On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Essex County, Docket No. FM-07-0583-93.
The opinion of the court was delivered by: Lihotz, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
APPROVED FOR PUBLICATION APPELLATE DIVISION
Before Judges Lihotz, Ostrer and Kennedy.
The opinion of the court was delivered by LIHOTZ, J.A.D.
At issue in this matter is whether defendant received a substantial economic benefit as a result of her cohabitation, such that alimony should be terminated. We conclude the inquiry regarding whether an economic benefit arises in the context of cohabitation must consider not only the actual financial assistance resulting from the new relationship, but also should weigh other enhancements to the dependent spouse's standard of living that directly result from cohabitation. We also find a trial judge may properly evaluate the duration of the new relationship and assess its similarities to the fidelity associated with marriage when determining whether to modify or terminate alimony.
In this matter, following a post-judgment evidentiary hearing, the trial judge determined defendant's open, ten-year cohabitation afforded her a significant economic benefit such that alimony was no longer warranted. Defendant Rebecca Weis appeals from the Family Part order terminating the obligation of her former spouse, plaintiff Ronald C. Reese, to pay alimony. On appeal, defendant challenges as erroneous the court's factual findings and legal conclusions.
Subsequent motions filed by the parties sought to fix the effective date of the order terminating alimony. The judge rejected plaintiff's position seeking to use the date he filed his original motion, and defendant's position suggesting alimony should terminate on the date the order was entered. After considering the interests involved, the judge concluded the appropriate effective date of the order was coincident with the emancipation of the parties' oldest child. Plaintiff cross-appeals from that order.
We have considered the parties' arguments advanced on appeal and on cross-appeal in light of the record and applicable law. Except for a technical correction in the order fixing an effective date, we affirm.
The parties' July 17, 1996 judgment of divorce (JOD) ended their thirteen-year marriage. Among its provisions, the JOD required plaintiff to pay defendant permanent alimony of $100,000 per year. This sum, combined with other provisions for support of the parties' three children, resulted in plaintiff paying defendant $237,872 per year.
Defendant began cohabitating with William Stein when they jointly purchased a home in Port Washington, New York, on October 13, 1998. Defendant explained: "I was responsible for my life and my children's lives[;] he was responsible for his life and his children's lives. . . . It was just not a marriage we were entering into." Defendant and the parties' three children, along with Stein and his two children, moved into the Port Washington home.
Plaintiff remarried in 1997. He and his wife have two children and reside in New Jersey and Florida.
On August 12, 2008, plaintiff filed a motion to terminate his obligation to pay alimony, citing defendant's cohabitation with Stein. Defendant never hid her cohabitation with Stein. She explained the two intended to remain in a long-term, exclusive, intimate, romantic relationship.*fn1 The trial evidence focused on the financial arrangements between defendant and Stein from 2006 to 2008. Defendant and Stein testified; defendant offered expert testimony from Steven Reiss, an accountant; and plaintiff presented expert testimony from Thomas
J. Hoberman, CPA. The following facts are taken from the trial record.
When defendant and Stein purchased their home, they agreed to divide acquisition and renovation costs based on the size of their respective families. Accordingly, defendant paid four- sevenths of the home's $567,500 purchase price and the $400,000 renovation costs, while Stein paid three-sevenths of these expenses.*fn2 At the time of trial, the house, encumbered by two mortgages totaling $650,000, was expected to be listed for sale for $1.9 million. Insisting she was paying her way, defendant nonetheless acknowledged she would not have been able to live in the type of home she and Stein purchased had it not been for Stein's initial and on-going contribution.
Defendant and Stein maintained separate telephone listings, individual savings and checking accounts, and personal credit cards. Further, they socialized and vacationed together and separately, and felt no formal obligation to the other's family. However, the record includes evidence showing defendant and Stein conducted themselves as a family unit. On cross-examination, defendant agreed Stein participated in family religious events, the children addressed Stein's parents as "Grandma" and "Grandpa[,]" and the families celebrated an occasional holiday together. Also, the parties' children shared bedrooms and were said to refer to each other as step-siblings.
Additionally, defendant and Stein owned a joint checking account and were signatories on joint Visa and American Express accounts, utilized to satisfy "joint" household expenses. The children had permission to use these credit cards. Defendant asserted "we wanted to try as best we could to keep our finances separate and the best way to keep our finances separate w[as] to have a joint account."
Defendant explained she deposited her receipts from alimony, child support, gifts, investment income, and any earnings, into her individual savings account. Each month she withdrew $8166 from her personal funds, which she deposited into the joint checking account. Stein matched the amount from his personal funds and deposited it into the joint checking account. The money in the joint checking account was used to pay the mortgage, real estate taxes, repairs, maintenance, utilities, landscaping, furniture, food, clothing, pharmacy, dry cleaning, gifts, housekeeper, dog care, summer camp, and other "everyday" expenses for all five children.
Defendant clarified that her individual credit cards were used to pay personal expenses for herself and the children, and she paid these bills solely from her personal checking account. The monthly Visa balances were paid from the joint checking account funds; however, Stein personally paid the joint American Express bill along with the bill from charges made to his individual American Express account.
Defendant and Stein conceded their financial arrangement was not based on the actual responsibility for an expense. No reconciliation was ever made to discern whether personal expenses were excluded from those satisfied with joint funds, or to assure each party paid his or her share of joint expenses. For example, defendant alone made cash withdrawals from the joint checking account using an ATM card and would sometimes "reimburse" the joint account if she felt she had incurred a personal, rather than joint, expense. If Stein perceived the joint American Express charges were high, he decided to withhold his monthly deposit to the joint account.
Defendant admitted "[i]t's difficult to keep the exact individual payments separate." Since she wrote almost all the checks drawn on the joint checking account, she decided whether to allocate bills as personal or joint. She explained "[t]here [wa]s no specific science" for reimbursements, nor a clear demarcation between their joint and personal expenses. She did not keep a ledger or actually review the expenditures with Stein, but assured she "just knows" that she used only her share of the joint account funds for her children, as she "followed [her] intent" and did "what was right in [her] mind and . . . heart" because she "trusted [her] instincts."
Elaborating on their financial relationship, defendant noted Stein personally paid for "luxuries, vacations, trips, [and] gifts" for her and the children, but not her expenses. She described elaborate vacations the combined family enjoyed, including a sail cruise to the Bahamas (2002); a week in the Galapagos Islands, Ecuador (2004); a $120,000 safari vacation in Africa (2006); a yachting trip to Cape Cod and Nantucket, Massachusetts (2007); a ten-day trip to Sedona, the Grand Canyon, Las Vegas, and Malibu (2007); excursions to Disney World; a villa at Half Moon Bay, Jamaica; and several ski trips each year to Vail, Colorado, Smuggler's Notch or Okemo Mountain, Vermont. At times, the parties' children were permitted to invite friends to accompany them on a vacation, for which Stein paid all costs. Stein also paid the costs incurred when he and defendant spent weekends in Washington, D.C., Beverly Hills, and New York City; attended the U.S. Open; and traveled to Greece, Anguilla, and Italy. Stein took defendant's two older children to California because the oldest child was interested in attending graduate school at the University of Southern California, and the three attended the Rose Bowl. Further, Stein had access to, and defendant and her children used, his family's private jet and his ski boat.
Stein also exclusively paid certain everyday expenses. He had acquired and paid all costs associated with a Jeep and Range Rover, primarily driven by the children; satisfied the lease on defendant's Mercedes CLK, and, when that vehicle was sold, paid for her Mini Cooper. Further, he satisfied all car insurance, repairs, and maintenance bills for all of the household's vehicles. His family's business extended full health insurance coverage to defendant, and he regularly gave her gifts of shoes, tennis lessons, handbags, and jewelry.
Defendant asserted Stein's generous provision of luxury expenses and gifts ceased in 2008, when he suffered financial reversals caused by the economic downturn in the real estate market. Stein and his family lost more than $11 million between bad investments in Madoff Securities and an uncompleted real estate development project known as "Oliver House." Additionally, Stein sold or listed for sale his luxury automobiles in favor of more practical cars, the family "rarely" ate out, conserved utilities, trimmed entertainment and vacation costs, and eliminated expenses for the housekeeper and someone to clean-up after the dog.
During her testimony defendant discussed her case information statements (CIS) filed during the post-judgment litigation. Generally, she disclaimed knowledge of individual expense items included in her monthly budget of $17,935, stating she did not review the underlying documents, but merely signed the CIS as prepared and presented to her by her accountant, Reiss. On cross-examination, defendant sought to correct certain CIS entries, asserting Reiss got them wrong; however, she was not certain of the actual correct amounts.
To prepare his report, representing a three-year income and expense statement, Reiss met with defendant and Stein, reviewed her checking account statements and cancelled checks from 2006 to 2008, considered defendant's individual credit card statements from 2006 to 2008, the joint checking account, and the expenses paid individually by Stein. Reiss initially calculated the total annual expenses in a category, which he then divided between defendant and Stein to determine their respective obligations. Next, the mortgage, real estate taxes, and improvements were allocated four-sevenths to defendant and three-sevenths to Stein, while other expense items were split equally, such as alcohol, food, magazines, pet expenses, and items associated with operating the residence. Items like vacations sometimes were allocated solely to defendant and other times partially to each party. Reiss computed the average of defendant's annual expenditures totaled $306,624, and noted, when the total expenses exceeded her income receipts, she used savings to satisfy the shortfall.
Reiss computed defendant's share of the annual shelter expenses as $74,855, and conceded she would not be able to afford to live in the residence if not for Stein's contribution. Also, but for the luxury vacations, Reiss concluded Stein was not contributing to defendant's support.
On cross-examination, the accuracy of Reiss's report was explored. He acknowledged he had captured defendant's spending and sources of funding, not her needs. Reviewing his report, Reiss stated, over a three-year period, defendant paid $152,000 more than Stein into the joint account, and over that same period Stein individually paid $175,679 that defendant had charged to the American Express account and $118,000 of expenses Stein personally charged, but which Reiss determined were joint expenses. When these sums are added to the $224,000 Stein also transferred into the joint account, Reiss concluded Stein had paid $146,000 more toward the joint expenses than defendant over the three-year period.
Reiss admitted certain anomalies were present in his report. For example, first, he included health insurance among defendant's necessary expenses, but did not add the funding source of this item when reporting defendant's resources.
Second, he had excluded the insurance and payments for defendant's and the children's cars, along with gifts such as defendant's tennis lessons, when totaling defendant's available income receipts. Third, Reiss acknowledged he had not reviewed Stein's checking account or considered what he might have paid from that account on behalf of defendant. Fourth, some of Stein's individual expenses, such as costs associated with his boat, were split, artificially increasing defendant's annual needs. And fifth, payments totaling $14,225 were catalogued as Stein's personal expenses; however, the check recipient was actually defendant.
Plaintiff's case included the expert testimony of Hoberman. He generally reviewed the same information Reiss did. However, his focus was not only the actual expenses paid, but who was funding those expenses. From this perspective, Hoberman concluded defendant benefited from cohabiting with Stein, and insisted her lifestyle was enhanced by Stein's contribution of luxuries, which afforded defendant an additional economic benefit.
Based on the joint checking account system, which defendant controlled, Hoberman found she did not exclusively pay her and her children's personal expenses, which he averaged as $142,000 per year. He calculated Stein contributed 56.5% of the total joint expenses, excluding vacations, automobile costs (e.g., fuel, loan payments, and insurance), homeowner's insurance, and restaurants, while defendant paid only 43.5%. At the same time, Hoberman computed defendant and her children consumed 57% of these items, while Stein and his children consumed only 43%. Using these figures, Hoberman concluded the benefit to defendant resulting from Stein's excess contribution equaled $49,337 per year.
Hoberman also considered that Stein's children lived in the home only half of the time, making their consumption the equivalent of one full-time child. Using this assumption, he concluded Stein's family actually constituted only one-third of the household members, thus increasing defendant's economic benefit from Stein's excess contribution to $84,786.
Additionally, Hoberman considered Stein's average annual payment over the three-year period attributed to vacations ($42,879), car purchases/leases ($21,000), car and homeowner's insurance ($4500), and health insurance ($8,996). If these items were added to Stein's excess contributions, and three- sevenths were allocated to Stein, defendant's net benefit increased to at least $65,783 per year. Alternatively, if Stein's expenses amounted to one-third, the benefit to defendant rose to $113,048.
Next, Hoberman applied defendant's tax bracket, opining her total pre-tax annual benefit, that is, the sum necessary to net the payments from Stein and satisfy hypothetical income taxes as if Stein's payments were earned income, was at least $105,899. He stated this amount could possibly be as much as $141,000, if ...