January 23, 2009
LARRY LEVINE, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
JODY LEVINE, DEFENDANT-RESPONDENT/ CROSS-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Hudson County, Docket No. FM-09-1075-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 17, 2008
Before Judges Payne and Newman.
Plaintiff Larry Levine appeals from an order of August 20, 2007, requiring that he pay for one-half of the high school tuition and books for his older daughter, now fifteen years old.
Defendant Jody Levine cross-appeals from the same order requiring her to pay ancillary high school expenses which include commutation expenses from Jersey City to New York City, cost of uniforms and a class trip to England. Defendant also cross-appeals from the court's denial of defendant's request to have one-half of the parking expenses while the older daughter was hospitalized over an extended period of time paid by plaintiff and modification of the Property Settlement Agreement (PSA) to allow out of country vacations for more than a one week time period. Although denied by the trial court, no mention of these rulings is made in the August 29, 2007, order. We affirm the trial court's orders for both the direct and cross-appeals.
The proceedings leading up to the plenary hearing held on August 20, 2007, may be summarized as follows. A dual judgment of divorce, incorporating the PSA, was entered on January 25, 2006. On January 22, 2007, defendant filed a motion for post-judgment relief seeking to compel plaintiff to contribute to the private high school tuition and costs for the oldest daughter, and for other relief unrelated to this appeal. Plaintiff filed a cross-motion seeking to modify his child support and alimony obligations based upon changed circumstances, to restrain defendant from removing the children from the country for more than one week, and for other relief. On March 6, 2007, the court entered two orders denying defendant's motion to compel plaintiff to contribute to the private high school tuition and costs, denying without prejudice plaintiff's application to modify child support and alimony payments, and granting plaintiff's application to enjoin defendant from removing the children from the court's jurisdiction for more than one week pursuant to the PSA.
Defendant filed a motion for reconsideration, which was heard on June 15, 2007. On that date, the trial court entered an order that amended the PSA to permit both parties, for one time, to travel with the children for seventeen consecutive days. In addition, the court ordered a plenary hearing to be held on August 20, 2007, to determine the parties' contribution toward the oldest daughter's private high school tuition. The court further ordered that "if Defendant files a motion pertaining to financial issues in a timely fashion, the court will merge the hearings, as they depend upon the same facts [and] evidence."
On August 16, 2007, plaintiff filed an application with the court for modification of his child support and alimony obligations to be consolidated with the scheduled hearing on August 20, 2007. The trial judge, who only received a copy of the application on August 20, 2007, declined to hear the motion.
The facts relevant to the issues considered at the plenary hearing are as follows.
According to the terms of the PSA, the parties agreed to share joint legal custody of the two children of the marriage, with defendant being the parent of primary residence. The PSA provided that "[t]he parties may each take two weeks vacation with the children a year. No party shall take more than one consecutive week vacation with the children at a time."
Regarding support and maintenance, the parties agreed that defendant's annual income would be imputed at $40,000, even though she was not employed, and plaintiff's annual income would be imputed at $150,000. Plaintiff agreed to pay defendant permanent alimony in the amount of $33,098 per year. The parties further agreed that plaintiff's child support obligation was an additional $33,098 per year for the two girls.
On the issue of the children's education, the PSA provided in relevant part that:
2. Wife shall pay the children's elementary school tuition, lessons, camps and other extracurricular activities currently estimated at approximately thirty-five thousand dollars ($35,000.00) per year one-half (1/2) from her own assets/income and one-half (1/2) from the equitable distribution of pre-marital assets of Husband. [. . .]
4. At the time the child(ren) attend high school, the contribution to same by both parents will be negotiated and if no agreement is reached, the parties may make an application to the court.
Plaintiff testified that at the time of the divorce, he had been unemployed for a long period of time. Previously, in the late 1990s, plaintiff earned approximately $150,000 to $200,000 per year as a consultant. In 2001, plaintiff had surgery for pheochromocytoma, and, as a result, he became addicted to painkillers and antidepressants, which precluded him from working for the better part of the year. In 2002, plaintiff began rebuilding his consulting business, but had trouble maintaining employment. Since that time, plaintiff's annual income after business deductions did not exceed $60,000. Plaintiff stated that for 2006, his earned income, after deductions for expenses, was $59,280. In addition, he borrowed $26,000 from his mother, and $17,000 from his girlfriend to pay his living expenses. At the time of the divorce in 2005, plaintiff also began withdrawing $44,000 a year from his retirement account to supplement his income.*fn1
On the day before the date of the divorce trial, plaintiff received an employment offer from an Internet start-up company for a consulting assignment. The offer, which was terminable at will by either party, guaranteed a monthly payment of $4,166 for three months, with the potential term of employment to extend up to seven-and-a-half months. In addition, the offer included an incentive based upon company performance that was projected to earn plaintiff approximately $171,000. Relying in part on this offer, plaintiff agreed to imputed income of $150,000 per year in the divorce settlement.
Both of the parties' daughters attended private elementary school, which was paid by defendant in part with the equitable distribution of plaintiff's pre-martial assets, which were set aside specifically for this purpose. According to defendant's testimony, the parties disagreed as to whether the oldest daughter should attend private high school. Defendant testified that plaintiff wanted the oldest daughter to attend public school, and he removed himself from the process of selecting a private high school. Defendant and the oldest daughter decided that she should attend the Nightingale School in New York City, where she received $28,000 in scholarships for the first year. The annual tuition was approximately $32,000, plus costs of books, daily commuting from Jersey City, school uniforms, and a mandatory trip to England, totaling approximately an additional $3,300.
On appeal, plaintiff raises the following issues for our consideration:
POINT I: THE COURT FAILED TO INCLUDE ALL RELEVANT INFORMATION IN DETERMINING THE ISSUE OF CONTRIBUTION TO HIGH SCHOOL TUITION BASED UPON A FINDING OF NO CHANGED CIRCUMSTANCES.
POINT II: THE COURT COMMITTED JUDICIAL MISTAKE OF FACT IN THE COURT'S ACCOUNTING OF THE ADD-BACKS OF THE APPELLANT'S INCOME AND MISTAKENLY IMPLIED AN INCORRECT PERCENTAGE AS THE THRESHOLD AMOUNT AND CHANGED CIRCUMSTANCES.
On the cross-appeal, defendant brings the following points to our attention.
POINT III: THE TRIAL JUDGE SHOULD HAVE ORDERED PLAINTIFF TO PAY ONE HALF OF TRAVEL AND OTHER HIGH SCHOOL EXPENSES, AS WELL AS, TUITION AND BOOKS.
POINT IV: DEFENDANT'S REQUEST TO HAVE PROPERTY SETTLEMENT AGREEMENT AMENDED TO EXTEND VACATION SCHEDULE TO MORE THAN ONE CONSECUTIVE WEEK SHOULD NOT HAVE BEEN DENIED WITHOUT A PLENARY HEARING.
We address plaintiff's arguments first and then those of defendant.
In the Family Part, "[a] notice of motion shall be served and filed, together with supporting affidavits and briefs, when necessary, not later than twenty four days before the time specified for the return date." R. 5:5-4(c).
Plaintiff argues in Point I that the trial judge's refusal to hear his motion, which was filed four days before the return date and not provided to the court until the hearing date, was error. Plaintiff, represented by counsel, had two months' notice of the August 20, 2007, plenary hearing, in which to file his motion. Defendant had no opportunity to respond to plaintiff's motion or to insist on additional discovery. Under the circumstances, it was well within the trial judge's discretion to reject the motion for a change in alimony and child support as untimely. Notwithstanding the motion's filing being unquestionably untimely, the trial court permitted plaintiff's attorney to introduce into evidence plaintiff's 2006 income tax return, which was attached to the motion.
Plaintiff contends that the trial court could not properly evaluate a change in financial circumstances because plaintiff's 2003 tax return was not introduced into evidence. However, there was no effort to introduce the 2003 tax return into evidence. Nevertheless, this omission was not fatal since there was substantial testimony of the parties' pre-divorce income, including the calendar year 2002.
We note further that a copy of the parties' joint 2003 tax return was included in plaintiff's appendix on appeal where the business income reported was $43,492. By comparison, plaintiff's 2006 tax return indicated a higher business income of $56,278. Thus, the trial court's refusal to entertain plaintiff's motion for a reduction in alimony and child support did not deprive the trial court of evidence that might undermine the trial court's finding of no change of circumstances. Pressler, Current N.J. Court Rules, Appendix IX-B to R. 5:6A, at 2341 (2009).
Plaintiff argues in Point Two that the trial court improperly added back certain tax deductions allowed by law in calculating his gross income. We disagree.
"The guidelines set forth in Appendix IX of [the] Rules shall be applied when an application to establish or modify child support is considered by the court." R. 5:6A. The line instructions for calculating gross income include:
b. the operation of a business minus ordinary and necessary operating expenses (see IRS Schedule C); [ . . . ]
d. interest and dividends (see IRS Schedule B);
e. rents (minus ordinary and necessary expenses - see IRS Schedule E);
[ . . . ]
j. distributions from government and private retirement plans including Social Security, Veteran's Administration, Railroad Retirement Board, deferred compensation, Keoughs and IRA's. [Pressler, supra, Appendix IX-B to R. 5:6A at 2340.]
With regard to income earned from self-employment or the operation of a business, the instructions further indicate:
b. Income and expenses from self-employment or the operation of a business should be carefully reviewed to determine gross income that is available to the parent to pay a child support obligation. In most cases, this amount will differ from the determination of business income for tax purposes.
c. Specifically excluded from ordinary and necessary expenses, for the purposes of these guidelines, are expenses allowed by the IRS for:
(1) the accelerated component of depreciation expenses; [ . . . ]
(5) home offices; [ . . . ]
(7) travel in excess of the government rate; [ . . . ]
(11) any other business expenses that the court finds to be inappropriate for determining gross income for child support purposes. [Ibid.]
First, plaintiff contends that the court improperly added back the $2,345 deduction for depreciation expenses. Plaintiff's 2006 tax return showed that he used the accelerated method of depreciation in calculating his deduction. The deduction for these expenses is specifically excluded by the guidelines in calculating gross income. Ibid. The trial court correctly added this deduction back into plaintiff's gross income.
Second, plaintiff asserts that the trial judge improperly added back $1,855, representing half of the home office expenses deducted from his taxes. Home office expenses, however, are specifically excluded by the guidelines, so the court actually erred in plaintiff's favor by not adding back the entire $3,710 deduction. Ibid.
Third, plaintiff contends that the trial court improperly added back half the $11,210 in travel expenses. In rendering her decision, the trial judge reasoned,
I didn't see that he ever traveled anywhere in the year 2006. He testified to travel to Los Angeles and travel to San Francisco to get employment, but I never was really clear as to what year that was. I believe he testified that he had that done before he got this contract at the time that he got divorced, so I didn't see that he traveled at all.
Plaintiff testified that he traveled to Los Angeles and San Francisco for job interviews in 2006. However, he indicated that he "was flown to Los Angeles to interview with a company . . . . They flew me out at their expense." Similarly, he testified, "[o]n another occasion I was flown to San Francisco to meet with a company." Lacking any additional evidence of significant travel expenses, the trial judge was well within her discretion under the guidelines to disallow half of those expenses in calculating plaintiff's income.
Fourth, plaintiff argued that the trial court improperly included as income the yearly $44,000 (according to the tax returns, $44,500) disbursement from his retirement account pursuant to I.R.C. § 72(t)(2)(A)(iv) (2008). Under the guidelines, such distributions were properly counted as income. Pressler, supra, Appendix IX-B to R. 5:6A at 2340.
Fifth, plaintiff maintains that the trial court double counted the $6,202 of investment income by adding it to the $56,278 of business income reported. Plaintiff's 2006 tax return included taxable interest of $6,202 in addition to the $56,278 business income. The guidelines provided for inclusion of interest income in calculating gross income for child support. Ibid. The trial court properly added it to plaintiff's income.
Lastly, plaintiff testified that he collected $10,000 a year in rental income that was not reported on his Case Information Statement (CIS). He argued that the trial judge added in the $10,000 rental income without deducting ordinary expenses that are allowed by the guidelines. Not so. Plaintiff testified that he charged $1,100 per month for rent, which would amount to $13,200 a year. He accounted for the difference by claiming that the apartment was frequently vacant, and that he needed to repaint it every time a tenant vacated the premises.
This court has held that non-income producing assets can be imputed and considered income for the purposes of calculating child support. Connell v. Connell, 313 N.J. Super. 426, 433 (App. Div. 1998). In light of Connell, it was reasonable for the trial court to impute the full potential rental value of $13,200 to plaintiff's income. As plaintiff failed to offer any evidence of his actual expenses, it was likewise reasonable for the trial judge to consider $3,200 as an offset for ordinary allowable expenses. The court's addition of the $10,000 rental income to plaintiff's gross income was well within its discretion.
If any error was made in calculating plaintiff's income, it worked in his favor. The court ultimately found that plaintiff's annual income was $126,000. As shown here, plaintiff's annual income should have been calculated at $128,640. The trial court made no appreciable mistake of fact in its finding with regard to plaintiff's income.
The PSA explicitly provided funds for the children's private elementary school education. The PSA did not make a similar provision for high school, stating only that contribution to the children's high school education would be negotiated by the parties, or failing that, adjudicated by the court. Plaintiff indicated that he disagreed with the decision to send his daughter to private high school, and he suggested public school as an alternative. It appeared that the children's continuing attendance at private school was previously decided by the trial court, and was not to be relitigated at the August 20, 2007, plenary hearing. That hearing was to focus on the parties' contributions to the private school expenses. Given that the original agreement did not provide the specific financing of the children's private educational needs after they reached high school, a prima facie showing of changed circumstances needed to be made under Lepis v. Lepis, 83 N.J. 139, 157 (1980).
Plaintiff claims that due to changed circumstances, he lacked the ability to contribute to his daughter's educational expenses. At the time of the divorce, plaintiff agreed to imputed annual income of $150,000, despite testifying to his struggle to maintain employment, and to his not earning more than $60,000 a year in the time period immediately preceding the divorce. Several years prior to that time period, plaintiff was able to earn a much higher income. Additionally, the day before settling the divorce, plaintiff received what turned out to be an unrealistic offer of earning over $170,000 on a seven-month assignment. Whether his agreement to imputed income of $150,000 was motivated by guilt over the divorce, as he testified, or rather, as defendant suggested, a desire to shield part of his income from his support obligations, remained unresolved. What the trial court considered in finding no substantial changed circumstances was that plaintiff was currently earning twenty percent less than his imputed income, although as pointed out, with omitted add-backs, the actual income was closer to fifteen percent less than his imputed income. After comparing the financial condition of the parties at the time of divorce and at the time of the hearing, the trial judge did not abuse her discretion in finding no substantial changed circumstances.
In addition, "a finding by the motion judge that . . . [plaintiff] was, without just cause, voluntarily underemployed . . . is requisite, before considering imputation of income." Dorfman v. Dorfman, 315 N.J. Super. 511, 516 (App. Div. 1998). In rendering her decision, the trial judge considered whether plaintiff was voluntarily underemployed by commenting,
I also was somewhat taken aback by the fact that he has not gone out to an official head hunter, gone out to a professional employment person and say, I need a job. I'm an exec. Find me a job. I was also concerned as to why he continues to look for start-up Internet companies, when he doesn't even have the computer skills to do a basic Excel spreadsheet. . . . But if that is his dream, who am I to interfere? He just needs to get a little bit more realistic on his going to find a job.
The trial court acted within its discretion both in imputing income to plaintiff, and in finding no substantial change in circumstances.
The guidelines for establishing or modifying child support obligations are set forth in Appendix IX of the Rules of Court.
R. 5:6A. These guidelines are applicable for the parties' combined net annual income up to $187,200.00. Pressler, supra, Appendix IX-A to R. 5:6A, at 2334-35.
Where the combined net income of the parents exceeds $187,200 per year, "the court shall apply the guidelines up to $187,200 and supplement the guidelines-based award with a discretionary amount based on the remaining family income . . . and the factors specified in N.J.S.A. 2A:34-23." Ibid. See also Pascale v Pascale, 140 N.J. 583, 593-94 (1995).
By agreement, the combined annual income of the parties was imputed at $190,000. Plaintiff's monthly child support obligation was $2,758.17, which exceeded the maximum in the guidelines. Any award of additional child support, therefore, would be discretionary based upon consideration of the parties' income and the statutory factors enumerated in N.J.S.A. 2A:34-23(a).
Included in the base child support schedules "are other costs related to transportation such as public transit." Pressler, supra, Appendix IX-A to R. 5:6A at 2321. Additional predictable and recurring expenses needing approval of the court are "expenses for children that may not be incurred by average or intact families such as private elementary or secondary education." Id. at 2322.
Here, defendant contends in Point Three of her cross-appeal that the trial court erred by not including ancillary educational expenses in its order for plaintiff's contribution in addition to half the cost of books and tuition for the daughter's private high school. These ancillary expenses amounted to approximately $3,300, and included commuting costs, school uniforms, and a mandatory trip to England. Defendant argues that transportation costs are not included under the child support guidelines. However, under Appendix IX-A8, transportation expenses are defined as:
All costs involved with owning or leasing an automobile including monthly installments toward principal costs, finance charges (interest), lease payments, gas and motor oil, insurance, maintenance and repairs.
Also included are other costs related to transportation such as public transit, parking fees, license and registration fees, towing, tolls and automobile service clubs.
The net outlay (purchase price minus the trade-in value) for a vehicle purchase is not included. [Pressler, supra, Appendix IX-A to R. 5:6A at 2321.]
Defendant observes that the transportation costs relate to the family's automobile and not to the cost of public transportation or commuting costs for the minor child. In so arguing, defendant overlooks the language contained in the definition, "other costs related to transportation, such as public transit . . . "
Here, the public transit involves commuting to New York to attend private school. If the oldest daughter had to attend a public school not within a reasonable distance of her home in Jersey City, she may have very well had to rely on public transportation unless there was busing provided by the school system. It should not be different if public transportation were required for her to go into New York.
The remaining expense of school uniforms and a mandatory trip to England are not extraordinary expenses and should be treated as predictable and recurring expenses. Pressler, supra, Appendix IX-A to R. 5:6A at 2322. As such, they needed approval by the court in order to be included in the list of expenses added to any child support obligation. While the scope of the plenary hearing was limited to consideration of the parties' contribution to their daughter's educational expenses, the testimony provided the trial court with sufficient information to consider the parties' incomes and the relevant statutory factors. These ancillary expenses were viewed as falling under existing support payments. In so doing, the trial court did not abuse its discretion.
The same is true with regard to defendant seeking reimbursement for one-half of the parking expenses when the oldest daughter was hospitalized for an extended period of time following brain surgery. These expenses were properly folded into the child support payments.
In seeking modification of support based upon changed circumstances, our Supreme Court held "that a party must clearly demonstrate the existence of a genuine issue as to a material fact before a hearing is necessary." Lepis, supra, 83 N.J. at 159.
Defendant contends in Point IV of her cross-appeal that the trial court was required to hold a plenary hearing based upon changed circumstances to consider her application to modify the PSA to extend her vacation time with the children. After the entry of the divorce judgment, she was presented with the opportunity to take advantage of "an annual low cost vacation in Europe." Plaintiff objected to this modification in the agreement because he claimed that on previous trips, defendant refused to allow the children to speak with him on the telephone "for weeks at a time." Additionally, plaintiff's unrefuted testimony was that defendant vacationed with her attorney, whom plaintiff had to contact in order to speak to his children.
The terms of the PSA, as defendant points out, were the result of "a complex negotiated settlement [that] . . . was bargained for only twenty months earlier." Part of that negotiation included the parties' agreement that the children could vacation with each parent for one week. The trial court acted with proper discretion in denying the modification of the PSA merely on the basis of defendant's new opportunity to take low-cost European trips with her attorney.
Defendant further asserts that modifying the PSA "presents a good cultural experience [that] will make the children happy and does not significantly impinge on plaintiff['s] relationship with his children and is in their best interests." This contention loses sight of plaintiff's uncontested testimony that the trips hindered him from speaking with his children.
Additionally, the record indicated that the children have not been deprived of cultural experiences, since the trial court allowed for a one-time modification of the PSA in 2007, and a mandatory trip to England was part of the oldest daughter's high school curriculum. Denial of the application to modify the PSA to extend vacation time was a proper exercise of judicial discretion.
Affirmed on both the direct and cross-appeals.