October 23, 2009
LYDIA HENRY, PLAINTIFF-RESPONDENT,
NECTOR HENRY, DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM 07-2000-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 22, 2009
Before Judges Wefing, Messano and LeWinn.
Defendant, Nector Henry, appeals from certain provisions of a final judgment of divorce entered, following trial, on December 19, 2007, relating to equitable distribution of two properties and the imputation of his income for the purpose of determining his alimony obligation to plaintiff, Lydia Henry; he also appeals from the February 14, 2008 order denying his motion for reconsideration.
We conclude that the trial judge's determination of the amount of the net proceeds of sale of an East Orange property subject to equitable distribution was not based upon substantial credible evidence of record; therefore, we reverse that issue and remand for further proceedings. In all other respects, we affirm the final judgment of divorce and the order denying reconsideration.
The parties were married on May 1, 1996; plaintiff filed her complaint for divorce on March 6, 2006. The parties have six children who ranged in age from eight to almost two years old as of the date of complaint. During the marriage, plaintiff "was solely a homemaker and... defendant was solely the income provider[,]" as the trial judge determined. Plaintiff has several disabilities; she was diagnosed with lupus in 2004, underwent surgery and chemotherapy for thyroid cancer in 2005 and 2006, and suffers from rheumatoid arthritis.
Defendant holds bachelor's and master's degrees in industrial manufacturing/engineering. During the marriage he was employed by the Metropolitan Transit Authority (MTA) in New York City; the parties' 2004 joint federal income tax return reflects that defendant earned wages of $51,428 in that year.
Defendant testified at trial that the MTA terminated him for cause in March 2005. Since that time, he has not sought comparable employment and has earned income through purchasing and renting residential properties.
In 2001, the defendant purchased a residence at 145-34 Arlington Avenue, Jamaica, Queens, New York; title to this property was in defendant's name only. This was a three-family house; the family lived on the first floor and rented out the other two floors. Defendant's brother, Carlos, moved into the basement apartment and lived there rent-free with his girlfriend and child until 2004.
In 2004, the family relocated to a single-family home at 241 North Walnut Avenue, East Orance, New Jersey; again, defendant purchased this property and held title in his name only.
Defendant moved out of that residence in November 2005, following a domestic violence incident. Defendant sold the East Orange property on November 14, 2005 for $350,000. The HUD-1 closing statement for that sale showed payoffs of two mortgages from the proceeds: a first mortgage in the amount of $246,733; and a second mortgage in the amount of $62,700.06. The trial judge determined that the latter mortgage amount was subject to equitable distribution. This determination will be discussed further below.
Defendant sold the Queens residence in June 2006; the HUD-1 statement reflected a sale price of $635,000. Defendant testified, however, that the actual sale price was $595,000, because the buyer had requested that the closing statement reflect an inflated purchase price. Defendant stated that he actually received net proceeds of $1213 and not $22,706 as reflected on the statement.
Defendant claimed that he owed his brother Carlos $90,000 from the closing proceeds on the Queens property, $75,000 for repairs and improvements Carlos allegedly made to the property and $15,000 to repay a loan from Carlos to defendant; defendant produced no documentation to support these claims. The trial judge found defendant's testimony incredible and concluded that "the payment of $75,000 to Carlos Henry and [the] $15,000 claimed loaned to defendant [by Carlos] was an attempt to dissipate marital assets subject to equitable distribution between the parties." Therefore, the judge added $90,000 to the amount of proceeds subject to equitable distribution.
Sometime in 2006, defendant purchased three rental properties in Pittsburgh, Pennsylvania, where he then resided. The trial judge noted that defendant had engaged in the purchase, rehabilitation and rental of residential properties during the marriage; therefore, the judge included the rental income from the Pittsburgh properties in calculating defendant's earnings. Based upon tax returns and other documents in evidence, the judge determined that defendant earned gross annual rentals of $91,152, and deducted $45,000 in "expenses to maintain the investment rental properties[,]" thus concluding that defendant's net annual rental income was $46,152.
Regarding defendant's earned income, the trial judge noted that since his termination from the MTA in 2005, defendant had made no effort to obtain new employment in a comparable position and had offered no explanation for his failure to do so. During the marriage, defendant had maintained gainful employment while simultaneously pursuing rental income. Therefore, the judge concluded that it was proper to impute earned income to defendant. In light of defendant's education and work experience, the judge determined that he "should be able to earn a mean annual income between $72,000 and $78,000 as imputed from the published Occupation Wage Guidelines." When combined with his net rental income, the judge imputed a total of $115,000 annual income to defendant.
Turning to defendant's issues on appeal, we first address his claim that the trial judge erred in determining the amount of funds subject to equitable distribution from the sale of the East Orange property. Specifically, defendant argues that the judge erred in including proceeds from the second mortgage, in the amount of $62,700.06 in the proceeds subject to equitable distribution. Based upon the trial record, we agree.
We note, initially, that throughout the trial the judge found defendant's testimony incredible in various aspects. We defer to those findings in light of the trial judge's superior ability to observe demeanor and assess credibility generally. State v. Locurto, 157 N.J. 463, 474 (1999). Such deference is particularly appropriate towards Family Part judges because of their "special jurisdiction and expertise in family matters...." Cesare v. Cesare, 154 N.J. 394, 413 (1998).
We recognize that equitable distribution findings are within the sound discretion of the trial judge and will not be disturbed if they could reasonably have been reached by the judge on the evidence. Borodinsky v. Borodinsky, 162 N.J. Super. 437, 444 (App. Div. 1978). We must determine whether the findings are "clearly unfair or unjustly distorted by a misconception of law or findings of fact that are contrary to the evidence." Perkins v. Perkins, 159 N.J. Super. 243, 247 (App. Div. 1978). Reversal is warranted where the findings are not supported by "adequate credible evidence." Rothman v. Rothman, 65 N.J. 219, 233 (1974).
We conclude that the judge's findings respecting the disposition of the proceeds from the second mortgage on the East Orange property are not supported by "adequate credible evidence" in the trial record. Ibid. Neither party addressed the second mortgage either in testimony or with documentary evidence. The trial record is devoid of any evidence demonstrating the use to which those funds were applied. Nonetheless, the judge found that "defendant failed to account for the use of the second mortgage proceeds[,]" and concluded that "the sum of $62,700.06 is an asset subject to equitable distribution between the parties."
Defendant attempted to clarify this issue in his motion for reconsideration; there, he certified that plaintiff never claimed that the second mortgage... was subject to equitable distribution at any time during the proceedings.... The [s]econd [m]ortgage was created on the day we purchased the East Orange property. The full proceeds of the [s]econd [m]ortgage were used to buy the property, and not for the purpose of hiding assets from [plaintiff].
Defendant appended a HUD loan statement dated October 12, 2004 and a mortgage dated October 8, 2004, both of which reflected a loan in the gross amount of $62,000, reduced by closing costs of $800.42 to a net amount of $61,199.58. Defendant also appended the HUD-1 closing statement from his purchase of the East Orange property, which reflected a "[s]econd [m]ortgage" of $61,199.58. Defendant contended that, "[b]ecause the [c]court raised the issue in its opinion, the [c]court should reopen the case and consider the documentary evidence [attached.]"
In denying defendant's motion for reconsideration on this issue, the judge stated in his February 14, 2008 written statement of reasons:
[D]efendant has failed to show any error on the part of the court in its determination of the sale proceeds of the East Orange property and the amount subject to equitable distribution. In fact, defendant's arguments are merely an attempt to rehash the issues presented to the court at trial in an attempt to get a ["]second bite at the apple.["]
The court came to rational and sound conclusions as to the equitable distribution proceeds from the sale of the East Orange property after carefully scrutinizing all documents presented to the court and diligently searched the record. Consequently, defendant's request for reconsideration of the court's ruling as to the equitable distribution of the sale proceeds and the court's assessment that the defendant failed to account for the monies secured through a second mortgage on the East Orange property and as such dissipated mar[it]al assets is denied.
It is well established that a party seeking to exclude an asset from equitable distribution bears the burden of establishing the basis for such exclusion. Landwehr v. Landwehr, 111 N.J. 491, 504 (1998); Painter v. Painter, 65 N.J. 196, 214 (1975). Here, defendant did not address this issue at trial; the only evidence he submitted regarding the sale of the East Orange property was the HUD-1 statement from that sale. Plaintiff, however, raised no claim to equitable distribution of these mortgage proceeds.
In the absence of any material evidence of record, the judge's finding in his trial decision that "the sum of $62,700.06 is an asset subject to equitable distribution between the parties" was not justified. Moreover, the judge's statement in his decision denying defendant's reconsideration motion, that he "came to rational and sound conclusions as to the equitable distribution" of this second mortgage "after carefully scrutinizing all documents presented... and diligently searching the record[,]" is not supported by the trial record. The only "document presented" at trial was the HUD-1 closing statement. No matter how "diligently" the trial judge may have searched that statement, it disclosed no evidence as to the disposition of the second mortgage proceeds.
Because the trial record itself did not provide adequate credible evidence to support this aspect of the judge's equitable distribution decision, Rothman, supra, 65 N.J. at 233, we reverse and remand for further proceedings on this issue.
With respect to defendant's other issues, we conclude they lack sufficient merit to warrant further discussion in this opinion. R. 2:11-3(e)(1)(E). We add only the following comments.
As noted earlier, the trial judge found much of defendant's testimony incredible. We defer to those findings. Locurto, supra, 157 N.J. at 474; Cesare, supra, 154 N.J. at 413. Defendant supported his claim of indebtedness to his brother, Carlos, by appending Carlos' certification and 2006 tax return to his motion for reconsideration. The tax return reflects a "bad debt recovered" in the amount of $75,000; it appears, however, that this tax return was never filed. The copy provided does not bear Carlos' signature. In fact, the following words are typed in the signature line, "For Info Only - Do not file[.]" Unlike the documents regarding the second mortgage on the East Orange property, we do not regard either Carlos' certification or his tax return as sufficient to cast doubt upon the trial judge's decision on this issue.
Finally, we affirm the trial judge's methodology of imputing income to defendant for support purposes, substantially for the reasons stated by the judge in his trial decision as supplemented by his reasons in his decision denying defendant's motion for reconsideration; we are satisfied that these reasons are adequately supported by the record. R. 2:11-3(e)(1)(A).
Affirmed in part; reversed and remanded in part.
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