NJ Family Legal Blog : New Jersey Divorce and Family Lawyer & Attorney : Fox Rothschild Law Firm : Domestic Violence, Prenuptial Agreements, Child Custody

How about in a situation where the payor spouse suffers from a health condition that he claims renders him unable to pay support at the level set forth in the Judgment of Divorce or Marital Settlement Agreement?  That was the issue before the Appellate Division in Schvey v. Schvey, where the payor Husband claimed that he was unable to work because of his health following quadruple bypass surgery and other heart-related issues.  He was not, however, receiving disability benefits from social security and had not received disability benefits for several years.  Based on the evidence, the Trial Court, among other things, terminated the Husband's alimony obligation and reduced child support until the parties' youngest son graduated from college.  It also ruled that, when the youngest son was emancipated, child support would end and the Husband's alimony obligation would be reinstated at the level of child support.  Notably, the child support obligation was combined with a tuition payment obligation for a child attending college and living away from home.

Finding no evidence of changed circumstances regarding either the Husband's situation or the Husband and Wife in combination justifying a suspension of alimony for a period of time "coterminous" (in conjunction with) with his obligation to continue to paying child support, the Appellate Division reversed the decision to suspend alimony.  The Appellate Division specifically found the Husband's evidence lacking as to his health condition and inability to work, since there was nothing to show that he would recover by the time the youngest child graduated from college or that the Wife would have a greater need for alimony at that time. 

The Appellate Division found that neither party successfully proved the need for an alimony modification, since the Wife's earnings had significantly increased since a prior post-divorce support modification Order was entered and the Husband failed to prove that he was doing anything other than retiring early.  Importantly, there was a lack of sufficient evidence that the Husband was involuntarily unemployed or that the Wife could maintain the marital standard of living at her current income.

The Appellate Division did, however, find sufficient evidence of changed circumstances to modify child support since, at the time of the prior support modification Order, both children were living with the Wife.  At the time of the present modification hearing, one child had graduated from college and the other was in college and living on campus during the school year.  The Appellate Division, however, again reversed and remanded because the Trial Court failed to provide proper factual or legal findings for its reduced child support/tuition payment figure.

Establishing the existence of substantial and continuing changed circumstances, or opposing such an application, based on the sort of factual scenario detailed above can be a difficult task.  One must be certain to provide detailed evidence to support such a claim for a support reduction.  Here, the Husband could not even establish that a social security determination had been made that he was disabled or that he was receiving disability benefits.  These basic forms of proof contributed to his downfall. 

In an attempt to reconcile the two decisions, the Morris court stated the following:

 We must give an equivocal answer to the question of whether an anti- Lepis clause is enforceable. It is both yes and no. Smith is correct when it states that the parties cannot bargain away the court's equitable powers. Finckin is also correct when it states that the parties can establish their own standards, and that these standards, where not unwarranted under the circumstances, will be enforced by the court irrespective of the need-based guidelines of Lepis, which are applied when there are no such standards. If circumstances have made the parties' standards unreasonable, they can in extreme cases be modified. In less extreme cases, as here, the payments can be accrued with enforcement conditioned upon the payment of reasonable periodic payments. In short, the court should endeavor to carry out the agreement of the parties on a reasonable basis. (Emphasis supplied.) Morris, 263 N.J. Super. at 245-46.

Although the court held that the anti-Lepis clause rendered a determination of the Morris wife’s needs irrelevant since the alimony was not negotiated on the basis of her needs, the following example of an “extraordinary case” was provided in a footnote by the Appellate Division: “[T]he wife's needs might be relevant if, for example, there is little economic need on the part of the wife and the husband's countervailing needs warrant his being permitted to retain a higher percentage of his income. (Examples that come to mind are a sick child from a second marriage, an impending loss of his business, or the like).” Id. at 245 n. 5 (emphasis added). Finally, the court held that “defendant's failure to pay can result in his incarceration only if such failure is willful, given his then-existing means.” Id.

Interestingly, there are not to many decisions that deal with an anti-Lepis clause. I surmise this to be the case because very few people would agree to be locked into a number that they are required to pay or entitled to receive regardless any change in circumstances. Of course there are situations in which it makes sense to agree to non-modifiable support; however, all facts should be considered with an attorney and the litigant should be prepared to take a significant risk. If on the other hand, your agreement already contains a non-modifiability or anti-Lepis clause and you have encountered significant changed circumstances, it is imperative that at the least you consult an attorney to determine if your circumstances are such that a Court could find the clause to be unreasonable to warrant a modification.

The parties subsequently memorialized the terms in a Property Settlement Agreement, which also addressed alimony in detail.  In one paragraph of the alimony section, the PSA specifically stated that Marcia "waiv[ed] any ability to attempt to modify or extend the . . . term before any [c]ourt of competent jurisdiction."  In the following paragraph, however, was another section entitled, "Waiver of Alimony" which stated:

In 2007, Joseph filed an application to reduce his alimony obligation based on a purported change in his financial circumstances - a $150,000 reduction in his income which he claimed rendered him unable to pay $143,000 in annual alimony and other expenses for the children required by the parties' settlement.  The trial court denied Joseph's application, claiming that the "Waiver of Alimony" section constituted an "anti-Lepis" clause precluding alimony modifications. 

On appeal, the Appellate Division initially noted the well established contract principle that the PSA is to be enforced to the extent it is fair and equitable, consistent with the parties' intent.  Analyzing the limited duration alimony at issue, the Appellate Division then noted that such support, in following N.J.S.A. 2A:34-23(c), may be modified "when either party experiences a substantial change in financial circumstances."

Noting that parties may waive statutory rights to seek modification through use of what is commonly known as an "anti-Lepis" clause, the Appellate Division quoted from its earlier decision in Morris v. Morris, 263 N.J. Super. 237 (App. Div. 1993) for the proposition that such a clause must be entered by the parties "with full knowledge of all present and reasonably foreseeable future circumstances" and, more explicitly must:

Applying these principles to Joseph and Marcia's PSA, the Appellate Division initially concluded that terms within the agreement regarding support, alimony and equitable distribution were interrelated - i.e., Marcia could seek child support in the event that alimony payments terminate.  It then noted that while the PSA prevented Marcia from seeking any increase in alimony, it was silent as to Joseph's ability to seek modification. 

The Appellate Division then analyzed the "Waiver of Alimony" section quoted above, noting that its language referencing the parties' mutual waiver of other alimony claims "past, present and future" waived claims "in addition to" or "outside of" the alimony award detailed in the earlier portion of the PSA.  Thus, the Appellate Division held that the trial court's reliance on the last sentence of this paragraph - "This Agreement shall have firm stability and shall not be subject to modification by reason of any change of circumstances encountered by either or both of the parties," did not apply to and, thus did not impact, the alimony terms found earlier in the agreement.  Rather, the Court concluded that it only related to the other alimony claims "past, present and future."

Moreover, the Appellate Division also held that the PSA neither specifically indicated that Joseph's alimony obligation was non-modifiable should he experience changed financial circumstances nor did it expressly waive modification rights granted in Lepis.

Accordingly, the Appellate Division, for three separate reasons, remanded for a plenary hearing to determine whether the PSA actually included an anti-Lepis clause precluding modification of the amount of alimony :  (1) It found that the oral settlement placed on the record contained no provision prohibiting an alimony modification and the final hearing expressed no indication that the parties were contemplating an anti-Lepis clause; (2) the record was unclear as to consideration provided for the modification waivers sought within the language of the PSA detailed above since any such modification required the parties' knowledge as to what they bargained for and the bargain's intended consequences; and (3) additional evidence was required to determine the parties' intended meaning of the modification language. 

The point to be reiterated again is that when you make a motion to reduce support, give the judge as much information as possible regarding why you lost your job, whether you were the only one or whether there was a reduction in force, what efforts have you made to find a new job (including voluminous and painstaking records regarding each inquiry and response), if you took a new job for lower than your historical pay, why you did this as opposed to holding out, what you have done to reduce your own expenses, what your current finances are, etc?

In any event, our firm is keenly able to assist those seeking a reduction and those opposing it.
 

To see a recent blog post addressing this issue in greater detail click here.

In addition, the husband disclosed a savings account with a balance of $90,000, three vehicles valued at $33,000, and an Individual Retirement Account valued at approximately $676,000 and liabilities totaling $10,000. 

The husband never distinguished which of these assets had been divided in the divorce, and therefore would be exempt from consideration now, and which were post divorce assets available to pay support.The Court relied upon this as the reason to deny the application, finding that he he had sufficient assets to continue to pay his support. 

In affirming, the Appellate Division succinctly restated the law on support modification, as follows:

Orders for support "may be revised and altered by the court from time to time as circumstances may require." N.J.S.A. 2A:34-23. The moving party bears the burden to make a prima facie showing of changed circumstances. Isaacson v. Isaacson,
348 N.J. Super. 560, 579 (App. Div.), certif. denied, 174 N.J. 364 (2002). A decrease in the obligor's income may be a changed circumstance warranting a revision of a support obligation. Lepis v. Lepis, 83 N.J. 139, 151 (1980). In Lepis, the Supreme Court addressed the changed circumstances standard. Id. at 157-59. Although expressed in the context of an application to reduce child support, the basic showing for a reduction in alimony is similar. The obligor must establish a diminution in income, earned and unearned, or a substantial increase in the financial circumstances of the former spouse or a combination of changes for both parties. Id. at 151; Stamberg v. Stamberg, 302 N.J. Super. 35, 42 (App. Div.
1997).

A reduction in salary has long been recognized as a change in circumstances. See, e.g., Martindell v. Martindell, 21 N.J. 341, 355 (1956) (a decrease in resources, standing alone, justifies a reduction in alimony). However, a reduction in salary, even the  loss of a large income, may not warrant a reduction in a support obligation if the reduction is temporary. Larbig v. Larbig, 384 N.J. Super. 17, 22-23 (App. Div. 2006).  If the obligor has assets that produce or have the potential to produce unearned income to meet on-going support obligations, the loss of earned income may not create a changed circumstance. See Connell v. Connell, 313 N.J. Super. 426, 432-33 (App. Div. 1998) (inherited assets and the income produced by such assets are factors to be considered in calculation of a support award).

Ex-husband informed the trial court that his law partner who ran the firm's New York office had committed suicide in 2006 and that upon his death, ex-husband learned that the deceased partner had stolen client trust funds, embezzled, wrongfully dissipated business assets and forged ex-husband's name on various contractual obligations. Ex-husband further claimed that a bank had issued a demand letter in the amount of $149,000 and that a former client filed a lawsuit to recover $450,000 that the deceased partner had stolen.  Moreover, ex-husband advised that the law firm's professional liability carrier disclaimed coverage and ex-husband was forced to file a lawsuit against the insurance carrier to assert the firm's rights.  Although the embezzlement seemed tragic, at the time that ex-husband had applied for a termination of alimony, ex-husband failed to provide the Court with the bank's demand letter and failed to provide the Court with court filed documents showing that the former client had sued the law firm to recover $450,000 of stolen money.  Additionally, the court noted that significantly, ex-husband made no claim that any single creditor had successfully obtained a judgment against the law firm as a result of the embezzlement.

The second devastating event claimed by ex-husband to substantiate his request for a termination of alimony related to the head bookkeeper's alleged mishandling of attorney trust funds in ex-husband's Florida office.  Ex-husband claimed that after the suicide of his New York partner, ex-husband undertook an audit of the Florida office's financial records.  Ex-husband claimed that the audit revealed that his bookkeeper had over a period of time transferred trust funds into the firm's operating accounts and that as a result, unbeknown to ex-husband, the firm had been operating at considerable losses having over $4.5 million in contingent liabilities.  Ex-husband indicated that as a result of the bookkeeper's conduct, the Florida office lost most of its clients, that no law firm was willing to hire him as a result of all the controversy surrounding his law firm, that his net taxable income dropped from $300,000 to $132,420 and that ex-husband was forced to forgo a draw from the law firm commencing in October 2006.  Moreover, ex-husband's Florida partner certified to the Court that the Florida office had been operating at a loss or at break-even.  Ex-husband claimed that to keep him afloat, he borrowed money from family and borrowed monies from his life insurance policy and his 401k account.  Notably, ex-husband's then current wife was employed as a legal secretary, paralegal and office administrator by the law firm earning $75,000 per year.  Except ex-husband's statements regarding the financial circumstances of the law firm, ex-husband failed to provide the Court with the audit that allegedly showed the misconduct of the bookkeeper, failed to provide the Court with certified financial statements showing that the law firm was subject to over $4.5 million in contingent liabilities and failed to provide the Court with any documentation showing his liquidation of his life insurance cash surrender value and his 401k account.

Ex-husband also argued that ex-wife no longer needed alimony because her income had increased from $25,000 to $70,000 per year.

The trial court denied ex-husband's application finding there was no changed circumstances to warrant a modification.  The trial court found that although ex-husband was having difficulties his liabilities at that point were still substantially contingent. Moreover, the trial court pointed out that ex-husband had expenses of over $200,000 per year and that ex-husband claimed he was surviving on his current wife's income of $70,000.  Suspiciously, the trial court noted that "it doesn't add up".  

On appeal, the Appellate Division affirmed the trial court's findings and rejected ex-husband's arguments finding that ex-husband did not meet his burden of showing changed circumstances.  The Appellate Division cited Lepis noting that the party seeking a modification has the burden of proof and that a request for modification based upon expected circumstances that have yet to occur should be rejected.  In making its determination, the Appellate Court looked beyond ex-husband's gloomy characterization of the law firm's state of affairs and focused on what ex-husband failed to provide.  The record did not contain any objective evidence supporting his description of a failed law firm.  Moreover, the Court noted that the liabilities resulting from the deceased partner's embezzlement and the bookkeeper's mishandling of accounts had not yet come into existence.  In other words, while there was a potential of judgments, losses and damages to be paid by the law firm, such liabilities were not yet present.  Finally, the Appellate Division found that while ex-husband claimed that he was unable to secure a job at any other law firm, ex-husband made no showing that he even attempted to do so.  The Appellate Court found that when the payor makes no effort to replace alleged lost income, he has failed to meet the burden establishing he has undergone changed circumstances.  Citing Aronson v. Aronson, 245 N.J. Super. 354 (App.Div. 1991.)

Notably, in light of the current state of the economy, I expect that modification requests such as that in Norych will be more prevalent.  I further suspect that among those applications there will be a good handful of litigants who will paint very bleak financial pictures but have no evidence to substantiate their claims.  Those cases are defendable.  For example, I successfully defended against a payor's application to modify alimony and child support based upon the payor's insistence that after he was laid-off by his company he was unable to obtain employment with comparable income.  The payor in my case was a regional executive for a plumbing manufacturer earning a significant amount of money.  After getting laid-off, the payor decided to live off of his severance and when it ran out, he filed an application to modify support. He claimed that he had actively sent his resumes to numerous companies and was not offered a position.  After some investigation, we learned and I advised the Court that every position for which the payor applied were positions that he was either overqualified for or did not have experience which clearly decreased his chances in securing employment.  The Court shot down his application noting that his conscious decision to avoid obtaining employment comparable to that which he had could not meet the standard for changed circumstances warranting review of support.

Undoubtedly, their will also be cases in which there are truly changed circumstances warranting review.  As evident in Norych, it is imperative that the applicant not only paint the picture for the Court but the applicant must also back up the description with objective evidence.  In the Norych case, the outcome for the ex-husband could have been entirely different had he presented certified financial statements, documentation of his liquidation of assets to maintain his expenses, documentation showing his attempts at seeking employment with other law firms, copies of court filings showing that the law firm had been sued, etc. assuming that such documents did in fact exist.  It is not too far fetched to assume that there are modification cases lingering in the courthouses of New Jersey where the litigant should have received a modification but did not due to a poor presentation of evidence.  For example, I have been consulted on a case in which the payor, prior to consulting me,  filed a modification of support after sustaining significant injuries in a horrific automobile accident and was denied review of his support obligations.  When he filed his application, he provided a thorough description of his injuries and indicated that he was unable to work.  The application was denied for failure to show changed circumstances- - no physician report was provided to the Court indicating that he was unable to work and that his injuries were permanent.  Notably, he did present to the Court some of his medical records showing the extensive medical treatment that he had received and was continuing to receive with the incorrect assumption being that the Court would automatically take the next step and find that he was unable to work.  

In short, just describing the severity of a litigant's current financial circumstances will not be enough.  If you are defending against a modification application, look for the objective substantiating proof and if there is none it must be made clear for the Court that no changed circumstances exist.  On the other hand, if you are in desperate need of a modification based upon your current financial circumstances, don't assume that the Court will take your word for it--no matter how obvious you believe your situation to be--better to take the time gathering documentary evidence than rushing to Court on what may (or may not be) obvious change circumstances.

What happens if you take a job in another field?  There is a reported decision that found that someone who was in computers and then took a job in massage therapy was not entitled to relief.  I think that whether relief will be granted in this case will be based upon, how long you were out of work, and the good faith nature of the job search. 

I think people who could have a harder time are those who, after losing a job, have decided to start their own business, in a related field or perhaps in some other field.  The choice to become en entrepreneur will present difficult problems for a court, especially when the income is nominal, as is often the case in a start up business.  In these cases, the good faith nature of the job search may come in to play, however, I suspect that a court will impute income to that person.  If the imputation is consistent with prior employment, which very well may be the case, because what other information will a Court have, that is probably not fair if we are dealing with a job loss caused by the current catastrophic economy.  If not that number, what is fair.

In these cases, lawyers and judges are going to have to be more creative.  I think that the concept of income averaging, as previously blogged about, may very well be unfair given these trying times.  Perhaps the remedy is for parties to "ride along" together, sharing income information yearly, if support is going to be reduced (or set a a level based upon income lower that was earned historically).  Traditionally, court's were reluctant to Order the yearly exchange of income information post divorce.  However, given the current times, that may be the most fair way to deal with support where income is reduced. When the income gets back to prior levels, or perhaps as it increases, maybe there can be reviews and self-executing increases.  There are many ways to to this, and these are only examples. 

Family law issues involve complex choices and decisions, and alimony and child support in these trying times is no exception. For more information regarding this issue  or guidance on other family law issues, contact an attorney in Fox Rothschild's an attorney in Fox’s Family Law Practice or visit us on the web at www.foxrothschild.com. 

Approximately 7 months later, husband filed another motion seeking child support for the son. This motion was granted, however the trial judge also ordered husband to pay child support for daughter, who remained with wife. About one month later, husband filed a motion seeking alimony. He argued that his obligation to now pay child support for daughter was a change in circumstances that entitled him to alimony per the terms of the agreement. This motion was denied as the trial judge found there was no change in the financial circumstances of the parties demonstrating a need for alimony to be paid.

One month thereafter, husband filed a motion for reconsideration and sought permanent alimony, termination of his obligation to pay child support for daughter, custody of daughter, discovery and for wife to file a CIS. This motion was also denied.

From there, husband filed his appeal arguing that the trial judge overlooked his entitlement to permanent alimony; did not properly read the PSA; failed to find that the change in custody of the son was a change in circumstances; improperly altered the terms of the PSA; and decided the matter without a plenary hearing.

In its opinion, the Appellate Court noted that trial judges are given deference to the issue of alimony, if those findings are supported by substantial credible evidence in the record as a whole. The Court also found that the parties could not waive the children's right to support, thus making that portion of the PSA unenforceable. Therefore, there was no error in the trial court's denial of husband's application to terminate child support for daughter.

As to the issue of alimony, the Court found that the PSA clearly and unambiguously provided that husband waived his right to alimony in exchange for non payment of child support. Thus, his obligation to pay child support for daughter constitutes a change of circumstances making enforcement of the alimony waiver unjust and inequitable. The Court found sufficient evidence of changed circumstances and ordered discovery and a plenary hearing to determine the amount of the alimony award.

EDITOR'S NOTE:  This case re-affirms the basis tenet that agreements regarding support are modifiable  based upon changes of circumstances.  Moreover, agreements are integrated and when two provisions are clearly related to each other and one is modified, it may be possible and/or necessary to modify the other provision too.  ERIC S. SOLOTOFF

In May 2005, defendant lost his position at Pershing. He attributed this loss to the fact that Bank of New York had taken over Pershing and his position was eliminated. The husband received a bonus in May 2007 of $700,000 (as opposed to the year-end bonuses defendant had received in the past) and a severance pay of $175,000, supporting the husband's claim that
his separation from Pershing was involuntary.

The husband eventually obtained a new position at Olson Global Markets, at which he was to receive a salary of $120,000 (equivalent to what he had earned as a salary at Pershing) and
receive bonuses that would place his earnings at the same level he had previously enjoyed. However, he asserted that Olson was not profitable, that he had not received any bonuses, and that he had not even received a salary for the years 2006, 2007, and 2008. Indeed the husband claimed that the situation at Olson was such that he was obliged to advance $138,000 to it from July 2007 to January 2008.

Based upon this apparent reduction in his earnings, the husband filed a motion in March 2008 seeking a reduction in his monthly alimony obligation. After hearing oral argument, the trial court denied defendant's application. It did so without conducting a plenary hearing.  The trial court analogized the case to a reported decision called Storey v. Storey where the husband changed careers, going from a computer technician to a massage therapist.
 

The Appellate Division reversed  noting that while the proofs presented by the husband at the motion did not warrant a reduction in and of them self, they certainly warranted a hearing.  The reason was that it was clear that the husband did not voluntarily leave his job and further, remained in the same industry.

The matter was remanded for a plenary hearing on whether a reduction was warranted. 

I suspect that there will be many cases like this.  For instance, I suspect that many people will be forced to take lower paying jobs in the same or similar industry.  They may even try to go into other industries when their job search proves fruitless.  Parties are going to have to be creative and have to be reasonable.  Otherwise, they risk a lot of litigation.

On May 30, 2008 the court heard oral argument on these applications. Ultimately, among other things, the court denied defendant's application and granted those aspects of plaintiff's cross application which: 1) gave him primary residential custody; 2) denied defendant's request for a custody evaluation as she had failed to show a change of circumstances; 3) gave defendant parenting time on a limited basis until she moved closer to plaintiff's home; 4) ordered both parties and the child to attend counseling; 5) the counselor was to recommend a change (increase) in defendant's parenting time; 6) plaintiff's child support obligation was terminated; and 7) defendant's request to take the child on vacation was denied.

Defendant filed an appeal, Pro Se, arguing that the court made decisions without having any evidence from plaintiff or his counsel. She based, in part, her argument on an allegation that the judge and plaintiff's attorney participated in an ex parte meeting, to which she was excluded, prior to the oral argument on the motion. The court gave a thorough discussion of how findings of a lower court will only be disturbed if they are "manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice." Cesare v. Cesare, 154 N.J. 394, 412 (1998). The Court found that this allegation was without merit.

In addressing the other aspects of the appeal, the Court gave deference to the findings of the lower court and found that there was substantial credible evidence to show that there was no change of circumstances to disrupt the child's residential custodial arrangement with plaintiff and the rocky relationship she had with defendant. Defendant had failed to meet her burden of proof to show that a plenary hearing was necessary in that she failed to show that "due to a substantial change in circumstances from the time that the current custody arrangement was established, the best interests of the child would be better served by a transfer in custody." Chen v. Heller, 334 N.J. Super. 361, 380 (App. Div. 2000). Further. R. 5:8-6 which addresses trial of custody issues, states that a court shall set a hearing on the issue of custody when it "finds that the custody of the children is a genuine and substantial issue..."

The Appellate Division did amend the lower court's Order in that it provided that if defendant relocates within reasonably close proximity of plaintiff and the child, defendant may move for increased visitation without having to demonstrate any change of circumstances other than her move further south.

The parties were married in 1987, had two children and were subsequently divorced almost 11 years later.  The Property Settlement Agreement required the husband to pay $7,000 in monthly child support, as well as certain health insurance and medical expenses for the wife and children.  Notably, the husband owned and operated his own business that developed parcels of real estate via residential and commercial projects, from which his income from 1998 to 2002 was approximately $22 million. 

In 2005, the Family Part reviewed the support order and, despite the fact that the husband was charged with income tax evasion in 2005 and his income that year was drastically lower than previous years - $194,055 in 2005 compared to $1.9 million in 2004 - the Family Part granted the wife's motion to increase the monthly support award to $9,000.

While the husband served time in prison for tax evasion, he continued to pay support, but retained an accounting firm to prepare a comprehensive report of his financial situation to be used as part of a subsequent application to modify his support obligation, which was filed in October 2007 and sought a modification retroactive to November 1, 2006.  The trial court denied the husband's motion, noting that despite any possible income decline, he still had a net worth of almost $3 million and, thus, had the ability to pay the ordered support under Lepis. 

On appeal, the Appellate Division first addressed what situations New Jersey courts have previously deemed "changed circumstances" under the first part of the Lepis test for a support modification.  These included as follows:

1.  An increase in the cost of living;

2.  An 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.

The Appellate Division explained that once changed circumstances are established, the analysis focuses on the parent's ability to pay when a decrease in support is sought, based on the parent's income and his respective assets.  In the case before it, the Appellate Division concluded that the husband's proofs prevented a determination regarding his ability to pay and, as such, his application was properly denied without a plenary hearing.  Specifically, while the accounting report contained sufficient proof of the husband's diminished income based on factors including, but not limited to, his criminal conviction, a worsening economy, his large tax debt, and increased expenses due to rising mortgage interest rates, he failed to provide sufficient proofs of his inability to pay. 

The Appellate Division detailed how the husband failed to explain his employment efforts and current business enterprises, provide documentation of his inability to further liquidate assets, address the alleged dissipation of the $22 million in income he received from 1998 to 2002, note profits realized from real estate sales, and address the status of his currently held assets.  The Court noted that the net profit from the parcels sold would more than have satisfied his support obligations for the year without looking to any other sources of income and that he failed to mention that he also owned other additional acreage that had been approved for the construction of waterfront town homes.  As such, the Appellate Division concluded that the husband could still pay the ordered support based on his almost $3 million net worth. 

This case detailed the standard that an ex-spouse must fulfill in seeking a downward modification in support, while tying in an interesting factual scenario where the changed circumstances were achieved in part by the husband's criminal conviction for tax evasion, which prevented him from carrying on his business. 

The husband subsequently moved again in 2007 before a different judge to reduce his child support obligation based on his current income, which had allegedly dropped by approximately $70,000 from the income figure used by the Court in deciding on the wife’s prior motion. The wife cross-moved for a support increase, again arguing that the husband’s 2004 and 2005 income should apply while the husband relied on the same successful arguments he previously made regarding his 2006 income. Notably, the husband also argued that the prior judicial finding was binding as to his reasons for leaving his former employer – involuntary termination – and also as to his 2006 salary. As such, he argued that because his 2007 salary was substantially lower than the 2006 income previously applied by the Court, he was entitled to a reduction. The motion judge decided without conducting a plenary hearing that the prior judicial determination regarding the husband’s relocation and income was binding on the parties in deciding motion before it.

Pursuant to the Court’s instructions, the husband then filed his motion to reduce support based on his judicially determined 2006 salary and his predicted 2007 salary. The wife, however, again reiterated her prior arguments regarding the husband’s relocation and income and, on this occasion, finally included a certification and report from an employability expert as to the husband’s earning capacity. A third judge reviewed the husband’s application and, despite the second judge’s finding, rejected the husband's argument that the first judge’s determination was binding. In so doing, the third judge concluded that the husband’s income decreased because he voluntarily left his employer, relocated to Florida and accepted a lower-paying position.

In reversing the third judge’s factual findings and conclusions of law regarding the husband’s relocation and income due to the binding nature of the first judge’s decision, the Appellate Division first held that the legal principle of res judicata was inapplicable because that principle prevents the re-litigation of the same controversy between the same parties, rather than a specific finding derived from a different controversy. The Appellate Division then held that the concept of collateral estoppel, which bars reconsideration of an issue of law or fact previously determined in a different action, did apply because the first judge’s decision “implicitly adopted” the husband’s arguments as to why he left his job, relocated to Florida and accepted a lower paying position. As such, the wife could not subsequently challenge these findings.

This case, while not approved for publication, presents interesting issues that will likely arise on a more frequent level as parties live in this difficult economic environment. In fact, in the current economic climate, the issue of whether a support payor who lost his or her job is underemployed may come up more and more. This hot topic was previously raised in another entry in this blog that can be found here.