldwell. In July 1997, defendant and Heflich sold Bey Lea and Laurelton for approximately $36 million. They agreed to sell, despite Pineles's and plaintiff's opposition, because they had received a "very good price" and because the deal was simply too good to refuse, especially in view of their belief that the nursing home business was declining in profitability. As expected, the new owners managed the facility themselves and did not enter into management agreements with LTCM.

D. Valuation

Before discussing valuation in detail, we pause to summarize the most pertinent issues. At the trial, as on appeal, the parties main disputes centered on three issues: the value of the nursing homes and other assets; whether the assets were active or passive, that is, whether Elie actively managed them and hence was entitled to a larger share of the profits and was chargeable with a larger share of the losses; and Karen's appropriate share of any active assets.

1. Accounts

a. Bear Stearns

On July 21, 1995, the date the complaint was filed, the parties had $1,214,098 in a Bear Stearns brokerage account, an account opened on December 30, 1994, in the name of defendant's father, Valerian Mendelsohn. Plaintiff testified that she had not known about the account, did not authorize defendant to place funds in his father's name, and had not participated in any investment decisions. David Smith, plaintiff's forensic accounting expert, traced the source of the funds and found that the money had originated from funds contained in a Valley National Bank money market account held in the parties' names. Marital funds had been invested in the Valley National account for about five years prior to the transfer to Bear Stearns.

Defendant admitted that he transferred the funds from Valley National to a Bear Stearns account managed by Avi Rojany, his cousin, who was a successful broker in Beverly Hills. Defendant said he did so because he was not satisfied with the return on the money market account, and not to hide the funds from plaintiff; although, there was some indication that defendant had intended that at least some of the funds be transferred to his father in repayment of educational expenses. It was undisputed that during the marriage the parties generally invested in money market and checking accounts, not brokerage accounts.

In any event, once the money was transferred, more than $20 million in trades were made from the Bear Stearns account over a five-year period. A few months before plaintiff filed the divorce complaint, defendant, for the first time, began trading on margin, ultimately incurring over $337,636 in interest on the margin borrowing, with the margin ratio on the account sometimes exceeding 200%. At times defendant was forced to liquidate stocks to meet margin calls.

Although Smith admitted he had no direct knowledge that defendant had directed the trades, based on Smith's experience with similar accounts, he surmised that defendant had done so, given the large number of trades. And, Smith noted that defendant had never produced written authorization granting Rojany permission to trade on defendant's behalf without direction; written authorization was required for such trades. Still, defendant denied directing stock trades, denied discussing investment strategies with Rojany, and said he was unfamiliar with the market. And, although defendant could not recall if he had given Bear Stearns written authorization to trade on margin, he claimed he had given Rojany verbal authorization to do so.

Although the funds in the Bear Stearns account had at one point increased to approximately $2 million, at the time of trial only $273,098 remained in the account, primarily as a result of margin trading, but also because the parties had withdrawn $475,000 pursuant to various pendente lite court orders. Defendant received monthly statements detailing the decline in value of the account, but he did not stop the trading or transfer the funds.

Plaintiff argued that given defendant's direct involvement in the risky margin trading, the Bear Stearns account should be considered an active asset for designating the date of valuation. Plaintiff claimed she was entitled to $369,549 ($1,214,098 (funds in account at time of filing) - $475,000 (court-ordered withdrawals) = $739,098 x 50% (marital share)). Conversely, defendant argued that the account was a passive asset and should be valued at the time of trial; and alternatively if it were an active asset, plaintiff was entitled to only $184,775, or 25% of $739,098.

b. Other Bank Accounts

As of the date the divorce complaint was filed, the balance in the parties' other bank accounts, which were passive assets, totaled $992,855. Smith, plaintiff's expert, and Alan Dunninger, defendant's expert, agreed that appreciation, dividends, and interest on the accounts from July 1995 to August 31, 2002, totaled $136,462. Court-ordered withdrawals totaled $828,898, of which $226,523 was for the children's school expenses, $70,000 was for defendant's support arrears, and $532,375 had been distributed equally to the parties, leaving a balance of $163,957.

Plaintiff argued that the school expenses and support arrears should be charged to defendant's share of the distribution, and claimed she was entitled to $298,471 ($163,957 (balance) $136,462 (appreciation and interest) $226,523 (school expenses) $70,000 (support) = $596,942 x 50%).

Defendant argued that the entire amount of court-ordered withdrawals, including the school expenses and arrears, should be deducted from the agreed-upon balance, and thus he maintained that plaintiff was entitled to $153,126 ($992,855 - $828,898 (withdrawals) $136,462 (interest) $5832 (additional interest) = $306,251 x 50%).

2. The Nursing Homes

a. West Caldwell

The parties stipulated that their interest in West Caldwell was a passive asset. The 180 bed long-term care facility, located on Fairfield Avenue, was situated on a 5.88-acre parcel of land. In 1997, the court appointed Larry Biel, a Certified Public Accountant, to prepare a balance sheet of assets and liabilities of the marital estate. Biel retained Capital, a firm specializing in senior living appraisals, to appraise West Caldwell. Mark Roth of Capital valued the operating fixed assets, as of July 1, 1995, at $19.3 million, and as of June 1, 1999, at $16.4 million. The 2003 tax-assessed value of the land and improvements was $7.9 million. By order entered on December 9, 2003, the court granted defendant's request to submit updated valuation reports.

Plaintiff retained Louis S. Izenberg, an appraiser, who valued West Caldwell as of May 4, 2004, at $7.5 million, an approximately 62% decrease in value from 1995. The allocation of that valuation was as follows:

Land Value$2,700,000 Improvement Value$4,740,000 Real Property$7,440,000 Personal Property$405,000 Intangible and other assets ($345,000)$7,500,000

In determining value, Izenberg applied three separate approaches: cost ($7,845,000); sales comparison ($7.2 million); and capitalization of income ($7,370,000). He concluded that the capitalization of income approach, a method that placed a present value on the anticipated future income stream, was "the most applicable." Under that approach, he considered vacancy and expense data, gross and net income estimates, and applied a capitalization rate. With regard to vacancy, he found that the facility had occupancy levels of 85% (2004), 83% (2003), 90% (2002), and 88% (2001), which were consistent with industry rates. He noted that Michael Duffy, a West Caldwell Administrator, confirmed that "occupancy levels have been eroding in recent years as a result [of] added competition and the loss of 'feeder institutions' such as Mountainside Hospital." And, he found that approximately 80% of the occupied beds were Medicaid and Medicare patients, for which the facility received a flat rate depending on the nature of the services provided.*fn5 Medicare rates had declined since 2001, and Medicaid did not, on average, cover the actual cost of care.

Next, Izenberg determined that annual gross patient service revenue for the facility was "stable" and totaled: $10,828,528 (2001); $12,077,280 (2002); and $11,668,956 (2003). Operating expenses totaled: $10,277,443 (2001); $10,797,794 (2002); and $11,201,726 (2003). And, net operating income totaled: $601,085 (2001); $1,279,486 (2002); and $467,230 (2003). In estimating value under the income capitalization approach, he considered the historical totals set forth above and calculated annual projected patient services gross income of $11,825,000, projected annual operating expenses of $11,010,700, yielding $715,467 in projected net annual operating income ($11,825,000 (income) - $11,010,700 (expenses) - $98,833 (reserves)). He then applied an equity capitalization rate of 9.71%. The inverse of the capitalization rate is the multiple applied to a projected future income stream, thus the 9.71% capitalization rate translated to a multiple of about ten times annual income, or $7.3 million. Izenberg reconciled that value, after considering the results from the other approaches, and found a value of $7.5 million.

Based on that estimate, plaintiff argued that the value of the parties' interest in West Caldwell was $885,301.22 ($7.5 million (Izenberg estimate) - $2,078,682 (long-term debt) = $5,421,318 x 16.33% (percent of ownership interest)). She sought $442,650.61, or 50%.

Defendant, who had retained Capital to conduct other evaluations in this case, including appraisals of Inglemoor, Warren, East Brunswick, and Fanwood, chose to retain Blau Appraisal Company to value West Caldwell. Appraiser Charles E. Blau had prepared valuations of nursing homes for the DOH, but admitted that in preparing those appraisals he had utilized only a cost approach analysis, as required by DOH regulation, which involves deriving a value for the land and then adding the replacement cost of the improvements. He initially valued West Caldwell at $15 million as of June 10, 2004, and amended that value to $14.5 million; a 24.9% decrease in value from 1995. Blau, like Izenberg, calculated value under three separate approaches, but derived significantly different estimates of value: cost ($19,255,300); sales comparison ($14.4 million); and income capitalization ($15 million). Blau, like Izenberg, considered the income capitalization approach as the primary indicator of value, explaining that "buyers of investment properties . . . are interested in the income that the property can generate and it is the method that most buyers or sellers for properties such as this would rely on."

Under the capitalization of income approach, Blau found that the average occupancy rate for the facility was 90%. In support of that finding, he cited to the average occupancy rates for the sales comparables, and the occupancy rates from twelve other facilities in New Jersey. He did not, however, consider that the actual occupancy rate for West Caldwell was lower in 2003 and 2004, nor did he consider that many nursing homes had lower occupancy rates.

In deriving projected income, Blau found that although Medicare rates had decreased in 2002 by an average of $35.37 per patient day, the rates had increased in 2003 by about 7.6%. He determined that West Caldwell could generate $13,074,826 in gross income, or $14,527,584 (potential gross income assuming 100% occupancy) - 10% (loss generated from 90% occupancy rate). That projected income was higher than the historic annual gross revenue. Next, he estimated annual projected operating expenses of $11,760,143, yielding $1,314,683 in annual projected net income ($13,074,826 (income) - $11,760,143 (expenses)). He then applied an equity capitalization rate of 9.87%, similar to Izenberg, resulting in a value of $13.32 million, reconciled and amended to $14.5 million. Based on that estimate, defendant argued that the value of the parties' interest in West Caldwell was $2,367,850 ($14.5 million x 16.33% (ownership)), of which he sought 50%, or $1,183,925.

However, during depositions, Blau admitted that he was not familiar with the profitability of nursing homes in New Jersey, testifying that:

Q: Has the profitability of nursing homes in northern New Jersey been detrimentally affected since August of 2000 by competition from assisted living facilities in your opinion?

A: I have not done a study on the effect of the assisted living boom on nursing homes. The occupancy rates do not seem to have changed, but the patient mix might have, which could affect the income stream, but I've not done a study.

Q: Other than a study, do you have some general understanding based on your experience as an appraiser as to whether the assisted living has detrimentally impacted the profitability of nursing homes in northern New Jersey since August 2000?

A: No.

Q: Do you know whether the profitability of nursing homes has declined for whatever reason since August of 2000 in northern New Jersey?

A: No.

Q: And you wouldn't know from the appraisals that you have done for the state because you utilize solely the cost approach in performing appraisals for the state. Is that correct?

A: That's correct.

Blau also admitted that he did not know how many assisted living facilities had been opened in northern New Jersey since 2000. However, Blau explained that he did not need to analyze the future profitability of the industry in assessing value because his income approach was "based on current as well as projected income and expenses."

In testimony pertaining to another nursing home, Inglemoor, Benjamin Miller, a consultant who owned and managed several nursing homes, testified on defendant's behalf that the profitability of the nursing home business in New Jersey had declined since 1999 due to rising wages and insurance premiums, reductions in Medicare and Medicaid reimbursements, and competition for paying patients from assisted living facilities. He explained that a nursing home receives less profit from Medicare patients because of decreasing reimbursements and the fact that these individuals generally require more complex medical care. And Medicaid, as a general rule, pays less per patient than Medicare, and funds more nursing home patients.

The most profitable patients for a nursing home are the private pay patients, because generally these individuals require less complex medical care and pay a full rate. Thus, he concluded that many nursing homes are now operating at little or no profit because many of the private pay populations are opting for the alternatives, especially assisted living facilities, which, in less than ten years, have gone from zero to approximately 15,000 beds. These events and continuing reduction in Medicare reimbursements leave little optimism that the nursing home industry generally will improve.

Relying in part on Miller's testimony and partly on weaknesses in Blau's knowledge of the nursing home industry, the trial judge rejected Blau's opinion and credited Izenberg's testimony.

b. Inglemoor

Inglemoor was a 108 bed licensed skilled care nursing facility located in Livingston, close to the West Caldwell facility. Only 32% of Inglemoor's residents were private pay patients. The facility was owned by Livingston Nursing Home Partnership and was leased to LTCM in 1993 for ten years, with three five-year renewal options. At the time of trial, there were eighteen years remaining on the lease.

Capital valued the leasehold estate, as of July 1, 1995, at $9.3 million, and as of April 1, 1999, at $8.2 million. On December 9, 2003, the court granted defendant's request to submit an updated valuation.

At trial, plaintiff relied on Capital's valuation of $9.3 million. Plaintiff calculated the parties' interest in the leasehold at $2,109,125 ($9.3 million - $325,000 (long-term debt) x 23.5% (ownership)), and sought 33.3% of that value, or $702,339.

Defendant retained Capital to update its valuation of Inglemoor. Capital valued the leasehold estate at $2 million as of January 1, 2004, a 78.5% reduction in value since 1995. Under the income capitalization approach, Capital determined an "optimistic" occupancy rate of 90%, despite a historic occupancy rate that ranged from 89% in 2001, to 83% in 2003. Capital used the discounted cash flow (DCF) model, and projected income ranging from $10,930,979 in 2004 to $12,787,699 in 2008, and projected expenses ranging from $10,610,939 in 2004 to $12,392,310 in 2008, yielding net operating income ranging from $320,040 in 2004 to $395,390 in 2008. Capital applied a capitalization rate of 15%, resulting in a value of $1,903,946, reconciled to $2 million. At trial, defendant admitted that Capital failed to account for a 2003 increase in Medicare rates, and as a result the value of Inglemoor should be $2,662,668.

Defendant claimed his ownership interest in Inglemoor was 4.226%, based on his equity or capital position, not 23.5%, his percentage of profits or distributions. The court appointed an independent expert to render an opinion as to whether defendant's 23.5% profit share interest, or his 4.226% equity ownership interest, should be used to determine the value of the parties' interest in Inglemoor. The expert found that defendant's 23.5% interest should be used. The judge accepted that opinion and neither party appealed from that determination.

c. Proceeds from sale of Bey Lea and Laurelton

In June 1997, defendant and Heflich sold the bulk of the assets, but not the receivables, of Bey Lea and Laurelton for about $36 million. The parties received $3,661,214 in gross proceeds, and after paying $897,551 in taxes, net proceeds of $2,763,663 were distributed: $732,135 to plaintiff and $2,031,528 to defendant.

Plaintiff conceded that if Bey Lea and Laurelton were still owned and operated by defendant at the time of trial, and constituted active assets, she would have been entitled to less than fifty percent of the value. However, she argued that because the assets were sold, and thus the tax consequences of the sale were established, she was entitled to 50% of the net proceeds, or $1,381,831.50 ($2,763,663 x 50%), and should receive an additional distribution of $649,696.50 ($1,381,831.50 - $732,135 (funds received)). In the alternative, if the proceeds were considered active assets, plaintiff argued she should receive 33.3%, or $1,219,184 ($3,661,214 x 33.3%), and should receive an additional distribution of $487,049 ($1,219,184 - $732,135).

Defendant argued that plaintiff should receive 25% of the net proceeds from the sale of the active assets, or $690,916 ($2,763,663 x 25%), and thus she was overpaid $41,219 ($732,135 - $690,916).

d. Residual Funds and Undistributed Capital

After the sale, certain residual funds remained in the Bey Lea and Laurelton accounts. Smith testified that the parties' share of the residual funds as of September 2002 was $91,528 ($69,957 (Bey Lea) 21,571 (Laurelton)). However, Smith conceded that adjustments after September 2002 might result in a lower value.

In any event, it was undisputed that defendant received $63,668 ($62,322 (Bey Lea) $1346 (Laurelton)) in residual funds, and that Heflich, who held an equal ownership interest in the facilities, received $90,581. Defendant could not recall why he received a lesser amount, but thought there may have been an adjustment for a change in the capital account. Plaintiff used the $90,581 value for equitable distribution purposes and sought 50% of that amount, or $45,290. Defendant argued plaintiff should receive 25% of $63,668, or $15,917. The judge accepted the $90,581 value, and awarded plaintiff 25% of that amount based on his findings that Bey Lea and Laurelton were active assets.

Next, it was undisputed that on July 21, 1995, the "pass-through entities," namely RAKRAM, HERBEL, BRICK, I.L.G.P., and HEL, through which the parties held their ownership interest in Bey Lea, Laurelton, and Inglemoor, had capital accounts with undistributed balances totaling $325,371, and as of the date of trial the balances in the accounts totaled $180,297. Plaintiff claimed $162,685.50, or 50% of the value of the accounts at the time of the filing of the divorce complaint. Defendant argued that she was entitled to $45,074.25, or 25% of the value of the accounts at the time of trial. The judge awarded plaintiff 25% of these funds.

3. Defendant's Business Interests

a. LTCM

At the time the divorce complaint was filed, LTCM, formed in 1988 as a corporation and then changed to a partnership, was owned and operated equally by defendant through Elcare, and by Heflich through Hefcare. In July 1995, LTCM provided management services to six facilities: West Caldwell, Regent, Franklin (Pineles facilities), Bey Lea, Laurelton, and Inglemoor (partnership facilities). LTCM also had an agreement to provide services to another business, New Jersey Post-Acute Network. LTCM had no assets, other than the management contracts, and each of the contracts contained provisions for termination and assignment. The experts agreed that as of July 21, 1995, defendant's one-half share of the profits of LTCM totaled $721,000, and management fees generated by the partnership facilities totaled $683,000. The parties agreed that LTCM was an active asset.

On September 3, 1996, Pineles cancelled the West Caldwell, Regent, and Franklin contracts. In July 1997, defendant and Heflich sold Bey Lea and Laurelton. Thus, as of 1997, LTCM had a management contract with only one facility, Inglemoor.

Smith valued defendant's ownership interest in LTCM as of July 1, 1995, at $1.65 million, which he conceded primarily represented goodwill. He used the capitalization of excess earnings approach in deriving value, that is a consideration of the stream of economic benefits accruing to the owner to determine what rate of return a buyer would require after analyzing the risks associated with the investment. In deriving value, Smith considered the income from all six facilities, applied a capitalization rate of 23%, and applied a 3% specific company risk rate. Plaintiff sought $549,450, or 33.3% of $1,650,000.

Dunninger valued LTCM as of July 21, 1995, with one contract, Inglemoor, at $167,000. He eliminated revenues from the three corporate facilities, because those contracts were cancelled after plaintiff filed for divorce. He used a 39.3% capitalization rate, and a 20% specific risk rate.

The judge rejected both parties' proposed valuations and selected a valuation based on LTCM's contracts with the three partnership facilities.

E. The Judge's Decision

To the extent not previously addressed, we outline the judge's decision. The judge first decided the limited issue of whether certain matrimonial assets should be classified as active or passive for valuation purposes. On January 8, 2003, the judge placed his findings of fact and conclusions of law on the record. He concluded that funds contained in the Bear Stearns account were an active asset, because Elie actively traded the account, and therefore Elie was chargeable with the losses in the account. The judge also concluded that the parties' interests in three nursing homes, Bey Lea Village (Bey Lea), Laurelton Village (Laurelton), and Inglemoor Care Center (Inglemoor), were active assets, because Elie and a partner managed the nursing homes. The active assets were to be valued as of the date the divorce complaint was filed, and the gains or losses occurring thereafter were attributable to Elie's share of equitable distribution.

After another forty days of trial, the judge issued a written decision dated December 16, 2005, in which he granted the divorce, awarded plaintiff permanent alimony of $13,500 per month,*fn6 $275,000 in retroactive support and support arrears, $225,000 in attorneys' fees, and $225,000 in expert fees, and denied defendant's application for reimbursement of one-half the expenditures for the older daughter's law school expenses. The judge also determined that Karen was entitled to 50% of the couple's passive assets and 25% of the active assets.

The court valued and distributed the marital assets, as set forth in the following chart:

AssetAward to plaintiffAward to defendant Bear Stearns account (active)$184,769.50 (25%)$554,308.50 (75%) Other bank accounts (passive)$150,209.50 (50%)$150,209.50 (50%) Proceeds from sale of Bey Lea and Laurelton (active)$590,915.75 (25%) ($41,219.25 credit owed defendant based on $732,135 pendente lite distribution)$2,072,747.20 (75%) Residual funds from sale of Bey Lea and Laurelton (active)$22,645.25 (25%)$67,935.75 (75%) Undistributed capital funds (active)$45,074 (25%)$135,222.50 (75%) West Caldwell Care Center (passive)Awarded to plaintiff$442,650.60 (50%) credit to defendant Inglemoore (active$213,086.25 (25%) credit to plaintiffAwarded to defendant Assisted Living venturePost-complaint immune asset  LTCM (active)$170,750 (25%)$512,250 (75%) Proceeds from sale of marital home (passive)$785,000 (50%) ($549,184 remaining in escrow account)$785,000 (50%) Country Club Bond$1250 creditAwarded bond Misc. items (passive)$25,957 (50%)$25,957 (50%) Funds (passive)$5,563.50$5,563.50 Pension (passive)$211,149 (50%)$211,149 (50%) Total$2,506,369.60 (including dispersed funds) and ownership interest in West Caldwell$4,962,993.50 (including disbursed funds) and ownership interest in Inglemoor

II.

In challenging the judge's decisions, the parties have raised a plethora of issues. Plaintiff raises the following arguments:

POINT I

THE TRIAL COURT ERRED IN ITS RULING THAT THE LIMITED PARTNERSHIP HOMES ARE ACTIVE ASSETS BECAUSE THE LIMITED PARTNERSHIP HOMES WERE PASSIVE INVESTMENTS AND WERE INDEPENDENT OF MR. MENDELSOHN'S ACTIVE MANAGEMENT OF THESE HOMES.

POINT II

EVEN IF THIS COURT DOES NOT REVERSE THE TRIAL COURT'S RULING THAT THE LIMITED PARTNERSHIP HOMES WERE ACTIVE, THIS COURT SHOULD FIND THAT THE TRIAL COURT ABUSED ITS DISCRETION IN AWARDING KAREN MENDELSOHN ONLY 25% OF THE VALUE OF THE LIMITED PARTNERSHIP HOME.

POINT III

AT A MINIMUM, GOLDMAN DOES NOT APPLY TO CONVERT THE VALUATION DATE OF INGLEMOOR TO THE DATE OF TRIAL RATHER THAN THE FILING DATE.

POINT IV

THE TRIAL COURT ERRED IN CONCLUDING THAT KAREN MENDELSON WAS ENTITLED TO ONLY 25% OF THE VALUE OF THE BEAR STEARNS ACCOUNT BECAUSE ITS DECISION IS CONTRARY TO LAW AND ITS OWN RULING THAT ELIEZER MENDELSOHN SHOULD BEAR THE ENTIRE LOSS OF THE BEAR STEARNS ACCOUNT BECAUSE OF HIS RISKY MARGIN TRADING.

POINT V

THE TRIAL COURT ERRED IN ITS CALCULATION OF THE AMOUNT OF FUNDS IN THE MARITAL ACCOUNT BECAUSE IT INCORRECTLY REDUCED THAT AMOUNT BY THE AMOUNT WITHDRAWN BY MR. MENDELSOHN TO PAY PENDENTE LITE SUPPORT OBLIGATIONS.

POINT VI

THE TRIAL COURT'S LOW AWARD OF PROFESSIONAL FEES AND COSTS IS BASED ON FINDINGS THAT ARE NOT SUPPORTED BY THE RECORD AND INDICATE BIAS BY THE TRIAL COURT.

POINT VII

BECAUSE NO FURTHER FACT FINDING IS REQUIRED -- AND TO EFFICIENTLY END THIS 11 YEAR LITIGATION -- THE APPELLATE COURT SHOULD EXERCISE ITS ORIGINAL JURISDICTION AND AMEND THE TRIAL COURT'S JUDGMENT WITHOUT REMAND.

Defendant raises the following contentions*fn7

POINT III

THE TRIAL JUDGE FAILED TO MEANINGFULLY ANALYZE THE EVIDENCE AS TO THE VALUES OF WCCC AND INGLEMOOR.

POINT IV

THE DESIGNATION OF THE BEAR STEARNS ACCOUNT AS ACTIVE IS A MISAPPLICATION OF THE SMITH AND GOLDMAN CASES AND CONTRARY TO THE CREDIBLE EVIDENCE THAT THE ACCOUNT WAS TRADED BY THE BROKER.

POINT VI

THE JUDGE MADE A MISTAKE OF LAW IN VALUING THREE MANAGEMENT CONTRACTS, IGNORING TWO CONTRACTS TERMINATED BY A COURT APPROVED SALE.

POINT VII

THE JUDGE DECIDED TO MODIFY PENDENTE LITE SUPPORT TO 9/3/96 BUT FAILED TO CALCULATE A CREDIT DUE FROM 9/3/96 TO 9/12/00.

POINT VIII

THE EMANCIPATION OF DANIELLE SUA SPONTE IS A MISAPPLICATION OF THE LAW AND THE FINDING THAT THERE IS NO AGREEMENT BETWEEN THE PARTIES RELATING TO DANIELLE'S SUPPORT AND LAW SCHOOL EDUCATION COSTS IS AGAINST THE WEIGHT OF THE CREDIBLE EVIDENCE.

POINT IX

IN AWARDING FEES OF $450,000, THE COURT FAILED TO DETERMINE THE REASONABLENESS OF THE FEES AND ABUSED ITS DISCRETION.

Having reviewed the record, we conclude that most of these arguments are entirely without merit, and were correctly addressed in the trial judge's two comprehensive opinions. To the extent not addressed here in detail, we affirm substantially for the reasons stated in the trial judge's opinions.

III.

In reviewing the trial court's factual findings, we do not write on a clean slate. Rather, we defer to the court's findings so long as they are supported by substantial credible evidence. Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). We owe particular deference to the judge's credibility findings, Cesare v. Cesare, 154 N.J. 394, 412 (1998), and the judge's feel for the evidence and testimony, which the judge has heard first-hand. See State v. Locurto, 157 N.J. 463, 470-74 (1999).

Moreover, we defer to the trial judge's determinations on equitable distribution. Equitable distribution involves identifying the specific property of each spouse eligible for distribution, valuing that property as of a particular date, and determining how such allocation can most equitably be made. Rothman v. Rothman, 65 N.J. 219, 232 (1974). Factors to be considered in an award of equitable distribution are set forth at N.J.S.A. 2A:34-23.1. "The goal of equitable distribution . . . is to effect a fair and just division of marital assets." Steneken v. Steneken, 367 N.J. Super. 427, 434 (App. Div. 2004), aff'd as modified, 183 N.J. 290, 299 (2005).

The trial court has discretion in allocating marital assets to the parties in equitable distribution. Borodinsky v. Borodinsky, 162 N.J. Super. 437, 443-44 (App. Div. 1978). We review distributions to determine whether the court has abused its discretion. Ibid. Thus, we will affirm an equitable distribution as long as the trial court could reasonably have reached its result from the evidence presented, and the award is not distorted by legal or factual mistake. Perkins v. Perkins, 159 N.J. Super. 243, 247-48 (App. Div. 1978). However, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty v. Township Comm., 140 N.J. 366, 378 (1995). [La Sala v. La Sala, 335 N.J. Super. 1, 6 (App. Div. 2000), certif. denied, 167 N.J. 630 (2001).]

With that standard in mind, we first address the issue of the characterization of the limited partnership nursing home assets and the Bear Stearns account as active or passive assets. This decision in turn determined the date on which the assets would be valued as well as the percentages to be allocated to the parties.

Passive assets, or assets whose value fluctuates based exclusively on market factors or inflation, which are acquired during the marriage, are valued as of the date of trial or distribution by the court, not the date the complaint was filed. Platt v. Platt, 384 N.J. Super. 418, 427 (App. Div. 2006); Valentino v. Valentino, 309 N.J. Super. 334, 338 (1998); Scavone v. Scavone, 230 N.J. Super. 482, 490-92 (Ch. Div. 1988), aff'd, 243 N.J. Super. 134, 137 (App. Div. 1990). "To do otherwise would be unjust and inequitable as one spouse would either reap a windfall or suffer a loss which was not of his or her doing." Scavone, supra, 230 N.J. Super. at 492. An example of a passive asset is a share of stock, or a "rare painting in a rising art market." Bednar v. Bednar, 193 N.J. Super. 330, 333 (App. Div. 1984). Other examples include an IRA, Platt, supra, 384 N.J. Super. at 427, a seat on the New York Stock Exchange, Scavone, supra, 243 N.J. Super. at 138, and a marital home, Wadlow v. Wadlow, 200 N.J. Super. 372, 385 (App. Div. 1985). By valuing a passive asset at the date of trial or distribution, the parties share in any incremental fluctuation in value. Bednar, supra, 193 N.J. Super. at 333.

The value of an active asset acquired during the marriage is determined as of the date of the divorce complaint. Scavone, supra, 230 N.J. Super. at 491-92. "By its very nature, an active asset's increase or decrease in value is a direct result of the attention, time, energy and devotion of the sole owner." Id. at 492. Active assets "involve contributions and efforts towards their growth and development which directly increase their value." Id. at 487. The rationale for the difference in valuation dates for active and passive assets is based on the premise that a marriage is a joint enterprise, akin to a partnership, that terminates on the date of the filing of the complaint for divorce. Steneken, supra, 183 N.J. at 299; Rothman, supra, 65 N.J. at 229; Scavone, supra, 230 N.J. Super. at 491-92. Thus, "if one spouse labors or makes waste of an asset," after the partnership terminates, then that spouse "ought to reap any benefit or suffer any loss which occurs as a direct consequence of effort and time exerted." Scavone, supra, 230 N.J. Super. at 492. In other words, "[i]nterim accretions pending actual distribution due to the diligence and industry of a party in possession of an asset, independent of identifiable market forces, should accrue to that party alone." Bednar, supra, 193 N.J. Super. at 333. Thus, "accretion in value must be analyzed in terms of whether it was attributable to the personal industry of the party controlling the asset, apart from the non-possessory partner." Ibid. The classic example of an active asset is "a sole-proprietorship commanding one party's substantial time and energy." Ibid. See Brown v. Brown, 348 N.J. Super. 466, 491 (App. Div.)(wholesale florist business), certif. denied, 174 N.J. 193 (2002); Valentino, supra, 309 N.J. Super. at 339 (commercial property).

At the beginning of the trial, the judge held a five-day evidentiary hearing on the proper characterization of the limited partnership nursing homes and the Bear Stearns account. After taking testimony from numerous witnesses, the judge concluded that the Bear Stearns account was an active asset. He based this decision primarily on his evaluation of Elie's credibility, concluding that Elie was not believable in testifying that he left the management of the account and all investment decisions to his broker. Rather, the judge concluded that Elie actively managed the account and made the investment decisions; this conclusion underlay the judge's later determination that Elie must bear the losses in the account that resulted from those investment decisions.

The judge also concluded that the three nursing homes - Bey Lea, Laurelton, and Inglemoor - were active assets, based on his factual finding that Elie and his partner Herb Heflich actively managed those facilities. The judge found no basis to reach a different conclusion simply because the two men's salaries for managing the homes were paid through a separate management corporation. The judge further concluded that there was "absolutely no basis in law or fact for the Plaintiff to have contested this issue."

Having reviewed the trial record, we find no warrant to disturb the judge's conclusions on any of these issues, which are supported by substantial credible evidence in the record. Rova Farms, supra, 65 N.J. at 484. The judge clearly explained why he did not believe Elie's testimony about the Bear Stearns account. We will not second-guess the judge's evaluation of Elie's credibility as it relates to the account.*fn8

On the other hand, Elie and Heflich provided cogent and consistent testimony explaining their management of the nursing homes, and the judge credited that testimony. We concur in the judge's conclusion that there was overwhelming evidence to support Elie's position that the nursing homes were active assets. Plaintiff presented virtually no evidence to the contrary. While plaintiff called Jacob Pineles to testify, plaintiff's counsel asked him no questions about Elie's management of the nursing homes. Pineles would surely have been in a position to know about Elie's and Heflich's management of the homes, and the failure to question him on the issue spoke volumes about the weakness of plaintiff's position on this issue. Accordingly, we affirm the judge's determinations on these issues.

IV.

We turn next to the issue of the distribution of those assets the judge concluded were active assets, as set forth in the chart found in our factual discussion. As previously indicated, we agree with the trial judge's conclusions that the Bear Stearns account and the limited partnership nursing homes were active assets, primarily because of defendant's extensive role in managing those assets and for the additional reasons stated in the judge's opinion. Plaintiff does not dispute that the other listed assets were active. However, we part company with the trial judge's allocation of plaintiff's share of the active assets.

In reviewing the judge's decision, we bear in mind that "[a]n equitable distribution will be affirmed even if this court would not have made the same division of assets as the trial judge. . . . A sharp departure from reasonableness must be demonstrated before our intercession can be expected." Perkins v. Perkins, 159 N.J. Super. 243, 247-48 (App. Div. 1978). See also Wadlow v. Wadlow, supra, 200 N.J. Super. at 377.

The judge allocated plaintiff a 25% share of the active assets, a figure at the low end of the scale in terms of cases allocating shares of active assets to a non-managing spouse. Compare Brown v. Brown, supra, 348 N.J. Super. at 478-80 (40%), with Orgler v. Orgler, 237 N.J. Super. 342, 358 (App. Div. 1989)(25%). In reviewing the judge's rationale, we conclude that the judge properly recognized that the well-educated plaintiff gave up the possibility of a professional career to raise the couple's children and that she was the primary caretaker for the children throughout the marriage. He also recognized the very significant contribution of plaintiff's family, particularly her father Jacob Pineles, in giving defendant his start in the nursing home business as well as giving the couple their first house. However, against these factors, the judge weighed plaintiff's lack of participation in the businesses and the large amount of domestic help she had.

While we are mindful that setting plaintiff's percentage of active assets is discretionary and not an exact science, we are left with the indelible sense that the judge somewhat undervalued plaintiff's contribution to the marital partnership. In particular, we conclude the judge unfairly penalized plaintiff for having domestic help. There is no suggestion in this record that plaintiff was an absentee parent or that she was not intimately and consistently involved, emotionally and otherwise, in their children's lives. That is the essence of parenting. The fact that an affluent parent has the kinds of domestic help listed in the court's opinion, including landscapers and au pairs, does not obviate the parent's far more important contribution to the family in nurturing and caring for their children.

"The nonremunerated efforts of raising children, making a home, performing a myriad of personal services and providing physical and emotional support are, among other non-economic ingredients of the marital relationship, at least as essential to its nature and maintenance as are the economic factors, and their worth is consequently entitled to substantial recognition." [Cox v. Cox, 335 N.J. Super. 465, 480 (App. Div. 2000)(citation omitted).]

Mindful that this litigation has been long, complex and extremely expensive, and that the trial judge has retired, we have determined to exercise our original jurisdiction to modify plaintiff's percentage of the active assets from 25% to 30%. See Esposito v. Esposito, 158 N.J. Super. 285, 298-99 (App Div. 1978)(exercising original jurisdiction modifying spousal share to 30%). Our decision requires no further litigation. On remand, the trial court shall recalculate plaintiff's share of the active assets based on 30% rather than 25%, by taking the total value of each active asset and allocating 70% to defendant and 30% to plaintiff.

V.

We next address the distribution of the marital accounts other than the Bear Stearns account (the "other bank accounts").

Plaintiff contends that the judge made a mathematical error in calculating her 50% share of these assets. We agree.

The issue can be understood as follows. As of the date of the divorce complaint, the balance in the parties' other bank accounts totaled $992,855, and interest and appreciation totaled $136,462. Court-ordered withdrawals totaled $828,898, of which $226,523 was to cover Elie's sole obligations for the children's school expenses and $70,000 was to cover his sole obligation to pay support arrears; $532,375 was distributed equally to the parties, leaving a balance of $163,957 at the time of the divorce filing. This amount was augmented by $136,462 in accrued interest as of the time of the divorce trial.

Plaintiff claimed the school expenses and support arrears should be charged to defendant's share of the distribution, and thus she was entitled to $298,471 ($163,957 (balance in account) $136,462 (interest) $226,523 (school expenses) $70,000 (support) = $596,942 x 50%). Defendant argued that the entire amount of court-ordered withdrawals should be deducted from the agreed upon balance, and thus he claimed plaintiff was entitled to $153,126 ($992,855 - $828,898 (withdrawals) $136,462 (interest) $5,832 (additional interest) = $306,251 x 50%)).

The court found that $163,957 remained in the accounts, and the net appreciated value was $136,462, yielding a total of $300,419. The court awarded each party 50% of that amount, or $150,209.50. The court explained that

[t]he difficulty arises from the fact that the Defendant at the time of the initial distribution was in arrears for school tuition of $226,523 and spousal support of $70,000. The Court ordered that from his one-half share of $828,898 or $414,449 he was to pay to the plaintiff $296,523 so that in actuality she received $710,972 and he received $117,926.

However, that adjustment has no bearing on what each party is entitled to from this asset (i.e. 50% each).

On appeal, plaintiff argues the court erred in determining that each party had received half the court-ordered distributions, or $414,449, and from that amount defendant paid $296,523 in support. As plaintiff correctly points out, they each received $266,187.50 in court-ordered distributions, and defendant received an additional $296,523 to pay his support obligations. Although defendant agrees that they received $266,187.50, not $414,449, he claims that in any event, the court intended to award plaintiff $150,209, because she already had received $562,710.50 ($296,523 $266,187.50).

We conclude that, based on the erroneous finding that the parties had each received distributions of $414,449, the court also erred in finding that defendant had paid the support obligations from his share of the distribution. It is well- settled that "[a] party to a matrimonial action cannot use marital assets to discharge support obligations and then claim that those marital assets are unavailable for equitable distribution." Weiss v. Weiss, 226 N.J. Super. 281, 291 (App. Div.), certif. denied, 114 N.J. 287 (1988). See also Goldman v. Goldman, 275 N.J. Super. 452, 458 (App. Div.), certif. denied, 139 N.J. 185 (1994).

On this appeal, defendant contends that the trial court implicitly modified Elie's support obligation by allowing him to pay those obligations out of marital funds. This contention is without merit. There is no indication that the court intended to impose any of the support obligation on Karen. Elie was permitted to use some marital assets to cover the obligation due to a cash flow problem, but this was subject to an eventual fiscal reconciliation at the time of the final divorce judgment.

The bottom line here is that Elie was permitted to withdraw $296,523 from marital accounts to pay his sole obligations. That sum must be added back into the account for purposes of the final reconciliation, and half of the sum so added back belongs to Karen. Hence, she is entitled to an additional $148,260. The final judgment shall be amended to reflect this sum.

VI.

We next address Karen's argument that the Inglemoor nursing home should have been valued as of the 1995 filing date rather than as of the date of trial. The decision arose in the context of a dispute over the respective valuations of the parties' interests in the West Caldwell and Inglemoor nursing homes, the former to be distributed to Karen and the latter to Elie. Not surprisingly, each party produced expert evidence designed to minimize the value of his or her prospective distribution and to inflate the value of the other party's prospective share.

The judge credited expert testimony that both nursing homes had lost value due to the rise of assisted living facilities, which had generally siphoned off business from nursing homes, and due to reductions in Medicaid and Medicare reimbursement rates. In that context, he rejected Elie's contention that Inglemoor had decreased in value by 71% but that West Caldwell had only decreased in value by 25%. Instead, he concluded that both nursing homes had declined in value by 61% due to the same factors. Relying on Goldman v. Goldman, 248 N.J. Super. 10 (Ch. Div. 1991), aff'd in relevant part, 275 N.J. Super. 452 (App. Div. 1994), the trial judge concluded that although Inglemoor was an active asset, Elie's interest should be valued as of the date of trial because the decline in value was due to market forces common to the entire industry and beyond his control. In Goldman, the trial judge held that a business that had become worthless by the time of trial, through no fault of the husband, its owner, would not be valued as of the date of the divorce filing. The judge noted the purpose of valuing active assets as of the time of the divorce filing was to accord to the active spouse the benefits or detriments of increases or decreases in value attributable to the active spouse's management efforts. In Goldman, the decrease was not attributable to the spouse's efforts and it would have been inequitable to charge him with the business's value as of the date of filing. 248 N.J. Super. at 15-16.

In affirming that determination, we noted that "[t]he consequence of value fluctuations for purposes of equitable distribution should not . . . turn wholly on whether an asset is properly classified as an active or passive asset." Goldman, supra, 275 N.J. Super. at 457. The same rationale applies here. We find no abuse of discretion or other error in the trial judge's equitable decision to give both parties the benefit of the overwhelming expert evidence that both nursing homes had declined in value, due to competition from the assisted living industry and to government reimbursement policies.

VII.

The parties' remaining contentions require little discussion. R. 2:11-3(e)(1)(E). We find no abuse of discretion or other error in the judge's award of counsel fees to plaintiff, an award she claims is inadequate and defendant claims is excessive. See Addesa v. Addesa, 392 N.J. Super. 58, 78-79 (App. Div. 2007).*fn9 We affirm for the reasons stated in the trial judge's written opinion.

We likewise find no merit in defendant's contention that the judge erred in determining the values of the parties' interests in the West Caldwell and Inglemoor nursing homes. The judge cogently explained why he did not find defendant's expert Blau to be credible. We find no basis to disturb his credibility findings in that regard. See Brown v. Brown, supra, 348 N.J. Super. at 478.

Nor do we find error in the judge's determination concerning the valuation of defendant's nursing home management company, LCTM. Karen had argued that the valuation should include contracts with nursing homes controlled by her father Jacob, even though Jacob canceled those contracts soon after the divorce complaint was filed. Elie contended that the valuation should only include the Inglemoor contract, because he sold the Bey Lea and Laurelton nursing homes two years after the divorce filing. The judge sensibly explained why he rejected both parties' extreme positions and valued LCTM based on its contracts with the three nursing homes controlled by Elie. We affirm the judge's valuation decision for the reasons stated in his written opinion.

Finally, we find no merit in Elie's remaining contentions that the judge should have given him a credit for pendente lite support paid between September 3, 1996, and September 12, 2000, and that the judge erred in denying him partial reimbursement for sums he paid for the older daughter's law school tuition. As to the former, the judge based his decision on his conclusion that defendant could afford to pay Karen $13,500 per month in alimony out of his very substantial income. The record supports the judge's conclusion. The record also supports the conclusion that, given Elie's large income and the family's lavish lifestyle, $25,000 was not an excessive total amount including child support and alimony. As to the tuition issue, the judge concluded that there was no agreement to share the daughter's law school expenses. Like the judge's alimony decision, the tuition determination is supported by substantial credible evidence in the record. See Clarke v. Clarke, 349 N.J. Super. 55, 57-58 (App. Div. 2002). Defendant's appellate contentions on these points are without sufficient merit to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).

We remand to the trial court for the limited purpose of entering an amended divorce judgment consistent with this opinion.

Affirmed in part, remanded in part.


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