May 6, 2011
BARBARA BAKER, PLAINTIFF-RESPONDENT,
TED H. BAKER, DEFENDANT-APPELLANT.
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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued April 5, 2011
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 firms. His comment that the "paying mechanism [was] broken" meant that many of the investment firms with which Olson was doing business had simply "collapsed."
Plaintiff also testified. She explained that after the divorce, she sold the marital home in Chatham for $645,000 and built a house in Dousman, Wisconsin, which is encumbered by a $236,000 mortgage. The marital home had no mortgage at the time of the divorce.
Plaintiff invested most of the cash proceeds from the divorce in a securities account, but the value of the account has since dropped to $135,000 due to the decline in the market. Plaintiff described her current lifestyle as "counting [her] pennies." She explained that the $120,000 per year in alimony that she receives from defendant is her sole income. Other than a brief period in 2001 when she earned $1198 working at a bakery, she had not worked since 1980, when she had been a secretary at an insurance company. She stopped working at the bakery because her children were "going through some difficult times." When asked whether she was planning to return to work in any capacity, plaintiff responded, "I don't know what I would qualify for. I know how to turn a computer on. I know how to e-mail. If I need to do anything like . . . e-mail . . . attachments, . . . I need to call my daughter."
On the last day of the hearing, the judge issued an oral decision covering fifty-eight transcript pages. The judge granted defendant a temporary reduction of his alimony obligation to $6666 per month. In arriving at that decision, the judge first stated that he found all three witnesses to be credible. He then found that, although Olson had not been generating any profit for years, both defendant and Donnelly anticipate that Olson will be able to repay the money they lent the company and make them money in the future. The judge stated:
And when that company makes money, and if he's making hundreds of thousands of dollars a year, I really don't think Mr. Baker is going to have a problem going back to his original obligation because he's been a fellow that when he's had the money he's always paid.
And I think we have to be appreciate [sic] of that mind set going forward. And I find in this circumstance I am going to reduce the alimony temporarily, and my finding today should not be interpreted in the future, if there's future applications, as my setting an acceptable standard of living for Mrs. Baker. This is being done by necessity because of the diminishment of Mr. Baker's income. If his income increases and he doesn't voluntarily resume his payments, this number that I'm about to give should not be construed as setting her standard of living, it's not. Her standard is living $10,000 a month, maybe more. That's what she does.
His standard of living is $20,000 a month. He's going to have to adjust his too, despite what I do here today. I reduce it by a third to $6,666 per month. . . .
This is not a waiver of a right to [the] full amount. I find that under LEPIS there is a change of circumstances that, although it is - I anticipate temporary in nature, it is of such magnitude right now that we do need to have some temporary relief and I am exerting my equitable powers as I am permitted under the statute [N.J.S.A. 2A:34-23] and the case law to set this new amount. I don't know whether it's too little or too much, but I find, in my opinion, it's a reasonable reduction.
With respect to how he had decided upon a one-third reduction to $6666, the judge told defendant: "I understand you're going through a rough time and you may not be happy with this number, but I cannot leave Mrs. Baker with half. How is she supposed to live on $60,000 a year? You know?" He also stated that it was "[n]ot impossible" for plaintiff to seek reimbursement of her one-third alimony reduction, depending on Olson's future performance, but that he would first like to see plaintiff return to receiving $10,000 per month.
On September 9, 2010, the judge memorialized his decision in a written order, which stated: "Defendant's motion for a reduction of his alimony obligation is granted on a temporary basis to $6,666 monthly, effective August 1, 2010." In addition, the judge ordered the parties to exchange personal income tax returns annually, and ordered defendant to also provide Olson's corporate tax returns annually.
In a supplemental statement of reasons issued on September 9, 2010, the judge explained his reason for choosing August 1, 2010 as the effective date of the alimony reduction, as opposed to March 25, 2008, when defendant filed his motion to reduce his alimony obligation. After noting that the decision to permit a retroactive modification of alimony is left to the sound discretion of the trial judge, the judge explained that affording defendant the benefit of a retroactive modification would force plaintiff to be without any alimony payments for at least a year. The judge stated:
[T]he Court agrees that retroactive application of Defendant's alimony obligation would be [an] unnecessarily harsh result to the Plaintiff. In making this decision the Court takes into account the testimony from the Defendant regarding the prospects for profitability of Olson Global Markets, and the Court's decision to grant a reduction on a temporary basis as a result of that prospect for profitability. In this Court's opinion, Plaintiff is taking a significant reduction in alimony, on a temporary basis, and to apply this reduction retroactively would ultimately result in Plaintiff receiving no alimony for a period of more than one (1) year. As a result, this Defendant's application for a reduction in alimony shall be effective August 1, 2010.
On appeal, defendant argues*fn1 1) "the court erred by only reducing [defendant's] alimony obligation to $6666 a month [because] the reduction should have been more substantial"; 2) "the court erred by only retroactively reducing [his] alimony obligation by one month (August 1, 2010) as opposed to an earlier date," either May 2005 when he was involuntarily terminated from his employment, or March 25, 2008, the date the original motion was filed; 3) "the court failed to provide the required findings of fact as to how the $6666 a month revised alimony amount was arrived at"; and 4) "if the within matter is remanded, it should be assigned to a different trial judge."
In point one, defendant argues that the judge erred in reducing his alimony obligation to the "arbitrary" amount of $6666 per month, as opposed to eliminating it entirely. As the Supreme Court has observed, "the goal of a proper alimony award is to assist the supporting spouse in achieving a lifestyle that is reasonably comparable to the one enjoyed while living with the supporting spouse during the marriage." Crews v. Crews, 164 N.J. 11, 16 (2000). The Court specifically recognized trial judges' "equitable power to establish alimony . . . and to revise such orders as circumstances may require[,]" a power that derives from N.J.S.A. 2A:34-23. Id. at 24. A reduction in the supporting spouse's income has been recognized as a changed circumstance warranting modification in alimony provided that the decrease is not merely temporary in nature. Lepis, supra, 83 N.J. at 151.
In our prior opinion in this matter, we concluded that defendant had demonstrated "a prima facie case of changed circumstances, thus warranting a plenary hearing to determine whether he is entitled to relief with respect to his alimony obligations." Baker v. Baker, No. A-4688-07 (App. Div. March 23, 2009) (slip op. at 6). Thus, we need not address the threshold question under Lepis of whether defendant demonstrated a change of circumstances, as that question has already been resolved in the affirmative by our prior opinion. We therefore confine our analysis to the question of whether the reduction of defendant's alimony obligation to $6666 was a sufficient reduction.
Although "the central issue is the supporting spouse's ability to pay," Miller v. Miller, 160 N.J. 408, 420 (1999), in setting the revised alimony amount, the court's "determination must be based not only on numbers, but also on what, in the light of all the facts presented to it, is equitable and fair, giving due weight to the strong public policy favoring stability of arrangements." Glass v. Glass, 366 N.J. Super. 357, 372 (App. Div.) (internal quotation marks and citations omitted), certif. denied, 180 N.J. 354 (2004). See also N.J.S.A. 2A:34-23 (stating that the court shall order an alimony amount that is "fit, reasonable and just" considering the "circumstances of the parties and the nature of the case").
When presented with a motion for downward alimony modification, the judge must consider "not only . . . the parties' earnings but also how they have expended their income and utilized their assets." Donnelly v. Donnelly, 405 N.J. Super. 117, 130 (App. Div. 2009). Although the supporting spouse's current income earned from employment is the primary factor considered, other appropriate considerations include investment income, real property, and the obligor's "potential to generate income." Miller, supra, 160 N.J. at 420-21. See also Innes v. Innes, 117 N.J. 496, 503 (1990).
"Whether an alimony obligation should be modified based upon changed circumstances is left to the sound discretion of the Family Part judge." Larbig v. Larbig, 384 N.J. Super. 17, 21 (App. Div. 2006); Innes, supra, 117 N.J. at 504. "Each and every motion to modify an alimony obligation 'rests upon its own particular footing and the appellate court must give due recognition to the wide discretion which our law rightly affords to the trial judges who deal with these matters.'" Larbig, supra, 384 N.J. Super. at 21 (quoting Martindell v. Martindell, 21 N.J. 341, 355 (1956)). Furthermore, since the Family Part has special expertise in family matters, and has had the opportunity to hear and see the witnesses testify firsthand, its findings of fact should be accorded deference on appeal. Cesare v. Cesare, 154 N.J. 394, 411-13 (1998). Thus, an alimony modification will be affirmed on appeal unless the trial judge has clearly abused his discretion:
To vacate a trial court's findings in a proceeding modifying alimony, an appellate court must conclude that the trial court clearly abused its discretion, failed to consider "all of the controlling legal principles," or it must otherwise be "well satisfied that the finding[s] [were] mistaken," or that the determination could not "reasonably have been reached on sufficient credible evidence present in the record after consideration of the proofs as a whole." [Rolnick v. Rolnick, 262 N.J. Super. 343, 360 (App. Div. 1993) (citations omitted).]
Defendant argues that the judge abused his discretion first by imputing income to him, and second, by failing to impute income to plaintiff. To support his claim that the judge wrongfully imputed income to him based upon Olson's potential future profitability, defendant insists that the judge could not have ordered him to pay the sum of $6666 a month unless the judge had implicitly concluded that defendant should be earning a considerable income, rather than the zero income he is currently earning. We reject defendant's contention that the judge imputed income to him. First, nothing in the judge's opinion remotely suggests that defendant is voluntarily underemployed as the chief executive officer of Olson. Indeed, in his oral opinion, the judge acknowledged our holding that defendant's circumstances were not an instance of an obligor being voluntarily underemployed where income should be imputed.*fn2
As opposed to secretly "imputing" income to defendant, as defendant contends, the judge's decision shows that he considered relevant circumstances besides earned income before determining that it would be unfair to eliminate defendant's alimony obligation entirely. For instance, the judge properly considered the plaintiff's current needs, her $10,000 per month standard of living, and the fact that alimony is her sole source of income. See Lepis, supra, 83 N.J. at 152. He also considered how defendant has spent his assets since 2005, despite his lack of any earned income. See Donnelly, supra, 405 N.J. Super. at 130. In particular, the judge noted that defendant has continued to incur monthly expenses -- excluding alimony -- in excess of $20,000, which defendant uses to maintain two upscale homes and take annual vacations. The judge remarked that defendant did not appear to be cutting back much on expenses, although "he seems to be cutting back on some of his vacations." In addition, the judge considered that defendant's income situation is likely temporary, given that both Donnelly and defendant expect Olson to be able to pay them for the years of unearned income, repay the loans each made to the company, and make them a substantial profit, all of which militates against any reduction.
We do not agree with defendant's contention that it is logically impossible for the judge to have required him to pay $6666 in alimony every month unless the judge imputed income to him. As the record clearly demonstrates, the judge engaged in a careful and nuanced analysis of the parties' respective positions. While the judge recognized defendant's financial dilemma, and respected defendant's decision to remain with Olson until the company's prospects turned around, as a court of equity he chose not to give those factors dispositive weight.
In particular, the judge refused to shut his eyes to what he described as the "harsh" result that would be visited upon plaintiff if defendant's alimony obligation were to be suspended in its entirety. The judge recognized that plaintiff had not worked for thirty years, had no job prospects and was entirely dependent on the alimony she received from defendant. Balancing those equities, as Lepis, supra, 83 N.J. at 150-56, requires, the judge chose to afford considerable relief to defendant while at the same time refusing to impoverish plaintiff. In choosing to reduce defendant's alimony obligation, but not eliminate it entirely, the judge was also mindful that plaintiff continues to enjoy an extremely comfortable standard of living, with two homes and a vacation every year. Thus, we perceive the judge to have balanced the equities rather than, as defendant suggests, silently imputing income to him. We therefore reject defendant's claim in point one that the judge abused his discretion in not ordering a more significant reduction in defendant's alimony obligation or not eliminating that obligation entirely.
Defendant also argues in point one that the judge erred by failing to impute income to plaintiff. This argument lacks sufficient merit to warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(A), (E). While we recognize that judges have discretion to impute income to a spouse who is deliberately underemployed, Tannen v. Tannen, 416 N.J. Super. 248, 261 (App. Div. 2010), certif. granted, 205 N.J. 80 (2011), the judge did not abuse his discretion by refusing to impute income to plaintiff. Except for a brief period working at a bakery where she earned less than $2000 per year, plaintiff has not been employed outside the home in more than thirty years.
Under such circumstances, the record does not support a conclusion that plaintiff deliberately chose not to accept a position for which she was qualified. We thus reject in its entirety the argument plaintiff advances in point one.
In point two, defendant argues that the trial judge erred in failing to make specific findings of fact and conclusions of law to support his determination that defendant's alimony obligation should be reduced from $10,000 to $6666. Essentially, defendant maintains that the judge randomly selected a one-third reduction, instead of being guided by the statutory factors listed in N.J.S.A. 2A:34-23(b).
As discussed above, modification of an alimony award is a matter left to the sound discretion of the trial court. Larbig, supra, 384 N.J. Super. at 21. That discretion, however, does not permit the trial court to draw "[n]aked conclusions." Curtis v. Finneran, 83 N.J. 563, 570 (1980). Rather, to satisfy Rule 1:7-4(a), the trial court "must state clearly its factual findings and correlate them with the relevant legal conclusions." Ibid.; see also R. 1:7-4(a) (stating that "[t]he court shall . . . find the facts and state its conclusions of law thereon in all actions tried without a jury"). "Findings which fail to permit a meaningful review of the evidence relied upon to justify the decision do not satisfy the rule." Wertlake v. Wertlake, 137 N.J. Super. 476, 485 (App. Div. 1975).
While we agree that the judge did not tether the alimony reduction to a commensurate reduction in defendant's income, the circumstances did not permit such an approach unless the judge was prepared to entirely eliminate defendant's alimony obligation. And while we recognize that the judge did not expressly consider the statutory factors listed in N.J.S.A. 2A:34-23(b) when he chose the monthly amount of $6666, it is evident from the record that he was guided by those very factors. In particular, the judge considered the actual need and ability of the parties to pay, the duration of the marriage, the age of the parties, the standard of living established during the marriage, the earning capacities of each party, the length of absence from the job market of the party receiving alimony, and the income available to either party through investment of any assets held by that party. Each of these factors is contained in N.J.S.A. 2A:34-23. We thus reject defendant's claim in point two that the judge's decision was unsupported by a statement of reasons.
In point three, defendant maintains that the judge erred by only retroactively reducing his alimony obligation by one month, to August 1, 2010, as opposed to either March 25, 2008, when he filed his original motion to reduce alimony, or May 2, 2005, when he was involuntarily terminated from his employment at Pershing.
Unlike child support awards, which may not be reduced retroactively except back to the filing date of the motion seeking a reduction, see N.J.S.A. 2A:17-56.23a, judges are not prohibited by statute from applying an alimony reduction retroactively. Walles v. Walles, 295 N.J. Super. 498, 514 (App. Div. 1996). Rather, the retroactivity decision is "left to the sound discretion of the trial judge." Ibid. (citing Brennan v. Brennan, 187 N.J. Super. 351, 357 (App. Div. 1982)). Thus, the trial judge's selection of the effective date for a reduced alimony obligation will not be disturbed on appeal unless the judge "abused his [or her] discretion." Ibid.
As we have noted, although plaintiff filed his motion to reduce alimony in March 2008, the matter did not come before the Family Part for a plenary hearing until July 2010, more than two years later. That substantial delay was due to several factors, none of which are the fault of defendant: his successful appeal of the adverse March 2008 order, the pre-hearing discovery and mediation, and the reassignment of the judge originally designated to hear the matter.
The judge appears to have given dispositive weight to the fact that granting defendant retroactive relief would entirely deprive plaintiff of alimony for a period of more than one year if the reduction were to be made retroactive to March 2008. It does not appear, however, that the judge considered any alternative to affording defendant the maximum retroactive credit each month. Stated differently, the judge appears to have concluded that the only way to grant retroactive relief to defendant would be to cancel plaintiff's alimony until the approximately $90,000 sum was repaid. The judge did not consider whether granting defendant a partial credit each month would be appropriate.
In light of the protracted nature of these proceedings, we choose to exercise our original jurisdiction to decide this limited issue rather than send the matter back to the Family Part for disposition. See R. 2:10-5 (permitting an appellate court to "exercise such original jurisdiction as is necessary to the complete determination of any matter on review"). See also Allstate Ins. Co. v. Fisher, 408 N.J. Super. 289, 301-02 (App. Div. 2009) (noting that an appellate court should not exercise original jurisdiction where fact-finding or further fact-finding is necessary to resolve the matter).
Taking into consideration all of the statutory factors set forth in N.J.S.A. 2A:34-23, the substantial period of time that elapsed between the time defendant filed his motion and the time he was granted relief in July 2010, we are satisfied that defendant should be granted a $1000 per month credit for the prior overpayment, retroactive to March 25, 2008. In the event that defendant's financial circumstances improve, either because Olson becomes profitable or for some other reason, plaintiff may apply to the court to modify or terminate the retroactive modification.
Last, in point four, defendant maintains that if this matter is remanded to the trial court that it be assigned to a different judge. Our exercise of original jurisdiction makes a remand unnecessary; however, were a remand necessary we would have no hesitation in sending the matter back to the same judge who presided over the July 2010 proceedings.
Affirmed in part. Reversed in part.