January 21, 2010
RAY V. CAPRIO, PLAINTIFF-APPELLANT,
JOANN C. CAPRIO, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Somerset County, Docket No. FM-18-153-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 21, 2009
Before Judges Rodríguez, Reisner and Chambers.
Ray V. Caprio (ex-husband) appeals from four post-divorce judgment orders. The May 5, 2008 order granted summary judgment in favor of Joann Caprio (ex-wife) and denied ex-husband's application for modification of his alimony obligation based on changed circumstances. The July 31, 2008 order denied reconsideration. The October 8, 2008 order denied an evidentiary hearing on ex-husband's medical condition, which allegedly impacts his gross annual income. The October 10, 2008 order awarded counsel fees to ex-wife. We reverse and remand, concluding that in light of conflicting evidence, the motion judge should have conducted an evidentiary hearing rather than deciding the matter on summary judgment.
The parties were divorced on December 22, 2003, after fourteen years of marriage. They have a thirteen-year-old daughter. However, the child support award is not an issue on this appeal. The parties' Property Settlement Agreement (PSA), which was incorporated into the judgment of divorce, provides that ex-husband would pay alimony for a term of fifteen years at $130,000 per year for the first ten years and $80,000 per year for the last five years. The PSA also provides that:
[s]aid alimony payments are based upon the [ex-husband's] gross annual income in excess of $500,000.00 per year. In the event that his gross annual income falls below $500,000.00 per year, then and in that event, [ex-husband] will be entitled to seek a modification or reduction of his alimony obligation. In the event that the [ex-husband] makes an application to the Court to modify support, then and in that event, the [ex-wife] shall have the right to seek a modification of this Agreement to extend the duration of said alimony payments. The parties agree that the [ex-wife's] income will not impact the amount of alimony [ex-husband] is required to pay pursuant to this Agreement.
In 2003, the year of the parties' divorce, ex-husband earned approximately $2.3 million. In 2004, he earned $2.2 million and in 2005, $800,000. Ex-husband, however, alleges that in 2006, rather than earning income, he incurred $333,954 in losses. Ex-husband also argues that his annual gross income for 2007 was less than $500,000. Ex-husband alleged that Equihome Mortgage (Equihome), of which he was president and a fifty-one percent shareholder, collapsed during 2006 and 2007 after struggling financially. Equihome filed for bankruptcy in January 2008. According to ex-husband, once Equihome went bankrupt, Certified Abstract and Settlement, Inc. (Certified Abstract), of which he was also president and shareholder, collapsed. The same occurred to Silver Creek Financial, LLC (Silver Creek), of which he was a fifty percent owner.
In February 2007, ex-husband moved for a reduction of his alimony obligation due to changed financial circumstances. However, ex-husband withdrew this motion in order to pursue mediation. After mediation failed, ex-husband re-filed the motion, asserting the same financial grounds for a reduction in alimony, i.e., his gross annual income has decreased below $500,000. Ex-husband also alleged a change in circumstances based on a significant change in his medical condition. At the time of the divorce, he suffered from hepatitis C. This condition has moved from stage three to full-blown cirrhosis of the liver. Ex-wife opposed the motion.
Both parties submitted briefs. Judge Thomas H. Dilts heard the parties' respective arguments and ruled that ex-husband had made a prima facie showing of changed circumstances. Judge Dilts ordered discovery and a plenary hearing and reduced exhusband's alimony obligation pendente lite from $130,000 per year to $60,000 per year.
The parties exchanged discovery. These included: exhusband's personal federal income tax returns for the years 2003 to 2006; Equihome's corporate income tax returns for the years 2005 and 2006; Silver Creek's corporate income tax returns for the years 2001 to 2006; Certified Abstract's corporate income tax return for the year 2006; and ex-husband's personal bank account statements.
In December 2007, ex-wife moved for summary judgment to dismiss ex-husband's application for modification of alimony and to reinstate the $130,000 a year alimony, retroactive to the date of Judge Dilts's order. Ex-wife also moved to sanction ex- husband and requested counsel fees and costs. In support of her motion for summary judgment, ex-wife relied on the reports and certifications of Michael A. Gould, CPA, a forensic accountant, who reported that ex-husband's gross annual income in 2007 exceeded the $500,000 threshold contemplated in the PSA. Gould examined deposits made into ex-husband's personal bank accounts during 2007 and determined that ex-husband's gross annual income was at least $894,974 net of inter-account transfers and documented repayment of loans.
Ex-husband opposed the motion and cross-moved for fees and costs. Ex-husband acknowledges the deposits in excess of $900,000, but alleges that $104,000 of those deposits actually represent income earned in 2001; $163,000 represents a federal income tax refund for tax years 2004 through and inclusive of 2006; $112,500 was a repayment from his Equihome partner for advances he made to Equihome; and $72,000 represents a return of a deposit made by ex-husband on a parcel of real estate. Exhusband's expert, Jeffrey E. Callahan, J.D., CPA, certified that "[a]ccording to [ex-husband's] bank statements, [ex-husband] advanced a total of $925,000 to Equihome (on behalf of himself and [his partner]) of which he received repayment of only $702,500." These amounts together exceed $452,000, which would reduce ex-husband's gross annual income for 2007 to $442,994.
Callahan also identified additional amounts that would reduce ex-husband's gross annual income to approximately $244,000. Thus, there was a sharp dispute as to whether ex-husband's income had decreased below the $500,000 threshold set by the PSA.
Despite this factual dispute, a different judge decided the motion for summary judgment and cross-motion for counsel fees without the benefit of an evidentiary hearing. The motion judge found that in 2007 ex-husband made deposits into his personal accounts totaling $1,991,887. The motion judge rejected Callahan's opinion "as being inconsistent with the standard established in the PSA" and accepted the analysis of Gould "as being consistent with law, logic and the facts." Because the motion judge found ex-husband earned over $500,000 in gross annual income in the year 2007, he granted summary judgment to ex-wife and signed an order to that effect dated May 5, 2008. The motion judge reversed the earlier determination, scheduling a plenary hearing on ex-husband's claim of possibility of changed circumstances based on his current medical condition. Alimony was reinstated to $130,000 per year and ex-wife was granted counsel and expert fees.
Ex-husband moved for reconsideration. By an order dated July 31, 2008, the motion judge denied this motion. Ex-husband moved for a plenary hearing to determine if his medical condition constituted changed circumstances warranting a reduction in alimony. On October 8, 2008, the motion judge denied ex-husband's application for a plenary hearing, noting that ex-husband's medical condition "would be relevant not as an independent basis to seek a reduction of support, but only on the issue of permanency." On October 10, 2008, the motion judge awarded $127,000 in counsel fees to ex-wife. Ex-husband now appeals.
Changed Circumstances Based on Reduced Income
Ex-husband first contends that "the court ignored and/or discounted competent evidence demonstrating that [ex-husband's] 2007 gross annual income was below $500,000 and failed to resolve genuine issues of material fact in his favor." Ex-husband argues specifically that the court's errors calculating his 2007 gross annual income at the summary judgment stage without a plenary hearing mandate reversal. We agree.
When a grant of summary judgment is under review, we apply the same standard as the trial court to the same motion record. Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536 (1995). Rule 4:46-2(c) provides that a court should grant summary judgment when "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." On appeal, we must first decide whether there is a genuine issue of fact. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). "An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." R. 4:46-2(c); see also Brill, supra, 142 N.J. at 540.
We conclude that the motion judge should not have granted summary judgment. First, on a motion for summary judgment, the evidence must be considered in the light most favorable to the non-moving party. Liberty Surplus, supra, 189 N.J. at 445. Here, it was not. The judge rejected the evidence presented by ex-husband on credibility and weight of the evidence grounds, including Callahan's opinion. Second, as stated above, summary judgment is applicable only when there are no disputed issues of material facts. Brill, supra, 142 N.J. at 536. Here, it is clear that there were disputed issues. Lastly, it is axiomatic that the judge should not find facts based on competing certifications. Davin, LLC v. Daham, 329 N.J. Super. 54, 70-71 (App. Div. 2000). Cross-examination of factual expert witnesses is essential to determine the validity of certifications and other proofs presented by a party. Lee v. Travelers Ins. Co., 241 N.J. Super. 293, 295 (App. Div. 1990). Here, an evidentiary hearing at which a factfinder can judge credibility is required.
Changed Circumstances Based On Medical Condition
Ex-husband argues that the parties' agreement did not state that support "may only" be modified if ex-husband's gross annual income fell below $500,000. Ex-husband presented evidence that he suffers from hepatitis C, which has moved from stage three to stage four liver disease to full-blown cirrhosis of the liver. Therefore, ex-husband argues that a demonstration that he was completely disabled and unable to work should constitute a changed circumstance, entitling him to a review of his support obligation. We agree.
New Jersey courts favor PSA agreements as a means to "resolve marital controversies" in allowing parties to anticipate future expenses. Konzelman v. Konzelman, 158 N.J. 185, 193 (1999). "[F]air and definitive arrangements arrived at by mutual consent should not be unnecessarily or lightly disturbed." Id. at 193-94 (quoting Smith v. Smith, 72 N.J. 350, 358 (1977)). Thus, although courts do generally consider support awards to be modifiable upon a showing of changed circumstances, a PSA will ordinarily control where it provides for the conditions under which modifications are allowable as between the parties. Lepis v. Lepis, 83 N.J. 139, 153 (1980); Dilger v. Dilger, 242 N.J. Super. 380, 385 (App. Div. 1990). In fact, particular leniency is afforded to agreements made in the area of domestic law, allowing judges greater discretion when interpreting these agreements. Massar v. Massar, 279 N.J. Super. 89, 93 (App. Div. 1995).
Here, the parties entered into a PSA setting a condition for modifying the alimony award, i.e., ex-husband's gross annual income falling below $500,000 in any year. As stated above, a determination whether that condition occurred for the year 2007 requires an evidentiary hearing on remand.
Our Supreme Court has also set forth the standard to be applied in determining whether the duties of the supporting spouse should be modified. Lepis, supra, 83 N.J. at 147-49.
The court's authority to modify the amount of an alimony award based on "changed circumstances" derives from N.J.S.A. 2A:34-23. Glass v. Glass, 366 N.J. Super. 357, 370 (App. Div.), certif. denied, 180 N.J. 354 (2004). Thus, the court may enforce the agreement if it is "fair and equitable," but the court's equitable authority to modify support obligations in response to changed circumstances cannot be restricted. Lepis, supra, 83 N.J. at 148-49; see also Smith, supra, 72 N.J. at 360. The Lepis inquiry involves two procedural steps: "[First,] [t]he party moving for the modification bears the burden of making a prima facie showing of changed circumstances. [Second,] [u]pon such a showing, a court may order discovery and hold a hearing to determine the supporting spouse's ability to pay." Miller v. Miller, 160 N.J. 408, 420 (1999) (citing Lepis, supra, 83 N.J. at 157-59). Thus, a hearing is held only if a party clearly demonstrates the existence of a genuine issue as to a material fact. Lepis, supra, 83 N.J. at 159.
In Lepis, the court recognized a non-exhaustive list of factors that give rise to changed circumstances, warranting modification:
(1) an increase in the cost of living;
(2) increase or decrease in the supporting spouse's income;
(3) illness, disability or infirmity arising after the original judgment;
(4) the dependent spouse's loss of a house or apartment;
(5) the dependent spouse's cohabitation with another;
(6) subsequent employment by the dependent spouse; and
(7) changes in federal income tax law. [Id. at 151.]
The party seeking modification carries the burden of proving changed circumstances. Id. at 157.
Here, the parties specified in their PSA an event which would entitle ex-husband to seek modification of alimony. However, the PSA did not address the issue of changed circumstances due to declining health of the supporting party. The PSA also does not limit a modification of alimony to only the gross annual income decreasing below $500,000. Therefore, we conclude that the October 8, 2008 order denying a hearing on ex-husband's health condition is vacated and remanded. On remand, the Family Part should determine in the evidentiary hearing whether ex-husband's health condition in conjunction with a decrease in his gross annual income, if so found, warrants a modification of alimony. In doing so, the Family Part should apply the Lepis factors.
The 2006 Annual Gross Income
Ex-husband argues on appeal that the motion judge erred as a matter of law in ruling that the terms of the PSA somehow rendered his 2006 gross annual income "irrelevant" and precluded him from seeking a modification of his support obligation in 2007. We agree.
The motion judge found ex-husband's 2006 gross annual income "irrelevant" because ex-husband earned more than the requisite $500,000 in 2007. However, ex-husband's income in 2006 was, allegedly, a negative amount. Ex-husband originally filed his motion to reduce alimony in February 2007 based on his 2006 income. Although this motion was withdrawn to pursue mediation, it was later re-filed in June 2007. Therefore, exhusband's income for the year 2006 was before the motion judge. We are mindful that changed circumstances must be permanent, rather than temporary. Lepis, supra, 83 N.J. at 151. However, the motion judge cannot ignore the fact that in 2006 ex-husband had no income, only losses on the grounds that in the following year there was some income.
Counsel Fees Award To Ex-Wife
Ex-husband argues that as a result of the motion judge's error in granting summary judgment to ex-wife, the award of attorney fees in her favor should be reversed. We agree.
A trial court's award of counsel fees and costs in a family action is discretionary and thus reviewed under an abuse of discretion standard. R. 4:42-9(a)(1); see also Williams v. Williams, 59 N.J. 229, 233 (1971); Eaton v. Grau, 368 N.J. Super. 215, 225 (App. Div. 2004). Here, based on the method by which the motion judge found the facts to support an award of counsel fees to ex-wife, we find an abuse of discretion. Therefore, the award of counsel fees to ex-wife is reversed and may be considered anew at the conclusion of the pending evidentiary hearing.
The May 5, 2008, October 8, 2008 and October 10, 2008 orders are reversed and remanded to the Family Part, Somerset County, for an evidentiary hearing to be conducted on exhusband's Lepis application. The July 31, 2008 order denying reconsideration of the May 5, 2008 order is moot.
Reversed and remanded.
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