December 13, 2012
JOEL D. DOUGHERTY, PLAINTIFF-APPELLANT,
KATHERINE DOUGHERTY, DEFENDANT-RESPONDENT.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Warren County, Docket No. FM-21-295-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted November 7, 2012
Before Judges Messano and Lihotz.
Plaintiff Joel Dougherty seeks to vacate the equitable distribution provisions of a Judgment of Divorce (JOD) entered on June 10, 2011. Plaintiff maintains discovery was improperly restricted, the trial judge's factual findings were not supported by the evidence of record, and, for the first time on appeal, argues the trial judge abused her discretion in refusing to recuse herself based on a prior work association with defendant's counsel. We agree the trial judge abused her discretion in denying plaintiff's discovery motion seeking documentation of defendant's bank accounts and erred in her determinations supporting the equitable distribution of the retirement assets titled to defendant Katherine Dougherty and the allocation of tax liabilities. Consequently, the provisions in the JOD on these issues must be vacated and subject to further proceedings on remand by a different Family Part judge. In all other respects, we affirm.
The parties were married on September 12, 1992, and have one child, adopted during the marriage. They separated on June 1, 2009, and plaintiff initiated this matrimonial action on January 8, 2010, alleging irreconcilable differences; defendant counterclaimed, also alleging irreconcilable differences.
Following case management, discovery was ordered to be completed by July 9, 2010. Thereafter, plaintiff moved to enforce discovery, which the trial judge granted, ordering the exchange of "information regarding retirement, 401(k) plan, annuity plan, savings plan, profit sharing plan, and deferred compensation plan . . . from 2006 to the present[.]" Trial was held over four non-consecutive days from September 13, 2010, to January 27, 2011. Each of the parties testified and presented documentary evidence. Defendant was represented by her brother, an attorney, and plaintiff elected to be self-represented.
Plaintiff started his testimony by outlining his position, including that he had no responsibility for an outstanding $18,000 tax bill from 2006, which allegedly resulted from defendant's premature withdrawal of her retirement assets, including the sums he asserted defendant wrongfully withdrew. Plaintiff also argued defendant failed to file an updated case information statement and to produce information regarding requested financial information, including a bank account. The trial judge ordered plaintiff and defense counsel to exchange "trial notebooks" containing proposed trial exhibits.
Following trial, the judge dismissed plaintiff's complaint for failure to prove his cause of action, but granted defendant's counterclaim for divorce; fixed child support and related obligations regarding the parties' child; denied defendant's claims for rehabilitative alimony; denied defendant's request for an award of counsel fees; and equitably allocated marital assets and debts. On appeal, plaintiff's challenges concern only those portions of the JOD dedicated to resolving equitable distribution of the parties' automobiles and personal property and defendant's withdrawals from her pension and 401(k) accounts, along with the obligation to pay any accompanying tax consequences.
In her written decision, the trial judge included the following factual findings:
During the marriage, the parties had joint [bank] accounts from 1992-1995. Thereafter and until separation, the parties maintained separate accounts.
The parties have a 2001 Chevy Blazer. There is no loan on said vehicle. Plaintiff also owns two motorcycles, a 1994 Suzuki Intruder at a value of approximately $1,000 and a 2001 Yamaha at a value of approximately $3,000. There are no loans on these motorcycles as well. Defendant owns a 2006 Toyota Rav 4, which has an outstanding [loan] balance of approximately $7,000.
The parties dispute their financial liabilities. Concerning taxes, both parties acknowledge that it was customary for plaintiff to provide defendant with copies of his W-2 forms and defendant would prepare and file joint taxes. Plaintiff claims . . . he . . . filed his own taxes when the parties were separated. Both parties acknowledge that during the last five to seven years, defendant filed joint tax returns.
Regarding the tax years 2006 through 2008, which are in dispute, both parties agree that plaintiff provided the appropriate tax information to defendant. The [c]court notes that the parties were residing together between 2006 and 2008. However, defendant did not file taxes for tax year 2006 through 2008. Defendant claims she could not file taxes in a timely manner, as the adopted child was not yet issued a social security card. The minor child's social security card was issued on or about March 11, 2008. Defendant hired an accountant to file taxes for the 2006, 2007, and 2008 years [who] . . . filed joint taxes on behalf of the parties. Taxes for 2006 were filed on October 23, 2009. Taxes for 2007 were filed on October 23, 2009. Taxes for 2008 were filed on November 18, 2009.
Subsequently, plaintiff hired an accountant . . . [who] re-filed 2006 taxes as "married filing jointly." On March 26, 2010, plaintiff's accountant re-filed 2007 and 2008 taxes as "married filing jointly." As a result the parties incurred tax consequences.
Each of the parties had acquired retirement assets during the marriage. The judge found plaintiff's account had a value of $36,528.37 as of November 16, 2009. Although not specifically stated in her written findings and conclusions, the trial judge appears to have accepted defendant's testimony that she liquidated her two retirement assets -- a "Cash Annuity Account," and a Prudential Employee Savings Program, referred to as a 401(k) account -- from 2006 through 2008, to pay adoption costs and living expenses while she was not working. The trial judge stated:
[B]oth parties state that there was not much difference in the parties' life style. Plaintiff was aware that the adoption expenses were approximately $20,754. Plaintiff was aware that defendant was unemployed, as the parties lived together between 2006 and 2008. Therefore, the [c]court finds that plaintiff was aware that defendant withdrew funds from her 401K for adoption expenses and living costs.
Based on all of these findings, the judge concluded "plaintiff's vehicles ha[d] a total value of approximately $8,145, while defendant's vehicle essentially ha[d] no equity," and she directed plaintiff to pay defendant one-half the value of his vehicles. The trial judge rejected plaintiff's argument to require defendant alone to satisfy all outstanding tax liabilities, concluding he must share jointly in satisfying marital debts, and ordering him to pay 40% and defendant to pay 60% of the outstanding tax debt. Finally, no award to plaintiff was made for the dissipated value of defendant's retirement assets, as the trial judge found plaintiff did "not show any evidence that defendant intentionally dissipated her assets." The trial judge concluded "plaintiff was aware of the withdrawals from defendant's 401K" based on a spousal consent form he signed, his knowledge of the amount of the adoption expenses paid in 2006, and the fact the parties were residing together and generally maintained the same lifestyle despite defendant's unemployment.
The trial judge entered a one-page JOD on June 10, 2010, which "incorporated" the judge's attached written decision.*fn1
Our review of a trial court's factfinding function made following a non-jury trial is limited. "The general rule is that findings by the trial court are binding on appeal when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 411-12 (1998) (citing Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 484 (1974)). A trial judge "'hears the case, sees and observes the witnesses, [and] hears them testify,'" id. at 412 (quoting Pascale v. Pascale, 113 N.J. 20, 33 (1988)), giving him or her "the opportunity to make first-hand credibility judgments about the witnesses who appear on the stand, . . . [based on] a 'feel of the case' that can never be realized by a review of the cold record." N.J. Div. of Youth & Family Servs. v. E.P., 196 N.J. 88, 104 (2008) (quoting N.J. Div. of Youth & Family Servs. v. M.M., 189 N.J. 261, 293 (2007)). Consequently, this court "should not disturb the factual findings and legal conclusions of the trial judge unless convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice," Cesare, supra, 154 N.J. at 412 (internal quotation marks and citations omitted), or when "the trial court's conclusions are so clearly mistaken or wide of the mark" that failure to intervene would result in "a denial of justice," E.P., supra, 196 N.J. at 104 (internal quotation marks and citations omitted). On the other hand, "[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) (citations omitted). On such issues, we always perform a de novo review. Ibid.
Plaintiff first urges the JOD be vacated, arguing he was prejudiced negatively and his right to a fair and impartial trial was violated because defendant provided "insufficient discovery," "result[ing] in cumulative errors committed by [the trial judge.]" Plaintiff proffers defendant did not: (1) comply with a March 19, 2010 pre-trial discovery order requiring her to release bank account information; (2) file a completed case information statement; and (3) supply her 401(k) information. Plaintiff argues the trial judge abused her discretion because she neither cited defendant for violating Rule 4:23 relating to defendant's failure to provide discovery, nor mandated the documents be supplied. Early in the proceeding plaintiff made clear his position that defendant withdrew monies from her retirement account, without his knowledge or consent, and placed them in a separate bank account, which she declined to reveal. Plaintiff identifies a pre-trial discovery enforcement motion asserting his right to receive the information, noting the trial judge erred when she failed to order defendant's compliance. We agree.
"New Jersey's discovery rules are to be construed liberally in favor of broad pretrial discovery" of all relevant evidence. Payton v. N.J. Tpk. Auth., 148 N.J. 524, 535 (1997). Although we "generally defer to a trial court's disposition of discovery matters[,]" we will reverse when "the court has abused its discretion or its determination is based on a mistaken understanding of the applicable law." Rivers v. LSC P'ship, 378 N.J. Super. 68, 80 (App. Div.) (citing Payton, supra, 148 N.J. at 559), certif. denied, 185 N.J. 296 (2005).
Prior to trial, plaintiff filed a motion to produce, seeking, among other items, "[c]opies of any and all bank statements, savings accounts, and checking accounts, in which the defendant has or had an interest in the defendant's name alone or with another, irrespective o[f] whether the same are current or closed from January 1, 2004 to the present." We note Rule 5:5-1 limits discovery in family matters, however, subsections (a) and (d) of the rule specifically permits use of interrogatory requests of financial issues, per Rule 4:17, and subsection (d) allows production of documents per Rules 4:18-1, -2.
In her statement of reasons accompanying the order, the judge did not specifically address plaintiff's request for bank account information. Further, the order only partially granted relief, ordering the exchange of tax forms and retirement account documents.
We are at a disadvantage in our review, as plaintiff did not include the motion papers filed, and the trial judge determined oral argument was unnecessary, so there is no transcript. Nevertheless, the court's statement of reasons suggests defendant's opposition was grounded in the claim plaintiff's demands were untimely and discovery sought from him remained outstanding. Citing Rule 4:23-5(a)(1), the judge commented plaintiff's motion could be denied because he failed to certify he was not in default of his discovery obligations. However, the trial judge did not fully deny plaintiff's motion, but rather granted limited relief regarding the mutual exchange of retirement assets information. We reject the judge's reasoning as unfounded and representative of a misunderstanding of the court's role to assure the exchange of discovery.
"[O]ne of the essential purposes of a civil trial is the search for truth[.]" Gonzalez v. Safe & Sound Sec. Corp., 185 N.J. 100, 117 (2005). "The trial court, not the parties, bears the ultimate responsibility for ensuring the fairness of the proceedings." Ibid. The rules governing discovery procedures are designed to assure these fundamental concepts remain true. Gone are the days when a trial turns on the quality of counsel's obfuscation of facts held solely by one party. The benefit of pre-trial discovery exchange aids the administration of justice and a fair determination of the issues.
The rule relied upon by the trial judge, Rule 4:23-5(a)(1), arms a court with sturdy tools to assure a party's compliance with discovery requests. Stiff sanctions, including dismissal of an action, could result for relentless recalcitrance in this regard, but "the main objective of the two-tier sanction process in Rule 4:23-5 is to compel discovery responses rather than to dismiss the case." A & M Farm & Garden Ctr. v. Am. Sprinkler Mech. L.L.C., 423 N.J. Super. 528, 534 (App. Div. 2012) (citations omitted).
However, plaintiff's motion sought provision of defendant's bank account information previously ordered to be provided in the March 19, 2010 case management order. He was not seeking sanctions, despite defendant's alleged noncompliance. The trial judge should have considered plaintiff's motion under the provisions of subsection (c) of Rule 4:23-5, which states:
Prior to moving to dismiss pursuant to subparagraph (a)(1) of this rule, a party may move for an order compelling discovery demanded pursuant to [Rule] 4:14, [Rule] 4:18-1 or [Rule] 4:19. An order granting a motion to compel shall specify the date by which compliance is required. If the delinquent party fails to comply by said date, the aggrieved party may apply for dismissal or suppression pursuant to subparagraph (a)(1) of this rule by promptly filing a motion to which the order to compel shall be annexed, supported by a certification asserting the delinquent party's failure to comply therewith.
The trial judge's failure to enforce her prior order requiring production of "bank account balances, pension, or other records . . . by June 9, 2010[,]" ignored the judge's principle role in "ensuring the fairness of the proceedings." See Gonzalez, supra, 185 N.J. at 117.
The discovery lapses were again raised by plaintiff on the first day of trial. Defense counsel asserted the failures were mutual. Properly, the judge ordered the exchange of proposed trial documents. When trial resumed, plaintiff testified defendant withdrew her 401(k) monies without his consent. He tracked the money and was given a routing number for the withdrawn 401(k) funds, stating "the routing number . . . [was] a bank in Morris Plains . . . . I did go to that bank. They looked it up. My name is not on that account." When the trial judge questioned whether the documents were subpoenaed from defendant, plaintiff testified: "We've asked repeatedly for documents from the defendant . . . and they don't give it [sic] to me." He then referenced the order dated September 24, 2010, maintaining its provisions were ignored by defendant.
We note plaintiff's testimony muddled his position on the contested issues. For example, a review of the transcript shows after plaintiff discussed the failure to reveal the Morris Plains bank account, he moved to a different issue, asserting defendant's retention of the funds meant she alone was responsible for the resultant income tax obligation incurred. Then plaintiff and the trial judge began to concentrate on this issue. Eventually, plaintiff returned to the issue of the undisclosed bank account, citing Wasserman v. Schwartz, 364 N.J.
Super. 399, 414, 417 (Law Div. 2001), which provides "[t]he value of the marital estate includes the assets . . . spent down or otherwise dissipated" and requires the spouse using the assets and incurring tax obligations to satisfy them. This discussion also addressed plaintiff's claim that he did not authorize the withdrawal or use of the more than $70,000 removed from defendant's retirement assets, stating he had no knowledge of this conduct until the divorce proceeding had commenced.
Following our review, we conclude the trial judge erred in denying plaintiff's discovery motion seeking to enforce the case management order that required release of all bank records. Plaintiff is entitled to these documents, especially in light of defendant's admitted withdrawal of marital assets. That the withdrawals occurred during the marriage does not bear on the issue of disclosure. Defendant was asked for the documents, which are relevant to an issue in dispute and may clarify whether she retained money following the 401(k) withdrawals.
This leads to the next error raised by plaintiff, which challenges the lack of factual underpinnings for the trial judge's finding plaintiff consented to defendant's withdrawal of her 401(k) funds, dissipating her retirement assets prior to his filing for divorce. We include these additional facts to provide context to understand plaintiff's claim.
In late 2006, defendant elected to receive a lump sum withdrawal of the entirety of her Cash Annuity Account of $34,950.77. The election form included a signature page, requiring both defendant's and plaintiff's signature to effectuate the election, and a separate spousal consent form approving the withdrawal. The form, which purports to be executed by plaintiff, was notarized on November 2, 2006, by defendant's brother, her attorney in the matrimonial litigation. These monies were rolled over by defendant to her 401(k) account, as shown on defendant's December 31, 2006 account summary.
The records of the 401(k) plan reflect withdrawals by defendant of $30,000 as of September 30, 2007; $19,000 as of December 31, 2007; $14,000 as of March 31, 2008; and $8,587.47 as of June 30, 2008. At the time plaintiff's complaint was filed in June 2009, the entire account was asserted to be depleted.
During trial, plaintiff denied the signature on the spousal consent form was his. Further, when he was presented with the spousal consent form authorizing the withdrawal from defendant's cash account, plaintiff initiated a criminal fraud complaint with the local police department. On appeal, he repeats his assertion the signature on the spousal consent form is not his.
It is also important to note defendant provided no additional testimony on this issue. Upon the advice of counsel, defendant exercised her Fifth Amendment right against self-incrimination, declining to respond when cross-examined by plaintiff regarding his alleged signature on the consent form.
The trial judge rejected plaintiff's argument, concluding plaintiff failed to sustain his burden to prove the signature was forged. She determined:
The [c]court finds that plaintiff was aware of the withdrawals from defendant's 401K. A Spousal Consent Form, which is necessary to withdraw funds from defendant's 401K, was admitted into evidence. . . . The Spousal Consent Form appears to have plaintiff's signature on it. . . . Moreover, both parties state that there was not much difference in the parties' life style. Plaintiff was aware that the adoption expenses were approximately $20,754. Plaintiff was aware that defendant was unemployed, as the parties lived together between 2006 and 2008. Therefore, the
[c]court finds that plaintiff was aware that defendant withdrew funds from her 401K for adoption expenses and living costs.
She ordered equitable distribution of plaintiff's pension alone, based on her finding defendant's retirement assets were spent for the parties' mutual benefit.
Before we examine this issue, we identify a troublesome fact: the jurat appended to the spousal consent form, affirming plaintiff appeared and voluntarily executed the consent, was issued by defendant's brother, her counsel. His testimony on this issue would have easily resolved the controversy, showing either plaintiff appeared and signed the form as the attestation states, or perhaps something else occurred. Although we identify this issue, noting the ethical quandary it raises for counsel, and note the trial judge assigned to conduct proceedings on remand is free to explore this issue, we discern a separate error in the court's factual findings, which clearly requires reversal and remand.
On this record, we agree with plaintiff's assertion that "[t]here is absolutely no evidence presented for a spousal consent form for the defendant's withdrawals from her 401K retirement account." The trial court's reliance on the spousal consent form to authorize the 401(k) withdrawals was error. The consent applies only to defendant's Cash Annuity Account, not her 401(k) account. The trial judge's blur of this distinction, applying the cash asset account liquidation consent to the 401(k) account withdrawals, is unfounded and must be reversed.
We also find the factual findings made by the trial judge insufficient to support the conclusions reached. For example, we cannot link the withdrawal of the 401(k) funds to defendant's assertion she needed the money to pay for the parties' child's adoption. The child was adopted on March 8, 2006. The first withdrawal was made more than one year later, on September 30, 2007. Also, the adoption expenses were reported as $20,000, but the first withdrawal by itself exceeds that sum by $10,000. Although defendant also generally asserted she spent the money for living expenses, the trial judge made no findings to link the claimed expenses, as reported on the case information statement, to the amount dissipated.
When defendant's failure to disclose her individually titled bank accounts into which distributions from her 401(k) were deposited is combined with defendant's reluctance to testify regarding the circumstances surrounding plaintiff's execution of the consent form, the lack of spousal consent to effectuate the 401(k) withdrawals, and the limited evidence linking the amount of the 401(k) withdrawals to expenses allegedly paid, we are convinced the trial judge's conclusions are not sufficiently supported and must be reversed. We remand for a new trial on these equitable distribution issues.
The tax consequences relating to these withdrawals is inextricably entwined with the trial judge's conclusion that the spousal consent established plaintiff's knowledge and authorization for defendant's 401(k) withdrawals. Consequently, the determination requiring plaintiff to share responsibility for payment of the taxes, penalties, and interest must also be reversed. The equitable allocation of the tax debts must abide the determinations regarding the equitable distribution of the dissipated retirement assets. See Hughes v. Hughes, 311 N.J. Super. 15, 37 (App. Div. 1998) (stating a party may be responsible for income tax liability incurred if that spouse enjoyed the benefits of the underlying monies).
In a challenge to a different provision equitably distributing assets acquired during the marriage, we do not agree with plaintiff's contention the allocation of the parties' vehicles and the loan obligation due defendant's parents need be set aside because it was based on "[f]acts not in evidence[.]" The trial judge relied on defendant's testimonial evidence and the lack of evidence presented by plaintiff to the contrary. These factual findings are sufficiently supported by the evidence in the record and will not be disturbed.
For the first time on appeal, plaintiff argues the trial judge erred in failing to disqualify herself from this matter. We have carefully examined each of plaintiff's contentions and conclude they lack merit and do not require extensive discussion in our opinion. R. 2:11-3(e)(1)(E).
In conclusion, we reverse the pre-trial discovery order denying plaintiff's request for proof of defendant's bank accounts and we reverse the provisions of the JOD relating to the equitable distribution of the parties' retirement assets and the outstanding income tax liabilities related to defendant's 401(k) withdrawals. These issues must be retried. Because the trial judge entered factual findings which we have found unsupported, we order the matter be reassigned to a different Family Part judge to conduct these proceedings. The remaining provisions of the JOD, including entry of divorce, are affirmed.
Affirmed in part, reversed, remanded and reassigned to a different trial judge in part.