Opinion
DOCKET NO. A-5517-12T3
08-18-2014
PAULA A. HALLETT, Plaintiff-Respondent, v. STEPHEN M. HALLETT, Defendant-Appellant.
Charles F. Shaw, III, argued the cause for appellant (Pandolfe, Shaw & Rubino, L.L.C., attorneys; Mr. Shaw and Jeff Thakker, on the briefs). Kristin S. Pallonetti argued the cause for respondent (Law Office of Steven P. Monaghan, L.L.C., attorneys; Ms. Pallonetti and Steven P. Monaghan, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Yannotti and Maven. On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County, Docket No. FM-13-1129-09B. Charles F. Shaw, III, argued the cause for appellant (Pandolfe, Shaw & Rubino, L.L.C., attorneys; Mr. Shaw and Jeff Thakker, on the briefs). Kristin S. Pallonetti argued the cause for respondent (Law Office of Steven P. Monaghan, L.L.C., attorneys; Ms. Pallonetti and Steven P. Monaghan, on the brief). PER CURIAM
Defendant Stephen M. Hallett appeals from an order entered by the trial court on July 2, 2013, denying his motion for reconsideration of its March 19, 2013 order. The earlier order denied defendant's motion for downward modification of his support obligations. For the reasons that follow, we reverse.
I.
The parties were married in 1993. Two children were born of the marriage, one in 1998 and the other in 2001. The marriage was dissolved by the final judgment of divorce entered in October 2009, which incorporated a property settlement agreement (PSA) between the parties. Among other things, the PSA required defendant to pay alimony in the amount of $5333 per month for three years, and then $4333 per month for six years.
The agreement stated that the alimony provided therein was based on defendant having a current annual income of $172,000, and plaintiff having a current annual income of $25,000. The parties agreed that the "imputed figure" for defendant took into account that certain buyouts would occur with regard to defendant's interests in OSI Restaurant Partners, Inc. (OSI). The PSA stated:
The PSA indicated that defendant had an interest in buyouts of nine "stores" which were scheduled to occur from October 2009 to September 2012. The parties agreed that plaintiff would receive 50% of the buyouts as they occur.
The parties specifically agree the fact that a buyout occurs and funds are received by the parties shall not be a basis to modify the alimony provision. The parties further agree the fact that [defendant's] income may be reduced as a result of the buyouts shall
not be a change of circumstances allowing for the modification of the support provisions. The parties specifically agree that any additional income for [plaintiff] of any amount above $25,000 shall not be a basis for the modification of the support provision, nor should [plaintiff's] income be utilized toward the calculation of any subsequent support provisions, with the exception that $25,000 shall be considered as [plaintiff's] income for child support. Subject to these limitations, each party reserves whatever right they have to modify the support provisions of this agreement pursuant to [Lepis v. Lepis, 83 N.J. 139 (1980)] and the law of the state of New Jersey.
The PSA further provided that the parties would share joint legal custody of their two minor children, with plaintiff designated as parent of primary residence and defendant as parent of alternative residence. The parties agreed that, so long as plaintiff has custody of the children, defendant would pay child support of $1100 per month. Defendant was also obligated to pay 55% of the children's unreimbursed medical expenses (after the first $250) and cover the children on his employer-provided medical insurance plan.
In February 2011, plaintiff filed a motion seeking various forms of relief. Defendant opposed the motion and filed a cross-motion seeking, among other relief, a reduction of his support payments due to changed circumstances. The court addressed the motions in an opinion and order filed on March 28, 2011.
Concerning defendant's cross-motion, the court noted that defendant had been working for OSI and lost that position in June 2010. In November 2010, defendant took a job at Carsmetics, an auto body repair service. Defendant claimed he was earning $50,000 per year in that position. Defendant also was working as a personal trainer, thus earning about $65,100 a year in total. Defendant claimed that he had searched for employment comparable to his employment at OSI, but the court found that defendant had not substantiated his claim.
The court determined that defendant had not shown that he was terminated for cause, as he claimed. The court also determined that defendant had not established that he diligently looked for comparable work in his area of expertise as restaurant consultant or joint venture partner. The court indicated that defendant's job at Carsmetics did not draw on his prior skills or experience.
The court concluded that defendant was voluntarily underemployed, given his prior imputed salary of $172,000 and, therefore, he had not proven changed circumstances warranting a modification of his support obligations. The court's order denied defendant's cross-motion, and granted some of the relief sought by plaintiff. Among other things, the court required defendant to pay the spousal support arrearages and awarded plaintiff counsel fees and costs.
II.
In March or April 2012, defendant filed another motion seeking, among other things, to modify or terminate his support obligations on the basis of changed circumstances. Plaintiff opposed the motion and filed a cross-motion seeking various forms of relief. The court addressed the parties' motions in an opinion and order dated April 23, 2012.
The court noted that defendant disputed plaintiff's assertion that he had left OSI voluntarily. The court stated that, according to occupational employment statistics that defendant had submitted, food service managers in the highest percentile earn about $80,000 a year, and defendant had received compensation "well in excess of someone with his skill set." The court said defendant was still working at Carsmetics and as a personal trainer, but his earnings were substantially lower than the income of $172,000 imputed to him in the PSA.
The court noted that defendant had submitted a spreadsheet regarding his purportedly extensive search for a job with a higher salary. The court pointed out that the spreadsheet contained notations that were unexplained, and personal notes that were illegible. The court said the spreadsheet was "basically understandable only to defendant."
The court determined that it was not significant whether defendant had been fired or resigned his position at OSI. The court said the critical determination was that defendant was underemployed at Carsmetrics and he had not shown that he looked for comparable work in his field. The court stated that defendant was asking it to revisit the issue of whether he had a substantial or permanent reduction in income, and that this was essentially a motion for reconsideration filed a year out of time.
The court also stated that defendant did not establish a prima facie case for reduction of his support payments. He had not presented his case information statement (CIS) at the time of the divorce and a CIS for the previous motion. Defendant had not fully completed the current CIS, and he had not explained how he could about $10,000 per month in expenses on a salary of about $65,000 per year.
The court again determined that defendant was underemployed at Carsmetrics, noting that there was some evidence that he had opportunities in his prior field of expertise and "inexplicably presented no evidence . . . as to why he did not take those positions or investigate those positions further." The court denied defendant's motion. The court awarded plaintiff counsel fees and costs.
III.
In October 2012, defendant filed another motion seeking, among other relief, to modify or terminate his support obligations based on changed circumstances. In his supporting certification, defendant stated that in June 2012, he had obtained a new job in the food industry with a company named "Sixteen Handles" which would pay $90,000 per year. He stated that this was not sufficient to pay his annual support obligations of $77,196. He said he lost the job in September 2012, and was again unemployed.
Defendant claimed that he was "again avidly searching for work." He said he searched for employment opportunities on the Internet, and had had interviews with two potential employers. He had also spoken with persons on "the corporate side" of Sixteen Handles. He said he would "continue to look for a job every day until" he found one.
Defendant asserted that there "can be no question" that there had been a substantial change of circumstances from those that prevailed in October 2009, when the parties divorced. He said if relief was not granted soon, he would be in bankruptcy. He claimed that, at the time of the divorce, he had had a net worth of $1,452,000, but his assets were down to about $200,000, and that included the value of his home, which was $550,000. His IRA account had been reduced to "a little over" $24,000.
Defendant claimed that, although he would eventually find new employment, he will "almost certainly" not reach the income level of $172,000, his imputed income under the PSA. He again asserted that managers in the food industry only earn up to about $80,000 per year. He said an entry level position would earn no more than $48,000. He added that, even if he earned the $90,000 he had expected to be paid at Sixteen Handles, that was still not enough to pay the support obligations, which he had been paying for the previous three years.
Plaintiff opposed the application, and filed a cross-motion seeking counsel fees and costs. In her certification, plaintiff stated that defendant had still not proven he could not earn the amount of imputed income that he agreed to in the PSA. Plaintiff said defendant was not being forthright about his income, his assets or finances. He provided no proof that he looked for employment with income comparable to what he had been earning during the marriage.
Plaintiff questioned whether defendant had been out of work since September 2012, as he claimed. She noted that he had provided no information as to whether his departure from the new employment had been voluntary or involuntary. Plaintiff noted that defendant's monthly expenses were about $11,250 per month, or $135,100 per year. He had not explained how he was able to pay those expenses.
Plaintiff asserted that defendant still had not shown changed circumstances warranting a reduction or termination of his support obligations. She stated that nothing had changed since the court's April 2012 ruling. She said defendant had provided no proof that he had searched for comparable employment. He merely asserted he was diligently searching for a position and contacted various "head hunters."
Plaintiff said defendant had not even explained the position he held at Sixteen Handles. She questioned whether defendant was actually employed there, and noted that there was no substantiation for the claim that his salary was $90,000 per year. Plaintiff also disputed defendant's claim that his assets had decreased dramatically.
Defendant filed a reply certification in December 2012, in which he stated that his financial situation had gone "from drastic to catastrophic." Defendant said he could not afford to pay the alimony and could barely pay the child support required by the PSA. He stated that his liquid assets were down to $14,000, and he had no one else to borrow from. He said his retirement assets were practically gone.
Defendant also stated that he had been unemployed since September 2012. He made every effort and continued to seek employment every day in the restaurant and food service industry. He said it was unrealistic to expect that he would ever get another job earning $172,000. The most he could probably earn would be $100,000 to $105,000. Defendant claimed he was trying to reduce his monthly expenses.
The court entered an order dated March 19, 2013, denying defendant's motion and awarding plaintiff counsel fees and costs. In an attached statement of reasons, the court stated that defendant had not presented a prima facie case of changed circumstances warranting modification of his alimony or child support obligations.
The court noted that defendant had remained employed at Carsmetrics for a period of time, but the judge who previously handled the matter had determined that he had been underemployed in that position. Defendant found a job at Sixteen Handles, but only worked there three months before being terminated. His motion was made one month after being terminated.
The court wrote that a one-month period of unemployment was not a permanent change of circumstances. In addition, the court stated that it placed significant weight on the fact that the parties had bargained for limited term alimony, which was based on defendant's imputed income and was lower than defendant's actual historical income.
IV.
On March 28, 2013, defendant filed a motion for reconsideration. In his certification, defendant noted that the original motion was supposed to have been heard on November 9, 2012, but the return date was postponed. The court then decided the motion without oral argument.
Defendant said, up until recently, he had been able to meet his financial obligations because he had liquidated his assets. He claimed he had presented sufficient evidence to show that he had attempted to secure a position in the restaurant industry with a salary comparable to the imputed annual income of $172,000. He noted that in June 2012 he had secured the position with Sixteen Handles earning $90,000 per year, but lost position in three months.
In addition, defendant said that after he lost his position with OSI, he had no opportunities or offers until September 2011. He claimed he took the position at Carsmetrics in November 2011, and used his prior skills and experience in that position. He said his position with OSI as well as the scale of pay "is nonexistent" in the industry.
Defendant also stated that it took him twenty-seven months to find a position earning $90,000 annually. He said earning $90,000 a year "is the best out there, and even at that rate it still would not be enough to cover [his] support obligations." Defendant stated that he was still unemployed and "searching every day for employment."
Plaintiff opposed the motion and filed a cross-motion for enforcement of the support obligations and an award of counsel fees. Plaintiff asserted that defendant was essentially making the same arguments he had made in his three previous applications to the court, and he was simply unhappy with the court's decisions. Plaintiff claimed that defendant was being dishonest regarding his income, OSI buyouts, and his employment searches. She said defendant was still underemployed.
Plaintiff noted that, while defendant claimed he was unemployed, his 2011 tax return indicated that he earned income as a consultant. He had not provided his 2012 tax returns. Moreover, defendant's 2011 tax return did not reflect any income from Carsmetics, where he claimed to be working since November 2010.
Plaintiff pointed out that defendant claimed to have only earned about $47,111 in 2012, but he had expenses of $17,000 per month. She said defendant continued to spend money "at an exceedingly high pace." He recently purchased a new Cadillac SUV and a 2013 Lexus, yet claimed he did not have any income. Plaintiff said defendant continued to misrepresent his actual finances and his assets had not decreased as substantially as he claimed.
The court entered an order dated July 2, 2013, denying defendant's motion. In an accompanying statement of reasons, the court said the motion was "a classic case" of trying to take a second bite of the proverbial apple. Defendant had not presented any new arguments or evidence that the court did not consider in its prior ruling.
The court stated that it had considered defendant's financial and employment circumstances, and found no basis for his motion to modify the support obligations. The court stated that defendant was seeking reconsideration based on the same facts. The court determined that plaintiff was entitled to an order enforcing the support obligations under the PSA.
However, the court refused to order defendant to pay all arrearages in seven days, as plaintiff had requested. The court stated that defendant had certified he could not pay the obligations at this time. The court ordered that, in the event the former marital home is sold, the proceeds would be placed in the trust account maintained by plaintiff's attorney and defendant would be obligated to pay the arrears from the proceeds of the sale.
On October 17, 2013, defendant filed his notice of appeal from the court's July 2, 2013 order.
V.
Defendant argues that the Family Part erroneously denied his motion for reconsideration. He argues that the court erred by stating that he had not presented any facts that the court failed to consider in its March 19, 2013 opinion. Defendant says that, while he was only unemployed one month when he filed the motion in October 2012, he remained unemployed in March 2013, when the motion was decided and he sought reconsideration.
Defendant contends that he established that the circumstances had changed substantially and permanently. He claims that, when the court entered its July 2, 2013 order, three years had passed since the last time he had earned anything like the $172,000 imputed to him under the PSA. He says he returned to the food service industry, obtained a $90,000 a year position, only to lose that position in three months. He says he went from being underemployed in one industry, to being unemployed in another.
An ex-spouse seeking downward modification of his support obligations has the burden of showing changed circumstances "as would warrant relief from the support or maintenance provisions involved." Lepis, supra, 83 N.J. at 157 (citing Martindell v. Martindell, 21 N.J. 341, 353 (1956)). In Lepis, the Court provided examples of certain changed circumstances that may warrant modification of a party's support obligations:
(1) an increase in the cost of living;
(2) increase or decrease in the supporting spouse's income;
(3) illness, disability or infirmity arising after the original judgment;
(4) the dependent spouse's loss of a house or apartment;
(5) the dependent spouse's cohabitation with another;
(6) subsequent employment by the dependent spouse; and
(7) changes in federal income tax law.
[Id. at 151 (internal citations and footnote omitted).]
A movant must not only establish changed circumstances, the movant also must show that the change is permanent. Ibid. An application to modify a support obligation will be denied if it is "based on circumstances which are only temporary or which are expected but have not yet occurred." Ibid. Furthermore, the party seeking modification must make a primary facie showing of changed circumstances before the court will order discovery of the former spouse's financial status. Id. at 157.
We are convinced that the trial court erred by refusing to reconsider the earlier decision denying defendant's modification motion. The reconsideration motion was based in part on facts that the court had not considered in its previous decision. The court correctly noted that defendant had been unemployed for only one month when he filed the initial motion, but his reply certification filed later indicated that he was still unemployed. Furthermore, when he sought reconsideration, defendant remained unemployed.
However, we disagree with defendant's contentions that he established a prima facie case of changed circumstances, that the matter must now proceed to the exchange of financial information by the parties and that he is entitled to a reduction of his support obligations. In our view, defendant's submissions raised genuine issues of material fact as to whether his circumstances had changed, as he claimed.
As indicated in the PSA, the parties agreed that defendant would pay alimony and child support based on imputed income of $172,000 per year, which he was earning at the time of the divorce working at OSI, an entity that apparently operates a chain of restaurants. It is undisputed that defendant lost that position in June 2010, and took a position in the auto repair business. He also worked as a personal trainer. His income was about $65,000 per year.
The trial court twice ruled that defendant was underemployed. The court determined that defendant had failed to present sufficient evidence showing that he made a diligent search for jobs in the food service industry that paid an annual salary comparable to the $172,000 per year imputed to him in the PSA. As the court noted, defendant continued to work in the auto repair business until June 2012, when he obtained a position with Sixteen Handles, at an annual salary of $90,000, but defendant lost that position in September 2012.
As noted in the parties' certifications, there were genuine issues of material fact as to whether defendant was voluntarily underemployed. It is unclear from the record what position defendant had at OSI. He claims that the salary of $172,000 was unique and he could not earn a comparable salary in the food service industry. Plaintiff disputed that claim. It is also not clear from the record what position defendant had at Sixteen Handles, and whether that position was comparable to the one he had at OSI.
Furthermore, as we pointed out previously, plaintiff alleged that defendant, in fact, earned substantially more than the imputed $172,000 per year when he worked at OSI. She questioned whether defendant was terminated or left the position voluntarily. She also said it was not clear whether defendant actually worked at Sixteen Handles. She noted that defendant had not provided the reason he lost that position after only three months.
Thus, there was a genuine issue of material fact as to whether defendant continued to be underemployed when he worked for Sixteen Handles. There is a genuine issue of material fact as to whether defendant's position at OSI was unique and whether he could earn a salary of $172,000 per year in the food service industry, or whether he could only be expected to earn up to $100,000 or $105,000 a year in such a position, as he claimed.
The parties' certifications also raised genuine issues of material fact as to whether defendant had, in fact, undertaken a thorough search of potential jobs comparable to the job he had held at OSI. In his certifications, defendant asserted that he made such a search. He says that he contacted "practically" every major food chain in the eastern part of the United States. However, plaintiff disputed defendant's assertions, stating that defendant had not provided any detail or documentation to substantiate his claim. Defendant's assertions could not be resolved based on the competing statements set forth in the certifications.
There also was a genuine issue of material fact as to whether defendant's assets had been diminished to the degree he claimed. As noted, defendant said his assets had been virtually depleted but when plaintiff opposed the October 2012 motion, she asserted that defendant misrepresented his assets at the time of the divorce. She claimed that his assets were about $452,455.50, and only decreased by $220,000. Plaintiff also asserted that defendant had not accounted for many of the assets he had at the time of the divorce.
In addition, there was a genuine issue of material fact as to whether defendant was unable to pay his support obligations, as he claimed. Plaintiff pointed out that in his September 2012 CIS, defendant reported that his monthly expenses, including child support, totaled $17,702, and were $11,259 without support. Plaintiff legitimately questioned how defendant could pay these expenses when he was unemployed.
In short, the certifications of the parties raised far too many questions about defendant's employment, income, assets and expenses to resolve the question of whether he has presented a prima facie case of changed circumstances which would warrant a change in his support obligations. Therefore, we reverse the court's July 2, 2013 order, including the award of counsel fees, and remand the matter to the trial court to again consider defendant's October 2012 modification motion.
On remand, the parties should be afforded a brief opportunity to engage in discovery, which should be strictly limited to the disputed material factual issues regarding defendant's income, assets and finances as they pertain to his claim of changed circumstances. Thereafter, the parties may supplement their submissions to the trial court and the court shall conduct a plenary hearing to resolve any remaining disputed issues of material fact.
The court shall then determine whether defendant has established a prima facie case of changed circumstances which might warrant relief from the support obligations he agreed to in the PSA. The court shall again consider an award of counsel fees and costs to plaintiff, should the court determine that defendant has not established the prima facie showing of changed circumstances.
We note that the burden remains with defendant to convince the court that the change in his circumstances is permanent. Id. at 151. Until such time as defendant establishes a change of circumstances warranting relief from his support obligation, plaintiff is not obligated to furnish an updated CIS or disclose any financial information. Donnelly v. Donnelly, 405 N.J. Super. 117, 131 (App. Div. 2009) (citing Lepis, supra, 83 N.J. at 157).
Reversed and remanded to the trial court for further proceedings in conformity 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