June 19, 2012
ERIC MICHAEL GOTTBETTER, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
MARCIE GOTTBETTER, DEFENDANT-RESPONDENT/ CROSS-APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-1660-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued June 12, 2012
Before Judges Fisher and Grall.
In this appeal of a post-judgment matrimonial order, we conclude that N.J.S.A. 25:2-1(b), which generally protects certain trust funds from creditors, does not insulate an individual retirement account (IRA) from a family court's reach when the account holder has failed to comply with an order to pay counsel fees incurred by an adversary in defending a support order. As a result, we affirm the order under review insofar as it imposed a constructive trust on plaintiff's IRA but reverse, on the cross-appeal, because the family judge mistakenly concluded that N.J.S.A. 25:2-1(b) precluded liquidation of the IRA.
In a prior appeal, we outlined the circumstances that preceded the order in question:
The parties were married in 1995 and had two children. They were divorced by way of a dual judgment entered on January 29, 2008. The judgment incorporated their settlement agreement, which required that plaintiff pay defendant limited duration alimony for nine-and-one-half years; plaintiff was obligated to pay defendant $55,000 annually for the first three years, $50,000 annually for the following three years, and $45,000 annually for the remainder of the alimony term.
Within a year of the entry of judgment, plaintiff filed the first of a series of post-judgment motions seeking a modification of the monetary obligations imposed on him by the agreement based on his consulting firm's loss of its only client. Plaintiff asserted that his business of selling sports and entertainment tickets on line was a "non-issue" because he "had never made a profit nor had any income from the ticket business." In light of these contentions, the trial court temporarily reduced plain-tiff's annual alimony obligation from $55,000 to $40,000 pending a plenary hearing.
Based on discovery obtained from plaintiff, as well as information subpoenaed by defendant from PayPal, defendant's forensic accountant provided an initial report, which suggested plaintiff earned a considerable profit in selling sports and entertainment tickets. A supplemental report provided by defendant's accountant in December 2009 asserted that from April 1, 2008 to October 14, 2009, plaintiff's PayPal account received deposits of $392,693, and plaintiff had made ticket purchases during the same time frame of $126,776, suggesting income for that period of $265,917 or in excess of $14,000 per month.
Plaintiff's earlier sworn contention that he "had never made a profit nor had any income from the ticket business" was not only forcefully challenged by defendant's accountant, but was belied by plaintiff's own accountant, who reported plaintiff received income from his ticket business during 2008 and 2009 of approximately $3500 per month. Plaintiff's accountant based this determination on information obtained from PayPal, which suggested income to the ticket business, after deductions for ticket purchases, of slightly more than $6000 per month; the income attributed to plaintiff from that source was reduced by the accountant because plaintiff allegedly had a partner. On the eve of the plenary hearing, plaintiff's accountant adjusted his figures upon learning that plaintiff received additional receipts from sources other than PayPal.
[Gottbetter v. Gottbetter, No. A-3300-09 (App. Div. Feb. 14, 2011) (slip op. at 1-3)]
The plenary hearing never occurred. Plaintiff's attorney requested and was relieved as counsel, and plaintiff withdrew his motion for a reduction of his support obligations. The earlier order that temporarily reduced the awards was vacated, plaintiff was ordered to repay that part of the earlier award that had been reduced pendente lite, and the judge scheduled the date for the submission of defendant's request for fees and expenses incurred during those proceedings and the date for submission of plaintiff's opposition. Id. at 3-4.
Defendant sought an award of $125,528 in counsel fees, expert fees and other costs, which the judge granted in full for reasons set forth in a written opinion. Plaintiff appealed, arguing, among other things, that the judge did not take into account his ability to pay. We found insufficient merit in plaintiff's arguments to warrant discussion in a written opinion, R. 2:11-3(e)(1)(E), and briefly summarized our holding with the following comments:
The record reveals that plaintiff's claim of an inability to pay alimony as originally agreed was based upon the allegation that he was without sufficient income and that his ticket business was a "non-issue" because it generated no income. After considerable discovery and expense, plaintiff's contentions unraveled; his own accountant demonstrated that plaintiff earned substantial income through his ticket business. That same evidence more than amply supports a conclusion, which the judge implicitly found, that plaintiff had the ability to pay defendant's counsel fees.
Plaintiff's attempt to perpetrate a fraud must come at a price and the judge's award, in light of all the factors expressly and implicitly considered, was reasonable and necessary to compensate defendant for having to respond to plaintiff's false allegations.
[Id. at 5]
Following our disposition of the appeal, the trial judge ruled on other pending issues, and ordered plaintiff to pay $4258 for the children's unreimbursed medical expenses and $18,059 in additional counsel fees. The judge also considered whether plaintiff's IRA could be utilized to compensate defendant for these sums, as well as the $125,528 in counsel fees previously awarded and affirmed by this court. The judge imposed a constructive trust over the IRA -- and supported that relief by compelling plaintiff to obtain life insurance for the benefit of defendant in the amount of $150,000 -- but ultimately concluded that she was not authorized to liquidate or otherwise encumber the IRA to satisfy plaintiff's outstanding counsel fee debt to defendant.
Plaintiff appeals, and defendant cross-appeals. Plaintiff
I. THE IMPOSITION OF A CONSTRUCTIVE TRUST UPON THE RETIREMENT ACCOUNTS OF THE PLAINTIFF AND THE REQUIREMENTS THAT THE PLAINTIFF NAME THE DEFENDANT AS THE BENEFICIARY OF HIS RETIREMENT ACCOUNTS, MAINTAIN A $150,000.00 LIFE INSURANCE POLICY NAMING THE DEFENDANT AS THE BENEFICIARY AND BE RESPONSIBLE FOR ALL COSTS ASSOCIATED WITH ANY SUPPLEMENTARY PROCEEDINGS WAS AN ABUSE OF DISCRETION AND WAS ORDERED FOR THE SOLE PURPOSE OF CIRCUMVENTING THE BAR ON THE LIQUIDATION OF RETIREMENT ACCOUNTS AS SET FORTH IN N.J.S.A. 25:2-1(b).
II. THE PLAINTIFF SHOULD NOT HAVE BEEN ORDERED TO PAY ANY, MUCH LESS ALL OF THE DEFENDANT'S COUNSEL FEES AND COSTS INCURRED IN CONNECTION WITH THE JUNE 15, 2010 MOTION FOR ENFORCEMENT AS MUCH AS OF THE RELIEF SOUGHT BY THE DEFENDANT WAS EITHER INAPPROPRIATE OR JUSTIFIABLY CONTESTED AND THE FEES CHARGED WERE EXCESSIVE.
III. THE TRIAL COURT'S DECISION DIRECTING THE PLAINTIFF TO REIMBURSE THE DEFENDANT THE SUM OF $4,258.00 FOR UNREIMBURSED MEDICAL AND EXTRACURRICULAR EXPENSES INCURRED ON BEHALF OF THE MINOR CHILDREN BORN OF THE PARTIES' MARRIAGE IS NOT SUPPORTED BY ADEQUATE, SUBSTANTIAL OR CREDIBLE EVIDENCE AND IS CONTRARY TO THE EXPLICIT TERMS OF THE PARTIES' MARITAL SETTLEMENT AGREEMENT.
In her cross-appeal, defendant argues:
PLAINTIFF'S RETIREMENT ACCOUNTS ARE NOT IMMUNE FROM LIQUIDATION FOR PURPOSES OF PAYING COUNSEL FEE AWARDS TO DEFENDANT AS SAID FEE AWARDS ARE IN THE NATURE OF SUPPORT TO DEFENDANT AND THE MINOR CHILDREN. ALTERNATIVELY, DENYING DEFENDANT'S APPLICATION TO LIQUIDATE PLAINTIFF'S RETIREMENT ACCOUNTS WOULD BE AN ABUSE OF THE SAFE HARBOR PROVISION IN N.J.S.A. 25:2-1(b).
We find insufficient merit in plaintiff's Points II and III -- as well as his arguments in Point I that the judge erred in ordering a supplementary proceeding, in imposing on plaintiff the costs of that proceeding, and in directing plaintiff to obtain $150,000 in life insurance for defendant's benefit -- to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We also reject plaintiff's argument, and agree with defendant's arguments, regarding the application of N.J.S.A. 25:2-1(b) for the following reasons.
N.J.S.A. 25:2-1(b) declares that "any property held in a qualifying trust and any distributions from a qualifying trust, regardless of the distribution plan elected for the qualifying trust, shall be exempt from all claims of creditors and shall be excluded from an estate in bankruptcy[.]" The statute, however, exempts from this general protection a number of types of claims by creditors, including: "any order for child support or spousal support[.]" N.J.S.A. 25:2-1(b)(2). Because plaintiff's IRA is a "qualifying trust" for the purposes of these statutes, see Gilchinsky v. Nat'l Westminster Bank N.J., 159 N.J. 463, 473 (1999), the question is whether the order compelling the payment of counsel fees incurred in defending a support order against a claim for its reduction or termination is an "order for child support or spousal support." We conclude that such an order falls within the scope of what the Legislature meant by a child or spousal support order in N.J.S.A. 25:2-1(b)(2).
As the record reveals, plaintiff fraudulently attempted to obtain a reduction in his obligation to pay the limited duration alimony imposed by the parties' property settlement agreement, causing defendant to incur a considerable amount of counsel fees and the costs of retaining an expert. To permit plaintiff to avoid payment of the fees incurred by his adversary in defending the existing support order through the insulation of what appears to be the only available asset would be tantamount to reducing the support order. The only reasonable interpretation of N.J.S.A. 25:2-1(b)(2) requires the inclusion not only of support orders but also obligations reasonably incurred in protecting or seeking enforcement of those orders. Our view of counsel fee awards in matrimonial matters is consistent with this interpretation, which has been adopted in matters considering the impact on a matrimonial judgment of a bankruptcy discharge. See DiGiacomo v. DiGiacomo, 256 N.J. Super. 404, 409 (App. Div. 1992) (holding that "the attorney's fees of the dependent party's attorney are usually not dischargeable in bankruptcy because they are considered to be in the nature of support"); Pelusio v. Pelusio, 130 N.J. Super. 538, 539 (App. Div. 1974) (holding that counsel fees to the supported spouse "are as much 'necessaries' as are alimony, maintenance and support and, as such, fall within the class of indebtedness excepted from release by a discharge in bankruptcy").*fn1 To follow plaintiff's interpretation would allow an obligor to impoverish an obligee through an attack on a support order without liability for the fees incurred by the obligee in defending against the attack. The Legislature, in enacting N.J.S.A. 25:2-1(b)(2), could not possibly have intended such an unjust result. As a result, we agree with defendant that plaintiff's IRA is not immune and may be invaded to pay the counsel fee award, which we previously affirmed and which plaintiff has contumaciously failed to pay, as well as other support-related awards in question in this appeal.
Because the trial judge mistakenly viewed her authority to compel payment of the counsel fees to be restricted by N.J.S.A. 25:2-1(b), we remand for further proceedings. We do not, however, require the liquidation of the IRA. The trial judge has a "feel" for this case and is entitled to exercise her considerable discretion to limit the use of the IRA commensurate with her prior rulings and, as a result, may still conclude that the imposition of restraints on the IRA, as previously imposed, is sufficient. We remand for her reconsideration of the prior orders in light of our holding that N.J.S.A. 25:2-1(b) does not insulate the IRA from execution.*fn2
To summarize, with regard to the issues raised in plaintiff's appeal, we affirm. We agree with the arguments raised in the cross-appeal and remand for reconsideration in conformity with this opinion. We do not retain jurisdiction.