September 19, 2011
LORI GABRIEL-PETSCHAUER, PLAINTIFF-RESPONDENT,
RODERICK PETSCHAUER, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1359-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued March 1, 2011
Before Judges Carchman and Graves.
In this post-judgment matrimonial matter, defendant Roderick Petschauer appeals from an order dated April 22, 2010, holding him responsible for an income tax liability due to early withdrawals from a retirement account. For the reasons that follow, we affirm.
Plaintiff Lori Gabriel-Petschauer and defendant were married on November 14, 1982. Plaintiff filed for divorce on March 19, 2007, and defendant counter-claimed two days later. Thereafter, the parties attended mediation sessions in an effort to resolve equitable distribution issues.
The parties were divorced on April 2, 2008, and their dual judgment of divorce incorporated a comprehensive property settlement agreement (the Agreement). In Article 10.9 of the Agreement, the parties acknowledged that defendant had received a monetary settlement from his prior employer, T&M Associates, and that some of the settlement funds remained in defendant's attorney's trust account. In Article 8.1, the parties agreed they would file joint state and federal tax returns for the year 2007 and, if taxes were owed, they would "be equally responsible in light of the monies received for the T&M settlement." The parties further agreed in Article 10.2, that their retirement accounts and stocks were to be equally divided, and they would equally share any tax liability resulting from the redemption of stock:
B. Husband has provided his 2007 Merrill Lynch Retirement Account year end statement. The net portfolio value is in the amount of $163,602 and shows debits of $83,953. For the purposes of equalizing the parties' respective accounts, Husband's Merrill Lynch Retirement Account will be valued at $247,555.
C. Husband [also] has a Merrill Lynch Retirement Account with his current employer, Brennan Beer Gorman/ Architects. The value is $5,596.
D. Wife's retirement account equals $76,204. Husband's retirement account[s] [total] $253,151. Therefore, husband will roll-over $88,474 from his Merrill Lynch Retirement Account into Wife's ING retirement account.
F.*fn1 Husband also has employee stock with Simat, Helliesen & Eichner, Inc. [(SH&E).] The stock is valued at $39,455. It appears that the full value of the stock has vested. Husband agrees to redeem this stock in full, in accordance with the plan, and give Wife fifty percent of the value or $19,727. The parties will share in the tax liability associated with this redemption on their 2007 return if it is a taxable event. . . .
When defendant prepared the parties' federal and state tax returns for 2007, he determined that his early IRA distributions resulted in a significant tax liability. However, plaintiff claimed that defendant's withdrawals were only used to pay his personal expenses, and that she never agreed to pay taxes resulting from the early withdrawals. Consequently, plaintiff sought an order compelling defendant to pay the tax liability, and defendant filed a cross-motion to compel plaintiff to pay one-half of the taxes.
The court initially granted plaintiff's motion. But defendant filed a motion for reconsideration, and the court determined the tax provisions in the Agreement were ambiguous. Accordingly, the court vacated the order it had entered and scheduled the matter for a plenary hearing.
After several adjournments, the hearing was held on April 21 and 22, 2010. Plaintiff testified that she agreed to file joint tax returns in 2007 because she was willing to share the tax liability incurred as a result of the parties' joint income, the T&M settlement, and the redemption of the SH&E stock. According to plaintiff, the parties never agreed to share the tax liability resulting from defendant's premature IRA withdrawals.
Defendant was the only other person to testify. In contrast to plaintiff's testimony, he claimed that the tax consequences from the IRA withdrawals were "negotiated and reviewed prior to the divorce and . . . the settlement agreement." Defendant acknowledged, however, that at least some of his IRA withdrawals were used to pay his personal expenses, including his American Express card.
In an oral decision on April 22, 2010, the trial court stated that defendant's testimony "was a major departure" from the information contained in his initial certification. The court also found that plaintiff was "more credible than the defendant on the issues at hand," and that plaintiff's testimony regarding the parties' intent was "more reasonable." Consequently, the court ordered defendant "to be 100% responsible for the 2007 income tax liability arising out of the early withdrawals from his IRA."
On appeal, defendant presents the following arguments:
AS PART OF A GLOBAL SETTLEMENT, PLAINTIFF AGREED TO SHARE LIABILITY FOR THE 2007 JOINT INCOME TAX DEBT; SINCE PLAINTIFF KNEW THERE WOULD BE A TAX, AND SINCE SHE KNEW THE APPROXIMATE AMOUNT OF THE TAX, THE LOWER COURT SHOULD NOT HAVE GRANTED HER RELIEF FROM THAT OBLIGATION WHILE SHE ENJOYED THE BENEFITS OF ALL THE OTHER PARTS OF THE GLOBAL SETTLEMENT.
IF THIS MATTER IS REMANDED FOR ANOTHER PLENARY HEARING, DEFENDANT SHOULD BE ALLOWED TO INTRODUCE ATTORNEY KING'S E-MAIL REGARDING WHAT WAS DISCLOSED DURING MEDIATION.
Our scope of review is limited. "Findings by the trial judge are considered binding on appeal when supported by adequate, substantial and credible evidence." Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974). We give special deference to the trial court's credibility assessments because the judge had an opportunity to hear and observe the witnesses. Cesare v. Cesare, 154 N.J. 394, 412 (1998). In addition, "[t]he basic contractual nature of matrimonial agreements has long been recognized," Pacifico v. Pacifico, 190 N.J. 258, 265 (2007), and "[a]s a general rule, courts should enforce contracts as the parties intended." Id. at 266.
In this case, the trial court determined that plaintiff was the more credible witness, and there is sufficient evidence in the record to substantiate that determination. The trial court also accepted plaintiff's testimony that she did not benefit from the early withdrawals, and the court concluded that it would be "unjust and inequitable" for plaintiff to pay taxes on the funds that defendant withdrew "for his own purposes." We agree and affirm substantially for the reasons stated by Judge Iadanza in his oral decision on April 22, 2010.