On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-488-07.
The opinion of the court was delivered by: Messano, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, Messano and LeWinn.
After nearly eighteen years of marriage, plaintiff Mark Tannen filed for divorce from his wife, defendant Wendy G. Tannen. The matter was tried only on the economic issues of equitable distribution, alimony, and child support, the parties having entered into a custody and parenting-time agreement regarding their two children while the litigation was pending. Immediately prior to the scheduled trial date, the judge ordered plaintiff to join four trusts in which either defendant or the couple's children were beneficiaries as third-party defendants.*fn1
The matter was tried over the course of several months and resulted in a final judgment of divorce (JOD) issued on January 23, 2008.
In A-4185-07, defendant appeals from: 1) paragraph 8E of the JOD that exempted from equitable distribution most of the monies contained in a certain investment account in plaintiff's name (the Vanguard account); 2) the amount of permanent alimony awarded to her pursuant to paragraph 13 of the JOD; 3) the amount of child support awarded to her pursuant to paragraph 14 of the JOD; and 4) paragraph 11 of the JOD that required the trustees of the WTT to pay her $4000 per month.
The Trusts also appeal in A-4211-07. They contend that:
1) the judge erred in ordering that they be joined in the action and by forcing them to proceed without discovery; 2) plaintiff lacked standing to bring any claims against them; 3) the judge erred in ordering the WTT to distribute $4000 per month to defendant; 4) the alimony award to defendant was based upon an "improper calculat[ion] [of] the amount of income available to [plaintiff]"; 5) any claims against the Children's Trusts should have been dismissed; 6) the judge erred in concluding defendant owed a "fiduciary duty to the spouse divorcing her"; 7) plaintiff's claims should be dismissed based upon his "unclean hands and dishonesty during . . . trial"; and 8) the Trusts should be awarded counsel fees on appeal.
Plaintiff cross-appeals. He contends that the judge erred in calculating the alimony award; in failing to "award [him] retroactive relief from his pendente lite support obligation . . ."; and in denying his request for counsel fees because defendant "unnecessarily protracted the litigation" after the Trusts "were properly joined."
The appeals were calendared back-to-back and argued together; we have consolidated them for purposes of a single opinion. After consideration of the arguments raised in light of the record and applicable legal standards, we affirm in part, reverse in part, and remand the matter for further proceedings consistent with this opinion.
We begin by recounting some of the procedural history and factual background adduced at trial regarding the involvement of the Trusts in this litigation. Our analysis and resolution of the arguments raised by defendant and the Trusts in this regard significantly advance our resolution of the corollary contentions raised by the parties.
Plaintiff and defendant were married on December 4, 1988. Plaintiff was fifty-years old and defendant was forty-eight years old at the time of trial in 2007; their two children were seventeen years old and fourteen years old. Plaintiff and defendant, both college graduates, were involved in real estate sales and marketing; however, defendant left the workforce when the couple married. Shortly thereafter they moved into a 4000 square-foot home on two acres in Saddle River that was purchased by defendant's father and titled in defendant's name.
In 2000, defendant's parents, Leonard and Gloria Phillips, settled the WTT, an irrevocable trust with defendant as the sole beneficiary and defendant and her parents as co-trustees. Section 3 of the WTT provided
The Trustees shall apply and distribute the net income and corpus of the Trust . . . to the beneficiary . . . in the following manner:
(A) The Trustees . . . shall pay over to or apply for the benefit of the beneficiary's health, support, maintenance, education and general welfare, all or any part of the net income therefrom and any or all of the principal thereof, as the Trustees shall determine to be in the beneficiary's best interests, after taking into account the other financial resources available to the beneficiary for such purposes that are known to the Trustees. The term "best interests" shall include, without limitation and in the Trustees' sole discretion as to need and amount, payments from the Trust to help meet educational expenses, medical expenses or other emergency needs of the beneficiary, to enable the beneficiary to purchase a home, and to enable the beneficiary to enter into a business or profession . . . . The time or times, amount or amounts, manner and form in which said distributions shall be made, or sums so expended, shall be left to the sole discretion of the Trustees and shall be made without court order and without regard to the duty of any person to support such beneficiary. . . .
(C) Notwithstanding any other provision in this Trust Agreement to the contrary, it is the express intention of the Grantors in creating this Trust that the beneficiary shall not be permitted, under any circumstances, to compel distributions of income and/or principal prior to the time of final distribution. [Emphasis added.]
The WTT also contained a "spendthrift" provision, Section 14, which provided:
Distribution of both income and principal shall be made as directed under the terms of this Trust, and the beneficiary shall not have the right to alienate, anticipate, pledge, assign, sell, transfer or encumber such income or principal distribution without first procuring the written consent of the Trustees. Any endeavor of any such beneficiary to circumvent this direction in any manner shall be wholly disregarded by the Trustees, and shall be null and void. [Emphasis added.]
At the time of trial, the corpus of the WTT included shares of mutual funds and stock valued at $1,155,877, a commercial property located in Clifton from which the trust received rental income, and the Saddle River home that had been conveyed from defendant to the trust. The WTT paid the annual real estate taxes on that home, approximately $13,000, and half the annual cost of a housekeeper, approximately $13,000; the home was free of any mortgage. The WTT also paid for capital improvements on the house, including a two-story addition, a new roof, driveway, kitchen, and deck, some new floors, and landscaping and pool renovation. In the four years prior to trial, the WTT generated at least $124,000 per year in investment and rental income.
Beyond those expenses, the WTT paid for the children's private school tuition for two years. According to defendant and her father, who testified at trial, she asked for money from the WTT to go on a trip with some friends, but her father refused.*fn2 Defendant made no other requests for funds from the WTT.
Defendant's father also settled the Children's Trusts, both of which were irrevocable and for the benefit of the parties' son and daughter. Each trust provided that the trustee, exercising his or her sole discretion, could make distributions that were necessary on behalf of the children. Defendant's father was the original trustee of both Children's Trusts, though defendant had recently been substituted as trustee. Each trust instrument clearly indicated that the creation of the Children's Trusts, and any distributions made therefrom, were not intended to relieve the parties from their legal obligations to support their children. At the time of trial, there had been no distribution from either of the Children's Trusts.
On March 21, 2007, the day before trial was scheduled to begin, defendant filed a motion in limine seeking to exclude any income generated by the Trusts as an asset for alimony and child support purposes. In an order dated April 4, the judge denied the motion without prejudice to defendant renewing her objection at trial. A second order dated the same day provided that the Trusts were "designated parties" to the action, and ordered plaintiff to file a third-party complaint against the Trusts. On April 12, plaintiff filed an amended complaint naming the Trusts as third-party defendants. The Trusts filed an answer on May 23.
On July 20, the Trusts moved to dismiss the complaint against them but the judge denied the application without prejudice. The Trusts renewed their motion when the trial commenced on August 6 and sought an adjournment for discovery. The judge denied both applications. Thereafter, the Trusts participated throughout the trial.
On December 20, the judge issued his written opinion following trial. He noted that "[a]limony orders are based upon actual income, potential to generate income, as well as imputation of income." The judge further observed that "[d]ivorcing spouses have a fiduciary duty toward each other[,]" and that defendant "ha[d] a fiduciary duty to pursue her option to seek income under the terms of the [WTT]. Upon her failure to do so, income should be properly imputable to her under the theory of fiduciary duties arising from the marriage." The judge further found that defendant's "reluctance or failure to pursue income from the [WTT] constitute[d] unreasonable action on her part and a breach of fairness in her fiduciary duty." As a result, he reasoned that income from the WTT was "treatable as income to [defendant], under the statutory criteria, in order for the [c]court to determine a fair amount of alimony to be paid by [plaintiff]."
The judge further reasoned that "[u]nder certain circumstances," he "ha[d] the authority to compel a distribution of income to [defendant]," stating that "[w]here a trustee acts outside the bounds of reasonable judgment, the court will interfere with the administration of a trust." The judge offered the following analysis:
While New Jersey courts have generally followed the Restatement of Law, our courts have determined that it would not be equitable for a beneficiary to maintain assets held in trust and not provide for his or her family, and similarly would not be equitable for a beneficiary to contract for services or goods and receive same but not remit payment. It is reasonable to conclude by analogy that a court may require income available to a beneficiary to be paid to that beneficiary in the process of calculating alimony and child support. If such income is imputed to the beneficiary and the trustee refuses to act accordingly, the beneficiary would certainly be unjustly enriched if she were to first receive alimony, have a limited child support obligation and ultimately receive the entire trust income anyway.
The judge concluded that under the Restatement (Third) of Trusts § 50 comment d(2) (2003),*fn3 the terms "support and maintenance and the language of the trust require[d] the trustee to disperse [sic] such sums as are necessary to maintain the lifestyle of the beneficiary. . . . This language also support[ed] a conclusion that benefits from the trust must be first considered before an alimony obligation is determined." The judge indicated that if the trustees of the WTT failed to "comply with th[e] Court's directive that [defendant] receive [monthly income] toward her health, maintenance, support and general welfare, that refusal w[ould] be deemed . . . an abuse of discretion and . . . the trustees w[ould] be ordered to make such distributions."
Paragraph 11 of the JOD filed on January 23, 2008, imputed $4000 in income per month to defendant from the WTT, further ordered the WTT to make this payment to her and to continue making the other payments on the marital home and for the housekeeper's expenses, and further provided that "in the event the trustees of the [WTT] d[id] not comply with the Court's directive . . . that refusal w[ould] be deemed . . . an abuse of discretion . . . ." Paragraph 12 of the JOD imputed $25,000 of earned income to defendant; no appeal is taken from this portion of the JOD. Paragraph 13 of the JOD set plaintiff's permanent monthly alimony obligation at $4500.
The Trusts argue that the judge erred in joining them as parties to the litigation, imputing income from the WTT to defendant, and in further ordering the WTT to pay $4000 a month towards defendant's support. As a result, they contend that plaintiff's alimony obligation was improperly calculated.
Defendant relies upon the arguments raised by the Trusts, and further argues that the judge erred in assessing the testimony of plaintiff's lifestyle expert, Thomas J. Hoberman, and her lifestyle expert, Howard Rauch, thus further improperly calculating the alimony award.
Plaintiff argues that the judge properly imputed income to defendant from the WTT, and thereafter properly included that income in the alimony calculation, though, in his cross-appeal, plaintiff contends that the judge failed to impute a sufficient amount of income from the WTT to defendant.
We state some basic principles regarding alimony and the factors that a trial judge must consider in making any award.
N.J.S.A. 2A:34-23 provides that in "any matrimonial action . . . the court may make such order as to the alimony or maintenance of the parties, . . . as the circumstances of the parties and the nature of the case shall render fit, reasonable and just . . . ." N.J.S.A. 2A:34-23(b) sets forth a non-exhaustive list of thirteen factors that the judge should consider in making any award. One such factor is "[t]he income available to either party through investment of any assets held by that party[.]"
N.J.S.A. 2A:34-23(b)(11) (emphasis added).
"'[T]he goal of a proper alimony award is to assist the supported spouse in achieving a lifestyle that is reasonably comparable to the one enjoyed while living with the supporting spouse during the marriage.'" Steneken v. Steneken, 183 N.J. 290, 299 (2005) (quoting Crews v. Crews, 164 N.J. 11, 16 (2000)). "The supporting spouse's obligation is set at a level that will maintain that standard." Innes v. Innes, 117 N.J. 496, 503 (1990) (citing Lepis v. Lepis, 83 N.J. 139, 150 (1980)).
Although the supporting spouse's income earned through employment is central to the . . . inquiry, it is not the only measure of the supporting spouse's ability to pay that should be considered by a court. Real property, capital assets, investment portfolio, and capacity to earn by "diligent attention to . . . business" are all appropriate factors for a court to consider in the determination of [an] alimony . . . [award].
[Miller v. Miller, 160 N.J. 408, 420-21 (1999) (quoting Innes, supra, 117 N.J. at 503) (in turn quoting Bonanno v. Bonanno, 4 N.J. 268, 275 (1950)).]*fn4
These principles apply with equal force to the supported spouse, since an appropriate alimony award must also consider "the supported spouse's ability to contribute to his or her own support . . . ." Crews, supra, 164 N.J. at 27 (citation omitted); see also Aronson v. Aronson, 245 N.J. Super. 354, 364 (App. Div. 1991) ("When support of an economically dependent spouse is at issue, ...