October 17, 2013
DIANA J. CRONIN, Plaintiff-Respondent/ Cross-Appellant,
WILLIAM J. CRONIN, Defendant-Appellant/ Cross-Respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 8, 2013.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-573-10.
Bettina E. Munson argued the cause for appellant/cross-respondent (Lomurro, Davison, Eastman & Muñoz, P.A., attorneys; Ms. Munson, of counsel; Carrie A. Lumi, on the brief).
Kristin S. Pallonetti argued the cause for respondent/cross-appellant (Law Office of Steven P. Monaghan, L.L.C., attorneys; Ms. Pallonetti and Steven P. Monaghan, on the brief).
Before Judges Alvarez and Carroll.
Defendant, William J. Cronin, appeals from two orders entered by the Family Part on August 20, 2012, compelling him to pay alimony arrears of $11, 500, authorizing the issuance of a bench warrant should he miss two support payments, and denying his post-judgment application to reduce his alimony and child support obligations. Plaintiff, Diana J. Cronin, cross-appeals from that portion of the order denying her application for counsel fees. Because we conclude that the motion judge failed to make adequate findings of fact and conclusions of law, we are constrained to reverse and remand.
The parties were married in March 2003 and divorced on May 24, 2011. They have two minor children. The judgment of divorce (JOD) incorporated the parties' marital settlement agreement (MSA) bearing the same date. The MSA required defendant to pay plaintiff $12, 000 per month limited duration alimony for four years, and $2000 per month child support. The MSA specifically noted that defendant's alimony and child support obligations were based on an average gross income of $504, 000 per year, which was defendant's average annual income from 2005 through 2007, as determined by a team of forensic accountants engaged by the parties during the divorce litigation. Income was imputed to plaintiff in the amount of $35, 000 per year.
During the divorce proceedings, it was defendant's position that his income had declined since 2007. At the May 24, 2011, uncontested divorce hearing, defendant testified that his 2010 income tax return showed "substantially reduced earnings." He "expressed serious concerns about [his] ability to meet his financial obligation pursuant to [the MSA] . . . alimony [and] child support." Paragraph 4.25 of the MSA indicated that defendant had funded a $252, 000 college savings plan for the children, and the parties "acknowledge[d] that [defendant] may have to borrow against it to meet his alimony and child support obligation." Consistent therewith, defendant testified at the divorce hearing that "[he] may have to use assets to meet [his] support obligation in the event that [his] business suffers."
At the hearing, plaintiff's counsel sought to make clear that defendant "has asserted the decrease in [in]come for 2010 [and] he has considered that decrease in income in entering into this agreement, " even though the MSA utilized the period 2005-2007 as the baseline for establishing his support obligation. When defendant expressed some uncertainty, the judge suggested that defendant take a few minutes to review the terms of the MSA with his attorney. After doing so, and after defendant indicated that he understood, his attorney stated: "I'm just a little concerned, that my client has to understand that – and I want the record to reflect that he is not waiving his right to come back in pursuant to Lepis."
Barely a year after the divorce, in July 2012, plaintiff filed a motion seeking, among other things, to compel defendant to pay alimony arrears of $11, 500, and to authorize the issuance of a bench warrant should defendant miss two support payments. Plaintiff also sought an award of counsel fees, pursuant to the express terms of the MSA. In response, defendant filed a cross-motion seeking to decrease his alimony obligation to $2500 per month, to recalculate child support pursuant to the Child Support Guidelines, and to compel plaintiff to produce her bank statements and records.
Defendant owns two businesses, Shore Insulation, Inc., and Commercial Thermal Solutions, Inc. In support of his cross-motion, defendant alleged that his 2005-2007 baseline gross income was no longer an accurate depiction of his current income from those businesses. Essentially defendant argued that, over the last three years, he earned as much as $400, 000 less than the $504, 000 gross income used to calculate his support obligation. He alleged that the economy had declined over the last three years, and that his businesses had suffered due to increased costs. Specifically, defendant maintained that he "must now advertise and attend trade shows, " and that "[c]osts of materials have increased and delivery companies now charge surcharges due to fuel costs." Also, the Environmental Protection Agency had issued new regulations, requiring him to create new advertising materials, and market to new customers. Profits had decreased, as the businesses had "been forced to cut our prices by [fifteen-to-twenty percent] to keep up with our competitors." Defendant further represented that his 2009 contract with the military had ended, and consequently his 2011 military sales were reduced from $717, 000 to $50, 000. He alleged that the businesses had $515, 164 in inventory that was not being utilized, accounts receivable of $226, 935 that were uncollected, and liabilities of approximately $641, 000. He was also forced to take out a line of credit with PNC Bank to "keep Shore Insulation afloat[.]"
As a result of the businesses' decline, defendant stated that he no longer took a paycheck from Shore Insulation, and that his monthly income was now only $4623, which was inadequate to meet his $14, 000 monthly support obligation. He was also forced to withdraw approximately $200, 000 from the children's college savings plan to meet his support obligations, although he promised to "take full responsibility for sending them to college in the future." Defendant resides with his mother, in an effort to reduce costs.
In opposing defendant's application, plaintiff maintained that defendant failed to demonstrate any changed circumstances. Plaintiff argued that the circumstances cited by defendant existed when the 2011 JOD was entered. Plaintiff disputed defendant's income figures, referring to them as "self-prepared style forensic accounting, " and noted that defendant "claims his net income (of over $5 million in total sales) is now down to $4623 per month . . . . This means that [defendant's] income is approximately [one percent] of his total sales." She further contended that the businesses' profit and loss statements reflected unusually high advertising expenses, depreciation, health insurance costs, and payroll expenses; in short, expenses that defendant as owner of the companies was in a position to manipulate. Plaintiff also alleged that defendant recently rented a new office, and drives a 2012 BMW 650i convertible.
In support of his cross-motion, defendant submitted his 2009-2010 joint tax returns, his 2011 tax return, 2011-2012 profit and loss statements for the businesses, and his 2009 and 2012 Case Information Statements (CIS). In reply, plaintiff submitted the 2005-2007 comparative cash flow analysis figures, her CIS income figures, comparative cash flow analysis reports from the three forensic accountants retained during the divorce action, and a cash flow analysis as of December 31, 2010, prepared by one of the accountants.
The judge heard oral argument on the motions on August 8, 2012. On August 20, 2012, the court entered companion orders, accompanied by written findings of fact and conclusions of law. The orders, in relevant part, required defendant to pay alimony arrears of $11, 500 within 120 days, placed him on two-missed payment warrant status, denied defendant's applications to modify his alimony and child support obligations and to compel plaintiff to produce her bank records, and denied plaintiff's request for counsel fees. Although the accompanying written statement identified the controlling case law as to the various issues raised by the parties, it was devoid of any factual findings, nor did it apply the case law cited to the facts presented.
On appeal, defendant argues that the motion judge (1) erred in denying his application to reduce his alimony and child support obligations based upon a significant change in circumstances, without discovery or a plenary hearing; (2) failed to apply the facts here to the governing law; (3) failed to appreciate that the amount he is obligated to pay plaintiff substantially exceeds the marital lifestyle; and (4) erred in failing to find the MSA unconscionable. On her cross-appeal, plaintiff argues that the motion judge mistakenly failed to enforce the MSA's provision for counsel fees should either party willfully fail to abide by its terms.
We begin by stating well-known principles that inform our review. "Generally, the special jurisdiction and expertise of the family court requires that we defer to factual determinations if they are supported by adequate, substantial, and credible evidence in the record." Milne v. Goldenberg, 428 N.J.Super. 184, 197 (App. Div. 2012). This court owes "particular deference" to the family courts because of their "special jurisdiction and expertise in family matters." Ibid. (quoting Cesare v. Cesare, 154 N.J. 394, 413 (1998)). Such deference will be "disturbed only upon a showing that the findings are 'manifestly unsupported by or inconsistent with the competent, relevant[, ] and reasonably credible evidence' to ensure there is no denial of justice." Ibid. (quoting Platt v. Platt, 384 N.J.Super. 418, 425 (App. Div. 2006)).
"The Family Court possesses broad equitable powers to accomplish substantial justice." Finger v. Zenn, 335 N.J.Super. 438, 446 (App. Div. 2000), certif. denied, 167 N.J. 633 (2001). This court "accord[s] great deference to discretionary decisions of Family Part judges." Milne, supra, 428 N.J.Super. at 197. Such discretion "takes into account the law and the particular circumstances of the case before the court." Ibid. (internal quotation marks omitted). This court, however, will not defer to a family court's decision where the court abused its discretion. See, e.g., State ex rel. J.A., 195 N.J. 324, 340 (2008). "An abuse of discretion 'arises when a decision is "made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis."'" Milne, supra, 428 N.J.Super. at 197 (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)). The family judge's legal decisions are subject to this court's plenary review. Crespo v. Crespo, 395 N.J.Super. 190, 194 (App. Div. 2007).
Family "judges are under a duty to make findings of fact and to state reasons in support of their conclusions." Heinl v. Heinl, 287 N.J.Super. 337, 347 (App. Div. 1996); see R. 1:7-4(a). "'Meaningful appellate review is inhibited unless the judge sets forth the reasons for his or her opinion.'" Strahan v. Strahan, 402 N.J.Super. 298, 310 (App. Div. 2008) (quoting Salch v. Salch, 240 N.J.Super. 441, 443 (App. Div. 1990)). "Naked conclusions do not satisfy the purposes of [Rule] 1:7-4. Rather, the trial court must state clearly its factual findings and correlate them with the relevant legal conclusions." Curtis v. Finneran, 83 N.J. 563, 570 (l980).
"When a party to a comprehensive negotiated [MSA] seeks to modify any support obligation, that party must meet the threshold standard of changed circumstances." J.B. v. W.B., ___ N.J. ___, ___ (2013) (slip op. at 22) (citing Lepis v. Lepis, 83 N.J. at 146-148).
Changed circumstances are not confined to events unknown or unanticipated at the time of the agreement. Dolce v. Dolce, 383 N.J.Super. 11, 19 (App. Div. 2006). On the other hand, care must be taken not to upset the reasonable expectations of the parties. Ibid. When a PSA addresses the changed circumstance, modification of the PSA may not be equitable or fair.
[J.B. v. W.B., supra, ___ N.J. at ___ (slip op. at 23).]
A prima facie showing of changed circumstances must be made before a court will order discovery of an ex-spouse's financial status. Lepis, supra, 83 N.J. at 157. "When the movant is seeking modification of an alimony award, that party must demonstrate that changed circumstances have substantially impaired the ability to support himself or herself. This requires full disclosure of the [obligor] spouse's financial status, including tax returns." Ibid.
Furthermore, "[c]ourts have consistently rejected requests for modification based on circumstances which are only temporary or which are expected but have not yet occurred." Id. at 151 (citing Bonanno v. Bonanno, 4 N.J. 268, 275 (1950)). Current earnings have never been viewed as "the sole criterion [upon which] to establish a party's obligation for support." Weitzman v. Weitzman, 228 N.J.Super. 346, 354 (App. Div. 1988) (internal citation omitted), certif. denied, 114 N.J. 505 (1989). "[A] court 'has every right to appraise realistically [a spouse's] potential earning power.'" Ibid. (quoting Mowery v. Mowery, 38 N.J.Super. 92, 102 (App. Div. 1955), certif. denied, 20 N.J. 307 (1956)) (alteration in original). A party's "potential to generate income is a significant factor to consider when determining his or her ability to pay [support]." Miller v. Miller, 160 N.J. 408, 420 (1999).
Moreover, satisfying this threshold does not automatically result in a downward modification of defendant's support obligations. There is no firm rule governing when an existing support obligation has ceased to be "equitable and fair[;]" rather, courts are to weigh several factors dependent on the nature of each case. Lepis, supra 83 N.J. at 153 (quoting Smith v. Smith, 72 N.J. 350, 360 (1977)) (quotation marks omitted). These factors include whether the change in circumstance is temporary or permanent; whether the change was voluntary; whether it was motivated by bad faith or a desire to avoid payment; and whether the change in circumstance renders the payor unable to pay. See Larbig v. Larbig, 384 N.J.Super. 17, 23 (App. Div. 2006) (finding a reduction in income to be temporary); Kuron v. Hamilton, 331 N.J.Super. 561, 572 (App. Div. 2000) (finding the movant's good faith to be an "ingredient" to consider); Deegan v. Deegan, 254 N.J.Super. 350, 355 (App. Div. 1992) (finding that a voluntary change such as retirement may sometimes justify a modification).
Here, the motion judge failed to make adequate findings of fact and conclusions of law as required by R. 1:7-4(a). In his written statement of reasons, the judge devoted roughly four pages to reciting the governing law underlying matrimonial agreements and changed circumstances. However, he did not engage in a factual analysis, nor did he apply any facts to his legal conclusions.
Specifically, as to defendant's application, the judge made no findings as to whether defendant made a prima facie showing of changed circumstances; whether any changed circumstances were merely temporary; the extent to which the parties may have contemplated the businesses' declining fortunes by including an acknowledgement in the MSA that defendant may have to use assets to meet his support obligations; and the effect of defendant's express reservation of a Lepis modification application at the time of the divorce hearing.
Similarly, as to plaintiff's application for counsel fees, a judge in a matrimonial action may award a party reasonable attorney's fees and costs, and in making that determination "shall consider the factors set forth in the court rule on counsel fees, the financial circumstances of the parties, and the good or bad faith of either party." N.J.S.A. 2A:34-23. See R. 5:3-5(c). Here, in denying counsel fees, the court did not conduct an analysis of any of these factors; nor did it comply with Rule 1:7-4. The court also failed to consider paragraph 8.1 of the MSA, which expressly provides for counsel fees "should either party willfully fail to abide by" its terms, and "is not intended to and shall not be subject to the [c]ourt's discretion under [Rule] 4:42-9(a)."
Given the nature of this record, we reverse and remand for the court to evaluate the facts and equities in light of the legal standards set forth in this opinion. Upon further review, should the court determine that defendant has proven a prima facie case of changed circumstances, it may order a period of discovery and, if warranted, a plenary hearing. Any request for counsel fees incurred at the trial level, on both the original motion practice and on remand, as well as the fees incurred on the present appeal, shall abide the outcome of the remand. See R. 2:11-4. The judge shall have the discretion to revisit his prior ruling as to fees, and to order whatever supplemental discovery or briefing on any issues he may deem appropriate.
Reversed and remanded.