ELIZABETH COHEN v. MATTHEW COHEN

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-6659-04T26659-04T2

ELIZABETH COHEN,

Plaintiff-Respondent,

v.

MATTHEW COHEN,

Defendant-Appellant.

________________________________________

 

Argued January 24, 2007 - Decided March 22, 2007

Before Judges A. A. Rodr guez, Collester and Lyons.

On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. FM-07-1760-04.

Sheryl J. Seiden argued the cause for appellant (Ceconi & Cheifetz, attorneys; Cary B. Cheifetz, of counsel and on the brief; Ms. Seiden, on the brief).

Patrick T. Collins argued the cause for respondent (Franzblau Dratch, attorneys; Mr. Collins, on the brief).

PER CURIAM

In this divorce case, defendant, Matthew Cohen, appeals from certain financial provisions of a final judgment of divorce fixing equitable distribution, parental contributions to college expenses, counsel fees, unreimbursed medical expenses, and responsibility for certain marital debts. The following factual and procedural history is relevant to our consideration of the issues advanced on appeal.

Plaintiff, Elizabeth Cohen, and defendant were married on May 6, 1993, and separated in February 2004. At the time of trial, they were both thirty-nine years old. Two children were born of the marriage W.C., age nine at the time of trial, and A. C., age seven.

Plaintiff graduated in 1988 from George Washington University with a Bachelor of Science degree in finance. While in college, plaintiff spent her summers working at her father's brokerage firm, Halpert & Company, located in Millburn. After college, plaintiff was employed by Titus & Donnelly, a municipal bond brokerage firm. Plaintiff obtained her Series 7 and Series 24 licenses. Then in 1990, she left Titus & Donnelly to work for her father as an assistant trader.

Defendant is a graduate of Tufts University, and in 1990 he graduated from Cardozo Law School. He is not, however, a practicing attorney, as he was not admitted to the bar. In 1991, plaintiff's father offered defendant a job at Halpert because defendant's father was an old friend of his. Defendant obtained a sales license prior to commencing his employment with Halpert.

The parties were both employed at Halpert when they met and developed a relationship. They became engaged in February 1992, and married in 1993. In September 1993, the parties purchased their first home in Short Hills. The purchase price was $417,000. The parties obtained a purchase money mortgage for $300,000, with plaintiff contributing $80,982 from an investment account which had been a gift to her from her grandfather, and the balance was derived from funds received as wedding gifts, as well as a $25,000 gift from plaintiff's parents. In December 1994, plaintiff received a $47,985 settlement arising from a 1990 car accident. These funds were used to make improvements to the home, including bathroom and kitchen renovations.

In 1997, the parties sold their first home and applied the net proceeds of $185,000 towards the purchase of their second home, also in Short Hills. The purchase price of the new home was approximately $691,000. Plaintiff contributed between $40,000 to $50,000 from an investment account that her grandfather had given her. The balance of the purchase price was financed through a mortgage.

Plaintiff continued to work at Halpert until November 1995, leaving its employ shortly before the birth of the parties' first child. By mutual agreement, the parties had agreed that plaintiff would not resume working after the birth of their child. In 1996, plaintiff's father decided to close Halpert and seek bankruptcy protection. Defendant resigned from Halpert in October or November 1996. With the assistance of plaintiff's father, defendant and plaintiff's brother formed a municipal bond brokerage firm known as Jeffrey Matthews Financial Group ("JMFG"), which commenced operations in 1996. Plaintiff's father provided $250,000 in start-up capital for JMFG by gifting plaintiff $105,000, defendant $20,000, plaintiff's brother $105,000, and his wife $20,000. In addition, the parents of Jeffrey's wife advanced $250,000 in bonds as collateral. During the trial, defendant maintained that defendant's parents contributed a secured demand note in the amount of $109,000, but he did not provide any corresponding documentation. Plaintiff maintained that defendant's parents contributed only $40,000 in collateral bonds. As a result of the capital formation of JMFG, defendant held a thirty-two percent interest in the business.

JMFG obtained the majority of its employees from Halpert. Many of JMFG's initial clients were former clients of Halpert. JMFG purchased the office equipment and client lists of Halpert for $51,000. According to defendant, JMFG paid $300,000 to settle some of the litigation arising from the investments sold by Halpert. Defendant also testified that additional litigation was still pending at the time of trial.

Defendant explained that his income was derived from three components: a salary, commission, and "K-1" distributions. In 2005, defendant received approximately $23,000 in "K-1" income in addition to his reported income. Defendant also received "perks" valued at approximately $30,000 a year, including automobile lease payments and medical insurance. At the time of trial, defendant's salary was $100,000. Defendant's reported income from 1999 through 2004 varied from a low of $306,000 to a high of $492,000.

In or about 1997 or 1998, defendant obtained a loan from JMFG to pay the parties' taxes and $15,000 of that loan remained outstanding at the time of trial. The parties also had approximately $12,000 in joint credit card debt.

In 2002, plaintiff obtained part-time employment as an office manager for an ophthalmology practice because she wanted both of her children to attend private school with an annual tuition of approximately $15,000 per year, per child. In 2002, plaintiff earned $22,500. Plaintiff's 2003 gross income was $56,000 and her 2004 income was $49,000.

At the time of trial, plaintiff recently had begun selling private jet chartering time, which enabled her to work in her home with flexible hours. She worked on commission and did not yet have any earnings from this business.

On February 26, 2005, plaintiff filed a complaint for divorce. On March 29, 2004, defendant filed an answer. On June 14, 2004, the trial judge appointed a forensic accountant to evaluate defendant's business interest. On October 15, 2004, the court-appointed expert valued defendant's business interest at $604,042. On October 10, 2004, plaintiff submitted the report of her expert which placed a significant higher value of $1,226,861 on defendant's business interest. On December 21, 2004, defendant submitted his expert's report which arrived at a value of defendant's business interest at $515,000.

The trial judge conducted a three day trial commencing on May 2, 2005, and concluding on May 5, 2005. The parties and all three experts testified. During the trial, the parties stipulated that the value of the marital residence was $1.5 million, with a net value of $968,000.

Following the close of testimony, the parties agreed on a stipulated value of $750,000 for defendant's business interest, in exchange for plaintiff's agreement to waive permanent alimony. The parties also agreed to waive their right to appeal the court's determination of their competing applications for attorneys' fees in order to avoid further testimony on the issue.

On May 16, 2005, following oral and written summations, the court issued a written decision. The judgment of divorce allocated fifty percent of the net equity in the marital home to plaintiff, with defendant receiving forty percent, and ten percent being set aside for the children's college education. Plaintiff received fifty percent of the value of JMFG's stipulated value of $750,000, with defendant receiving the other fifty percent. The credit card debt of $12,000 was equally divided, however, defendant's liability to JMFG in the amount of $15,000 was allocated solely to defendant. Defendant was ordered to pay plaintiff's counsel $10,000 and be responsible for his own attorney's fees.

Child support was set at $26,000 to be paid by defendant. Defendant was also to provide medical insurance for the parties' children and be responsible for all of the children's unreimbursed medical and dental expenses, including vision care. A college fund for each child was established utilizing the fund referred to above. In addition, to the extent that defendant's income (salary, commissions, K-1) exceeds $360,000 in any given year, ten percent of the amount by which the defendant's income exceeds $360,000 per year shall be added to the children's college fund. Any college related expenses, which are not satisfied from the fund established by the judgment, is to be allocated between the parties, with defendant being responsible for seventy percent and plaintiff being responsible for thirty percent. The judgment requires that defendant be the custodian of the children's college accounts or their 529 Plan, whichever he chooses to open upon their establishment. The final judgment of divorce was entered on July 15, 2005. This appeal ensued.

On appeal, defendant presents the following argument for our consideration:

POINT I

THE TRIAL COURT ERRED IN AWARDING MARITAL ASSETS AND DEFENDANT'S FUTURE INCOME TO THE PARTIES' CHILDREN.

A) The Trial Court Erred in Equitably Distributing Marital Assets to Non-Parties.

B) The Trial Court Erred in Awarding the Parties' Children Property In Lieu of Security Interest.

C) The Trial Court Erred By Awarding Assets To the Parties' Children as There Was No Request or Evidence of Bad Faith To Justify a "Need" For Security.

D) The Trial Court Erred by Requiring Defendant To Set Aside His Future Income Regardless of Whether It Is Distributed to Him For The Children's Expenses.

E) The Trial Court Erred by Equally Allocating Defendant's Share of the Equity and Post-Commencement Contributions.

F) The Trial Court Erred By Failing To Order an Appropriate Buy-Out of The Equity in the Marital Residence.

POINT II

THE COURT ERRED IN ALLOCATING COLLEGE EXPENSES FOR THE PARTIES' CHILDREN EIGHT YEARS BEFORE THEY BEGIN COLLEGE.

POINT III

THE TRIAL COURT ERRED IN THE MANNER IN WHICH IT DISTRIBUTED THE PARTIES' OTHER MARITAL ASSETS.

A) The Trial Court Erred by Awarding Plaintiff Fifty Percent of Defendant's Business Interest.

B) The Trial Court Erred by Failing to Equitably Distribute the Parties' Marital Debt.

POINT IV

THE TRIAL COURT ERRED IN NOT PERMITTING DEFENDANT TO CONDUCT A PROPER EXAMINATION OF THE EXPERTS ON THE BUSINESS VALUATION ISSUES AND IN COERCING A SETTLEMENT OF THAT ISSUE.

POINT V

THE TRIAL COURT ERRED BY REQUIRING DEFENDANT TO PAY 100% OF THE UNREIMBURSED MEDICAL EXPENSES FOR THE PARTIES' CHILDREN.

POINT VI

THE TRIAL COURT ERRED IN AWARDING PLAINTIFF $10,000 IN COUNSEL FEES.

POINT VII

THE TRIAL COURT ERRED BY FAILING TO MAKE FINDINGS OF FACT AND CONCLUSIONS OF LAW WITH REGARD TO ALL ISSUES SUBJECT TO ADJUDICATION.

POINT VIII

BECAUSE OF THE BIAS ON THE PART OF THE TRIAL JUDGE, THE TRIAL JUDGE SHOULD BE RECUSED AND THE MATTER SHOULD BE REMANDED TO A DIFFERENT JUDGE.

We begin our consideration of defendant's arguments concerning equitable distribution and support by restating applicable legal principles. Support following divorce is governed by N.J.S.A. 2A:34-23. It provides in pertinent part that ". . . after judgment of divorce . . . the court may make such order . . . as to the care, custody, education, and maintenance of the children, or any of them, as the circumstances of the parties and the nature of the case shall render fit, reasonable and just . . ." N.J.S.A. 2A:34-23.

Equitable distribution is addressed in N.J.S.A. 2A:34-23(h), which provides that,

[i]n all actions where a judgment of divorce . . . is entered the court may make such award or awards to the parties, in addition to alimony and maintenance, to effectuate an equitable distribution of the property, both real and personal, which was legally and beneficially acquired by them or either of them during the marriage.

In applying these provisions of N.J.S.A. 2A:34-23, the trial judge is vested with broad authority to divide the parties' property. La Sala v. La Sala, 335 N.J. Super. 1, 6 (App. Div. 2000), certif. denied, 167 N.J. 630 (2001). In effecting equitable distribution, a trial judge must identify the property eligible for distribution, determine its value, and determine how such allocation can most equitably be made. Rothman v. Rothman, 65 N.J. 219, 232 (1974). "[T]he manner of distribution and the amount to be awarded to each party are issues addressed to the sound discretion of the trial court." Barba v. Barba, 198 N.J. Super. 205, 211 (App. Div. 1985), overruled on other grounds, Moore v. Moore, 114 N.J. 147 (1989).

Appellate review of the exercise of that discretion is narrow. Valentino v. Valentino, 309 N.J. Super. 334, 339 (App. Div. 1998); Wadlow v. Wadlow, 200 N.J. Super. 372, 377 (App. Div. 1985). The appellate court will consider only whether the result was "reached by the trial judge on the evidence, or whether it is clearly unfair or unjustly distorted by a misconception of law or findings of fact that are contrary to the evidence." Wadlow, supra, 200 N.J. Super. at 382 (quoting Perkins v. Perkins, 159 N.J. Super. 243, 247-48 (App. Div. 1978)). A trial court's factual findings are overturned on appeal only if they are "so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974).

Defendant argues that the trial court erred in equitably distributing marital assets to non-parties when it allocated ten percent of the home for an educational fund for the children. We disagree.

As stated above, N.J.S.A. 2A:34-23 explicitly authorizes the court to make such order as to the care, custody, and education of the children "as the circumstances of the parties and the nature of the case shall render fit, reasonable and just." The children are not third-parties in the eyes of the statute, but are to be protected and provided for in accordance with the statute by the court. The allocation of funds from the defendant's share of equitable distribution for the children's education is not an abuse of discretion by the trial judge. As the record indicates, the parties' family income was exceeding $400,000 for the last five years and there was no savings set aside for the children's education. Moreover, the testimony and the history of plaintiff's father's business demonstrate the volatility of such a business, and there was testimony that in the past, the defendant had used drugs. All of these factors support the trial judge's exercise of discretion to establish a fund for the future education of the children at this time. There are, however, some aspects of the creation of this fund which require us to remand the matter to the trial judge for further proceedings. The trial judge, in his letter opinion, states "at the conclusion of all college education expenses, any overage remaining shall be equally divided to the children." There is no explanation by the trial judge of either the legal or factual support for that. Moreover, that provision is not in the judgment itself. Should such an instance occur in the future, the judgment does not address the point. The children are presently not creditors of either plaintiff or defendant and, while there is authority for the allocation of assets for care, maintenance and education of children, N.J.S.A. 2A:34-23 is not so broad as to authorize gifts from one of the parties' share of equitable distribution. Accordingly, that provision of the opinion is remanded to the trial court so that it can either: (1) articulate a supportable basis for such a provision, or (2) because the trial court's opinion notes that the ten percent set-aside for the college account comes from defendant's fifty percent equity in the home, modify it to provide that should there be overage, it would belong to defendant.

Defendant further argues that there is no basis for an outright transfer of property but rather a security interest should be provided for their children with the property remaining in the husband's name pursuant to N.J.S.A. 2A:34-23.1(n). As stated earlier, there is no prohibition to an outright transfer in an appropriate circumstance. Consequently, a security interest was rejected by the trial court in a proper exercise of its discretion. Defendant's argument that before a court may require security for the performance of a financial obligation for education, a bad faith showing must be met is without support. As to defendant's sought-after ability to utilize the income from this ten percent interest for his purposes during the fund's existence, it is clear from the judge's opinion that a fund was to be established with the ten percent equity and that all income from those monies was to be utilized for the children's education.

Defendant's argument that the judgment of divorce requires him to contribute ten percent of the amount by which his income exceeds $360,000 per year even though it may not be actually received, is incorrect. A review of the judgment of divorce indicates that "to the extent that defendant's income (salary, commissions, K-1) exceeds $360,000 in any given year, ten percent of the amount by which defendant's income exceeds $360,000 per year shall be added to the children's college funds." That provision of the judgment uses the phrase "income in any given year." It is clear, therefore, that the judgment was referring to income actually received in a given year. The trial judge was well aware that the K-1 income referred to in one year may not be received until the next. However, from the colloquy in court, it is apparent that the trial judge anticipated looking at the income actually received from salary, commissions, and K-1 in a particular calendar year as the basis for determining whether the $360,000 threshold was met. We conclude, based upon our careful review of the record, that there was no abuse of discretion by the trial judge providing that the court- established college fund shall be equally applied to the parties' responsibilities for college.

Defendant appropriately notes that the trial court neither established a timetable nor a mechanism for the creation and funding of the college account to be set up with the ten percent equity in the home. Accordingly, this issue is remanded to the trial court for resolution.

Defendant argues that the court erred in allocating college expenses to the parties' children eight years before they begin college. Although plaintiff correctly observes that certain of the Newburgh v. Arrigo factors may not be determined now, many of them can and were addressed by the court. 88 N.J. 529 (1982). Our courts have recognized that in establishing support orders in connection with matrimonial actions, these orders are "always subject to review and modification on a showing of 'changed circumstances.'" Lepis v. Lepis, 83 N.J. 139 (1980) (quoting Chalmers v. Chalmers, 65 N.J. 186, 192 (1974)). In order for a future court to determine whether there has been a showing of changed circumstances, a baseline finding of the circumstances at the time the initial order was entered is necessary. See e.g., Crews v. Crews, 164 N.J. 11 (2000). While we find no fault in the trial judge establishing a college support order at the present time, it should be based upon findings which allow a court to assess its adequacy and reasonableness both now and in the future as circumstances may change. Consequently, on remand, the trial court is to set forth its findings as to a basis for its determination that the college costs which exceed the fund should be thirty percent plaintiff's responsibility, and seventy percent defendant's.

The trial court did not err in awarding plaintiff fifty percent of defendant's business interest. This discretionary action is supported by the judge's statement that he relied heavily on the funding sources of defendant's investment in JMFG. Defendant's argument that anecdotal, historical averages of the percent of equitable distribution awarded to spouses involved in a business should be a benchmark for a court in equitably distributing a particular business is unprecedented and certainly not a substitute for a trial judge's exercise of discretion founded on credible evidence.

Defendant argues there is no articulated factual basis for the allocation of the $15,000 of marital debt solely to the defendant. We agree. On remand, the trial judge is to analyze, and set forth the factual basis and his legal conclusion as to the allocation of that debt.

An argument has been raised by defendant that the trial court should have required plaintiff to pay the initial $250 of the unreimbursed medical expenses with any balance to be paid by the parties in proportion to their income. Again, the trial judge did not articulate a basis for his determination. Although, we note in the trial transcript that there was testimony concerning a flexible medical plan maintained by defendant which may be the reason for the trial judge's determination, we cannot point, however, to a stated rationale for this assessment and, therefore, remand that for further findings as well.

Defendant has requested that should there be a remand, the matter should not be returned to this trial judge. Our review of the record finds no basis to have this matter heard by another judge.

With respect to the balance of the points of appeal raised by defendant, we find them to be without merit. See R. 2:11-3(e)(1)(E).

Affirmed in part and remanded in part for further proceedings consistent with this opinion. We do not retain jurisdiction.

 

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A-6659-04T2

March 22, 2007