July 22, 2010
BARBARA K. FELDMAN, PLAINTIFF-RESPONDENT/CROSS-APPELLANT,
HARVEY A. FELDMAN, DEFENDANT-APPELLANT/CROSS-RESPONDENT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-1119-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued January 26, 2010
Before Judges Wefing, Grall and LeWinn.
In 2005, after thirty-six years of marriage, plaintiff Barbara K. Feldman filed a complaint for divorce and defendant Harvey A. Feldman filed a counterclaim. Plaintiff's claim for equitable distribution and defendant's claims for alimony and equitable distribution were tried to the court. When the trial was completed, plaintiff was sixty-one years of age, defendant was sixty-two and their only child was emancipated. An amended final judgment of divorce distributing the marital assets and denying alimony and counsel fees was entered in March 2008 and clarified on defendant's motion for reconsideration by order of July 8, 2008.
Defendant appeals and plaintiff cross-appeals. Defendant contends that the judge erred in denying him alimony. Both parties claim error in the following: the judge's distribution of marital assets; the award of debits and credits for expenses pending trial; allocation of responsibility for property taxes and insurance pending sale of their real estate; and the denial of counsel fees. We modify the judge's determination of credits, but otherwise affirm substantially for the reasons stated in the judge's oral decisions of February 28 and July 8, 2008 as supplemented herein.
Plaintiff was born in 1945 and defendant was born in 1946. They married in November 1969. At that time, plaintiff had a college degree in political science and was working for the City of New York in the Department of Housing and Community Development. Defendant had a degree in accounting and was employed in the tax department of Avon Products, Inc. Neither party had assets at the time of the marriage, and their first home was a one-bedroom apartment in New York City. Throughout the marriage, the parties separated their finances and defendant allocated the expenses between them. They had one joint checking account into which plaintiff deposited her earnings, but defendant kept his funds in separate accounts. When he paid a bill that he believed plaintiff should have paid, he reimbursed himself from the joint account.
The parties' only child was born in 1973. Plaintiff left the workforce during the pregnancy and did not return to work until 1975. In the two-year interim, plaintiff cared for their child and home and defendant worked and studied for an advanced degree.
In 1975, defendant obtained his MBA at the expense of his employer, who paid his tuition. That same year the Feldmans purchased a house in Teaneck, and plaintiff returned to her employment with the City of New York. In 1978, plaintiff left her job with the City to work for a New York State financing agency. Defendant continued his employment with Avon until his position was eliminated in 1980.
Before his severance pay expired, defendant was hired as a vice president and the director of new product development by Margrace Corporation in Middlesex. At that point in the marriage, he was earning about $5000 a year more than plaintiff.
In 1983, plaintiff left her government job to serve as vice president for Salomon Brothers in the area of municipal finance. She and defendant discussed her career change before she moved to the private sector, and he helped her prepare a plan to accomplish that goal. In her opinion, defendant was otherwise not supportive of or helpful in her career. When plaintiff went to work for Salomon Brothers, she hired and paid a full-time, live-in housekeeper who also cared for the Feldmans' child.
Plaintiff continued a pattern of changing her job to advance her career. In 1984, she left Salomon Brothers to accept a position at Bear Stearns. Her starting salary was between $100,000 and $125,000, and she was required to work long hours and on weekends and, at times, had to travel. By 1988, plaintiff earned $197,986.21.
In 1985, Margrace closed and defendant, then earning $75,000, started his own marketing and consulting business. He worked from the family home. Defendant's average earnings between 1986 and 1996 were $104,000. In 1990, his best year, defendant earned in excess of $250,000.
In 1991, defendant selected a vacation home for the family in East Hampton. Plaintiff paid the purchase price, $388,000, in cash from funds in her investment accounts and took title in her name alone. She also paid for all of the furnishings and the landscaping done at the East Hampton home. Defendant paid about $8000 per year for the property taxes and insurance.
As their careers advanced, the parties continued to keep separate checking and investment accounts, separate credit cards and one joint account that was funded solely by plaintiff. In addition to the mortgage, property taxes and insurance, defendant assumed responsibility for their child's private school tuition and his personal expenses. When their child enrolled in college, defendant paid the tuition, but he later reimbursed himself in the amount of $88,000, exhausting a fund set up for that purpose.
In 1994, plaintiff left Bear Stearns and joined Merrill Lynch's municipal bonds group. Her new job was more demanding and required travel throughout the country. By that time the Feldmans' child was about nineteen years old and in college.
In 1994, the Feldmans purchased land in Cresskill for just over $480,000 with the intention to make their home there rather than in Teaneck. As with the East Hampton house, plaintiff paid the purchase price for the land in cash from her investments; this time she acquired the funds by selling her Bear Stearns stock. Again, plaintiff took title in her own name only. She spent about $1.2 million to fund the construction of a custom built 8500 square-foot home, which included an apartment for her mother. Although plaintiff hired a construction manager, defendant said he contributed by selecting and working with the architect, overseeing the workers and negotiating with the vendors.
When the Feldmans sold their Teaneck home, they received $167,000. Upon completion of their new million-plus dollar home, plaintiff spent in excess of $200,000 to furnish the house. Defendant purchased the grill and the equipment in the home's "media room." He also paid $36,000 per year for the property taxes and insurance on that home.
The parties' recollections of their respective roles in raising their child and assisting each other differed. Both believed that he or she had played a greater role than the other perceived. In any event, the Feldmans' child graduated from college in 1996 and found a job and an apartment.
In 1996, defendant's gross receipts were $178,000, which was the second-best year for his business. Thereafter, the business declined. The parties had different views on the cause. Defendant blamed it on changes in the field brought about by in-house and internet marketing. In plaintiff's opinion, defendant lost interest in his business and did not do what was necessary to keep current and obtain and retain clients.
Defendant's gross annual billings during years 2000 to 2004 averaged about $25,000. He had no earnings in 2005, and in his best year of that period, 2001, he billed $47,485. For a one-year period commencing in 2003, defendant participated in a joint venture involving the manufacture of leather products in China for sale in this country. That joint venture was abandoned as unsuccessful.
There is no dispute that defendant devoted significant time to civic, religious and homeowners' organizations during the years that his business was declining. He explained that he also looked for employment, as an alternative to trying to revive his business. He posted his resume on the internet and responded to advertisements in the New York Times, Wall Street Journal and trade publications. He suspected that his age was the reason he had difficulty finding work.
In 2002, defendant ceased paying the mortgage, property taxes and insurance on both of their homes. Thereafter, plaintiff paid those expenses.
Both parties retained employability experts. In the opinion of plaintiff's expert, defendant had the capacity to earn between $85,000 and $110,000 as a marketing or sales manager. Defendant's expert believed that he could earn no more than $45,000 to $65,000 per year, but defendant disagreed. By his estimate, earnings in the range of $25,000 to $45,000 were the best he could expect. He had obtained a certificate and planned to work as a "life coach."
Plaintiff's career continued to advance while defendant's declined. Although plaintiff's base salary at Merrill Lynch was $200,000, she also received a bonus comprised of stock options and cash. Her earnings were: 2001, $941,319; 2002, $698,630; 2003, $892,865; 2004, over $1.1 million; 2005, over $1.7 million; and in 2007, $850,000. There is no serious disagreement that the drop in plaintiff's income was the result of market conditions. Although plaintiff planned to retire at sixty years of age on account of the demanding nature of her job, she was sixty-one years old and still working when the trial concluded.
The parties had accumulated significant assets by the time plaintiff filed her divorce complaint. In their view, the combined value of their homes was about $4 million. They agreed that the houses should be sold, with plaintiff having the right of first refusal on the Cresskill house and defendant having the right of first refusal on their vacation home in East Hampton.
The Feldmans retained a certified public accountant (CPA), who provided information to the court on their financial assets. The CPA used the balances on the date of the complaint and accounted for changes in value due to deposits and withdrawals. To account for increases or decreases due to market forces, interest or dividends, he assigned a proportionate share to the pre-complaint value.
On the basis of the CPA's determinations, the total value of accounts not reserved for retirement and subject to equitable distribution as of September 2007 was $5,817,158.32: $5,725,895.85 in plaintiff's cash management account; $38,215.59 in defendant's Merrill Lynch account; $13,719.75 in defendant's Morgan Stanley account; and $39,327.13 in defendant's Fidelity account. The CPA's total value for the following retirement assets subject to equitable distribution as of September 2007 was $1,213,979.76: plaintiff's 401(k), stock ownership plan and retirement allowance plan (RAP), $390,333.78; plaintiff's IRA, $389,720.24; plaintiff's deferred compensation, $32,352.42; defendant's IRA, $67,528.73; and defendant's Fidelity retirement accounts, $334,044.59. The total value was $7,031,138.08, not including the roughly $4 million estimated value of their real estate. By March 2008, the total value of these assets had declined to $6,193,306.72. That amount did not include $119,328.81 that plaintiff withdrew and spent on their two homes while the litigation was pending.
In addition to the foregoing assets, plaintiff also had options to buy Merrill Lynch stocks at a fixed price, i.e., a strike price. These options had been granted prior to the filing of the complaint for divorce but had not been exercised. Each grant of options had a future vesting date, and the options not exercised by the date of the complaint included some that had vested and some that had not. The options have value only to the extent that the price of the stock is higher than the strike price when the options are exercised.
The parties agreed that one-hundred percent of the options that had vested before the action for divorce was commenced were subject to equitable distribution. They disagreed about whether the full value of unvested options was subject to equitable distribution.
Merrill Lynch's compensation plan states three purposes for its stock incentive program: a) to deliver a portion of annual bonuses in stock rather than cash; b) to attract, retain and motivate key employees; and c) to encourage long-term stock ownership that would align the interests of employees and shareholders. While each grant had a vesting period, failure to continue employment throughout the vesting period is not a bar to full enjoyment of the grant if the employee leaves due to death, disability, or retirement in circumstances that do not involve competition with Merrill Lynch after departure. Based on age and years of service, plaintiff was eligible for retirement when the grants at issue here were made.
In the CPA's opinion, the grants were given in part for plaintiff's services during the year of the award and in part as an incentive to remain with Merrill Lynch. For that reason, he suggested use of a coverture fraction that would identify the portion of each grant attributable to years of service during the marriage between the grant and vesting. He recommended a fraction with a numerator equivalent to the length of service between the dates of the grant and the filing of the complaint and a denominator equivalent to the length of service between the dates of the grant and vesting.
The CPA also provided information relevant to the parties' respective need for and ability to pay alimony. Specifically, he addressed the rate of return on bonds to estimate a fair rate for unearned income the parties could expect to receive on their respective shares of the marital assets. The CPA looked to the five-year average rate of return on bonds for the period ending on September 30, 2007. He determined that the five-year average was 11.23% for high risk, 5.55% for moderate risk and 2.69% for low risk bonds.
Also relevant to alimony, the Feldmans described their marital standard of living and what they required to maintain it.
According to plaintiff, they spent about $24,870 per month during the marriage, most of it spent to maintain their homes. She had little time for leisure activities, such as dining out, travel and hobbies, and the Feldmans did not belong to a country club or attend galas. Defendant painted a different picture. He said they had traveled to Paris, Hawaii, Italy, Mexico, Wales, Scotland, Israel and the Caribbean. He also mentioned their live-in housekeeper, dinners at fine restaurants, membership in two synagogues and his wife's purchases of jewelry that they had insured for an amount in excess of $150,000.
Plaintiff emphasized that the period during which she was earning in excess of a million dollars was brief and not representative of their marital standard of living. Defendant contended that he would need alimony of $17,627 per month to maintain the marital standard of living which required $18,395 per month. His figure includes $5000 per month or $60,000 per year for savings.
The trial judge addressed each of the statutory factors relevant to equitable distribution in light of the evidence adduced at trial. N.J.S.A. 2A:34-23.1. She determined that the majority of the parties' assets was acquired because of plaintiff's efforts and success during the later years of the marriage. Nonetheless, the judge recognized that during the early years of the marriage defendant supported the family while plaintiff stayed home with their child and that he was the spouse who made it possible for them to purchase their first home. The judge concluded that both parties had contributed to the marriage and the family. The judge also considered the fact that they were nearing a reasonable age for retirement, especially plaintiff whose job was demanding and who was probably already past the age at which others in positions like hers retire. On those considerations, the judge divided the retirement assets equally between them.
The judge did not divide the non-retirement accounts in the same proportion as the retirement assets. In that context, the judge determined that it was appropriate to give additional recognition to the fact that plaintiff's efforts funded the parties' accumulation of their significant wealth and did so during a period when defendant was working less than he had, or not at all, without any good reason. The judge stressed that defendant was not in the same position as a spouse who opts to raise a child and care for the home in order to enhance his or her spouse's opportunity to advance in the workplace. That conclusion was supported with reference to the fact that plaintiff always hired and paid for live-in help to attend to those matters. There was other support in the record. It was after 1996, when their daughter had graduated from college, that defendant's business went into serious decline.
On those additional considerations, the judge awarded plaintiff sixty and defendant forty percent of the marital assets not invested as funds for retirement. The judge recognized that a sixty-forty division would leave plaintiff with greater wealth but deemed that equitable given the parties' relative contributions to the marriage.
The restricted stocks and stock options were to be divided sixty-forty after the coverture fraction recommended by the CPA was applied to one-half of each grant at the time of its exercise. The judge applied the coverture fraction to one-half of each grant because the CPA had concluded that Merrill Lynch made the grants for two purposes - to reward past efforts and provide an incentive for future service. To effectuate a future distribution at the time of exercise that would avoid the need to speculate on value, the judge provided for distribution through a "Callahan trust."*fn1
The judge divided the parties' furnishings and jewelry on a different basis. She determined that plaintiff and defendant would keep the jewelry and furnishings he or she acquired. The judge reasoned that this was an equitable basis for division as there was no evidence of the fair market value. Because there was no dispute that plaintiff purchased the bulk of the furnishings for their two homes, the judge allowed defendant to identify any furnishings for the Teaneck home that were still in use as well as items he purchased for the East Hampton and Cresskill homes.
The judge determined that an award of alimony to defendant was not appropriate. In that regard, the judge considered the parties' respective age, health, earning capacity, and contribution to the marriage and the absence of any economic interdependence developed as a result of time and effort devoted to further the marital partnership in other ways. The judge also focused on need and ability to pay and on plaintiff's likely retirement in the near future.
The judge imputed annual earned income of $65,000 to defendant, in accordance with his expert's opinion. Using the rate for moderate risk investments calculated by the CPA, 5.5%, the judge imputed annual unearned income on liquid assets in the amount of $128,000 and unearned income of $50,000 on defendant's forty percent share of the proceeds from the sale of the Cresskill and East Hampton homes. To gain $50,000 of unearned income at the 5.5% rate, defendant would be required to invest $909,090 of his estimated $1.6 million share of the total $4 million value. The judge did not impute income on the remaining $690,910. She reasoned that defendant would purchase another home. The judge also did not impute interest income on defendant's fifty-percent share of the retirement assets.
Based on all the relevant statutory factors, the judge concluded that defendant was able to maintain a standard of living reasonably comparable to the marital standard without alimony.
The judge also granted credits against equitable distribution based on expenditures during the pendente lite period. Plaintiff had withdrawn $119,328.81 from her accounts to pay the property taxes and insurance on their homes. The judge awarded defendant his share, forty percent, of that amount. During the pendente lite period plaintiff also paid $6500 monthly support to defendant and accounts were drawn down to advance his counsel fees. The judge charged both expenses against defendant's share of the equitable distribution; in effect that adjustment treats the money as an advance on equitable distribution. No counsel fees were awarded to either party at the conclusion of trial.
The standards governing this court's review of the issues raised on this appeal are well-settled. Determinations about alimony and equitable distribution are left to the sound discretion of the trial court judge. See Steneken v. Steneken, 367 N.J. Super. 427, 434 (App. Div. 2004) (alimony), aff'd as modified on other grounds, 183 N.J. 290 (2005); Rolnick v. Rolnick, 262 N.J. Super. 343, 355 (App. Div. 1993) (equitable distribution). When the trial court judge's determinations are consistent with the law and not "manifestly unreasonable, arbitrary, or clearly contrary to reason or to other evidence, or the result of whim or caprice," we do not disturb them. Foust v. Glaser, 340 N.J. Super. 312, 316 (App. Div. 2001) (internal quotations omitted). The question is not what the members of this court would have decided on the same record, but whether the trial court judge's factual findings are supported by "adequate, substantial, credible evidence" in the record and the trial court judge's conclusions are in accordance with the governing legal standards. Ibid.; see La Sala v. La Sala, 335 N.J. Super. 1, 6 (App. Div. 2000), certif. denied, 167 N.J. 630 (2001) (noting that we affirm when "the trial court could reasonably have reached its result from the evidence presented, and the award is not distorted by legal or factual mistake").
We turn to consider the parties' various objections to the allocation of marital property - i.e., equitable distribution, N.J.S.A. 2A:34-23h; N.J.S.A. 2A:34-23.1. "The goal of equitable distribution . . . is to effect a fair and just division of marital assets." Steneken, supra, 183 N.J. at 299 (internal quotations omitted). Equitable distribution requires identification of the assets acquired during the marriage, assignment of value and a determination as to how to equitably allocate the marital assets between the spouses. Rothman v. Rothman, 65 N.J. 219, 232 (1974). The party seeking to exclude all or a portion of an asset on the ground that it was not "attributable to the expenditure of effort by either spouse during the marriage" has "the burden of establishing such immunity from equitable distribution as to any particular asset." Pascale v. Pascale, 140 N.J. 583, 609 (1995) (internal quotations and alterations omitted).
The most significant dispute on this appeal centers on the percentage allocation of retirement and non-retirement assets - the equal division of retirement assets and the sixty-forty division of non-retirement assets. Defendant contends that all assets should have been divided equally, and plaintiff contends that she should have received sixty percent or more of all of the marital assets.
The trial judge in this case clearly articulated the findings that led her to conclude that the division she directed was appropriate in light of the evidence and the factors set forth in N.J.S.A. 2A:34-23.1. We are not persuaded by either party's claims of error. Defendant's suggestion that the judge relied on marital fault has no support in the record; the judge's focus was properly fixed on relative contributions and efforts during this long-term marriage, not marital fault. See Mani v. Mani, 183 N.J. 70, 91 (2005).*fn2 Accordingly, we affirm that determination.
Defendant's objections to the unequal division of furniture and jewelry also concern the division, not the identification, of marital assets. Defendant suggests that the judge decided that this personal property acquired during the marriage was immune from distribution and did so based on an unfair allocation of the burden of proof. See Pascale, supra, 140 N.J. at 609 (noting that the burden of proof is on the party asserting immunity of an asset). That is not what the judge did. Rather, the judge determined that it was most appropriate for each party to keep the furnishings and jewelry he or she acquired, including allowing defendant to identify furnishings moved to the parties' other homes from Teaneck.*fn3
Given our standard of review, there is no basis to intervene. As the trial judge noted, there was no evidence produced at trial as to present value of the furnishings and the only evidence relevant to the jewelry was the amount for which it was insured. Under the circumstances, we cannot conclude the division ordered was arbitrary or the product of an abuse of discretion.
The identification of assets subject to equitable distribution is the basis for the parties' dispute about use of the coverture fraction to divide unvested stock and options. A coverture fraction is employed when it is necessary to identify the portion of an asset attributable to efforts during the marriage and the portion attributable to efforts thereafter. Moore v. Moore, 114 N.J. 147, 166 (1989). Because plaintiff failed to establish that a portion of the grants are immune, each grant is fully subject to equitable distribution.
As noted above, the judge determined that each grant could be divided into two parts - one-half intended by the company to reward work during the past year and one-half intended by the company to encourage plaintiff to stay.
There may be a case in which it is appropriate to apply a coverture fraction to segregate portions of unvested rights to stock subject to equitable distribution. But given the evidence in this case, it was not appropriate.
Misdirected by the CPA jointly retained by the parties, the judge focused on the employer's purpose. The question, however, was whether plaintiff met her burden of establishing that but for post-complaint efforts on her part she would not benefit from these grants. Pascale, supra, 140 N.J. at 610-11; cf. Robertson v. Robertson, 381 N.J. Super. 199, 205 (App. Div. 2005) (a case in which the spouse established that the options were awarded upon hiring, subsequent to the date of the complaint, as an incentive for him to accept the employment).
The employer's reasons for paying a bonus are largely irrelevant to the question of immunity of assets in the context of equitable distribution. As the Court explained in Pascale, an asset's immunity depends upon whether the spouse's efforts were made during the marriage, as opposed to before or after the marriage. 140 N.J. at 609. Immunity arises only when the employer's forward-looking goals are implemented in a way that requires the recipient of the employment benefit to do more than he or she did during the marriage to exercise his or her right to the benefit.
Finding nothing in the record that establishes the necessity for post-complaint efforts by plaintiff, we conclude that Pascale requires equitable distribution of each grant in its entirety. Accordingly, we direct that all of the restricted stock and options distributed by the judge be divided at the rate of sixty percent to plaintiff and forty percent to defendant without use of a coverture fraction. The distribution shall be by way of the Callahan trust contemplated by the trial judge, which avoids the risk of any unfairness due to the speculative value of the assets and the potential for loss.
The judge's decision to deny alimony is affirmed because it is supported by adequate evidence in the record and not inconsistent with the law. Not every long-term marriage results in an economic dependency that must be addressed with an award of alimony. The duration of the marriage is one of many factors that courts must consider. N.J.S.A. 2A:34-23b(1)-(13). In this case, the judge found several other factors to be more pertinent: age, and the fact that plaintiff was approaching a retirement age appropriate for one in her position; the marital standard of living and the parties' ability to maintain it; contributions during the marriage, both economic and non-economic; the equitable distribution of property; and the income available through investment of assets. Ibid. There are no findings relevant to these factors, including the rate of return on investments, that lack adequate support in the record, and the judge's balance of the factors was influenced by her assessment of defendant's credibility in asserting a need for alimony to maintain the marital standard of living.
Defendant raises one objection related to alimony that has merit. He contends that the judge's assessment of his ability to maintain the marital standard of living was skewed by the subsequent grant of debits against his share of the equitable distribution that effectively diminished the assets he can invest to generate income. We agree.
The judge erred in treating the pendente lite support and counsel fees as an advance against equitable distribution.
The judge determined that alimony was not appropriate, in part because of defendant's ability to support himself at the marital standard of living with unearned income on his share of the marital assets. Defendant, however, did not have access to the income from those assets during the pendente lite period. In treating pendente lite support and counsel fees advanced during the proceeding as an advance against equitable distribution, the judge did not consider the impact on defendant's ability to support himself in the future. Accordingly, we direct that the pendente lite support and counsel fees be treated not as an advance against equitable distribution, but as an expense that plaintiff should have paid from her vastly superior earnings during that period. Without the income on assets, defendant was in need of support and, unlike plaintiff, not in a position to fund the litigation.
Having reviewed the parties' remaining contentions in light of the record and the decisions rendered by the judge, we conclude that none of the issues require further discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed as modified by this opinion.