Opinion
DOCKET NO. A-1623-14T2
02-09-2016
JOHN R. DEPROSPO, Plaintiff-Respondent, v. MARILYN DEPROSPO, Defendant-Appellant.
Rebecca R. Faulkner argued the cause for appellant (Oswald & Zoschak, P.C., attorneys; Ms. Faulkner, on the brief). Respondent has not filed a brief.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Leone and Whipple. On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Passaic County, Docket No. FM-16-270-13. Rebecca R. Faulkner argued the cause for appellant (Oswald & Zoschak, P.C., attorneys; Ms. Faulkner, on the brief). Respondent has not filed a brief. PER CURIAM
Defendant Marilyn DeProspo and plaintiff John R. DeProspo entered into a Property Settlement Agreement (PSA) incorporated into their October 17, 2013 final judgment of divorce (FJOD). Defendant appeals from subsequent orders, particularly one concerning the payment of taxes on IRA withdrawals. Because we cannot determine the basis for the trial court's ruling, we vacate and remand for further proceedings.
I.
In its "Retirement Accounts" section, the parties' PSA provided that the parties agreed to divide plaintiff's two pensions equally, using Qualified Domestic Relations Orders (QDROs), within thirty days of the entry of the final judgment of divorce. The PSA then stated that plaintiff "also has a Wells Fargo IRA . . . which shall be equally divided between the parties." The PSA added:
The parties had previously agreed to make withdrawals from the IRA as needed to pay the expenses on the former marital home. Accordingly, [plaintiff] made certain withdrawals of $20,000 (before taxes were withheld) and distributed one-half of each withdrawal to [defendant]. For so long as no other withdrawals were made, the parties shall share in the remaining balance.
Other than referring to the withholding of taxes, the "Retirements Accounts" section made no provision for the payment of taxes on the IRA withdrawals. The "Income Taxes" article of the PSA stated: "For the year 2012 the parties have filed joint federal and state tax returns and they have shared equally in all refunds. Thereafter, the parties will file separate tax returns and each shall be responsible for any tax liability incurred in their own name."
Plaintiff made several withdrawals in early 2013 from his IRA, Wells Fargo withheld money for taxes, and plaintiff gave one-half of the net withdrawals to defendant.
In July 2014, plaintiff filed a motion seeking reimbursement from defendant for taxes on the withdrawals. In his certification, plaintiff stated: "Initially, with the exclusion of my half of the pension withdrawals, the amount I owed for taxes was only $2,027.00." He attached a 2013 U.S. Individual Income Tax Form 1040, marked "draft," showing a tax owed of $2,027. This draft Form 1040 indicated IRA distributions of $38,668, pension distributions of $6,385, and federal income tax withheld of $4,505, each marked "1/2."
Plaintiff's certification then stated: "However, due to the fact that I was forced to liquidate my retirement accounts and solely pay taxes on the same, I owed [$]9,521.00." He attached an unsigned 2013 Form 1040 showing a tax owed of $9,521. This unsigned Form 1040 indicated IRA distributions of $77,335, pension distributions of $12,769, and federal income tax withheld of $9,011. Plaintiff argued defendant should reimburse him the $7,4 94 difference in federal tax owed.
In his certification, plaintiff also asserted he had to pay additional New Jersey income tax due to the IRA withdrawals. He attached a draft 2013 NJ-1040 Form showing pension and IRA withdrawals of $19,463 and tax owed of $0, and an unsigned 2013 NJ-1040 Form showing pension and IRA withdrawals of $54,228 and tax owed of $312. Plaintiff contended that defendant should reimburse him $156 for half of the additional New Jersey taxes.
In her certification in opposition, defendant asserted that plaintiff's tax returns were unfiled drafts, and that he failed to supply the supporting documentation such as the Form 1099 from Wells Fargo. Defendant attested, and alleged the Form 1099 would confirm, that she had already paid half of the estimated taxes on the IRA withdrawals because Wells Fargo had withheld 10% of each withdrawal, the withdrawals were evenly divided, and the balance of the IRA was evenly divided between the parties. Defendant also expressed concern at plaintiff's claim that he had liquidated other retirement accounts and made withdrawals from his pensions, as the QDROs had not yet been signed.
Defendant's principal argument in her certification and at the motion hearing was that any additional tax plaintiff owed in 2013 was plaintiff's responsibility under the "Income Taxes" article of the PSA. Further, defendant's certification attached a proposed version of the "Income Taxes" article which instead stated: "Thereafter, the parties will file separate tax returns but the parties agree to be equally responsible for all distributions, withdrawals, and cash outs the parties have made in 2013 from John's IRA pursuant to this agreement. This is solely for the tax year of 2013." Defendant's certification represented that plaintiff's counsel had proposed this version, that defendant's counsel had rejected this language because defendant had already paid half the withheld taxes, and that instead the parties had agreed on the PSA's "Income Taxes" article providing: "Thereafter, the parties will file separate tax returns and each shall be responsible for any tax liability incurred in their own name."
In his reply certification, plaintiff said he had filed the "unsigned" federal and New Jersey tax forms. He admitted that Wells Fargo withheld 10% for taxes, but argued his calculations gave plaintiff "her ten percent back." Plaintiff's reply certification did not address the current and proposed versions of the "Income Taxes" article. At the motion hearing, plaintiff's counsel acknowledged that the parties had made changes to the PSA, but argued that he did not know who had sent the proposed language attached by defendant.
At the October 2, 2014 motion hearing, after the parties' counsel voiced these arguments, the trial court asked to see counsel "inside," apparently in a chambers conference that was not transcribed. The hearing ended without a resolution of this issue on the record. On October 21, 2014, the court issued an order stating only that the court ordered defendant to reimburse plaintiff $3,757 and $156, respectively one-half of the difference in the federal and state taxes plaintiff alleged were owed. On October 29, 2014, the court issued a letter opinion simply stating:
In an October 13, 2014 letter to the court, defendant's counsel stated that plaintiff had been given until October 9, 2014, "to supplement his pleadings," but had failed to do so. Defendant's counsel asked the court to rule based on the filed pleadings and oral arguments.
1. Mr. DeProspo alleges his taxes were $9,251 for the year 2013. They would have been $2,207 for 2013 but for the withdrawal for his IRA.
2. The IRA money was split in half — so the taxes on that withdrawal — $7,494 — were also split in half.
Defendant appealed. Plaintiff has failed to file a brief.
II.
"[A] question regarding the interpretation or construction of a contract is a legal one and our review is plenary, with no special deference to the trial judge's interpretation of the law and the legal consequences that flow from the established facts." Barr v. Barr, 418 N.J. Super. 18, 31 (App. Div. 2011). However, a ruling on an enforcement motion in a matrimonial action "is reviewed for abuse of discretion, with deference to the expertise of Family Part judges." See Costa v. Costa, 440 N.J. Super. 1, 4 (App. Div. 2015). We must hew to those standards of review. However, the trial court's opinion is inadequate for us to resolve the appeal.
There was no indication in the trial court's opinion whether or how the court considered the arguments made by defendant. In particular, nothing in the letter explicitly addressed defendant's principal argument based on the PSA's "Income Taxes" article, which provided that, after 2012, "the parties will file separate tax returns and each shall be responsible for any tax liability incurred in their own name." The plain language of this provision was that plaintiff would be responsible for any 2013 tax liability incurred in his own name. Any additional tax on plaintiff's 2013 withdrawals from his IRA was legally incurred in his name because it was a withdrawal by him from his IRA. Nonetheless, the court ordered defendant to be responsible for part of plaintiff's tax liability for 2013 in apparent contradiction of the plain language of the "Income Taxes" article.
See Webster's II New College Dictionary 576 (3d ed. 2005) (defining "incur" as "[t]o become liable or subject to, esp. because of one's own actions."); Black's Law Dictionary 836 (Garner, 9th ed. 2009) (defining "incur" as "[t]o suffer or bring on oneself (a liability or expense)."); see also Alpert, Goldberg, Butler, Norton & Weiss, P.C. v. Quinn, 410 N.J. Super. 510, 545 (App. Div. 2009) ("incurred means 'to have liabilities cast upon one by act or operation of law, as distinguished from contract, where the party acts affirmatively; to become liable or subject to'" (citations omitted)), certif. denied, 203 N.J. 93 (2010).
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Moreover, defendant presented evidence of the parties' intent. The earlier version of the "Income Taxes" article attempted to create an exception to make both parties equally responsible for any taxes on plaintiff's 2013 withdrawals from his IRA. Defendant certified she rejected that version proposed by plaintiff, and argued that he was attempting to obtain through his motion what he had attempted and failed to obtain in the parties' consensual agreement.
"'New Jersey has long espoused a policy favoring the use of consensual agreements to resolve marital controversies.'" J.B. v. W.B., 215 N.J. 305, 326 (2013) (quoting Konzelman v. Konzelman, 158 N.J. 185, 193 (1999)). "Advancing that public policy is imperative in the family courts where matrimonial proceedings have increasingly overwhelmed the docket." Puder v. Buechel, 183 N.J. 428, 438 (2005). Such matrimonial agreements "should be enforced according to the original intent of the parties." J.B., supra, 215 N.J. at 326. Indeed, "courts 'strain to give effect to the terms of a settlement wherever possible.'" Brundage v. Estate of Carambio, 195 N.J. 575, 601 (2008) (citation omitted). Such "'[f]air and definitive arrangements arrived at by mutual consent should not be unnecessarily or lightly disturbed.'" Konzelman, supra, 158 N.J. at 193-94 (citation omitted).
In interpreting consensual matrimonial agreements, certain principles generally apply. "First and foremost, 'fundamental canons of contract construction require that we examine the plain language of the contract and the parties' intent, as evidenced by the contract's purpose and surrounding circumstances.'" Highland Lakes Country Club & Cmty. Ass'n v. Franzino, 186 N.J. 99, 115 (2006) (citation omitted). A court has "'greater discretion'" when interpreting agreements in the domestic arena. Sachau v. Sachau, 206 N.J. 1, 5 (2011) (citation omitted). Nonetheless, "if we find 'the terms . . . are clear and unambiguous, there is no room for construction and the court must enforce those terms as written.'" Barr, supra, 418 N.J. Super. at 32 (quoting Watson v. City of E. Orange, 175 N.J. 442, 447 (2003)).
"However, '[i]f the terms of the contract are susceptible to at least two reasonable alternative interpretations, an ambiguity exists. In that case, a court may look to extrinsic evidence as an aid to interpretation.'" Ibid. (quoting Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 N.J. 231, 238 (2008)). Finally, we may not "make a better contract for either of the parties than the one which the parties themselves have created." Ibid. (quoting Maglies v. Estate of Guy, 193 N.J. 108, 143 (2007)).
Here, the trial court's terse opinion does not state whether it considered the "Income Taxes" article, whether it found its language ambiguous, or whether it considered the prior version in determining the parties' intent. We do not know if the court accepted defendant's certification concerning the parties' negotiations, or found plaintiff's argument created an issue of fact. If the latter, a plenary hearing may have been required. See id. at 38.
The trial court's opinion could be understood as invoking principles of equity rather than contract interpretation. However, "as a general rule, 'absen[t] . . . unconscionability, fraud, or overreaching in negotiations of the settlement,' a trial court has 'no legal or equitable basis . . . to reform the parties' property settlement agreement.'" J.B., supra, 215 N.J. at 326 (citation omitted). Because a PSA "'must reflect the strong public and statutory purpose of ensuring fairness and equity in the dissolution of marriages,'" a court may modify a PSA if a party "meet[s] the threshold standard of changed circumstances." J.B., supra, 215 N.J. at 326-27 (citation omitted). However, it is unclear whether the trial court found changed circumstances, particularly as defendant certifies that the possibility of defendant paying additional taxes was discussed and rejected in negotiating the PSA. See id. at 327.
We recognize the heavy burden on trial courts imposed by busy motion calendars. Nonetheless, a trial court must "find the facts and state its conclusions of law thereon . . . on every motion decided by a written order that is appealable as of right." R. 1:7-4(a). "[A]n articulation of reasons is essential to the fair resolution of a case." Schwarz v. Schwarz, 328 N.J. Super. 275, 282 (App. Div. 2000). "[N]aked conclusions do not satisfy the purpose of R. 1:7-4." Ibid. (quoting Curtis v. Finneran, 83 N.J. 563, 570 (1980)). "Failure to make explicit findings and clear statements of reasoning 'constitutes a disservice to the litigants, the attorneys, and the appellate court.'" Gnall v. Gnall, 222 N.J. 414, 428 (2015) (citation omitted).
Here, we cannot discern the basis of the trial court's opinion from the naked conclusion in its letter opinion. Given the trial court's failure to explicitly address the "Income Taxes" article, and the effect of any negotiations over the prior version, we are compelled to remand for it to address those issues.
We are also concerned that, with no explanation, plaintiff's draft Form 1040 differs from the unsigned Form 1040 in two ways that increase the difference in tax owed, of which plaintiff demands defendant pay half. First, the unsigned Form 1040 includes $12,769 in taxable pension distributions to plaintiff, but the draft Form 1040 includes only half — $6,385. As the PSA provides that plaintiff's pensions are to be divided by QDRO, and as defendant certified that the QDROs had not been signed and that plaintiff's pension withdrawals were unauthorized, there is no obvious reason why plaintiff can treat only half of the taxable withdrawals as attributable to him. Second, the draft Form 1040 includes a student loan interest deduction of $2,500 that is omitted without explanation from the unsigned Form 1040. Moreover, the two NJ-1040 forms' figures for "pensions, annuities, and IRA withdrawals" differ in unexplained ways from each other.
Because we cannot determine the propriety of the figures, which helped determine the amount for the trial court's order, remand is further justified. See Fodero v. Fodero, 355 N.J. Super. 168, 170 (App. Div. 2002). Remand also allows the court, in its discretion, to order plaintiff to supply supporting documentation for his tax calculations, including the Wells Fargo Form 1099.
Accordingly, we vacate the trial court's grant of plaintiff's motion, and remand for the court to consider the issues raised above in light of the applicable precedent, to hold a plenary hearing if necessary, and to issue a decision comporting with Rule 1:7-4(a). We leave for the trial court's initial determination whether the negotiation history of the PSA or the equities alter or support the plain language of the "Income Taxes" article. See Vasconi v. Guardian Life Ins. Co., 124 N.J. 338, 340 (1991).
III.
Defendant also appeals the trial court's denial of counsel fees. Defendant filed a cross-motion requesting the court: to hold plaintiff in violation of litigant's rights for his failure to comply with the PSA's requirements that he "provide all statements received in 2013 for [the Wells Fargo IRA] account"; to order plaintiff to produce the statements within ten days; if he failed to do so, to allow defendant to subpoena those records; to order plaintiff to provide proof that he had not dissipated defendant's share of his retirement accounts; and to compel plaintiff to complete the QDROs. In a second order issued October 21, 2014, the court granted that relief, and provided that the amount wrongfully dissipated would be determined after the exchange of documents, but denied defendant's request for counsel fees and costs. The court provided no explanation for that denial.
As we are vacating the trial court's ruling on plaintiff's motion, which may have affected its ruling on defendant's request for counsel fees, we vacate the court's denial of that request. After resolving plaintiff's motion, the court shall issue an opinion comporting with Rule 1:7-4(a), resolving the request for counsel fees, considering all factors incorporated in Rule 5:3-5(c), including "the degree to which fees were incurred to enforce existing orders or to compel discovery," Rule 5:3-5(c)(8).
Vacated in part, and remanded for further proceedings consistent with this opinion. 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