April 20, 2010
CAROLE RAY, PLAINTIFF-APPELLANT,
DAVID RAY, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division - Family Part, Somerset County, Docket No. FM-18-670-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 1, 2010
Before Judges Lisa, R. B. Coleman and Baxter.
Plaintiff Carole Ray appeals from three post-judgment matrimonial orders in which the judge determined that defendant David Ray had demonstrated a permanent, involuntary change in his financial circumstances that: 1) entitled him to a fifty percent reduction in his alimony and child support payments; 2) entitled him to a suspension of his obligation to maintain life insurance policies to secure those payments; and 3) excused him from reimbursing plaintiff for the sums of money she expended in paying the premiums on those life insurance policies.
We reject plaintiff's argument that the reduction in defendant's child support and alimony obligations was unwarranted. We are satisfied that defendant demonstrated, through sufficient, credible evidence, that the computer consulting firm he owned had suffered a dramatic downturn, which was not merely temporary, and that his decision to accept employment with a former client, at a vastly reduced income, represented a sensible response to the abrupt and permanent decrease in his income.
However, we agree with plaintiff that once the judge found a change of circumstances that warranted such a reduction, the methods the judge used to set the new child support and alimony payments were flawed.
We thus vacate those orders and remand for a redetermination in accordance with the discussion below.
We also agree with plaintiff's contention that even if the judge was entitled to suspend defendant's obligation to pay the life insurance premiums, she mistakenly exercised her discretion when she declined to order defendant to reimburse plaintiff for the premiums she had paid to prevent the policies from lapsing. Finally, we agree with plaintiff's argument that the judge erred when she denied plaintiff's request for counsel fees incurred as a result of an enforcement motion that plaintiff filed in March 2007. In all other respects, we affirm the denial of plaintiff's request for counsel fees.
We thus affirm in part, reverse in part and remand.
The parties were married in November 1986 and were granted a dual judgment of divorce (JOD) in January 2004, which incorporated a property settlement agreement (PSA) of the same date. Four children were born of the marriage, two sons and two daughters, between November 1991 and January 2001.*fn1
During and after the marriage, plaintiff worked part-time as a preschool teacher in a school owned and operated by her parents. At the time of the divorce, she was earning $3,600 per year. The PSA reflected the parties' expectation that by 2014, plaintiff would have earned a Master's degree in education, and would be earning approximately $50,000 per year in a full-time teaching position.
Pursuant to the terms of the PSA, the parties had joint legal custody of the children, with plaintiff being the parent of primary residence. The PSA obligated defendant to pay child support of $3,334 per month ($40,000 per year), and required him to maintain a $400,000 life insurance policy to secure his child support obligation.
The PSA also specified that for a six-year period beginning December 15, 2003, defendant would pay rehabilitative and permanent alimony of $8,334 per month ($100,000 per year). After six years, and for the next five years, defendant would pay the reduced amount of $6,667 per month ($80,000 per year) as permanent and rehabilitative alimony. Finally, beginning December 16, 2004, defendant's alimony obligation, which by then no longer included rehabilitative alimony, dropped to $5,000 per month. In addition, defendant was obligated by the PSA to maintain a $700,000 life insurance policy to secure his alimony obligation for the first eleven years of the agreement, which rose to $800,000 per year thereafter.
Section 2.10 of the PSA provided that child support and alimony would be reviewed at the request of either party upon the happening of certain specified circumstances, including an increase or decrease in income. Significantly, section 3.1 of the PSA specified that defendant's gross annual income at the time the PSA was executed was $289,000:
The parties have compromised and agree that Husband's income is currently $289,000 gross per annum and he is the owner of 50% of the stock and is a manager of both DR Solutions, Inc. and Phase II, Inc., computer consulting businesses.
After applying all the credits and debits and dividing the retirement and savings accounts, defendant owed plaintiff $105,549, which he was entitled to pay in cash, or by transferring a portion of his retirement accounts to plaintiff by rollover, or by preparation of a Qualified Domestic Relations Order. This $105,549 payment compensated plaintiff for her surrender of her interest in two businesses defendant owned, DR Solutions and Phase II. Her share of those two businesses was valued at $178,000. The foregoing provisions were the result of protracted mediation sessions over the course of several months, during which each party produced numerous expert reports on the value of, and income generated by, defendant's two businesses. Defendant did not comply with his equitable distribution obligations under the JOD, which forced plaintiff to file numerous enforcement motions. She did not receive her equitable distribution of the retirement funds until March 2004, and of defendant's two businesses until May 2005.
Less than thirty days after the parties' PSA was executed and their JOD was granted, defendant notified plaintiff that his business, Phase II, was in far worse financial condition than he had thought, that its value was significantly less than the parties had agreed to in their PSA, and that his income had been substantially reduced. He sought a return to mediation to renegotiate the parties' equitable distribution and support agreement. Because defendant had not fulfilled his equitable distribution obligations under the PSA, plaintiff declined to return to mediation.
On June 10, 2004, defendant filed a motion seeking to compel plaintiff to participate in mediation to address his proposal for a reduction of his alimony and child support obligations in light of his claim of changed financial circumstances. The judge denied defendant's request to return to mediation on those issues, but, in August 2004, plaintiff changed her mind and agreed to participate.
On October 4, 2004, after the mediation was unsuccessful, defendant filed a motion alleging that he had sustained "significant, permanent changed financial circumstances," which entitled him to an adjustment of his alimony and child support obligations. He also sought to reduce his life insurance obligation in accordance with the anticipated reduction in alimony and child support.
On November 15, 2004, the judge denied defendant's request to modify alimony and child support, finding that defendant failed to show a permanent and substantial change, and that his "rapid downturn in business" so soon after the divorce was "suspicious." The judge likewise denied defendant's request to adjust his life insurance obligations.
Less than four months later, on March 1, 2005, defendant renewed his motion for a reduction in child support and alimony. This time, however, the motion was assigned to a different judge, who, in a March 11, 2005 decision, concluded that defendant had presented prima facie evidence of changed circumstances that warranted a plenary hearing to determine whether defendant had, as he claimed, suffered a substantial and permanent change in circumstances that entitled him to a reduction of his alimony, child support and life insurance obligations. The judge held that if any modification were to be granted, it would be retroactive to the date defendant filed his motion.
The plenary hearing was conducted over a three-day period in May 2005. Defendant testified that his company, DR Solutions, was in the business of obtaining contracts from large corporations to establish and maintain their computer networks. DR Solutions earned a profit by supplying computer specialists to those companies and paying such consultants less than the amount that DR Solutions billed the client corporation.
In 1997, defendant joined forces with his longtime friend and colleague, Raoul Alonso, who also owned a computer consulting company. The two men formed Phase II, in which each was half owner. Although Alonso and defendant began working together on Phase II in 1997, each partner maintained his own company until January 2002, when they "collapsed" their individual businesses into Phase II.
Phase II's revenue peaked in 2001, and then began to decline. The company earned gross receipts of $392,874 in 1999; $1,801,766 in 2000; $3,134,683 in 2001; $2,870,297 in 2002; $2,131,805 in 2003; and $1,055,926 in 2004. As to the distribution of profits between the two partners, defendant explained that he and Alonso equally split the profits derived from the work performed by the firm's employees; however, if either he or Alonso personally generated more revenue than the other, the one who generated such excess "would get that money." When asked whether it was "fair to say... that... you get to eat what you kill," defendant answered "absolutely." As an example, defendant explained that in 2004, although the total compensation for the two was $306,000, all but $72,083 went to Alonso because Alonso had sourced more of the profit than defendant had.
During his testimony, Alonso introduced "equitable compensation calculation" charts that he claimed were prepared by defendant and himself at the end of each year. The charts were used to determine how much money should be paid as a year-end bonus to the partner who had generated the most income, to ensure that his income was commensurate with the revenue he generated.
Defendant testified that in January 2004, after the Phase II corporate books for 2003 were closed, defendant and Alonso met with their accountant, Michael Hausman, as they did every year. According to defendant, it was only at this point that he learned that although Phase II "showed a profit on the books," the company was "actually losing $30,000 a month." Hausman's testimony corroborated defendant's description of that meeting. According to Hausman, he advised defendant and Alonso that "the business was getting so bad that there had to be some changes made. Otherwise they weren't going to be able to stay in existence."
Hausman pointed to the significant decline in the firm's gross revenues in the one year between 2003 and 2004. In 2003, the firm enjoyed gross receipts of $2,131,000, but by 2004, the firm's revenues had dropped by fifty percent down to a level of $1,055,926.
According to Hausman, this steep drop in revenues occurred because "the bottom fell out of the industry." Hausman described similar problems experienced by several of his other clients who were also in the computer consulting industry. According to Hausman, the downturn was caused by "outsourc[ing] outside the country." Hausman explained that in his meeting with Alonso and defendant "[t]hey were giving me their insight from their end and I was giving them the information that I had from other businesses I deal with about what was going on with the economy." He recommended that they prepare "some schedules... where they could see the difference in the number of people that they were hiring, the number of placements, what was changing in the industry."
In response to Hausman's warning that Phase II would be forced to go out of business unless some radical changes were made, Phase II adopted cost-saving measures, including reducing the partners' salaries, stopping all voluntary contributions to their pension funds, leasing less expensive cars, laying off sales personnel, reducing the office manager's salary by fifty percent, cutting travel and entertainment expenses and canceling their life insurance polices.
Defendant's testimony also described a significant drop-off in the number of employees that Phase II had "on billing" each month. He testified that throughout 2001, Phase II had been able to maintain between eleven and eighteen people on billing each month, and in 2002, between thirteen and seventeen. In 2003, although the company had fourteen people on billing each month in the first half of the year, by the fourth quarter, the number had dropped to only seven per month. The same trend continued in 2004, because, during the first half of the year, six or seven consultants were on billing each month, but by the fourth quarter, there were only four. The same trend continued throughout all of 2005.
Defendant also presented the testimony of his former employee, Nicholas Arrigan. Arrigan testified that he was only employed at Phase II for a few months, from October 2003 through March 2004, explaining that because of declining revenues, defendant had been forced to lay him off. When asked to describe the changes he had seen occur in the computer consulting industry, Arrigan responded that the field was "completely different from when I first got into the business."
At the beginning, according to Arrigan, "it was really all about relationships and who you know and it [was] sort of done on a handshake." Arrigan explained that "[n]ow it is completely different," both because of "outsourcing" and "vendor management organizations." Such vendor management organizations typically post the information technology needs of large corporations on their websites. A vendor who believes he or she can fulfill that requirement simply responds to the online posting, and will often be awarded the contract, even though he or she has no prior relationship with that former client.
In his testimony, Arrigan provided an example of the outsourcing and the vendor management organizations that were crippling the computer consulting industry. He described one large multi-national corporation, whose identity we need not specify, which uses a company in India and pays $20 per hour for computer consulting services "for somebody that they would typically have paid three or four times that in the past." Arrigan's testimony closed with his comment that "the last four or five years have just been devastating to me personally." Because of changes in the computer consulting industry, he had been forced to sell his home as he could no longer afford the mortgage payments.
Arrigan also described his efforts while at Phase II to find consulting work for defendant to perform. Arrigan named four large corporations, but none of them had a need for defendant's services, which Arrigan attributed to the changes in the industry that we have described.
Arrigan also maintained that several former clients of Phase II were willing to "sacrifice quality for price." To compete in such a changing market, defendant, whose time had been billed in the past at "well over $100 an hour," had been forced to accept assignments where he earned only $55 or $65 an hour. According to Arrigan, defendant's attitude was "just get me something." Arrigan asserted that the decline in defendant's earnings during the six months that Arrigan was with Phase II "wasn't for a lack of effort."
Plaintiff presented Vincent Canterelli, a certified public accountant who had reviewed the general ledger and tax returns of Phase II for 2002, 2003 and 2004. Cantarelli noted that despite invoicing different amounts in 2002 and 2003, Alonso and defendant each took $200,000 in salary. However, in 2004, although they still generated different income, Alonso received $233,917 in salary compared to defendant's $72,083. Cantarelli also looked at payroll records of Phase II for 2004, and determined that for the first quarter of 2004, Alonso received paychecks totaling $65,417 and defendant received $35,417; for the second quarter, Alonso received $12,500 and defendant received $10,833; for the third quarter, Alonso received $118,500 and defendant received zero; and for the fourth quarter, Alonso received $233,917 and defendant received $72,083.
Defendant testified that by the beginning of 2004, he was no longer generating any revenue for Phase II. Between January 14 and March 4, 2004, defendant sent out his resume and applied for positions as a computer consultant.*fn2 In April 2004, through Phase II, defendant began working for Wakefern Foods as a consultant. Although he had been earning $145 per hour at BASF as a consultant, at Wakefern he was paid only $75 per hour. In the fall of 2004, when Wakefern offered him a permanent salaried position, he accepted it. The position paid $104,000 per year. Thus, his salary at Wakefern was only thirty-seven percent of the $289,000 per year income he admitted earning at the time the PSA was executed.
Defendant testified that in light of the changes in the computer consulting industry, he believed his prospects for earning more money than Wakefern was offering him were so slim that refusing Wakefern's offer of employment would have been extremely imprudent. Defendant acknowledged that even after he accepted the position at Wakefern, Phase II continued to pay for his gasoline, car lease, cell phone and some meals and entertainment. With those additional benefits, defendant's total annual income was $114,000. On cross-examination, defendant conceded that during the divorce negotiations, he had overstated his compensation and his earning capacity so as to convince the parties' joint accounting expert that Phase II had high expenses and thus a lower value for equitable distribution purposes.
A considerable portion of the testimony during the May 2005 plenary hearing centered around defendant's purchase of a home on Watchung Lake from Alonso. From the fall of 2002 through June 2003, defendant lived in a rented townhouse in Bedminster, for which he paid $2,300 per month for the first six months and $2,600 per month for the last three months. In June 2003, Alonso purchased the home on Watchung Lake, which he testified he bought as an investment property, for $499,000. In June 2003, at a time that defendant claimed his income was plummeting, he began renting the house from Alonso for a monthly rental of $3,400. After a year, and once the divorce was final, defendant purchased the house from Alonso for the same price Alonso had paid for it a year earlier.
Defendant claimed that his mother invested $140,000 in the purchase of the property pursuant to an agreement in which defendant was responsible for paying the mortgage. Defendant testified that his mother would recoup her $140,000 investment, and all of the increase in the value of the home, upon its sale. Defendant would be entitled to the tax deductions for the mortgage interest and would be entitled to the return of any principal payments on the mortgage. Defendant acknowledged that the house he bought on Watchung Lake was worth more, and cost more to maintain, than the former marital home. He renovated the property to turn the basement into an apartment for his niece, who paid him no rent.
On July 1, 2004, when defendant applied for a mortgage on the Watchung Lake property, he signed a mortgage application in which he claimed to be earning $33,500 per month. This was at the same time defendant claimed to be earning only $12,000 per month at Wakefern. When asked to explain the $33,500 monthly income listed above his signature on the July 1, 2004 mortgage application, defendant explained that he provided accurate salary information to the mortgage broker, but the broker made a mistake when he completed the form, and defendant did not notice that mistake before he signed the application.
On July 29, 2005, the judge issued a comprehensive written opinion, in which she concluded that defendant had met his prima facie burden of proof of a change of circumstances warranting a modification of his support obligations because his annual income had declined by more than $100,000. She found a modification was appropriate "despite certain issues of credibility" with defendant and Alonso, and attributed the decrease in defendant's income to changes in the consulting industry, including preferred vendors, off-shore placement, and reduced hourly rates.
In reaching her decision, the judge rejected Alonso's claim that the "equitable compensation calculation" charts were prepared at the end of each fiscal year, and rather, found it more likely that the documents were prepared "only for the purpose of explaining why Alonso's income increased substantially during a period of time when the business was experiencing a substantial downturn," and why, in 2004, Alonso took $118,000 in addition to his salary. According to the judge, this was done to "prevent that amount from being designated as profit and divided with Defendant."
After analyzing the testimony, the judge determined that in addition to the $104,000 salary defendant earned from Wakefern, plus $10,000 in perquisites he received from Phase II, she would add $59,000 to his income for 2005 for his share of the Phase II proceeds. She therefore set his income at $173,000 a year, ordered plaintiff to file an updated case information statement (CIS), and ordered the parties to attend mediation to determine the modified amount of alimony and child support. If the parties were unable to reach an agreement within sixty days of the date of the order, the court would conduct a hearing to determine the reduced alimony and support amounts.
The parties attended mediation but were unable to agree on new support amounts. In December 2005, plaintiff was diagnosed with a serious illness, which delayed the hearing until 2007. In the interim, in an order dated May 15, 2006, the court temporarily reduced defendant's alimony obligation to $5,000 a month and child support to $2,000 a month. The court froze defendant's arrears, which were by then approximately $80,000, did not require payments on the arrears, and suspended defendant's obligation to pay his life insurance premiums.
The plenary hearing to establish defendant's reduced alimony and child support obligation started in January 2007 and concluded eleven months later. The judge repeatedly stated that in setting the support amount, she would confine her analysis to the circumstances as they existed in 2005, and would not consider the circumstances that had since transpired. Nevertheless, some post-2005 events were addressed.
Plaintiff testified that in 2005, she earned $6,750 for her thirty-hours-per-week, nine-months-per-year work at the pre-school. Plaintiff obtained her teaching certification, and was taking classes in 2005 toward her Master's degree in special education; however, when she became ill in December 2005, she stopped attending school. Her parents, who owned the pre-school where she worked, were "generous" with reassigning her duties so she was not in contact with children while her immune system was weakened. Plaintiff's goal was to finish her Master's degree and work full-time as a teacher, but she did not know if that was feasible given her health.
Plaintiff testified that she paid defendant's life insurance premiums because he failed to pay them as he was obliged to under the terms of the PSA, and she sought $5,367.50 in reimbursement. She also paid marital debts, for which defendant was responsible under the PSA. To pay these sums, plaintiff stated she borrowed $78,000 from her father, which was secured by a note. Her father also held the mortgage on her house, and suspended payments during her 2006 illness and treatment.
On March 12, 2008, the judge issued a written decision in which she ordered defendant to pay $4000 per month in alimony and $1505 per month in child support, retroactive to July 29, 2005. She also ordered him to pay $500 per month toward arrears, and required each party to be responsible for his or her own counsel fees. A confirming order was signed on March 12, 2008.
On appeal, plaintiff maintains:
I. THE TRIAL COURT ERRED IN ITS JULY 29, 2005 ORDER WHEN IT CONCLUDED THAT DEFENDANT DEMONSTRATED A PERMANENT, INVOLUNTARY CHANGE IN CIRCUMSTANCES.
A. The Trial Court Erred By Failing To Consider Whether The Defendant's Alleged Decrease In Income Was Merely Temporary.
B. If The Trial Court Did Conclude That Defendant's Change In Circumstances Was Permanent, That Conclusion Was An Abuse of Discretion.
C. The Trial Court Also Erred In Its July 29, 2005 Order When It Found That Defendant Was Not Voluntarily And Unreasonably Under-Employed.
D. The Trial Court Erred By Consistently Giving The Benefit Of The Doubt To Defendant Despite His Pattern Of Deceit.
II. THE COURT'S MARCH 12, 2008 ORDER REDUCING DEFENDANT'S MONTHLY ALIMONY AND CHILD SUPPORT OBLIGATIONS TO 4,000 AND $1,505 RESPECTIVELY RESULTED FROM ABUSES OF DISCRETION AND MISTAKES OF LAW AND FACT.
A. It Was An Abuse of Discretion For The Trial Court To Treat Plaintiff's And Defendant's Post-2005 Evidence Inconsistently.
B. [The] Trial Court Erred When It Considered The Parties' Relative Net Worths As A Factor In Determining The New Alimony And Child Support Amounts.
C. The Trial Court Committed Numerous Errors In Its Evaluation Of The Parties' Financial Circumstances, Which Resulted In Erroneous Conclusions And Unjust Results.
D. The Trial Court Erred As A Matter Of Law When It Failed To Consider The Parties' Marital Standard of Living.
E. The Trial Court Erred When It Disregarded Defendant's Testimony Concerning The Appropriate Calculation of Alimony.
III. THE TRIAL COURT ERRED IN ITS MAY 15, 2006 ORDER WHEN IT SUSPENDED DEFENDANT'S OBLIGATION TO PAY HIS LIFE INSURANCE PREMIUMS, AND ERRED AGAIN IN ITS MARCH 12, 2008 ORDER WHEN IT FAILED TO ORDER DEFENDANT TO REPAY THE LIFE INSURANCE PREMIUMS THAT PLAINTIFF PAID ON DEFENDANT'S BEHALF.
IV. THE TRIAL COURT ERRED WHEN IT DENIED PLAINTIFF'S ENTIRE APPLICATION FOR ATTORNEYS FEES.
A. The Trial Court Abused Its Discretion When It Concluded That Neither Party Could Afford To Pay The Other's Legal Costs.
B. The Trial Court Erred Because It Failed To Separately Consider Plaintiff's Request For Attorney's Fees Incurred For Her March 2007 Enforcement Motion.
In Point I, plaintiff argues that the judge erred when she concluded that defendant demonstrated a permanent, involuntary change in circumstances sufficient to trigger a recalculation of alimony and child support. Plaintiff maintains that any reduction in defendant's income was merely temporary, that defendant is "underemployed" at Wakefern and that the judge erred by "consistently" giving defendant "the benefit of the doubt... despite his pattern of deceit."
A court may modify alimony and child support if it finds that there has been a change in circumstances since the time the original support order was entered. Lepis v. Lepis, 83 N.J. 139, 149 (1980). Courts have found changed circumstances to include an increase or decrease in the supporting spouse's income. Id. at 151 (citing Martindell v. Martindell, 21 N.J. 341, 355 (1956)). A judge is required to reject a request for modification based on circumstances that are merely temporary. Donnelly v. Donnelly, 405 N.J. Super. 117, 127-28 (App. Div. 2009).
The party seeking modification has the burden of showing changed circumstances. Lepis, supra, 83 N.J. at 157. If a prima facie showing of changed circumstances is made, a court will order discovery. Ibid. If, after a review of the discovery, the court determines that there is a genuine issue of material fact in dispute, a plenary hearing will be held. Id. at 159.
"Whether an alimony [or child support] obligation should be modified based upon a claim of changed circumstances rests within a Family Part judge's sound discretion." Larbig v. Larbig, 384 N.J. Super. 17, 21 (App. Div. 2006). Each motion to modify "'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.'" Ibid. (quoting Martindell, supra, 21 N.J. at 355).
"[F]indings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998) (citing Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974)). We will not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that "'they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice.'" Rova Farms, supra, 65 N.J. at 484 (quoting Fagliarone v. Twp. of N. Bergen, 78 N.J. Super. 154, 155 (App. Div.), certif. denied, 40 N.J. 221 (1963)).
Plaintiff first argues that the judge erred by failing to consider whether defendant's alleged decrease in income was merely temporary, as his motion for modification was filed a mere fourteen months after the entry of the judgment of divorce. She analogizes this case to Larbig, supra, 384 N.J. Super. at 22, in which the trial court found, and we agreed, that a self-employed husband's alleged change in income did not support the need to conduct a plenary hearing, because, in light of the fact that the modification motion was filed twenty months after the initial amount was set, the husband failed to demonstrate that even if his business's income had changed, it was "anything other than temporary." Ibid. We also rejected the husband's argument that a lesser period of decreased income should constitute a change when the obligor is self-employed, because "it 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." Id. at 23.
Plaintiff is correct that a change in circumstances that is merely temporary does not entitle the supporting spouse to relief. Ibid. While we also agree with plaintiff's observation that the judge never explicitly found that defendant's change in income was permanent, such finding was implicit in her decision.
Plaintiff's reliance on Larbig is unavailing, as its facts are markedly different from those here. The husband in Larbig continued to run his own business and, during the time he claimed a downturn, hired a new chief financial officer who "redid" the husband's books, increased the company's office space, hired new staff, and doubled his travel and entertainment expenses. Larbig, supra, 384 N.J. Super. at 22.
Here, in contrast, defendant accepted a full-time permanent, salaried position at Wakefern. Although he continued to receive income and benefits from Phase II, Phase II underwent a significant reduction in consultants working for it that, unlike Larbig, could not be manipulated, and defendant showed a verifiable decrease in the hourly wages companies were paying for computer consultants. The record provides us with no reason to reject the judge's conclusion that defendant had been forced to take a salaried position in light of changes in the computer consulting industry, which changes also impacted his income from Phase II. Moreover, defendant's testimony about the worsening prospects for companies such as Phase II was corroborated and bolstered by that of Hausman, Arrigan and Alonso.
As we noted in Larbig, there is no brightline rule for when a situation is permanent or temporary, and that decision is left to the discretion of the trial judge. Id. at 23. That the judge made no explicit finding of permanence is of no consequence, as her detailed findings about the decline of Phase II and the changes in the industry make it unmistakably clear that she concluded such a change was permanent.
Plaintiff next argues that even if the court did impliedly conclude that defendant's change in circumstances was permanent, that conclusion was an abuse of discretion. To support her argument, plaintiff cites to defendant's own testimony, in which he said, "I fully don't intend my salary to remain where it is. I still am part owner in Phase II and we are still trying to build up the business within there. But, I would be very hard pressed to leave a permanent, stable job at this point." Plaintiff also points to Arrigan's testimony that the computer consulting industry "is very cyclical," with companies hiring consultants for a period and "then as a matter of cost cutting they will get rid of consultants and they will want to hire full time employees or they won't hire anybody." This evidence, claims plaintiff, combined with the timing of defendant's motion, should have been sufficient to convince the court that defendant's alleged changed circumstances were not permanent.
Plaintiff has focused on Arrigan's comments concerning the "cyclical" nature of the business, while ignoring his testimony that the computer consulting business was now "completely different" due to "outsourcing" and "vendor management organizations." Nothing in Arrigan's testimony suggested that either of those developments was likely to change. Indeed, his testimony was consistent with a conclusion that the fundamentals of the industry, which had always been based on personal relationships, had irretrievably changed.
To further support her claim that defendant's circumstances were not permanent, plaintiff points to evidence that defendant's lifestyle was not consistent with his claims of declining income. She notes that defendant purchased an expensive home and claimed on his mortgage application to be earning $33,500 per month. Plaintiff also criticizes the judge's refusal to draw "a negative inference from defendant's purchase of a home," and the judge's finding that "no evidence" had been presented to cause the court to question the investment agreement defendant entered into with his mother. Plaintiff also asks us to reject the judge's refusal to draw negative conclusions from defendant's mortgage application, and the judge's finding that there was "no reason established to explain why Defendant would report such a greatly exaggerated income." As we have noted, the judge accepted defendant's explanation that the income reported was an error made in the preparation of the application by the mortgage broker that defendant had failed to notice.
While we recognize that perhaps other judges viewing the same facts might have drawn different conclusions than the judge did here, that is not a sufficient basis to reject the judge's findings and conclusion. See Cesare, supra, 154 N.J. at 411. Moreover, plaintiff's claim that the judge gave defendant the benefit of the doubt at every turn, and ignored obvious instances of defendant's lack of credibility, is belied by the record.
In particular, the judge was critical of defendant's and Alonso's testimony concerning some aspects of the business, even finding that the compensation charts were contrived, and she recognized the possibility that defendant had manipulated his earnings at Phase II. However, the judge also noted that defendant was forced to partially liquidate two 401(k) accounts to satisfy his equitable distribution obligations, which supports the judge's finding that defendant's proofs on the whole were sufficiently credible to entitle him to relief. Plaintiff's arguments do not convince us that the judge abused her discretion in finding that defendant's change in financial circumstances was permanent.
Plaintiff next argues that the judge erred when she found that defendant was not voluntarily and unreasonably underemployed. Specifically, plaintiff argues that defendant's decision to work full-time at Wakefern for $104,000, at a salary of roughly $50 per hour, was not justified because his most recent position at Wakefern had paid $75 an hour, Alonso was still earning $85 an hour, and other employees of Phase II were billing at $100 an hour. Plaintiff claims that defendant billed over $100,000 in 2003 when he was "on billing" for only five months, and thus he should have been able to earn twice that amount for a full year's work.
Income may be imputed to a party who is voluntarily unemployed or underemployed. Dorfman v. Dorfman, 315 N.J. Super. 511, 516 (App. Div. 1998). An obligor is not entitled to "choose to remain in a position where he has diminished or no earning capacity and expect to be relieved of or to be able to ignore the obligations of support to one's family." Arribi v. Arribi, 186 N.J. Super. 116, 118 (Ch. Div. 1982).
The record does not support plaintiff's claims that the judge erred when she failed to find defendant was underemployed. Preliminarily, we note that the judge imputed $59,000 of income to defendant from his share of Phase II proceeds. She also found that the billing rates in the field had decreased and that neither defendant nor Alonso was any longer able to command higher rates. She noted that defendant had been without a position for eight months, and that the highest hourly billing rate defendant could obtain was $75 per hour. In addition to defendant's own worsening consulting contracts, defendant demonstrated that the number of Phase II consultants "on billing" declined from eighteen to four during this time, lending credence to defendant's assertions that consulting jobs were becoming more scarce and that he was unable to find one for himself. Further, defendant did not give up Phase II--he continued to work there, in addition to his full-time job--in an effort to make the business profitable and increase his own earnings. Given the changes in the industry and defendant's history of being off billing, we reject plaintiff's contention that the judge abused her discretion in finding that defendant's acceptance of a salaried position at Wakefern was reasonable.
Moreover, the record demonstrates that defendant's employment at Wakefern was stable and permanent, which was not true of his consulting assignments at Phase II, and which was becoming increasingly difficult to achieve in his changing industry. We cannot fault defendant for accepting a full-time position, rather than clinging to Phase II and its shrinking prospects. For the same reasons, we have no reason to reject the judge's conclusion that defendant's decision to accept a secure position at Wakefern was not an instance of underemployment for which income should have been imputed beyond the $59,000 the judge had already added. The judge thoroughly reviewed the evidence, made critical credibility determinations, and reached conclusions that were supported by the evidence. We thus reject the claims plaintiff advances in Point I and affirm the judge's conclusion that defendant has presented a change in circumstances sufficient to warrant a modification of alimony and child support.
In Point II, plaintiff argues that the trial court's March 12, 2008 order, which reduced alimony to $4,000 a month and child support to $1,505 a month, was the result of abuses of discretion and mistakes of law and fact. An award of child support is within the discretion of the trial judge and will not be disturbed unless it is "manifestly unreasonable, arbitrary or clearly contrary to reason or to the evidence, or the result of whim or caprice." DeVita v. DeVita, 145 N.J. Super. 120, 123 (App. Div. 1976). Similarly, as we have already observed, "[e]very application for alimony 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." Martindell, supra, 21 N.J. at 355.
Plaintiff first argues that the judge abused her discretion because she treated plaintiff's and defendant's post-2005 evidence inconsistently. Throughout the January and February 2007 hearing to establish the reduced amount of child support and alimony defendant would be required to pay, the judge repeatedly remarked that because no additional testimony had been presented to support any further change of circumstances beyond those that had existed at the time of the 2005 hearing, she would confine her modification of defendant's support obligations to the circumstances as they existed in 2005.
The judge recognized that but for plaintiff's cancer diagnosis in December 2005, the hearing to set the reduced support amounts would have occurred immediately after the 2005 Lepis hearing had concluded. For that reason, the judge announced during the 2007 hearings, and repeated again in her March 12, 2008 written opinion, that the new support amounts would be based only on the circumstances as they existed in 2005. In her March 12, 2008 written opinion, the judge noted:
Each party has argued additional change of circumstances since the 2005 order. However, due to the long delay in hearing this matter and the fact that no additional or current discovery had been exchanged by the parties, the modified support amount may not include current changes to the parties' financial circumstances. Moreover, there has not been any judicial determination regarding a change of circumstances subsequent to 2005.
We begin our analysis with plaintiff's contention that although the judge repeatedly stated that she was basing her decision only on the circumstances as they existed in 2005, the judge mistakenly used plaintiff's 2006 income, which was nearly twice as much as her 2005 income, when setting child support. Plaintiff is correct. The judge found that plaintiff's income was $12,000 per year, although that was the income plaintiff was earning in 2006. It was not the income she had been earning in 2005, which was the much lower sum of $6,710. There was no dispute concerning plaintiff's 2005 income, and no request by defendant to impute income to her, nor did defendant claim that plaintiff should have worked more in 2005. Indeed, in 2005, plaintiff was doing what the PSA required, namely working at the marital level and attending graduate school.
Because the child support award figures that are contained in the Child Support Guidelines*fn3 are calculated by a specific formula, a reduction by nearly half of plaintiff's income is likely to make a significant difference in the child support award. Were this the only error in the judge's calculations, we would exercise original jurisdiction to address it. However, as there are other issues that require a remand, the judge's inclusion of plaintiff's 2006 income, rather than her 2005 income, should be considered on remand along with the other issues that we shall discuss.
Next, plaintiff maintains that the judge erred when she eliminated from plaintiff's monthly budget the $700 she was spending on tuition payments to earn her Master's degree. The judge justified such action with the comment that "plaintiff has not adduced any proof of educational costs for herself." The judge also reduced plaintiff's monthly baby-sitting expenses from $190 to $50 and her charitable contributions from $550 to $0. As to the latter, the judge observed that plaintiff's current financial situation "certainly does not support her planned generosity." Plaintiff has presented no meritorious basis upon which we should reject the judge's findings of fact on these issues, especially in light of the broad deference owed to a matrimonial judge's findings of fact that result from a plenary hearing. See Cesare, supra, 154 N.J. at 411-12.
Along the same lines, plaintiff quarrels with the judge's refusal to take into consideration the $7,500 of medical s she paid that were not covered by her health insurance plan. As with the judge's rejection of plaintiff's claimed educational expenses, the judge commented that "plaintiff did not offer any documentation of these [medical expenses] or her payment of them." This, too, was a judgment the court was entitled to make. We will not second-guess the judge's insistence that plaintiff provide at least some documentary evidence to support her claimed payment of unreimbursed medical expenses.
Plaintiff also maintains that the judge wrongly refused to take into consideration plaintiff's $78,000 debt to her father. The judge reached that conclusion because plaintiff had not provided any documentary proof to support the existence of such loan. Plaintiff complains that the judge at the same time recognized defendant's claimed debt to his mother, even though defendant had not provided any documents to support such debt. We agree that this seemingly disparate treatment, without any explanation, had the potential to unfairly skew defendant's alimony obligation.
The judge discussed each party's budget at considerable length; however, it is unclear from the judge's March 2008 opinion whether, or to what extent, she used those budget determinations as a basis for setting child support. Child support is subject to the fixed amounts set forth in the Child Support Guidelines, which are in turn based only on the parties' respective gross incomes, adjusted for taxes, alimony, mandatory union dues and retirement contributions. Therefore, in the absence of contrary evidence, we deem it unlikely that the judge's disparate treatment of the debt owed to the parties' respective parents had any role in shaping the child support amount.
Alimony, however, is different. Alimony is established not by application of mathematical guidelines, but instead by a weighing of the thirteen qualitative factors contained in N.J.S.A. 2A:34-23(b). Among those factors is "[t]he actual need and ability of the parties to pay." N.J.S.A. 2A:34-23(b)(1). Plaintiff's debt to her father, if recognized, could have a bearing on her "need." Thus, on remand, the judge should clarify whether she considered defendant's debt to his mother in her calculation of defendant's new alimony obligation, and, if so, the judge should explain why that debt was considered when plaintiff's debt to her father was not.
Plaintiff's remaining contentions concerning the setting of child support and alimony lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(A) and (E).
In Point III, plaintiff maintains that the judge erred when she denied her request for counsel fees. We note that both sides made a counsel fee request and the judge denied each; however, only plaintiff has appealed from that denial. In denying plaintiff's request for counsel fees, the judge reasoned that defendant had not acted in bad faith and he was not in a position to be able to afford to contribute to plaintiff's counsel fees. The judge also noted each party's financial difficulties resulting from defendant's decreased income, and stated that plaintiff had a net worth of $557,300 and defendant had a net worth of negative $224,619. Plaintiff has provided no meritorious basis for us to reject the judge's conclusion that plaintiff was not entitled to an award of counsel fees for the 2005 and 2007 hearings, as the judge's treatment of the issue properly addresses the factors set forth in Rule 5:3-5(c). We decline to interfere with the judge's determination.
However, we reach a different result concerning the balance of plaintiff's counsel fee application. Specifically, plaintiff maintains that the judge erred when she failed to separately consider plaintiff's request for counsel fees incurred as a result of the enforcement motion plaintiff filed in March 2007. At that time, plaintiff sought a judgment for a sum she expended in defending and settling a lawsuit that was instituted against her by a joint creditor, Rosenfarb and Winter, whom defendant was obligated by the PSA to pay, but had not done so. Although the judge ultimately entered a judgment against defendant and in favor of plaintiff for $14,855, the judge reserved decision on counsel fees until the conclusion of the plenary hearing on the modification motion. We agree with plaintiff that the judge should have separately addressed this claim for counsel fees as it, unlike the Lepis hearing, arose from defendant's willful disregard of a court order. On remand, the judge is directed to separately address plaintiff's counsel fee request concerning the March 2007 hearing.
Finally, plaintiff maintains that the judge erred by refusing to require defendant to reimburse her for the sums she expended in keeping defendant's life insurance policies in effect. As we have discussed, the PSA required defendant to maintain life insurance to secure both his alimony ($700,000 in coverage) and child support ($400,000 in coverage) obligations. As part of the judge's March 11, 2005 order granting a plenary hearing regarding a change of circumstances, she ordered that the plenary hearing include the question of what the new "life insurance coverage should be." In her May 15, 2006 order, the judge suspended defendant's obligation to pay the premiums on his life insurance policies. That order was intended to grant defendant temporary relief while awaiting the plenary hearing, which had been delayed due to plaintiff's health.
At the 2007 plenary hearing, plaintiff requested to be reimbursed $5,367.50 for the premiums she paid on defendant's behalf, which defendant admitted he did not pay. However, in her final opinion and order, the judge did not rule on plaintiff's request for reimbursement or defendant's request to reduce his insurance coverage. The March 2008 order merely provided that "all previous Orders shall continue in full force and effect except to the extent modified by this Order."
Plaintiff maintains that it is unclear whether the May 2006 order, which was intended to be temporary, was included in the judge's March 2008 order that stated all prior orders shall continue in full force and effect. We agree that the issue is unclear. In the absence of a definitive ruling on this subject, we remand to allow those findings of fact to be made. See R. 1:7-4(a).
Affirmed in part, reversed in part, and remanded.