On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Morris County, Docket No. FM-14-000660-97.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Wefing, Baxter and Hayden.
Defendant Ted H. Baker appeals from a September 9, 2010 Family Part order that reduced his monthly alimony obligation, but by an amount he argues is grossly insufficient. He also appeals from a portion of the order that denied his motion to apply the alimony reduction retroactively. We reject his argument that the extent of the reduction of his alimony obligation was insufficient, but agree that some retroactive relief should have been afforded. As we shall discuss later in this opinion, rather than remand the matter to the trial court for further proceedings, we have exercised our original jurisdiction to establish how the retroactive modification should be accomplished.
Married on May 31, 1975, the parties were divorced on December 18, 1998 pursuant to a judgment of divorce that incorporated their property settlement agreement (PSA). The PSA obligated defendant to pay plaintiff Barbara Baker permanent alimony of $10,000 per month.
At the time of the divorce in 1998, defendant was a managing director at Pershing Trading Company earning $790,000 per year, of which all but $120,000 came in the form of an annual bonus. In May 2005, defendant was terminated from his employment at Pershing through no fault of his own when the Bank of New York acquired Pershing and eliminated defendant's position. At the point when his position at Pershing was terminated, defendant's income had increased to between $900,000 and $1,000,000 per year. During that time, defendant lived in a $1.5 million unencumbered home in Chatham. In 2004, he purchased a second home in Naples, Florida where he intends to eventually retire, for $1.3 million with a $900,000 mortgage.
In 2005, defendant obtained a new position at Olson Global Markets (Olson), at which he was to receive a salary of $120,000, which was equivalent to what he had earned as a salary at Pershing. He also anticipated receiving an annual bonus that would place his aggregate earnings at the same level he had enjoyed previously. Contrary to defendant's expectation that Olson would be profitable, and that he would be able to earn the same income as he had been earning at Pershing, defendant received no salary at Olson for the years 2006, 2007 or 2008, nor did he receive a bonus for any of those years. In fact, defendant maintained that the situation at Olson was so dire that he had no choice but to lend the company $138,000 from his own funds from July 2007 to January 2008.
In light of that decline in his earnings, defendant filed a motion in March 2008 seeking a reduction in his monthly alimony obligation. He maintained that he had continued to pay alimony as required ever since 2005 even though the dramatic reduction in his earnings made it inequitable that he pay alimony at the former level. He also pointed out that he was continuing to contribute to the support of the couple's two adult children and that he had made his financial records, and those of Olson, available to plaintiff to demonstrate the accuracy of his claims. After oral argument on May 9, 2008, the trial court denied defendant's application without the benefit of a plenary hearing.
Defendant filed an appeal of the May 9, 2008 order, arguing that he had presented prima facie proof of changed circumstances that were not merely temporary in nature, and was thus entitled to discovery and a plenary hearing in accordance with Lepis v. Lepis, 83 N.J. 139, 151 (1980). In a per curiam opinion on March 23, 2009, we reversed the Family Part's May 9, 2008 order and remanded for a plenary hearing. Baker v. Baker, No. A-4688-07 (App. Div. March 23, 2009) (slip op. at 6).
A few months after our remand, and while the plenary hearing was pending, defendant filed a motion for interim relief, which was denied by order of August 10, 2009. The following year, defendant filed another motion for interim relief, which was denied on April 1, 2010. At some point, however, plaintiff agreed to temporarily accept $8000 per month in alimony "to try and help Ted out."
Due to the reassignment of judges within the Family Part in Morris County, and the protracted discovery and mediation process, the plenary hearing did not commence until July 26, 2010. The hearing consumed three trial days and concluded on July 28, 2010.
At the July 2010 plenary hearing, defendant testified that his prospects for being able to continue to pay $10,000 per month in alimony were "[g]rim." Defendant stated that because he has not earned income since May 2005, he has been forced to encumber his home in Chatham with a $480,000 mortgage to raise cash, and has also been forced to deplete his stock portfolio, and make a premature withdrawal of $450,000 from his 401(k) in order to meet his alimony obligations and pay his own monthly expenses. Defendant explained that his monthly expenses totaled $20,000, of which $10,000 is attributable to maintaining his two homes, and the balance is used for food, personal expenses and vacations.
Defendant asserted that his two residences were "mortgaged . . . to the hilt" and his only other available assets were $180,000 in a retirement account and $85,000 invested in securities. He claimed to be using his retirement account to pay his monthly alimony obligation and his $20,000 monthly living expenses. He anticipated that he would begin to receive a salary and bonus from Olson "within the next couple of years." Defendant explained that he has been willing to continue to invest time and money in Olson, and remain there without a salary for five years, because he believes the company "will eventually prosper." Additionally, if he were to leave the company before it became profitable, he would be relinquishing four years of unpaid salary and $138,000 in loans.
Defendant also presented the testimony of his business partner, James Donnelly, III, who corroborated defendant's testimony that the company had not paid either of them a salary at any time since defendant joined the company. Like defendant, Donnelly expressed confidence that Olson would be able, in his words, "to ramp up the revenues significantly" in the next year or two. He stated, "I think our product is terrific. That's the problem, it's like -- it's a terrific product, but it's just that the paying mechanism is broken." The "product" referred to Olson's business of providing focused buy/sell alerts to brokerage ...