On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-557-99.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Telephonically argued May 12, 2009 -Remanded June 15, 2009
Telephonically argued November 16, 2011
Before Judges A. A. Rodriguez, Payne and Newman.
On June 15, 2009, we issued our opinion in husband Shashi K. Agarwal's appeal and wife Poonam Agarwal's cross-appeal, affirming the provisions of the final judgment of divorce that "award[ed] fifty percent of equitable distribution to wife" and "determin[ed] that income may be imputed to wife." Agarwal v. Agarwal, No. A-0581-06 (App. Div. June 15, 2009) (slip op. at 1, 38-40).
We reversed the specific award of equitable distribution to wife, as well as the award of counsel fees and expert fees to her, remanding those matters so that the trial court "could consider the effect of husband's sizable federal and state tax liabilities on those issues." Id. at 38. We further reversed and remanded for reconsideration those provisions that concerned the valuation and distribution of husband's medical practice, the valuation of the Richard Road property, the equitable distribution of the Midland Bank account, and the imputation of $50,000 in annual income to wife. Id. at 39. Additionally, we reversed and remanded for initial consideration of the provision that imposed restraints on husband's ability to transfer his property following the divorce, and we also directed the trial court to determine the values of the Indus property and the Las Vegas condominium for equitable distribution purposes. Ibid.
We retained jurisdiction and "le[ft] it to the trial court's discretion to determine what issues may require additional or supplemental testimony and/or documents." Ibid.
On remand, the trial judge allowed the parties to file "written submissions" on the issues that were being reconsidered.
On January 19, 2011, the trial court issued an oral decision, addressing and deciding most of the remanded issues. That same day, the judge entered an order, directing that: (1) the award of equitable distribution and counsel/expert fees to wife would remain the same, (2) the value of husband's medical practice was fixed at $1,001,463.10, as of the trial date, (3) the value of the Richard Road property was fixed at $420,000,
(4) the Midland Bank account was not subject to equitable distribution, and (5) the values of the Indus property and the Las Vegas condominium were fixed at $67,000 and $50,000, respectively, with each party entitled to receive one-half of those amounts.
The order further provided that wife had thirty days to submit documentation in support of her claim that she was entitled to an additional $25,384.25 in equitable distribution from the proceeds of the sale of the Richard Road property. Ibid. The order also provided that husband had thirty days to submit documentation in support of his claim that the net proceeds from the sale of the Las Vegas condominium were less than the $50,000 valuation fixed by the judge and that wife was thus not entitled to $25,000 as her one-half share. Ibid.
On April 6, 2011, the judge entered a supplemental order, noting that wife had submitted "appropriate documentation" concerning the monies still owed her from the sale of the Richard Road property and that husband had not submitted any documents to show that he received less than $50,000 in net proceeds from the sale of the condominium. Accordingly, the order stated that wife was entitled to an additional $25,384.25 in equitable distribution for the Richard Road property, as well as $25,000 for her share in the condominium. Ibid.
The matter has now returned to this court and the parties have raised the following issues in their respective briefs: The husband asserts:
THE TRIAL COURT'S CONCLUSION THAT THE TAX DEBT DID NOT EXIST AT THE TIME OF TRIAL WAS WITHOUT ANY BASIS AND AN ABUSE OF DISCRETION.
THE REVISED VALUATION OF PLAINTIFF'S MEDICAL PRACTICE IS WITHOUT BASIS IN THE RECORD. Point Three
THE BROAD RESTRAINTS ON ASSETS IS WITHOUT BASIS.
THE AWARD OF COUNSEL AND EXPERT FEES WAS AND REMAINS PUNITIVE.
In the wife's cross-appeal, she argues that (1) the valuation amount on the husband's medical practice was too low,
(2) that the Midland bank account should have been equitably distributed, and (3) that the court mistakenly imputed $37,500 in annual income to her.
Our review of the record in light of the briefs submitted and argument thereon satisfies us that the trial court's decision on remand has provided the necessary clarification of its original rulings and its findings are supported by adequate, substantial and credible evidence. Pascale v. Pascale, 113 N.J. 20, 33 (1988). We therefore reject the contentions on both the direct and cross-appeals and affirm, except to correct an arithmetical error. We address the issues in the order raised on the direct and cross-appeals.
Husband contends in Point One that the "trial court's conclusion that the tax debt did not exist at the time of trial was without any basis and an abuse of discretion."
In our opinion, we noted that, "by March 18, 2003, husband and wife owed $1,612,330.26 in unpaid federal income taxes, penalties, and interest, and about $355,326.60 in New Jersey income taxes, penalties, and costs." Agarwal, supra, slip op. at 18. We further observed that the trial court had not explicitly considered or commented upon these tax liabilities in making its equitable distribution determination or in determining husband's ability to pay wife's counsel/expert fees. Id. at 20, 27. Consequently, we reversed those provisions of the divorce judgment and remanded the matter so that the trial court could consider how the tax liabilities affected those issues. Id. at 38.
On remand, the trial court determined that husband failed to show that the claimed tax liabilities existed at the time of trial and that, in contrast, wife submitted proofs showing that "most of the alleged tax debt was either paid or abated by the
I.R.S well before the trial in this case began." Accordingly, the trial court explicitly refused to find that husband "had in fact any substantial tax liability either owing to the I.R.S. or to the state."
Additionally, the court stated that, even if a significant tax liability had existed, that circumstance would not have affected the court's determinations concerning equitable distribution and counsel fees because "the court found that the existence of any liability was due solely to the acts of the plaintiff [husband] by not filing his tax returns and paying taxes on his income." Thus, the court took that circumstance "into consideration and determined that any liability, taX liability that is, should come from the plaintiff's share of the equitable distribution since it was his non-action that resulted in the liability." The court was "not going to penalize the defendant [wife] for the plaintiff's wrongdoings."
Husband now asserts that the trial court's findings were in error because the evidence he submitted on remand showed that the combined federal and State tax liabilities exceeded $1,555,000 as of September 11, 1998, when he filed the divorce complaint. That evidence included an affidavit dated March 18, 2003, from an Internal Revenue Service ("IRS") employee showing tax liabilities, interest and penalties totaling $1,612,330.26 accrued by the parties over the tax years 1989 to 2001, as well as a "one page summary attached to the court-appointed forensic accountant's report" dated March 19, 2004, showing a New Jersey tax, interest, penalty, and costs liability of $355,326.60 for an unspecified tax period. This was the same evidence that was submitted at trial.
In contrast, on remand, wife submitted a certification and IRS documents dated September 9, 2010, showing that a large amount of the federal tax liabilities that husband claimed was owed had been abated or paid before the divorce complaint was filed. For instance, those documents showed that, in 2005, the IRS released federal tax liens in the amount of $312,906.65 for the 1989 tax year, and that much of that reduction was made effective as of 1993.
Husband disputes wife's proofs, arguing that they were improper because they "supplement[ed] the record with facts that transpired post-judgment," that is, after the final divorce judgment was entered on September 15, 2006. Husband does not specify what those "facts" were, but, presumably, they are the IRS records dated September 9, 2010, that had been procured by wife.
Husband's objection rings hollow because, while retaining jurisdiction, we expressly left it to the "trial court's discretion to determine what issues may require additional or supplemental testimony and/or documents." Agarwal, supra, slip op. at 39-40. We invited the type of documentation that husband now challenges.
Husband also contests the efforts of wife's counsel to interpret and explain the IRS documents, asserting that counsel was incompetent to offer such technical interpretations. Notwithstanding this objection, husband's counsel then offered her own interpretation of the IRS documents. Husband's counsel explained that husband "discharged most of the marital tax debt in bankruptcy he filed after the trial" and that the "retroactive adjustments to the tax records is [sic] merely the manner in which the IRS records the discharged liability." Husband's counsel was essentially arguing that, even though the IRS documents showed that the penalty and interest abatements and tax-lien releases became effective prior to the September 1998 filing date of the divorce complaint, those liabilities had not really been addressed and satisfied until well after the filing date. This explanation suggests manipulation by the husband to dispose of tax liability post litigation and is in accordance with the type of deception he engaged in throughout as noted by the trial court.
The problem is that there is no expert proof showing that the IRS dealt with abatements and releases in the manner that either husband's or wife's counsel argue it did. Instead, all that can be said is that the IRS documents submitted by wife on remand showed a markedly lower pre-divorce-complaint federal tax liability than that set out in the IRS affidavit relied upon by husband.
Husband acknowledges that, for purposes of equitable distribution, he "had the burden of establishing the marital debt that existed as of the filing of the [divorce] complaint." Monte v. Monte, 212 N.J. Super. 557, 566-67 (App. Div. 1986) (recognizing that the spouse seeking to divide responsibility for the payment of a marital debt has the burden of establishing that debt). Husband failed to carry his proof burden. He has not countered the proofs submitted by wife and relied upon by the trial court that showed the reduced federal tax liabilities. Instead, he continues to rely upon an ...