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Slutsky v. Slutsky

Superior Court of New Jersey, Appellate Division

August 8, 2017

NANCY G. SLUTSKY, Plaintiff-Respondent/ Cross-Appellant,
v.
KENNETH J. SLUTSKY, Defendant-Appellant/ Cross-Respondent. NANCY G. SLUTSKY, Plaintiff-Respondent,
v.
KENNETH J. SLUTSKY, Defendant-Appellant. DONAHUE, HAGAN, KLEIN & WEISBERG, LLC, Respondent.

          Argued December 1, 2016

         On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Morris County, Docket No. FM-14-1535-08.

          Edward S. Snyder argued the cause for appellant/cross-respondent in A-5829-13 and appellant in A-2813-14 (Snyder, Sarno, D'Aniello, Maceri & DaCosta, LLC, attorneys; Mr. Snyder, of counsel and on the briefs; Scott D. Danaher, on the briefs).

          Ronald M. Abramson argued the cause for respondent/cross-appellant in A-5829-13 (Winne, Banta, Basralian & Kahn, PC, attorneys; Mr. Abramson, of counsel and on the brief).

          Donahue, Hagan, Klein & Weisberg, LLC, pro se respondent in A-2813-14 (Francis W. Donahue, of counsel and on the brief).

          Before Judges Lihotz, Hoffman and Whipple.

          OPINION

          LIHOTZ, P.J.A.D.

         These two appeals arise from the parties' matrimonial litigation. The court scheduled the matters back-to-back before the same panel to address all issues in a single opinion.

         In Docket No. A-5829-13, defendant Kenneth J. Slutsky appeals from a May 30, 2014 final judgment of divorce (final judgment). He challenges various aspects of final judgment; most significantly, the rejection of evidence regarding the need to repay family loans and the valuation and equitable distribution of his interest as an equity partner in a large New Jersey law firm. Additionally, defendant appeals from the ordered equitable distribution of what he asserts were premarital IRAs and the awarded counsel fees and expert costs to plaintiff Nancy Slutsky. Defendant further challenges a July 28, 2014 order denying his motion for reconsideration, and a second order filed the same date, which implemented a payment schedule for the ordered amount of equitable distribution and fees.

         Plaintiff cross-appeals, challenging the final judgment and the July 28, 2014 orders. She argues the judge improperly denied her claim for financial adjustments to account for insufficient pendente lite support, and maintains the trial judge abused his discretion in not ordering defendant to satisfy the entirety of her counsel fees and expert costs, by allowing defendant to satisfy ordered obligations over time.

         In the second matter, Docket No. A-2813-14, defendant appeals from a January 9, 2015 order denying his motion to dismiss for lack of standing, a petition filed by plaintiff's former counsel to enforce the order mandating defendant remit payment to satisfy obligations owed to plaintiff. Defendant argues counsel no longer represented plaintiff in the application, making counsel adverse to her interests.

         Before this court, defendant moved to supplement the record with subsequent orders relating to the amount of plaintiff's counsel fee obligation. The reviewing motion panel deferred the matter for consideration in this opinion. We grant the motion.

         For the reasons discussed in our opinion, we affirm the order rejecting defendant's request to require plaintiff to contribute to the repayment of monies transferred from various family trusts; we reverse the evaluation of the goodwill attached to defendant's interest in his law firm, as well as the percentage interest in this asset, granted to plaintiff; we reverse the July 28, 2014 order subjecting defendant's Union Central and Wells Fargo IRAs to equitable distribution; we reverse the award of counsel fees, but affirm defendant's ordered payment of expert costs. Additionally, we affirm the final judgment provision denying plaintiff's request for an allocation of additional support based on the pendente lite award and reject as unavailing her claim for an award of additional attorney's fees.

         Because various provisions in the final judgment are vacated, the order under review in A-2813-14 is reversed. The matter must be reviewed on remand by a different Family Part judge.

         I.

         After thirty years of marriage, plaintiff filed a complaint for dissolution of the parties' marriage and review of her related requests for alimony, equitable distribution, and satisfaction of debts, counsel fees, and costs. The litigation was difficult and protracted. Some delays in the final disposition occurred from June 2009 to April 2013, to abide the conclusion of a guardianship proceeding and another delay resulted in 2011, to accommodate one party's medical concerns. Ultimately, trial commenced on January 6, 2014, and was conducted over nineteen days. The judge issued a written opinion, addressing all disputed issues. Final judgment was filed on May 30, 2014.

         Post-trial cross-motions sought to modify certain provisions of the final judgment and the judge issued an amended final judgment, correcting clerical errors. On the same date, two other orders were filed. These orders effectuated provisions of the amended final judgment, and included a payment schedule for defendant's satisfaction of the ordered obligations. Motion practice continued. Subsequent orders denied defendant's request to stay pending appeal the financial obligations set forth in the final judgment; denied defendant's request for additional findings of fact and conclusions of law; and granted a limited stay to allow defendant to request this court stay execution of the amended final judgment. We denied defendant's stay motion.

         The parties challenged various provisions of the final judgment arguing the judge's insufficient factual findings could not sustain the legal conclusions reached, and contended legal error and abuse of discretion require reversal. We recite the well-settled standards guiding our review of Family Part orders and judgments.

         In our review of a non-jury trial, we defer to a trial judge's factfinding "when supported by adequate, substantial, credible evidence." Cesare v. Cesare, 154 N.J. 394, 412 (1998). We also note proper factfinding in divorce litigation involves the Family Part's "special jurisdiction and expertise in family matters, " which often requires the exercise of reasoned discretion. Id. at 413. In our review, "[w]e do not weigh the evidence, assess the credibility of witnesses, or make conclusions about the evidence." Mountain Hill, LLC v. Twp. of Middletown, 399 N.J.Super. 486, 498 (App. Div. 2008) (alteration in original) (quoting State v. Barone, 147 N.J. 599, 615 (1997)), certif. denied, 199 N.J. 129 (2009). Consequently, when this court concludes there is satisfactory evidentiary support for the trial court's findings, "its task is complete and it should not disturb the result." Beck v. Beck, 86 N.J. 480, 496 (1981) (quoting State v. Johnson, 42 N.J. 146, 161-62 (1964)).

         In bench trials, our "[d]eference is especially appropriate when the evidence is largely testimonial and involves questions of credibility." Cesare, supra, 154 N.J. at 412 (quoting In re Return of Weapons to J.W.D., 149 N.J. 108, 117 (1997)). We recognize a trial judge who observes witnesses and listens to their testimony, develops "a feel of the case" and is in the best position to "make first-hand credibility judgments about the witnesses who appear on the stand." N.J. Div. of Youth & Family Servs. v. E.P., 196 N.J. 88, 104 (2008). In contrast, review of the cold record on appeal "can never adequately convey the actual happenings in a courtroom." N.J. Div. of Youth & Family Servs. v. F.M., 211 N.J. 420, 448 (2012).

         Reversal is warranted when the trial court's factual findings are "so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Rova Farms Resort, Inc. v. Inv'rs Ins. Co. of Am., 65 N.J. 474, 484 (1974) (quoting Fagliarone v. Twp. of N. Bergen, 78 N.J.Super. 154, 155 (App. Div.), certif. denied, 40 N.J. 221 (1963)). All "legal conclusions, and the application of those conclusions to the facts, are subject to our plenary review." Reese v. Weis, 430 N.J.Super. 552, 568 (App. Div. 2013).

         In this matter, the trial judge issued a written opinion, identified the undisputed facts, related aspects of expert testimony, and stated his conclusions. Noting not all decisions set forth in the final judgment are challenged on appeal, we limit our discussion to facts underlying discrete challenges, which we include in the discussion of each individual issue.

         II.

         We start with the nine issues raised by defendant on appeal. Where appropriate, we have combined arguments directed to similar matters.

         A.

         Initially, defendant argues he was denied a fair trial because plaintiff engaged in "willful, contumacious behavior that made a mockery of justice, " for which the judge declined to sanction her. Defendant contends, "no reported case in New Jersey has recited facts demonstrating more of an affront to the justice system than the actions of this plaintiff" during the pendency of this case. Review of defendant's argument recites plaintiff's obstreperous behavior "effectively precluded [him] from cross-examining plaintiff . . . the key witness on the issue of family loans." Defendant maintains the judge should have sanctioned plaintiff, followed through on his threats to strike her pleadings, and, at the very least, draw an adverse inference on the loan issue "instead of placating plaintiff" and treating her in a solicitous manner. Defendant's argument in Point I strikes only at his request to equitably allocate monies borrowed from several family trusts; a related issue is raised in Point V.

         Defendant testified regarding the nature and amount of the loans from various family trusts. He explained plaintiff's spending resulted in a "tsunami" of credit card debt, which could only be met by borrowing, and asserted approximately $1.9 million was loaned by the trusts to maintain the marital lifestyle, between the years 1987 and 2008. When received, the monies were deposited into a joint account with plaintiff and all must be repaid. The trustees did not intervene in the litigation to seek repayment.

         Admitted into evidence was a "revolving promissory note, " dated June 15, 1998, executed by defendant and issued to the June Slutsky Trust. June Slutsky is defendant's mother and this testamentary trust was created by her mother, Rose Gross. The trust granted a lifetime interest to June and her sisters. The remainder of June's interest passes to defendant. The note contained a grid of blank boxes, which were to be completed with amounts borrowed on stated dates. A similar note, also dated June 15, 1998, was executed by defendant to borrow money from a credit shelter trust established by his late father.[1] June Slutsky was the sole trustee and defendant held her power of attorney. The third trust was an inter vivos insurance trust. The insurance policy pays a death benefit to the named beneficiary, defendant, upon the death of both insureds, defendant's parents. Defendant is the trustee and borrowed against the cash value of the insurance policy. There was no documentation for borrowings from the life insurance trust.

         Defendant testified he received permission for each trust withdrawal and insisted he must repay the obligations. Defendant's testimony differentiated these borrowed sums from gifts made by June.

         In addition, defendant presented a legal pad containing his and plaintiff's handwriting, which he explained was prepared while they engaged in estate planning. Defendant urged plaintiff falsely testified she knew nothing about the loans because he told her each time he borrowed money and the notes demonstrated her knowledge of the debts and the requirement for repayment. The legal pad notes purportedly calculated additional life insurance purchased to assure plaintiff's financial security in the event defendant predeceased June, who required the debts be repaid and essentially "pull the rug out from her [plaintiff] right away."

         In her scattered testimony, plaintiff did not agree she knew of the obligation for repayment of the monies borrowed. She also denied understanding the debts were accounted for during estate planning discussions. In fact, in the course of her cross-examination on this subject, plaintiff was non-responsive, ignored questions asked, as well as the judge's instructions to answer "yes" or "no."

         Plaintiff's expert, Gary Phillips, analyzed the documents and opined the facts raised risks these trust transfers triggered tax consequences and would not be considered loans, but rather a trust distribution to June, which were followed by a gift to defendant. Phillips acknowledged the trustees of all three trusts were empowered to engage in loans; however, he stated the notes executed by defendant lacked an interest component, the instruments' grids were not completed when borrowings were made, so amounts stated on the notes were significantly less than totals claimed by defendant. For example, the June Slutsky Trust note reflected borrowing of $56, 000, yet defendant claimed the actual amount loaned was $256, 000; the credit shelter trust note reflected loans of $275, 500, yet defendant claimed $700, 000 was borrowed. Phillips further challenged the claimed loan status for all trust borrowings because he found no record defendant made repayments.

         Plaintiff also presented de bene esse deposition testimony of a bank loan officer responsible for reviewing documentation submitted to obtain mortgage loans secured by the marital home. The loan officer testified the family trust debts were not disclosed on the loan applications completed by defendant and plaintiff.

         On appeal, defendant asserts plaintiff's failure to respond to questions regarding her handwritten notes, showing she understood the debts, required the judge to draw an adverse inference. He highlights plaintiff's extensive higher education, which includes a bachelor's degree in economics from an Ivy League institution, a master's degree in finance from New York University, and certifications as a public accountant and a financial planner, as belying her claims of ignorance and lack of understanding. He also argues the judge erroneously misapplied the law.

         "Generally speaking, in dividing marital assets the court must take into account the liabilities as well as the assets of the parties." Monte v. Monte, 212 N.J.Super. 557, 567 (App. Div. 1986); see also N.J.S.A. 2A:34-23.1(m) (requiring "debts and liabilities of the parties" to be considered when determining equitable distribution). Where marital debts are proven, courts should deduct marital debts from the total value of the estate, or allocate the obligations between the parties. See Pascarella v. Pascarella, 165 N.J.Super. 558, 563 (App. Div. 1979) (holding the trial judge was required to deduct debt incurred during the marriage between husband and his mother); Ionno v. Ionno, 148 N.J.Super. 259, 262 (App. Div. 1977) (holding obligations should be allocated between the husband and wife).

         These matters are fact sensitive. When a particular debt is claimed to be owed to a member of one spouse's family, the burden of proof rests on the claiming spouse to establishing a bona fide obligation to repay the monies asserted as loans. Monte, supra, 212 N.J. Super, at 567-68.

         In Monte, the defendant questioned whether the loans to the plaintiff's family were "bona fide." Id. at 568. This court stated:

Under these circumstances it would not be equitable to require [the] defendant to be charged with any portion of the loans if [the] plaintiff is not likewise required to pay. Moreover, absent a finding as to whether the debts to [the] plaintiff's relatives did or did not exist, it may be necessary for those relatives to establish the basis and amount of the debts.

[Ibid.]

         Following review of the facts at hand, we are not persuaded defendant suffered prejudice by plaintiff's non-responsiveness during cross-examination or her disruptive behavior tolerated by the trial judge warranted a new trial. We are hard-pressed to criticize the trial judge's attempts to control the courtroom. In hindsight, one reading the trial transcripts might suggest things should have been done differently. However, we are not convinced possible errors when dealing with plaintiff prevented defendant from presenting his case.

         We understand defendant argues plaintiff's claimed lack of understanding of family finances and estate planning is incompatible with her extensive financial and tax educational achievements. This may be true. In the trial judge's words, plaintiff's testimony was scattered and, "tenuous at best." His credibility findings imply some of plaintiff's conduct aligned with her "fixed agenda, " which included among other things "'getting back' at [d]efendant."The judge further characterized plaintiff as "belligerent" and "fixated."

         That said, we also cannot overlook plaintiff suffered health and emotional problems. Early in the litigation defendant asserted the necessity to appoint a guardian ad litem for plaintiff. In the companion guardianship matter a different judge conducted a trial and concluded plaintiff was competent.

         In our view, the trial judge is in the best position to discern whether plaintiff feigned ignorance. He did not make such a finding. Rather, his opinion conveys plaintiff was fixated on a given set of results on somewhat specific issues, and "she clearly was stressed beyond her limits."

         Importantly, despite his general finding defendant was credible, [2] and although there is no serious challenge to the fact the parties' living expenses exceeded defendant's earnings necessitating supplemental funds unquestionably provided by the family trusts, the judge rejected defendant's position seeking plaintiff to share in the obligation to repay the loans. This decision turned on a conclusion defendant did not satisfactorily meet his obligation to prove he must repay the debts. This conclusion is supported by the record.

         In finding defendant's proofs deficient, the judge noted: the notes contained no specific terms for interest or repayment; the trust did not intervene in the litigation to protect its interest; documents produced lacked specificity as to the total amounts distributed, which were asserted only by defendant; and defendant generally held a beneficial interest in the trusts. Most significant among the judge's findings was the absence of disclosure of the debts on the 2002 and 2004 mortgage loan applications and the loan officer's lack of recollection to corroborate defendant's testimony he orally revealed the debts.

         Even if plaintiff were aware of the borrowings, as defendant now argues, the judge determined defendant's claim of required repayment was neither binding nor determinative. Rather, he scrutinized the evidence and found defendant's assertions of necessary repayment was "not credible." We defer to these supported factual findings, including this credibility assessment. Cesare, supra, 154 N.J. at 412. Accordingly, ...


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