On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Mercer County, Docket No. FM-11-0719-00B.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fisher, Baxter and Nugent.
Defendant Stephen McPhillips appeals from a December 13, 2010 Family Part order that denied his motion to terminate his permanent alimony obligation. We agree with defendant's contention that the judge's refusal to treat defendant's retirement as a change of circumstances was error. We reverse and remand for a plenary hearing.
On December 14, 2000, a Family Part judge issued a dual judgment of divorce (JOD), terminating defendant's marriage to plaintiff Dolores McPhillips. In relevant part, the JOD specified that based upon defendant's then-current annual income of $88,000, he would be obligated to pay $300 per week as alimony to plaintiff. The JOD also awarded plaintiff the sole title to the former marital home in Hamilton Township. In return, the parties agreed that defendant would retain "as his sole and exclusive property, free from all claims of the plaintiff," the "past, present and future value of his pension plan" held by the New Jersey Public Employees Retirement System (PERS). Finally, the JOD specified that after awarding plaintiff the sum of $9200 from defendant's deferred compensation plan, the balance of the deferred compensation plan proceeds would be divided equally. Various stock portfolios and money market accounts, as well as two certificates of deposit, were also divided equally.
On January 1, 2009, eight years after the parties' divorce, defendant retired at the age of sixty and one-half, which was nearly five years after he was eligible to do so. Defendant's retirement income consisted of a Social Security retirement benefit of $1581 per month, a Veteran's Administration (VA) pension of $243 per month, and his PERS pension of $5227.66 per month. Because defendant's PERS pension was his sole property as a result of the divorce, and because N.J.S.A. 2A:34-23(b)(13) provides that an asset already subject to equitable distribution as part of a divorce shall not be considered an available resource for purposes of the payment of alimony, defendant asserted that he had experienced a seventy-five percent reduction in his income since retiring.
He moved to terminate his alimony obligation. He argued that apart from his exempt PERS pension income, his monthly income from Social Security and the VA totaled only $1826 per month, which was a mere twenty-five percent of the $88,000 annual income he was earning at the time of the parties' divorce. He further argued that if he were required to continue to pay alimony at the rate of $1290 per month, he would be forced to live on $536 per month, which was the remaining balance after the monthly alimony of $1290 was deducted from his non-exempt monthly income of $1826.
Relying on N.J.S.A. 2A:34-23(b)(13), the judge held, in an August 21, 2009 order, that pursuant to the divorce decree, defendant's monthly PERS pension could not be considered an asset or a source of income for the purpose of paying alimony to plaintiff. The judge further ordered the parties to attempt to resolve the dispute for a thirty-day period, after which, if they were unsuccessful, defendant would be obliged to provide plaintiff and the court with information concerning his post-retirement income.
The parties were unable to resolve the dispute, and on September 3, 2010, defendant again moved to terminate his alimony obligation. A second judge conducted a motion hearing that began seven weeks later, on October 22, 2010. Treating the August 21, 2009 order as the law of the case, the judge held that defendant's pension could not be attached, or in any way used, to satisfy his alimony obligation. The judge further held that defendant had retired in good faith, and that his decision to retire was not motivated by a desire to frustrate or impede plaintiff's right to receive alimony. In reaching that determination, the judge considered the fact that defendant worked for more than thirty-four years, paid alimony for more than eight years after the divorce, and had worked for nearly five years after he initially became eligible to retire. The judge concluded there was "no problem with [defendant's] decision to retire under the circumstances."
Nonetheless, although the judge recognized that defendant's PERS pension could not be utilized for the payment of alimony, he refused, at the conclusion of the December 10, 2010 motion hearing, to terminate defendant's alimony obligation. The judge reasoned that although plaintiff's current annual income of $35,000 was $10,000 greater than it had been at the time of the parties' divorce, the termination of alimony would result in an unfair hardship to her. The judge also concluded that even though defendant's "$57,000" annual pension income was unavailable "as a source of payment of alimony, . . . the fact he receives $57,000 is something we have to consider, even though it's not a source of payment for alimony."*fn1
The judge held that defendant had sufficient income to enable him to pay $300 weekly alimony to plaintiff, even without counting his PERS pension benefits. Ultimately, the judge concluded that defendant's retirement did not constitute a change of circumstances because his aggregate income in retirement, including ...