November 1, 2010
KATHLEEN UNGVARSKY, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
JOHN S. UNGVARSKY, DEFENDANT-RESPONDENT/CROSS-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Burlington County, Docket No. FM-03-493-05Z.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 14, 2010
Before Judges Parrillo, Yannotti and Espinosa.
Plaintiff Kathleen Ungvarsky (Kathleen) appeals from three provisions in two post-judgment matrimonial orders that: denied her request to impute income to defendant John Ungvarsky (John); retroactively reduced child support based exclusively upon John's unemployment benefits; and denied her request for discovery regarding John's finances. John cross-appeals from an order denying his cross-motion for a change in custody to him. We reverse the orders regarding John's child support obligation and denying discovery and remand the matter for a plenary hearing. On the cross-appeal, we affirm the denial of John's cross-motion.
The facts relevant to this appeal can be summarized as follows. Kathleen and John were married in April 1993 and had four children. They agreed to a property settlement agreement (PSA) on May 22, 2005 and a subsequent addendum, both of which were incorporated into the Judgment of Divorce (JOD) entered on January 30, 2006.
Pursuant to the PSA and JOD, the parties share joint legal and physical custody of the children. Kathleen is the parent of primary residence. Under the PSA, John was to have one hundred twenty-two overnight visits per year with the children. The former marital residence was valued at approximately $600,000. John, who remarried in 2007, purchased Kathleen's interest for a sum of $207,477 by refinancing the mortgage solely in his name.
John's child support obligations under the PSA were scheduled to begin June 1, 2005, "in the sum of $1,000 per month for the four children of the marriage, for a maximum of four months. . . ." On May 22, 2005, the addendum to the PSA altered John's child support obligation, providing:
1. Child Support. Commencing February 1, 2006, Husband shall pay the sum of $2,000 per month to Wife as child support for the parties' four minor children. . . . Husband shall continue to pay said level of child support for a period of thirty-siX (36) months, and both parties agree that said level of child support shall not be modified during the 36-month period of time notwithstanding any increases or decreases in either of their incomes. At the end of the 36-month period, the parties shall renegotiate the amount of child support payable for the four minor children.
The parties agree that any and all support arrears owed by Husband as provided for in the present Agreement would be eliminated, and that, as set forth above, the new child support amount would commence February 1, 2006.
At the time John agreed to these terms, he was unemployed. In fact, he earned no income in 2005. During the marriage, Kathleen was not employed outside the home. After working as a real estate closing agent, she was eventually able to find employment as a teacher at an annual salary of $51,939.85.
In February 2008, Plaintiff filed a pro se motion, seeking, in part, the following relief: to require defendant to produce 2007 and 2008 income information and tax returns and to fully complete a Case Information Statement (CIS); and to impute income to defendant in order to calculate a new support amount.
In March 2009, John filed a responsive certification, asking the court to deny plaintiff's motion, and a cross-motion, seeking: a transfer of residential custody to him; referral of the custody issue to mediation; to require Kathleen to pay child support to him; and to award counsel fees and costs.
John declared that he suffered significant financial difficulties as a result of his unemployment, which forced him to liquidate many of his assets, take out a second mortgage on his home, and incur sizable credit card debt. His CIS reflects a $9,135.41 decrease in his 401(k) plan from January 1, 2009, to March 8, 2009. As of March 2009, his CIS showed $38,282.61 in his 401(k) plan and $13,609.45 in his traditional IRA. He stated that he failed to pay his mortgage payments for February and March 2009. A real estate tax deficiency of $5,435.49 as of February 2009 was satisfied. Notwithstanding these difficulties, John maintained that he met his financial obligations to Kathleen.
In support of his request for a change in custody, John asserted a change in circumstances regarding the environment provided for the children. He contended that Kathleen allowed men to spend the night at the house while the children were present; that she has displayed obsessive, controlling behavior, and has refused to seek treatment for a diagnosed obsessive-compulsive disorder and a possible eating disorder. Although John provided no evidence to support such diagnoses or Kathleen's behavior toward the children, he stated that her conduct had an adverse impact on the children's safety and development.
In her reply certification, Kathleen disputed John's statement that he had fulfilled his financial obligations, noting that alimony was only paid for eighteen months*fn1 and that he had failed to meet other obligations. She also contended that John had provided inadequate financial information that resulted in an inaccurate depiction of financial hardship. She detailed the income information he did provide, including the fact that he earned $322,329 in a twenty-four month period between June 2006 and May 2008. Kathleen questioned John's decisions to remain living alone in a $600,000 house with a very high mortgage when he was unemployed and to make monthly credit card payments of $1,948 while neglecting his property taxes. Kathleen also contended that John continued to enjoy a "lavish" lifestyle that is inconsistent with his claimed financial state and included: a major kitchen renovation and new landscaping; vacations and family membership to a local YMCA and swim club; dining at expensive restaurants; attendance at sporting events, including season tickets to the Philadelphia Eagles and playoff tickets to the Philadelphia Phillies; and an "overabundance of Christmas presents" to the children.
John did not deny owning season tickets to the Philadelphia Eagles, attending Phillies playoff games, or that landscaping work was done at his residence but argued that these facts did not reflect a better financial condition than he claimed.
In response to John's criticism of her fitness as a parent, Kathleen maintained that she had not misused money belonging to the children; engaged in immoral behavior; or neglected the children's health, nutrition, or safety. She further disputed John's accusation that she had been diagnosed with obsessive-compulsive disorder. Kathleen stated that, despite an increased interest in the children's lives since the divorce, John failed to use the maximum number of available visitation days and nights granted under the PSA. She therefore requested that the number of overnight visits used for calculating child support be reduced to ninety-one by the court.
By order dated May 1, 2009, the trial court granted in part Kathleen's application for production of financial documents and the completion of a CIS. Specifically, John was required to produce his 2008 income tax return and a 1099 statement, reflecting his claimed unemployment benefits of $8,960. The court noted John's willingness to provide his full tax return and his wife's financial information for an in camera review but concluded that such review was unnecessary.
Kathleen's request for income to be imputed to John and for child support to be recalculated was also granted in part. Using the New Jersey Child Support Guidelines, Pressler and Verniero, Current N.J. Court Rules, Appendix IX-B to R. 5:6A at 2407 (2011), the court calculated John's support obligations to be $287 per week, based upon John's unemployment benefits and earned income in 2008, which totaled $99,339. In addition, the court found that John had failed to produce evidence that a significant change in circumstances had occurred and therefore, denied without prejudice his application to modify the existing custody arrangement and to refer the parties to mediation.
John filed a motion for reconsideration of the trial court's May 1, 2009, order, contending that the written order was inconsistent with the court's oral decision relating to the use of earned income in 2008 for child support calculations.
Kathleen cross-moved, seeking, in part, post-judgment discovery in anticipation of a potential plenary hearing.
It is undisputed that John has not enjoyed a stable employment history. During the parties' marriage, he was employed in the field of computer networking as a salesperson and earned an annual income ranging from $175,000 to $350,000. There were also periods of unemployment during the marriage and after. He was unemployed for approximately a year and a half prior to the finalization of the parties' divorce.
As a result of this spotty employment record, John's earnings have vacillated between a six-figure income and zero. In his certification, John states that his annual income was $37,341 in 2004 and that he earned no income in 2005. Working only six months in 2006, he earned $108,000. He then earned $115,000 in 2007 and $99,329 in 2008. Between 2006 and 2008, John was employed for a consecutive twenty-four month period, earning $322,329. John earned an income of $99,329 when he was employed for approximately four and one-half months in 2008. John was unemployed for the latter seven and one-half months of 2008 and remained unemployed at the time the motion was decided.
John states that his periods of unemployment are due to the volatile nature of the technology industry. However, John presented no evidence to document his efforts to secure employment. Instead, he relied upon the fact that he receives unemployment benefits from the State as evidence that he made the efforts to secure employment required to receive such benefits.
Kathleen asserts that John's current unemployment is voluntary and that his financial stresses are exaggerated. She states that, during his period of unemployment prior to their divorce, he did not make a serious effort to find new employment and appeared to be "comfortable living on [the parties'] savings." She further contends that, despite his experience and skills, John made no effort, much less a reasonable one, to find new employment and has failed to consider training for a career in an alternative field.
By order dated July 2, 2009, the court granted John's motion, stating "[I]t would be unfair and inequitable to use his earned income and unemployment compensation due to the length of time for which he was without employment." His child support obligation was reduced retroactively to February 11, 2009 to $112 per week, an amount based solely upon his unemployment benefits of $732 per week.
In her appeal, Kathleen raises the following issues:
POINT I THE COURT'S CALCULATION OF CHILD SUPPORT WAS IN ERROR.
POINT II THE COURT'S REFUSAL TO IMPUTE INCOME TO THE DEFENDANT OR CONSIDER DEFENDANT'S 2008 GROSS INCOME WAS ERRONEOUS. THE DEFENDANT DID NOT CORROBORATE OR PROVIDE COMPETENT EVIDENCE THAT HE HAD MADE ANY EFFORT TO SEEK EMPLOYMENT OR THAT HE WAS INVOLUNTARILY UNEMPLOYED AND IT WAS IMPROPER FOR THE COURT TO CALCULATE CHILD SUPPORT BASED UPON UNEMPLOYMENT COMPENSATION ONLY.
POINT III THE COURT IGNORED THE DEFENDANT'S STANDARD OF LIVING HE ENJOYED WITH HIS PRESENT WIFE OR THE ECONOMIC BENEFIT HE RECEIVED FROM HIS WIFE, RESULTING IN AN INEQUITABLE AND UNFAIR CHILD SUPPORT AWARD.
POINT IV THE TRIAL COURT REFUSED TO CONSIDER, IN FIXING DEFENDANT'S SUPPORT OBLIGATION, WHAT IS EQUITABLE AND FAIR UNDER ALL THE CIRCUMSTANCES.
POINT V IT WAS IMPROPER FOR THE COURT TO DENY A PLENARY HEARING OR ALLOW DISCOVERY, INCUDING AN IN CAMERA REVIEW OF THE DEFENDANT'S PRESENT WIFE'S INCOME.
In his cross-appeal, John presents the following issues:
POINT I AS THE PARTIES' CERTIFICATIONS INCLUDED SIGNIFICANT CONFLICTS ABOUT IMPORTANT FACTS RELEVANT TO THE BEST INTERESTS OF THE CHILDREN, THE TRIAL JUDGE ABUSED HIS DISCRETION BY DENYING THE DEFENDANT A PLENARY HEARING ON HIS APPLICATION FOR A CHANGE IN RESIDENTIAL CUSTODY.
POINT II THE TRIAL COURT MADE A CLERICAL ERROR IN DETERMINING THE DEFENDANT'S CURRENT CHILD SUPPORT OBLIGATION.
After considering the record, briefs and arguments of counsel, we are satisfied that both points raised by John lack sufficient merit to warrant discussion in a written opinion, R. 2:11-3(e)(1)(E), and we affirm the denial of his motion substantially for the reasons expressed by the trial court. Simply put, John failed to present sufficient evidence of a material change in circumstances to warrant either discovery or a plenary hearing. See Larbig v. Larbig, 384 N.J. Super. 17, 23 (App. Div. 2006).
We next turn to the orders relating to John's child support obligation. The original motion and cross-motion were decided by order dated May 1, 2009. When a child support obligation is calculated prior to June 30 of a given year, the court should, when possible, use Federal and State income tax returns, W-2 statements and IRS 1099s from the preceding year as the basis for determining a parent's income. Pressler and Verniero, Current N.J. Court Rules, Appendix IX-B to R. 5:6A at 2411 (2011). In this case, John's income for 2008 was $99,329 for four and one-half months and $8,960 in unemployment benefits. The trial court used those amounts in its initial order, fixing child support at $287 per week.*fn2
However, after granting John's motion for reconsideration, the trial court set his child support obligation at $112 per week for four children. This represented less than 25% of the amount that John agreed to pay at a time when he was also unemployed for an extended period of time and, more important, was a departure from the child support guidelines. See Appendix IX-B, supra.
Rule 5:6A provides:
The guidelines . . . shall be applied when an application to establish or modify child support is considered by the court. The guidelines may be modified or disregarded by the court only where good cause is shown. [Emphasis added.]
Good cause consists of "a) the considerations set forth in Appendix IX-A, or the presence of other relevant factors which may make the guidelines inapplicable or subject to modification, and b) the fact that injustice would result from the application of the guidelines." Although the determination as to whether good cause exists lies within the sound discretion of the court, R. 5:6A, we are satisfied that the trial court abused its discretion in finding such good cause here.*fn3
The trial court concluded that "it would be unfair and inequitable to use [John's] earned income and unemployment compensation [as a basis for determining his child support obligation] due to the length of time for which he was without employment." It was undisputed that John was unemployed for long periods of time. The dispute here was whether his extended unemployment was voluntary or involuntary.
Underlying the trial court's conclusion was the implicit finding that John's unemployment was not voluntary. In reaching this conclusion, the trial court accepted John's representations despite his failure to present any documentation of his efforts to obtain employment. John's contention that his receipt of unemployment benefits establishes that he made appropriate efforts is wholly unpersuasive. In rejecting Kathleen's colorable argument that John failed to exercise reasonable efforts to secure employment, the court made a critical credibility finding without conducting a plenary hearing, permitting discovery or even conducting an in camera review of John's full tax return.
Kathleen's contentions required the court to determine whether to exercise its authority to impute income to John on the grounds that he was voluntarily unemployed without just cause. See Caplan v. Caplan, 182 N.J. 250, 268 (2005). It was not necessary for her to establish that employment was available to John in order for the court to make a determination as to whether income should be imputed to him. "Rather, the obligor must establish that he or she is earning at capacity, i.e., not underemployed, in order to avoid imputation." Storey v. Storey, 373 N.J. Super. 464, 474 (App. Div. 2004). Appendix IX-A provides the following guidance to the trial court:
In determining whether income should be imputed to a parent and the amount of such income, the court should consider: (1) what the employment status and earning capacity of that parent would have been if the family had remained intact or would have formed, (2) the reason and intent for the voluntary underemployment or unemployment, (3) the availability of other assets that may be used to pay support, and (4) the ages of any children in the parent's household and child-care alternatives. [Pressler and Verniero, Current N.J. Court Rules, Appendix IX-A(12) to R. 5:6A at 2439 (2011).]
Support should not be based upon circumstances that are only temporary in nature. See Lepis v. Lepis, 83 N.J. 139, 151 (1980); Gertcher v. Gertcher, 262 N.J. Super. 176, 177 (Ch. Div. 1992). The principles applicable to an obligor's motion to reduce child support based upon a change in circumstances are equally applicable to the setting of an appropriate award here. John's ability to pay is "the central issue," and his "potential to generate income is a significant factor to consider" when determining his ability to pay. Miller v. Miller, 160 N.J. 408, 420 (1999).
Here, the trial court established John's child support obligation based on an amount of income that is significantly lower than the amounts John was able to earn in the past. For an award to be set based upon an amount so dramatically lower than his historical earnings, "it is not enough that an obligor demonstrate a reduction in income; the obligor must also demonstrate how he or she has attempted to improve the diminishing circumstances." Donnelly v. Donnelly, 405 N.J. Super. 117, 131, n.5 (App. Div. 2009). "[O]ne cannot find himself in, and 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).
We recognize that "not every factual dispute that arises in the context of matrimonial proceedings triggers the need for a plenary hearing." Harrington v. Harrington, 281 N.J. Super. 39, 47 (App. Div.), certif. denied, 142 N.J. 455 (1995). See also Colca v. Anson, 413 N.J. Super. 405, 422 (App. Div. 2010). However, in this case, John has presented no documentation of his efforts to obtain employment. His employment history includes both periods of substantial earnings as well as periods of unemployment, giving some credence to Kathleen's contentions. There were, therefore, genuine issues of fact as to whether his unemployment was voluntary without just cause or represented a temporary status, both significant factors in the determination of an appropriate child support obligation. We are satisfied, based upon the genuine and substantial factual dispute presented here, that a plenary hearing is required. See Lepis, supra, 83 N.J. at 159; Hand v. Hand, 391 N.J. Super. 102, 105 (App. Div. 2007); Palmieri v. Palmieri, 388 N.J. Super. 562, 564 (App. Div. 2006).
The "'fairness of a child support award is dependent on the accurate assessment of a parent's net income.'" Caplan, supra, 182 N.J. at 265 (quoting Pressler, supra, Appendix IX-A (12) to R. 5:6A at 2516). Still, a trial court's ruling on the issue of whether to impute income is a discretionary ruling that we do not overturn "unless the court abused its discretion, failed to consider controlling legal principles or made findings inconsistent with or unsupported by competent evidence." Storey, supra, 373 N.J. Super. at 479. In this case, the trial court's decision not to impute income to John was based upon the implicit findings that he was not voluntarily unemployed and that his unemployment benefits constituted an accurate assessment of his earning capacity. Those findings are unsupported by competent evidence. We therefore reverse those portions of the orders that retroactively reduced John's child support obligation to $112 per week and denied discovery and remand this matter for a plenary hearing.
Reversed and remanded on the appeal; affirmed on the cross-appeal.