June 28, 2011
LESLIE SMITH, PLAINTIFF-RESPONDENT,
LORRE SMITH, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-632-01.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 3, 2011
Before Judges Wefing, Baxter and Koblitz.
In this post-divorce case, defendant Lorre Smith appeals from an order awarding continued child support and counsel fees to plaintiff Leslie Smith and allocating college expenses between the parties. He also appeals from an earlier order quashing his subpoena and awarding plaintiff related counselfees. Defendant contends that the trial judge erred in resolving contested issues of material fact without an evidentiary hearing. After reviewing the record in light of the contentions advanced on appeal, we affirm the judge's suppression of the subpoena and two counsel fee awards, and reverse and remand for a plenary hearing on the remaining issues concerning the calculation of child support and allocation of child-related expenses.
The parties were married in 1978, and two children were born of the marriage; Marc in 1985 and Julie in 1989. Throughout the marriage, defendant, an attorney in solo practice who handled some matrimonial matters, was the primary breadwinner for the family. Between 1998 and 2000, his practice generated an average annual gross income of approximately $405,000 and net income of approximately $230,000, with "adjusted practice income"*fn1 of approximately $270,000. Plaintiff was a school teacher who went back to work shortly before the divorce was finalized, earning approximately $40,000 the first year. In 2006, plaintiff enrolled in a three-year program to obtain a master's degree in speech therapy, which she has since completed.
In 2000, plaintiff filed for divorce. The parties placed a property settlement agreement (PSA) on the record on April 3, 2002, which the judge reduced to writing because the parties were unable to resolve the wording of the written agreement. The judge incorporated the PSA in the final judgment of divorce, entered on June 21, 2002. Neither party sought a modification of the judge's version of their agreement.
According to the terms of the PSA, after a long-term marriage of twenty-two years, plaintiff agreed to waive permanent alimony in return for a one-time payment of $50,000 plus limited duration alimony consisting of $50,000 per year for five years, followed by $35,000 per year for four additional years. The PSA further provided that plaintiff was to be the parent of primary residence for both children and that defendant would pay child support as follows:
9. Defendant shall begin to pay Plaintiff child support payments of $15,000.00 per year . . . until each child completes his or her post high school education . . . . The child support shall be revised per the guidelines when each child enters college or is emancipated. Additionally, the Defendant shall pay one half of the children's summer programs, camp, sports clinics and lessons, riding lessons, horse shows and horse expenses, etc., up to the sum of $3,750.00 per child representing one-half up to $15,000.00 of recreational expenses, starting on April 5, 2002. When Marc starts college, the amount that the Defendant shall pay will be adjusted to the sum of $2,500.00 representing one-half up to $10,000.00 of previously described expenses. [Emphasis added.]
The PSA also addressed anticipated college expenses as follows:
10. The parties agree that their children's college tuition, room, board, books, fees, computer, transportation, [and] application fees shall be paid from the children's trust funds held by the Defendant as the Trustee to be prorated over the remaining number of semesters for said child. . . . The balance due and owing shall be paid by the parties on a prorated basis to their respective income plus or minus any support payments to the other party for the prior year. The Defendant's income from his business shall be the total amount of the income on his Schedule C [tax form], the pension deductions, if any, and the sum of $5,000.00 for his "perks." [Emphasis added.]
The parties specified that the limited duration alimony payments were "tax-deductible to" defendant and "tax-reportable to" plaintiff.
In the fall of 2004, Marc began attending Fairleigh Dickinson University (FDU). In December 2004, plaintiff retained her prior divorce attorney to address what she believed to be defendant's failure to comply with the terms of the parties' divorce agreement. In a 2004 letter to defendant, plaintiff's counsel discussed defendant's obligations regarding the allocation of Marc's college expenses as follows:
Allocation of college tuition and costs required you to supply copies of your  income tax return Schedule-C. . . .
Based on your alleged Schedule-C Income of $197,668 [of net profit], $5,000 for PERKS and $35,000 of retirement contributions less $50,000 of alimony and $15,000 of child support leaves $172,668 versus Leslie's $41,587 of salary, $50,000 of alimony, $5,000 of child support and $4,338.00 of unemployment for a total of $110,925.*fn2 This means you would be liable for 61% and Leslie 39%. However, until the complete Schedule-C or business return is produced, we cannot be sure that you have continued to operate your business in the same fashion as pre-divorce.
In the spring of 2007, Marc was twenty-one years old and residing in an apartment rented on a yearly basis during his junior year at University of Central Florida (UCF), having transferred there from FDU at the beginning of the school year. Julie was seventeen years old and about to graduate from high school. She planned to attend the University of Vermont (UV) in August 2007.
In May 2007, plaintiff filed a motion requesting an increase in child support in accordance with the income of the parties, an extension of the duration of defendant's $50,000 alimony obligation, reimbursement of $4800 in recreational expenses, copies of the children's trust account statements and copies of defendant's tax returns for 2004, 2005 and 2006.
Defendant cross-moved seeking the elimination of his obligation to pay child support to plaintiff based upon the children's residence at out-of-state colleges, his maintenance of rooms for them at his home, and plaintiff's having "failed miserably" as the parent of primary residence. He also argued that, as both children would be living at college, the Child Support Guidelines (Guidelines) were wholly inapplicable. Defendant further sought reimbursement from plaintiff of $10,511 in college and other child-related expenses.
A second judge signed two orders in October 2007, denying plaintiff's request for an extension of her $50,000 per year alimony and directing plaintiff to pay an unspecified "share" of college expenses for Marc for 2004 through 2007. The judge further directed defendant to pay plaintiff slightly increased child support of $15,860 per year, or $305 per week, based on attached Guideline calculations.
In an attached statement of reasons, the judge explained her rationale for increasing defendant's child support by $860 per year as follows:
[T]his court relies upon the certifications and 2007 income statements for both parties in determining whether an increase or decrease in child support is warranted by a change of circumstances. Additionally paragraph 9 of the Dual J.O.D. [(judgment of divorce)] dictates that "child support shall be revised per the guidelines when each child enters college or is emancipated".
It is instructive to examine paragraph 9 of the Dual J.O.D. that provides for the payment of $15,000.00 per year child support "until each child completes his or her post high school education, enters the military, dies or terminates earlier his or her full-time education except for medical reasons." Furthermore, the recreational expenses are provided for with an adjustment of $2500.00 representing one-half of up to $10,000.00 when Marc starts college. Given the Court's consideration of the recreational expense adjustment upon the oldest child's commencement of college, it is only appropriate that said adjustment shall also be applied to each child upon commencement of college. Pursuant to the Uniform Child Support Guidelines and affording each party all appropriate credits the child support shall be $305.00 per week, effective May 16, 2007. . . . This finding is consistent with the considerations of the Dual J.O.D. and evaluated within the context of all the circumstances including the Newburgh v.
Arrigo, 88 N.J. 529 (1982)[,] factors to assess the reasonableness of each party's contributions.
In arriving at the $305 weekly support amount, the judge used the sole parenting worksheet indicating that plaintiff was the parent of primary residence for both children. She ascribed income of $120,328 to plaintiff (including alimony but not child support) and income of $140,816 to defendant based on his net profit from his Schedule C, deducting his alimony payments but not child support. Neither party appealed this ruling, although the income numbers used by the judge did not completely conform entirely to the parties' subsequently reported 2007 income.
According to her 2007 tax return, plaintiff's salary was $66,082, but due to an IRA distribution, her total earned and unearned income for that year was $95,768. She also declared $42,500 in alimony. Defendant's 2007 tax return indicated that his Schedule C gross income was $369,592, and his net profit was $161,866. His individual tax return reflected $167,007 of total income before his $42,500 alimony payment.
In September 2008, plaintiff sent an e-mail to defendant advising that Julie was not feeling well and inquiring about the possibility of moving her out of her "germ-filled" dorm at UV and into an apartment for the remainder of her sophomore year. According to e-mails subsequently exchanged between the parties, defendant refused to pay rent for Julie unless plaintiff agreed to waive her child support payments. When they were unable to come to an agreement, defendant proceeded unilaterally, signing a guarantee for the year-long rental of an apartment for Julie starting in June 2008, thereby increasing Julie's college shelter expense.
In November 2008, defendant filed a motion seeking: (1) to have Marc declared emancipated and no longer entitled to child support as of his anticipated graduation date; (2) to eliminate child support for Julie based upon her year-round residence in Vermont; (3) to compel plaintiff to reimburse him $10,511 for college and medical expenses for 2004 through 2008; and (4) to compel plaintiff to account for and turn over all money held by her on behalf of Marc and Julie.
Plaintiff filed a cross-motion seeking the continuation of defendant's child support obligation and a determination that defendant was responsible for eighty-five percent of the children's college and medical expenses. She asked that Marc not be declared emancipated yet, and that Julie's child support be continued at the reduced rate of $12,500 per year after Marc's eventual emancipation. She alleged that defendant had:
(1) "gone behind her back" in renting an apartment for Julie;
(2) consistently understated his income for purposes of allocating college costs between them; and (3) miscalculated her income by improperly treating his child support payments as income.
Although Marc participated in UCF's December 2008 graduation ceremony, he had to take another course that spring before he could receive his diploma. He enrolled in the necessary course for the Spring 2009 semester and also secured a job as an intern at an investment firm, earning fifteen dollars per hour for up to thirty-two hours per week. Defendant and plaintiff continued to pay for his rent, utilities, car, car insurance, gasoline, health insurance, food, clothing, entertainment, cable television and cell phone.
On January 23, 2009, a third judge heard oral argument and, upon being told that the marriage lasted twenty-two years, he commented, "[s]o for a quick $50,000 she waived permanent alimony. She decided give me [$]50,000 and I won't be in your life for alimony purposes, except for . . . five years, then four years." The third judge observed that, because plaintiff gave up permanent alimony, the agreement provision addressing college expense allocation may have to be read in her favor. The judge asked the parties to submit additional information and referenced that the matter would be scheduled for a plenary hearing. Although defendant confirmed the date of the plenary hearing to the judge in a letter, the judge stated he would review all the documents and only conduct a hearing if needed after that review.
On February 27, 2009, the original return date on the motions, defendant issued a subpoena duces tecum to obtain bank records for two accounts plaintiff maintained on behalf of Marc.
Pursuant to plaintiff's application, on March 25, 2009, the judge quashed this subpoena and awarded plaintiff $2000 in counsel fees explaining, in a written decision, that the subpoena was improper because a plenary hearing had not been scheduled and because the information in the account records was not relevant to either the issue of child support or allocation of college expenses. The judge noted that these accounts belonged to Marc, who was "over the age of 21," and plaintiff, as custodian, "ha[d] no legal, equitable, or fiduciary interest in the subpoenaed accounts." Defendant filed a motion for reconsideration of the judge's order, which was denied.
On October 23, 2009, without conducting an evidentiary hearing, the trial judge signed an order, with an accompanying written decision: (1) declaring Marc emancipated as of May 31, 2009, when he finished his final college course; (2) continuing defendant's child support obligation for Julie alone in the amount of $305 per week, or $15,860 per year; (3) directing defendant to pay seventy-nine percent of Julie's college expenses; (4) requiring defendant to reimburse plaintiff $85,445 for overpaid college expenses; (5) directing defendant to pay $25,000 towards plaintiff's attorney's fees; and (6) requiring defendant to provide plaintiff with a full accounting for eachtrust account held by him for the benefit of the parties' children.
Defendant argues the following issues on appeal, POINT ONE
THE COURT'S OCTOBER 23, 2009 DECISION CONSTITUTED AN ABUSE OF DISCRETION WARRANTING A REVERSAL AS IT IGNORED THE PROOFS SUBMITTED AS WELL AS SETTLED LEGAL PRINCIPLES.
a) The [c]court failed to make the appropriate findings of fact and conclusions of law.
b) The [c]court abused its discretion in recasting the parties' Agreement, the terms of which were clear and unequivocal, as to the determination of Mr. Smith's income with respect to allocating college and other related expenses incurred on behalf of the parties' children, ordering Mr. Smith to reimburse the Plaintiff $85,445 when the facts established it was Mr. Smith who was entitled to over $10,515.00 in payments made on behalf of the children.
c) The [c]court abused its discretion in recasting the parties' Agreement, the terms of which were clear and unequivocal as to the emancipation of Marc and when it failed to recalculate child support in consideration of Julie's college attendance and her moving to Vermont.
d) Julie, a college student living in Vermont for the entire year and full[y] supported by her father[,] does not require child support be paid to a parent, but rather sharing of her expenses paid directly to the child.
e) By failing to rule on Mr. Smith's request that Plaintiff reimburse him enforcement relief where the previous Order of October 29, 2007 required Plaintiff to reimburse Mr. Smith.
f) Mr. Smith's subpoena for [c]court ordered information was proper.
THE COURT ABUSED ITS DISCRETION AND COMMITTED REVERSIBLE ERROR BY NOT HOLDING A PLENARY HEARING DESPITE NUMEROUS ISSUES IN DISPUTE AND MR. SMITH'S REPEATED REQUESTS FOR ONE.
THE COURT ABUSED ITS DISCRETION IN FINDING BAD FAITH ON THE PART OF MR. SMITH AND IN AWARD[ING] $25,000 IN COUNSEL FEES ON BEHALF OF PLAINTIFF FOR SERVICES PROVIDED BY PLAINTIFF'S BOYFRIEND/ATTORNEY WHERE THE PURPORTED RETAINER AGREEMENT AND AFFIDAVIT IN SUPPORT OF REQUEST FOR FEES FAILED TO COMPLY WITH R. 5:3-5(a), R. 4:42-9 AND R.P.C. 1.5, WHEREBY PLAINTIFF PAID NO RETAINER[,] ANY FEE WAS REVERSIBLE ERROR.
We acknowledge our general deference to factual findings made by Family Part judges. Fact findings of the trial court should be deferred to if they are supported by "'adequate, substantial, credible evidence.'" Parish v. Parish, 412 N.J. Super. 39, 47 (App. Div. 2010) (quoting Cesare v. Cesare, 154 N.J. 394, 411-12 (1998) (citation and internal quotation marks omitted)). "Because of the family courts' special jurisdiction and expertise in family matters, appellate courts should accord deference to family court factfinding." Cesare, supra, 154 N.J. at 413. "Minimally adequate fact finding requires a discussion that demonstrates that the court has heard and addressed the relevant facts and claims under the controlling legal standards." Gordon v. Rozenwald, 380 N.J. Super. 55, 76-77 (App. Div. 2005). "A trial court's rulings in such matters are discretionary and not overturned unless the court abused its discretion, failed to consider controlling legal principles or made findings inconsistent with or unsupported by competent evidence." Id. at 76.
The motion judge's findings, however, were based solely on the written submissions of the parties and oral argument. Thus, we do not owe the deference to the fact-finding we would if the judge had had the opportunity to make credibility findings. See P.B. v. T.H., 370 N.J. Super. 586, 601 (App. Div. 2004) ("Deference is especially appropriate when the evidence is largely testimonial and involves questions of credibility because, having heard the case, and seen and observed the witnesses, the trial court has a better perspective than a reviewing court in evaluating the veracity of witnesses."). The parties submitted sharply conflicting certifications regarding the crucial issues decided by the court, including their interpretation of their PSA.
Defendant argues that the trial judge erred by failing to conduct a plenary hearing before awarding the relief in the October 23, 2009 order. The parties disagreed about the meaning of their PSA regarding three issues, which were decided by the judge in plaintiff's favor in the October 23, 2009 order: (1) whether defendant's Schedule C income should be based on his gross income or net profit; (2) whether child support should remain the same for one child as it was for two; and (3) whether child support should be considered part of plaintiff's income for the purpose of determining the proper allocation of the children's expenses.
The judge decided that the parties intended to base defendant's income on his gross income from his Schedule C income tax report. Plaintiff's trial counsel, who represented her at the time of the PSA, apparently did not have that understanding as reflected in counsel's 2004 letter to defendant discussing his Schedule C net profit as the correct starting point for gauging defendant's income. The plain wording of the PSA also causes us to question the judge's decision regarding defendant's income, as it references an add-back of "the sum of $5,000.00 for his 'perks.'" It also appears to us, however, that if the PSA is interpreted to refer to defendant's net profit, the decrease in proportion of gross income reported by defendant as net profit could be disputed by plaintiff at a hearing. If defendant in bad faith is reporting less net profit than appropriate, then plaintiff would be entitled to child support based on a larger number.*fn3 Also, the PSA says that college expenses "due and owing shall be paid by the parties on a prorated basis to their respective income plus or minus any support payments to the other party for the prior year." The judge decided that it would be "contrary to law" for "support payments" to include child support. We disagree.
Absent an agreement to the contrary, child support is not taxable to the recipient, nor included as income for child support purposes. See Pressler & Verniero, Current N.J. Court Rules, Appendix IX-A to R. 5:6A at 2476 (2011). However, parties are permitted to fashion an agreement contrary to prevailing law, as long as they do not bargain away the child's support. See Ordukaya v. Brown, 357 N.J. Super. 231, 239-41 (App. Div. 2003) (parties may agree to deviate below the standards for child support in the Guidelines, but not if the children will be prejudiced); see also Pascale v. Pascale, 140 N.J. 583, 591 (1995) (where the Court said the right to child support belongs to the child and may not be waived by the custodial parent) (citation omitted); Monmouth Cnty. Div. of Social Servs. for D.M. v. G.D.M., 308 N.J. Super. 83, 95 (Ch. Div. 1997) (where the court vacated a consent order relieving the father of child support in exchange for his termination of parental rights).
By agreeing to calculate income to include child support, plaintiff would not be waiving the child's support. In her 2004 letter to defendant, plaintiff's trial counsel indicated plaintiff's income would be increased by the $15,000 of child support she was then receiving.
The trial judge decided that the child support should remain the same after Marc's emancipation. Whether or not the PSA supports that decision is open to dispute. Plaintiff herself suggested in her cross-motion that child support would diminish by over $3000 upon Marc's emancipation and did not argue in her application that the PSA anticipated support remaining the same for one child as it was for two. The PSA dictates that "[t]he child support shall be revised per the Guidelines when each child enters college or is emancipated." Child support for one child is more than one-half the support for two children under the Guidelines, but it is not ever the same.*fn4
Although "not every factual dispute that arises in the context of matrimonial proceedings triggers the need for a plenary hearing, . . . we have repeatedly emphasized that trial judges cannot resolve material factual disputes upon conflicting affidavits and certifications." Harrington v. Harrington, 281 N.J. Super. 39, 47 (App. Div.), certif. denied, 142 N.J. 455 (1995). The Court recently reiterated the law regarding contract interpretation, applying it to a matrimonial agreement:
As a general rule, courts should enforce contracts as the parties intended. Henchy v. City of Absecon, 148 F. Supp. 2d 435, 439 (D.N.J. 2001); Barr v. Barr, 418 N.J. Super. 18, 32 (App. Div. 2011). Similarly, it is a basic rule of contractual interpretation that a court must discern and implement the common intention of the parties. Tessmar v. Grosner, 23 N.J. 193, 201 (1957). A court's role is to consider what is "written in the context of the circumstances" at the time of drafting and to apply "a rational meaning in keeping with the expressed general purpose." Atl. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953); accord Dontzin v. Myer, 301 N.J. Super. 501, 507 (App. Div. 1997). [Sachau v. Sachau, ___ N.J. ___ (2011) (slip op. at 12-13).]
A plenary hearing is necessary here to determine the parties' intentions at the time of the agreement, particularly in light of their inability to agree on the meaning of terms in a written PSA. Pacifico v. Pacifico, 190 N.J. 258, 266 (2007) (remanding for a plenary hearing where a PSA provided for a buyout of the marital home but did not specify the terms of pricing to which the parties disagreed); see also Harrington, supra, 281 N.J. Super. at 46-47.
In such a proceeding, the judge will have a chance to assess the credibility of the movant's assertions, as tested through the rigors of cross-examination. Eaton v. Grau, 368 N.J. Super. 215, 222 (App. Div. 2004). In light of our decision that a plenary hearing is required, we do not address defendant's arguments regarding the calculations of payments awarded.
Defendant argues that the trial judge should not have quashed his subpoena for Marc's bank account records. We disagree. The account information was not relevant to any payment calculations involved. Defendant also issued the subpoena before the judge had decided whether or not to hold a plenary hearing. The judge also acted within his discretion in awarding plaintiff the corresponding counsel fees.
Defendant also appeals the judge's grant of counsel fees. Defendant argues that the judge abused his discretion in ordering him to pay $25,000 towards plaintiff's counsel fees, billed to her at the reduced rate of $250 an hour.
The court may award fees to any party in an action on a claim for support. R. 5:3-5(c). An award of fees is at the trial court's discretion, and the decision is reviewable under the abuse of discretion standard. Grau, supra, 368 N.J. Super. at 225. We should only overturn the trial court's determination on fees "'on the rarest occasion,'" and only for "'a clear abuse of discretion.'" Strahan v. Strahan, 402 N.J. Super. 298, 317 (App. Div. 2008) (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)). In awarding counsel fees, the court should consider the following factors:
(1) the financial circumstances of the parties; (2) the ability of the parties to pay their own fees or to contribute to the fees of the other party; (3) the reasonableness and good faith of the positions advanced by the parties both during and prior to trial; (4) the extent of the fees incurred by both parties; (5) any fees previously awarded; (6) the amount of fees previously paid to counsel by each party; (7) the results obtained; (8) the degree to which fees were incurred to enforce existing orders or to compel discovery; and (9) any other factor bearing on the fairness of an award. [R. 5:3-5(c).]
Even though the decision on fees is discretionary, the court must consider the above factors in making its determination. Pressler & Verniero, Current N.J. Court Rules, comment 4.1 on R. 5:3-5 (2011). If deemed just, an award may be made in favor of either party, whether or not they prevailed. See Kingsdorf v. Kingsdorf, 351 N.J. Super. 144, 158 (App. Div. 2002).
Defendant repetitively raised the same arguments to eliminate his child support. The prior motion judge had ruled that plaintiff remained the parent of primary residence for Marc even though he resided in a year-round rental near his Florida college campus and assessed child support pursuant to the Guidelines. Once again, defendant claimed that he should not pay child support for Julie because she resided in a year-round rental in Vermont where she was attending college. He sought to emancipate Marc as of December 2008, although Marc had to take another course before graduating and was not employed full-time. In his motion papers, defendant argued that the prior motion judge erred in applying the law to the facts, although he did not appeal that decision. The judge who awarded counsel fees found this repetitive motion practice to be evidence of bad faith and contrary to the principles of res judicata and "the law of the case."
Res judicata is a common law doctrine barring the same parties from re-litigating a claim or issue that has already been finally, validly and fairly adjudicated on its merits. Velasquez v. Franz, 123 N.J. 498, 505 (1991); Innes v. Carrascosa, 391 N.J. Super. 453, 488-89 (App. Div.), certif. denied, 192 N.J. 73 (2007). The law of the case doctrine "is a guide for judicial economy based on the sound policy that 'when an issue is once litigated and decided during the course of a . . . case, that decision should be the end of the matter.'" Feldman v. Lederle Labs., 125 N.J. 117, 132 (1991) (quoting State v. Hale, 127 N.J. Super. 407, 410 (App. Div. 1974)). The doctrine is a discretionary rule of practice that applies when there is an unreversed decision of a question of law or fact made during the course of litigation. Hale, supra, 127 N.J. Super. at 410-11. We agree that defendant should not be permitted to re-litigate issues decided by the prior motion judge.
Defendant argues that because counsel and plaintiff have a personal relationship, and he believes that plaintiff will not have to pay her attorney, no counsel fees should have been assessed. He also argues that the judge based the award primarily on his bad faith litigation, whereas he did not litigate in bad faith. The judge, however, indicated he alsoconsidered the need and financial ability of the parties to pay counsel fees. Williams v. Williams, 59 N.J. 229, 233 (1971). Any relationship between plaintiff and her counsel is irrelevant to the award of counsel fees. Her counsel performed the legal work and is entitled to compensation. He gave his client a fifty-percent discount, and the judge awarded only the discounted fee.
Affirmed in part and reversed and remanded for a hearing in conformance with this opinion.