September 5, 2013
MICHAELA GEMIGNANI, Plaintiff-Appellant,
ROBERT GEMIGNANI, Defendant-Respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted April 16, 2013.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1569-07.
John A. Patti, attorney for appellant.
Weinberger Law Group, LLC, attorneys for respondent (Sebastian Ferrantell, on the brief).
Before Judges Lihotz and Mantineo.
In this post-matrimonial matter, plaintiff Michaela Gemignani appeals the denial of her motion for reconsideration of the court's order reducing defendant Robert Gemignani's child support obligation. Because we find that the court's decision was based on a palpably incorrect basis, we reverse and remand.
The parties were married on August 28, 1998 and divorced on February 11, 2009. They are the parents of two children who are the subject of the present order. As part of their divorce, plaintiff and defendant entered into a Property Settlement Agreement (PSA) on February 11, 2009. The PSA provided defendant's child support obligation would be $26, 000 per year for the two years plaintiff received alimony. Once defendant's alimony ceased, child support would automatically increase to $50, 000 per year.
The PSA provided a procedure to be used if defendant sought modification of his child support obligation prior to the increase to $50, 000. The PSA provided:
[i]f the husband believes that his annual pretax cash flow is less than $200, 000 and he desires to negotiate a lower payment than as prescribed herein, the husband shall have the obligation to furnish all financial documents upon which he intends to rely to justify his position to the wife not later than 90 days before the two[-]year anniversary of this agreement. The husband agrees to allow the wife to have access to all corporate documents, including but not limited to profit and loss statements, balance sheets, K-1s issued to any owner that she may request in order to intelligently assess his claim of lower income. If the wife does not agree that the husband lacks the ability to pay the prescribed child support, the husband and wife shall submit the financial documents upon which the husband intends to rely and any other documents, personal, corporate or belonging to her husband's brother . . . to Laura Ditomasso [sic], CPA, for the purpose of preparing a cash flow analysis showing the husband's annual pretax cash flow from all sources. If the pretax cash flow report prepared by the accountant shows that the husband's pretax cash flow from all sources is less than $200, 000 the wife shall be obligated to pay 50% of the cost of the accountant's fee. . . .
On June 14, 2011, defendant filed a motion for parenting time and plaintiff cross-moved for an increase in child support as stipulated in the PSA. Defendant objected, arguing his pretax cash flow (PTCF) from his business was less than $200, 000 annually. Defendant sought to use the procedure set forth in the PSA to recalculate child support. On August 5, 2011, the court heard argument on the motions. The judge held that defendant's objection to the increase in child support was untimely, as the PSA provided that in order for defendant to prevent the automatic increase from taking effect, he had to object at least ninety days prior to the two-year anniversary of the PSA. This deadline would have made defendant's objection due prior to November 11, 2010. Additionally, the judge found defendant failed to provide plaintiff with the financial documentation which supported his position for downward modification as required by the PSA. The court then ordered, as per the PSA, an increase in defendant's child support to $50, 000 per year.
On August 6, 2011, nearly six months after the two-year anniversary of the parties PSA, defendant retained the services of DiTommaso, the CPA listed in the PSA, to conduct a PTCF analysis. On or about September 29, 2011, plaintiff received a copy of the PTCF report. No motions were pending at the time the analysis was submitted. Thereafter, in October of 2011, defendant's attorney contacted plaintiff's counsel for a response to the analysis. Upon failing to receive a response, defendant filed a motion on November 4, 2011, seeking to have his child support obligation reduced and for plaintiff to reimburse him fifty-percent of the $2, 500 cost of the PTCF analysis. Plaintiff objected to the requested relief, arguing defendant needed to produce his tax returns, bank statements and engage in full financial disclosure prior to any relief being granted. Plaintiff also sought permission to have her own CPA review the PTCF analysis.
On December 2, 2011, the matter was assigned to a different judge who, without holding a plenary hearing, granted defendant's motion to reduce child support retroactive to August 5, 2011,  the filing date of the original motion increasing support.
Plaintiff filed a timely motion for reconsideration. See R. 4:49-2. Plaintiff sought reconsideration of the December 2, 2011 order in its entirety or, in the alternative, a ninety-day discovery period to investigate defendant's financial information. Plaintiff also sought counsel fees for the motion. Defendant filed a cross-motion for enforcement of the court's earlier order. The motion was adjourned several times while the parties attempted to resolve the dispute. During this time plaintiff's counsel visited DiTommaso's office and upon review of defendant's records allegedly discovered his company reported $600, 000 of retained earnings and, thereafter, alerted the court of same. Defendant denied the $600, 000 was retained earnings and submitted an updated PTCF report from DiTommaso. Again, plaintiff was not provided with a copy of defendant's financial documentation which formed the basis of the expert's report, nor was she permitted to make a copy of the report.
The judge, apparently applying what he viewed was the procedure set forth in the PSA, assessed DiTommaso's analysis as requiring an adjustment of child support. He denied reconsideration stating, "the specific terms of the PSA were bargained for by both parties. Plaintiff has not shown a change of circumstances that would warrant reopening a fair agreement . . . ." The judge also determined plaintiff was not entitled to conduct discovery with respect to defendant's financial information and found defendant had provided the court with sufficient financial documentation warranting a reduction. Finally, defendant was awarded attorney's fees as the judge concluded plaintiff had acted in "bad faith." This appeal ensued.
Plaintiff raises the following arguments on appeal:
THE SUPERIOR COURT ABUSED ITS DISCRETION IN FINDING THAT THE APPELLANT WAS NOT ENTITLED TO DISCOVERY INTO THE RESPONDENT'S FINANCIALS PURSUANT TO THE PARTIES' PROPERTY SETTLEMENT AGREEMENT AND CASE LAW.
A. It was an abuse of the court's discretion not to allow the discovery of the respondent's cash flow, as necessary, because of his self-employment.
B. The Superior Court further abused its discretion by not following the second step of Lepis v. Lepis, by imputing income to the appellant when the court had appellant's true income (not raised below).
COUNSEL FEES AND SANCTIONS AWARDED BY THE SUPERIOR COURT WERE EXCESSIVE AND SHOULD BE REVERSED PURSUANT TO R. 5:3-5(c).
The standard of review for the denial of reconsideration is whether the trial court abused its discretion. Triffin v. Johnston, 359 N.J.Super. 543, 550 (App. Div. 2003); Marinelli v. Mitts & Merrill, 303 N.J.Super. 61, 77 (App. Div. 1997). We have held reconsideration is appropriate for "that narrow corridor" of cases in which "the [c]ourt has expressed its decision based upon a palpably incorrect or irrational basis, " or has obviously disregarded "or failed to appreciate the significance of probative, competent evidence." Fusco v. Bd. of Educ. of Newark, 349 N.J.Super. 455, 462 (App. Div.), certif. denied, 174 N.J. 544 (2002). See also Cummings v. Bahr, 295 N.J.Super. 374, 384 (App. Div. 1996). Moreover, motions for reconsideration are limited to clear error or matters the court overlooked on the original motion. R. 1:7-4.
Here, we find the motion judge abused his discretion. First, he incorrectly applied the provisions of the PSA. Second, he deprived plaintiff of discovery.
"The basic contractual nature of matrimonial agreements has 'long been recognized.'" Sachau v. Sachau, 206 N.J. 1, 5 (2011) (quoting Petersen v. Petersen, 85 N.J. 638, 642 (1981)). "As a general rule, courts should enforce contracts as the parties intended." Ibid. "Similarly, it is a basic rule of contractual interpretation that a court must discern and implement the common intention of the parties." Ibid. Nevertheless, the incorporation of a property settlement agreement "into a divorce decree does not render it immutable." Konzelman v. Konzelman, 158 N.J. 185, 194 (1999). "Courts have continuing power to oversee divorce agreements, and the discretion to modify them on a showing of changed circumstances, that render their continued enforcement unfair, unjust, and inequitable." Ibid. (internal citations omitted).
Here, in the PSA, the parties afforded defendant the opportunity to demonstrate his income decreased shortly after execution of the agreement. The provisions also incorporated an automatic increase, based on an apparent understanding defendant's income would more likely increase. The PSA incorporated a specific time frame for action and imposed on defendant an affirmative obligation to "furnish all financial documents upon which he intends to rely to justify his position to the wife, no later than 90 days before the two[-]year anniversary of [the] agreement." Once this deadline passed, the children were entitled to an automatic increase in support to $50, 000. The protocol the parties set in place in the PSA regarding the recalculation of support had become obsolete at the time of defendant's November 4, 2011 motion to decrease child support. Thus, the only way defendant would thereafter be entitled to a downward modification of child support was if he demonstrated his right to such relief under Lepis v. Lepis, 83 N.J. 139 (1980).
Under Lepis, the proper procedure required defendant to first demonstrate a prima facie showing of "a change in circumstances warranting relief from the support or maintenance obligations." Innes v. Innes, 117 N.J. 496, 504 (1990) (citations omitted). Changed circumstances may be shown by an increase or decrease in the resources of the supporting spouse, an increase in cost of living, illness or disability arising after the original judgment or changes in the dependent spouse's lifestyle, among other things. Lepis, supra, 83 N.J. at 151. If defendant met this threshold showing of changed circumstances, then the court may order discovery, full financial disclosure by both parties, and a plenary hearing. Id . at 157-59. At this time, plaintiff would be able to retain her own expert and have full access to defendant's financial information.
By decreasing defendant's child support obligation, the motion judge made his assessment unguided by the Court's instruction in Lepis. Rather, the judge erroneously relied upon the parties' PSA, which by the time of defendant's motion no longer controlled the manner by which defendant could request a downward modification. Indeed, the record does not contain any analysis by the court under Lepis. Instead, the court allowed defendant to obtain a downward modification based on the report of DiTommaso which plaintiff had no opportunity to contest. Further, plaintiff was improperly denied the right to discovery of defendant's financial information. It appears the motion judge wholly accepted DiTommaso's conclusions without further analysis or affording plaintiff a hearing to cross-examine the hearsay expert report. However, by relying on DiTommaso's report to conclude defendant had less money the judge completely abrogated his responsibility. This was in error.
In addition, we find there was no basis for the court to require plaintiff to pay defendant fifty-percent of the cost of the preparation of PTCF. As noted earlier, the time to invoke the procedure utilizing the report of DiTommaso had expired well before defendant retained the expert. As such, we find no basis for plaintiff to have to share in the cost of the report.
Upon remand, the court must consider whether defendant has proven a prima facie case of changed circumstances. If the court finds defendant has met the first prong of Lepis, then the parties shall exchange financial information and if necessary, a plenary hearing on the matter shall be held. 83 N.J. at 157-59.
Additionally, plaintiff argues the motion judge's award of attorney's fees to defendant should also be reversed. We agree.
A trial court's award of attorney's fees and costs in a family action is discretionary and thus reviewed under an abuse of discretion standard. R. 4:42-9(a)(1); see also Williams v. Williams, 59 N.J. 229, 233 (1971); Eaton v. Grau, 368 N.J.Super. 215, 225 (App. Div. 2004).
In awarding defendant attorney's fees, the motion judge found plaintiff acted in bad faith as a result of her counsel not responding "during the nine[-]month period before and during the pendency of the initial [m]otion leading to the December 2, 2011 [c]ourt [o]rder. . . ." We disagree and find the award of counsel fees was not warranted herein. We reverse the fee award bottomed on the judge's erroneous grant of relief to defendant. Further, we are hard pressed to find evidential support for the judge's finding of bad faith.
The order denying reconsideration is reversed and the matter is remanded for further proceedings consistent with this opinion.
Reversed and remanded. We do not retain jurisdiction.