ELIZABETH FENSKE v. KARL FENSKE (2011)

Defendant Karl Fenske appeals from a judgment of divorce following a bench trial.   He alleges that the court erred in finding that he earned an annual income of $72,000 as an attorney in Morristown in 2005, in determining equitable distribution and in assessing counsel fees.   After reviewing the record in light of the contentions advanced on appeal, we affirm the court's decisions as modified herein and remand to the trial court to consider whether or not the pendente lite support order should have been retroactively modified in light of the proofs presented at trial.

The parties were married in 1982 and had three children.   Plaintiff Elizabeth Fenske filed a complaint for divorce on September 21, 2006.   At the time of their divorce, one child was emancipated, and the other two children were attending college.

Plaintiff has a master's degree in counselor education and was employed as a manager in human resources for AT & T until her first child was born.   She then stayed home for eight years as a full-time homemaker.   In 1992, as the youngest child reached school age, plaintiff began working for defendant part-time in his law office.   In addition, she began working part-time at a church in Morristown in 1999.   She phased out her work in defendant's office and began to work full-time for the church in 2006.   At the time of trial, she received an annual salary of $42,000 and health benefits for the family as the church director of children's ministries.   Defendant's employability expert opined that she could earn more money in her field if she relocated to a larger church in a southern state.   Plaintiff, however, had no desire to leave her home state.

Defendant obtained a law degree in 1977 and maintained a solo practice throughout the marriage.   Since 1987, he has leased a spacious but modest third-floor office in a building in a prime location on the Green in Morristown.   He renovated this space following the parties' separation to provide him with a residence in addition to an office.

At trial, defendant maintained that plaintiff was the primary wage earner, claiming that he never earned more than $30,000 in any year.   He attributed his lack of financial success to his battle with alcoholism.   He argued that he has remained sober since 1994 only because of the extensive time and energy he devotes to Alcoholics Anonymous (A.A.) and athletic activities, which his therapist testified were necessary to cope with his “adjustment disorder.”

Defendant also indicated that he bartered with many clients whom he met socially.   They performed repair or maintenance work at his office in exchange for his legal services.   He charged other clients a reduced fee of $150 to $200 per hour.   He also testified that many of his more time-intensive cases were not profitable.

Daniel Schreck, a certified public accountant for more than twenty-five years, testified as plaintiff's forensic accountant that defendant did not keep accurate records of his business income.   He consistently commingled with his law practice accounting income and expenses relating to the parties' rental property located next door to the marital home, as well as personal family expenses.   Schreck analyzed only records for 2005 because he found those to be the most complete.   Defendant used the “Quicken” program that year to keep track of his finances.   Schreck adjusted the $20,162 total income reported on defendant's tax return for 2005 by nearly $49,000 on the basis of excessive business deductions alone.   Schreck did not include in defendant's income any portion of the approximately $200,000 that defendant received in compensation for a shoulder injury he sustained in 1999 when an automobile collided with his bicycle.

In 1989, the parties purchased rental property with defendant's parents, which included an improved lot as well as a vacant, unimproved lot.   The improved lot was purchased for approximately $244,000.   The unimproved lot, which had a steep slope preventing improvement, was purchased for approximately $20,000.   Defendant's parents provided half of the down payment on the rental property, approximately $40,000.   Defendant managed the property, with some assistance from his father.   Defendant used any income generated from the property for his family and business expenses, reporting a net loss from the property to the taxing authorities.   In 2001, the parties refinanced the marital home, obtaining a mortgage for $180,000, which they used almost exclusively to pay off completely the mortgage on the rental property.¹  The parties agreed at trial that the market value of the improved lot was $525,000.   The court found the current value of the vacant lot to be $10,000, consistent with the defense expert's testimony.

After trial, but prior to the trial court's decision, the parties sold the marital home.   The trial court divided the proceeds equally between them, after deducting various credits.   The court allowed plaintiff to keep her pension and IRA. Both parties agreed that defendant's law practice has no value beyond generating defendant's income.

Defendant raises the following issues on appeal:

POINT 1

IT WAS AN ABUSE OF DISCRETION TO FIND THAT THE DEFENDANT MADE $72,OOO PER YEAR FROM HIS LAW PRACTICE.

POINT 2

THE EQUITABLE DISTRIBUTION WAS AN ABUSE OF DISCRETION.

POINT 3

THE PENDENTE LITE MOTION WAS IMPROPERLY DECIDED.

POINT 4

ATTORNEY FEES WERE IMPROPERLY AWARDED TO PLAINTIFF.

We affirm the income determination, unequal division of the rental property as modified, and attorney fee award substantially for the reasons expressed in the trial court's written opinion of February 27, 2009.   We add a few comments, however, concerning defendant's three central arguments:  (1) his income is far less than was determined by the court;  (2) he should not have been assessed counsel fees;  and (3) the rental property should have been equally divided.   In his brief, defendant argues that, “[i]n essence, the [d]efendant was treated like a dog from the start to the finish, and the [p]laintiff was given almost all of the assets of the parties' marriage and a steady income stream even though she makes more money than the [d]efendant.”   He attributes this “miscarriage of justice” to his belief that “the wife is generally favored in matrimonial matters.”

After arguing that he was “reporting only $42,000 a year from [his] law practice,” defendant says his “income should be less than $20,000 for purposes of alimony and child support once you take away [the rental property] and give it to someone who doesn't know the business end of a hammer.”   Defendant acknowledged keeping his financial records in shopping bags and mixing rental income, money from his personal injury award and income from his law practice.   He argues that he considers himself “to be a client in regard to the apartment building” and therefore properly combined those records with his law practice records.   He supplied hand-written notes of his income and expenditures.

Defendant's admitted benefit of barters with clients is income, as are his 2005 tax deductions that the court found should be added back to determine his income for matrimonial purposes, based on the testimony of Schreck, plaintiff's forensic accountant.

Defendant argues that the $72,000 income attributed to him in 2005 improperly included rental income and expenses.   As the rental property operated at a loss, according to defendant's representations on his tax returns, the inclusion of rental income and expenses should not have increased his income.

Given the lack of verifiable information presented by defendant, plaintiff's expert's assessment of his income was reasonable and fair.   Defendant's own employability expert testified that the United States Department of Labor's Occupational Employment Statistics indicated that seventy-five percent of attorneys in Morristown and its surrounding area earned more than $81,960;  the average income being $120,950.

Defendant argues that the court did not adequately consider his inability to earn money due to the disease of alcoholism, which required him to spend an average of two hours each day in extensive athletic, philanthropic and A.A. activities.   Defendant cannot complain here that the court improperly imputed additional income to him that he was unable to earn due to his disabilities.   The court implicitly accepted defendant's limitations by assessing defendant's income based on his actual earnings calculated by Schreck and not an imputation of additional income to him that he could have earned but did not.   See, e.g., Caplan v. Caplan, 182 N.J. 250, 268 (2005) (concluding that, where the father was terminated from his job and did not seek other employment, “the imputation of income to one or both parents who have voluntarily remained underemployed or unemployed, without just cause, will promote a fair and just allocation of the child support responsibility of the parents.”).

Defendant argues that he should not have been assessed counsel fees as he was willing to do all the legal work necessary for the parties to obtain a divorce and was willing to divide marital assets equally with his wife.   Defendant incurred virtually no counsel fees.²  Plaintiff incurred approximately $120,000 in counsel and expert fees of which she paid $80,000.   Given the parties' respective abilities to pay and defendant's extension of the litigation through his refusal to provide accurate and complete information as well as his failure to comply with court orders, the court reasonably assessed a portion of plaintiff's fees, a total of $35,000, against defendant.   N.J.S.A. 2A:34–23.

Plaintiff testified that defendant told her that his parents would sign over their one-half share of the rental property if the parties paid off the mortgage on the property.   After the mortgage was paid off, however, the deed to the rental property continued to reflect the parties' one-half interest.   Defendant denied telling plaintiff that his parents would give their portion of the rental property to the parties.   The parties agreed that defendant had explained that the refinance would have the benefit that the interest on the new mortgage for the marital home would be less than the interest for the mortgage on the rental property.   The trial court found plaintiff's testimony to be more credible on the issue of whether defendant represented that his parents agreed to gift the couple their share after the refinance.   We generally defer to a trial court's credibility determinations.  Cesare v. Cesare, 154 N.J. 394, 412 (1998).

Plaintiff's unwillingness to accept defendant's offer to equally divide their assets was reasonable and certainly did not evidence bad faith.   The court appropriately gave plaintiff a larger share of the parties' rental property based on the $180,000 from the mortgage taken on the marital home that was poured into the rental property, which was owned jointly with defendant's parents.   The court, however, did not explain precisely how it determined that plaintiff was entitled to eighty percent of the parties' one-half share of the property.   The court found defendant improperly induced plaintiff to incur marital debt of $90,000 (one-half the mortgage on the marital property used to pay off the mortgage on the rental property), which benefited only defendant's parents.   Thus, when dividing the marital rental property, it was appropriate to give plaintiff $90,000 more of the joint equity than defendant.   The court found that the total value of the rental property was $535,000.   By giving plaintiff two-thirds of the one-half marital interest in the property, this goal is accomplished.   Plaintiff's share would be worth approximately $180,000 and defendant's approximately $90,000.³  We therefore modify the trial court's division of the rental property accordingly.

Defendant also argues that the pendente lite order entered without prejudice, which resulted in nine subsequent motions, should have been modified at trial, if not before trial.   The March 12, 2007 pendente lite order required defendant to pay

all of the Schedule A and B expenses as are set forth in the plaintiff's Case Information Statement [$3559 on plaintiff's October 19, 2006 case information statement,] ․ the sum of $500.00 per month as for unallocated pendente lite support [,] ․ [the older daughter's] college educational expenses at Rutgers University including but not limited to tuition, meal plan, rent, utilities, books and college fees ․ and any fees and costs associated with [the younger daughter's] impending college expenses and including filing the FAFSA.4

Defendant argues that because plaintiff was given the rental income pendente lite, she should have paid all of her own expenses.   Defendant liquidated his retirement accounts, cashed in his life insurance and depleted his personal injury award pendente lite.   He did not keep accurate records to reflect how this money was spent.

The court that decided the pendente lite award and subsequent pre-trial motions concerning support had no means to accurately assess defendant's true income.   He reported on his case information statement dated November 14, 2006, that he earned $7673 in 2004.   Defendant reported his gross income for 2005 as $10,000 in his case information statement dated May 29, 2007.   He reported his gross income on his 2005 tax return, which is dated November 16, 2007, as $29,492.   Defendant now argues in his brief that his income from his law practice was $42,000 for that year.

Defendant did not comply with the pendente lite order to pay the mortgage on the marital home, and a foreclosure complaint was filed.   After trial, the court directed that the unpaid mortgage payments be divided equally between the parties, thus relieving defendant in part from the pendente lite order.   Defendant claimed his profit from his law practice in 2007 was $3629.   He also renovated his office to convert it into living quarters during the pendente lite period, making it extremely difficult to determine what money was spent on that renovation rather than to support his family.   The trial court awarded credit to plaintiff for unpaid pendente lite payments without considering the propriety of the pendente lite order in light of defendant's income as disclosed at trial.

These determinations should be reconsidered in light of the support awarded post-trial ⁵ and well-established law that pendente lite orders, even orders for child support, may be retroactively adjusted after trial.   See Mallamo v. Mallamo, 280 N.J.Super. 8, 12–17 (App.Div.1995);  see also Tannen v. Tannen, 416 N.J.Super. 248, 284 (App.Div.2010) (where we remanded and specifically permitted the trial court to consider whether retroactive modifications of alimony and child support were necessary after deciding other financial issues), certif. granted, 205 N.J. 80 (2011).   Especially in a situation where the payor is earning considerably less than the average attorney with his years of experience, yet considerably more than he self-reports, the trial court must look at the pendente lite order with care to ensure it was appropriate under the financial circumstances demonstrated after a full trial on the merits.   In light of the trial court's finding that defendant's annual income was $72,000, we remand for a determination of whether the pendente lite order should be modified retroactively and, if so, for equitable distribution credits to be adjusted accordingly.

Defendant also raises issues that have arisen since the trial in this matter.   We do not address those matters in this opinion as they must first by brought to the trial court by way of a post-judgment motion.

Affirmed in part, modified in part, reversed and remanded in part for further proceedings in conformance with this opinion.

FOOTNOTES

FN1. Approximately $2000 to $3000 was used to pay off the prior mortgage on the marital home..  FN1. Approximately $2000 to $3000 was used to pay off the prior mortgage on the marital home.

FN2. Defendant was represented by counsel for only a brief time..  FN2. Defendant was represented by counsel for only a brief time.

FN3. Given that there was no claim made nor facts developed regarding the interest paid on the $90,000, a more precise calculation is not possible.   The absence of an interest calculation, which would benefit plaintiff, is balanced in part by disregarding the $2000 to $3000 used to pay off the small prior mortgage on the marital home..  FN3. Given that there was no claim made nor facts developed regarding the interest paid on the $90,000, a more precise calculation is not possible.   The absence of an interest calculation, which would benefit plaintiff, is balanced in part by disregarding the $2000 to $3000 used to pay off the small prior mortgage on the marital home.

FN4. The FAFSA is the Free Application for Federal Student Aid..  FN4. The FAFSA is the Free Application for Federal Student Aid.

FN5. The taxes paid by the parties also affect the portion of their income available to pay expenses.   Plaintiff's tax payments are more closely regulated than defendant's payments..  FN5. The taxes paid by the parties also affect the portion of their income available to pay expenses.   Plaintiff's tax payments are more closely regulated than defendant's payments.

PER CURIAM