A couple that used “employment” of the ex-wife by the ex-husband as a device to provide post-remarriage support to the ex-wife was bound to employment rules. The wife could be fired for misconduct. So held the Appellate Division, Fourth Department, in its September 26, 2014 decision in Anderson v. Anderson.

The Separation and Property Settlement Agreement that was incorporated into, but survived the entry of the parties’ divorce decree, provided that if the wife remarried, terminating the husband’s maintenance obligation, the husband would “employ” the remarried wife as a “consultant” for a stated weekly salary. That “employment” was to continue until husband’s child support obligations under the Agreement terminated. Although the Agreement did not require the wife “to work any particular number of hours,” it did require her to “be available at reasonable times and from time to time to consult, as needed by the [husband], with respect to [his] various business interests.”

After her remarriage, however, the wife opened a business in competition with her prior husband. He moved to terminate the consultation fees being paid to his former wife on the ground that she, as his employee, had breached her duty of loyalty.

Niagara County Supreme Court Justice Frank Curso denied the motion, concluding in relevant part that “the employment provision is not a contract for employment, but rather . . . is a support provision which allow[ed] the defendant’s business to make payments to plaintiff instead of the defendant himself.”

The Appellate Division, Fourth Department, reversed. The appellate court concluded that the Agreement provision constituted an employment contract, thereby permitting the husband to terminate the payments upon the wife’s breach of her duty of loyalty to him as her employer.

The separation agreement was required to be “enforced according to the plain meaning of its terms.” The Fourth Department did agree with the wife and Justice Curso that the clear and unambiguous intent of the Agreement was to provide a substitute source of monetary support for the wife after the husband’s maintenance obligation terminated. Nevertheless, the appellate court concluded that:

the reason defendant agreed to employ plaintiff does not change the fact that the Agreement established an employment relationship with corresponding rights and obligations for both parties.

An employee may not compete with his or her employer’s business during the time of his or her employment. Here, when the wife opened a business in direct competition with the husband’s business, the wife breached her duty of loyalty to her employer, thereby permitting the husband to terminate the consultation fees and the employment relationship.

Comment: If, indeed, the “employment” of the ex-wife was simply a device to continue to provide support to the ex-wife despite her remarriage that was tax deductible to the husband (and includable in the income of the wife), the device seems wholly unnecessary. Post-remarriage maintenance (alimony) payments need not lose their tax deductibility if other tests for deductibility under the Internal Revenue Code are met. The obligation must terminate if the ex-wife dies before the end of the stated support period (I.R.C. §71[b][1][D]).

Lawrence J. Vilardo, of Connors & Vilardo, LLP, of Buffalo, represented the husband. Joseph M. Finnerty, of Hiscock & Barclay, LLP, of Buffalo, represented the wife.

Not according to Richmond County Civil Court Judge (and Acting Suprme Court Justice) Philip S. Straniere, seemingly running afoul of a contrary body of case law, particularly in the Second Department.

Small Claims Court proceedings may well be the only practical way to redress relatively modest, but often important breaches of divorce settlement agreements as to matters of support and property. Such proceedings are quick, inexpensive, can be pursued without lawyers, and do substantial justice. Eliminating Small Claims Court as a proper forum for such relief would often leave parties without a reasonable remedy.

In his February 19, 2014 decision in Pivarnick v. Pivarnick, Judge Strainiere, held that Small Claims Court was without subject matter jurisdiction to enforce a divorce settlement agreement.

Doing so, he vacated an arbitrator’s $4,000 award to an ex-wife for counsel fees she incurred in connection with her submission to the Supreme Court of a proposed Qualified Domestic Relations Order to implement a division of the ex-husband’s pension and her defense of the ex-husband’s motion to dismiss that proposed QDRO. The ex-wife had cross-moved for sanctions “in the form of ‘attorneys’ fees for his engagement in frivolous conduct.’” Those post-divorce Supreme Court submissions were resolved by a so-ordered stipulation under which the entitlement of the ex-wife to share in the ex-husband’s pension was restated. No reference in the stipulation was made to the wife’s “attorneys’ fee claim” by cross-motion.

Thereafter, the ex-wife sought her counsel fees in Small Claims Court. The arbitrator had awarded the claimant legal fees in the amount of $4,000.00 and dismissed the defendant’s counterclaim for his own counsel fees.

Continue Reading Does Small Claims Court Have Jurisdiction to Resolve Divorce Settlement Agreement Disputes?

A non-written agreement for cohabitants to share retirement benefits can be enforceable under a breach of contract claim, but will not support claims to impose a constructive trust, or for unjust enrichment or an accounting. Such was the holding of the Appellate Division, Second Department, in its November 13, 2013 decision in Dee v. Rakower.

In the majority opinion written by Justice Leonard B. Austin, the appellate court relied heavily on the facts as pleaded in the complaint. The parties had lived together in a committed, same-sex relationship for nearly 18 years. Two children were born of this relationship; each party being the biological parent of one child, legally adopted by the other.

After the relationship ended in 2007 (before the passage of New York’s Marriage Equality Act [see, Domestic Relations Law §§ 10-a, 10-b]), Ms. Dee commenced this action seeking to enforce the alleged oral “joint venture/partnership” agreement. Under that agreement, Ms. Dee was to share in assets, including Ms. Rakower’s retirement contributions and earnings, in exchange for Ms. Dee leaving her full-time job to care for the parties’ children.

Before they had children, each party was employed full-time, earning a salary and retirement benefits. The parties pooled their respective salaries to meet their shared expenses. The parties purchased a house as joint tenants with rights of survivorship.

After the parties’ first child was born, the parties agreed, it was alleged, that given the cost of child care, Ms. Dee would eschew her full-time employment and work part-time so that she could be home with the children and perform other non-financial services for the benefit of the family and for the parties’ partnership and/or joint venture while Ms Rakower would continue to work full-time. Ms. Dee alleged that her decision to leave her full-time employment was based upon the parties’ specific agreement that Ms. Dee would be entitled to one half of Ms. Rakower’s retirement contributions and earnings for the period.

Ms. Rakower moved to dismiss Ms. Dee’s complaint. Kings County Supreme Court Justice Yvonne Lewis granted that motion, determining that the facts did not support causes of action for breach of contract, to impose a constructive trust, for unjust enrichment or for an accounting.

Continue Reading Oral Cohabitation Contract Claim Withstands Motion To Dismiss

Two decisions within the last 10 days confirm the need for agreements relating to support to be in (an acknowledged) writing, and then incorporated in a court order.

In one, the Second Department affirmed the award of maintenance arrears without a hearing despite the claimed reduction of maintenance under an oral modification of the parties’ separation agreement. In the second, Albany County Family Court Judge W. Dennis Duggan directed a father to pay 71% of his older son’s private middle school expense, despite the mother’s conceded agreement to pay the full tuition.

In its January 30, 2103 decision in Parker v. Navarra, the Second Department affirmed the award of maintenance arrears by Dutchess County Supreme Court Justice James V. Brands. The ex-husband alleged that he and his ex-wife had orally modified the maintenance provisions of their separation agreement and, alternatively, that the ex-wife should be equitably estopped from enforcing the maintenance provisions of the separation agreement. The ex-husband had requested an evidentiary hearing so that he could present the testimony of witnesses on those issues. Justice Brands denied the request for an evidentiary hearing, awarding arrears on the basis of the parties’ submissions.

The Second Department affirmed, noting that the ex-husband failed to make a showing sufficient to entitle him to a hearing on this issue:

Where, as here, the parties’ separation agreement contains a provision that expressly provides that modifications must be in writing, an alleged oral modification is enforceable only if there is part performance that is unequivocally referable to the oral modification. The defendant did not demonstrate that the plaintiff’s acceptance of reduced monthly maintenance payments was unequivocally referable to an alleged oral modification by, for example, demonstrating that consideration was given in exchange for the plaintiff’s alleged oral agreement to accept reduced maintenance payments.

Moreover, to establish a defense of equitable estoppel, the ex-husband was required to have shown that the ex-wife’s conduct induced his significant and substantial reliance upon an oral modification. Again, the ex-husband was required to have shown that the conduct relied upon to establish estoppel was not otherwise  compatible with the agreement as written.

Continue Reading Support Modification Agreements: Get’em in Writing; Get’em into Court (Part II)

scissors contract 2.jpgWhat happens when only one provision of an agreement is invalid because it violates some statute or public policy?  The answer may depend on who the court wants to benefit, instead of consistently-applied rules of contract law.

Take, for example the April 5, 2011 decision of the Second Department in Duggan v. Duggan.  In that case, the parties had resolved their divorce by a surviving February 26, 2009 stipulation of settlement. Under that stipulation, the father, who had gross income of $475,000.00, agreed to pay a base monthly child support obligation of $8,000.00.  That amount deviated from the presumptive amount under the Child Support Standards Act (C.S.S.A.) of $11,929.54. The mother had no income.

Apparently, the stipulation also had a provision which called for the reduction in the father’s monthly obligation in the event his income was reduced.

In 2010, the mother brought a Family Court enforcement proceeding when the father ceased making the payments to which he originally agreed. The father raised the stipulation’s modification provision, arguing that his $8,243.00 annual reduction in income to $466,757.00 entitled him to a $76,800.00 annual reduction in child support (to $1,600.00 per month)!

Finding that the father’s interpretation of the stipulation modification provision was “not plausible,” Nassau County Family Court Judge Julianne S. Eisman denied the father’s objections to the Order of Support Magistrate Tejindar S. Kahlon which granted the mother’s arrears petition. Finding that the language of the Stipulation, as interpreted by the father, would violate the C.S.S.A., and was against the best interests of the children, the modification provision was ignored.

On appeal, the Second Department affirmed, holding that the Family Court had the authority to find that a provision in a stipulation of settlement violated the C.S.S.A. The appellate court found that a provision which called for a reduction in child support to 13% of the presumptive C.S.S.A. amount, merely because the father’s income dropped by 1.7% was “against the best interests of the children.”

It is noteworthy that the appellate court did not quote the startling modification provision. Equally noteworthy is that there was no discussion of any interpretation of the modification provision other than the one the Family Court considered implausible.

In order to have obtained the Judgment of Divorce, it would have been necessary to have made the recitation in the stipulation of settlement that the parties had been made aware of the C.S.S.A. and its presumptive formula in their case. D.R.L. §240(1-b)(h).  The parties would have had to have stated the reasons they agreed to deviate from the C.S.S.A guidelines. Specific Findings of Fact would have been made by the Supreme Court upholding those reasons.

It is understandable that the presumed failure of the Supreme Court to review the specific modification provision might not estop the mother from later attacking that provision when it was sought to be applied. Thus, the form language of a divorce judgment that “the parties are directed to comply with every legally enforceable term and provision” of the agreement incorporated into the judgment, does not mean that every provision is, in fact, legally enforceable.

What then is, or should be the impact of rendering unenforceable only one provision of a settlement agreement?

Continue Reading Severability: When Only One Provision of a Divorce Settlement Agreement Is Invalid