On February 13, 2009, the Appellate Division issued an interesting unreported decision in the case of Chopoorian v. Chopoorian dealing with a topic that we have blogged about frequently as of late - modification of support obligations. To review the full text of the opinion, click here.
The parties were divorced in 2005. During the marriage, the husband operated a highly successful advertising business which provided him with an annual income of over $900,000 in 2003. The parties also owned several valuable pieces of real estate. The divorce agreement required the husband to pay $187,500 per year in permanent alimony and $50,000 per year in child support. Of note, the Agreement stated:
Husband’s earned income as defined herein may increase to $650,000 gross per year (before taxes) before Wife is entitled to file a Motion to modify/increase alimony
based on an increase in Husband’s earned income. Husband’s earned income must decline to $400,000 gross per year (before taxes) or below before he is entitled to file a Motion to modify/decrease alimony based on a decrease in earned income.
The husband was also supposed to pay the wife $1.3 million over time for her share of the business interests.
In late 2006, the wife filed an enforcement motion because the husband stopped making payments. The husband cross moved seeking a temporary suspension of paying his alimony and equitable distribution obligations and for a reduction in his child support obligation.
The trial judge questioned the validity of the husband's motion given the lifestyle that he claimed on his Case Information Statement and the fact one month after ceasing his alimony payments, the husband entered into a $465,000 mortgage. In addition, for 2005, the year of the agreement, despite the aforementioned language in the agreement, the husband claimed a negative income on his tax returns. Notwithstanding, the judge suspended the husband's equitable distribution obligations for six months and temporarily reduced his alimony obligation by fifty percent for six months. He indicated in his oral decision that if, after six months, defendant continued to contend that his economic situation had not improved, the court
would be inclined to hold an evidentiary hearing.
Approximately three months before the court was to reconsider the husband's ability to pay, he filed another motion seeking a second six-month reduction to his support obligations. The motion was denied.
The Appellate Division determined that it notably missing from husband's proofs in support of his
motion is any certified statement from an accountant concerning the finances of his business. All that were provided were self created documents and his tax returns which were suspect. The Court noted:
In short, it is not possible to draw meaningful conclusions based on defendant's submissions, without a detailed report from an accountant explaining the earnings and losses of the business and what income as well as other financial benefits defendant obtained from the business. As we indicated in Larbig, supra:
[I]t is the self-employed obligor who is in a better position to present an unrealistic
picture of his or her actual income than a W-2 earner. In light of this self-evident
fact, it would seem, as a general proposition, that what constitutes a temporary change in income should be viewed more expansively when urged by a selfemployed obligor. [Larbig, supra, 384 N.J. Super. at 23.]
The record also raises questions about defendant's personal finances as well as those of his business.
In this case, the proofs were just inadequate. One may assume that there were substantial personal expenses paid by the business. The refusal to get an accountant is telling.
The bottom line to those that are self-employed, if your income is down, you will need to open your books and records and get an accountant to certify to his or her review to be credible to a court.