Opinion
DOCKET NO. A-5558-10T2
2013-10-11
DEBORAH CARR, Plaintiff-Appellant/Cross-Respondent, v. HARRY J. CARR, Defendant-Respondent/Cross-Appellant, and HARRY J. CARR, Third-Party Plaintiff, v. RICHARD QUICK, SANDRA QUICK, his wife, JOHN RODDY, LISA RODDY, his wife, and RUDOLPH POLAKOVIC, HELEN POLAKOVIC, his wife, Third-Party Defendants/Fourth-Party Plaintiffs, v. DEBORAH CARR and HARRY J. CARR, Fourth-Party Defendants.
James P. Yudes argued the cause for appellant/cross-respondent (James P. Yudes, P.C., attorneys; Mr. Yudes, of counsel; Karen T. Willitts, on the brief). Bruce H. Nagel argued the cause for respondent/cross-appellant (Nagel Rice, LLP, attorneys; Mr. Nagel, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Parrillo, Harris and Kennedy.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Somerset County, Docket No. FM-18-0937-06.
James P. Yudes argued the cause for appellant/cross-respondent (James P. Yudes, P.C., attorneys; Mr. Yudes, of counsel; Karen T. Willitts, on the brief).
Bruce H. Nagel argued the cause for respondent/cross-appellant (Nagel Rice, LLP, attorneys; Mr. Nagel, on the brief). PER CURIAM
Both plaintiff Deborah Carr and defendant Harry J. Carr appeal from various aspects of the judgment of divorce entered by the Family Part on June 29, 2011. Most of the issues raised by the parties concern equitable distribution of several marital assets, although both parties also challenge the alimony award and contend the child support determination is not adequately grounded in the record. We consider these issues, and others raised by the parties, in light of the record and applicable law.
Because the parties have the same last name, we shall refer to them by their first names throughout our opinion in order to distinguish them. We mean no disrespect thereby.
I.
To state that the divorce proceedings and trial in this matter were acrimonious, complex and marred by Harry's failure to provide discovery and Deborah's contradictory and, at times, irrational arguments, would be an understatement. Also, Harry's election to represent himself at trial, despite his law degree, did not make things easier for the patient and diligent trial judge.
Trial took place over the course of fifty-five days, and presented a confusing picture of the parties' extensive assets and lavish lifestyle. The trial judge wrote a detailed opinion of forty-nine pages addressing the issues raised by the parties. It is unnecessary for purposes of this appeal to set forth a detailed recitation of the facts developed at trial, given the trial judge's comprehensive survey of the facts pertaining to this divorce action, much of which is undisputed on appeal.
We note only that Harry and Deborah were married on May 27, 1988, and had one child, who was born in 2002. Deborah filed a divorce complaint on April 27, 2006, and Harry answered and filed a counterclaim for divorce and a third-party complaint against Deborah's parents and sisters on June 15, 2006. Deborah was fifty-two years of age at the time the divorce proceedings started, and defendant was fifty years of age.
Deborah earned a bachelor's degree in business from Susquehanna University, and an MBA in finance from Lehigh University. She worked as a financial analyst for several companies before working at AT&T, where she earned "over $100,000" as a marketing executive by the time she left the job market in 1998.
Harry earned a bachelor's degree from Fairfield University and a J.D. from the University of Connecticut. He worked in private practice in Washington, D.C., and, later, as a vice president at AT&T, where he earned approximately $225,000 per year. Harry left AT&T in June 1997 and accepted a job as chief operating officer for Yurie Systems, a start-up technology company. In addition to his salary, Harry received options on one million shares of Yurie stock. In May 1998, Lucent Technologies acquired Yurie, and Harry's stock options yielded $25 million dollars. Because the parties hoped to start a family and they no longer needed Deborah's salary, Deborah left her job at AT&T in June 1998.
After working for a while at Lucent, Harry took a job at another start-up company in January 2000. Here, too, in addition to a substantial salary, Harry received options for millions of shares in the company. After the start-up became a public corporation, it was acquired by another technology company and Harry, again, realized millions of dollars on the stock options, when he left the company in November 2003.
While Harry thereafter worked for a short time for another company, the parties decided to live off their assets and unearned income and to pursue investment opportunities. By this time, having achieved substantial wealth, the parties embarked upon an opulent lifestyle. As the trial judge stated in her opinion:
The standard of living established during the marriage was rich. The parties bought themselves a 1.8 million dollar 14-room home in 1998. They spent another $1 million improving the grounds, adding a pool and extensive landscaping, a fence and gates. They also had a decorator furnish the interior. The parties gave millions of dollars to their respective families in the form of Mercedes, Lexus, Cadillac and other automobiles to ten or more parents, aunts, uncles and Deborah's siblings, million dollar homes for Deborah's sisters and their families to live in, smaller but luxurious homes for the parties' parents, a condominium for one of Deborah's sisters, annual gifts of between $10 and $50 thousand dollars to some relatives, vacations for many family members to Europe, Las Vegas, the Caribbean, Alaska, San Francisco and other places, diamond jewelry to mothers and sisters, expensive medical and dental treatments for family members and people in the community who were needy, annual allowances of up to $100,000 for Deborah's sisters and $40,000 to $60,000 per year to the parties' parents. The parties also bought a house for [their daughter's] birth parents and one for Deborah's ailing former college roommate. The Carrs traveled byAll was not well in this apparent paradise, however.
private jet to vacation destinations in Florida and the Caribbean. They stayed in luxury hotels. [Their daughter] went to exclusive private preschools and grade school. They belonged to the Trump National Golf Club and entertained there, including all of [their daughter's] classmates and their parents at birthday and other parties for her. [Deborah's financial expert] estimated the marital standard of living at $4,104,355 per year, or $342,030 per month based on years 2003 through 2005.
In December 2005, Harry advised Deborah he wanted to separate and by February 2006, both parties had retained counsel. As noted earlier, Deborah filed for divorce on April 27, 2006.
During the course of their marriage, the parties had accumulated much real estate, maintained many bank and brokerage accounts, and undertook a number of investments. Among their assets were a number of limited liability corporations, some of which were formed to pursue the sale and lease of high-end aircraft, and to develop real estate. Harry almost exclusively managed the parties' assets and investments, and Deborah had little, if any, role in managing the aircraft and real estate investments.
We will not burden the record with an exhaustive list of all these assets. However, we shall hereinafter identify and examine those assets which are in dispute.
On October 10, 2006, the court considered cross-motions of the parties pertaining to, among other things, pendente lite management and use of the substantial marital assets, and entered an order restraining the parties from "transfers or dissipation of assets" and appointing attorney Kevin Kovacs as "attorney in fact" for Deborah as to her interest in one of the aircraft investment businesses, and Greenwich Estates, I, LLC, an entity engaged in the development of some real estate in Connecticut. The court allowed Harry to "continue to sell or purchase properties through his real estate business", but required Kovacs to hold in trust (hereinafter referred to as "KTA") any net proceeds from the aircraft business, or generated by the activities of Greenwich Estates I, LLC. This order was entered, in part, in recognition of Deborah's limited knowledge of and control over many of the parties' active investments, as well as Harry's need to manage these investments during the divorce proceeding.
Regrettably, as the trial judge recognized several times in her comprehensive opinion following trial, Harry was unwilling to provide "fully honest discovery" about the finances and assets he controlled, thereby hampering Deborah, and the judge, in tracing the disposition of marital funds, valuing assets, and most prominently, determining the disposition of $8.8 million in marital funds.
Further, neither party provided the court with an expert to address their respective post-divorce employment prospects, and the only financial expert to testify at trial was Deborah's accounting expert, David A. Smith. Smith opined as to the financial aspects of the parties' lifestyle and assets, but conceded several times that his analyses were compromised by Harry's failure to provide financial discovery.
Also, despite various court orders, Harry did not regularly turn over to Kovacs funds generated in the operation of marital investments, or otherwise sequester such funds for an accounting. Finally, the trial judge, while finding Harry's testimony was "for the most part factual, credible, consistent with the documentary evidence and made good sense[,]" nonetheless also found that he "offered only general explanations of where the money went without details or organized documentation."
The latter quote from the trial judge's written opinion concerned, in particular, the unaccounted-for sum of $8.8 million we mentioned earlier, but it nonetheless encapsulates the judge's often-expressed view of Harry's testimony, in general.
With this background in mind, we turn to the parties' contentions on appeal, following which we shall identify and describe the assets in contention. Thereafter, we shall set forth our conclusions.
II.
With respect to equitable distribution, Deborah argues that the trial judge erred in failing to evaluate and distribute as of the date of the complaint, HM, LLC (HM), a business entity formed by Harry and another person to carry on the aircraft sale and lease business, and, further, abused her discretion in distributing HM's debt to both her and Harry. Deborah also argues that the trial judge erred in failing to find that Harry's real estate investments constituted a single "real estate construction business" subject to evaluation and distribution. The judge, in essence, determined that Harry simply undertook a discrete series of individual investments that could not be characterized as an independent and ongoing "real estate business." Further, she argues that the trial judge erred in refusing to award to her fifty percent of the $8.8 million Harry did not account for, and omitted "credits" due to her on equitable distribution.
The credits would include $31,138.38 in property tax payments deducted from Harry's share of equitable distribution, which the court directed to be paid to Deborah; $125,000, representing half the money deducted from Harry's equitable distribution share paid for taxes and for fees in settling the third-party complaint; Deborah's share of marital money the court permitted Harry to spend for living expenses between January and June 2010; half of the date-of-complaint balance of $127,398 the parties kept in a Bank of America account; credit for her share in a Trump National Golf Club membership; pendente lite arrears; and a share of income tax refunds.
Turning to claims other than equitable distribution, Deborah argues that the trial judge abused her discretion in awarding alimony not "consistent with the marital lifestyle," and failed to make adequate findings and conclusions in support of the child support order.
Harry argues on appeal that the trial judge erred in ordering a "Goldman hearing" to determine whether Harry improperly increased the debts of HM post-complaint without Deborah's knowledge; by not enforcing "the agreement to sell the marital residence"; by determining that he failed to account for $8.8 million in marital funds; by awarding permanent alimony; by awarding alimony and child support without sufficient findings; by awarding counsel fees to Deborah; and by failing to equitably distribute various assets. Harry also argues that the trial judge "double counted" the value of two properties sold by Greenwich Estates, LLC; failed to credit Harry for paying down $4 million in marital debt owed by HM; used a wrong evaluation date for an investment in "Sun Fun Anguilla"; failed to credit Harry for "the vast pendente lite overpayment"; and failed to credit Harry for Deborah's "unreasonable support" of her relatives' claims against their property.
Goldman v. Goldman, 275 N.J. Super. 452 (App. Div.), certif. denied, 139 N.J. 185 (1994).
These would include the real properties in Connecticut, and $5,743,500 realized from the sale of NextFlight Aviation.
III.
We now briefly review some of the assets in dispute for purposes of equitable distribution.
A. HM, LLC.
In 2003, Harry started HM, a Delaware limited liability corporation, with an equal partner, Mark Mariani. HM purchased aircraft that it then chartered or leased. In 2004, Harry and Mariani formed a separate company, Next Flight Aviation, to obtain a charter license and manage charter flights for HM. They also formed Next Flight II to purchase an existing fix-based operation at Manassas Airport in Virginia. Throughout the remainder of the marriage, the parties used HM's planes for vacations for themselves and their families.
At the time of the complaint, HM owned several aircraft, and Harry maintains it is "undisputed" that "the parties had $40.5 million in debt" in connection with that business. Nonetheless, Harry continued operating HM after the complaint was filed. HM's last purchase was a Falcon 2000 jet in January 2008. Between May 2006 and September 2007, Harry apparently put substantial sums of money into a Smith Barney trust account, derived from the sale of another investment property, to pay HM's expenses. He also used marital money and his income from a job he briefly held at another technology company to support HM. Although Harry used marital money to operate HM post-complaint, he could not say exactly how much money he used.
At the time of trial, HM was still in existence. HM still owned aircraft, some or all of which were leased to customers. Although aircraft loans originally totaled, apparently, $40.4 million, which Harry and Mariani had personally guaranteed, and Harry, at the time of the trial and thereafter, was paying $100,000 each month on debt service, the actual amount of the outstanding debt at the time of trial was unclear. Harry asserted he was trying to find an alternative financing source as the loans were far in excess of the value of the aircraft.
The record includes an amended forbearance agreement between, among others, HM and a lender indicating that HM sold a Falcon 2000 jet aircraft in September 2010 and paid the lender $8 million against an amended aggregate loan amount of $19.9 million.
Because of accounting depreciation on its assets, HM never showed a profit, and Harry maintained HM had no value. Harry sold all of Next Flight's assets in May 2007, with the exception of its charter certificate, but eventually, that was sold as well. Harry realized $5,743,000 from the sale of Next Flight, which the court ordered to be deposited into the KTA.
Deborah, who had nothing to do with the management of HM, relied at trial on the expert opinion of Smith as to the value of the business. Smith opined that, using an income approach, the parties' fifty percent share of HM had a value of $4,433, 812, as of the date of the divorce complaint. Smith's opinion was admittedly speculative because, as the trial judge repeatedly noted, "Harry and [] Mariani were very reluctant to turn over full discovery for this business." The judge further explained,
Harry provided records on a piecemeal basis as late as his case in chief at trial, and Mr. Smith was not allowed into Mr. Mariani's office to see the business's books there until one week before the report was finished. Even then the documents from the office tabbed by Mr. Smith for copying and transmittal to Mr. Smith were not received by him before his report was completed. The ongoing discovery struggles not only compelled Mr. Smith to engage in utter speculation based on a modicum of documentation of certain business transactions, but it led to a higher degree of advocacy on the part of Mr. Smith who, understandably, resolved unrecorded or undocumented income and expenses in favor of his client, Deborah. From this court's perspective, such advocacy was unhelpful because it so skewed the resulting value that it is unreliable.
Moreover, while Harry argued that HM was without value and stated he was spending $100,000 each month "to keep the business going," several of his 2009 and 2010 Case Information Statements indicated that that amount was "offset by revenue" generated by HM. The judge noted that the trial record contained "no evidence of how much was offset or how much Harry actually paid out of personal funds for these expenses." The judge explained that Harry's failure to provide discovery, and flaws in the speculative Smith report, "left the court in a position where, after 55 days of trial, it still lacks an answer on the value of a major asset, HM, LLC." The judge added that lacunae in the proofs also precluded her from ascertaining how much in marital assets actually was used in the payment of HM's operating expenses during the pendente lite period.
Again, it is unclear if the $100,000 referenced by the judge pertains only to debt service, or whether it includes other monthly business expenses, as well.
The judge determined that Harry could not be faulted for using marital assets to repay the aviation loans because that was a "marital debt." Moreover, the judge stated that payments made in connection with HM to try to maintain its viability "were not dissipation." She added that she could not determine how much Harry paid to maintain HM, and that,
Both parties face financial devastation if HM, LLC defaults on the jet aircraft loan and the creditor, PNC Bank, looks to them for repayment. The magnitude of the loan is unknown because the court doesn't know if the balances in evidence represent the Carrs' share or the entire balance. There is also the question of Deborah's liability, in equitable distribution, for any addition principal balance incurred without her knowledge. One way of equitable distribution of assets of unknown value is a distribution in kind. However this contingent liability will require contingent distribution as well.While the judge gave the unvalued HM to Harry in equitable distribution, she did divide the contingent liabilities of the entity between the parties, reasoning:
As to the principal balance of the aircraft loan itself, it appears from the evidence, without any explanation except that two older jets were replaced by two newer jets, that the loan balance increased from $28 million in November 2007 to $40.2 million in November 2009. Without any testimony or documentation as to when the parties signed personal guaranties and whether Deborah knew about the increase in the principal balance, the court cannot determine whether this increase in the loan balance is even subject to equitable distribution. In addition, the increase in the loan balance is a further consideration on the subject of asset dissipation.
The tax consequences of equitable distribution are weighty in that tax deductions for net operating losses from HM, LLC number in the millions of dollars, and are available, apparently, to the parties because of their personal guaranty of the HM, LLC aircraft loan. There is no evidence
from Mr. Smith on whether this deduction can be divided by the court between Harry and Deborah, or whether once it appears on Harry's tax returns, as it did on his 2008 return filed as married filing separately, it can be shifted in whole or in part to Deborah. There is also potential tax liability for a sum of money received by the Deborah Carr 2000 Family Trust which was tentatively covered by a $200,000 payment to Deborah out of Harry's share of the Kovacs Trust Account for that purpose. No further evidence was presented on this liability. There are no known tax issues arising out of the equitable distribution of the marital estate.
. . . .
The parties shall divide equally the contingent liability to PNC Bank in the event of the verified insolvency of HM, LLC. Harry shall provide to Deborah copies of all documents, correspondence and other communications between PNC, or its representative or attorney and Harry having anything to do with this loan. In the event that the loan balance was increased by further borrowing or purchase of more expensive aircraft by HM, LLC, Deborah shall be entitled to a hearing pursuant to the Goldman decision on whether she was aware of or authorized such an increased exposure.
The judge mistakenly found that Deborah had also personally guaranteed HM's aviation loan. She did not, however, do so.
B. REAL ESTATE BUSINESS.
Harry and Mariani undertook a number of real estate projects. They never formed a separate corporation, LLC or partnership to generally undertake such projects, however. Rather, separate entities were formed for each project, and each project had different terms.
Harry formed DHC Properties in 2004 to construct a luxury home on Khakum Woods Road in Greenwich, Connecticut, (Khakum Woods) with Mariani's construction company acting as the contractor. At some point, Mariani no longer wanted to build the property, so Harry took over the project on his own. Mariani never owned any part of Khakum Woods. Harry sold Khakum Woods in March 2007 for $12.5 million. He deposited $4,461,363 of the proceeds into the KTA and used $1.8 million to invest in Sun Fun Anguilla (discussed below).
Also in 2004, Harry and Mariani formed Greenwich Estates I, LLC to purchase land and build luxury homes on two properties on Round Hill Road in Greenwich. Originally, Harry owned twenty percent of Greenwich Estates I, LLC, but he eventually bought Mariani's interest. One of the properties on Round Hill was sold in November 2005 (pre-complaint) for $17.6 million. There was never any construction on the other Round Hill property, only demolition of existing structures. The lot was sold in May 2006 for $20 million, for a profit of $375,184, and a return of capital funds "back to [Harry]" of $10,546,932. Harry claimed that he wired $100,000 to Deborah's checking account, and wired $200,000 to his own checking account, and that the remainder of the proceeds were placed in his personal Smith Barney account. He claims he used the proceeds to pay for personal expenses for himself, Deborah and their child, as well as expenses related to HM and the real estate interests.
Harry and Mariani entered a third joint business venture called Sun Fun Anguilla (Sun Fun) in 2007. Sun Fun was to include a $12 million luxury home built in a resort development called St. Regis in Temenos, Anguilla. Sun Fun was not going to build the property or act as the developer; it would simply own the beachfront property and home. Although Harry signed an agreement with Mariani to obtain an interest in Sun Fun and paid $1.8 million for his half-share, he could not legally own the property because under Anguillan law, he needed to obtain an alien land holding license.
When the entire St. Regis development became insolvent, Harry determined that obtaining the license was not worth the investment. Although the infrastructure of St. Regis had been partially developed, "they haven't put a shovel into the ground" on the property. Still, there was some expectation that the development would be taken over by another entity and completed. Harry believed the investment "could be a loss," but "perhaps something is going to happen and then I might get some of my money back, or actually make some money."
Harry maintained that he did "not own a construction business," but rather, he owned interests in three LLCs formed to purchase land and build specific properties. He claimed that he was "put out of business" by Deborah because she would not permit him to use marital money to invest in further real estate investments.
The judge considered the testimony and other evidence developed at trial, and determined that these investments by Harry did not give rise to an independent "development business" subject to equitable distribution. The judge stated, in part:
As the only business valuation expert presented at trial, Mr. Smith observed that within accepted methodologies of business valuation, a business whose assets are comprised primarily of real estate holdings is appraised based on the value of those assets. However he chose to value Harry's interest in the three Greenwich development projects using the income approach to value because the partnership sold the properties as soon as the homes were built. . . .
The business of building homes and selling them for a profit ended for the partnership of Harry and Mark Mariani with the Khakum Woods sale, and there was no evidence that they were continuing that business. Their venture in Anguilla, which was a small part of a large resort development, had also come to an end, with the insolvency of the principal in that project before the end of trial. For the building partnership, the quality of being ongoing was simply unsupported by the facts in this case. Although the Greenwhich, CT projects were works in progress on the end-date of the
marriage, to label the activity as "ongoing" would work an injustice. Both parties knew that there were no more lots owned by the partnership. The profits were limited to what they owned and were building or had completed by the end-date of the marriage, given the turn of events afterward. Thus the proceeds of sale, which included return of purchase money plus Harry's share of the profits, were more in the nature of asset money than ongoing income. For these reasons the court declines to attribute any value to the construction business beyond the funds received by Harry from the sales of the three partnership properties.
C. THE UNACCOUNTED FOR $8.8 MILLION.
The trial judge determined that Harry had failed to account for his use or disposition of $8.8 million in marital funds. The judge stated:
Deborah and her accountant allege that Harry dissipated millions of dollars in assets. Mr. Smith analyzed Harry's accounts from the end-date of the marriage through 10/31/09 when the Smith report was rendered. He calculated Harry's spending on personal expenses other than the parties' CIS budgets, plus business expenses, at $14,253,557 over that period of time. Harry, not surprisingly, disputed that figure. He pointed out that his share of the aircraft loan payments and FAA compliance expenses were real and paid by him at the rate of $100,000 to $105,000 per month, for a total over the period of the Smith analysis of $4,200,000 to $4,410,000. Harry also provided documentation of Deborah's use of her Amex card on Harry's account for 2006-2008. She charged $141,600 on that account from the end-date of the marriage to 12/31/08, above and beyond the CIS and cash support payments that Harry was
ordered to pay pendent[e] lite, according to his testimony. It appears from Mr. Smith's analysis that these payments were not attributed to Harry's support of Deborah and may have been categorized as his "other" personal and business expenses. Harry testified that the money he didn't spend on his household and Deborah's, and in satisfaction of court-ordered payments toward her counsel fees and expert fees, went into the jet leasing and charter businesses. However he did not provide documentation or even an explanation of what funds went into the businesses and when. The court is aware from his testimony that by the end of trial the costs of periodic inspections and repairs required by the FAA, along with the general decline in the economy, had pushed HM, LLC into the red in its operations. However the court does not accept at face value, without details or documentation, the blanket assertion by Harry that all his remaining money went into HM, LLC.
From Mr. Smith's sum of $14,253,557 in unaccounted for marital funds, Harry's evidence supplied an explanation for $4,200,000 to $4,410,000 for the HM, LLC loan and aircraft compliance expenses, and $141,600 for Deborah's use of his AMEX card. Deborah's testimony indicated that Harry spend another $1 million on landscaping at his new home. There remains approximately $8,800,000 unaccounted for.
. . . .
Deborah speculates that Harry has dissipated the funds for which he has not provided documentation. Harry has offered general explanations of where the money went without details or organized documentation. The court has no obligation to root through all of his bank and credit card records to come up with a theory on the subject. The burden
of proof is his. The court has accepted some explanations which comport with the other evidence and tend to be supported by it, but the disposition of the $8,800,000 remains uncorroborated. It is possible, as Deborah has alleged, that it lies in undisclosed assets to which it was funneled pendent[e] lite. Some of it undoubtedly went for Harry's litigation expenses for this divorce.
. . . .
Instead, the court will incorporate its balancing of the equitable distribution factors and consideration into the distribution of the remaining marital assets. Taking all the court's factual findings into account, and giving weight to those factors identified above as the most significant in this case, the court will distribute the marital assets as follows:
The judge thereafter ordered the sale of the marital home and three other houses owned by the parties in New Jersey, with two-thirds of the proceeds of sale to go to Deborah and one-third to Harry. The appraised values of these properties exceed $7.5 million.
IV.
We shall now briefly review the disputed alimony award, child support and counsel fees.
A. ALIMONY.
After acknowledging that "marital lifestyle is but one of twelve statutory factors enumerated at N.J.S.A. 2A:34-23b[] used to determine alimony," the trial judge noted that nonetheless the parties "can no longer afford the marital life style." The judge found that the parties had lived a lifestyle of "extreme wealth [and] extreme extravagance." This was due to Harry's success "in a time of financial excesses in the stock market" that had come to a close with the current economic climate. She likened their situation to that of "lottery winners, who live the high life for a period of time and, when the money is mostly gone, are left with a lifestyle substantially lower than the spending level during the 'bubble' of wealth."
With regard to Harry's earning capacity, the judge found that his "success in a time of financial excesses in the stock market to be related as much to the atmosphere of the times as to Harry's . . . inherent talents." Harry took advantage of the times and "developed an opportunity into a fortune. Not many people have that ability, but almost no one has it in a recession such as the current economic condition in this country." She found that Harry's "short-lived career in negotiating the inner workings of a Wall Street phenomenon was over with the [end of] the frenzy" in the early 2000s. While noting that there was no expert testimony on Harry's earning capacity, she found his chances of obtaining a CEO job were "slim," given the "glut of career Wall Street personnel looking for work in this time of high unemployment in every sector." Nevertheless, she found that Harry's "reputation, network and experience will likely enhance his ability to obtain a job" that paid $380,000 per year. She based that figure on his last salary, "adjusted for a modest cost-of-living" increase of 2.5% per year and rounded."
With regard to Deborah's earning capacity, the judge found that she left the workforce in 1998, but "her education and work experience are credentials which are still sought by employers." Her MBA and "executive demeanor" would help her in finding a position. When she left the workforce, Deborah was earning over $100,000 per year. The judge used a 2.5% cost-of-living adjustment to arrive at an imputed yearly income of $130,000.
The judge could not calculate the amount of equitably distributed funds that each party would retain "due to the extent of the assets that are to be sold as part of the distribution plan." Still, at the end of trial, Deborah had $5 million in liquid assets in her name. The judge used a return rate of 2.25%, which was the rate Deborah received on her UBS account as of December 2009, to determine that she should receive $125,000 per year in unearned income. The judge imputed the same amount of unearned income to Harry "for lack of proofs of his disposition of up to $8.8 million."
The judge determined Deborah's total monthly budget to be $29,921 and Harry's to be $36,857. The judge ordered Harry to pay permanent alimony to Deborah in the amount of $10,000 per month, but recognized that "[n]either party's net income will cover his or her living expenses." She noted that Deborah's housing expense would change because the marital home would be sold, and she stated that Harry's shelter expenses were "excessive" due to the size of the mortgage. Further, the judge found that questions "linger[ed]" about "any undisclosed funds Harry has left over from the marital estate."
B. CHILD SUPPORT.
The judge stated that child support "is not governed by the Child Support Guidelines due to the incomes of the parties exceeding the maximum Guideline amount. Thus, the court looks to the Child Support factors set forth at N.J.S.A. 2A:34-23(a)." Considering the child's needs, the judge noted the daughter attended a private school at a cost of $2100 a month, and was tutored at an unspecified cost. She had no assets of her own, but Deborah could use the $1.5 million in her family trust for the child's "unforeseen needs". The daughter lived with Deborah nine days out of fourteen or approximately sixty-four percent of the time, and the parties' "fixed and variable expenses" were "tied into the time she spends at each parent's home." Taking those factors into account, the judge awarded Deborah $500 per month in child support, and ordered Harry to pay the child's tuition and health insurance coverage. Deborah would pay the daughter's uninsured healthcare expenses up to $5000 per year, and, after that, the expenses would be divided equally. There were other incidental provisions for support, as well.
C. COUNSEL FEES.
Harry contends that the judge erred by ordering him to pay Deborah $300,000 in counsel fees and in not awarding counsel fees to him.
In making the fee determination, the judge recounted each party's role in this extraordinary litigation. She observed that Deborah engaged in "intractable and inconsistent positions" with regard to Harry's income, earning capacity and marital assets. "While chastising him vehemently in motion after motion for keeping or not turning over to the [KTA] marital 'assets' that he received from his investment and business activities, she also expected him to 'earn' enough income to keep her in the marital lifestyle with his alleged 'income.'" Finding that income and assets were "comprised of the same dollars," the judge found that Deborah's insistence on pressing this position "result[ed] in a presentation of evidence that was flawed in concept from the beginning." Additionally, Deborah supported her sisters in "their ill-conceived attempt to keep the houses that they lived in and which belonged" to the parties.
The judge was equally critical of Harry's litigation conduct. He engaged in "scorched earth" tactics in an attempt to have Deborah declared an unfit mother. His "reluctance to engage in good faith discovery, whether by design or ignorance, cost Deborah extra fees for both counsel and her accounting expert."
The judge found that Deborah incurred $1,935,000 in counsel fees as of May 23, 2010. Additionally, she paid Smith $519,227 and her custody expert $22,500. Deborah's counsel's attitude was "no holds barred" and there "was little evidence of willingness to settle or even acknowledge Harry's income-asset dilemma." Therefore, she found the total fee "excessive by reason of the amount of trial time it took to resolve this case."
Harry's attorney in the third-party action "prolonged" the trial by "excessively quarrelling" with the other attorneys and the court over procedure. In addition, Harry had been represented by two other sets of attorneys. He paid $1.1 million in total counsel fees. Because he represented himself at trial, he incurred no further counsel fees.
The judge found that although the case was complicated, "both sides made it far more self-important and complex than it had to be," and the "acrimony, which the court attribute[d] to both parties and all their counsel, further prolonged and complicated the case." The judge concluded:
Taking all relevant factors into account, the court finds that Deborah's intractability and Harry's scorched earth commencement of the case and discovery failure are substantially offsetting. The former prolonged the entire trial and precluded settlement and the latter caused more discrete but very costly extra work and set the tone of the litigation. However, the attorneys on both sides could have done more to control the vindictiveness. What strikes the court as lopsided, after all circumstances are considered, is the fact that Deborah paid an attorney throughout trial and Harry saved himself hundreds of thousands, if not over a million dollars by representing himself. And his self-representation came at a cost in time for all involved in the trial and in fees charged to Deborah.Therefore, the judge ordered Harry to pay $300,000 in counsel fees for Deborah.
V.
We begin by setting forth the principles which guide our analysis of a Family Part bench trial. We are required to accord deference to the Family Part's fact-finding because of the court's "special expertise" in family matters and substantial weight to "the judge's observations of the parties' demeanor, comprehension and speech and to the fact that the trial judge had the distinct advantage of observing the demeanor of the witnesses and a better opportunity to judge their credibility than a reviewing court." Cesare v. Cesare, 154 N.J. 394, 413 (1998); Heinl v. Heinl, 287 N.J. Super. 337, 345 (App. Div. 1996).
Nevertheless, we owe no special deference to the trial court's "interpretation of the law and the legal consequences that flow from established facts." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995); Crespo v. Crespo, 395 N.J. Super. 190, 194 (App. Div. 2007). We are compelled to reverse if the trial court abused its discretion, failed to consider all the controlling legal principles, or reached a determination that "could not reasonably have been reached on sufficient credible evidence present in the record after considering the proofs as a whole." Heinl, supra, 287 N.J. Super. at 345 (citation omitted). See also Cox v. Cox, 335 N.J. Super. 465, 473 (App. Div. 2000). Moreover, if the "court ignores applicable standards, we are compelled to reverse and remand for further proceedings." Gotlib v. Gotlib, 399 N.J. Super. 295, 309 (App. Div. 2008).
Furthermore, "[t]rial judges are under a duty to make findings of fact and to state reasons in support of their conclusions." Heinl, supra, 287 N.J. Super. at 347; 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). We will be guided by these principles.
1. CHILD SUPPORT.
We turn first to the arguments of the parties respecting child support. "'The trial court has substantial discretion in making a child support award. If consistent with the law, such an award will not be disturbed unless it is manifestly unreasonable, arbitrary, or clearly contrary to reason or to other evidence, or the result of whim or caprice.'" Jacoby v. Jacoby, 42 7 N.J. Super. 109, 116 (App. Div. 2012) (quoting Foust v. Glaser, 340 N.J. Super. 312, 315-16 (App. Div. 2001)). "'Of course, the exercise of this discretion is not limitless[,]' and remains guided by the law and principles of equity." Ibid. (quoting Steneken v. Steneken, 367 N.J. Super. 427, 434 (App. Div. 2004), aff'd in part and modified in part, 183 N.J. 290 (2005)). "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.'" Ibid. (quoting Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002)). However, "we are not bound by '[a] trial court's interpretation of the law' and do not defer to legal consequences drawn from established facts." Id. at 116-17 (quoting Manalapan Realty, supra, 140 N.J. at 378 (1995)).
Both Harry and Deborah argue that the income figures employed by the judge in determining child support were flawed. Also, contrary to the judge's finding, the Deborah Carr 2000 Family Trust no longer contains $1.5 million for Deborah to use for the daughter's care, if necessary. Further, Deborah complains that the judge did not attach a child support guidelines worksheet or otherwise indicate how child support was calculated.
Paragraph 2 of Appendix IX-A of the Child Support Guidelines allows the trial court to disregard the guidelines if the court finds that "such action is appropriate due to conflict" with several factors. One of those factors is the "extreme parental income" situation as set forth above. Although the child support guidelines generally limit a judge's discretion in setting child support, in extreme parental income situations, the judge retains that discretion. Caplan v. Caplan, 182 N.J. 250, 271 (2005). "Under those circumstances, the trial court must consider the factors set forth in N.J.S.A. 2A:34-23(a) to determine the amount of the supplemental support award and then combine that amount with the guidelines-based award." Ibid.
The judge addressed the factors of N.J.S.A. 2A:34-23(a) and used her discretion to supplement the support award. However, under paragraph 3, "If the support guidelines are not applied in a specific case or the guidelines-based award is adjusted, the reason for the deviation and the amount of the guidelines-based award (before any adjustment) must be specified in writing on the guidelines worksheet or in the support order." Appendix IX-A, paragraph 3. This is necessary because "[s]uch findings clarify the basis for the support order if appealed or modified in the future."
Although the judge's award appeared well within her discretion under the circumstances, she did not prepare a worksheet, nor did she specify the reasons for the deviation from the support guidelines in the final judgment. Should there be an allegation of changed circumstances in the future, due to changes in income or the time spent in each household, for example, it would be difficult to understand the basis for the judge's decision from the present final judgment. Therefore, we remand with instructions to the judge to either prepare a child support worksheet or to make clear in a supplemental support order the basis for her decision.
2. COUNSEL FEES.
We next address counsel fees. Rule 5:3-5(c) governs the award of fees in family actions. In determining the amount of the fee award, the court should consider:
(1) the financial circumstances of the parties; (2) the ability of the parties to pay their own fees or to contribute to the fees of the other party; (3) the reasonableness and good faith of the positions advanced by the parties both during and prior to trial; (4) the extent of the fees incurred by both parties; (5) any fees previously awarded; (6) the amount of fees previously paid to counsel by each party; (7) the results obtained; (8) the degree to which fees were incurred to enforce existing orders or to compel discovery; and (9) any other factor bearing on the fairness of an award.
An award of counsel fees is discretionary, and will not be reversed except upon a showing of an abuse of discretion. Barr v. Barr, 418 N.J. Super. 18, 46 (App. Div. 2011). "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."'" Ibid. (quoting Flagg, supra, 171 N.J. at 571 (quoting Achacoso-Sanchez v. Immigration & Naturalization Serv., 779 F.2d 1260, 1265 (7th Cir. 1985))).
We do not find the judge's award of fees to necessarily be an abuse of discretion. Further, the bulk of the judge's fee opinion is without error. However, one part of the judge's reasoning gives us pause: whether the judge was justified in assessing fees against Harry in part because he was self-represented and therefore: 1) did not incur substantial fees himself; and 2) caused Deborah to incur higher fees.
From a policy standpoint, it is troubling to hold that because a self-represented litigant incurred fewer or no fees, the counsel fees are "lopsided," thus warranting an adjustment. Self-represented litigants often choose that path to avoid legal fees. To make them pay the fees of the opposing side simply because they did not incur fees themselves seems unfair.
Conversely, in most cases, self-represented litigants pose challenges to the other party and the court, and frequently make the trial longer and more complicated. However, allowing self-represented litigants to be assessed counsel fees based on their inexperience would potentially penalize every pro se litigant. Rule 5:3-5(c) does not provide for consideration of this factor. Although it could be considered as "any other factor bearing on the fairness of an award," (factor 9), it appears unfair to consider self-representation as a factor in the counsel fee decision unless the litigant utilizes his self-representation as a sword to unreasonably prolong the litigation, and thereby to inflict fees upon the other party.
Here, the judge said that defendant's self-representation cost "time for all involved" and increased fees to Deborah. However, she gave no specific examples of what Harry did to increase trial time. Was he unfamiliar with substantive or procedural law? Did he make unsupported motions? Our review of the case did not reveal any glaring problems associated with Harry's self-representation, and given that he was an attorney, his performance was far better than most pro se litigants. The judge also failed to explain how she determined that $300,000 would compensate Deborah for that time.
Accordingly, we remand to the trial court for a fuller explanation of the basis of her counsel fee determination. In particular, the court should address how it factored in the issue of Harry's self-representation and how that fact, if at all, caused Deborah's counsel fees to be greater than if counsel had represented Harry at trial.
3. ALIMONY.
We next turn to the parties' arguments respecting alimony. Deborah argues that the judge abused her discretion in failing to award alimony consistent with the marital lifestyle, in overstating her earning capacity, and understating Harry's imputed income. Harry argues that the judge erred in awarding permanent alimony, or in the alternative, failed to make findings of fact to support the alimony award.
N.J.S.A. 2A:34-23(b) authorizes a family court to "award one or more of the following types of alimony: permanent alimony; rehabilitative alimony; limited duration alimony or reimbursement alimony to either party." The court has great latitude in crafting an appropriate alimony award. Steneken, supra, 367 N.J. Super. at 434. Nonetheless, that discretion is not without limits, and the court's assessment must be guided by the following thirteen factors:
(1) The actual need and ability of the parties to pay;
(2) The duration of the marriage or civil union;
(3) The age, physical and emotional health of the parties;
(4) The standard of living established in the marriage and the likelihood that each party can maintain a reasonably comparable standard of living;
(5) The earning capacities, educational levels, vocational skills, and employability of the parties;
(6) The length of absence from the job market of the party seeking maintenance;
(7) The parental responsibilities for the children;
(8) The time and expense necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment . . . and the opportunity for future . . . income;
(9) The history of the financial or non-financial contributions to the marriage or civil union by each party . . . ;
(10) The equitable distribution of property . . . ;
(11) The income available to either party through investment of any assets held by that party;
(12) The tax treatment and consequences to both parties of any alimony award, including the designation of all or a portion of the payment as a non-taxable payment; and
(13) Any other factors which the court may deem relevant.
[N.J.S.A. 2A:34-23(b).]
Judges considering an alimony request must always keep in mind the primary "purpose of awarding alimony to a spouse is based on 'an economic right that arises out of the marital relationship and provides the dependent spouse with a level of support and standard of living generally commensurate with the quality of economic life that existed during the marriage.'" Clark v. Clark, 429 N.J. Super. 61, 72-73 (App. Div. 2012) (quoting Mani v. Mani, 183 N.J. 70, 80 (2005) (internal quotation marks and citations omitted)). The economic dependence created as a result of the marital relationship is a crucial finding necessary to impose the ongoing financial entanglement of an alimony award. The law attributes a party's individual success to the joint union of both parties. See Guglielmo v. Guglielmo, 253 N.J. Super. 531, 543 (App. Div. 1992) ("We are entirely satisfied that a spouse who maintains the home while her husband's career advances should share in the rewards of their combined efforts." (citations omitted)).
Finally, a judge awarding alimony must methodically consider all evidence to assure the award is "fit, reasonable and just" to both parties, N.J.S.A. 2A:34-23, and properly balances each party's needs, the finite marital resources, and the parties' desires to commence their separate futures, N.J.S.A. 2A:34-23(c). Parties must not forget, "alimony is neither a punishment for the payor nor a reward for the payee." Mani, supra, 183 N.J. at 80 (citations omitted).
The supporting spouse's obligation turns on the parties' economic life during the marriage, and the supporting spouse has an obligation to "contribute to the maintenance of the dependent spouse at the standard of living formerly shared." Lepis v. Lepis, 83 N.J. 139, 150 (1983). Thus, the standard of living during the marriage ordinarily serves as the "touchstone" for alimony. Crews v. Crews, 164 N.J. 11, 16 (2000). The court should state whether the support granted will enable each party to live a lifestyle that is "reasonably comparable" to the marital standard of living. Id. at 26 (quoting N.J.S.A. 2A:34-23(b)(4)). "The standard of living during the marriage is the way the couple actually lived, whether they resorted to borrowing and parental support, or they limited themselves to their earned income." Hughes v. Hughes, 311 N.J. Super. 15, 34 (App. Div. 1998).
The judge recognized that the parties' standard of living during the marriage was "rich" and marked by "extreme wealth" and "extreme extravagance," and she made detailed findings concerning the marital lifestyle. But she also found that the marital lifestyle had to be reduced. Contrary to Deborah's argument, those findings were supported in the evidence and permitted by law. As noted above, the judge equated the parties' financial success to "lottery winners" who lived the "high life" for a while, but spent their money in a "short-sighted" manner on gifts and on HM, necessitating a reduction in their spending level from the "bubble" period of their wealth.
Harry was not capable of making money as he had in the past, and their spending habits during the marriage, undertaken by both parties, caused a great reduction in their wealth and future security.
Further, with the decline of HM and the real estate business, changed circumstances occurred from the time of the complaint to the time of the decision four years later. To force the judge to set an initial alimony award consistent with a lifestyle that was no longer sustainable due to the parties' actions during the marriage and circumstances occurring during the pendency of the case would be contrary to logic and common sense. Moreover, even though these parties will be living in circumstances not quite as grand as during the height of the "bubble" period, both parties still have several millions of dollars at their disposal, which, under these circumstances, will make their future standard of living "reasonably comparable."
Although "[c]ourts must consider the duration of the marriage" when fixing alimony, "the length of the marriage and the proper amount or duration of alimony do not correlate in any mathematical formula." Lynn v. Lynn, 91 N.J. 501, 517-18 (1982). The Legislature's confining limited duration alimony awards to those "shorter-term marriages," where the facts make a permanent alimony award "inappropriate or inapplicable," reinforces this concept. J.E.V. v. K.V., 426 N.J. Super. 475, 485-86 (App. Div. 2012) (internal quotation marks and citations omitted) (emphasis added).
For more than eight years of the marriage, Deborah functioned as the primary homemaker for the family, foregoing any earning capacity and professional success she may have achieved during this period. She had not worked since 1998. She initially left employment largely because the parties decided they wanted a family and no longer needed her salary. Viewed with the requisite deference, the findings of the judge support permanent alimony.
As noted, neither Harry nor Deborah presented any expert testimony on their employability, and having been given the opportunity at trial, they are not entitled to any further opportunity to present evidence. Clarke, supra, 34 9 N.J. Super. at 58. The judge properly based her decision on the evidence before her, and therefore her determinations as to the parties' imputed incomes do not constitute error.
Deborah next claims that she is not voluntarily unemployed because she stopped working by agreement of the parties to be a homemaker and mother. Even if income were imputed to her, she argues, the amount imputed was unrealistic, as she had been out of the work force for fourteen years.
Although there is no doubt that the parties agreed that Deborah would stop working after Harry realized his first fortune, there is no authority for the proposition that such an agreement binds the parties for the remainder of their lives, especially in the face of changed circumstances. While acknowledging that Deborah would have "challenges" returning to the workforce, the judge found that her MBA and previous work experience would make her an "attractive candidate" for a position. She based Deborah's imputed income on her last salary, and added cost-of-living increases, as she had with Harry. Given the lack of expert testimony on the subject, the judge made findings based on the only evidence before her, and we find no abuse of discretion.
In her last point regarding alimony, Deborah claims that the judge overstated her assets by including the $1.5 million in the Deborah Carr 2000 Family Trust that was disbursed in the third-party litigation settlement. While she is correct on this point, the error does not undercut the judge's decision. The judge based her alimony decision on the belief that Deborah would have five million dollars to invest, and used that number to calculate her unearned income of $125,000 per year. However, in Deborah's reply brief, she sets forth a chart showing her equitable distribution to be around $11.5 million. Because the judge based her calculations on only $5 million, and Deborah admits she has over $11 million, the error regarding the $1.5 million is harmless.
Harry argues that Deborah had millions in assets and thus was not entitled to alimony at all. Although Deborah will indeed have significant assets, the judge found that even with alimony, she will not be able to maintain the marital lifestyle.
In the alternative, Harry argues that the alimony award must be vacated because the judge failed to make "the requisite findings with regard to the statutory factors" and made findings that were not supported in the evidence. This argument is without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
We find no abuse of discretion here with respect to the judge's determination of the type and amount of alimony awarded. We affirm the judgment of divorce with respect to alimony.
4. EQUITABLE DISTRIBUTION.
We turn next to the parties' arguments pertaining to the judge's determination with respect to the equitable distribution. We begin with consideration of HM. Deborah argues that the judge abused her discretion in failing to equitably distribute the value of HM as of the complaint date. She also argues that after the complaint was filed, Harry dissipated marital money in continuing HM's operations, and she should have been awarded half of the dissipated amount. Finally, she maintains that the judge erred in, initially, ordering her to pay one-half of a potential debt of HM to PNC Bank, and, later, in ordering a Goldman hearing to determine if it is subject to equitable distribution.
Harry, in his cross-appeal, argues that the judge erred in failing to give him a credit for millions of dollars he paid toward HM's debt post-complaint. He also claims that the judge erred in ordering a future hearing with regard to Deborah's responsibility for the HM debt to PNC Bank.
As we stated earlier, the trial judge explained that she could not value HM for purposes of distribution, because of Harry's failure to provide complete financial discovery pertaining to HM's operation, and the unreliable speculation in the report of Deborah's financial expert. As a consequence, the trial judge did not even address the question of the appropriate valuation dates.
Deborah argues that she "should not be denied equitable distribution of the fair value of HM because [Harry] did not cooperate with [her expert] or because he was recalcitrant in discovery." She also asserts that the judge erred in ordering a hearing as to the debt because Harry failed to account for his use of marital assets and incurred the PNC debt, not to salvage a dying business, but "to grow the business himself." She adds that contrary to the trial judge's assumption, she did not personally guarantee any of HM's debts.
Harry asserts simply that "debt must be included" in the distribution of marital assets and that the trial judge "correctly determined" HM "had no value." Harry also claims the Goldman hearing is improper because the trial judge "already determined that [Harry] paid [and incurred] the marital debt in good faith and that his use of marital assets" to operate HM did not constitute "dissipation."
While we empathize with the trial judge's understandable frustration with the parties, and her effort to cobble a fair solution to the problems of valuing HM, we nonetheless vacate that portion of the judgment pertaining to the equitable distribution of HM and the post-complaint debts of the entity, and we remand for a new trial with respect to all claims as to that entity, including whether Harry utilized marital assets in operating HM, and, if so, the amount utilized, the application and propriety of the application of marital assets to the operation of HM, and whether Harry dissipated such assets or any part thereof.
Further, the trial judge must address the valuation of HM and the appropriate date of that valuation, in accordance with the recognized standards we briefly summarize hereinafter. While it is difficult for us to ascertain a fair basis for allocating HM's debt to Deborah in the circumstances of this case, given her lack of knowledge about or control over the finances of HM, as well as the absence of any guarantee by her of that debt, we are confident that this issue will evaporate once the trial judge has the proofs upon which to base a proper valuation determination.
We are not even confident that the parties provided the trial judge with enough evidence to make any determination as to the amount of HM's debt, as of the date of the complaint and thereafter. This issue, therefore, must be addressed by the defendant in discovery.
Prior to the trial of these issues, the trial judge shall consult with counsel and order the exchange of additional discovery and expert reports as she shall, in her discretion, deem to be appropriate. In the event the trial judge's findings of fact and conclusions of law respecting HM require changing any other aspect of the divorce judgment, the trial judge shall order such changes and shall set forth the reasons therefor.
We come to this conclusion because HM appears to be a substantial asset that the trial judge found she could not evaluate, and, further, could not ascertain the extent to which Harry devoted marital assets to operate the business and reduce its debt. The inability of the trial judge to undertake these determinations was largely a consequence of Harry's failure to provide discovery. Given the trial judge's understandable inability to make these factual determinations, we cannot be confident that the judge's conclusions concerning the equitable distribution of the asset are fair.
The goal of equitable distribution is to bring about a "fair and just division of marital assets." Steneken, supra, 183 N.J. at 299 (internal quotation marks and citation omitted). When distributing marital assets, a court must: (1) identify the property subject to equitable distribution; (2) determine the value of each asset; and (3) decide how to allocate each asset most equitably. Rothman, supra, 65 N.J. at 232. "In every case, . . . the court shall make specific findings of fact on the evidence relevant to all issues pertaining to asset eligibility or ineligibility, asset valuation, and equitable distribution[.]" N.J.S.A. 2A:34-23.1. A court should apply all the factors set forth in N.J.S.A. 2A:34-23.1, and distribute marital assets consistent with the parties' unique needs. DeVane v. DeVane, 280 N.J. Super. 488, 493 (App. Div. 1995). An appellate court will affirm an equitable distribution provided "the trial court could reasonably have reached its result from the evidence presented, and the award is not distorted by legal or factual mistake." La Sala, supra, 335 N.J. Super. at 6.
We recognize that "valuation is not an exact science." Brown v. Brown, 348 N.J. Super. 466, 477 (App. Div.), certif. denied, 174 N.J. 193 (2002). "There are probably few assets whose valuation imposes as difficult, intricate and sophisticated a task as interests in close corporations." Ibid. (quoting Lavene v. Lavene, 148 N.J. Super. 267, 275 (App. Div.) certif. denied, 75 N.J. 28 (1977)). Nonetheless, the court must make an effort to evaluate a major asset subject to equitable distribution, especially where, as here, it is asserted by one party that the asset became worthless post-complaint.
"During the early years of the evolution of the concept of equitable distribution, it was held that the date for valuing assets should be the same as the termination date for determining eligible assets." Goldman v. Goldman, 24 8 N.J. Super. 10, 14 (Ch. Div. 1991), (citing Smith v. Smith, 72 N.J. 350, 362 (1977) and Borodinsky v. Borodinsky, 162 N.J. Super. 437 (App. Div. 1978)) aff'd in part, 275 N.J. Super. 452 (App. Div.), certif. denied, 139 N.J. 185 (1994). More recently however, courts have recognized that there is "no absolutely iron-clad rule" for determining the date of valuation, and we have taken a more equitable approach, finding that the valuation date should be based on the "nature of the asset and any compelling equitable considerations." Bednar v. Bednar, 193 N.J. Super. 330, 332 (App. Div. 1984).
A "separate" but related issue is the question of a change in an asset's value from the date of the complaint to the date of distribution. Id. at 333. See Goldman, supra, 275 N.J. Super. at 457. Where an asset has not just decreased, but has become worthless after the date of the complaint but before the distribution, the court must consider that factor in its equitable distribution of that "asset." Scherzer v. Scherzer, 136 N.J. Super. 397, 400 (App. Div. 1975), certif. denied, 69 N.J. 391 (1976). In Scherzer, the court rejected the wife's claim that she was entitled to equitable distribution of the value of an asset as of the time of the complaint when the asset had become worthless before trial. Id. at 399-400.
Guided by these principles, it is our determination that the better course of action in a case like this - where the question of the valuation of a major asset is at stake, and one of the parties exclusively managed that asset apparently using marital funds post-complaint, and that party has not provided necessary discovery - is to require the party in exclusive possession of the asset to provide full discovery before the court enters final judgment with respect to that asset. Only in that way may a court assure itself of the fairness of its conclusions.
We next address Deborah's argument that the trial judge erred by failing to equitably distribute the fair value of Harry's "real estate construction business." She argues that the construction business should have been valued in accordance with Smith's testimony, as a going concern and under the capitalization of earning approach, and that the judge's finding that the construction business was not a collective, on-going activity, was contrary to Harry's testimony. Her argument is based on Harry's characterization of his "real estate business" throughout the trial and his stated intention to resume making money through real estate after the divorce.
Guided by the principles which govern appellate review in cases like that before us, which we have earlier set forth, we reject these arguments and we find that the judge's conclusions were based upon findings of fact supported by the record. R. 2:11-3(e)(1)(A).
We next address the parties' arguments respecting the "dissipated" $8.8 million post-complaint. Deborah argues that the trial judge correctly determined that Harry failed to account for the sum, but erroneously failed to equitably distribute that sum. Harry argues that the judge's findings are unsupported in the record. We reject both of these arguments.
The trial judge stated that despite accepting some of Harry's explanations, there was still $8.8 million in "unaccounted" funds. "Given the absence of firm numbers for these categories, the court concludes that there can be no dollar for dollar offset for dissipation by [defendant]. It is a factor, one of fourteen, for this court to consider, along with all the other factors, in determining an equitable distribution of assets[,]" she added. Taking into account this issue as well as others, the judge awarded Deborah two-thirds of the net proceeds of the sale of the marital home, as well as two-thirds of the net proceeds of the sale of three other properties.
Of course, a spouse's use of marital property for his or her own benefit, or for support obligations, must be accounted for. Kothari v. Kothari, 255 N.J. Super. 500, 506-07 (App. Div. 1992); Weiss v. Weiss, 226 N.J. Super. 281, 291 (App. Div.), certif. denied, 114 N.J. 287 (1988). Harry had the burden of proof on the issue.
The judge's decision was predicated on a "Summary of Funds Used by Mr. Carr" prepared by Smith, which showed that Harry used $14,253,557 in marital funds after the complaint was filed. The judge found that Harry spent over $4.4 million paying down the aircraft loans and compliance expenses, and she subtracted that from the total. Although Harry argues that the judge ignored his proofs regarding the money, he simply provides cites to the record with no explanation of the documents provided. Some of the documents he cites show payments on the planes and Deborah's American Express bills, which the judge already took into account. More importantly, the documentation provided by Harry contains only line items of bills he paid from different accounts. He did not provide, at trial or on appeal, any method for the court to interpret the raw data provided.
It is not the court's duty to search the record to substantiate the argument of an appellate brief. State v. Hild, 148 N.J. Super. 294, 296 (App. Div. 1977). Harry did not address, either at trial or on appeal, Smith's report or explain why his figures were wrong. In the absence of a cogent explanation by Harry with respect to the use of these funds, we cannot find the judge erred in either her findings of fact or conclusions of law on this issue. See Miller v. Reis, 189 N.J. Super. 437, 441 (App. Div. 1983) (conclusory statements of a brief writer are no substitute for facts).
The judge acknowledged that the amount could not be perfectly quantified, and rather than giving Deborah a credit for half of the "missing" money, she adjusted the equitable distribution of the house sale proceeds in Deborah's favor. While Deborah is correct that the amount may not be precisely half of the $8.8 million that Smith found missing, it recognizes and sustains Deborah's claim while giving Harry the benefit of some doubt as to the exact unaccounted amount.
"Equitable" does not necessarily mean "equal." Rothman, supra, 65 N.J. at 232 n.6. An appellate court will affirm an equitable distribution provided "the trial court could reasonably have reached its result from the evidence presented, and the award is not distorted by legal or factual mistake." La Sala, supra, 335 N.J. Super. at 6. Neither party presents any persuasive argument that the judge erred in her resolution of this issue.
In addition, both parties claim entitlement to various equitable distribution "credits" they did not receive from the trial judge. None of these claims has any merit, except that it does appear the trial judge did not distribute to Deborah her share of $127,398 in a Bank of America account in the parties' names on the date of the divorce complaint. Therefore, we direct the trial judge to examine this issue, and, if not otherwise accounted for, amend the judgment of divorce to recognize Deborah's right to her share of the account.
The remainder of the parties arguments on appeal are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
To summarize, we affirm in part, reverse in part, and remand certain parts of the judgment of divorce for a more complete statement of the court's findings and conclusions. We reverse the judgment of divorce as it pertains to HM, LLC, and remand for a new trial as to the equitable distribution of that asset consistent with this opinion. The trial court, after consultation with the parties, may order such additional discovery and the exchange of expert reports as it deems appropriate. In the event the trial court's conclusions warrant an adjustment of other aspects of the judgment of divorce, it shall order such changes it finds to be appropriate. We remand to the trial court the assessment of counsel fees and child support for a more complete statement of reasons supporting the court's determinations. Finally, we direct the trial court to examine whether Deborah is entitled to a credit for her share of a Bank of America Account, and, if so, to appropriately modify the judgment of divorce.
In all other respects, we affirm the judgment of divorce. We do not retain jurisdiction.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION