March 2, 2010
BONNI KISBERG, PLAINTIFF-RESPONDENT,
FRANKLIN KISBERG, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-1787-98.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued Telephonically October 26, 2009
Before Judges Carchman, Lihotz and Ashrafi.
Defendant Franklin Kisberg appeals from a post-judgment order denying his motion to modify the amount of spousal support he must pay plaintiff Bonni Kisberg. In 2005, the parties entered a consent order, which reduced spousal and child support based upon defendant's financial circumstances. Defendant moved for further reductions when he began repayment of past-due income taxes. Defendant asserts the trial court erred in concluding this was not a change of circumstances. Following our review of the record and the arguments of counsel, we affirm.
After sixteen years of marriage, plaintiff filed a complaint for divorce. On September 15, 1998, the parties negotiated the terms of a property settlement agreement (PSA), resolving the issues of property distribution, alimony, child custody and support. Pursuant to the terms of the PSA, defendant agreed to pay $1350 per week in spousal support and $432 per week to support the parties' two children. That day, the PSA was incorporated into the terms of a Final Judgment of Divorce (FJOD).*fn1
In late 2001, defendant was unable to pay as agreed. He filed a motion seeking modification. The court ordered a plenary hearing to review whether defendant's circumstances had changed sufficiently to warrant a downward modification of his support obligations. Sometime during this period, defendant filed a voluntary petition pursuant to Chapter 7 of the Bankruptcy Code, and a discharge was entered on November 23, 2003.
Following a hearing on January 12, 2004, the court entered an order reducing defendant's weekly support obligation to $1050 and issued a schedule for satisfaction of the accumulated arrearages.*fn2 Plaintiff filed multiple enforcement requests, including motions requesting defendant's incarceration for non-payment. On October 4, 2004, the parties again redefined defendant's support obligations. The agreement stated defendant would pay $550 per week, allocated $200 for child support and $350 for alimony, until June 1, 2005. After that date, support was to "return to the level determined by the [c]court's previous order of January 12, 2004."
In 2005, defendant again moved to reduce support. The parties resolved the matter without benefit of a hearing by entering into a consent order on November 7, 2005. That order provided defendant would pay an aggregate sum of $1192 on the first and fifteenth day of each month, allocated $400 in child support and $792 in alimony. Further, the parties agreed that beginning on June 1, 2006, the alimony component would be increased by $200 each quarter until it reached $1750. Additionally, the order detailed defendant's obligations to fund a portion of the children's college education costs, satisfy the accumulated arrearages, and pay plaintiff's attorney's fees.
Defendant repeatedly failed to pay the sums due. Consequently, plaintiff moved for enforcement of litigant's rights, and her request was granted. The resulting November 16, 2007 order required defendant to satisfy $4300 in outstanding arrearages and provide financial disclosure of his business, Den Ventures, LLC.
In a December 19, 2007 letter, counsel revealed defendant had failed to pay his federal income taxes since 2001, creating a $90,000 indebtedness to the Internal Revenue Service (IRS). The letter stated defendant had agreed to repay his tax obligation at a rate of $1800 per month and to remain current on his estimated quarterly tax payments of $3500.
In January 2008, defendant's nonpayment of support prompted plaintiff to again move to enforce litigant's rights.*fn3
Attributing his inability to pay the ordered support to the necessity of complying with the IRS agreement, defendant filed a cross-motion to reduce his support obligations.
Defendant suggested his now $100,000 federal income tax debt was incurred when he "failed to pay his taxes... because [he] used the money for [p]laintiff's support." Defendant also argued it was impossible to meet his income tax debt and pay support as ordered from his $120,000 annual earnings. He asserted the "massive IRS debt constituted a prima facie change in circumstances warranting" a plenary hearing to review whether a further support reduction should be ordered.
Defendant's certification did not discuss his current employment and, except to generalize that he was "strapped financially" and his "financial situation has taken a turn for the worse," defendant did not elaborate on his current business enterprise or elucidate any limitations on his earning abilities. He attached only a partially completed case information statement and uncertified business spreadsheets for 2006 and the first six months of 2007. No expert analysis of this information was submitted.
In reply, plaintiff argued defendant's financial situation improved from what he experienced in 2005. She specifically identified: (1) the $120,000 salary he paid himself was more than double his reported 2005 earnings of $50,000;*fn4 (2) $714,000 of debts had been eliminated following entry of his bankruptcy discharge, including $70,000 owed to her as her equitable distribution; (3) the IRS debt was not new or unanticipated as defendant had disclosed an almost $70,000 IRS debt on his 2005 CIS; and (4) defendant was current on his newly incurred $675 per month car loan and also listed a new "personal loan" obligation of $520,000, without explaining the loan's use.
Oral argument on the matter was heard on March 3, 2008. After reviewing the parties' certifications and considering the arguments of counsel, the court enforced the November 5, 2005 consent order and denied defendant's request for a plenary hearing to demonstrate his asserted diminished financial circumstances.
In colloquy with counsel, the judge intertwined the following findings, which bore on her denial of defendant's motion: (1) the level of support set forth in the 2005 order was set by an agreement of the parties, not a determination of the court; (2) the agreement was based upon defendant's net income and indebtedness as expressed in his 2005 CIS; (3) at the time the 2005 agreement was struck, the IRS had already imposed a taX lien; (4) defendant's income had increased significantly since the time of the agreement; (5) defendant was not a "financial neophyte" but a "very intelligent[,]" and "very well-educated" person who "knows money"; (6) defendant's request to reduce support was filed in reaction to plaintiff's motion for enforcement; (7) defendant is "creative, he's innovative, he's not shy, he's not without his charm, and he's very knowledgeable and sophisticated about financial matters"; (8) this was a long-term marriage; (9) the IRS debt was not "a reversal of fortune" or an unexpected event, it was known and "anticipated"; and (10) beginning in 2001, defendant chose not to pay the IRS.
The motion judge responded to defendant's argument asserting defendant's support obligation must be decreased because he "can't ignore the IRS," stating:
[H]e's not permitted to ignore the [c]court and he's not permitted to ignore what he consented to. [Defendant] has a long history of not meeting his obligations and of making agreements, which he doesn't meet. I mean, believe me, we've had a lengthy plenary hearing, and it  actually stands out in my mind,... he's an interesting person. And he's certainly financially savvy. You know he's by no means some poor soul who's uneducated about these matters[.]*fn5
Taken together, we understand the court's comments and credibility findings to suggest defendant's failure to meet his burden of a prima facie showing that his recent repayment of back taxes was a change of circumstances warranting modification of support. See Lepis v. Lepis, 83 N.J. 139, 157 (1980); Isaacson v. Isaacson, 348 N.J. Super. 560, 579 (App. Div.), certif. denied, 174 N.J. 364 (2002). On appeal, defendant labels his support obligation "oppressive and inequitable" and contends he must be permitted to establish his inability to earn income consistent with his expectations when he entered into the 2005 order. Collectively, defendant's arguments challenge the motion judge's findings and assert the court erred in denying his request for a plenary hearing to demonstrate his inability to satisfy the ordered obligations.
"Because of the family courts' special jurisdiction and expertise in family matters, [we] should accord deference to family court factfinding" when those findings are supported by "adequate, substantial, credible evidence in the record." Cesare v. Cesare, 154 N.J. 394, 412-13 (1998); Gonzalez-Posse v. Ricciardulli, __ N.J. Super. __ (App. Div. 2009). Particular deference is afforded on issues of credibility. Cesare, supra, 154 N.J. at 412. "Trial court findings are ordinarily not disturbed unless 'they are so wholly unsupportable as to result in a denial of justice.'" Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 475 (1988) (quoting Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974)); Roe v. Roe, 253 N.J. Super. 418, 432 (App. Div. 1992). Therefore, we will not disturb a trial judge's factual findings unless we determine they are "so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Cesare, supra, 154 N.J. at 412 (internal quotations omitted); Beck v. Beck, 86 N.J. 480, 496 (1981). The trial court's legal conclusions, however, receive no such deference. Balsamides v. Protameen Chems., Inc., 160 N.J. 352, 372 (1999).
Additionally we consider the "strong public policy favoring stability of consensual arrangements for support in matrimonial matters[.]" Avery v. Avery, 209 N.J. Super. 155, 160 (App. Div. 1986). Enforcement of consensual agreements ensures their stability and "enabl[es] parties to order their personal lives consistently with their post-marital responsibilities." Konzelman v. Konzelman, 158 N.J. 185, 193 (1999). "An application to modify an agreement is an exception, not the rule... [and] agreements entered into in good faith... shall be performed in accordance with their terms." Glass v. Glass, 366 N.J. Super. 357, 379 (App. Div.), certif. denied, 180 N.J. 354 (2004).
When a significant change in circumstances renders enforcement of a support agreement inequitable, an exception may be made resulting in modification of the parties' agreed terms. Ibid.; see also Innes v. Innes, 117 N.J. 496, 518 (1990) (stating a settlement agreement should be enforced by a trial court only to the extent it is equitable and just); Miller v. Miller, 160 N.J. 408, 420 (1999); Lepis, supra, 83 N.J. at 146. "The equitable power of the courts to modify alimony and support orders at any time is specifically recognized by N.J.S.A. 2A:34-23[.]" Lepis, supra, 83 N.J. at 145; Weitzman v. Weitzman, 228 N.J. Super. 346, 353 (App. Div. 1988), certif. denied, 114 N.J. 505 (1989). Payment obligations are subject to review and their modification may be granted upon a showing of "changed circumstances." The party requesting modification bears the burden to show circumstances have changed in a way to compel an increase or decrease in the order for support. Lepis, supra, 83 N.J. at 157.
Importantly, "deciding whether a support agreement should be modified based upon changed circumstances requires the court to determine 'what, in the light of all the facts presented to it, is equitable and fair, giving due weight to the strong public policy favoring stability of arrangements.'" Avery, supra, 209 N.J. Super. at 160 (quoting Lepis, supra, 83 N.J. at 148). The court is obliged to examine "whether the agreement or decree has made explicit provision for the change." Lepis, supra, 83 N.J. at 152. "If the  support arrangement... provided for the circumstances alleged as 'changed,' it would not ordinarily be 'equitable and fair' to grant modification." Id. at. 153 (quoting Smith v. Smith, 72 N.J. 350, 360 (1977)).
In Lepis, supra, the Court identified certain events that qualify as changed circumstances. 83 N.J. at 151. These include:
(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. [Ibid. (citations omitted).]
There is no firm rule governing when an existing support obligation ceases to be "'equitable and fair'"; rather, courts must assess and balance a myriad of factors presented in each individual case. Id. at 153. (quoting Smith, supra, 72 N.J. at 360). These factors include whether the change is temporary or permanent, voluntary or involuntary, motivated by bad faith or a desire to avoid payment or renders the payor unable to pay.
Defendant relies upon our unpublished opinion in Hawley v. Levine, Docket No. A-3098-06T3 (App. Div. Nov. 2, 2007), to support his argument that recent resolution with the IRS of his tax delinquency qualifies as a change of economic circumstances. Even though the opinion does not "constitute precedent," Rule 1:36-3, we will examine the opinion because it is the single legal authority advanced by defendant.
In Hawley, the plaintiff's earning capacity was a hotly contested issue. Ibid. The plaintiff, a physician, lost his employment in a medical practice following his arrest for "participation in an illegal scheme to sell prescription drug samples to a drug company representative." Id. at 2. He pled guilty, and the state licensing board revoked his privilege to bill Medicare or Medicaid for ten years. Ibid. At the time of trial, the plaintiff was operating a clinic and performing laser hair removal. Ibid. He testified the business was operating at a loss but receipts were expected to improve. Ibid. The trial court imputed income to the plaintiff based upon his proofs, which included financial projections, admitted into evidence. Id. at 3. Five years later, the plaintiff's actual income was significantly less than the sum imputed, and the plaintiff sought modification. Id. at 5.
The trial court denied the plaintiff's motion, finding he was not acting in good faith, as he had not paid his support obligations for several months and, generally, lacked credibility. Id. at 7. We reversed, concluding "an evidentiary re-evaluation of the parties' financial circumstances" was necessary to ascertain whether the plaintiff had a "realistic ability in [the current year] and in the foreseeable future to earn" annual income at the level imputed by the court. Id. at 9. We stated, the tax returns, financial records, certifications and other documents in the record are prima facie indicia, sufficient under the Lepis standard, to suggest that the [plaintiff] has sustained an adverse change in his financial circumstances, in contrast to the rosier earnings that were forecasted for him at the divorce trial six years ago[.] [Id. at 11.]
When comparing the facts of this matter to Hawley, we find no similarities. The crucial question in Hawley was whether defendant's inability to earn income at the level imputed over a five-year period demonstrated changed circumstances warranting a reduction in alimony. Ibid. Here, defendant negotiated the agreed amount of support with full knowledge of his economic means and burdens. There is no evidence that the level of support set in the 2005 order was premised on "the rosier earnings that were forecasted for [defendant]," as he claims. Furthermore, defendant has experienced an increase in income from the date of that agreement, apparently as anticipated. No facts demonstrate a negative impact upon defendant's earning ability in support of a downward modification.
The motion judge properly weighed the fact that the 2005 support amount was set by the parties themselves. Ozolins v. Ozolins, 308 N.J. Super. 243, 249 (App. Div. 1998). "Such an agreement ordinarily entails trade-offs between the parties." Ibid. Absolutely nothing substantiates a suggestion that plaintiff agreed to accept, or even knew of defendant's now alleged decision to forgo payment of his legally imposed income tax obligation in favor of paying the agreed support amount. Defendant's independent choices have not adversely affected his earning capacity but increased his debt.
Good faith requires complete disclosure of relevant facts necessary to the court's determination. "Facts concerning the motives, timing, and reasonableness of the payor's conduct should be evaluated with a view to determining whether he or she has acted in good faith in the matrimonial matter." Kuron v. Hamilton, 331 N.J. Super. 561, 571 (App. Div. 2000). "Good faith in the context of changed circumstances is concerned [with]... why the payor has adopted his or her course of action[.]" Id. at 571-72.
When the 2005 agreement was struck, support was calculated using defendant's net income, the IRS debt was known, and defendant claimed a need for a tax reserve, as reported on his CIS. No explanation justifies defendant's decision to avoid his federal tax obligation. Also, defendant incurred other indebtedness since the consent order without explaining his use of the borrowed funds. Defendant's decision to increase his indebtedness cannot be rewarded by again reducing his support.
We also reject defendant's argument that his support obligation must yield to his accumulated tax debt. The IRS employs various standards to evaluate the financial condition of a delinquent taxpayer when determining "whether to initiate enforcement action, accept a taxpayer's offer in compromise or enter into an installment repayment plan with the taxpayer." Miller v. Sallie Mae, Inc. (In re Miller), 409 B.R. 299, 314 (Bankr. E.D. Pa. 2009). The published standards, which are part of the Internal Revenue Manual, require taxpayers to submit federal Form 433-A to disclose financial information for determination of an appropriate monthly repayment. See 4 I.R.M. Abr. & Ann. § 220.127.116.11 (West 2009). Defendant did not provide the financial disclosure submitted to the IRS or a completed Offer in Compromise form. The record contains no documents verifying the IRS "ordered" a monthly repayment of $1800.
We also find defendant's calculation of his annual financial burdens flawed. A brief review of the supporting documentation accompanying defendant's certification reveals defendant's claimed inability to meet the support obligations is not substantiated. As to income, defendant is self-employed: he co-owns and operates his business. It appears he sets his income at $10,000 per month. He submitted no tax returns for 2006 or 2007, and only attached a partially completed CIS and uncertified ledgers of corporate income and expenses, presumably prepared by him.
A healthy skepticism arises when a party's financial situation results from self-employment where he controls the purse strings. "[I]t is the self-employed obligor who is in a better position to present an unrealistic picture of his or her actual income than a W-2 earner." Larbig v. Larbig, 384 N.J. Super. 17, 23 (App. Div. 2006). When considered in light of the motion Judge's credibility findings, implicating defendant's motivation to avoid payment of his support responsibility, this fact supports rejection of defendant's claimed inability to meet his obligations.
Likewise, the claim that the amount of support and taxes exceeds defendant's income is incompatible with the facts. Defendant asserted his annual support totaled $85,900, which included $30,000 for college costs. However, the 2005 order fixed annual child support at $9600, to be reduced to $4800 upon the graduation of the oldest child, and alimony at $19,008 per year. The total of the two is $28,608, with an anticipated reduction to $23,806 on the occurrence of the child's emancipation. During argument before us, it was conceded that college costs were paid by a loan requiring defendant's monthly repayment of $192 or $2304 per year.
Finally, the claimed $69,000 current annual tax payment merely estimates a monthly payment of approximately forty percent of defendant's gross income. This projection is not supported by expert evidence. A review of the 2008 federal income tax tables reflects a married taxpayer filing separately with a gross income of $120,000 would pay about $29,000. IRS Rev. Proc. 08-66, 2008-45 IRB 2-5. Additionally, in defendant's case, taxable income would be decreased by the amount of alimony paid, lessening his year-end tax obligation. 26 U.S.C.A. § 215.
Assuming defendant pays $1800 per month or $21,600 per year for past taxes, our computation of his tax and support obligations total $79,238.
Accordingly, we reject defendant's assertion that an evidentiary re-evaluation of the parties' financial circumstances is required. A plenary hearing is necessary when the moving party can "clearly demonstrate the existence of a genuine issue... [of] material fact." Lepis, supra, 83 N.J. at 159. Without the requisite proofs, a court is unable to evaluate the appropriateness of defendant's request for relief, and no requirement to conduct a plenary hearing was triggered. Ibid. We conclude no genuine and material factual issues warranted a plenary hearing was shown.
In the end, "[e]ach and every motion to modify an alimony obligation rests upon its own particular footing and the appellate court must give due recognition to the wide discretion which our law rightly affords to the trial judges who deal with these matters." Donnelly v. Donnelly, 405 N.J. Super. 117, 127 (2009) (internal quotations and citations omitted). We conclude the motion judges' findings were reasonably based upon the evidence in the record and should not be disturbed.
In light of our determination, defendant's arguments that the consent order is inequitable and its enforcement is abusive are without sufficient merit to warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(E).