MICHAEL GRACE v. LAURA GRACE

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3231-08T2

MICHAEL GRACE,

Plaintiff-Appellant,

vs.

LAURA GRACE,

Defendant-Respondent.

__________________________________

September 22, 2010

Argued: February 24, 2010 - Decided:

Before Judges Cuff and C.L. Miniman.

On appeal from the Superior Court of New Jersey, Chancery Division-Family Part, Sussex County, Docket No. FM-19-91-07.

Gail J. Mitchell argued the cause for appellant (Schwartz Barkin & Mitchell, attorneys; Ms. Mitchell, on the brief).

Constance Kresge Stickle argued the cause for respondent.

PER CURIAM

In this post-judgment matrimonial matter, we review several orders enforcing the terms of a property settlement agreement (PSA) entered by the parties and certain other post-judgment orders. Essentially, plaintiff argues that changed circumstances warranted modification of financial obligations assumed by him in the PSA, and the transformation of his obligation to pay the monthly mortgage payment on the former marital home to a monthly alimony obligation was wholly unwarranted. We affirm.

Plaintiff Michael Grace and defendant Laura Grace were married for eighteen years before they divorced on September 6, 2006. The parties have three children born in 1990, 1992, and 1994. The final judgment of divorce (FJOD) incorporated a PSA dated August 12, 2006. Plaintiff agreed to pay $2200 monthly for child support and to pay the $4000 monthly mortgage payment. Article 2, paragraph 2.1 of the PSA addresses plaintiff's support obligation as follows:

[Defendant] is presently employed as a full time administrative assistant earning an annual salary of $27,300. [Plaintiff] is a financial broker dealer in an investment training company in which he is a partner and has been so employed for the last two years. [Plaintiff's] income fluctuates, however he represents that he takes a draw of $8,000.00 net per month. It is agreed that [plaintiff] shall continue to pay the monthly mortgage payment on the house of approximately $4000.00,1 which the parties approximate to be a reasonable and fair alimony payment. [Plaintiff] shall also pay to [defendant] additional support in the amount of $2,200.002 monthly, payable directly through personal check on or before the 15th of each month which shall continue until the youngest child graduates high school.

[Emphasis supplied.]

The parties also agreed that plaintiff would continue to pay the mortgage, taxes, and insurance on the house until the mortgage was fully paid, the house was sold, or defendant remarried. They also agreed that "[n]either the mortgage payment nor the monthly support payment shall be taxable income to [defendant]." Defendant was to be responsible for all other household expenses and her transportation expenses. The parties contemplated that the child support paid by plaintiff and the income earned by defendant would cover these expenses.

The parties agreed to joint custody of the children with "liberal and reasonable parenting time." They also agreed that neither would cohabit with another, except in the case of remarriage, while the children resided with them and before the last child reached eighteen years of age.

The PSA also addressed equitable distribution. Defendant received the former marital home. If the house sold after the youngest child reached eighteen years of age, defendant would receive the entire net proceeds of the sale. If the house sold before the youngest child reached eighteen years of age, the parties would equally divide the net proceeds. They also agreed to refinance the first mortgage to create a $40,000 fund to allow certain improvements on the house and to satisfy automobile loans.

Following a hearing on September 6, 2006, Judge Edward Gannon entered the FJOD. Both parties appeared at this hearing. Plaintiff's counsel asked plaintiff several questions about the PSA, including whether he understood the agreement and whether the agreement was a product of extensive negotiations. Plaintiff answered these questions affirmatively, and further agreed that the parties were able to reach an agreement on all issues through mediation. Plaintiff also affirmed he "had a large input in the preparation of this [PSA]," and that it "is fair and equitable under the circumstances."

Plaintiff's counsel next noted "what appears to be a fairly generous support and alimony amount" for defendant. Plaintiff responded he was willing and able to meet the obligation. Plaintiff's counsel asked him "but you're satisfied with that and you're willing to -- you're going to abide by that, is that correct?" Plaintiff responded, "Yes, I am." Plaintiff emphasized his interest in and the importance of keeping the children in the marital home.

Plaintiff further represented to the court that he had entered the PSA voluntarily, without coercion, and in the absence of any influence of drugs or alcohol. Finally, plaintiff's counsel ensured that plaintiff was satisfied with the decision to mediate and forgo trial, and that he wished to incorporate the PSA into an FJOD.

The judge directly examined defendant, who appeared pro se. Defendant stated she had reviewed the PSA with a different attorney prior to the proceeding. Then, in response to several questions, defendant assured the court she entered the PSA voluntarily and freely, she was satisfied with the mediator's services, and she found the PSA fair and reasonable. Defendant also agreed she could abide by the terms of the PSA.

Defendant filed her first motion to enforce the terms of the PSA on May 29, 2007. This was the first of four motions and two cross-motions that she eventually filed. We recount most of these efforts to enforce the terms of the PSA, plaintiff's opposition to these motions, and his motions to eliminate or modify his support obligations in order to place in context his varying responses to defendant's efforts to gain compliance.

In her certification in support of her May 29, 2007 motion, defendant stated that plaintiff made one mortgage payment as required by the PSA on September 1, 2006, had paid no other monthly installment, and the mortgagee had filed a complaint to foreclose the mortgage. Defendant also advised the court that recently plaintiff had failed to pay the entire amount of child support, accumulating $500 in arrears. Defendant also asserted that plaintiff had failed to pay the additional automobile insurance premium assessed when their son became a licensed driver. She requested enforcement of the PSA, counsel fees, and costs.

In his response, plaintiff admitted that sometimes he paid the child support after the fifteenth of the month. He also admitted he agreed to pay the mortgage monthly, but fell behind on these payments because he "simply do[es] not have the money," not because he had "deliberately refuse[d]" to pay. He attributed his noncompliance to the size of the financial obligations assumed by him in the PSA and to his uncertain employment situation.

By order dated August 9, 2007, Judge Gannon ordered plaintiff "to bring the mortgage current and pay whatever fees and costs are necessary to cure the foreclosure action and bring the debt current . . . ." He also ordered plaintiff to pay the $500 child support deficiency within fifteen days, calculated the child support obligation at $512 each week, and ordered plaintiff to pay $750 in legal fees to defendant.

Thereafter, defendant filed other enforcement motions. In response to her second enforcement motion filed on October 9, 2007, plaintiff explained for the first time in his responsive papers that his difficulty meeting his support obligations was due to changed circumstances regarding his employment and compensation. By order dated November 9, 2007, Judge James Farber ordered plaintiff to "immediately bring the mortgage current and pay whatever fees and costs are necessary to cure the foreclosure action and bring the debt current . . . ." The order also established a method to prepare the house for sale. Paragraph seven of this order required plaintiff to pay the $4000 directly to defendant; it provided that "[b]eginning with the plaintiff's next pay period, which is semi-monthly, the plaintiff shall pay $4000 per month which amount shall be payable directly to the defendant in two equal payments and shall continue until July 1, 2011. Such payments shall not be taxable to the defendant or deductible by the plaintiff." The judge also ordered plaintiff to pay $2782.50 in counsel fees to defendant.

Plaintiff filed a motion for reconsideration in which he asserted he had been able to successfully resolve the foreclosure action. He also requested reinstatement of the terms of the PSA. Defendant responded with a cross-motion to enforce the November 9, 2007 order because plaintiff had not paid $4000 directly to her. A January 4, 2008 order provided the November 9, 2007 order was modified to allow defendant to sell the former marital home for not less than $500,000 and to require plaintiff to pay

alimony in the amount of $4000 per month, beginning January 2008 through June 30, 2012. Alimony shall be non-taxable to defendant. However, Plaintiff may deduct the amount equal to the mortgage interest and property tax deductions for the defendant's new residence, up to the current deductions for the former marital home, if payments are current.

On September 15, 2008, defendant filed another motion to enforce plaintiff's financial obligations. She asserted that defendant had failed to comply with prior court orders. Plaintiff filed a cross-motion raising various issues about the sale of the house and requested modification of his child support obligation, if the youngest child chose to live with him. He also asserted he would pay the previously ordered attorneys' fees when he could afford to do so. By order dated October 24, 2008, Judge Farber found plaintiff had violated the terms of the August 9, 2007, November 9, 2007, and January 4, 2008 orders. He ordered certain funds released to defendant from an escrow fund, and awarded additional counsel fees.

This order also allowed defendant to file a certification outlining non-compliance by plaintiff in support of a bench warrant. Defendant did so on November 19, 2008, and on December 12, 2008, Judge Farber ordered plaintiff to pay $2500 by 4:00 p.m. on December 15, 2008. If he did not comply with this order, the judge would issue a bench warrant for his arrest. In his opposition to defendant's application for a bench warrant, plaintiff argued for the first time that the PSA did not contemplate an alimony payment directly to defendant.

Then, on December 15, 2008, plaintiff filed a motion to modify his child support, mortgage, and alimony payments based on changed circumstances. Plaintiff included several exhibits with his certification, including income and expense documents for 2004, 2006, 2007, and 2008, a case information statement, and charts depicting the fluctuation of his income. On January 23, 2009, Judge Farber denied plaintiff's motion to modify his support obligations. In doing so, Judge Farber outlined the history of the post-judgment motion practice and concluded that plaintiff did not demonstrate changed circumstances.

The judge also addressed the issue of defendant's cohabitation with her fiancé and its relevance to the support provisions of the PSA. Judge Farber denied plaintiff's request to reduce the $4000 payment in half simply because defendant now lived with her fiancé. He stated that plaintiff still had an obligation to support defendant and the three children. The judge also found the cohabitation provision of the PSA unenforceable because it was not contingent upon any support arrangement. The January 23, 2009 orders and the February 6, 2009 order assessing additional attorneys' fees are three of six orders that are subject to plaintiff's notice of appeal and amended notice of appeal.

Judge Farber issued an order for plaintiff's arrest. Following an ability to pay hearing, Judge Farber vacated the arrest order on March 6, 2009.

In the meantime, the sale of the marital home proceeded. By order dated April 13, 2009, Judge Farber released the lien imposed on the former marital home occasioned by plaintiff's child support arrears. He reasoned that continuation of the lien would hamper sale of the house. The judge also refused to incarcerate plaintiff for non-payment of support following an April 21, 2009 ability to pay hearing. The judge did, however, enter an order fixing plaintiff's arrears at $27,126.92 and directed withholding of income from unemployment compensation being received by plaintiff.

Defendant filed another motion to enforce litigant's rights on June 16, 2009; plaintiff responded with a cross-motion to terminate alimony due to defendant's marriage and to reduce child support. By orders dated July 31, 2009, Judge Farber terminated plaintiff's alimony obligation but did not eliminate or modify the alimony arrears. He denied plaintiff's motion to reduce child support due to changed circumstances. In doing so he queried why plaintiff would work for a company on a commission basis for an entire year without receiving any income. In a separate order dated September 21, 2009, Judge Farber awarded counsel fees associated with the enforcement motion memorialized in his July 31, 2009 order. These orders are subject to the amended notice of appeal.

To summarize, plaintiff now appeals from a total of six orders. First, plaintiff appeals the two January 23, 2009 orders denying modification of support obligations based upon changed circumstances. Plaintiff also appeals the February 6, 2009 order for counsel fees accompanying that decision. Next, plaintiff appeals the two July 31, 2009 orders which again denied his efforts to modify the support obligations. The September 21, 2009 order is also the subject of plaintiff's appeal.

On appeal, plaintiff argues that Judge Farber had no authority to modify the PSA to direct plaintiff to pay $4000 monthly directly to defendant as alimony. He also contends that he successfully established changed circumstances and his motions to eliminate his alimony obligation and modify his child support obligation should have been granted. Accordingly, all of the orders imposing counsel fees should be vacated. Finally, he argues that Judge Farber should have granted his December 2 008 Rule 4:50-1(f) motion to re-open and review the August 2006 PSA.

Preliminarily, we note that the court ordered plaintiff to pay $4000 directly to defendant as alimony as early as January 4, 2008. Moreover, plaintiff made such payments to an escrow fund on a more or less regular basis from January 2008 until October 24, 2008, when the escrowed funds were released to defendant. Plaintiff did not expressly contest the conversion of this obligation from a mortgage payment to a direct payment to defendant until December 15, 2008. Plaintiff now appeals from the January 23, 2009 order rejecting plaintiff's contention that the alimony payment was neither contemplated by the PSA or authorized as a matter of law or equity. It is questionable whether any appeal from this order is timely.

Addressing the merits, we are satisfied that the conversion of the $4000 monthly payment from a mortgage payment to a direct payment to defendant as alimony was in complete conformity with the letter and spirit of the PSA. The parties were married eighteen years at the time of the divorce. Although their educational backgrounds may have been similar, their earnings history and their respective ability to earn income differed dramatically. Based on the information presented to us in this appeal, we do not hesitate to conclude that plaintiff would have been expected to pay alimony to defendant, unless the parties agreed otherwise.

Paragraph 2.1 of the PSA also expressly provided that the $4000 monthly mortgage payment fairly approximated the alimony otherwise due to defendant. It is, therefore, curious that plaintiff argues here that the parties never contemplated an alimony obligation, and that the motion judge crafted a better agreement for defendant than she had negotiated for herself. In addition, we view the conversion of the $4000 monthly payment from a mortgage payment to a direct payment as a sensible solution to the financial havoc wrought by plaintiff due to his failure to pay the mortgage, his inability to maintain the work-out plan negotiated with the mortgagee, the commencement of foreclosure proceedings, and the consequent need to sell the former marital home earlier than initially contemplated by the parties.

Citing the financial crisis, plaintiff insists that he demonstrated that his financial obligations should have been modified, and his motion pursuant to Rule 4:50-1(f) should have been granted. He contends that his personal financial circumstances deteriorated due to the financial crisis, and the prolonged nature of the crisis belied any suggestion that he alone was responsible for his lack of employment or underemployment.

It is within the sound discretion of a Family Part judge whether to modify an alimony or child support obligation based upon a showing of changed circumstance. Innes v. Innes, 117 N.J. 496, 504 (1990); Larbig v. Larbig, 384 N.J. Super. 17, 21 (App. Div. 2006); see also Martindell v. Martindell, 21 N.J. 341, 355 (1956) ("Every application for alimony . . . rests upon its own particular footing and the appellate court must give due recognition to the wide discretion which our law rightly affords to the trial judges who deal with these matters."). Thus, the findings of the Family Part judge should not be disturbed unless they are wholly unsupported as to lead to a denial of justice. Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 483-84 (1974). Such findings "are considered binding on appeal when supported by adequate, substantial and credible evidence." Id. at 484.

Here, plaintiff argues the trial court erred in failing to modify the alimony and child support in accordance with Lepis v. Lepis, 83 N.J. 139 (1980). Lepis provides that modification of alimony and support orders set forth by both judicial decrees and consensual agreements are subject to the standard of "changed circumstances." Id. at 148; W.S. v. X.Y., 290 N.J. Super. 534, 540-41 (App. Div. 1996); see also Pressler, Current N.J. Court Rules, comment 3.2.1 on R. 5:6A (2010) ("The general standard for addressing modification is changed circumstances, not unconscionability."). For example, changed circumstances could mean an "increase or decrease in the supporting spouse's income, . . . [or] the dependent spouse's cohabitation with another." Lepis, supra, 83 N.J. at 151 (citations omitted). However, "[c]ourts have consistently rejected requests for modification based on circumstances which are only temporary . . . ." Ibid.; Larbig, supra, 384 N.J. Super. at 23 (quoting Lepis, 83 N.J. at 151).

Furthermore, the party seeking modification of a support order has the burden of demonstrating a prima facie showing of "changed circumstances." Lepis, supra, 83 N.J. at 157. For instance, if a movant seeks to modify an alimony award based upon a change in income, the party must provide "full disclosure of [his or her] financial status, including tax returns." Ibid. Only after the court is satisfied that the movant has made a prima facie showing of changed circumstances will the non-movant's financial information be considered. Ibid.

Financial reverses following entry of a PSA may warrant modification. When the default occurs soon after entry of the agreement, such a motion will normally be greeted with some skepticism. For example, in Larbig, supra, the supporting spouse sought modification of his alimony and child support obligations on the basis "that the fortunes of his business had severely declined since the entry of the judgment of divorce . . . warrant[ing] a downward modification or, at least, trigger[ing] a right to compulsory discovery and a plenary hearing on the subject." 384 N.J. Super. at 21. The application for modification, however, "was filed a mere twenty months after the parties' execution of the PSA and the entry of the judgment of divorce." Id. at 22. Therefore, the Family Part judge concluded that the supporting spouse had only demonstrated a temporary change, which is not sufficient in meeting the required prima facie burden. Id. at 22-23. On appeal, this court noted "[t]here is . . . no brightline rule by which to measure when a changed circumstance has endured long enough to warrant a modification of a support obligation," but rather such determinations are within the sound discretion of Family Part judges "based upon their experience as applied to all the relevant circumstances . . . ." Id. at 23. As such, this court found no abuse of discretion by the Family Part judge for not permitting discovery or ordering a plenary hearing. Ibid. ("Neither compulsory discovery nor a plenary hearing is required until a movant provides sufficient evidence of a material changed circumstance").

Here, plaintiff appeals orders from two separate hearing dates on motions to modify his support obligations: January 23, 2009 and July 31, 2009. The following sections analyze each set of orders in turn.

A. The January 23, 2009 Orders

As noted previously, the parties incorporated the PSA into their FJOD on September 6, 2006. Under the PSA, plaintiff agreed to pay $4000 per month towards the mortgage and $2200 in child support. Plaintiff first moved to reduce these obligations based on changed circumstances by way of notice of motion dated December 15, 2008. In his certification, plaintiff contended that his employment had been negatively affected by the "volatility" of the current financial market and that defendant's cohabitation with her fiancé in a new home should alter his obligations.

To support his application with respect to the changed income, plaintiff provided his 2006 income tax returns, representing the year he entered the PSA, to show an approximate adjusted gross income of $95,000. Although plaintiff did not provide tax returns for other years, plaintiff certified that he had earned an average annual income of over $433,000 between 1999 and 2002. An attached statement of Social Security earnings documented that plaintiff earned taxable Medicare wages of $94,283, $0, $28,290, and $108,414 for the years 2003, 2004, 2005, and 2006, respectively. Finally, plaintiff certified that as of November 30, 2008, he had earned over $160,000 for 2008 income. Nevertheless, plaintiff could not predict what his future earnings would be, noting that they could be in excess of the "$8000 net draw per month" he attested to in the PSA, or could fall short of that amount.

At the January 23, 2009 hearing, Judge Farber found plaintiff had earned upwards of $160,000 by the end of 2008 and was about to start another job. Plaintiff's counsel further admitted plaintiff had begun that job by the hearing date. Based on this information, the judge stated: "anything that may be occurring presently is considered nothing more than a temporary situation . . . ."

Plaintiff's argument ignores certain facts. In his PSA executed in Summer 2006, plaintiff made several representations about his income and his ability to pay the financial obligations he agreed to assume. On September 6, 2006, he assured Judge Gannon that he understood his obligations and had the resources to meet them. He fell into arrears almost immediately. He also argues that the 2008 financial crisis precipitated his fluctuating income and his inability to meet his financial obligations. However, plaintiff recognized in 2006 that his income was subject to fluctuations annually, yet he also acknowledged that he participated actively in negotiation of the PSA, and acknowledged in September 2006 that he was willing and able to pay. Finally, he defaulted on his obligation when he failed to pay the mortgage on October 1, 2006, a full two years before the financial crisis which broke with full force in Fall 2008.

Plaintiff also suggests in his brief that the financial crisis of 2008 is not the cause of his financial distress at all. Rather, he states that he never fully appreciated the nature and scope of his obligations. He writes:

At the time the parties divorced, the plaintiff's primary goal was to keep the family in the marital residence until the youngest child was emancipated. In his zeal and effort to do so, he failed to properly analyze the financial circumstances surrounding that desire.

This is a curious and slim reed on which to support an application to re-open a PSA. This application was made over two years after execution of the document and testimony at the divorce hearing that he understood his obligations, had the means to comply with these obligations, and believed that the settlement was fair and reasonable, and after over a year of multiple enforcement motions.

Plaintiff also argues that Judge Farber should have terminated his alimony obligation before defendant re-married. He argued that the cohabitation of defendant and her boyfriend, now husband, was contrary to the terms of the PSA. He also argued that the alimony obligation should have ceased when defendant and her boyfriend moved from the marital home and purchased a house with a lower mortgage payment. Defendant always acknowledged that she cohabited in the former marital home with her present husband before their marriage. She argued that plaintiff's failure to adhere to the terms of the PSA placed the children and her in a financially precarious position and required not only the move but also the financial assistance of her boyfriend.

While Lepis, supra, 83 N.J. at 157, places the burden of a prima facie showing of changed circumstances on the party seeking modification, this burden shifts when the changed circumstances is based upon cohabitation, Ozolins v. Ozolins, 308 N.J. Super. 243, 248-49 (App. Div. 1998). That is, "[t]here is a rebuttable presumption of changed circumstances arising upon a prima facie showing of cohabitation. The burden of proof, which is ordinarily on the party seeking modification, shifts to the dependent spouse." Ozolins, supra, 308 N.J. Super. at 248-49. However, the fact of cohabitation does not necessarily compel termination; instead, modification may be appropriate depending upon the proofs. Ibid. Specifically, "modification is called for when '(1) the [cohabitant] contributes to the dependent spouse's support, or (2) the [cohabitant] resides in the dependant spouse's home without contributing anything toward the household expenses.'" Id. at 248 (quoting Gayet v. Gayet, 92 N.J. 149, 153 (1983)). Importantly, the critical factor is not the cohabitation itself, but rather "[t]he extent of actual economic dependency" that arises from the cohabitation. Gayet, supra, 92 N.J. at 154.

Judge Farber agreed with defendant's position and denied plaintiff's motion to eliminate his alimony obligation. The judge reasoned that plaintiff had agreed to maintain not only defendant's lifestyle but also his children's lifestyle. Due to plaintiff's default, defendant's boyfriend was the person who supported and maintained the family. Accordingly, the judge held that plaintiff should not benefit from his failure to meet his obligations. Moreover, the judge noted that the PSA discussed cohabitation only in the context of the parties' obligations to support the parental relationship of the other with their children. The PSA did not link cohabitation and the cessation of a support obligation.

To be sure, Judge Farber did not conduct a plenary hearing to investigate the financial contribution to the household of defendant and her boyfriend. On the other hand, plaintiff's acknowledged and long-standing default of his support obligations and the judge's familiarity with the havoc this default wrecked on defendant and the children fully supports his decision on this motion.

B. July 31, 2009 Orders

Finally, we address the July 31, 2009 orders.3 This motion was another attempt to modify his support obligation. In this motion, plaintiff argued that defendant filed a criminal complaint for non-support, he disclosed the existence of the complaint to his employer, and he lost his job. Judge Farber noted that plaintiff's employment documents stated he left his job voluntarily, and he made no efforts to obtain new employment. The judge refused to reconsider his cohabitation decision. Again, the judge ruled that plaintiff cannot fail to meet his obligations, place defendant in a position where housing is not affordable, and then argue a change of circumstances when defendant cohabits with another. We discern no basis to disturb the disposition of this motion.

Finally, plaintiff's argument that Judge Farber should not have awarded counsel fees on February 6 and September 21, 2009, is without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

1 This provision initially provided that the monthly mortgage obligation was $3000. This amount was amended and each party initialed the amendment prior to execution of the PSA. We have elected to use the amended figure in the text.

2 Initially, the parties agreed to $2,000 monthly. They amended the PSA prior to execution to increase the child support payment to $2,200 monthly.

3 Initially, we denied plaintiff's motion to amend his cross-appeal to include the July 31, 2009 order. This was an interlocutory order at the time. It became a final order on September 21, 2009, when the judge entered an order awarding counsel fees in favor of defendant. Plaintiff then filed a timely amended notice of appeal on October 5, 2009.