December 23, 2008
ROSEMARY FERRARO, PLAINTIFF-RESPONDENT,
GUY FERRARO, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1115-98A.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: November 6, 2008
Before Judges Parrillo, Lihotz and Messano.
Defendant Guy Ferraro appeals from a November 30, 2007 Family Part order denying his motion for reduction of child support and modification of his obligation to pay medical insurance costs and unreimbursed medical expenses for plaintiff, Rosemary Ferraro, and the parties' children. We affirm.
The parties were married on November 22, 1987 in Red Bank. They have two children, born on September 4, 1989 and September 25, 1990. After almost eleven years of marriage, the parties divorced. The Final Judgment of Divorce (FJOD), which incorporated the terms of a negotiated property settlement agreement (PSA), was filed on August 11, 1998.
Pursuant to the terms of the PSA, the parties shared joint legal custody of the children and plaintiff was designated "the custodial parent" (paragraph 2.2). Defendant agreed to pay $7,000 per month in child support (paragraph 3.5), the children's secondary school education costs (paragraph 2.8), and the medical insurance costs and all uninsured medical expenses for the children (paragraphs 4.1 and 4.3). Both parties waived alimony (paragraphs 3.6 and 3.7). However, defendant consented to pay the cost of plaintiff's health insurance coverage until she remarried or obtained coverage through employment (paragraph 4.1) and her unreimbursed medical expenses (paragraph 4.3).
The PSA did not state the incomes of the parties.
Defendant's primary business interest was Ferraro International, Inc. (Ferraro, Inc.). He remains the sole owner and operator of the company. The corporation developed various parcels of real estate owned by defendant, on which it would build residential or commercial projects. Defendant admitted his income from 1998 to 2002 was approximately $22 million. Plaintiff stopped working when the parties' children were born. Following the divorce, she obtained a real estate agent's license. In 2007, plaintiff's income was approximately $20,000.
Defendant suffered from alcoholism. In 2004, he entered a residential rehabilitation facility. On September 25, 2005, the Family Part was requested to review the support order that was then seven years old. Predictably, plaintiff sought an increase, while defendant sought a decrease.
Defendant's income generally remained at the post-divorce level and ranged from a low of $1,645,418 in 2003 to a high of $1,973,585 in 2004. However, in 2005, defendant was charged with income tax evasion. His income that year was $194,055. Notwithstanding the decreased income experienced in 2005, the court denied defendant's request to reduce his support obligations and granted plaintiff's motion for an increased award. Defendant's child support obligation was reset at $9,000 per month.
In August 2006, defendant commenced a thirteen-month prison sentence imposed following his guilty plea for income tax evasion. In addition to a $16,000 fine, defendant was ordered to pay $940,500 in restitution for taxes due from 1998 to 2001, interest, and penalties.
In an effort to satisfy his tax deficiencies, defendant borrowed $715,000 from his father, and in an effort to lessen his expenses, he liquidated seven parcels of realty. While in prison, defendant retained Withum, Smith & Brown (WSB), accountants, "to conduct a comprehensive review of his financial situation and to prepare a report" to be used to support an anticipated application to modify his support obligations (WSB report). Defendant continued to satisfy his support obligations.
In May 2007, the Monmouth County Probation Department issued a notice to impose a cost of living adjustment (COLA), pursuant to Rule 5:6B. Defendant did not follow the necessary procedures to object. Consequently, on July 25, 2007, the order effectuating a COLA adjustment was filed, which increased child support to $9,540 per month.
On September 26, 2007, defendant was released from the Fort Dix Correctional Facility. Almost immediately thereafter, he resumed the abuse of alcohol. Defendant again entered a residential rehabilitation facility and also commenced psychiatric treatment for depression.
In October 2007, defendant filed a motion to modify his child support and related obligations, nunc pro tunc to November 1, 2006. Defendant attached exhibits to his certification, including the WSB report, individual income tax returns from 2002 to 2006, a case information statement, and the Ferraro, Inc. income tax returns for fiscal years 2002 to 2005.
Plaintiff cross-moved to deny defendant's application; require him to satisfy child support arrearages of $32,610, reimburse medical expenses; place him on bench warrant status; initiate a wage execution to collect future child support and arrearages; designate her as the custodian of the children's accounts and require defendant to pay her counsel fees incurred in responding to his motion and filing her cross-motion.
Following his review, the motion judge remained "skeptical" of defendant's claims because the informational underpinnings of the WSB report were provided to the accountants by defendant and were not independently verified. The judge analyzed defendant's submission this way:
The Court does note in documents presented by defendant that at his sentencing hearing . . . he admitted that during . . . 1998 to 2001, he earned approximately $22 million . . . . He admitted to diverting approximately $762,000 in income which he had at the time of his sentencing described as being insignificant.
[T]he Court has questions regarding the representations with regard to the company, [and] also has some questions with regard to the balance sheet submitted in the case information statement for the reasons raised by [plaintiff]. The property values are not the result of certified appraisals.
. . . there is by his own admission[,] a net worth of almost $3 million.
It has long been the law of this State that the [c]courts have the authority to consider not only the income of a supporting spouse, not only the earning potential of the supporting spouse, but the assets and other financial circumstances in addition to income when determining support. This is supported by case law and the statute N.J.S.A. 2A:34-23a . . . . All resources must be considered available for support.
In this application for a downward modification[,] the central issue is [defendant's] ability to pay. The fact that he may have had some difficulty in liquidating his real estate does not detract from the fact that his net worth is more than sufficient to meet his obligation. Real property, capital assets, investment portfolios are all appropriate factors.
The [c]court also notes that the townhouses in Union Beach, which were not brought to the [c]court's attention by defendant but rather by the plaintiff, represent more than just a potential for development. This is a plan that has been submitted and approved for 23 waterfront townhouses. Union Beach is one of the few thriving real estate markets at the shore as a result of the proximity to the ferry service to New York. The [c]court considers that as part of the defendant's capacity to earn by diligent attention to business under [Innes v. Innes], 117 [N.J.] 496[, 503 (1999)].
Therefore[,] even accepting the report by [WSB] and the statement of assets and liabilities provided in the case information statement, even giving the benefit of the doubt in that case, the Court finds that defendant's net worth is, under the authority of [Miller v. Miller,] 160 [N.J.] 408[, 420 (1999)], adequate to meet his obligations.
We understand the court's comments to suggest, notwithstanding a decrease in his assets and income, defendant failed to meet his burden showing he lacked the ability to pay the ordered child support obligations.
In an order filed on November 30, 2007, the motion judge denied defendant's motion, set child support arrearages at $29,700 and required defendant to pay $5,000 by December 3, 2007, with the balance due in twenty-one days. Plaintiff's requests for the reimbursement of medical expenses and payment of counsel fees were also granted, but the balance of her requested relief was denied.
On appeal, defendant presents these arguments:
I. THE TRIAL COURT'S DENIAL OF THE DEFENDANT'S REQUEST FOR A REDUCTION IN CHILD SUPPORT WAS AN ABUSE OF DISCRETION BECAUSE THE DEFENDANT HAS MADE A PRIMA FACIE SHOWING OF A PERMANENT AND SUBSTANTIAL CHANGE OF CIRCUMSTANCES.
POINT I (A).
THE DEFENDANT MADE A PRIMA FACIE SHOWING OF CHANGED CIRCUMSTANCES UNDER LEPIS V. LEPIS, 83 N.J. 139 (1980).
POINT I (B).
THE TRIAL COURT FAILED TO REQUIRE THE PLAINTIFF TO PROVIDE HER CURRENT TAX RETURNS AND FINANCIAL INFORMATION AS REQUIRED BY LEPIS V. LEPIS, 83 N.J. 139 (1980).
POINT I (C).
THE TRIAL COURT FAILED TO CONSIDER THE NEW JERSEY CHILD SUPPORT GUIDELINES IN DETERMINING THE DEFENDANT'S REQUEST FOR A REDUCTION IN CHILD SUPPORT.
THE TRIAL COURT IMPROPERLY RELIED ON INNES V. INNES, 117 N.J. 496, 503 (1999) AND MILLER V. MILLER, 160 N.J. 408 (1999) WHEN IT CONCLUDED THAT THE DEFENDANT HAD THE ABILITY TO PAY HIS SUPPORT OBLIGATIONS.
THE TRIAL COURT'S FAILURE TO SET ASIDE THE COST OF LIVING ADJUSTMENT IMPOSED UPON THE DEFENDANT BY THE MONMOUTH COUNTY PROBATION DEPARTMENT WITHOUT THE BENEFIT OF A HEARING WAS AN ABUSE OF DISCRETION UNDER [R.] 5:6B, LEPIS V. LEPIS, 83 N.J. 139 (1980), AND THE NEW JERSEY CHILD SUPPORT GUIDELINES.
THE TRIAL COURT'S REFUSAL TO COMPEL THE PLAINTIFF TO PAY FOR THE COST OF HER OWN HEALTH INSURANCE AND UNREIMBURSED MEDICAL EXPENSES WAS AN ABUSE OF DISCRETION, BECAUSE THE DEFENDANT HAS MADE A PRIMA FACIE SHOWING OF A PERMANENT AND SUBSTANTIAL CHANGE IN CIRCUMSTANCES.
THE TRIAL COURT'S FAILURE TO ORDER A PLENARY HEARING ON THE ISSUE OF CHANGED CIRCUMSTANCES AND THE APPROPRIATE LEVEL OF SUPPORT WAS AN ABUSE OF DISCRETION.
Overall, these arguments challenge the trial judge's finding that defendant remains able to satisfy his support obligations, and maintain the court should have conducted a plenary hearing.
The scope of our review is limited. "The general rule is that findings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998). Moreover, "[b]ecause of the family courts' special jurisdiction and expertise in family matters, appellate courts should accord deference to family court factfinding." Id. at 413. "Trial court findings are ordinarily not disturbed unless 'they are so wholly unsupportable as to result in a denial of justice.'" Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 475 (1988) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974)); Roe v. Roe, 253 N.J. Super. 418, 432 (App. Div. 1992).
When confronted with the claim that the trial court erred in its determination of the facts, we consider "'whether the findings made could reasonably have been reached on sufficient credible evidence present in the record.'" Beck v. Beck, 86 N.J. 480, 496 (1981) (quoting State v. Johnson, 42 N.J. 146, 161-62 (1964)). See DeVita v. DeVita, 145 N.J. Super. 120, 123 (App. Div. 1976) (applying this standard in custody cases). When a reviewing court satisfies itself of the evidentiary support for the trial court's findings, "'its task is complete and it should not disturb the result, even though it has the feeling it might have reached a different conclusion were it the trial tribunal.'" Beck, supra, 86 N.J. at 496 (quoting Johnson, supra, 42 N.J. at 161-62). Where our review addresses questions of law, however, we are not bound to defer to the legal conclusions of the lower court. See Balamides v. Protameen Chems., Inc., 160 N.J. 352, 373 (1999) (stating "matters of law are subject to de novo review").
Agreements between divorcing spouses as to child support are "always subject to review and modification based on a showing of 'changed circumstances.'" Lepis, supra, 83 N.J. at 146; Berkowitz v. Berkowitz, 55 N.J. 564, 569 (1970). This principle applies equally to an order not calculated under the guidelines. Farmilette v. Farmilette, 237 N.J. Super. 29, 31 (Ch. Div. 1989).
The courts have recognized various events that satisfactorily demonstrate "changed circumstances," including:
(1) an increase in the cost of living, see Martindell v. Martindell, 21 N.J. 341, 353 (1956);
(2) increase or decrease in the supporting spouse's income, Martindell, supra, 21 N.J. at 355; Traudt v. Traudt, 116 N.J. Eq. 75 (E & A 1934); Acheson v. Acheson, 24 N.J. Misc. 133 (Ch. 1946);
(3) illness, disability or infirmity arising after the original judgment, e.g., Kirshbaum v. Kirshbaum, 129 N.J. Eq. 429 (E & A 1941); Limpert v. Limpert, 119 N.J. Super. 438 (App. Div. 1972); see Ostrow v. Ostrow, 59 N.J. Super. 299, 305-306 (App. Div. 1960);
(4) the dependent spouse's loss of a house or apartment, Jackson v. Jackson, 140 N.J. Eq. 124 (E & A 1947); McLeod v. McLeod, 131 N.J. Eq. 44 (E & A 1942);
(5) the dependent spouse's cohabitation with another, Wertlake v. Wertlake, 137 N.J. Super. 476 (App. Div. 1975); Garlinger v. Garlinger, 137 N.J. Super. 56 (App. Div. 1975); Eames v. Eames, 153 N.J. Super. 99 (Ch. Div. 1976); Grossman v. Grossman, 128 N.J. Super. 193 (Ch. Div. 1974);
(6) subsequent employment by the dependent spouse, Ramhorst v. Ramhorst, 138 N.J. Eq. 523 (E & A 1946); Kavanagh v. Kavanagh, 134 N.J. Eq. 358 (E & A 1944), see also Lavene v. Lavene, 162 N.J. Super. 187, 203 (Ch. Div. 1978); and
(7) changes in federal income tax law, Acheson, supra, 24 N.J. Misc. at 133. [Lepis, supra, 83 N.J. at 151.]
In any case, "[t]he party seeking modification has the burden of showing such 'changed circumstances" as would warrant relief from the support . . . provisions involved." Lepis, supra, 83 N.J. at 157. When a parent files an application for a downward modification of support, the focus centers on his or her ability to pay. Miller, supra, 160 N.J. at 420. In any analysis of whether a downward modification is appropriate, the judge may consider a parent's income, as well as his or her respective assets. Id. at 422; N.J.S.A. 2A:34-23(a)(3).
The impetus for defendant's motion was principally bottomed on the slow-down in the real estate market, which consequently impeded his ability to develop the parcels he owned and thus, thwarted his ability to generate sufficient income to meet his support obligations. Defendant relied heavily on the analysis of information contained in the WSB report and the accountants' conclusion that defendant suffered a significant decrease in income.
In the WSB report, reasons cited for the diminishment of defendant's income were: the change in the economy, the large tax debts he owed the IRS and the State of New Jersey, increased expenses resulting from rising mortgage interest rates, property taxes and utility costs, decreased cash flow because income producing assets were liquidated, and finally, defendant's generally deteriorated "emotional and physical state," which prevented him from earning income.
Our review of the record reveals defendant has satisfactorily submitted prima facie evidence of diminished income. When child support was reviewed in 2005, defendant was earning well in excess of one million dollars per year. His subsequent criminal conviction interfered with the operation of his business and reduced earnings from the year following divorce. Lepis, supra, 83 N.J. at 157. However, this change in financial circumstances meets only the first of the two Lepis prongs, which must be proven to warrant a review of support. Ibid. Once the movant presents a prima facie showing of "changed circumstances," the court must next consider an ability to pay. Ibid. Thus, defendant bears the burden of not only showing the financial changes he experienced and that those changes are permanent, but also an inability to pay the level of ordered support. Ibid.
In this regard, the motion judge commented on the inadequacy of defendant's proofs. He stated, "[o]ne would think that a defendant with Mr. Ferraro's history, having been convicted for evading federal income taxes, would present himself with financials that were beyond reproach or beyond question. That has not been done here." Although the motion judge did not elaborate on this comment, we identify the following deficiencies in defendant's application.
Defendant's certification did not elucidate the details of his employment efforts and current business enterprises or attach documentation to support his inability to further liquidate assets. Neither defendant's statements nor the WSB report discussed the dissipation of the claimed $22 million in income received from 1998 to 2002. Although each submission identified the realty sold to decrease expenses, the status of the admitted $148,000 profit realized from those sales was omitted, as was a clear statement of the status of currently held assets. Interestingly, the net profit from the seven parcels sold would have more than satisfied defendant's support obligations for the year without resorting to other sources of income. The last prepared corporate income tax return for fiscal year-end March 31, 2006, identified a shortfall, only after consideration of "paper deductions," such as depreciation. Otherwise, an excess of reported income over expenses existed. Defendant failed to explain the preferential repayment of his father's loan over his children's support. Most importantly, in the hundreds of pages of documents defendant attached to his moving papers, defendant failed to mention he owned five acres of bay front property in Union Beach, for which he received site plan approvals to build twenty-three waterfront town homes.
It is clear, the trial judge rejected the net worth reported by defendant and WSB. Notwithstanding that finding, after giving defendant all benefits or every conceivable reduction, his admitted net worth remained at almost $3 million. This strongly supported defendant's ability to pay support, which amounts to approximately $115,000 per year.
Thus, it was the inadequacy of defendant's disclosures that hindered the motion judge's ability to properly assess defendant's ability to pay and doomed his motion to reduce support. R. 5:5-4(a); Zazzo v. Zazzo, 245 N.J. Super. 124, 132 (App. Div. 1990), certif. denied, 126 N.J. 321 (1991). Without the requisite proofs, the court was unable to evaluate the appropriateness of defendant's request for relief, id. at 129, and no requirement to conduct a plenary hearing was triggered. Lepis, supra, 83 N.J. at 158.
We conclude the present record adequately supports the determination that defendant failed to sustain his burden establishing he was entitled to a reduction in child support. The Family Part judge, in a proper exercise of discretion, enforced the existing obligation.
Defendant's challenge to the entry of the COLA is rejected, as defendant failed to comply with the conditions set forth in the COLA notice to initiate an administrative review. Defendant, through counsel, corresponded with probation to challenge the application of the COLA. Upon receipt of that letter, the probation department responded stating, "Your letter dated June 14, 2007 formally requesting an administrative hearing did not include the required information for a review to be completed." No new information was submitted. Defendant had already engaged WSB to prepare its financial review and the final WSB report is dated August 7, 2007. Yet, no extension of time for compliance with the administrative requirements was made. Defendant's failure to follow the administrative process, prevents our review.
Although we affirm the November 30, 2007 order following our review of the record, we are compelled to comment on the scant factfinding by the motion judge. Rule 1:7-4(a) denotes a trial court's obligation to make findings of facts and state conclusions of law "on every motion decided by a written order that is appealable as of right." Our cases have repeatedly stressed the importance of a trial judge's responsibility to provide findings and conclusions to assure informed appellate review. Curtis v. Finneran, 83 N.J. 563, 569-70 (1980); Rosenberg v. Bunce, 214 N.J. Super. 300, 303 (App. Div. 1986).
We must be clear, this opinion was not without findings. However, it significantly lacked the preferable findings when presented with such a complex factual presentation. Defendant submitted voluminous documentation, including an expert evaluation, regarding his financial circumstances. The trial court's rejection of the material as lacking should have included more specific determinations, such as those we have identified, to fully inform the litigants and the attorneys of the deficits. We are mindful of the heavy motion volume handled weekly by family court judges. However, the burden of the workload should not result in a diminishment of factfinding.
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