Opinion
DOCKET NO. A-2898-12T1
04-21-2014
CHRISTINE WAINWRIGHT, Plaintiff-Respondent/Cross-Appellant, v. THOMAS J. SOWANICK, Defendant-Appellant/Cross-Respondent.
Janine Danks Fox argued the cause for appellant/cross-respondent (Szaferman, Lakind, Blumstein & Blader, attorneys; Ms. Fox, of counsel and on the brief). Steven M. Resnick argued the cause for respondent/cross-appellant (Budd Larner, attorneys; Mr. Resnick and Elizabeth M. Foster-Fernandez, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner, Ostrer and Carroll.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Mercer County, Docket No. FM-11-77-11.
Janine Danks Fox argued the cause for appellant/cross-respondent (Szaferman, Lakind, Blumstein & Blader, attorneys; Ms. Fox, of counsel and on the brief).
Steven M. Resnick argued the cause for respondent/cross-appellant (Budd Larner, attorneys; Mr. Resnick and Elizabeth M. Foster-Fernandez, on the brief). PER CURIAM
In this post-judgment matrimonial matter, defendant Thomas Sowanick appeals from the October 19, 2012 Family Part order denying his motion for a reduction of his child support and life insurance obligations, and from the January 25, 2013 order denying his motion for reconsideration. Plaintiff Christine Wainwright cross-appeals from that part of the October 19, 2012 order that denied her application for counsel fees, and from the provisions of the January 25, 2013 order that denied her requests for unreimbursed medical expenses and counsel fees. After reviewing the record and applicable law, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
The parties were married in September 1995, and divorced by Final Judgment of Divorce (JOD) on September 1, 2010. They have one child, A.S., born in June 1999. The JOD incorporated a comprehensive Marital Settlement Agreement (MSA), which the parties executed on June 23, 2010. The MSA was the product of negotiations lasting approximately eighteen months during mediation with a jointly agreed upon mediator, Thomas J. Hoberman, CPA, ABV, CFF, of the accounting firm of Withum Smith & Brown (WSB). Both parties were represented by counsel during this process.
Throughout most of the marriage, defendant was employed by Merrill Lynch as a financial strategist. He served in several senior executive positions and was eventually promoted to Chief Investment Officer (CIO) for the private client group. While at Merrill Lynch, he earned a sizable annual income ranging on average from $1 million to $2.5 million per year. During his tenure there, his base salary never exceeded $200,000, and his excess earnings over that amount came in the form of substantial bonuses. Plaintiff did not work outside the home throughout the marriage, although she previously worked in finance for Lehman Brothers.
During the marriage, the parties owned a $4.1 million dollar home in New Jersey and a $1.5 million dollar vacation home in Colorado, as reflected in the Statement of Assets & Liabilities prepared by WSB as of December 31, 2008 and March 31, 2009. The parties undisputedly lived a "very comfortable lifestyle," spending approximately $66,000 per month, or $800,000 per year.
Despite defendant's high earnings, he alleges that the parties did not accumulate a significant amount of marital assets in brokerage accounts and retirement accounts. Defendant admittedly did not dedicate a substantial portion of his earnings to investments, retirement accounts and savings.
About two years before the parties commenced mediation, and four years prior to the JOD, defendant lost his position with Merrill Lynch and experienced a diminution in income. According to defendant, the financial markets declined globally, which affected his position as CIO. Due to a restructuring at Merrill Lynch, he was ultimately laid off in June 2006. Following his departure, defendant received a $1 million dollar severance payment in January 2007.
Soon after being laid off, defendant accepted a position at Clearbrook Financial. He began in September 2006 as the CIO with an annual salary of $200,000, which was comparable to his base salary at Merrill Lynch.
Defendant eventually left Clearbrook in July 2009 and joined Omnivest Group (Omnivest) as a co-President and CIO. There, his base compensation was originally $200,000. Defendant currently holds a forty-six percent interest in Omnivest, where he states he is paid as a W-2 employee.
Defendant alleges that Omnivest suffered a loss of $82,875 in 2010 and $91,469 in 2011. To keep the business afloat, defendant, along with the other partners, were all required to contribute $125,000 as an investment in 2010 and $50,000 in 2011. Additionally, in 2010, all Senior Partners' base salaries were reduced by fifty percent in an effort to minimize expenses. Defendant's salary was thus reduced to $100,000. The partners also downsized the rented office space and terminated several key employees, while the remaining employees received salary reductions.
In connection with the mediation, WSB prepared a Marital Lifestyle Analysis, Income Flow Analysis and Marital Balance Sheet based upon information jointly submitted. In the resulting MSA and First Addendum, defendant agreed to pay child support of $3,500 per month, or $42,000 per year. Additionally, defendant agreed to maintain a $1 million life insurance policy for A.S., at a cost of $5,000 per year. Defendant also pays $4,800 in annual health insurance premiums for A.S., and fifty percent of her unreimbursed or uninsured medical expenses. He also pays for a portion of A.S.'s private school tuition of approximately $11,000 per year. Defendant's financial support for his daughter thus totals approximately $63,000 a year.
On August 20, 2012, approximately twenty-six months after their settlement, defendant moved for a downward modification of his child support and life insurance obligations. Plaintiff opposed the motion and cross-moved for counsel fees and other relief not pertinent to this appeal.
In his moving papers, defendant certified that his child support obligation was premised upon his income during a three-year look-back period for the years 2006, 2007 and 2008. Defendant's Case Information Statement (CIS) and Social Security Earnings Statement submitted in support of his motion outlined his earnings as $1,000,917 in 2006, $3,287,241 in 2007 and $1,848,240 in 2008. Consequently, the $3,500 monthly support amount was not calculated according to the New Jersey Child Support Guidelines, and no Child Support Guidelines Worksheet was referenced.
Defendant's 2007 earnings reflect the $1 million dollar severance payment he received from Merrill Lynch in January 2007.
According to defendant, after he was laid off by Merrill Lynch, his income began to steadily decline. Contrasted with his prior earnings, he earned $212,522 in 2009, $141,228 in 2010, $97,089 in 2011, and $28,050 in 2012. Even though the MSA was signed in 2010, defendant claimed he assumed the decline in his income would be temporary, justifying his agreement to pay $3,500 in monthly child support. He emphasized that at the time of signing the MSA, he had only experienced one full year of declining income in 2009, when he earned approximately $212,000. Defendant further alleged that his decline in income was the reason for including a Lepis clause within the MSA, underscoring the parties' right to revisit the child support calculation in the future should there be a change in circumstances.
Lepis v. Lepis, 83 N.J. 139 (1980).
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Defendant asserted that, following the parties' divorce, plaintiff's exempt assets totaled $4.5 million, and the marital assets she retained totaled an additional $4.5 million, thus allowing her to leave the marriage with some $9 million worth of assets. On the other hand, defendant alleged that some of the assets he retained, which included his business interests and his Merrill Lynch stock options, ultimately had little value. Defendant also converted a $248,792 Merrill Lynch account to a UGMA Account to fund A.S.'s college expenses. He also contributed $40,000 into the UGMA account from his fifty percent share of the proceeds from the sale of the Colorado property. Defendant represented that the current balance of the UGMA account, available for A.S.'s college education, is $300,000.
Summarizing, in his Lepis motion, defendant claimed that his drastic reduction in earnings had now become permanent, and that his age (fifty-nine), coupled with his unsuccessful efforts to find comparable employment, rendered him unable to afford his current child support and life insurance obligations. Defendant also certified that, as a result, he has had to deplete his retirement assets in order to maintain those obligations.
In opposing defendant's motion, plaintiff contended that defendant failed to demonstrate a change in circumstances, which were presently no different than they were at the time of the settlement and divorce. Plaintiff also disputed defendant's assertion that his support obligations were based upon his earnings during the three-year look-back period. Rather, she certified that defendant's annual base income of $200,000 was partially used to derive the child support amount, and that $3500 was a negotiated figure that was part of a global settlement of all issues and was not strictly based on defendant's earnings. Plaintiff also disputed defendant's claims as to the values of the assets retained by the parties, and questioned whether defendant had improperly dissipated his assets.
Following oral argument, the motion judge denied defendant's motion without conducting an evidentiary hearing on his claim of changed circumstances for the reasons set forth in the October 19, 2012 order. The judge also denied plaintiff's cross-motion for counsel fees, finding that the parties had the financial ability to afford their own fees, and that no bad faith had been shown.
Defendant filed a motion for reconsideration on November 15, 2012. Plaintiff then filed a cross-motion for reconsideration on December 26, 2012, opposing defendant's motion and seeking reimbursement for out-of-network medical expenses for A.S., and counsel fees. On January 25, 2013, the judge denied defendant's motion, finding that he had failed to meet the reconsideration standard. The court also denied plaintiff's application for counsel fees and medical expenses. This appeal followed.
On appeal, defendant argues that he showed the requisite change in circumstances under Lepis, supra, 83 N.J. at 157-58. Defendant contends that he demonstrated that his income has permanently decreased, warranting a plenary hearing. Essentially, he argues that four-and-a-half years have now passed since he enjoyed his significantly higher earnings, so that his circumstances are no longer temporary, as they were at the time of the settlement and divorce. He contends that his decline in income, decreased lifestyle, age, and the depletion of his assets all support a finding of a substantial change in circumstances, thus warranting a review of his child support and life insurance obligations. He also maintains that the trial court erred in not requiring plaintiff to submit an updated CIS.
We review a decision granting or denying a motion to modify child support under the abuse of discretion standard. Jacoby v. Jacoby, 427 N.J. Super. 109, 116 (App. Div. 2012). Family courts have "'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.'" Ibid. (quoting Foust v. Glaser, 340 N.J. Super. 312, 315-16 (App. Div. 2001)).
It is well-settled that a party seeking to modify a child support obligation has the burden of proof and must make a prima facie showing of changed circumstances. Lepis, supra, 83 N.J. at 157; Jacoby, supra, 427 N.J. Super. at 116. "Any decision must be made in accordance with the best interests of the children." Jacoby, supra, 427 N.J. Super. at 116. One such example of a change in circumstances that has been found to warrant modification is an "increase or decrease in the supporting spouse's income." Lepis, supra, 83 N.J. at 151 (citing Martindell v. Martindell, 21 N.J. 341, 353 (1956)). Additionally, "the custodial parent bears the burden of establishing the reasonableness" of the requested expenses. Accardi v. Accardi, 369 N.J. Super. 75, 88 (App. Div. 2004 ) (citing Isaacson v. Isaacson, 348 N.J. Super. 560, 579 (App. Div.), certif. denied, 174 N.J. 364 (2002)). Moreover, temporary or anticipated changed circumstances do not warrant modification. Lepis, supra, 83 N.J. at 151.
Because the motion judge's denial of defendant's motion was based upon his conclusion that defendant had failed to demonstrate a change of circumstances that was unknown and unanticipated - a determination based solely on the face of the motion papers - it does not warrant enhanced deference. Here, 2009 was the first year defendant's earnings suffered a drastic decline. When entering into the MSA in 2010, it is highly conceivable, as defendant alleges, that he believed his financial condition would improve, and that he would eventually earn substantially higher wages than he did at Clearbrook and Omnivest. However, since signing the MSA, defendant has alleged an even more drastic decrease to $97,089 in 2011, and $28,050 in 2012. Thus, by the time the motion for reconsideration was heard, defendant's earnings had purportedly drastically declined for four successive years. We are satisfied that these allegations constitute a prima facie case of changed circumstances, and that defendant's motion was not premature because the alleged change in income does not appear to constitute a temporary setback.
However, satisfying this threshold requirement does not automatically result in a downward modification of defendant's child support and life insurance obligations. There remain unresolved issues of fact, including (1) whether defendant's decreased income is in fact permanent and substantial, whether he is currently incapable of obtaining employment at his former earning capacity, and whether he has the present ability to hide income, and is doing so, as plaintiff alleges; (2) whether defendant's support obligations were based on his income at the time of the settlement, or were part of a global resolution that included equitable distribution of assets and plaintiff's waiver of alimony; and (3) whether defendant has sufficient other assets to continue paying his support obligations, and/or has imprudently dissipated those assets, as plaintiff also alleges.
We hold only that defendant has presented a prima facie case of a substantial change in circumstances that entitles him to the opportunity to prove what he has asserted at a plenary hearing, if necessary after completion of discovery. See Conforti v. Guliadis, 128 N.J. 318, 322-23 (1992) (requiring plenary hearings to resolve factual disputes). Accordingly, we conclude that the matter must be remanded for the parties to exchange updated CISs and any necessary discovery counsel wish to pursue, and a plenary hearing, if necessary, in which the parties' competing factual contentions can be fully developed and evaluated.
We reach a different result with respect to the issues raised on plaintiff's cross-appeal. Plaintiff first argues that the motion judge erred in denying her request for reimbursement of out-of-network medical expenses incurred on behalf of the child. She contends that the MSA provides that both parties equally share these costs, and that enforcement of this provision should not have been denied because the services utilized were out of network. However, the court did not simply deny plaintiff's request on this basis. Rather, the judge noted that the proofs did not establish that the claim exceeded the annual threshold amount that plaintiff was first responsible to pay. Further, the judge noted that no bill was attached to the motion papers, nor was proof provided that defendant was apprised of the expense so that he could respond whether it was reasonable or necessary (citing Accardi, supra, 369 N.J. Super. at 87 and Curley v. Curley, 37 N.J. Super. 351, 355 (App. Div. 1955)). In the absence of such proof, we discern no error, and affirm the trial court's ruling.
Finally, we reject plaintiff's claim that the trial court erred in twice denying her application for counsel fees. Plaintiff acknowledges that she has the ability to pay, but argues that defendant acted in bad faith in attempting to modify the parties' MSA, that was negotiated a mere two years earlier.
The decision to award counsel fees "in a matrimonial action rests in the discretion of the trial court," Addesa v. Addesa, 392 N.J. Super. 58, 78 (App. Div. 2007), and will be disturbed "only on the 'rarest occasion,' and then only because of clear abuse of discretion." Strahan v. Strahan, 402 N.J. Super. 298, 317 (App. Div. 2008) (quoting Rendine v. Pantzer, 141 N.J. 292, 317 (1995)). The court expressly found that neither party was acting in bad faith, and denied both parties counsel fees. Moreover, in view of our determination that defendant did at least establish a prima facie showing of changed circumstances, we discern no abuse of discretion here. Accordingly, we affirm the trial court's ruling, without prejudice to plaintiff's right to renew her application should defendant's bad faith be established by the facts borne out at the plenary hearing.
As to defendant's appeal, we reverse and remand for further proceedings consistent with this opinion. With respect to plaintiff's cross-appeal, we affirm. 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