Equitable Distribution

1% sale high resolution renderingDivorce cases are supposed to have an ever-increasing set of rules. Last week’s decision of the Appellate Division, First Department, in Campbell v. Cambell demonstrates that while a judge must follow the rules, the judge still has many tools to accomplish an equitable result. Perhaps the most powerful is discretion.

In Campbell, the parties were married in 1973. After living together as husband and wife for only 52 months, the husband vacated the marital residence in 1978. The parties’ minor son remained with the wife. For the next 37 years, the parties lived separate and apart, the husband providing no economic or non-economic support to the wife and child.

In 2011, the wife retired from her job at Lincoln Hospital, where she began working in 1973, the same year as the marriage. She is now collecting $4,241.95 per month in pension benefits.

In 2013, the wife commenced this action for divorce. The wife’s pension was the parties’ primary marital asset. Supreme Court, Bronx County Justice Doris M. Gonzalez awarded the husband 50% of that portion of the wife’s pension that was accumulated during the 52 months the parties lived together. The husband appealed.

Continue Reading Husband Who Left Wife and Child Awarded 1% of Wife’s Pension

Zipped LipsThe judgment of divorce awarded by Orange County Supreme Court Justice Paul I. Marx, in Gafycz v. Gafycz, granted the wife, among other relief, 100% of two parcels of marital real property, 25% of properties located in Port Jervis, and $1,000 per month in nondurational (permanent) spousal support. The husband appealed.

In its March 1, 2017 decision, the Appellate Division, Second Department, affirmed. It held that Justice Marx providently exercised his discretion when awarding the wife 100% of the marital properties located in Chester and Pond Eddy. The appellate court noted, “The trial court is vested with broad discretion in making an equitable distribution of marital property . . . and unless it can be shown that the court improvidently exercised that discretion, its determination should not be disturbed.”

In this case, Justice Marx had considered that the husband secreted assets, willfully failed to comply with court orders, and was deliberately evasive in his testimony in fashioning its equitable distribution award of the marital property.

Continue Reading Division of Assets Adjusted Due To Evasiveness of Husband

In its August 24, 2016 decision in Maddaloni v. Maddaloni, the Appellate Division, Second Department, upheld the rulings of Supreme Court Suffolk County Justice Justice Carol Mackenzie that invalidated the all-but-complete maintenance waiver contained in a 23-year-old postnuptial agreement, awarding the wife maintenance for 10 years. The appellate court also upheld Justice Mackenzie’s award to the wife of 25% of the $2,000,000 appreciation during the marriage in the value of the husband’s pre-marital business, Maddaloni Jewelers of Huntington.

The Maddalonis were married in January, 1988. At the time of the marriage, the husband owned several cars, a house, and a jewelry business, and he was in contract to buy a shopping center. On August 22, 1988, less than eight months after the parties were married, they experienced marital difficulties and entered into a postnuptial agreement. Among other things, this agreement provided that, in the event that the parties divorced after the first five years of marriage, the wife agreed to accept the sum of $50,000, payable in five equal annual installments of $10,000, “in full satisfaction of any and all claims of whatsoever kind and nature she may have at that time for past or future support or for distribution of assets.”

Continue Reading Maintenance Provision of Postnuptial Agreement Voided; Wife Awarded 25% of Appreciation of Husband’s Premarital Business

Focused man paying his bills in the living room

The filing of a divorce summons commences the action and terminates the marital economic partnership. As noted by the Court of Appeals in Mesholam v. Mesholam, 11 N.Y.3d 24, 27, 862 N.Y.S.2d 453 (2008), that partnership is to be considered dissolved when a divorce action is commenced.

Retroactive to the first request for support, often contained in the divorce summons, itself, the trial court has the power to order both spousal and child support. It can also determine the parties’ relative responsibilities for marital residence carrying charges and other expenses.

In light of the trial court’s power to determine the parties’ rights and obligations for the period the divorce action is pending, what should be done if a party’s uses marital assets to pay living expenses accruing after the divorce action is commenced.

In its June 30, 2016 decision in Carvalho v. Carvalho, the Appellate Division, Third Department, held that marital assets may be used while a divorce action is pending to pay for legitimate household and living expenses without needing to later offset the division of those assets. Moreover, the burden is on the non-spending party to prove that the marital assets were not used for such “legitimate” purposes.

Continue Reading Charging a Party for Spending Marital Assets During the Divorce Action

The ever-changing landscape of Equitable Distribution case law makes it difficult, if not impossible, to rely on the “law.” A parent cannot (or rather, should not) make a gift to a married child without bringing the lawyers into it.

Take the April, 2016 decision of the Appellate Division, Second Department in Mistretta v. Mistretta. There, the parties had been married in 1991. During their marriage they lived in a home, at first owned by the husband’s mother, and deeded to the husband in 1996.

At the trial of this 2010 divorce action, the husband claimed that the residence was a gift from his mother, and therefore constituted separate property. However, he acknowledged that for many years, he paid his mother $500 per month “rent” (the opinion does not state whether rent was paid after the property was deeded to the husband). The husband and his sister both acknowledged that rental income from the subject premises was paid to the husband’s mother pursuant to the written agreement between the husband and his mother that was introduced into evidence.

Supreme Court, Suffolk County Justice Joseph Santorelli held that the home was marital property subject to equitable distribution. He directed the sale of the premises, with the parties to share equally in any net proceeds or deficiency from such sale.

Continue Reading You Can't Make A Gift To Your Married Child Without Getting The Lawyers Involved

It Need Not Be Rocket Science
It Need Not Be Rocket Science

A business, professional practice, or (until recent statutory amendments) license may be valued as a asset for divorce purposes based upon the amount of income it generates for the owner/holder. That asset may then be equitably distributed by granting the non-owner a monetary award equal to some percentage of the value.

Double-dipping, or double-counting, is the term for using the same stream of income both to value the business/practice, and then, after distributing an award to the non-owner based on the asset’s value, using the stream of income generated by the business/practice to base an award of spousal support (or child support, for that matter). If the non-owner spouse receives a “piece” of the income stream as an asset award, should the spouse get another piece as spousal support (maintenance)?

The “law” is yes, no and maybe. There is a rule against double-dipping, except when there’s not.

For the most part, if the business/practice is recognized as a “tangible asset,” just as the court would characterize a piece of real property, or publicly-traded stock, or a privately-held company whose income is a result of the work of many people, then it is generally held that the rule against double-dipping does not apply. The non-owner would get a distributive award based on the asset. Maintenance may also be awarded based upon the income generated by the tangible asset business. The rule against double-dipping rule does not apply.

If however, the business value is recognized as an “intangible asset,” then the rule against double-dipping applies, and the same stream of income may not be twice used.

Continue Reading Double Dipping and the Distinction Without a Difference

What do you do upon divorce when the home purchased during the marriage and titled in one spouse’s name was purchased using the proceeds from the sale of the home owned at the date of marriage solely in the name of that same spouse?

The Appellate Division, Second Department, in its March 2, 2016 decision in Ahearn v. Ahearn, applied well-established equitable distribution principles to affirm the determination of now-retired Suffolk County Supreme Court Justice William J. Kent, III, and hold that the home purchased during the marriage was marital property even though titled in only the one spouse’s name. Moreover, the titled spouse was entitled to a dollar-for-dollar separate property credit against the equity in the marital-property home for the use of the first home’s net sales proceeds.

The fact pattern was straightforward. In June 1996, the wife-to-be purchased a house on Salem Street in Patchogue. Approximately nine months later, the parties were married and lived together in the Salem Street house. In December 2004, the wife sold the Salem Street house and used the $143,000 in net proceeds from that sale toward the purchase, in March 2005, of a house in Holbrook. Only the wife’s name was on the Holbrook deed, but, at the time of trial, both parties were listed on the mortgage.

Continue Reading Tracing One Spouse’s Pre-Marital Home Sold During Marriage To Purchase Another

House on moneyAdjusting the financial rights between divorcing spouses for the payment of marital residence carrying charges while the divorce action is pending can be problematic. Claims for such adjustments are not always made and the results may be affected by other issues. Calculation of the credits may be illogical.

In its September, 2015 decision in Goldman v. Goldman, the Appellate Division, Second Department, modified the judgment of now-retired Suffolk County Supreme Court Justice William J. Kent, on the facts and in the exercise of discretion, to award each party a credit against the proceeds of the sale of the marital residence for 50% of the amounts they each expended after the commencement of the action on carrying charges related to the marital residence. Justice Kent had awarded no such credits.

Generally, it is the responsibility of both parties to maintain the marital residence during the pendency of a matrimonial action. Where a party has paid the other party’s share of what proves to be marital debt, such as the mortgage, taxes, and insurance on the marital residence, reimbursement is required.

Here, while both parties paid certain carrying charges related to the marital residence after the commencement of the action, the husband had paid the vast majority of these expenses. Since these expenses should have been allocated on a 50/50 basis, the Second Department modified the judgment and remitted the matter for a determination of the amounts that each party expended after the commencement of this action on such carrying charges, and for the entry of an appropriate amended judgment thereafter.

Michael W. Meyers, of the Law Offices of Clifford J. Petroske, P.C., now Petroske, Riezenman & Meyers, P.C., of Bohemia, represented the husband. Elizabeth Diesa and Joy Jankunas, of Tabat, Cohen, Blum & Yovino, LLP, of Hauppauge, represented the wife.

For the second time in six weeks the Appellate Division, Third Department, reduced an award of spousal maintenance for the failure to adjust for the distributive award based on the husband’s business. In its October 22, 2015 decision in Gifford v. Gifford, the Appellate Division, Third Department, modified a maintenance award because of the trial court’s failure to adjust the husband’s income for computation purposes to account for the distributive award to the wife based on the husband’s business. In September, in Mula v. Mula, the Third Department held that once valued, the income attributable to ownership of a professional practice may not also be the basis on which to award spousal maintenance (see, the September 14, 2015 blog post).

In Gifford, the parties in this divorce had stipulated a resolution of Equitable Distribution issues, including a $210,000 award to the wife based on the value of the husband’s geotechnical engineer business. After a trial on maintenance on counsel fees, Supreme Court Justice Vincent J. Reilly awarded the wife nondurational maintenance of $6,000 per month from January 1, 2014 through January 31, 2020, $3,000 per month from February 1, 2020 through June 1, 2022, and $800 per month thereafter, terminating upon either party’s death or the wife’s remarriage.

The Third Department held that Justice Reilley erred in utilizing the husband’s total average annual income of $332,431 for purposes of calculating a maintenance award, without making an adjustment for the distributive award of the company.

Continue Reading Double-Dipping: The Interrelationship of Business-Based Distributive Awards and Spousal Support

As there is no contrary statutory authority, the interest rate on a distributive award payout is 9%.

So held the Second Department in its October 7, 2015 decision in Cohen v. Cohen. In so holding, the appellate court modified the decision of Nassau County Supreme Court Justice Arthur M. Diamond that had directed that 5% interest be paid.

In this divorce action, the Second Department held that Justice Diamond providently exercised his discretion in finding that the wife was entitled to only a 25% share of the husband’s interest in his law firm. Furthermore, the appellate court upheld the lower court’s evaluation. Nothing in the testimony of the court-appointed appraiser undermined the conclusions in his report as to the proper valuation of the husband’s interest in the firm.

However, it was error to compute postjudgment interest on the wife’s share of the husband’s interest in his law firm at a rate of 5% per annum. Interest was awarded from the date of entry of the judgment of divorce.

Unless otherwise provided by statute, interest on a judgment is to be calculated at the statutory rate of 9% per annum. . . . Here, no applicable statute authorizes interest on the judgment other than at the statutory rate.

The Second Department also held that Justice Diamond erred when failing to award the wife a 50% share of so much of parties 2001 income tax refund as constituted marital property. This appears to have been calculated based upon the pre-commencement portion of the year in which the action was commenced (2001).

Victor Levin, P.C., of Garden City, represented the wife. Sol Barrocas and Allan Cohen, pro se, of Barrocas, Mintz, Misuraca & Record, P.C., of Garden City, represented the husband.