July 11, 2011
GREGORY SCHAFFER, PLAINTIFF-RESPONDENT,
MARYANN SCHAFFER, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Warren County, Docket No. FM-21-282-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted: October 12, 2010
Before Judges A.A. Rodriguez and C.L. Miniman.
Maryann Schaffer (the wife) appeals from a final judgment of divorce (JOD) entered on June 16, 2009, following a bench trial on all issues. Because we are satisfied that the parties' home was a marital asset that was fairly and equitably distributed between the parties, we affirm.
Plaintiff Gregory Shaffer (the husband) and the wife were married to each other on June 29, 2002. At the time of their marriage, the wife had two children from a previous marriage, which had ended in divorce on February 11, 2002. The wife had brought $228,500 to this marriage as her share of equitable distribution from the dissolution of her first marriage.
Prior to her February 2002 divorce, the wife began looking for a residence for herself, her two children, and her future husband and then entered into a contract to purchase vacant land in May 2002 before the parties were married. On June 10, 2002, the parties began to cohabit in an apartment with the wife's two children and the wife signed a contract on June 20, 2002, for construction of a home on the property she was under contract to purchase. The parties married on June 29, 2002. About three weeks after their marriage, the wife closed title on the vacant land, taking sole title under her former surname, LoCasio. The husband brought no liquid assets to the marriage and conceded that all of the monies utilized to purchase the vacant land belonged solely to the wife. However, the wife admitted that when her first divorce became final, she had already decided to marry the husband and knew that his income would be available in connection with acquiring a new residence.
Construction of the residence was completed on May 9, 2003, at a total contract cost of $180,124.76. Additional costs outside the contract totaled $31,393.98. Thus, the total cost of the new marital home including the land was $285,456.74. Shortly before completion of construction, the wife in her sole name took out a $105,000 construction loan and mortgaged the property. The husband did not know why his name was not on the deed to the property, the construction contract, or the construction loan and mortgage.
The husband trusted his wife to handle the parties' finances. From the beginning of the marriage, he gave his paycheck to her, and she paid the bills. His checks were deposited into a joint checking account. However, he was aware that the wife moved his money into a bank account in her former married name. It was clear that the husband's earned income during the marriage and the wife's remaining separate property from her first marriage were commingled, and the parties used their commingled assets to pay construction costs, the mortgage, and all other expenses of the marriage. The husband used no credit cards during the marriage; the only existing credit cards were issued solely in the wife's former name and used exclusively by her.
On July 31, 2004, the parties jointly borrowed $30,000 on a home equity line of credit. That money was used in part to build a swimming pool, put up a fence, pave the driveway, and take a trip to Virginia. In 2005, the parties jointly signed a new mortgage in the amount of $140,000 which paid off the construction mortgage in the wife's name and the home equity loan in joint names. This new loan was a negative-amortization mortgage, the import of which neither party understood.
The marriage began to falter when the wife had an extramarital affair; the husband filed for divorce. Several months later, and without the husband's knowledge, the wife took out a new loan in her name only in the amount of $205,000 to pay off the first mortgage, which by then had a balance of $154,891.26, and provide the wife with a fund of $50,108.74.
The matter was tried on February 24 and March 16, 2009. The wife claimed that the property was not purchased in contemplation of marriage because it was located one mile from her former home; she used the same construction company; and she purchased the same furniture that she previously owned. She further testified that she never referred to the marital home as "our house." The judge found that the wife was not a credible witness and this testimony in particular was not credible.
On June 16, the judge issued a dual JOD pursuant to which the wife was permitted to retain the marital residence but was required to remain solely responsible for all costs and expenses incurred in connection with the ownership and occupancy of same. Additionally, the wife was ordered to pay the husband $73,200 as and for his share of the equity in the marital residence. That sum was to be paid upon the wife's remarriage, closing of title upon sale of the residence, any refinancing of the first mortgage, or on June 30, 2010, whichever was earlier. If none of the undated eventualities occurred by January 1, 2010, the marital residence was to be listed for sale, although the payment due on June 30, 2010, was not contingent upon sale of the former marital residence or its refinancing.
In her written decision, the judge explained that the vacant lot and home constructed thereon was purchased for this marriage and that the parties' commingled monies were available in connection with the construction of the home and improvements to it, all of which occurred after the parties' marriage. The judge found the wife's testimony that she never intended the home to be a marital asset was "wholly incredible"; she found that the purchase was a joint enterprise.
The judge also found that the husband credibly testified that he helped paint the home; put up lighting; pick out certain fixtures and furniture; stain trim inside the house; apply putty to nail holes in the trim, baseboard and moldings; assist in the final grading of the back of the property; work in the yard; cut the grass; and put up the fence. Additionally, she found that the husband participated in some of the negotiations with the builder, particularly with respect to the height of the ceilings and the addition of extra length to the back of the house. Otherwise, the husband acquiesced to the wife's ideas and taste in the construction and furnishing of the home. The judge also noted that the $30,000 home equity line of credit was a joint borrowing, as was the jointly signed mortgage in the amount of $140,000, which paid off the home equity loan and the first mortgage in the wife's sole name.
Having made the above and other fact-findings, the judge considered each of the factors contained in N.J.S.A. 2A:34-23 in making an equitable distribution of property and made specific findings of fact with respect to each. She found, among other facts, that the parties stipulated to the value of the real estate at $460,000. With the outstanding balance of the mortgage at $203,000, there was a net equity of $257,000. The husband provided no evidence that he was interested in keeping the house, which the wife wished to retain as a residence for her children.
The judge, distinguishing our decision in Weiss v. Weiss, 226 N.J. Super. 281, 288 (App. Div.), certif. denied, 114 N.J. 287 (1988) (holding that property acquired in contemplation of marriage may be subject to equitable distribution), found it unnecessary to address our holding because here the land and its improvements were acquired after the marriage, not in contemplation of it. The judge found that the parties had stipulated to a single-sum value for the land and improvements, making it difficult to value the land, which had been purchased exclusively with premarital assets.
What happened thereafter is equally clear. [The wife] had available $228,500 from her previous divorce. Approximately $74,000 of that money was used for the land, as aforesaid. The total price of the land, construction, and improvements exceeded $285,000, or approximately $60,000 more than what was available to the [wife]. There were other payments that were not accounted for at the trial, and all the furniture and furnishings and other life expenses were paid by the parties during the course of their marriage. [The wife] conceded that the $20,000 annual child support she received for the children was exhausted meeting the children's needs, and she had little income of her own through the end of 2007. It was not until 2006 when her aunt started paying rent to the parties. Further, [the husband's] income and [the wife's] money were commingled. Indeed, the checks that [the wife] showed to the [c]court reflecting payments for various aspects of the construction were drawn on accounts into which [the husband's] income was deposited. Notwithstanding the fact that title to the land and home were taken in [the wife's] sole name, both the home equity line, in the amount of $30,000, and the refinancing of the mortgage and home equity line, in the amount of $140,000, were taken in the parties' joint names.
In deciding the most equitable method for distributing the net equity in the marital residence, the judge considered the husband's stipulation that $74,000 of the wife's premarital property was used to purchase the land. She also considered that the husband's earned income over five years totaling $200,000 and the wife's equitable distribution from her first marriage were commingled, supported the parties' lifestyle, and were used to acquire the marital assets. She rejected the wife's suggestion that she should retain the marital asset as her separate property because she "used [the husband] to pay for her expenses in the residence, to contribute toward the construction of the residence, to sign loans which funded the construction and payment for improvements for the home, and posits that he should be responsible for 50% of all her current credit card debt." She found that the asset was purchased after the date of the marriage and, but for the husband's concession that the purchase price for the land was paid from the wife's premarital assets, the wife "ha[d] failed to meet her burden of proving that her separate property alone was used for the construction and improvement of the house."
The judge concluded that it was equitable to deduct the cost of the land from the stipulated net equity in the marital residence. She allocated sixty percent of the balance to the wife and forty percent, or $73,200, to the husband. After addressing each of the other issues before her, the judge entered a final dual JOD dissolving the parties' marriage. This appeal followed.
The wife raises the following issues for our consideration:
(1) the judge plainly erred in finding that the marital residence was subject to equitable distribution; (2) the judge erred in failing to determine the value of the marital residence on the date of the marriage; (3) the judge erred in calculating the parties' respective contributions during the marriage; and (4) the judge misapplied N.J.S.A. 2A:34-23.1 in finding that the marital residence is subject to equitable distribution.
Appellate review of a trial court's fact-finding function is circumscribed so that "findings by the trial court are binding on appeal if supported by adequate, substantial, and credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998) (citing Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484 (1974)). Trial courts that "hear the case and see the witnesses . . . are in a better position to evaluate the credibility and weight to be afforded testimonial evidence." N.J. Div. of Youth & Family Servs. v. I.Y.A., 400 N.J. Super. 77, 89 (App. Div. 2008) (citing In re Guardianship of D.M.H., 161 N.J. 365, 382 (1999); Pascale v. Pascale, 113 N.J. 20, 33 (1988)).
The Supreme Court has observed that "matrimonial courts possess special expertise [and experience] in the field of domestic relations." Cesare, supra, 154 N.J. at 412 (citation omitted). "Because of the family courts' special jurisdiction and expertise in family matters, appellate courts should accord deference to family court fact[-]finding." Id. at 413. In reviewing equitable-distribution decisions, our role is "to determine whether the court has abused its discretion." La Sala v. La Sala, 335 N.J. Super. 1, 6 (App. Div. 2000), certif. denied, 167 N.J. 630 (2001). We must decide "whether the result could reasonably have been reached by the trial judge on the evidence, or whether it is clearly unfair or unjustly distorted by a misconception of law or findings of fact that are contrary to the evidence." Perkins v. Perkins, 159 N.J. Super. 243, 247 (App. Div. 1978).
We begin with the wife's argument that the judge erred in finding that the marital residence was subject to equitable distribution. She grounds this argument on the undisputed facts that she had $228,500 available to her at the time of this marriage and the husband had no liquid assets. She contends that the $105,000 construction loan and her liquid assets were sufficient to pay the $285,456.74 cost for constructing the home and buying the land. She urges that under Painter v. Painter, 65 N.J. 196, 214 (1974), and Sculler v. Sculler, 348 N.J. Super. 374, 378 (Ch. Div. 2001), any asset in her sole name and any property for which it was exchanged is immune from equitable distribution as is any increase in its value. She contends that the new home required little, if any, improvements and that the husband's "contribution" based on his liability for the negative-amortization mortgage actually decreased the net equity in the home.
In determining the equitable distribution of marital assets, Family Part judges apply a three-prong analysis. Rothman v. Rothman, 65 N.J. 219, 232 (1974). First, the judge determines what assets are subject to equitable distribution. Ibid. Second, the judge values the distributable assets. Ibid. Last, the judge allocates the assets to the parties. Ibid. This last prong requires application of the factors enumerated in N.J.S.A. 2A:34-23.1.
Beginning with the first prong, property owned by a party prior to marriage and held separately thereafter is generally an asset immune from equitable distribution. Painter, supra, 65 N.J. at 214; Valentino v. Valentino, 309 N.J. Super. 334, 338 (App. Div. 1998); Orgler v. Orgler, 237 N.J. Super. 342, 350-51 (App. Div. 1989). Where the original asset is exchanged for another asset or the proceeds from the sale of the original asset may be traceable into the new asset, the new asset is likewise immune. Painter, supra, 65 N.J. at 214.
The party claiming immunity bears the burden of proving that the asset is in fact immune. Ibid.; see also Weiss, supra, 226 N.J. Super. at 291 (burden of proving immunity on party claiming it). Such proof raises a presumption that any increase in value is also immune. Sculler, supra, 348 N.J. Super. at 381. If the immune asset is a passive one, that is, the changes in value "are based exclusively on market conditions," Valentino, supra, 309 N.J. Super. at 338, any subsequent increase in value is likewise immune, Painter, supra, 65 N.J. at 214. However, where the asset is an active one, that is, it had the capacity to increase in value due to the parties' efforts, the non-owner spouse bears the burden of proving that there has been an increase in value during the marriage and the increase in value can be linked to the efforts of the non-owner spouse. Sculler, supra, 348 N.J. Super. at 381; see also Scherzer v. Scherzer, 136 N.J. Super. 397, 401 (App. Div. 1975), certif. denied, 69 N.J. 391 (1976) (holding that "any increase in value [in an immune asset] occurring after the marriage should be considered eligible to the extent that it may be attributable to the expenditures of the effort of [the] plaintiff".*fn1 "[O]nce an asset has been determined to be part of the marital estate, it will be presumed to have been acquired by the joint efforts of the parties." Sculler, supra, 348 N.J. Super. at 379 (emphasis removed).
Here, the premarital asset was the wife's equitable distribution from her first marriage. During this marriage, she used $74,000 of that amount to purchase land for the marital residence. In making her first argument, the wife has ignored the judge's fact-finding that she commingled her remaining premarital liquid assets with the husband's income right from the beginning of the marriage and that she could not establish which monies were used for what purpose. Where premarital assets, here the remaining equitable distribution from her first marriage, have been commingled with marital assets, here the husband's entire income, without reservation and the funds withdrawn to construct a marital residence, it may be inferred that the parties intended that the funds were the exclusive property of both parties. See, e.g., Ryan v. Ryan, 283 N.J. Super. 21, 25-26 (Ch. Div. 1993) (finding residence purchased in joint names from commingled funds was subject to equitable distribution); Pascarella v. Pascarella, 165 N.J. Super. 558, 563-64 (App. Div. 1979) (premarital assets commingled with jointly held assets). On the other hand, where there is a clear intent that a commingled premarital asset was to remain the property of one party, it is not subject to equitable distribution. See Wadlow v. Wadlow, 200 N.J. Super. 372, 380-81 (App. Div. 1985) (finding that testimony of party seeking distribution established that the asset, "although not segregated, was not intended as a gift"); Shayegan v. Baldwin, 237 N.J. Super. 47, 51 (App. Div. 1989) (finding "evidence of Iranian custom regarding inter-spousal separate funds" and the parties' testimony regarding stock transferred from wife to husband "established the separateness of the accounts in question").
In light of the judge's credibility determinations, to which we grant deference, N.J. Div. of Youth & Fam. Servs. v. M.M., 189 N.J. 261, 279 (2007) (citing Cesare, supra, 154 N.J. at 411-12), there is substantial support in the record for the judge's conclusion that the marital residence was subject to equitable distribution. We find no abuse of discretion in identifying the assets subject to equitable distribution under the first prong of Rothman. La Sala, supra, 335 N.J. Super. at 6.
We next consider Rothman's second prong, valuation of the distributable assets. Rothman, supra, 65 N.J. at 232. The husband argues under this prong that the judge erred in failing to determine the value of the marital residence on the date of the marriage, in concluding that the husband contributed to the marital debt, and in failing to recognize that a negative-amortization mortgage depleted the value of the marital assets. We conclude that these issues are without sufficient merit to warrant extensive discussion in this opinion. R. 2:11-3(e)(1)
(E). Suffice it to say that the land had not even be acquired at the time of the marriage and was presumptively worth no more than the consideration paid for it at the time of closing three weeks after the marriage. Additionally, there was no evidence before the judge of any increased value to the land when the complaint for divorce was filed because the wife failed to secure testimony from an expert to establish such fact. The judge had no choice but to value the land in accordance with the parties' stipulation and to award the wife a sum equal to its purchase price. Additionally, the judge merely pointed out that the wife was seeking contribution from the husband toward the monies due on the credit cards in her sole name and the impact of the negative amortization mortgage had been suffered before the divorce. Thus, the wife did not meet her burden of proof under Painter, supra, 65 N.J. at 214, and Mol v. Mol, 147 N.J. Super. 5, 7-9 (App. Div. 1977).
We turn to the third prong of Rothman, allocation of the assets
between the parties. Rothman, supra, 65 N.J. at 232. The wife urges
that the judge failed to properly consider the statutory factors
enumerated in N.J.S.A. 2A:34-23.1. She points out that the marriage
lasted less than six years and the judge failed to consider the extent
of her contributions to the parties' annual cash flow from her child
support, her own earnings, and the income from her aunt when the judge
found that the wife had "virtually no income." Due to these erroneous
findings, she urges that the judge misallocated the marital residence
and that she was entitled to a greater percentage.
It is clear that the judge considered each of the statutory factors, which do not bear repetition here, because she cited and discussed each and every one of them. The issue is really whether she failed to find facts that have substantial support in the record. In this respect, the wife completely ignores the judge's credibility determinations. What is pivotal is that the wife produced little documentary evidence of her earnings--only an income tax return that revealed $728 in gross receipts from her business--nor did she produce proof of the rent received from her aunt. With her credibility rejected, she simply did not meet her burden of proving her contributions to the marriage. Additionally, although her receipt of child support from her former husband was undisputed, the wife ignores the judge's finding that she testified that she applied the child support exclusively to the needs of her children. As such, she did not contribute that support to the marital enterprise. The judge did not err in excluding that income from the factors to be considered in the allocation of the marital residence.