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Ferraro v. Ferraro

December 23, 2008


On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1115-98A.

Per curiam.


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 ...

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