Opinion
DOCKET NO. A-4450-13T1
10-26-2015
OLIVIA STEWART, Plaintiff-Respondent, v. TERRENCE THOMAS, Defendant-Appellant.
Clara S. Licata argued the cause for appellant. Bonnie M. Weir argued the cause for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano and Maven. On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Middlesex County, Docket No. FD-12-3048-99. Clara S. Licata argued the cause for appellant. Bonnie M. Weir argued the cause for respondent. PER CURIAM
Defendant Terrance Thomas appeals from the Family Part order, dated April 25, 2014, recalculating his child support obligations. On appeal, defendant challenges the trial court's treatment of his Restricted Performance Units (RPUs) as income for child support purposes, as well as the trial court's failure to credit his other child support obligation. Because the April 25, 2014 order does not sufficiently detail the trial court's findings and legal support thereof, we remand the matter for further proceedings.
Also referred to as Restricted Stock Units (RSUs).
I.
We set forth only the procedural history and facts relevant to this appeal.
Plaintiff and defendant have a child, K.S., born in the spring of 1999. An August 21, 2000 court order required defendant to pay $181 per week for child support.
In November 2013, plaintiff sought an increase in child support through the Probation Department, based upon changes in the parties' respective incomes since the initial order. Probation scheduled a hearing for January 2014, however, it did not complete its review of the matter. Instead, on January 23, 2014, plaintiff filed a motion with the Family Part requesting an increase in child support, as well as contribution towards the cost of the child's extra-curricular activities, driving lessons, and future college expenses. In her certification, plaintiff asserted that defendant's income increased since 2000 and that he earned additional income from his entertainment management business. Plaintiff sought full financial disclosure from defendant. Defendant opposed the motion.
On February 21, 2014, the court held oral argument on the motion. The court determined that modification of child support was warranted based on a review of the financial documents the parties had submitted to Probation, but ordered both parties to provide additional information, namely, Case Information Statements (CIS), "three most recent paystubs, 2013 W2s/1099s, complete 2012 tax returns and W2s/1099s." (Emphasis in the original). The judge reserved decision on child support pending review of the additional financial documentation. The court denied plaintiff's request for contribution towards the child's automobile costs and college expenses as premature.
Defendant requested an adjournment to obtain counsel, but the court did not directly address the request.
Defense counsel submitted defendant's CIS and attached pay stubs showing wages for November 2013, December 2013, and January 2014, and his 2012 tax return. In the section of the CIS entitled "Explanation of Income and other Information," defendant indicated his gross monthly salary from UPS was $11,919, totaling $143,028 per year. He explained that his compensation included RPUs, however, he asserted they should not be considered as income because he had not earned any money from them. He also provided a notarized letter from his ex-wife, confirming that he pays her $724 per month in child support and an additional $270 per month for high school tuition for their child B.T., born in the summer of 1998.
Defendant submitted information provided by his employer explaining that the company's Management Incentive Program (MIP) is not part of regular compensation, but rather, a discretionary incentive award that is above and beyond normal pay. Through this program, defendant receives annual bonuses in the form of restricted stock units (RSUs) (prior to 2011) and RPUs (after 2011). The company materials define RPUs as "equivalent to full-value shares of UPS Class A Stock. . . . RPUs are restricted from sale or transfer until they are vested and the restrictions have lapsed." Further, the company explains that RPUs are not subject to income tax withholding until they vest and the restrictions lapse. When the RPUs lapse they convert to Class A stock.
Plaintiff objected to defendant's submission and argued that the 2013 income reported in his CIS, $143,028, differs from the year-end income reflected on the December 2013 pay stub, $242,97 0, and is significantly less than the income reported on his 2012 tax return, $236,075. She also argued that defendant failed to identify his annual bonuses, failed to verify the funds in his retirement account, and failed to provide information about his income-producing rental property and entertainment management business. She questioned the amount of child support paid for his other child and the lack of proof that payments were being made through wage garnishment, as he claimed.
Defendant responded by submitting a consent order, dated and entered April 10, 2014, which confirmed his obligation to pay $994 per month in child support directly to the mother of his other child. His counsel also informed the court defendant had not earned income from the RPUs and could not "access" 80% of the RPUs. With respect to the investment property, defendant claimed it was operating at a loss and generating no income. He offered to provide records of the tenant's rent payments and his mortgage obligation. Plaintiff challenged the timing and accuracy of the consent order, as well as the lack of proof that the child support payments were being made by wage garnishment as he claimed.
The consent order was entered by a judge in the county where defendant's divorce case was venued. Defendant submitted a child support guidelines worksheet to support the parties' agreement, which utilized $142,896 annual salary for defendant and credited him with child support of $181 paid for K.S. The guidelines calculation was $229 per week.
The motion judge entered an order modifying child support after reviewing the documentation, without additional oral argument or a plenary hearing. Using the child support guidelines, the judge applied defendant's 2013 year-end income of $242,970, which included wages and the value of the RPUs that lapsed during the year. The judge did not incorporate the consent order for defendant's other child support obligation into the recalculation, because she did not find it to be "credible" or supported by proof that defendant made the payments. The judge entered an order increasing the child support obligation for K.S. to $423 per week, or $1819 per month. This appeal followed.
POINT I
THE TRIAL COURT ERRED IN INCLUDING THE VALUE OF DEFENDANT'S VESTED AND LAPSED RESTRICTED STOCK UNITS AS INCOME FOR CHILD SUPPORT.
A. Background of IRS Treatment of Vested and Lapsed Restricted Stock Units as Income.
B. New Jersey Law Does Not Support the Treatment of vested and Lapsed, But Unliquidated, Restricted Stock Units as Income for Child Support Purposes.
POINT II
THE TRIAL COURT ERRED IN NOT GIVING DEFENDANT THE OTHER DEPENDENT DEDUCTION, AS THE COURT WAS NOT FREE TO IGNORE THE ORDER DOCUMENTING THE SUPPORT DEFENDANT PAID TO HIS OTHER CHILD.
POINT III
THE TRIAL COURT ERRED IN MODIFYING THE PARTIES' EXPENSE RATIO IN CONNECTION WITH THE CHILD'S EXTRA-CURRICULAR ACTIVITIES AND UNREIMBURSED MEDIAL EXPENSES.
II.
When reviewing decisions granting applications to modify child support, we examine whether, given the facts, the trial judge abused his or her discretion. Larbig v. Larbig, 384 N.J. Super. 17, 21 (App. Div. 2006). "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." Foust v. Glaser, 340 N.J. Super. 312, 315-16 (App. Div. 2001) (internal citations and quotation marks omitted). We may thus reverse a trial court's decision when it "is 'made without a rational explanation, inexplicably depart[s] from established policies, or rest[s] on an impermissible basis.'" Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002) (quoting Achacoso-Sanchez v. Immigration & Naturalization Serv., 779 F.2d 1260, 1265 (7th Cir. 1985)). Moreover, we are not bound by "[a] trial court's interpretation of the law" and do not defer to legal consequences drawn from established facts. Manalapan Realty, L.P., v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
By statute, parents are presumptively required to provide for the financial support of their unemancipated children. N.J.S.A. 2A:34-23(a). The State has established presumptive Guidelines, and a corresponding worksheet, to calculate child support. See Child Support Guidelines, Pressler & Verniero, Current N.J. Court Rules, Appendix IX-A and IX-B to R. 5:6A at www.gannlaw.com (2016). The Court Rules prescribe that the Guidelines "shall be applied when an application to establish or modify child support is considered by the court." R. 5:6A; see also Lozner v. Lozner, 388 N.J. Super. 471, 480 (App. Div. 2006). "A court may deviate from the [G]uidelines only when good cause demonstrates that [their] application . . . would be inappropriate." Lozner, supra, 388 N.J. Super. at 480 (citing Ribner v. Ribner, 290 N.J. Super. 66, 73 (App. Div. 1996)).
In establishing "the amount to be paid by a parent for support of the child," the court must consider, among other factors: the "[s]tandard of living and economic circumstances of each parent"; "[a]ll sources of income and assets of each parent"; the "[e]arning ability of each parent"; and the "[r]esponsibility of the parents for the court-ordered support of others." N.J.S.A. 2A:34-23(a). When reviewing the parties' sources of income, the court must look to the Guidelines' definition of "gross income," which it defines as "all earned and unearned income that is recurring or will increase the income available to the recipient over an extended period of time." Pressler & Verniero, supra, Appendix IX-B at www.gannlaw.com (2016) (Shared-Parenting Worksheet: Gross Income). The Guidelines provide that gross income, includes, but is not limited to, income from the following sources:
a. compensation for services, including wages, fees, tips, and commissions;Additionally, the Guidelines exclude certain types of income, notably, "non-income producing assets (e.g. . . . stocks and bonds) unless the court finds that the intent of the investment was to avoid the payment of child support." Id. (Shared-Parenting Worksheet: Types of Income Excluded from Gross Income).
b. the operation of a business minus ordinary and necessary operating expenses (see IRS Schedule C);
c. gains derived from dealings in property;
. . . .
e. rents (minus ordinary and necessary expenses - see IRS Schedule E);
f. bonuses and royalties;
. . . .
s. the sale of investments (net capital gain) or earnings from investments;
[Id. (Shared-Parenting Worksheet: Sources of Income).]
In Point I, defendant contends that the RPUs awarded to him by his employer as a managerial bonus should not be counted as income for the calculation of child support. He relies on our holding in Heller-Loren v. Apuzzio, 371 N.J. Super. 518 (App. Div. 2004). In that case, the parties' PSA provided that they each retained their respective stocks and existing stock options. Id. at 523. After the divorce, the husband acquired additional options that he later exercised and sold. Id. at 525. We found that the husband's exercise and sale of stock options acquired after the parties' divorce did not constitute income under the PSA for purposes of child support. Id. at 527. We further concluded that "the ability to exercise stock options does not by itself give rise to 'income' for purposes of defendant's child support obligation, but that the actual exercise of the options may give rise to income if there is a demonstrated fair market value of the stock above the option price." Id. at 533.
Defendant also relies on Melton v. Melton, 2007 Conn. Super. LEXIS 1661 (Conn. Super. Ct. June 26, 2007), which found that the obligor's restricted stock units, considered income for purposes of the Internal Revenue Service, were not income for child support purposes. That unpublished, non-precedential opinion is not binding on this court. See R. 1:36-3; see also Montana v. Wyoming, ___ U.S. ___, ___, 131 S. Ct. 1765, 1773 n.5, 179 L. Ed. 2d 799, 807 n.5 (2011) (observing that state courts are the final arbiter of state law).
Our decision in Heller-Loren was narrowly tailored to the unique fact that the parties had a PSA addressing the retention of their respective stocks. Heller-Loren, supra, 371 N.J. Super. at 522. In the instant matter, the parties had no prior agreement respecting the inclusion of the value of the RPUs in calculating child support. Therefore, the recalculation of support should have followed the Guidelines and assessed all sources of defendant's income.
Although we were provided a copy of the parties' initial child support order, we did not receive a copy of the initial Guidelines Worksheet, if there was one. --------
In reviewing the matter at hand, the court did not address defendant's argument that the RPUs should not be considered income for child support calculations. Instead, the court used defendant's 2013 year-end income of $242,970 to recalculate child support. Though this figure appears to include both wages and the value of the lapsed RPUs, the court did not evaluate the stock units to determine whether defendant's receipt of the RPUs were recurrent, or if they were an income producing asset. See Pressler & Verniero, supra, Appendix IX-B at www.gannlaw.com (2016) (Shared-Parenting Worksheet: Gross Income). Thus, we cannot conclude the judge properly determined whether the RPUs are income.
Additionally, the court did not address plaintiff's assertion that defendant earns income from an investment property and a management business. The Guidelines provide that when a supporting party derives income from self-employment or the operation of a business, the court must "determine gross income that is available to the parent to pay a child support obligation. In most cases, this amount will differ from the determination of business income for tax purposes." Pressler & Verniero, supra, Appendix IX-B at www.gannlaw.com (2016) (Shared-Parenting Worksheet: Income from self-employment or operation of a business). Gross income is defined as gross receipts minus the enterprise's ordinary and necessary expenses. The Guidelines delineate those expenses ordinarily associated with a business that are excluded for purposes of the Guidelines. Ibid. Courts must conduct a careful review of the business income and expenses to establish the appropriate personal income for child support purposes. Ibid.
Defendant did not submit complete tax returns for 2012 and 2013. A review of the 2012 returns reveals that defendant reported business income of $15,699, but he failed to attach Schedule C, which would reflect the business's gross receipts and any expenses and deductions claimed for the business. Moreover, defendant's CIS indicates that he owns an investment property in Georgia and that the income from the property covers its expenses, but fails to provide the value or the income generated by the property. As noted above, defendant did not submit the 2013 return as ordered, therefore, the court did not have Schedule E, which would show the income and expenses associated with the investment property. According to the Guidelines, the court would need to review both of these schedules to determine the appropriate amount of income to be derived from these enterprises for inclusion in the recalculation of child support.
In sum, the court failed to fully assess all sources of defendant's income. Therefore, a remand is necessary for the court to determine whether the RPUs are income, as well as to reconsider the extent of defendant's income following a thorough review of defendant's financial circumstances including, but not limited to, tax returns for 2012 and 2013 and all filed schedules.
In Point II, defendant contends the court erred by refusing to accept the consent order for defendant's other child support obligation. Defendant asserts that the motion judge was not free to ignore the consent order entered by another court, because it is prima facie evidence that he was entitled to the other dependent deduction.
"The Guidelines require the court to consider multiple family obligations to obtain an equitable resolution that does not favor any family." Harte v. Hand, 433 N.J. Super. 457, 462 (App. Div. 2013) (citing Pressler & Verniero, supra, comment 10 on Appendix IX-A to R. 5:6A at 2587-88 (2014 )). "Pursuant to the Guidelines, prior child support orders must be deducted from an obligor's weekly income because such an obligation represents income that is not available for determining the current child support obligation . . . ." Ibid. (internal quotation omitted).
Where a party has multiple family obligations and pays child support to children of different households, the court has discretionary power to adjust or disregard a guidelines-based award. See Harte, supra, 433 N.J. Super. at 462; Pressler & Verniero, supra, comments 10(b), 21(o) on Appendix IX-A at www.gannlaw.com (2016).
In rejecting the consent order, the court stated:
Additionally, the [c]ourt also does not find [ ] [d]efendant's Consent Order dated April 10, 2014, to be credible. It seems very suspicious that the [d]efendant enters into a Consent Order on April 10, 2014, which indicates that the [d]efendant's child support obligation is $994 per month while in his Certification and Case Information Statement he lists the 'other child support' obligation as $724 per month.The court order then provided that defendant could file for modification if he could provide bank statements to prove that he made the payments in accordance with the consent order.
The record before us indicates that defendant had an obligation to pay support for his other child since 2003, as reflected in his final judgment of divorce. Plaintiff does not appear to dispute the obligation, but rather, challenges the amount of the obligation and whether defendant should receive credit for making the payments.
The court's refusal to incorporate the consent order, without an explanation for deviating from the Guidelines, warrants reversal. As stated earlier, the Guidelines need not be strictly applied and the trial court may disregard or deviate from the guideline. However, "the reason for 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." Schwartz v. Schwartz, 328 N.J. Super. 275, 283 (App. Div. 2000). In this case, the court's reasons for disregarding the other child support obligation are insufficient to explain its deviation from the guidelines. Notably, while the court clearly rejected the $994 figure provided in the consent order, it does not explain its similar disregard for the $724 amount listed in defendant's CIS, a figure plaintiff does not appear to contest.
"Rule 1:7-4 requires a judge to provide findings of fact and conclusions of law on every [decision] decided by a written order that is appealable by right." Fodero v. Fodero, 355 N.J. Super. 168, 170 (App. Div. 2002); see R. 1:7-4 (requiring a trial judge to accompany all opinions with findings of fact and conclusions of law). "Naked conclusions" are not enough; there must be some stated correlation between those facts and the applicable law. Curtis v. Finneran, 83 N.J. 563, 570 (1980). Ultimately, "[m]eaningful 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). Because we remand for recalculation of support, we need not reach the remaining issue raised in Point III.
We reverse the order fixing child support and remand for additional proceedings to complete the calculation under N.J.S.A. 2A:34-23a. In doing so, the judge must make a determination on all of defendant's income, including defendant's RPUs and decide whether they are includable as income for child support purposes. Further, the court must incorporate defendant's other child support obligation, or explain its reasons for deviating from the Guidelines in declining to do so. We defer to the trial judge to determine whether the submission of additional financial documentation and a plenary hearing is necessary to address these or other materially disputed issues.
Reversed, and remanded for further proceedings. 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