Opinion
DOCKET NO. A-2516-11T2
08-11-2014
SANDRA VILLEGAS, Plaintiff-Respondent v. JAMES VILLEGAS, Defendant-Appellant.
LaRocca Hornik Rosen Greenberg & Blaha, PC, attorneys for appellant (Erin K. Burke and Frank J. LaRocca, on the briefs). Geraldine E. O'Kane, attorney for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Reisner, Alvarez and Ostrer. On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Passaic County, Docket No. FM-16-574-10. LaRocca Hornik Rosen Greenberg & Blaha, PC, attorneys for appellant (Erin K. Burke and Frank J. LaRocca, on the briefs). Geraldine E. O'Kane, attorney for respondent. PER CURIAM
Defendant James Villegas appeals a Family Part final judgment of divorce issued on June 30, 2011. The Family Part judge's accompanying memorandum of decision was not issued until November 21, 2012, more than a year after the judgment of divorce dissolving the marriage. We affirm in part and, unfortunately, must remand for clarification of the equitable distribution decision. Since the remand is for a narrow question, we direct that a decision be rendered within ninety days.
Defendant and plaintiff Sandra Villegas married on September 1, 1990, and have two children, born December 1993 and March 1996. Plaintiff filed the divorce complaint on October 16, 2009, and the parties thereafter entered into an agreement regarding custody and parenting time. On December 18, 2009, a pendente lite order was entered requiring defendant to pay $299 per week in child support and barring both parties from disposing of assets held in their individual names absent the other's consent or a court order.
The final judgment dissolving the marriage incorporated the parties' prior agreement with regard to parenting time and required defendant to pay $277 per week in child support based on his 2010 earnings of $182,000 and plaintiff's imputed annual earnings of $60,000.
Plaintiff was awarded $3500 per month for three years as temporary alimony; however, in lieu of requiring defendant to make actual payments, the court decided that each party was "entitled to keep all of the monies in their respective retirement, investment and other bank or financial accounts." Insofar as the first-year college costs for the parties' eldest child, they were allocated twenty-five percent to plaintiff and seventy-five percent to defendant. Defendant filed a notice of appeal in January 2012, which was reinstated after the trial judge's November 21, 2012 written findings of fact and conclusions of law.
We reiterate the facts developed during the trial. Approximately six years after the marriage, throughout which they maintained separate finances, the parties purchased the marital home. Defendant paid the mortgage, while plaintiff was responsible for other expenses such as food, utilities, and car insurance. Plaintiff, who holds a bachelor's degree in mathematics, worked as a claims representative, and, later, a senior manager in the collection department of a medical services company (MSC). By 2009, she earned $147,733. In January 2010, half of her department was outsourced, and she lost her job. Plaintiff's six-month severance package extended through July 31, 2010, and included full salary, medical coverage, vacation time, and personal time.
Although plaintiff considered becoming a teacher, she ultimately rejected the idea because the starting salary was $45,000 and teaching positions were vulnerable to layoffs. She continued to monitor openings at the MSC, but the only positions available at her former salary required travel for approximately half the time. Because of the children, she did not wish to apply for these positions. She contacted three headhunters but could only find comparable jobs in New York City at an annual salary between $60,000 and $65,000. Plaintiff posted her resume on two different job websites. In September 2010, the MSC reopened her job, but then she was placed on hold and the interview was cancelled.
Eventually, plaintiff bought a pizza restaurant, and the building where it is located, for $220,000 in January 2011. In order to finance the purchase, she borrowed $125,000 and paid the balance out of her credit union account. In preparation for managing the business, plaintiff apprenticed for three months at the restaurant at no pay. At the time of trial, she had been operating it for nearly a month, and estimated that she would net $1000 per week. In addition, she anticipated monthly rent of $1050 for the upstairs apartment. When, in February 2011, the MSC again opened her position for interviews, she could not pursue the opportunity because she had just purchased the restaurant and building.
Sometime in or before the summer of 2009, plaintiff exercised stock options worth approximately $280,000 to fund that account. Plaintiff's use of the funds to buy the building was contrary to the trial court's December 18, 2009 order requiring consent of both parties or a court order for the disbursement of such monies.
Defendant, who does not hold a college degree, also worked at the MSC. His income grew from $22,646 in 1993 to $153,094 in 2009. Although disputed, defendant's 2010 W-2 established his gross income at $181,913. At trial, he testified that his base pay that year was $115,000. When asked about the discrepancy between his base pay and the figure on the W-2, he could not explain it. He then acknowledged that he received a $16,000 bonus, $10,445 as reimbursed travel expenses, $3252 for medical expenses, and $13,644 as 401(k) contributions. The remaining difference consisted of miscellaneous disbursements and the sale of stock options.
When the parties purchased the marital residence in 1996, they did so using funds from individually owned accounts. While the divorce was pending, they stipulated that the property's value was $400,000, with a mortgage balance of approximately $82,000. Plaintiff purchased defendant's equity in the home for $160,000 in cash, and funded the buy-out by withdrawing $40,000 from her credit union account. She obtained a new mortgage for approximately $200,000, thereby paying off the original mortgage and coming up with the balance due defendant. During the marriage, plaintiff largely financed approximately $140,000 in substantial improvements on the home, including a rear extension, the addition of fencing and stucco siding, and the installation of a pool.
Plaintiff's Case Information Statement (CIS) indicated that her monthly budget for herself and the two children was $8360, including $640 per month in utilities and repairs and $2114 for the monthly mortgage payment. She did not include any savings. Defendant's CIS indicated that his monthly expenses totaled $4234, including rent of $1450.
By the time of trial, the parties' oldest child had been accepted to college. Tuition was anticipated to be $26,000 per year, and the child had been offered $9000 in scholarships.
When the trial judge finally issued his memorandum of decision, he relied upon many of the facts that we have recounted above. He then determined that:
Under the totality of the circumstances, [plaintiff]'s decision to stick with her new business venture seems to be reasonable . . . . [The MSC]'s decision to transfer half of the accounts receivable unit to India and terminate [plaintiff] from her position . . . , followed by a reposting of the same position . . . , only to then place it on hold a month later, reasonably caused [plaintiff] to embark on a serious and fairly methodical evaluation of the pizzeria's worthiness as a business venture by which she could support herself and her children, eventually.
Having closed on the [pizzeria] business on January 26, 2011, [the MSC]'s next reporting of the position on February
15, 2011, with the added preference of experience in outsourcing work, whether or not travel to India was required, should have reasonably caused [plaintiff] doubt as to the long term viability of that position, even had she been offered it. . . .
The Court does not second guess the reasonableness of [plaintiff]'s decision as there would appear to be risks either way and [plaintiff]'s belief that her future would no longer be secure at [the MSC] and that sticking to her business plan was the better choice . . . .
As a result, the judge imputed $60,000 of yearly income to plaintiff, reasoning that this figure represented the highest salary plaintiff was offered in her field after making diligent efforts to secure other employment. In addition, that was "roughly" the amount she anticipated earning from the business, including rental from the apartment in her building.
The judge found that during the marriage the parties enjoyed a "solid middle class" lifestyle, that plaintiff was now the parent principally responsible for the children, and that, unlike her situation prior to the divorce, she now had a substantial mortgage on her home and on her new property. Defendant, on the other hand, had no debt, and had substantial assets and substantial earnings. The judge decided that although plaintiff was entitled to alimony, it should be only for a "[l]imited term," fixing the period at three years. He conc1uded that defendant's gross pay for 2010 was $181,913, and should be used to calculate his support obligations based on the following calculations:
This income consisted of $113,706 in base salary, a bonus of $16,000 and, according to [defendant], $41,763 from the sale of stock options and restricted stock units and the payment of "travel and expenses" in the amount of $10,445; why that last category is included as part of his gross pay is unclear. [] Defendant received unquestionably[] $29,282.95 from the sale of stock options in 2010 as [defendant] produced a 2010 W-2 reflecting the same. If he received $12,480 from the sale of restricted stock units, as claimed, (no W-2 was produced for that), then that would account for all of his total gross pay of $181,913.99. Different figures add up to that same amount on his W-2, however. His 2010 W-2 shows that he was paid $13,644.78 in 401 (k) benefits. Whether that was a matching contribution, bringing his total compensation closer to $195,000 is unclear but it seems plausible in that [the MSC] deducted that sum, along with the travel expenses and medical and prescription payments/reimbursements from his gross pay.
All but, perhaps, the "travel and expenses" portion of [defendant]'s gross pay are appropriate for consideration as to [defendant]'s income for purposes of determining his spousal and child support obligations. While bonuses and the amount of income from the exercise of stock options vary from year to year, [defendant] . . . has enjoyed such income virtually every year, with a nearly unbroken upward trajectory. Those are the perquisites of his employment at [the MSC] and must be considered. His 2010 income for support purposes was, arguably, as little as $171,469 if the "travel and expenses" portion of his gross pay was, in fact,
simply a reimbursement of 2009 travel expenses, as [defendant] claims, but its inclusion in his gross pay makes that questionable. . . . On balance, it is the [c]ourt's view that the proofs support using the figure on [defendant's] W-2 of $181,913.99 in gross pay as the figure to be used for calculating [defendant]'s support obligations at this time.
The judge also found that, at the time of the filing of the complaint, plaintiff had about $780,000 in bank accounts, stock investments, retirement accounts, and pension benefits whereas defendant had about $500,000 in his name. The judge stated that "[p]recise amounts c[ould not] be determined . . . as the parties submitted documents with varying dates for the value of the multiple liquid assets." By his calculations, the difference between the parties' shares was approximately $140,000.
The judge noted that plaintiff, other than COBRA, had no medical insurance, she had minimal life insurance, and was not in a financial position to accumulate retirement assets as she had during the marriage. Defendant, who was debt-free, could continue to save. He therefore opined that even with $60,000 of imputed income, $277 per week of child support, and $3500 per month in alimony, the amount that plaintiff was requesting, plaintiff would be unable without substantially depleting her savings, to continue providing a lifestyle for herself and the children commensurate with the standard they had previously enjoyed. The judge calculated defendant's expenses at $51,800 per year, exclusive of $14,404 in child support and his share of college expenses.
The judge then fixed the amount of alimony at $3500 for three years to allow plaintiff to either develop her business or enter into a new financial plan that would put her back in an earning position similar to what she had enjoyed prior to her loss of employment. The judge decided that the alimony obligation would be satisfied by each party retaining the assets in his or her name only.
The judge next considered defendant's allegation that plaintiff's use of funds from her individual account to buy out his interest in the marital home violated the prior order barring either party from making unilateral withdrawals on their assets. The judge deemed the violation to be "irrelevant and immaterial" because "[w]hether the house was sold and those liquid assets were subsequently distributed, the bottom line . . . would not be different for the [parties]." Additionally, the judge denied defendant's request for child support credits, to which he claimed he was entitled because of overnight visitation. He did so because defendant's business travel caused him to frequently miss visits with the children.
Defendant raises the following points on appeal:
POINT I
THE TRIAL COURT ERRED IN FAILING TO IMPUTE SUFFICIENT INCOME TO THE PLAINTIFF FOR PURPOSES OF ALIMONY AND CHILD SUPPORT, THEREBY IGNORING HER EARNINGS HISTORY, LACK OF CREDIBILITY AND EVIDENCE OF HER VOLUNTARY UNDEREMPLOYMENT.
POINT II
THE TRIAL COURT INCORRECTLY ATTRIBUTED INCOME TO THE DEFENDANT FOR PURPOSES OF ALIMONY AND CHILD SUPPORT.
POINT III
AS A RESULT OF THE TRIAL COURT[']S INCORRECT IMPUTATION OF INCOME TO THE PARTIES AND THE ORDER THAT BOTH PARTIES KEEP THEIR ACCOUNTS IN LIEU OF ALIMONY, CHILD SUPPORT WAS MISCALCULATED.
POINT IV
THE TRIAL COURT'S ERRORS IN IMPUTING INSUFFICIENT INCOME TO THE PLAINTIFF, AND ATTRIBUTING EXCESS INCOME TO THE DEFENDANT, LED TO AN ERRONEOUS GRANT OF A THREE YEAR ALIMONY AWARD OF $3,500.00 PER MONTH.
POINT V
THE TRIAL COURT USURPED THE DEFENDANT'S RIGHT TO EQUITABLE DISTRIBUTION OF MARITAL ASSETS IN ORDERING THAT THE PARTIES EACH RETAIN THEIR FINANCIAL ACCOUNTS IN LIEU OF DEFENDANT PAYING ALIMONY, AND FURTHER DENIED HIM THE RIGHT TO CLAIM ALIMONY AS A DEDUCTION IN ACCORDANCE WITH THE INTERNAL REVENUE CODE.
POINT VI
THE TRIAL COURT ERRED IN ALLOCATING RESPONSIBI[L]ITY FOR COLLEGE COSTS, WHERE THE COURT FAILED TO IMPUTE SUFFICIENT INCOME TO THE PLAINTIFF AND INCORRECTLY ATTRIBUTED INCOME TO THE DEFENDANT.
POINT VII
THE TRIAL COURT ERRED IN DENYING THE DEFENDANT A CHILD SUPPORT CREDIT IN ACCORDANCE WITH THE HOLDING OF MALLAMO v. MALLAMO.
"The scope of appellate review of a trial court's fact-finding function is limited," and, "[b]ecause of the family courts' special jurisdiction and expertise in family matters, appellate courts should accord deference to family court factfinding." Cesare v. Cesare, 154 N.J. 394, 411, 413 (1998). We "ordinarily defer to the factual findings of the trial court because it has the opportunity to make first-hand credibility judgments about the witnesses who appear on the stand; it has a feel of the case that can never be realized by a review of the cold record." See N.J. Div. of Youth & Family Servs. v. E.P., 196 N.J. 88, 104 (2008) (internal quotation marks omitted). "Particular deference is afforded to decisions on issues of credibility." N.J. Div. of Youth & Family Servs. v. G.L., 191 N.J. 596, 605 (2007 ).
"However, where the focus of the dispute is not on credibility but, rather, alleged error in the trial judge's evaluation of the underlying facts and the implications to be drawn therefrom the appellate function broadens somewhat." C.B. Snyder Realty Inc. v. BMW of N. Am. Inc., 233 N.J. Super. 65, 69 (App. Div.), certif. denied, 117 N.J. 165 (1989). "[T]he trial judge's legal conclusions, and the application of those conclusions to the facts, are subject to our plenary review." Reese v. Weis, 430 N.J. Super. 552, 568 (App. Div. 2013).
I.
Defendant contends that all of the trial judge's calculations - the income imputed to plaintiff, the income the judge found that defendant earned in 2010, the child support guidelines calculations, the percentage of college contribution, the amount of alimony - were incorrect. And, he contends that the judge's failure to award him a credit for child support contributions made prior to the entry of an order was reversible error.
For purposes of calculating alimony and child support awards, a trial court may impute income to one or both spouses. Mowery v. Mowery, 38 N.J. Super. 92, 104-05 (App. Div. 1955), certif. denied, 20 N.J. 307 (1956); see Tannen v. Tannen, 416 N.J. Super. 248, 261 (App. Div. 2010) (noting that a trial judge "may impute income" in the process of "determining an appropriate alimony award"), aff'd o.b., 208 N.J. 409 (2011); Tash v. Tash, 353 N.J. Super. 94, 99 (App. Div. 2002) ("Both the [child support] guidelines and the case law of this State explicitly permit the imputation of income where earnings cannot be determined [for child support purposes]."). We recognize that "[i]mputation of income is a discretionary matter not capable of precise or exact determination but rather requiring a trial judge to realistically appraise capacity to earn and job availability." Storey v. Storey, 373 N.J. Super. 464, 474 (App. Div. 2004). Accordingly, "[a] trial judge's decision to impute income of a specified amount will not be overturned unless the underlying findings are inconsistent with or unsupported by competent evidence." See Overbay v. Overbay, 376 N.J. Super. 99, 106-07 (App. Div. 2005) (internal quotation marks omitted).
In making alimony determinations, a court is directed to consider a host of factors, including, but not limited to, need, duration of the marriage, standard of living attained during the marriage, earning potential, history of financial contributions to the marriage, equitable distribution, and the tax treatment and consequences "to both parties of any alimony award, including the designation of all or a portion of the payment as a non-taxable payment." See N.J.S.A. 2A:34-23(b).
We begin by considering defendant's claim that the trial court erred by imputing insufficient income to the plaintiff while inflating his 2010 earnings. As a threshold matter, he challenges the judge's conclusion that plaintiff's decision to abandon her job search and instead develop her business was reasonable. We disagree.
This exercise of discretion on the part of the judge appears unassailable, given plaintiff's responsibilities for the children and concerns that substantial travel would impair her availability as it existed prior to the divorce. She made good faith, bona fide efforts to obtain comparable employment yet was simply unable to do so.
We see nothing in the record which raises a doubt in our mind as to the propriety of the judge's conclusion. Given plaintiff's background and her caution in entering into the business, the likelihood is that she will indeed be able to earn a reasonable income from the enterprise while continuing to be available for her children. This availability is important in light of defendant's business travel. The record therefore supports the judge's conclusion. Plaintiff is not voluntarily underemployed; instead, she made the best of a financially difficult situation. We see no abuse of discretion in the judge's imputation of income.
With reference to defendant's claim that his income was inflated, defendant first contends that the trial court erroneously included proceeds of stock option sales, in reliance on Heller-Loren v. Apuzzio, 371 N.J. Super. 518 (App. Div. 2004). In that case, we did state that "the ability to exercise stock options does not by itself give rise to 'income.'" Id. at 533. However, "[w]e emphasize[d] [] that our decision [wa]s based on the particular PSA in question." Id. at 522. We further stated: "the exercise of a stock option may constitute 'income' in New Jersey, and in any event, [] the profitable sale of stock after exercise of the options certainly constitutes 'income.'" Id. at 533. Here, there was no PSA and defendant appears to have exercised stock options and received income. It would have been illogical for the trial judge under those circumstances not to have included the proceeds in defendant's income for the year.
Insofar as the award of alimony, the trial judge expressly premised his "award of spousal support" on "the parties' respective incomes (and imputed income), the length of the marriage (twenty (20) years) and [] other factors discussed." (emphasis added). The judge also commented on plaintiff's heavier parenting responsibilities, change in career, assumption of substantial mortgage debts, past expenditures on the home, lack of employer-provided health insurance, underestimation of family maintenance expenses, and inability to accumulate retirement assets. Additionally, the judge touched on defendant's job security, positive economic prospects, substantial perquisites of employment, and past unavailability for some of his parenting time because of business travel. The parties' testimony, even if conflicting on some points, and the documents submitted during the trial, supported the judge's observations.
N.J.S.A. 2A:34-23(b) enumerates twelve factors that a trial court may consider when awarding and calculating alimony, in addition to "[a]ny other factors which the court may deem relevant." In light of the discretion vested in judges by the statute, and the plethora of factors relied on by the judge in the matter at hand, we cannot agree that the judge erred.
The particulars of defendant's 2010 income were far from transparent. His W-2 indisputably indicated that his gross pay was $181,913. The W-2 listed $10,444.52 for travel and expenses, $13,644 for 401(k), $3,252.34 for medical expenses, and roughly $1,000 for other, miscellaneous compensation. That left about $154,000 in unaccounted-for monies, and the face of the W-2 does not appear to shed any light on the allocated sources of that sum. When testifying, defendant could not fully explain the gap, originally directing plaintiff's attorney to "contact The MSC." Ultimately, defendant estimated that his base salary was $115,000, and he stated that he had received a $16,000 bonus. That still left a gap of roughly $23,000, which it was defendant's responsibility to explain. He did not do so.
The trial judge attempted to dissect defendant's W-2, but ultimately concluded that "[d]ifferent figures add up to that same amount on his W-2." The judge also pointed out that the 401(k) figure of $13,644.78 might have been a matching contribution. Further, the judge questioned whether the travel and expenses figure was truly a reimbursement sum, since it was included in the W-2 "pay" column. In light of the fragmentary testimony and less-than-clear financial proofs, the judge's decision to settle on $182,000 was a reasonable exercise of discretion. See E.P., supra, 196 N.J. at 104.
It is also noteworthy that the trial judge did not arrive at defendant's income figure by sole reference to the W-2. The judge pointed out that defendant could expect increases in future income, including additional bonuses and stock options, which were "the perquisites of his employment . . . and must be considered." Although not expressly relied on by the judge, defendant also continues to enjoy health insurance and the ability to accumulate retirement assets (additional employment perquisites).
For those reasons, we conclude that the judge's calculations of income for support purposes were based on sufficient evidence in the record. We see no reason to disturb those calculations.
II.
Defendant also contends that the trial court "usurped" his right to equitable distribution because of the manner in which he structured the alimony payments. Further, defendant argues that the judge's equitable distribution award deprived him of the ability to deduct alimony from his income for tax purposes. Initially, we reject the latter point because a trial judge has authority to balance tax consequences, as one of many factors, when arriving at an equitable distribution decision. See N.J.S.A. 2A:34-23.1(j).
As to defendant's remaining point, the parties agree that defendant's equitable distribution assets totaled approximately $364,000. However, they disagree as to the value of plaintiff's assets; plaintiff puts the number at $650,448 whereas defendant estimates it to have been $715,022. The difference stems from the parties' respective valuations of a single asset, plaintiff's 401(k) account. Given the conflicting proofs, the judge had the prerogative to accept a figure in line with plaintiff's valuation. See Cesare, supra, 154 N.J. at 412-13.
The difference between $650,448, which is plaintiff's valuation of her assets on appeal, and $364,000, which the parties agree was the value of defendant's assets, is $286,448, and half of that amount is $143,224. The trial judge placed the value of plaintiff's assets at $780,000 and defendant's assets at $500,000, which differ from the numbers now asserted by the parties. However, the difference is roughly the same-approximately $280,000 - entitling each party to $140,000, the number arrived at by the judge. Thus, although not entirely clear from the record, it appears that the judge either adopted plaintiff's valuation of her 401(k) account or arrived independently at a number in line with that figure.
Further, the trial judge determined that plaintiff was entitled to $3500 per month ($42,000 annually) in alimony for three years, in light of her expenses and decreased earning power. Defendant was, accordingly, obliged to pay an aggregate alimony sum of $126,000.
On balance, the difference between the amount of plaintiff's assets to which defendant had a claim ($140,000) and the amount of defendant's assets to which plaintiff had a claim ($126,000) was $14,000. However, we believe that two additional sums were relevant to the equitable distribution calculus.
The parties also had approximately $320,000 of equity in the marital home, potentially entitling them each to $160,000. Plaintiff purchased defendant's interest using $40,000 from her credit union account and paying the balance with mortgage monies. Of the $40,000 from her account, however, defendant was theoretically already entitled to $20,000 (since the judge seemed to be splitting assets in half). Furthermore, defendant had a claim on another $47,500, representing half of plaintiff's account funds that she used to purchase the business and building.
As the trial judge explained, however, plaintiff's budget was quite modest, not including amounts for savings, investment, maintenance of either her home or her investment property, or vacation. Those items are included in the lifestyle plaintiff previously enjoyed and that, realistically, may now be beyond her reach. Defendant, in contrast, enjoys a substantial annual income while incurring relatively modest expenses. Additionally, although plaintiff seems to have approached her investment in her business in a prudent fashion, her lack of experience in restaurant operation could make the enterprise particularly difficult.
In total, then, the trial judge's equitable distribution decision, in which the parties were permitted to simply keep their respective accounts, favored plaintiff by approximately $81,500. Specifically, using a fifty-fifty distribution scheme, defendant was entitled to an additional $14,000 of plaintiff's current account monies and $67,500 of plaintiff's funds in her own name that she used to buy out defendant's interest in the marital home and to buy her business.
Although we recognize the substantial discretion afforded to Family Court judges to fashion equitable distribution, we are constrained to remand this issue to the Family Part. The trial judge neither expressly identified the $81,500 shortfall in assets retained by plaintiff, nor accounted for their equitable distribution. However, for the reasons just discussed, he may have intended a disproportionate award of those monies to plaintiff because of the disparity in future earning potential or for some other reason. Therefore, we remand the matter to the Family Part judge for clarification within ninety days as to whether he intended to allow plaintiff to retain the $81,500 excess, and to articulate his reasons for the allocation, or whether the allocation was an oversight and if so what distribution would be appropriate.
Insofar as we have not expressly addressed any of defendant's points in this opinion, we find them so lacking in merit as to not warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed in part, and remanded. I hereby certify that the foregoing is a true copy of the original on file in my office.
/s/_______
CLERK OF THE APPELLATE DIVISION