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Howard v. Fortuna

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 15, 2009

CARI HOWARD, PLAINTIFF-RESPONDENT,
v.
NICHOLAS FORTUNA, DEFENDANT-APPELLANT.

On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-2681-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 24, 2009

Before Judges Parker, Yannotti and LeWinn.

In this matrimonial matter, defendant Nicholas Fortuna appeals from an amended judgment of divorce entered on May 3, 2007; and five post-judgment orders: three entered on July 20, 2007 granting plaintiff's motion for enforcement and counsel fees and denying defendant's motion for reconsideration; an order entered on September 24, 2007 denying defendant's motion for recusal of the trial judge; and an order entered on September 27, 2007 denying defendant's motion for a stay.

I.

The parties were married in 1989 and had two children: a son, now age sixteen, and a daughter, now age fourteen. When they married, plaintiff had a Masters Degree in public policy and defendant had his law degree. In the early years of the marriage, plaintiff earned considerably more than defendant, who was beginning to build his law practice in New York City.

Plaintiff left her employment in 1996 to care for the children. In 1997, the parties purchased the marital home in Short Hills. In 2002, the parties hired an after-school babysitter so that plaintiff could assist defendant at the law firm after defendant bought his partner's interest. Plaintiff had law firm business cards listing her as "Administrator." She worked at the firm's New York City office and from home to increase the efficiency of the firm's billing and collection records. Among other things, plaintiff created monthly accounts receivable reports and summary spreadsheets listing the firm's matters, the outstanding balances and new invoices. Defendant acknowledged that plaintiff also managed the installation of all the computers and software at the firm.

At trial, plaintiff testified that through her efforts, "the firm revenues are fairly stable, but expenses have gone down significantly; and, therefore, the business profitability has gone up consistently since 2002." The only compensation plaintiff received was a lump-sum payment in 2004 of $7,500, which was actually paid by Millburn Management, a related company the parties had formed for tax purposes.

In April 2004, the parties contracted to purchase property in Naples, Florida. They paid $305,731 for the property and sold it in January 2005 for net proceeds of $357,169. In September 2004, they contracted to build a home in East Marion, Long Island, New York, for $670,000. In November 2004, they contracted to purchase a furnished condominium in Naples, Florida, for $285,000. The parties closed on the Florida condominium in January 2005, and stipulated the value of that property as $362,966.

At about the time they closed on the Florida condominium, plaintiff told defendant she wanted a divorce. As a result, in March 2005, they cancelled the contract for the Long Island home, losing about $65,000. Between January and June 2005, defendant claimed he spent $13,989.23 on furnishings, personalty and improvements for the Florida condo. Plaintiff disputed this, however, noting that they had purchased the condo furnished. In any event, approximately $12,000 of those purchases were made through Millburn Management.

On June 2, 2005, the parties signed an agreement in which they consented to joint legal custody of the children. On June 14, 2005, plaintiff filed the complaint for divorce. A consent judgment was entered on December 14, 2005, wherein the parties agreed that the children would spend sixty percent of their overnights with plaintiff and forty percent with defendant. In the consent judgment, the parties continued their agreement to share joint legal custody and to confer with each other before making decisions concerning the children's health, education and welfare. In the event they disagreed, they would retain a mediator to resolve those issues before resorting to litigation.

Prior to the complaint being filed, defendant diverted funds paid to his law firm and deposited them in an account in his own name. In April 2005, he deposited $42,000 in his account, $32,000 of which came from "draw checks" and $10,000 from the Millburn Management account. That same month, defendant deposited $1,000 toward the purchase price of $452,000 for a condominium in Maplewood. In May 2005, defendant paid an additional $44,200 on the condominium, and closed on that property in June 2005, and transferred $14,000 from the marital savings account to his individual checking account without telling plaintiff. The parties later agreed that plaintiff would receive credit for the $45,000 he had used from marital funds or defendant would pay her $22,600 from his share of the assets.

In June 2005 -- the month the complaint was filed -- defendant cancelled plaintiff's access to his American Express account and terminated her online access to their joint savings account. Plaintiff then transferred $34,500 of marital funds and $5,000 from a joint home equity account to her own checking account.

In September 2005, in accordance with a court order, plaintiff obtained employment as a manager for Jacobs Levy Equity Management, Inc. At the time of trial, she was earning $120,000 with the ability to earn a year-end bonus up to $30,000 and a deferred compensation bonus up to $20,000. Defendant's tax returns from 2004 indicated that his law firm earned $467,304 and Millburn Management earned $12,257. Based upon her knowledge of the firm's billing, accounting and collection systems, plaintiff maintained that defendant suppressed collection of receivables after January 2005. In January 2006, defendant made a mortgage application for a new home in Short Hills.

During the trial, numerous discrepancies in defendant's case information statement (CIS) were brought to light. He acknowledged not making certain court-ordered counsel-fee payments to plaintiff and making other payments from joint funds when he had been directed to use his own assets.

With respect to valuation of defendant's law firm, plaintiff's expert, Mark Bloomfield, testified at length as to how he valued the firm. He stated that he used the excess earnings approach, which he described as "a method between an asset approach and a capitalization of earnings." The excess earnings approach "is based on a methodology included in Internal Revenue Service Revenue Ruling 68609, which basically lays out a formula." The "formula attempts to capture not only an intangible good will value based on a revenue stream but also considers the tangible assets of the . . . entity that you're valuing." According to Bloomfield, "[t]hat approach is very commonly used in valuing professional practices." After extensive testimony about how he reached his conclusions, Bloomfield testified that the firm's good will was valued at $579,512 and added that amount to the net tangible assets of $441,660. As of June 30, 2005, he valued the practice at $1,020,000.

Several weeks after his testimony, Bloomfield supplemented his initial evaluation after receiving corrected billing information for June 2004 to June 2005. He indicated that the newly-provided billing information resulted in a revised value of defendant's interest in the law firm as $940,000 as of June 30, 2005 -- approximately $80,000 less than his initial appraisal.

Defendant's experts, David Politziner and Michael Yanoff, valued the law practice as of January 2006 at $379,000 using the capitalization of earnings method, and $303,000 using the asset approach. Politziner later amended his report and valued the firm at $340,000 using the capitalization of earnings method, and $541,000 using the excess earnings method. Politziner also testified at length as to how he reached his valuation.

With respect to the marital home, plaintiff's certified real estate appraiser valued the home at $960,000. Defendant's licensed appraiser valued the property at $1.3 million. Notwithstanding the difference in valuation, the balance on the mortgage as of March 2006 was $254,331.35. The parties agreed to share that balance equally.

II.

After a ten-day trial, the court rendered a lengthy and detailed written opinion, setting forth the parties' stipulations and the court's findings of fact and conclusions of law on custody and parenting time, equitable distribution, alimony, child support, the distribution of tax exemptions and provisions, allocation of medical insurance and expenses, life insurance and counsel fees. The amended judgment of divorce was entered on May 3, 2007 and provided as follows:

1. The marital home in Short Hills was valued at $960,000, to be shared equally by the parties.

2. The condominium in Naples, Florida, was valued at $362,966, to be shared equally by the parties.

3. Defendant's law practice was valued at $960,000, to be shared equally by the parties. Defendant was ordered to pay $480,000 to plaintiff by way of payment or offset of credit/debit.

4. Millburn Management was valued at $150,000. Defendant was awarded ownership but ordered to pay plaintiff $75,000 or offset by way of credit/debit.

5. The parties' retirement accounts were valued at $294,860 as of April 10, 2006, subject to market conditions from that date until the date of distribution. The parties were to share equally in those accounts and to submit a Qualified Domestic Relations Order (QDRO) for the distribution of the accounts.

6. The MB Trading Account/RAD 500 was valued at $2,200 on the date of the complaint and $2,300 as of April 10, 2006. Plaintiff was awarded ownership of the account and ordered to pay defendant half of its value as of the date of distribution.

7. The parties were to share equally in the American Express points accumulated as of June 30, 2005.

8. Plaintiff was awarded $22,600, representing half of the marital funds defendant had used toward the purchase of the Maplewood condominium.

9. Plaintiff was awarded $7,000, representing half of the marital funds defendant had transferred from the parties' joint checking account to facilitate his move from the marital residence.

10. Plaintiff was awarded $6,994.62, representing half of the marital funds defendant had transferred from the Millburn Management account and used to purchase personal property for the Florida condominium.

11. Defendant was awarded $17,250, representing half of the marital funds plaintiff had transferred from her MB Trading Account to her separate checking account.

12. Defendant was awarded $2,500, representing half of the monies plaintiff had transferred from the parties' home equity line of credit to her separate checking account.

13. Plaintiff was awarded $12,500, representing half of the monies defendant had transferred from the parties' home equity line of credit and used to pay attorneys fees.

14. The parties were ordered to share equally in the mortgage loan balance of $254,331.35.

15. The parties were ordered to share equally in the home equity loan balance of $242,817.43 as of March 23, 2006.

16. The parties were ordered to share equally in the $7,557.50 copying charges paid to Merrill Communications.

17. Defendant was ordered to pay $150,000 annually in alimony to plaintiff, with $6,250 payable on the first and fifteenth of each month, effective June 1, 2007.

18. Defendant was ordered to pay $33,660 annually in child support for the two minor children, with $1,403 payable on the first and fifteenth of each month, effective June 1, 2007.

19. The parties were ordered to share the reasonable child-related expenses, including but not limited to, "counseling, camps, extracurricular activities, tutors, enrichment programs, and higher education," with plaintiff responsible for forty-four percent and defendant responsible for fifty-six percent of such costs.

20. Defendant's pendente lite support obligation remained in effect until May 31, 2007, when the alimony and child support obligations became effective.

21. Plaintiff was permitted to claim the parties' older child as her dependent and exemption on State and Federal income tax returns, and defendant was permitted to claim the younger child as his dependent. When the older child is no longer a dependent under the Internal Revenue Code, the parties shall alternate the younger child as their dependent and exemption until that child is no longer a dependent.

22. Each party was ordered to be responsible for his and her own health insurance and unreimbursed medical expenses.

23. Plaintiff was ordered to continue to provide full health insurance coverage for the children until each becomes emancipated, and was ordered to be responsible for the first $250 and forty-four percent of the amount thereafter in unreimbursed medical expenses per child per calendar year. Defendant was ordered responsible for the remaining fifty-six percent.

24. Defendant was ordered to maintain life insurance in the face amount of $1.5 million as security for plaintiff's permanent alimony. He was further ordered to designate plaintiff as the irrevocable beneficiary.

25. Each party was ordered to maintain life insurance in the face amount of $1 million as security for the children's support and the anticipated costs of higher education.

26. Each party was ordered to be responsible for his or her own insurance, such as automobile and homeowner's insurance.

27. Defendant was ordered to pay $100,000 to plaintiff in counsel fees and costs.

28. Defendant was ordered to pay $60,000 to plaintiff for expert accounting fees and costs.

III.

In this appeal, defendant argues:

I.*fn1 THE COURT ERRED IN SETTING ASIDE THE JOINT LEGAL CUSTODY AND MEDIATION DISPUTE PROCESS AS AGREED UPON IN THE CONSENT JUDGMENT FIXING CUSTODY AND PARENTING TIME.

II. THE EQUITABLE DISTRIBUTION OF THE LAW FIRM, MARITAL HOME, MOVING EXPENSE AND PERSONAL PROPERTY CREDITS SHOULD BE REVERSED AS CONTARY [SIC] TO LAW AND FACT

A. Errors Regarding the Value and Distribution Of The Law Firm.

B. The Court Impermissibly Used Discovery Violations to Draw an Adverse Inference and Character as a Basis for Its Findings.

C. THE COURT'S OTHER FINDINGS ON ACCOUNTS PAYABLE AND ADMINISTRATIVE SERVICES FOR THE LAW FIRM SHOULD BE REVERSED AS A MATTER OF LAW.

D. The Valuation of the Firm should Be Determined by This Court, or Remanded With Specific Instructions Not to Include the Suppressed Receivable Cash Flow Numbers in the Court's Analysis, to Account for Accounts Payable, and to Account for the Value of Administrative Services.

2. The Court Erred in the Valuation and Distribution of the Marital Home.

3. The trial Court erred distributing no marital home personal property to defendant while crediting Plaintiff for Defendant's Moving Expenses and the expenses for improving and adding personal property to the Florida residence.

II. The Amount Of Child Support And Duplicate Obligations Imposed On Defendant Must Be Reversed And Remanded.

III. The Amount Of Child Support And Duplicate Obligations Imposed On Defendant Must Be Reversed and Remanded.

IV. The Entitlement And Amount Of Fees Awarded to Plaintiff Should Be Reversed.

V. ON REMAND OR FOR CONTINUED ENFORCEMENT PROCEEDINGS, THIS MATTER SHOULD BE ASSIGNED TO ANOTHER TRIAL JUDGE.

We have carefully considered the very extensive record in this matter*fn2 and we are satisfied that the trial court's decision is based upon findings of fact which are adequately supported by the credible evidence in the record. R. 2:11-3(e)(1)(A). We affirm substantially for the reasons set forth by Judge James B. Convery in his written opinion dated May 3, 2007. Nevertheless, we add the following comments.

IV.

Defendant initially argues that the trial court erred in "setting aside material portions of the Consent Judgment to elevate plaintiff's decision-making authority" respecting the parties' two children. We disagree.

This was a bitterly contested divorce as evidenced by the extent of the record and the expense of the litigation. The court recognized that the parties "dispute[d] how to make decisions related to their children" and "recognized the parent of primary residence to be the parent in the better position to make those decisions." The court held that as "primary caretaker," plaintiff "shall decide in the best interest of the children their medical needs and treatment, schooling, expenses, and even religious instruction" because it was not in the children's interest to "be in the middle of parental conflict" when decisions concerning their welfare needed to be made. The court left intact the parties' agreement to "confer on all important matters concerning the children's health, education and general well being" and to use a mediator to resolve disputes that might arise concerning the children. The court concluded that "[t]he parties shall be bound by the terms of their consent judgment fixing custody and parenting time subject to the plaintiff's authority as parent of primary residence." With respect to extraordinary medical treatment, the parties were to consult each other in advance, except in cases of emergency, and "[n]either party shall unreasonably withhold consent."

We agree that the trial court's modification of the parties' consent judgment is in the children's best interest, considering the hostility between the parties. Kinsella v. Kinsella, 150 N.J. 276, 317 (1997). Should the parties come to a resolution of their hostilities and be able to deal reasonably with each other regarding the children, they may seek to amend the judgment in respect of the custody provisions pursuant to N.J.S.A. 2A:34-23. In the meantime, irrespective of the parties' agreement, the court properly exercised its "supervisory jurisdiction as parens patriae," in the children's best interests. Sheehan v. Sheehan, 38 N.J. Super. 120, 125 (App. Div. 1955).

V.

With respect to alimony, defendant argues that the court erred in awarding permanent alimony and in focusing on what he claims were the "inflated" cash flow numbers in 2004 and 2005, rather than taking a more "historical" approach. The trial court set forth a detailed analysis of its alimony determination. After addressing the legal standards, the court stated that it was "clear the parties measured their standard of living defined by their annualized expenses of over $360,000," and that they "included savings and investments as part of their lifestyle."

The court correctly concluded that plaintiff was entitled to share in the "economic reward" achieved as a result of the parties' "combined efforts," and that the parties' marital lifestyle was as much a result of plaintiff's contributions in and out of the home as from defendant's efforts. The court found plaintiff's monthly expenses outlined in her July 2006 CIS to be credible, but found that defendant failed to "produce any credible evidence to support his marital monthly expense budget of $11,804 or $141,648 annualized[,] and [omitted] savings/investment from his marital budget" set forth in his July 2006 CIS. The court also found that defendant was not credible concerning the marital standard of living and calculated the parties' "available cash flows" at "over $550,000 in 2004 and approximately $590,000 in 2005 inclusive of perquisites received by the defendant." The court found it unacceptable that defendant "failed to disclose what became of the net income available to the parties under his marital standard of living budget except to declare 'any marital savings and investment [were] cancelled out to pay debt previously accumulated.'" Based upon our review of the record, we agree.

The court found plaintiff capable of earning $170,000 per year, but that defendant would continue to "out-earn" her. The court did not consider his ability to pay to be an issue. The primary consideration in determining alimony was the amount necessary to "continue maintenance" of plaintiff at the marital standard of living. Given plaintiff's annual income of $170,000 and defendant's imputed income of "$590,000 inclusive of perquisites," the court correctly balanced the parties' respective incomes with alimony. See Miller v. Miller, 160 N.J. 408 (1999); Overbay v. Overbay, 376 N.J. Super. 99 (App. Div. 2005).

The court reviewed plaintiff's expenses, noting that her monthly expenses included a full-time nanny for the children, her monthly home equity payment, her "current annualized needs" for her and the children, and concluded that $360,000 was "reasonably supported" as the family standard of living at the time of separation. After carefully reviewing the record, we find that the trial court's award of alimony is adequately supported by the credible evidence in the record. R. 2:11-3(e)(1)(A).

VI.

With respect to the July 20, 2007 orders, the trial court granted plaintiff's motion to enforce the support provisions of the judgment because while a defendant has certainly a right to appeal, has a right to seek reconsideration, the obligation of child support and alimony . . . was not paid according to the findings of the [c]court, the judgment . . . . He is obligated to comply with those until he got a stay.

We agree.

With respect to defendant's motion for reconsideration, the court stated "that its findings are based on the evidence" and that there was "no showing that the [c]court's decision was based on [a] palpably incorrect or irrational basis or that the [c]court did not consider or failed to appreciate the significance of probative, competent evidence." Accordingly, the court denied the motion for reconsideration and defendant's application for a stay of the judgment. The court declined to review its credibility findings, stating that "the testimonial and documentary evidence" supported those findings.

Again, we have considered the record with respect to the motions and we are satisfied that the trial court's decisions are supported by the credible evidence in the record. R. 2:11-3(e)(1)(A).

VII.

Finally, in an amended notice of appeal, defendant seeks review of an order entered on September 24, 2007 denying his motion for recusal of the trial judge. Defendant claims that "the trial [judge] made several inappropriate credibility determinations about defendant and his experts to justify rejecting the testimony and objective evidence presented at trial." After reviewing the record, we find no evidence of bias against defendant. The court made credibility determinations based upon the evidence presented and defendant's demeanor and testimony. We give great deference to the trial court's credibility findings and will not upset them unless they are patently contrary to the credible evidence in the record. State v. Locurto, 157 N.J. 463, 470-71 (1999).

Moreover, if this had been a jury trial, the court could have given the "False in One, False in All" charge, instructing the jury that if it found that defendant had testified untruthfully in one instance, it could find his entire testimony to be untruthful. Since numerous discrepancies in defendant's financial information were brought to light during trial, the "False in One, False in All" principle applies. As we have stated previously, the trial court's findings of fact are adequately supported by the credible evidence in the record.

Affirmed.


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