JACQUELINE R. HERSCH VS. NATHAN J. HERSCHÂ (FM-07-2100-09, ESSEX COUNTY AND STATEWIDE)
A-2339-15T3
| N.J. Super. Ct. App. Div. | Jul 28, 2017|
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2339-15T3
JACQUELINE R. HERSCH,
Plaintiff-Respondent,
v.
NATHAN J. HERSCH,
Defendant-Appellant.
___________________________
Submitted May 3, 2017 – Decided July 28, 2017
Before Judges Accurso, Manahan and Lisa.
On appeal from Superior Court of New Jersey,
Chancery Division, Family Part, Essex
County, Docket No. FM-07-2100-09.
Greenbaum, Rowe, Smith & Davis, LLP,
attorneys for appellant (Andrea J. Sullivan,
of counsel and on the brief; Stephanie G.
Reckord, on the brief).
Wolkstein, Von Ellen & Brown, LLC, attorneys
for respondent (Marisa Lepore Hovanec, of
counsel and on the brief).
PER CURIAM
Defendant Nathan J. Hersch appeals from aspects of three
post-judgment orders compelling him to pay $111,542.38 in
additional alimony and $68,841.25 in additional child support
for the years 2010 through 2013 in accordance with the parties'
marital settlement agreement, awarding plaintiff Jacqueline R.
Hersch $10,000 in counsel fees for defendant's unreasonable and
bad faith behavior in resisting payment, and denying his
requests for a plenary hearing, reconsideration and to modify
his alimony and child support on the basis of changed
circumstances. Because we agree Judge Casale correctly
interpreted the plain language of the parties' agreement, no
evidentiary hearing was required, and the remaining rulings Mr.
Hersch challenges were reasonable and not an abuse of
discretion, we affirm.
The parties were divorced in 2010 after fifteen years of
marriage and two children, both now teenagers. Mr. Hersch is a
high-earning executive compensation and benefits specialist in
the financial services industry. Although he has been laid off
more than once, the record reveals he has also become re-
employed at the same or higher levels of compensation. Ms.
Hersch is a product manager. She was earning over $80,000 at
the end of the marriage.
Both parties were represented by counsel in the divorce,
and their marital settlement agreement was the product of
extensive negotiation. It is over thirty pages long and
contains sixty-eight paragraphs, several with subparts. Ten
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paragraphs addressing alimony and child support are relevant to
this dispute. They are as follows, with emphasis added.
Base Child Support
11. Husband shall pay Wife $16,900 per year
in base child support for the calendar year
(or such amount as applicable and adjusted
for the calendar year in proportion to the
full calendar year, for example, 3 months
for 2010) directly to Wife for the two minor
children, it being understood that such base
child support shall be paid in equal
installments of $704.16 due on the first day
and fifteenth day of each month beginning on
the first month after the execution of this
Agreement via either direct deposit or ACH.
Additional Child Support
12. Commencing with the entire calendar year
2010 and continuing thereafter until
emancipation of the children, Husband shall
pay additional child support of eight (8%)
percent from the gross amount of any bonus,
incentive award, deferred compensation or
other form of compensation whether in the
form of forgivable loans, money, stock,
stock options, stock warrants or otherwise
when received as cash income to Husband.
. . . .
14. Notwithstanding anything to the contrary
in this Agreement, if Husband receives any
bonus, incentive awards, deferred
compensation or other form of compensation
whether in the form of forgivable loans,
money, stock, stock options, stock warrants
or otherwise during the period he is
obligated to pay child support, but which
are not received as cash income during such
period in which he is required to pay child
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support, he will be required to pay child
support for such income pursuant to
Paragraph 12 when the bonus, incentive award
or deferred compensation is received as cash
income. By way of example, if Husband
receives a bonus while [the youngest child]
is in his senior year of college which is
not realized as income until the following
year after [the youngest child] has been
emancipated, Husband will still owe Wife
child support on that bonus pursuant to
Paragraph 12. At all times Husband shall
keep Wife advised in writing of the
foregoing forms of compensation, as well as
the statements referred to in preceding
Paragraph 7.
Base Alimony
26. Husband shall pay Wife base alimony of
$27,000 per year for a period of twelve (12)
years and three (3) months beginning on the
first month after the execution of this
Agreement. Thus, by way of illustration,
but not limitation, if alimony commences on
October 1, 2010, the term for the payment of
alimony shall expire on December 31, 2022.
Base alimony shall be paid in equal
installments of $1,125 on the first day and
fifteen[th] day of each month via either
direct deposit or ACH. Alimony shall be
taxable to Wife and deductible by Husband
under the applicable provisions of the
Internal Revenue Code.
27. Base alimony is based on Husband having
a base salary of $225,000, and Wife having a
base salary of $90,000. In the event
Husband's base compensation exceeds $275,000
or Wife's base compensation exceeds one
hundred forty thousand dollars ($140,000),
such excess for each of them shall be
considered bonus compensation and subject to
paragraph 29. Husband further agrees not to
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arrange a compensation package which defeats
the objective of this Agreement.
Additional Alimony
29. Commencing with the entire calendar year
2010 and continuing thereafter until the
term of alimony expires and subject to above
paragraph 27 hereof, Husband shall pay
additional alimony for each year of the
twelve (12) years and three (3) months for
an amount equal to twenty-five (25%) percent
of the difference between the gross of the
sum-total of (a) his bonuses, incentive
award, deferred compensation or other form
of compensation whether in the form of
money, stock, forgivable loans, stock
options or stock warrants when received as
cash income and (b) Wife's total
compensation bonus, incentive award or other
form of compensation whether in the form of
bonuses, incentive awards, deferred
compensation or other forms of compensation,
whether in the form of money, stock,
forgivable loans, stock options or stock
warrants when received as cash income.
Additional alimony shall be paid to Wife
within seven (7) days after receipt of any
bonus, incentive award, deferred
compensation or other form of compensation
whether in the form of money, stock, stock
options, stock warrants when realized as
cash income by Husband as long as Husband
has already received from Wife her aforesaid
financial information. Thus, by way of
illustration, but not limitation, if the
Wife received a bonus totaling $10,000 and
Husband[] received [a] bonus totaling
$110,000, Wife would receive $25,000 as
"Additional Alimony."
30. The parties agree that the additional
alimony calculation for 2010 will not
include the signing bonus received by
Husband from Capital One in January 2010.
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31. Husband shall not pay additional alimony
as described in Paragraph 29 on any of his
adjusted gross earned income as reported on
his federal tax return over and above Five
Hundred Thousand and 00/100 ($500,000.00)
Dollars for a calendar year; provided,
however, the aforesaid Five Hundred Thousand
and 00/100 ($500,000.00) Dollar limitation
shall be increased to Five Hundred Fifty
Thousand and 00/100 ($550,000.00) Dollars on
October 1, 2016.
32. With regard to the payment of
"Additional Alimony," the parties shall
exchange tax information including W-2s,
1099s, K-1s, 1040s, stock awards, stock
options, stock warrant and any other
document reasonably necessary to reflect an
award of compensation, each year within
seven (7) days of receipt of such
information. Husband shall be obligated to
convert all awards, stock, stock options and
stock warrants into cash within one (1) year
of receiving such award unless Wife consents
in writing to a longer period of time. Her
consent shall not be unreasonably withheld.
At all times, Husband must furnish Wife with
written notice of such awards.
. . . .
35A. Computation and Payment of Additional
Child Support and Additional Alimony. With
regard to the additional child support and
additional alimony to be paid by Husband to
Wife, all calculations as to the amount of
Husband's income will be made on the basis
of what he has to report as earned income
for a given year. However, if awards to
Husband are not in cash but in other forms
of remuneration, for example, stock awards,
stock options and stock warrants, Husband
shall not have to pay such additional child
support or alimony until such stock awards,
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stock options or stock warrants are
converted into cash in accordance with the
provisions of this Agreement.
The divorce judgment was entered in September 2010. Mr.
Hersch was laid off a year later, in September 2011. He
received $364,576.42 in severance pay, $277,000 of which he
received in 2011 and $87,576.42 in 2012. He was re-employed in
January 2012, but was laid off again in October 2013. He
received severance pay of $248,958.31, $68,750 of which was
received in 2013 and $180,208.31 in 2014. Mr. Hersch was re-
employed in January 2014 and laid off a year later in January
2015. He received severance pay of $386,507 in 2015. He was
still unemployed at the time the orders appealed were entered in
late 2015 and January 2016.
There is no dispute but that Mr. Hersch would owe
additional alimony under the marital settlement agreement if his
severance payments were treated as compensation.1 He argues,
however, that "he considered his severance[] packages as damages
for having been terminated from his position," and that Ms.
1
Mr. Hersch conceded in the trial court that he owed additional
child support based on his receipt of severance payments
"[b]ecause that's just a flat 8 percent." Accordingly, the
dispute as to whether Mr. Hersch's severance payments are
compensation is limited to the calculation of additional
alimony. Mr. Hersch's objections to the child support award are
based on the calculation discussed infra.
7 A-2339-15T3
Hersch's view that the severance was compensation represented a
dispute of fact warranting a plenary hearing. Further, he
asserts that "severance payments are not compensation as defined
by New Jersey law." He contends:
At best, severance pay becomes
compensation if it replaces compensation
lost as a result of termination of
employment. Thus, it is effectively a "rear
view mirror" or lookback form of payment
definition.
To effectuate such a lookback, the
amount of severance would be divided by the
amount of compensation to determine, if the
severance document itself did not, the
amount of time that severance replaced
compensation. If, however, the recipient of
severance, which is, as [Mr. Hersch]
certified, more in the nature of damages for
job termination than in the nature of
compensation, replaced compensation, a payor
of alimony or child support could not seek
modification of those payments based on
changed circumstances because circumstances
would not have changed by dint of the
severance.
The trial judge rejected both arguments, as do we. First,
we reject Mr. Hersch's contention that the parties' differing
interpretations of their marital settlement agreement
necessitated a plenary hearing. Our courts treat marital
settlement agreements as contracts and interpret them
accordingly. Pacifico v. Pacifico, 190 N.J. 258, 265 (2007).
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"[T]he judicial interpretive function is to consider what
was written in the context of the circumstances under which it
was written, and accord to the language a rational meaning in
keeping with the expressed general purpose." Owens v. Press
Publ'g Co., 20 N.J. 537, 543 (1956). "Where the 'principal purpose' of the parties is found, 'further interpretation of the words of contract should be such as to attain that purpose, if reasonably possible.'"Ibid.
(quoting Corbin on Contracts, § 545). Construction of contract language is generally a question of law unless its meaning is unclear and turns on conflicting testimony. Bosshard v. Hackensack Univ. Med. Ctr.,345 N.J. Super. 78
, 92 (App. Div. 2001).
As Judge Casale reasoned:
[W]hen you look at the plain language
of the marital settlement agreement, the
severance pay would have to be included as
income for purposes of the alimony,
additional alimony calculation. The
language is extremely broad. The only thing
it excluded was the signing bonus. I also
think that under any reading of I.R.S.
regulations, that the severance pay was
meant and is replacement income.
And I don't buy the Defendant's version
that it's a release of a specific damage
claim. It's severance pay for employment.
It's includable as wages. And it's
includable as income under any reading of
the I.R.S. regulations here. Therefore, I
find that it should be included within the
additional alimony calculation.
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. . . .
And when I read the marital settlement
agreement, it's broad. It was negotiated to
try to prevent the Defendant from
manipulating his income into other forms of
unearned income. The Defendant's argument
that unemployment income is earned income,
but the severance pay is not does not carry
weight with this Court.
Here, as the trial judge found, the language of the
parties' settlement agreement is clear and its intent
unambiguous, making a plenary hearing unnecessary. See Segal v.
Lynch, 211 N.J. 230, 264-65 (2012) ("[A] plenary hearing is only
required if there is a genuine, material and legitimate factual
dispute."). By its express terms, Mr. Hersch's obligation to
pay additional alimony (as well as additional child support) is
calculated based on "what he has to report as earned income for
a given year." The agreement obligates him to pay additional
alimony based on the amount of his "adjusted gross earned income
as reported on his federal tax return," between $275,000 and
$500,000. His severance pay is indisputably reportable as
earned income on his federal tax return. See 26 U.S.C. §
3401(a) (defining wages);26 C.F.R. § 31.3401
(a)-1(b)(4) (noting
"[a]ny payments made by an employer to an employee on account of
dismissal, that is, involuntary separation from the service of
the employer, constitute wages regardless of whether the
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employer is legally bound by contract, statute, or otherwise to
make such payments"); 26 U.S.C. § 61(a) and26 C.F.R. § 1.61
- 2(a)(1) (treating severance pay in the same manner as salary and wages for federal income tax and withholding purposes); Meehan v. Comm'r,122 T.C. 396
(2004) (treating severance pay as salary
and wages for purposes of IRS continuing wage levy). Moreover,
Mr. Hersch reported his severance payments and included them on
his federal tax returns on line #7, "Wages, salaries, tips,
etc."
Further, no case supports Mr. Hersch's novel view that
under New Jersey law "the amount of severance [is to] be divided
by the amount of compensation to determine, if the severance
document itself did not, the amount of time that severance
replaced compensation."2 New Jersey treats severance as does the
federal government, as a form of wages. Owens, supra, 20 N.J.
2The only case Mr. Hersch cites in support of this theory, Reinbold v. Reinbold,311 N.J. Super. 460
(App. Div. 1998), he
concedes is "not precisely analogous." The question presented
in that case was whether an early retirement incentive offered
after the complaint for divorce was filed but earned during the
marriage as a reward for service, was "includable in the pot for
equitable distribution." Id. at 472. We held that it was,
distinguishing it from the defendant's severance pay, which was
intended as "the replacement for future earnings component of
defendant's benefit," and like all future earnings "is not
subject to equitable distribution." Id. at 471. Far from
supporting Mr. Hersch's position, the case is consistent with
both New Jersey and federal law that severance pay is a form of
wages.
11 A-2339-15T3
at 545-46 (characterizing severance pay as "terminal
compensation[,] . . . a means of recompense for the economic
exigencies and privations and detriments resulting from the
permanent separation of the employee from service for no fault
of his own").
Our Supreme Court long ago rejected the theory that
"severance pay is intended only to provide for the period of
unemployment when the employee is discharged." See Adams v.
Jersey Cent. Power & Light Co., 21 N.J. 8, 15 (1956). Were that the case, the Court reasoned, "it would be mere unemployment compensation relating merely to the period of unemployment and the actual wage loss."Ibid.
Instead, the Court determined that severance pay had "other objectives," including "the readjusting of the employee's life to altered circumstances. It is not a gratuity but a compensation earned by service."Id. at 15-16
. Accordingly, we find no support for Mr. Hersch's
argument that severance payments are not considered compensation
under our law.
The obvious purpose of the parties' marital settlement
agreement was to adjust alimony in response to an increase in
compensation by either party, regardless of how that
compensation might be characterized, except when specifically
excluded, such as in the case of Mr. Hersch's 2010 signing
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bonus. Considering "what was written" in the agreement, "in the
context of the circumstances under which it was written," and
according the words "a rational meaning in keeping with the
expressed general purpose," Owens, supra, 20 N.J. at 543, we
have no hesitation in concluding, as did the trial court, that
Mr. Hersch's severance payments were properly included as earned
income for purposes of calculating additional alimony.
Applying those same interpretive principles, we similarly
dispose of Mr. Hersch's argument that the amounts for additional
child support in the order were incorrectly calculated. Mr.
Hersch contends the court "failed to properly shift alimony paid
to [Ms. Hersch] from [Mr. Hersch's] income and add it to her
income before analyzing additional child support," as called for
in the Child Support Guidelines. This is, however, not a
Guidelines case. See Caplan v. Caplan, 182 N.J. 250, 264-66
(2005); see also Child Support Guidelines, Pressler & Verniero,
Current N.J. Court Rules, Appendix IX-A, ¶ 20 to R. 5:6A at
www.gannlaw.com (2017).
There is nothing in the parties' detailed agreement that
suggests they intended that alimony paid to Ms. Hersch should be
deducted from Mr. Hersch's income before calculating any
additional child support due. Although the parties in several
places in their marital settlement agreement used hypothetical
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examples to demonstrate how a particular calculation was to be
computed, they did not do so in the case of additional child
support. Instead, the agreement provides simply that "Husband
shall pay additional child support of eight (8%) percent from
the gross amount of any bonus, incentive award, deferred
compensation or other form of compensation whether in the form
of forgivable loans, money, stock, stock options, stock warrants
or otherwise when received as cash income to Husband." Because
the language is clear that the eight percent is on "the gross
amount" of any compensation, we reject his effort to make a more
favorable agreement for himself than the one he negotiated.3 See
Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999)
(noting "it is not the function of the court to make a better
contract for the parties, or to supply terms that have not been
agreed upon").
Judge Casale's decision to deny Mr. Hersch's application to
modify his base alimony and child support obligations is
3
Mr. Hersch does not explain how the court "ignored the [marital
settlement agreement's] express limitation that only [Mr.
Hersch's] income between $275,000 and $500,000 was to be
considered" in calculating additional alimony, and the alleged
error is not obvious to us. We thus do not address it. See 700
Highway 33 LLC v. Pollio, 421 N.J. Super. 231, 238 (App. Div.
2011) (noting the failure to adequately brief an issue permits
the court to treat it as waived).
14 A-2339-15T3
supported by adequate, substantial and credible evidence in the
record and thus will not be disturbed on appeal. See N.J.S.A.
2A:34-23; Lepis v. Lepis, 83 N.J. 139, 145 (1980); Storey v. Storey,373 N.J. Super. 464
, 470 (App. Div. 2004). Mr. Hersch
was separated from his most recent employment in January 2015,
ten months before he applied to modify his support obligations.
In addition to his demonstrated ability to find re-employment in
similar situations in the recent past, the record reveals Mr.
Hersch received gross pay of $426,956.04 in the first two months
of 2015 and anticipated income in a new venture of $200,000 in
2016. Given that his base alimony obligations were premised on
income of $225,000, and that his gross income in the years since
the divorce had ranged from a low of $330,000 to a high of
$695,000, we cannot find the court erred in finding he had not
met his burden of proving changed circumstances of a permanent
nature.
We likewise find no error in Judge Casale's orders setting
a schedule for payment of arrears and awarding Ms. Hersch
$10,000 in counsel fees; decisions that are likewise committed
to the Family Part judge's sound discretion. See Eaton v. Grau,
368 N.J. Super. 215, 225 (App. Div. 2004) (counsel fees); Mastropole v. Mastropole,181 N.J. Super. 130
, 141 (App. Div.
1981) (arrearages). Judge Casale initially ordered Mr. Hersch
15 A-2339-15T3
to pay only $400 per month toward his support arrears of
$180,383.60. Following review of the parties' updated case
information statements, which for Mr. Hersch revealed gross
assets of over $2,000,000, almost twice Ms. Hersch's gross
assets,4 and 2015 income of over $400,000, the judge ordered Mr.
Hersch to pay down his arrears by $100,000 within ten months in
$20,000 increments.
We perceive no error in that ruling or in the court's
decision to award Ms. Hersch fees on the motions. The court's
findings, that Mr. Hersch obfuscated and delayed providing a
true picture of his finances, are amply supported in the record.
The trial judge considered the relevant factors contained in
Rule 5:3-5(c). The fee award, which was approximately half of
the fees requested, was in accord with both the Rule and the
parties' agreement5 and well within the court's considerable
discretion. See Tannen v. Tannen, 416 N.J. Super. 248, 285 (App. Div. 2010), aff'd o.b.,208 N.J. 409
(2011).
4
The case information statements also revealed a significant
disparity in the parties' net assets.
5
Paragraph sixty-four of the marital settlement agreement
provides the party defaulting in performing any obligation shall
pay the prevailing party's fees in any action to enforce.
16 A-2339-15T3
In sum, we affirm the trial court's orders of August 27,
2015, October 30, 2015 and January 29, 2016.
Affirmed.
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