Opinion
DOCKET NO. A-2346-12T3
08-08-2014
JILL GARDINER, n/k/a JILL STEENLAND, Plaintiff-Respondent, v. CHARLES K. GARDINER, Defendant-Appellant.
Klehr Harrison Harvey Branzburg, L.L.P., attorneys for appellant (Lisa Moore, on the briefs). Puff & Cockerill, L.L.C., attorneys for respondent (Christine C. Cockerill, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Reisner, Alvarez and Ostrer. On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Cumberland County, Docket No. FM-06-356-10. Klehr Harrison Harvey Branzburg, L.L.P., attorneys for appellant (Lisa Moore, on the briefs). Puff & Cockerill, L.L.C., attorneys for respondent (Christine C. Cockerill, on the brief). PER CURIAM
Defendant Charles K. Gardiner (defendant) appeals from several portions of a March 4, 2013 final judgment of his divorce from plaintiff Jill Gardiner (plaintiff). The order on appeal resulted from a 16-day bench trial, after which the trial judge issued a 124-page written opinion that included detailed factual findings and credibility determinations.
Defendant's appeal raises the following nine points, which challenge financial issues addressed by the trial judge as well as the counsel fee award to plaintiff.
I. THE TRIAL COURT ERRED BY DIRECTING DEFENDANT TO PAY CHILD SUPPORT TO PLAINTIFF WITH WHOM HE SHARES JOINT LEGAL AND PHYSICAL CUSTODY.
II. THE TRIAL COURT ERRED BY ALLOCATING THE PARTIES' RESPECTIVE PRIVATE SCHOOL TUITION CONTRIBUTION 75% TO THE
DEFENDANT [AND] 25% TO THE PLAINTIFF.
III. THE TRIAL COURT ERRED IN AWARDING PLAINTIFF SPOUSAL SUPPORT TOTALING $710.00 PER WEEK.
a. The Trial Court failed to properly impute to work [sic] income to the Plaintiff based upon her ability and financial contributions she receives from her parents.IV. THE TRIAL COURT ERRED IN TRANSFERRING 230 BREWSTER ROAD TO THE PLAINTIFF'S PARENTS, MR. & MRS. HENRY STEENLAND.
b. The Trial Court erred by failing to consider the impact of the downturn of the economy, the financial impact of relocating the business from the marital home and the loss of nonrecurring income upon the Defendant's income in its determination of Defendant's present income for support purposes.
V. THE TRIAL COURT ERRED BY ESTIMATING THE PRE[-]MARITAL VALUE OF SUPERIOR PEST CONTROL TO TOTAL $14,748.00.
VI. THE TRIAL COURT ERRED IN ITS VALUATION AND DISTRIBUTION OF PLAINTIFF'S INTEREST IN SUPERIOR PEST CONTROL.
a. Capitalization Rate.VII. THE TRIAL COURT ERRED BY AWARDING PLAINTIFF 50% OF THE VALUE OF SUPERIOR PEST CONTROL.
b. Yearly Net Income.
c. Corporate Years Analyzed.
VIII. THE TRIAL COURT ERRED IN ITS DISTRIBUTION OF THE MARITAL BANK ACCOUNTS ACQUIRED DURING THE MARRIAGE.
IX. THE TRIAL COURT ERRED IN AWARDING THE PLAINTIFF $40,000.00 IN COUNSEL FEES, RELAXING THE MANDATES [OF] [R.] 4:42-9 AND [R.] 5:5-3(c).
Having read the entire trial transcript and otherwise reviewed the record presented to us, we find that as to defendant's first eight points, the trial judge's decision is entitled to the deference we normally accord to the expertise of the Family Part. See Cesare v. Cesare, 154 N.J. 398, 411-12 (1998). The decision is supported by sufficient credible evidence, and we find no basis to second-guess the judge's evaluation of witness credibility. His conclusions on these issues are consistent with applicable law, and do not represent an abuse of discretion. Except as further discussed herein, we affirm for the reasons stated in the trial judge's comprehensive opinion.
With respect to defendant's ninth point, we find it was error to award plaintiff $40,000 in counsel fees without requiring plaintiff's attorney to submit a detailed affidavit of services. We remand for the limited purpose of reconsidering the fee award.
I
The evidence is reviewed at length in the trial judge's opinion. We briefly summarize the pertinent facts and the judge's findings which, as noted above, are supported by the record.
Defendant's statement of facts is notably concise as well, comprising approximately six pages.
The parties were married in November 1991, after a six-year dating relationship. They have four children, all of whom were still minors in 2010, when the divorce complaint was filed. During the marriage, the parties agreed that plaintiff would stay home with the children, while defendant built up a successful business. The parties enjoyed an affluent lifestyle, and lived in a luxurious house on land that was gifted to them by plaintiff's parents.
There were stresses in the marriage, as detailed in the judge's opinion. Immediately prior to the February 2010 divorce filing, defendant engaged in a course of inequitable conduct, which included emptying the family's bank accounts and safe deposit box, canceling all marital credit cards, depriving plaintiff of a car, and removing plaintiff from the family's health insurance policy.
Because our opinion will be available on the internet, we have omitted irrelevant details that might compromise the children's privacy or that of their parents. We have included information which is necessary to understand our decision.
The judge found that during the trial, defendant and his expert accountant substantially undervalued the business. He further found that defendant, who was the business's sole owner, underreported its income and secreted cash proceeds in a safe deposit box. The judge found incredible defendant's claims that the business suddenly began doing poorly just as the divorce was filed. The judge further found it likely that defendant sold a piece of investment property for considerably more than he disclosed to plaintiff, by accepting an unreported cash payment in addition to the stated contract price.
Plaintiff's accounting expert testified that, in examining the computerized records of the business, he discovered that defendant had misrepresented to him the cash income of the business from years prior to the divorce. The expert also discovered that after the divorce complaint was filed, the business records suddenly started to reflect no cash payments at all, as well as payments by check from customers who had previously paid in cash. The latter entries were marked in the records with a double "X." During the divorce trial, the parties filed amended tax returns, paying taxes on previously unreported income.
In deciding equitable distribution, the judge allowed defendant to keep the business, the marital share of which he valued at approximately $240,000, and awarded plaintiff half the value of the business. The judge adjusted the parties' shares of the remaining marital assets so that each party received about $397,000 in equitable distribution.
The judge explained in detail why he accepted significant aspects of plaintiff's expert's testimony rather than defendant's expert's testimony in valuing the business, and why he disallowed certain amounts that the defense expert deducted in calculating the business's annual income. Essentially, the business paid many of the parties' personal expenses, and the judge agreed that those expenses should not be deducted when calculating the actual income of the business. On the other hand, the judge rejected a $45,000 addition to the business's income proposed by plaintiff's expert. The judge also explained why he found that defendant's income for child support purposes was higher than his income for purposes of evaluating the business. He reasoned that defendant could not possibly have supported his family in the style they lived, on the income he reported from the business.
In distributing the marital bank accounts, the judge reconsidered certain interim decisions he had made earlier that favored plaintiff, and he gave defendant additional credits in his final, amended decision. For example, the judge found that defendant wrongfully took about $43,000 from a joint bank account and made misrepresentations to the court about the withdrawal; but the judge nonetheless gave defendant credit for spending half that amount on joint family expenses. The judge also declined to give plaintiff any financial credits for loans she claimed her parents extended to her for her living expenses, because the loans were not documented in writing.
The judge determined defendant's annual income to be $143,000. He imputed $30,000 in annual income to plaintiff, who had not worked during the marriage and who was earning slightly less than $30,000 at the time of the trial. The judge awarded plaintiff $90 per week in child support, taking into account the parties' relative income levels and shared parenting arrangement. He awarded plaintiff $710 per week in alimony. He also awarded her $40,000 in counsel fees, payable from defendant's share of the sale proceeds from the marital residence.
II
As previously noted, on this appeal our review of the judge's decision is limited. Our task is not to decide the case de novo, but to determine whether the judge's findings are supported by sufficient credible evidence and are consistent with applicable law. Cesare, supra, 154 N.J. at 411-12.
We find no basis to second-guess the judge's decisions on the economic issues, which in large part hinged on credibility determinations. In particular, the record supports his finding that defendant was not a credible witness. Defendant admitted filing false tax returns, even while the divorce litigation was pending. He also admitted providing false financial information to the business valuation experts (including his own expert) and to the court. As the judge noted, defendant appeared unable or unwilling to give a straight answer to virtually any question his attorney asked him. Instead, he made rambling and self-serving speeches, laced with irrelevant and gratuitously insulting commentary.
On this appeal, defendant raises a plethora of issues, most of which involve exercises of the trial judge's discretion. Defendant contends that the judge erred in awarding plaintiff $90 per week in child support and $710 per week in alimony. He contends that the judge should have ordered plaintiff to pay a larger percentage of the children's private school tuition. He further argues that in deciding equitable distribution, the judge erred in dividing the marital bank accounts and in awarding plaintiff fifty percent of the marital value of the business. He also challenges the judge's determination of the business's current value. Based on our review of the record, we find that the judge's decisions on these issues were well supported, properly explained in his extensive opinion, and were not an abuse of his discretion. To the extent the judge credited the opinions of plaintiff's valuation expert instead of the defense expert, we find no basis to disturb his choice. Defendant's arguments on these points are without sufficient merit to warrant further discussion here. R. 2:11-3(e)(1)(E).
In his Point II, which consists of one paragraph, defendant does not object to the children's continued attendance at private school, and hence we do not address that aspect of the judge's ruling.
We turn next to defendant's argument concerning the premarital value of the business. "The value of defendant's interest in [a closely held] corporation which predated the marriage is . . . immune from distribution. However, any increase in value occurring after the marriage should be considered eligible to the extent that it may be attributable to the expenditures of the effort of plaintiff wife." Scherzer v. Scherzer, 136 N.J. Super. 397, 401 (App. Div. 1975), certif. denied, 69 N.J. 391 (1976). The burden of proving that an asset is immune from distribution is on the party claiming that the asset is immune. Painter v. Painter, 65 N.J. 196, 214 ( 1974); Sculler v. Sculler, 348 N.J. Super. 374, 380 (Ch. Div. 2001) (discussing the order of proof in a case involving the valuation of pre-marital assets). That includes the initial presentation of evidence concerning the pre-marital value of the asset. See Orgler v. Orgler, 237 N.J. Super. 342, 351 (App. Div. 1989) (defendant husband presented expert proof that the pre-marital value of his business was $600,000; plaintiff wife failed to rebut that proof).
During the trial, the judge rejected the defense expert's proposed testimony concerning the pre-marital value of the business, because the expert admitted he had never performed a pre-marital valuation of the business, and the judge concluded that his testimony on the issue would have been a net opinion. The judge reached what he found to be a reasonable approximate value by assuming that the business, which defendant bought in November 1988, would approximately triple in value during the three years before the parties were married in November 1991. Since he found that defendant paid $5000 for the business, the judge found that defendant was entitled to a credit of $14,780 for its pre-marital value. Subtracting that amount from approximately $255,000, which the judge found to be the total current value of the business, he concluded that the marital portion value of the business was $240,000.
The expert reports were admitted in evidence. However, at the end of the trial, the parties agreed that the court would not consider the page of the defense expert's rebuttal report which addressed the possible pre-marital value. Neither party has provided us with that report, with or without the omitted page.
That was plaintiff's testimony; defendant testified that he paid $2500 for the business. Defendant benefitted from the judge's acceptance of the higher figure.
On this record, we find no error in that decision. Neither party produced an expert valuation of the business as of the date of the marriage, and neither party asked the judge to appoint an expert to do so. In her written closing argument to the trial court, plaintiff noted that defendant "was unable to provide any documentation whatsoever that would enable any expert to determine the value of the business as of . . . November of 1991." Defendant does not claim otherwise.
Further, given defendant's established history of manipulating the business's records and income, and providing false financial information to both sides' experts and to the court, it is questionable how any expert could accurately assess what the business was worth more than twenty years ago. Since those difficulties were attributable to defendant, the judge could reasonably have declined to give him any credit for the pre-marital value of the business. Clearly, in these circumstances, it was not plaintiff's obligation to prove the pre-marital value of the business. "'[I]t would be unreasonable to place the burden of proof on a party not having access to the evidence necessary to support that burden of proof.'" Ozolins v. Ozolins, 308 N.J. Super. 243, 249 (App. Div. 1998) (citation omitted). While, in some circumstances a trial judge has discretion to appoint an expert to assess the pre-marital value of a business, see Orgler, supra, 237 N.J. Super. at 351, we find no abuse of the judge's discretion here in failing to sua sponte appoint a valuation expert. On this record, defendant was fortunate that the court gave him the approximately $15,000 pre-marital credit, an award we need not further analyze because plaintiff has not cross-appealed.
By way of illustration, defendant's testimony about when he started the business was contradicted by the testimony of his mother, whom the defense called as a witness. It can fairly be inferred that virtually nothing defendant would recall about the business from 1991, including information needed to complete a valuation, would be trustworthy.
Defendant also contends that the judge erred in ordering that the marital home be sold to plaintiff's parents, instead of either allowing defendant to buy out plaintiff's share or having the house sold on the open market. We disagree.
Toward the end of his trial testimony, defendant conceded that he expected that the divorce judgment would require him to pay plaintiff half the value of the marital home, a share of the post-marital value of the business, half the funds in the various bank accounts, and monthly support payments. He indicated no opposition to that result. Instead, he insisted that his primary concern was keeping possession of both the marital home and his business.
The issue arose in this context. During the trial, plaintiff's parents offered to buy the marital home for $4 00,00 0, which was $75,00 0 more than the amount defendant claimed was its market value and $50,000 more than the value to which plaintiff's expert opined. The judge accepted that proposal, due to concerns that defendant might resist paying plaintiff her share of equitable distribution. The judge determined that allowing the parents to buy the house would create a pool of cash from which to satisfy a large portion of the divorce judgment, and would obviate future enforcement issues. The judge found such issues were likely to arise if defendant were ordered to pay equitable distribution from the income of a business he claimed (falsely, in the judge's view) was "tottering" financially.
Plaintiff's parents lived near the parties' marital home, and intended to allow plaintiff to live there if they purchased the house. Contrary to defendant's appellate argument, the trial judge did not "award" plaintiff "possession" of the marital home. The parents clearly wanted to ensure that plaintiff would have a place to live, but would have no legal obligation to let her reside in the house. The record also indicates that the property had a special value to plaintiff's father; he wanted to control its future development, because of its proximity to his land and that of a close friend.
The judge also found it inequitable to allow defendant to keep both the business and the marital residence, and to let him reimburse plaintiff for her share over a period of several years, a financial obligation the judge found defendant was unlikely to satisfy. Accordingly, the judge ordered that the marital residence be sold to plaintiff's parents for $400,000. He ordered that $300,000 of the purchase price go to plaintiff, and $100,000 go to defendant, as part of their respective shares of equitable distribution.
We find no abuse of discretion or other error in that decision. See Valentino v. Valentino, 309 N.J. Super. 334, 339 (App. Div. 1998). The parents' offer was considerably higher than the value either party's expert placed on the house, and therefore was the most economically beneficial disposition of this asset. Further, allowing this sale would produce a guaranteed funding stream to pay three-fourths of plaintiff's share of equitable distribution, as well as one-fourth of the equitable distribution to which defendant was entitled. As the judge wisely noted, this approach would also avoid the almost-inevitable future litigation that would arise if defendant were permitted to pay plaintiff her equitable distribution share over time.
Next we address the issue of counsel fees. On the last day of the trial, plaintiff's counsel stated on the record that she reserved her right to submit a fee application supported by a certification that would include information concerning a "settlement negotiation." She stated that she did not believe it would be proper to submit to the court any information about settlement negotiations, until the court decided the merits of the case. The judge indicated his understanding that both sides were reserving the right to submit additional information concerning counsel fees after the court rendered its decision. However, plaintiff's counsel did not submit a certification of services, and, on this appeal, neither party has advised us of any pre-trial stipulation concerning counsel fees.
Without requiring plaintiff's counsel to submit a certification of services documenting either her reasonable hourly rate or the hours worked, the judge awarded plaintiff $40,000 in counsel fees. In making the award, he found that defendant had litigated in bad faith, and had been guilty of grossly inequitable conduct, and had far greater income than plaintiff did. In selecting the amount of the award, the judge inferred that the parties' litigation expenses had been "astronomical" and that $40,000 was a small percentage of what plaintiff had likely incurred in fees. He based that conclusion on defendant's testimony that he owed his attorney over $60,000 in fees, and plaintiff's counsel's written representation that plaintiff had incurred about $168,000 in fees. The judge also expressed concern that requiring plaintiff's counsel to prepare a detailed certification of services would impose further delay and expense.
On this appeal, defendant rightfully points out that plaintiff failed to submit an affidavit addressing the factors set forth in Rule 5:3-5. He also contends that the fee application violated Rule 4:42-9(b), which mandates a detailed affidavit of services, "addressing the factors enumerated by RPC 1.5(a)," as well as Rule 4:42-9(c), requiring that in a matrimonial action the fee application must state not only the amount actually paid to the attorney but all amounts received through pendente lite applications and any provisions that have been made to pay fees in the future. We agree.
An award of counsel fees in a matrimonial action is subject to the trial court's considerable discretion. Barr v. Barr, 418 N.J. Super. 18, 46 (App. Div. 2011). Given defendant's conduct in this case and the disparity between his income and plaintiff's, we would be disinclined to disturb a fee award in some amount, if plaintiff had complied with the Rules concerning fee applications and if the court had made the appropriate factual findings. However, we find it was a mistaken exercise of discretion to decide the amount of the fee award without requiring plaintiff's counsel to submit a detailed affidavit of services.
In reaching our conclusion, we acknowledge that, as a practical matter, it is highly unlikely that any attorney would have billed less than $40,000 for litigating a sixteen-day matrimonial trial. Nonetheless, this was not a de minimus fee award, for which a relaxation of the Rules might perhaps have been warranted or at least have been deemed harmless error. See R. 1:1-2(a); R. 2:10-2. Although we are reluctant to extend this litigation, we simply cannot condone the trial court making a $40,000 counsel fee award without requiring the attorney to comply with Rule 4:42-9(b) and (c), and Rule 5:3-5, and without the trial court making the necessary findings based on a complete fee application.
Accordingly, we remand this case to the judge who conducted the trial, for the limited purpose of reconsidering the amount of the fee award, after plaintiff's counsel submits an appropriate affidavit of services. Additionally, both parties shall submit certifications providing the court with the information required by Rule 5:3-5(c), including the total amount of fees each party has incurred in the litigation thus far, and the total amount of fees each party has actually paid to his or her counsel. See R. 5:3-5(c)(4), (c)(6). In all other respects, the order on appeal is affirmed.
Our April 22, 2013 order staying the sale of the marital residence pending appeal, previously entered on defendant's motion, is hereby vacated.
In the interest of preserving their resources, the parties might wish to attempt to settle this matter on remand. Additionally, because defendant's business is the source of plaintiff's future alimony and child support, and the business is currently operating from the marital residence, we anticipate plaintiff's father would give defendant a reasonable opportunity to relocate the business.
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Affirmed in part, remanded in part. 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