February 6, 2009
MELISSA MUNDIE,*FN1 PLAINTIFF-RESPONDENT,
RICHARD W. ADAMS, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Mercer County, FM-11-1010-02-C.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 9, 2008
Before Judges Fuentes and Chambers.
Defendant Richard W. Adams appeals from the orders of January 22, 2008, and February 20, 2008, denying his post divorce judgment application to modify his child support, limited duration alimony, and reimbursement alimony obligations and requiring that he pay arrears and plaintiff's counsel fees.
Defendant's alimony obligations may not be modified based on changed circumstances because the property settlement agreement prohibits modification of the alimony payments. However, we reverse and remand to permit the trial court to fix a reasonable schedule for payment of the alimony obligations based on defendant's current ability to pay. Defendant has made a prima facie showing of changed circumstances regarding his child support obligations, and we reverse and remand for discovery and, if necessary, a plenary hearing on those issues. We reverse and remand in order that a reasonable schedule for payment on arrears may be fixed. We also reverse the award of counsel fees.
The parties were married on July 15, 1989, and have three children. They were divorced on April 23, 2003. The Final Judgment of Divorce incorporated the parties' Property Settlement Agreement (PSA) dated March 24, 2003. Both parties are now in their forties, and plaintiff has remarried.
The PSA gave the parties joint legal custody of the children, with plaintiff having primary residential custody. Defendant was obligated to pay $5,000 per month in child support, but upon plaintiff's remarriage, that obligation would increase to $6,000 per month. As part of his child support obligations, defendant was also required to maintain health insurance for the children, and he was responsible for their unreimbursed health costs up to $7,500 per year and half of the unreimbursed costs above that sum. In addition, he was required to contribute up to $3,000 toward the costs of the children's camp, pool membership, and lessons.
The PSA required defendant to pay plaintiff both limited duration alimony and reimbursement alimony. Defendant was also obligated to contribute to plaintiff's health care costs for a three year period ending March 31, 2006.
The limited duration alimony was in the sum of $5,000 per month payable for a period of ten years. It would terminate upon remarriage of the wife or the death of either party, whichever occurred first. The agreement provided that "[t]he aforesaid alimony payments shall not be modifiable except that in the event HUSBAND becomes physically disabled or WIFE cohabitates with an unrelated male, then alimony pursuant to this paragraph shall be modifiable consistent with New Jersey case law."
The reimbursement alimony arose from a $350,000 loan that plaintiff made to defendant to enable him to purchase interests in two minor league hockey teams. Defendant's share of the proceeds of the marital home (less a payment of $8,500 to defendant from the proceeds) were given to plaintiff towards payment of the loan. The balance due of $220,823 was treated as reimbursement alimony. The PSA provided that "HUSBAND'S reimbursement alimony obligation shall be non-modifiable under Lepis v. Lepis,*fn2 shall not be subject to termination upon WIFE'S remarriage, and shall not be dischargeable in bankruptcy court." This obligation did not terminate upon the death of the parties. Defendant was obligated to pay this sum by March 1, 2004, and if he did not do so, he was to pay off the loan in thirty-six equal monthly installments with interest.
Due to defendant's difficulties in meeting the payments on the loan, two written amendments were made to the PSA. In the first amendment made in 2005, when $169,276.96 remained due on defendant's reimbursement alimony obligation, the parties agreed that defendant's payments would be reduced to $3,500 per month at 7.5 percent interest, and the payment would increase to $4,322.03 commencing on January 1, 2006.
In the second amendment in May 2006, when defendant owed $139,477.14 in reimbursement alimony, the parties agreed that defendant's payments would be reduced to $1,500 per month and would be increased to $3,122.16 per month commencing January 1, 2007, and the interest was reduced to six percent. This amendment also modified the payment schedule for the limited duration alimony. While defendant was still obligated to pay plaintiff the equivalent of $5,000 per month in limited duration alimony until February 28, 2013, or her remarriage, he was allowed to make the payments at the rate of $1,000 per month until either plaintiff's remarriage or by February 28, 2013. At that time, he then was required to pay the balance due at the rate of $4,000 per month.
By December 2006, defendant had fallen into arrears in the amount of $11,230. Upon plaintiff's remarriage on July 1, 2007, defendant's child support obligation increased from $5,000 to $6,000 per month and his limited duration alimony payments increased from $1,000 to $4,000 per month. When defendant fell into further arrears, plaintiff moved to enforce litigant's rights. She sought arrears through December 2007, totaling $62,225.23. However, this sum included a monthly charge for unreimbursed medical costs with no proof that unreimbursed medicals were incurred in these amounts. It also included charges for medical insurance coverage that had terminated in March 2007. She also sought a judgment for the balance due on the loan, which by that time had been reduced to $105,224.78.
By order dated January 22, 2008, the trial court required defendant to pay the sum of $10,609 (representing the arrears for 2006) within thirty days and the balance of the arrears was to be paid at the rate of $4,301 per month. If defendant missed a payment, a judgment could be entered against him for the balance due. However, when explaining its decision, the trial court indicated that defendant could seek a modification and propose a payment schedule. Plaintiff's request to have payments on the loan accelerated was denied.
The trial court denied without prejudice defendant's cross-motion to modify his support obligations based upon changed circumstances due to defendant's failure to file his prior case information statement as required by Rule 5:5-4(a). Since neither party was found to have acted in bad faith, the trial court denied their requests for counsel fees.
Defendant immediately filed a motion for reconsideration, appending the requisite prior case information statement. Plaintiff cross moved for enforcement of litigant's rights.
Defendant's papers indicated that his income was not sufficient to meet his support obligations. Those obligations consisted of the following monthly payments: $6,000 for child support, $4,000 for back limited duration alimony, $3,122 for reimbursement alimony, and $4,301 in arrears for a total of $17,423 per month, plus his potential responsibility for $10,500 per year in camp and unreimbursed medical expenses. His monthly net income at this time was $10,260. Defendant's support obligation (including the unreimbursed medical and camp costs) totaled $219,576 per year.
Defendant's gross income for 2007 was $249,000, including a $69,000 bonus. His gross income for the year 2006 had been $197,502. At the time of the application before the trial court, defendant was employed by an events planning company. His base salary was $180,000, consisting of $160,000 in direct compensation and the balance in a car allowance and COBRA benefits. While he had received the $69,000 bonus in 2007, a certification from his employer made clear that defendant is not entitled to bonuses, that bonuses are at the sole discretion of the Board of Directors, and that the Board of Directors had no plans to provide defendant with a bonus in the near future. The listing of defendant's assets and liabilities in his Case Information Statement showed a negligible net worth. He had been going into credit card debt and selling assets in an attempt to meet his financial obligations.
At the time of the divorce, defendant agreed that income of $305,000 before taxes, could fairly be imputed to him. As defendant now explains, at the time of the divorce "I was at the pinnacle of my success." During the marriage, defendant had first worked as a police officer until 1995. Then after graduating from law school and passing the bar, he became president and chief executive officer of the East Coast Hockey League where he worked for nine years. He began managing minor league hockey teams for Coachsports and also acquired interests in various minor league hockey teams. According to defendant, because "the hockey business has imploded over the past five (5) years," he was unable to sustain this level of income. He lost his position with Coachsports, and began his position with his current employer. He sustained losses from his investments in the minor league teams, and sold all of his interests in the teams except one, and that team is losing money.
While defendant's financial situation had deteriorated, he argued that plaintiff enjoys a standard of living beyond that experienced during the marriage, due to her remarriage and inheritance from her grandfather. Indeed, plaintiff submitted proofs that she and her children are beneficiaries of her grandfather's trust. The trustee has the power to invade principal for their health, education, and welfare, and through this provision, the children's education costs are paid. Plaintiff also is expected to receive $25,000 annually in interest from the trust.
By order dated February 20, 2008, the trial court denied defendant's motion, ordered him to pay $1,500 in counsel fees to plaintiff, and directed that he pay the arrears totaling $51,774.92 within thirty days or a judgment would be entered against him in that sum.
On appeal, defendant contends that he had made a prima facie case of changed circumstances warranting a review of his child support obligations; that his payment schedule for reimbursement and limited duration alimony should have been modified; that the payment schedule for the arrears was in error; that the arrears should not be reduced to judgment; and that the trial court erred in awarding counsel fees to plaintiff.
At the outset we note that a property settlement agreement will be enforced if it was voluntarily made and its terms are fair and equitable. Lepis v. Lepis, supra, 83 N.J. at 148. However, the court has the equitable power to modify the support obligations set forth in a property settlement agreement in response to changed circumstances. Id. at 148-49. A "decrease in the supporting spouse's income" is a changed circumstance warranting modification of the support obligation. Id. at 151.
Defendant has made a prima facie showing of changed circumstances due to the decrease in his income. At the time of the PSA, $305,000 annual income was imputed to him. At the time of the application before the trial court, his annual income was $180,000. Plaintiff contends that the $69,000 bonus defendant received should be included in his income figure. However, as defendant's employer's certification makes clear, it has no obligation to provide a bonus nor does it have any plans to do so. Defendant's support obligations now exceed his income. Further, plaintiff's inheritance also supports a prima facie showing of changed circumstances. See Stamberg v. Stamberg, 302 N.J. Super. 35, 42-43 (App. Div. 1997) (recognizing that "receipt of a substantial inheritance, standing alone, or [in] combination [with] the changes in [the supporting spouse's] finances for the worse" may constitute a change in circumstances).
In the PSA, the parties agreed that the limited duration alimony could not be modified unless defendant became physically disabled or plaintiff cohabited with an unrelated male. They also agreed that the reimbursement alimony, the payments intended to pay off plaintiff's loan to defendant, could not be modified under Lepis v. Lepis, and would not be terminated upon the wife's remarriage. Limitations such as these on the ability to modify support obligations are enforceable with the exception that "[i]f circumstances have made the parties' standards unreasonable, they can in extreme cases be modified." Morris v. Morris, 263 N.J. Super. 237, 246 (App. Div. 1993). As we explained:
The usual 'fair and equitable' Lepis standard is still to be applied, but . . . the court must determine what is warranted under the prevailing circumstances. Such circumstances include plaintiff's agreement to accept and defendant's agreement to pay a fixed amount, regardless of changes in circumstances.
[Id. at 242.]
On appeal, defendant does not dispute the enforceability of these anti-modification provisions. However, he seeks a repayment schedule that he can reasonably meet. He is entitled to this relief. As we concluded in Morris, while the support payments set forth in the agreement remained a liability of the former husband, they would be allowed to accumulate "and he only will make these payments if and when his fortunes change." Id. at 244. The trial court had "both the power and duty to establish a reasonable level of current payment based upon defendant's income, assets, and reasonable resort to credit." Ibid. Similarly, in this case while the alimony debt to plaintiff may accumulate, the court must fix a reasonable level of current payments based on defendant's present financial circumstances. Accordingly, we reverse and remand in order that the trial court may fix a reasonable level of current alimony payments.
The child support payments, including the contributions toward unreimbursed medical and camp expenses, are not subject to similar language preventing modification based on changed circumstances. As a result, since defendant has made a prima facie showing of changed circumstances, we remand for further proceedings, including any discovery and, if necessary, a plenary hearing. Even though payment of defendant's alimony obligation may be deferred in part, it is still part of his overall financial status and must be considered when fixing the child support obligation. We leave it to the sound discretion of the trial court, once the full financial situation of both parties is clarified, to fix the appropriate amount of child support payments.
We next address the issue of arrears. Enforcement and collection of arrears in alimony and support payments is left to the sound discretion of the court. In re Rogiers, 396 N.J. Super. 317, 327 (App. Div. 2007). In exercising this discretion, the court must engage in a "careful examination and weighing of all of the essential facts." Ribner v. Ribner, 290 N.J. Super. 66, 76 (App. Div. 1996) (quoting Mastropole v. Mastropole, 181 N.J. Super. 130, 141 (App. Div. 1981), superseded by statute on other grounds, N.J.S.A. 2A:17-56.23 (prohibits retroactive modification or extinguishment of child support arrears)). In this effort, the court must consider defendant's ability to pay. See Crespo v. Crespo, 395 N.J. Super. 190, 195 (App. Div. 2007) (holding that collection of child support arrears were to be suspended until "such time as defendant has the ability to pay the arrears from income or assets, actual or imputed, other than SSI"); Mastropole v. Mastropole, supra, 181 N.J. Super. at 140 (stating that where factual issues regarding the amount of arrearages or the obligor's ability to pay are presented, a plenary hearing is required).
The provisions for repayment of the arrears imposed by the court constituted an abuse of discretion, because they bore no correlation to defendant's ability to pay and were virtually impossible for him to meet. The trial court initially required defendant to pay arrears at the rate of $4,301 a month. The monthly arrears payment together with defendant's other support obligations to plaintiff exceeded his monthly income. When defendant failed to make the payments, the court then entered an order requiring him to pay the full amount, totaling $51,774.92, within thirty days or a judgment would be entered against him in that sum. However, the record indicates that defendant did not have the means to make such a payment. Accordingly, we reverse and remand in order that a reasonable payment schedule may be fixed for payment of the arrears.
Finally, we consider the award of attorney's fees in favor of plaintiff. While the awarding of counsel fees in a matrimonial case is within the discretion of the family court judge, the judge nevertheless must consider and make findings on the factors set forth in Rule 5:3-5(c). Clarke v. Clarke, 359 N.J. Super. 562, 572 (App. Div. 2003). The trial judge reviewed these factors, and indicated that he was awarding plaintiff counsel fees in the sum of $1,500 due to "the need to enforce an existing agreement and the reasonableness and good faith of the positions advanced by the parties." In light of our rulings, these reasons for awarding counsel fees fail, since defendant had a reasonable, good faith basis for his application. Accordingly, we reverse the award of counsel fees.
Reversed and remanded for further proceedings in accordance with this opinion.