Wednesday, January 19, 2011

Can I reduce my New Jersey alimony?

The Superior Court of New Jersey Appellate Division, in a recent unreported decision, overturned a decision by the lower court that significantly decreased a permanent alimony award.  The decision was overturned because the lower court made a premature decision that was based on minimal credible evidence.  Because the case is unreported, it does not hold precedential value; however, it can be helpful to understand the court’s logic in their decision-making, as well as how a New Jersey court likely will rule in future cases.  The name of the case is Butera v. Toy

In New Jersey, alimony and support order amounts are subject to modification if there is a change of circumstances on the part of either spouse.  According to the court, some common situations that would qualify as a change of circumstances are: an increase in the cost of living, an increase/decrease in the supporting spouse’s income, deterioration in the health of a spouse in the form of illness, disability or infirmity, loss of housing, the dependent spouse’s cohabitation with another party, employment by the dependent spouse and changes in federal income tax laws. 

A change in the circumstances must be “permanent and continuing” in order to justify a change in the support.  This requirement prevents parties from seeking a change to their support order in the event that the situation is only temporary.  The courts want to see a permanent, lasting change before they are willing to make any modifications.  In a modification of alimony case, the New Jersey courts have stated that the supporting spouse’s ability to pay is the central issue.  Although income is a significant factor, when determining ability to pay, the courts also to look at factors such as “real property, capital assets, investment portfolio and capacity to earn by diligent attention to . . . business.”  The party seeking the change in support must show the change in circumstances that would require such modification. 

The parties in Butera v. Toy were divorced in August 1999 after nineteen (19) years of marriage.  The parties’ Property Settlement Agreement included an alimony award to the Wife at a rate of $45,000.00 per year from January 1999 to December 2004 and then at a rate of $75,000.00 from January 2005 onward.  The alimony payment was calculated based on Husband’s annual income of $350,000.00 and Wife’s imputed income of $20,000.00.  Husband, an attorney, worked in a large New York law firm at the time of the divorce proceedings.

In 2005, Husband left the firm and began employment with a Houston, Texas law firm that was establishing a New York office.  Husband, under his new employment, earned approximately $743,000.00 annually during 2006, 2007 and 2008.  Wife, who stayed home during the marriage, at the time of the litigation held a position as an associate college professor, in addition to being a Chair of the Art and Music Departments and the Director of an Art Gallery.  Wife earned approximately $56,000.00 in 2008.

In early 2009, Husband notified Wife that his contract with the Texas law firm was ending and that, due to a lack of employment prospect and income, he would likely be unable to pay her alimony payments.  Husband, in June 2009, opened a solo practice and, around this time, stopped making his required alimony payments to Wife.  Husband, after accumulating several months in arrears for failing to pay alimony, filed a motion with the court to terminate his alimony obligations. 

After an unsuccessful mediation attempt, the trial court determined that a change in alimony was justified because Husband had undergone such a change in circumstances in the seven (7) months since the ending of his employment contract with the firm.  Notably, the court made this decision solely on the basis of Husband’s submission of two (2) case information statements and three (3) certifications.  Case information statements in New Jersey are basically a roadmap to the parties’ income, expenses and assets.  Up-to-date statements are required at the filing of divorce, the finalization of divorce and during any modification requests.  Certifications in New Jersey are documents that state the supporting information and circumstances for the party’s request.  Based on these submissions, the trial court drastically reduced Husband’s monthly alimony obligations from $6,250.00 per month ($75,000.00 annually) to $1,400.00 per month retroactive to September 2009.  Wife naturally appealed the surprising decision. 

On appeal, the court found numerous errors with the lower court’s decision and remanded for further proceedings.  First, the original order for alimony was based on Husband earning an annual income of $350,000.00.  Defendant, according to his case information statement, earned $725,000.00 in 2008 and, according to financial records, earned over $400,000.00 in 2009. Although Husband’s career was now based on a solo practice, there was a lack of evidence to show that his income would decrease to the point that it would fall below the $350,000.00, which was the basis for the original agreement.  Furthermore, there was a lack of documentation to support Husband’s claimed dramatic decrease in income and to support his projections of decreased income for the next year.  Husband’s figures of income and future income were taken on their face without any proof that the amounts were accurate.  In addition, the lower court did not consider any assets acquired post-divorce, including Husband’s significant 401K.  The appellate court found that a review of the case information statements and certifications submitted by Husband “does not constitute an adequate study” of Husband’s financial situation. 

The appellate court also took issue with the lower court’s failure to establish that the change in circumstances requiring the decrease in alimony was permanent and lasting, such to require modification of the order.  New Jersey courts are generally unwilling to allow for a modification where the circumstances are only temporarily altered.  For example, the courts have rejected changing alimony orders, even when there was a significant decrease in income, when that decrease occurred only twenty (20) months after the original order.  Here, a seven (7) month period likely would not be an adequate amount of time to demonstrate that a change in income was permanent.  Also, the income predictions by Husband, even if they were supported by adequate documentation, were not a basis for a modification, because the circumstances were merely predictions rather than being actual changes.  Thus, circumstance that have not yet actually occurred are not sufficient to show that a change in support is necessary. 

Due to the significant lack of financial records, the appellate court stated that the lower court should have first ordered that Husband submit the required documentation, and then should have conducted a plenary (full) hearing to further develop a complete financial status of both of the parties.  The modification, if granted, should have been after a thorough investigation into Husband’s assertions. 

This case is a further example of the reluctance of New Jersey courts to disturb alimony awards, except where there is a significant change in circumstances that is permanent or at least proven to be long-term.  Furthermore, the courts want to see substantial documentary support, including tax returns and pay stubs, for the party’s assertions and claimed changes in circumstances.  The courts are unwilling to entertain requests from parties who are seeking to decrease the amount they are responsible to pay or increase the amount they receive, unless they prove their case with legitimate and comprehensive evidence.

If you would like to read the full opinion, click here

Written by Elizabeth Early, law clerk with the Law Offices of Linda A. Kerns, LLC.

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