NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2300-12T2
KATHLEEN KRUPINSKI, n/k/a KATHLEEN GOCKLIN, APPROVED FOR PUBLICATION
Plaintiff-Respondent/ September 2, 2014 Cross-Appellant, APPELLATE DIVISION v.
MICHAEL KRUPINSKI,
Defendant-Appellant/ Cross-Respondent.
_____________________________________
Argued May 21, 2014 – Decided September 2, 2014
Before Judges Fuentes, Fasciale and Haas.
On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Sussex County, Docket No. FM-19-352-90.
John V. McDermott, Jr., argued the cause for appellant/cross-respondent.
Chris H. Colabella argued the cause for respondent/cross-appellant (Gruber, Colabella & Liuzza, attorneys; Mr. Colabella and Kristen C. Montella, on the brief).
The opinion of the court was delivered by
FUENTES, P.J.A.D.
Defendant Michael Krupinski appeals from the order of the
Family Part denying his motion to terminate his obligation to pay permanent alimony to his former wife, plaintiff Kathleen
Krupinski, n/k/a Kathleen Gocklin. Plaintiff cross-appeals the
court's decision to deny her application for an award of counsel
fees incurred defending defendant's motion. After reviewing the
record before us, we hold the Family Part mistakenly exercised
its discretion when it denied defendant's motion to terminate
alimony without affording the parties discovery and thereafter
determining whether an evidentiary hearing was warranted.
Defendant's motion requires the trial court to address and
answer one key question it did not address in denying
defendant's motion to terminate alimony in 2010 and again in
2012. Specifically, the court must discern what part of the
$1,871 monthly pension benefits plaintiff has been receiving
since defendant's retirement in 2010 is attributable to
defendant's post-dissolution efforts, and thus may be considered
income to plaintiff for purposes of determining alimony, outside
the bar imposed in N.J.S.A. 2A:34-23(b). The trial court erred
in denying defendant's motion without making this threshold
determination.
We thus remand for the Family Part to enter a case
management order to afford the parties the right to engage in
limited discovery to ascertain each other's current financial
status, including medical and social needs. We leave the
2 A-2300-12T2 precise method and scope of discovery to the discretion of the
trial court. We suggest, however, that the judge confer with
counsel and thereafter enter a case management order limiting
the form of discovery to written interrogatories, requests for
admissions, production of documents, and updated Case
Information Statements (CIS) supported by copies of filed income
tax returns for the past three years. At the conclusion of
discovery, and after consultation with counsel, the court will
then be in a position to determine whether it is necessary to
conduct an evidentiary hearing to resolve any factual issues in
dispute.
I
The parties were both twenty-two years old when they
married in 1968, and had two children who are both emancipated
adults. They separated twenty years later on October 24, 1988.
With the assistance of independent counsel, they negotiated and
entered into a comprehensive property settlement agreement (PSA)
that covered all of the key issues associated with the
dissolution of marriage, including child support, the cost of
college education for the children, and most relevant here,
alimony, and equitable distribution. The PSA was incorporated
by the court to the final judgment of divorce (JOD) dated June
27, 1990.
3 A-2300-12T2 Defendant was a public school teacher at the time the
parties separated in 1988, earning an annual salary of
$45,798.28. He was enrolled in the Public Employment Retirement
System (PERS). With respect to the equitable distribution of
defendant's pension benefits, Paragraph 14 of the PSA provided
in relevant part as follows:
It is agreed that at such time as the Husband starts to draw his pension, the Wife shall be entitled to one-third of each of the periodic pension payments made to the Husband. The Husband further agrees to execute such qualifying domestic relations order [QDRO] as may be necessary to direct the organization administering the pension to make the Wife's one-third share of each pension payment directly to the Wife.
At the time the court entered the JOD in 1990, the PERS
recognized defendant had accumulated nineteen years and eleven
months of service as a public school teacher. The QDRO, which
for reasons not disclosed in the record was not filed until
October 5, 2000, provided, in relevant part, for the Division of
Pension and Benefits
to withhold from [defendant']s gross monthly retirement allowances for equitable distribution payments to [plaintiff] an amount to be computed by multiplying the gross monthly retirement allowances by Fifty Percent (50%) and a coverture fraction in which the numerator will be the total number of years that the spouses were married while the member was a member of the retirement system (from September 1, 1969 to July 21, 1989 or 19 Years 11 Months), and the
4 A-2300-12T2 denominator will be stated to be the total years of service credit accrued within the retirement system at the time of retirement. After payments commence to the Alternate Payee, they shall continue until the death of the Participant or the Alternate Payee.
The Alternate Payee shall receive a pro-rata share of any cost of living adjustments or other economic improvements made to the Participant's retirement allowance on or after the date of his retirement. Such pro- rata share shall be calculated in the same manner as the Alternate Payee's share of the Participant's gross monthly retirement allowance is calculated pursuant to Section 2 above.
Defendant was sixty-four years old when he retired on April
1, 2010. He had accumulated forty-one years and five months of
service in the PERS. Of particular importance here, defendant
continued his education after the parties separated, and was
promoted to an administrative position, resulting in a
significant increase in salary. The Division of Pensions and
Benefits calculated his retirement benefits based on an annual
salary of $132,210.97, nearly three times the $45,798 salary he
was making as a teacher when he separated from plaintiff.
With respect to alimony, Article II, Paragraph 4 of the PSA
obligated defendant to pay plaintiff $100 per week, the
equivalent of $430 per month ($100 X 4.3 weeks), subject to
termination only upon plaintiff's death, remarriage, or
cohabitation "with an individual to whom she is not related by
5 A-2300-12T2 blood or marriage." No provision was made for any adjustment of
alimony based on an increase in the cost of living. Plaintiff
accepted this arrangement without protestation until defendant
filed his second motion seeking to terminate his alimony
obligation. Stated differently, defendant paid plaintiff a
total of $113,520 in alimony over a period of twenty-two years
without any cost of living adjustments and without objection
from plaintiff.
According to defendant, he did not keep in contact with
plaintiff after the divorce. He does not know anything about
her personal life, including whether she was employed on a
fulltime basis, what kind of work she performed, or if she has
cohabitated with a person other than a family member. The only
communication defendant received from plaintiff after 1990 came
in the form of a letter dated June 9, 2009, which stated:
Dear Michael:
I hear you are retiring this month. Congratulations!! I hope you enjoy it as much as I have been enjoying it even though I do work 2 days a week to keep my mind sharp and for the socialization.
I am writing to inquire about what your plans are regarding your pension. The pension of which I am entitled to a portion. It is my understanding that I will start receiving my portion when you start to collect your portion.
6 A-2300-12T2 Please advise me as to what needs to happen or what is happening concerning my portion.
Thank you.
Kathy
In a certification plaintiff filed in opposition to the
motion to terminate alimony filed by defendant in 2012,
plaintiff made clear that when she decided to retire in 2008,
she "reviewed [her] finances to be sure I could afford to do so
before [she] made that final decision." That review included
alimony of $430 per month from defendant, as it was agreed in
the original divorce settlement of 1990 that she would receive
alimony until she died, remarried or cohabited, and she had
"done none of these."
Conspicuously, yet understandably missing from plaintiff's
careful review of her finances in anticipation of retirement,
was any mention or reliance on her equitable distribution share
of defendant's pension benefits. This omission makes it clear
that plaintiff's share of defendant's pension benefits was not a
factor in her carefully considered decision to retire in 2008.1
1 We characterize this omission by plaintiff as understandable because when she would start receiving her share of defendant's pension, and the dollar amount of that share, were factors totally and exclusively within defendant's control. That is, because defendant was not compelled to retire at any particular age, he and he alone would choose when to retire. Furthermore, the amount of defendant's monthly pension benefits, including (continued)
7 A-2300-12T2 Defendant's retirement automatically triggered plaintiff's
right to receive her coverture share of defendant's PERS pension
benefit. Defendant began receiving his monthly pension payments
on May 1, 2010. In a letter dated April 22, 2010, the Division
of Pensions and Benefits explained to defendant that based on
the distribution formula described in the QDRO, he would receive
$5,929.90, resulting in a monthly benefit payment to plaintiff
in the amount of $1,871.
Defendant filed his first motion seeking to terminate his
alimony obligation to plaintiff in April 2010. In a Statement
of Reasons attached to the order denying defendant's motion, the
judge, who was not the same judge who entered the order under
review here, noted that plaintiff objected, claiming her gross
income for the year 2009 was $18,282. Although plaintiff did
not break down the source of this income, the judge found that
she received $430 per month from defendant in alimony, and $205
per week in Social Security benefits. These two sources of
income amount to $10,760 per year. We thus infer that before
she began receiving her share of defendant's pension, plaintiff
earned $7,522 per year from undisclosed employment.
(continued) plaintiff's share, would be based on defendant's years of service and his annual salary on the date of retirement.
8 A-2300-12T2 After acknowledging the standard applicable for
modification of spousal support under N.J.S.A. 2A:34-23 and the
Court's seminal decision in Lepis v. Lepis, 83 N.J. 139, 145
(1980), the judge found that "[o]n this record, defendant has
proven that his retirement constitutes a change of
circumstances." The judge nevertheless found "critical"
defendant's failure to disclose his income in 1990 or provide "a
description of the marital lifestyle in 1990. Cf. Weishaus v.
Weishaus, 180 N.J. [131], 145 (2004)."2
Based on an alleged inconsistency between what defendant
expected to receive from his pension, the judge found the record
was "unclear" as to what his actual income would be after
retirement. Despite these factual misgivings and alleged
inconsistencies, the judge found "clear" that "defendant will
2 The motion judge's contrasting reference to Weishaus for the proposition that the parties' failure to have determined their marital lifestyle at the time of their divorce, created an insurmountable impediment to the adjudication of defendant's motion seeking modification of spousal support was misplaced. Indeed, as Justice LaVecchia explained in Weishaus, supra, the Court was relaxing what some perceived was an inflexible directive in Crews v. Crews, 164 N.J. 11, 26 (2000), requiring a determination of the marital lifestyle, even in settled cases. 180 N.J. at 134. The Court in Weishaus thus wanted to make clear that "[a] trial court may forego the findings [of a marital lifestyle] when the parties freely decide to avoid the issue as part of their mutually agreed-upon settlement, having been advised of the potential problems that might ensue as a result of their decision." Id. at 144.
9 A-2300-12T2 continue to be able to pay expenses, including alimony
obligation, following his retirement."
II
Defendant waited two years before attempting to once again
seek judicial relief from his obligation to pay alimony. This
time, however, defendant presented two years of retirement
history to a different judge. The record before the judge in
2012 showed that after plaintiff began receiving her share of
defendant's pension benefits, her annual gross income increased
from $18,282 in 2009 to $40,734 in 2010. In his decision in
support of his August 12, 2012 order denying defendant's second
motion for termination of alimony, the judge found that "[o]n
this record, and as noted on the previous record, defendant's
retirement constitutes changed circumstances."
The judge also noted that defendant had addressed the issue
raised by the previous judge in 2010 by submitting evidence of
"his 1990 marital lifestyle." This evidence includes copies of
the tax returns filed by the parties from 1988 to 1990, the
three years immediately preceding their divorce, and a detailed
certification from defendant. We can reasonably describe this
evidence as substantial. If accepted as truthful, defendant
established through these documents that from 1968 to 1988, the
parties enjoyed a "frugal, modest" marital lifestyle.
10 A-2300-12T2 As an appellate court, it is not our function to weigh
evidence or determine defendant's credibility. The trial judge
must carefully review and evaluate this evidence and determine
first whether there is a basis to dispute defendant's account of
his life with plaintiff or question his socio-economic
characterization of their lifestyle. If there are disputes
about these and other issues, the judge must conduct an
evidentiary hearing and make detailed factual findings supported
by the record. Many of these findings will require the judge to
make credibility determinations based on the judge's personal
assessment of the parties' testimony. The tools necessary to
carry out this charge are uniquely available to the trial judge.
Only the trial judge "has the opportunity to make first-hand
credibility determinations about the witnesses who appear on the
stand. . . [and] has a 'feel of the case' that can never be
realized by a review of the cold record." N.J. Div. of Youth &
Family Servs. v. R.G & J.G., 217 N.J. 527, 552 (2014) (quoting
N.J. Div. of Youth & Family Servs. v. E.P., 196 N.J. 88, 104
(2008)).
After reviewing defendant's financial status, the motion
judge denied defendant's motion to terminate alimony because he
found that defendant "is still able to pay his alimony
obligation." Defendant argued that the PSA created a reasonable
11 A-2300-12T2 expectation that his alimony obligation would end upon his
retirement. In rejecting defendant's argument, the judge
accepted at face value plaintiff's claim "that there was never
any discussion or debate at the time of the original divorce as
to alimony ending when [defendant] retired and his income
changed." This clearly constitutes a disputed issue of fact
concerning what may or may not have been anticipated or
discussed that cannot be resolved without an evidentiary
hearing.
The motion judge principally relied on defendant's
financial condition after retirement to deny his motion to
terminate alimony. Although the judge found defendant's
retirement created "changed circumstances," he concluded
defendant was still financially able to pay alimony. This
conclusion, however, overlooks the second part of the analysis:
whether plaintiff's financial status has improved to such an
extent upon receiving defendant's share of his PERS pension,
that she no longer needs alimony from defendant to maintain her
former marital lifestyle. This is the central thesis of
defendant's argument. However, in concluding that defendant
remains capable of paying alimony, the motion judge did not
adequately address this issue.
12 A-2300-12T2 N.J.S.A. 2A:34-23(b) provides that: "When a share of a
retirement benefit is treated as an asset for purposes of
equitable distribution, the court shall not consider income
generated thereafter by that share for purposes of determining
alimony." This legislative injunction codified an earlier
decision reached by the Chancery Division in D'Oro v. D'Oro, 187
N.J. Super. 377 (Ch. Div. 1982), aff'd, 193 N.J. Super. 385
(App. Div. 1984), which held that income flow from a pension
cannot be considered as income for alimony modification purposes
if the value of the marital asset had previously been equitably
distributed by the court. That took place here in the form of a
QDRO.
Although there was some initial ambiguity about whether
this legislative injunction in N.J.S.A. 2A:34-23(b) was intended
to apply to modification of alimony, the Supreme Court settled
that question in Innes v. Innes, 117 N.J. 496, (1990), holding
that the statute applied "to both initial alimony orders and
modifications of earlier alimony awards." Id. at 508. The
Court also made clear that the Legislature intended that the
statute preclude "double-dipping," that is, the practice of
counting the pension as both an asset subject to equitable
distribution and income. Ibid.
13 A-2300-12T2 However, what can be considered "income" for purposes of
deciding a motion for alimony modification, or in this case
termination, in the context of pension benefits and the bar
imposed by the Legislature in N.J.S.A. 2A:34-23(b), is a
question that has not been directly answered. Here, defendant
argues that his pension benefits increased significantly as a
result of his post-divorce efforts to continue his education and
training, which led to his promotion to high school
administrator. Thus, defendant argues the motion judge was
required to identify which portion of his pension shared by
plaintiff was a joint effort of the parties during the marriage,
and which part was due to defendant's post-divorce efforts.
We agree with defendant. As we recently noted in Barr v.
Barr, 418 N.J. Super. 18, 41 (App. Div. 2011):
[T]here are some extraordinary post-judgment pension increases that may be proven to be attributable to post-dissolution efforts of the employee-spouse, and not dependent on the prior joint efforts of the parties during the marriage. In such instances, these sums must be excluded from equitable distribution and the application of the coverture fraction may be insufficient to accomplish this purpose.
What part of a pension benefit is barred from consideration
under N.J.S.A. 2A:34-23(b) and what part can be considered
"income" for purposes of modification of alimony is not an easy
determination. In Bednar v. Bednar, 193 N.J. Super. 330 (App.
14 A-2300-12T2 Div. 1984), we considered the legal and equitable implications
when a marital asset increases in value pending the entry of a
final order settling its distribution. Writing for the panel,
our colleague Judge King held that "accretion in value must be
analyzed in terms of whether it was attributable to the personal
industry of the party controlling the asset, apart from the non-
possessory partner, or simply to fortuitous increase in value
due merely to inflation or other economic factors." Id. at 333
(internal citations omitted). We faced a similar dilemma in
Wadlow v. Wadlow, 200 N.J. Super. 372 (App. Div. 1985), and
again endorsed Judge King's approach in Bednar as a guiding
principle:
[A]n increase in value caused by market factors or inflation and an enhancement which is the result of the "personal industry of the party controlling the asset" [are different]. We held [in Bednar] that "interim accretions pending actual distribution due to the diligence and industry of a party in possession of an asset, independent of identifiable market forces," should accrue to that person alone. However, where the enhanced value is attributable to market factors or inflation, "each party should share equitably in the increment."
[Id. at 384 (quoting Bednar, supra, 193 N.J. Super. at 333).]
The case that comes closest by analogy to the situation we
confront here is Menake v. Menake, 348 N.J. Super. 442 (App.
15 A-2300-12T2 Div. 2002). The issue in Menake concerned the valuation of a
deferred distribution pension, similar to the one the parties
share here. Writing for the panel, our colleague Judge Conley
gave the following summary of the deferred distribution
valuation formula:
Under the existing law as we understand it, the deferred distribution valuation formula utilizes the value of the pension as of the date of retirement. That value will necessarily reflect, to some degree, post- divorce work efforts. Thus far, we have considered the "coverture fraction" as sufficient to carve out the marital value of the asset and have not required that the value of the benefits as of the date of retirement be analyzed to determine, and subtract out, any enhancement due to post- divorce work effort. We do not foreclose that possibility in the event, on remand, the parties choose to pursue this issue and establish an appropriate record. Can, for instance, such enhancement be mathematically determined and factored out? Perhaps more importantly, can it be shown that the post- divorce enhancing factors, i.e., here, the alleged extraordinary overtime, are entirely unrelated to plaintiff's prior years of service? If, for instance, seniority were a dispositive factor in his ability to obtain the overtime, it would seem that would be future enhancement of the marital efforts for which it could be said both spouses looked forward to. If only partially a factor, can the post-divorce service efforts be mathematically extracted? Additionally, did plaintiff work overtime during the marital years such that enhancement of his pension benefits by post- divorce overtime efforts could have been anticipated and, therefore, would become part of the expected "future enjoyment" of
16 A-2300-12T2 the marital asset? We leave it to the parties, should they chose to, to flesh these issues out upon remand and to develop the factual record needed for a cogent resolution.
[Id. at 454. (Emphasis added).]
Using these principles as a guide, the trial court here is
required to determine what Judge Conley in Menake called the
"post-divorce enhancing factors." Defendant alleges he can
establish that, but for his educational and professional
training that led to his promotion to an administrative position
and other "post-divorce enhancing factors," plaintiff's share of
his retirement benefit would be $665 as opposed to $1,871, a
difference of $1,206. As the party seeking the elimination of
alimony, defendant has the burden of proof.
Stated differently, in order for defendant to prevail in
his motion to terminate his permanent alimony obligation, he
must prove that: (1) $1,2063 of the $1,871 plaintiff is receiving
as her equitable distribution share of his pension is the result
of defendant's post-divorce efforts that enhanced the value of
3 We use $1,206 without prejudice to plaintiff's right to challenge the validity of this figure before the trial court. We also emphasize that, as the party seeking to eliminate his alimony obligation, defendant has the burden of proving that this or any other figure qualifies as "income" to plaintiff and thus falls outside of the bar in N.J.S.A. 2A:34-23(b), as it quantifies the enhanced value of the pension resulting from his post-divorce efforts.
17 A-2300-12T2 his overall pension benefits; (2) this $1,206 is "income" to
plaintiff and outside the scope of N.J.S.A. 2A:34-23(b); and (3)
as a result of this additional "income," plaintiff will be able
to live and enjoy a lifestyle equal to, or better than, the
marital lifestyle she enjoyed while married to defendant,
without the $100 per week permanent alimony defendant has paid
to her for the past twenty-two years.
III
In conclusion, we reverse the order of the Family Part
denying defendant's motion seeking to terminate his permanent
alimony obligation to plaintiff and remand for the court to
enter a case management order establishing a discovery schedule.
At the conclusion of discovery, the court shall confer with
counsel and determine whether there are material issues of fact
in dispute warranting an evidentiary hearing. The order of the
court awarding plaintiff an increase in alimony based on the
rise of the cost of living since 1990 is vacated without
prejudice pending the outcome of defendant's motion to terminate
alimony. The order of the court denying plaintiff's motion for
an award of counsel fees is likewise affirmed without prejudice
pending the outcome of defendant's motion to terminate alimony.
Reversed and remanded on defendant's appeal. Affirmed
without prejudice on plaintiff's cross-appeal.
18 A-2300-12T2