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Coleman v. Coleman


July 20, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Morris County, Docket No. FM-14-718-06.

Per curiam.


Argued: May 26, 2010

Before Judges Axelrad, Sapp-Peterson and Espinosa.

In this post-judgment matrimonial matter, defendant Wayne Coleman (husband) appeals from the Family Part's August l0, 2009 order denying his motion to reduce his alimony and child support obligations. We reverse and remand for further proceedings consistent with this opinion.

The parties separated in October 2003 and plaintiff, Deirdre Coleman (wife), filed for divorce in November 2005, following a nineteen-year marriage. A dual judgment of divorce was entered on May 29, 2007, incorporating the parties' marital settlement agreement (MSA), that provided for them to share joint legal custody of their three sons, born in April l988, September l989 and August l997, with wife to have primary custody.*fn1 At the time of divorce, both parties were around fifty years old. Wife was not employed outside the home during the parties' marriage and defendant was employed as a broker of interest rate swap derivatives and, beginning in mid-2005, as a broker of credit default swaps. Husband's total earned income for the five years prior to execution of the MSA was as follows: $944,687 (2002); $1,098,643 (2003); $1,138,262 (2004); $988,959 (2005); $698,559 (2006), averaging $973,822. Husband had been terminated from his employment due to a merger in May 2005, thus his 2005 earnings reflect a $481,250 non-recurring severance payment. Husband promptly secured a new position with another Wall Street firm, GFI Group, which contract of employment extended to June 30, 2007, and provided for a non-recurring signing bonus of $300,000, with $100,000 payable in 2005 and $200,000 payable in 2006. The contract also provided for a base salary of $230,000 and a guaranteed bonus of $270,000; however, around October 30, 2006, based on circumstances beyond husband's control, his contract was voided, his position was changed, his base salary was reduced from $230,000 to $175,000 and his bonus became discretionary.

Against this backdrop, the parties entered into the MSA, which set forth the following provisions regarding the income upon which the agreement is based:

4. Each of the parties acknowledge that the Husband receives a base income of One Hundred Seventy-Five Thousand ($175,000) Dollars and is eligible for a bonus. The Husband's alimony and child support obligations . . . are entered into on the assumption that the Husband's base of One Hundred Seventy-Five Thousand ($175,000) Dollars and bonus income will amount to approximately Six Hundred Thousand ($600,000) annually.

5. The parties have imputed to the Wife the ability to earn approximately Twenty-Five Thousand ($25,000) Dollars in annual income. Therefore, the Wife's receipt of the first Twenty-Five Thousand ($25,000) Dollars in earned income subsequent to the execution of this Agreement shall not be a basis, in and of itself, for a modification of the alimony and child support provisions of the within Agreement.

As reflected in the MSA, husband agreed to pay permanent alimony to wife of $15,000 per month ($180,000 annually), tax deductible to him and reportable as income to wife. To the extent that husband's gross annual income exceeded $600,000 in a given year, he would pay wife, as additional alimony, 25% of the excess up to a cap of $l,l00,000, making his maximum additional alimony payment $125,000 per year.

Husband also agreed to pay $4,250 per month ($51,000 annually) as child support for the three unemancipated children, calculated as a deviation from the guidelines based on the significant family income. The parties provided for a $750 reduction when their oldest son, who was a full-time college student, was emancipated, a $500 reduction when their middle son entered college, and a review when their youngest son entered college. Husband also agreed to pay for all reasonable extracurricular activities and camp expenses and any costs for the children's college education in excess of the funds in their custodial accounts. Husband was also obligated to continue to maintain medical coverage for his unemancipated sons, with the uncovered expenses allocated 70% to husband and 30% to wife and containing an express agreement to review the allocation upon review of child support.

The parties set forth the following provisions regarding modification of the alimony and child support obligations established in the MSA:

6. If the income assumptions as to either party's earnings as set forth above should significantly change subsequent to the execution of the within Agreement, each party reserves the right to petition the Court for a modification, upwards or downwards, in alimony and/or child support.

7. Nothing within the preceding paragraphs shall preclude either party from making an appropriate application to the Court for modification of alimony and/or child support based on any other significant change in either party's financial circumstances.

On March 5, 2009, husband moved for post-judgment relief seeking to reduce his annual alimony and child support obligations to $90,000 and $18,000, respectively, and other monetary relief related to the MSA based on a claim of substantial change of financial circumstances. At that time, the two older sons were in college and the youngest one resided with wife in the marital home. Wife filed a notice of cross-motion opposing the relief sought and seeking relief not relevant to this appeal. Both counsel requested oral argument.

Husband certified about his reduced income as a result of the downturn in the economy and, in particular, the 2008 collapses of Bear Sterns and Lehman Brothers and the severe domino effect on Wall Street and his profession. He provided copies of his contracts, W-2s, tax returns and an updated case information statement (CIS). For 2007, husband's gross earned income, including bonuses, was only $290,709, and he had unearned income of $41,867 comprised of interest and dividend income generated on his share of assets, making his gross taxable income $332,576. Husband stated he began using his share of assets to meet his 2007 financial obligations to wife and children under the MSA, totaling $231,000, and looked for and obtained a better job.

Husband became employed by ICAP North America, Inc. (ICAP) with offices in Jersey City. On December 20, 2007, he negotiated an employment agreement commencing January 1, 2008 and ending December 31, 2010, providing for a base annual salary of $400,000 conditioned upon producing certain net brokerage revenues. Under the terms of the agreement, the employer was also obligated to pay a quarterly incentive bonus equivalent to 50% of husband's net brokerage revenue. Husband certified that he was not able to produce the anticipated revenue due to "upheavals in the market" and in November 2008, he was faced with termination "as a result of cutbacks within the industry and, in particular, at ICAP," which he explained "functions as a middle man in the market" and "brokered institutional banks." Husband certified that, as an alternative, he renegotiated his contract. The amendment to the employment agreement was effective for one year commencing November l, 2008, which provided for a $200,000 annual base salary, a one-time $100,000 signing bonus to be paid in 2009, and further provided that if husband generated net brokerage revenue of $400,000, he was entitled to an incentive bonus of 50% of the excess net brokerage revenue.*fn2 Husband further certified that he had no contract with ICAP beyond October 2009, he received no bonus for 2008, and as reflected in his W-2 and tax returns, his gross earned income was $376,387, and his earned and unearned income totaled $398,625.

Husband anticipated a gross salary of $300,000 for 2009, consisting of the $200,000 base salary and the $100,000 signing bonus with ICAP. Husband certified he had not been paid any incentive bonuses and did not anticipate receiving any additional bonuses in 2009. He provided his earnings statement as of April 15, 2009, showing year-to-date salary of $38,333.31 ($8333.33 bi-weekly). Husband stated he was willing to provide whatever confirmation and submit to whatever monitoring of his income the court deemed necessary as a condition of modifying his alimony or support obligation and would return to his negotiated obligation if his income returned to its prior level.

Husband reiterated that he had been invading his assets to satisfy his financial obligations to his family but could not continue to do so. Husband also provided confirmation of his net worth, which he certified was $1,541,858, of which he estimated $600,000 to be his half ownership interest in the marital home, $200,000 to be invested in IRAs or 401Ks, which he could not draw upon, and $46,000 to be attributable to the cash value of his life insurance which he could not access unless he terminated the policy. He also provided an explanation for his shelter expenses in New York City and discussed the exempt assets he received in equitable distribution, disputing wife's claim that there was an agreement for him to pay alimony at a certain level for a certain period of time in exchange for wife's waiver of future interest in the exempt assets and pointing to the absence of such language in the MSA.

Wife emphasized that at the time husband entered into the MSA in March 2007, he knew his employment contract was going to expire shortly and that he no longer had guaranteed bonuses. She also noted that husband's employment history demonstrated fluctuations in earnings and urged that his application was premature. Wife pointed out that husband's earnings had increased from 2007 to 2008. She questioned husband's motive in renegotiating his contract, noting husband presented no evidence substantiating that his employment was at risk, such as a certification from his employer. Wife further asserted that ICAP reported earnings and profits for 2008 and 2009. She also expressed concern that "[w]ithout a 2009 final income disclosure we have no idea if his income will increase again," commenting that the court just had husband's "self-serving, 'anticipation' of a bleak future with documents that prove the exact opposite of what he represents to be a dire situation."

Wife questioned husband's shelter expenses, comparing them with those they had as a family of five, and claimed his lifestyle increased since the divorce. She also claimed husband's net worth was virtually identical to what he had at the time of the divorce, suggesting he could invest the assets in a conservative interest-bearing account from which he could pay his child support obligation. Wife also made the generalized statement that husband received a disparate share of assets in consideration of the support arrangement. She additionally pointed out husband's voluntary $7,500 charitable contributions reflected on his 2007 tax return.*fn3 According to wife, based on the family expenses, she could not provide for the children and herself on less than the bargained-for amounts.

By order of August 10, 2009, entered on the papers, the court denied husband's motion to decrease his alimony and support obligations.*fn4 As noted on the order, citing Larbig v. Larbig, 384 N.J. Super. 17 (App. Div. 2006), the court found husband did not satisfy his burden to produce evidence of sufficient permanent changed circumstances, i.e., that his earnings level permanently decreased, noting the parties were less than two years removed from their MSA, husband was still in the early phases of a new job and he earned substantial annual income with an expectation of annual bonuses. The court commented that when husband switched companies his base salary actually increased to $400,000 and that he voluntarily agreed to decrease his base salary to $200,000 with a one time payment of $100,000 in 2009. This appeal ensued.

By letter of October 5, 2009, the court supplemented its findings pursuant to Rule 2:5-1(b). The judge added that husband obligated himself to the support obligations for his family in the MSA despite his acknowledgement in his March 2007 CIS that his base income had been reduced to $175,000 with no guaranteed bonus. The judge concluded, in part:

The Court was faced with balancing the claims of both parties, and was not satisfied that Defendant had met his burden of proof in demonstrating that his financial circumstances would decline in 2009. He had recently taken it upon himself to renegotiate his contract with his current employer at the end of 2008, his 2008 income exceeded his 2007 income, he speculated, as he did in 2007 that he might not receive additional bonuses in 2009, and his earning history for many years preceding 2007 was higher than the level ultimately imputed to him.

In reaching this determination, the judge questioned husband's budget and expenses as reflected in his CIS and his analysis of his statement of assets, concluding he showed minimal debt and could not prove he was invading his assets to meet his obligations. The judge found no deficiency in wife's failure to file an updated CIS or disclose any financial information, concluding husband had not met his burden to justify the additional discovery.

A support award made at the time of divorce, whether by agreement or court order, may be adjusted based upon a finding of substantial changed circumstances. Lepis v. Lepis, 83 N.J. 139, 149-50 (1980). Courts must undertake a two-step process before modifying a support or maintenance provision. Id. at 157; Crews v. Crews, 164 N.J. 11, 28 (2000). First, the movant must make a prima facie showing of such changed circumstances as would warrant relief; then, the court will order discovery of an ex-spouse's financial status and consider both parties' financial positions, including the supporting spouse's ability to pay. Lepis, supra, 83 N.J. at 157. For modification of an alimony award, the movant must demonstrate that "changed circumstances have substantially impaired the ability to support himself or herself." Ibid. This refers to "the ability to maintain a standard of living reasonably comparable to the standard enjoyed during the marriage." Crews, supra, 164 N.J. at 28. When a movant is seeking to modify child support the "guiding principle is the 'best interests of the children.'" Lepis, supra, 83 N.J. at 157.

Factors to be considered on a motion for modification include "the dependant spouse's needs, that spouse's ability to contribute to the fulfillment of those needs, and the supporting spouse's ability to maintain the dependant spouse at the former standard." Id. at 152. Examples of changed circumstances include an increase in the cost of living; an increase or decrease in the supporting spouse's income; and subsequent employment by the dependent spouse. Id. at 151. Changed circumstances "are not limited in scope to events that were unforeseeable at the time of divorce." Id. at 152. Criteria include whether the change in circumstances is continuing and whether the MSA has made explicit provision for the change. Ibid. See also Glass v. Glass, 366 N.J. Super. 357, 372 (App. Div.) (holding that the marital standard of living is central to determining changed circumstances, but that the agreement between the parties is also entitled to significant consideration), certif. denied, 180 N.J. 354 (2004).

Here, the parties' MSA delineated the income assumptions upon which husband's alimony and child support obligations were based, i.e., annual income of $600,000 on the part of husband and $25,000 imputed to wife. The MSA expressly provided, consistent with Lepis, that each party reserved the right to petition for modification of either or both alimony and child support, "upwards or downwards," if these figures significantly changed subsequent to the execution of the agreement.

As the trial judge recognized, our courts have consistently rejected requests for modification based on circumstances which are only temporary. See, e.g., Larbig, supra, 384 N.J. Super. at 22-23. We note, however, that husband has presented prima facie evidence that his income through 2009 has been substantially below the income assumption set forth in the parties' MSA.*fn5 As we recognized in Larbig, supra, "[t]here is, of course, no brightline rule by which to measure when a changed circumstance has endured long enough to warrant a modification of a support obligation." 384 N.J. Super. at 23. At some point, a reduction in earned income may be more than merely passing or temporary, particularly in view of the drastic downturn in the financial market and brokerage-related jobs in which husband is employed. Although we defer to the discretionary decisions of the Family Part judges in these type of matters, ibid., we are satisfied that husband's certifications and supporting documentation were sufficient to demonstrate the existence of a genuine issue as to material facts and establish a prima facie case warranting the exchange of discovery and a plenary hearing. Lepis, supra, 83 N.J. at 159; Shaw v. Shaw, 138 N.J. Super. 436, 440 (App. Div. 1976). We have summarized in this opinion each of the party's positions and the court's findings, some of which are supported by the record and others of which are not. Considering there will be further discovery and proceedings in which many of these issues will be fleshed out, we decline to address these matters further and take no position on the merits or ultimate success of husband's application.

Reversed and remanded. Jurisdiction is not retained.

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