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Case Law Review for the Week of September 1, 2014

Krupinski v. Krupinski, Appellate Division, Published Decision, September 2, 2014: In this post-judgment appeal, the Appellate Court reversed the trial court's denial of the alimony payor's request for termination of alimony. In remanding the matter, the Appellate Division framed the issue for the trial court to address as follows: the court must discern what part of the $1,871 monthly pension benefits [payee] has been receiving since [payor's] retirement in 2010 is attributable to [payor's] post-dissolution efforts, and thus may be considered income to [payee] for purposes of determining alimony, outside the bar imposed in N.J.S.A. 2A:34-23(b).

The inquiry in this case resulted from the payor's post-judgment efforts which significantly increased his pension benefit, in that at the time of the divorce he was a teacher earning $45,000 per year whereas at the time of his retirement (after obtaining further education post-divorce) he was a school administrator earning $130,000. During this time, he continued to pay $430 per month in alimony. Upon retirement, he sought to have the alimony terminated based partly due to the fact that the payee was receiving $1,871 per month from his total pension payments of $5,929. The trial court focused on the fact that he was capable of continuing to make the alimony payment; however, the trial court failed to consider whether the payee continued to have a need for the alimony.

The relevant case law and statutes that were considered by the Appellate Court present an interesting legal question to be applied to the particular facts of this case. 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." In subsequent cases interpreting the statute, the Supreme Court settled the question of whether the statute applied to modification applications 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. However, because of the increase in the pension in this case was attributable to post-judgment factors, the inquiry of the Court was 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.

The Appellate Court noted that in Barr v. Barr, 418 N.J. Super. 18, 41 (App. Div. 2011) it was stated that: "[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." In Bednar v. Bednar, 193 N.J. Super. 330 (App. Div. 1984), the Court had considered the legal and equitable implications when a marital asset increases in value pending the entry of a final order settling its distribution and 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). In further consideration of the holding in Bednar, the Court in Wadlow v. Wadlow, 200 N.J. Super. 372 (App. Div. 1985) held: "[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).]

With this as a background, the Appellate Court, citing its decision in Menake v. Menake, 348 N.J. Super. 442 (App. Div. 2002), ultimately determined that the trial court must endeavor to sort through the "post-divorce enhancing factors" to determine whether the coverture fraction was insufficient in appropriately attributing the share of the pension attributable to the marital enterprise to the share of the pension attributable to the post-divorce enhancing factors. If the share of the pension that is being received is attributable to the post-divorce enhancing factors, then that share would be appropriately classified as income and, therefore, not barred from consideration as a share of equitable distribution.

If you have questions about modification of alimony, please contact a lawyer from Miller & Gaudio today.

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