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

Once again, it has been made clear that where either or both spouses have assets or liabilities at the date of marriage, it is foolhardy (or at least imprudent) to enter the marriage without a prenuptial agreement and/or the assembly of proof of the extent, nature and value of those assets or liabilities.

Take the January 8, 2015 decision of the Appellate Division, Third Depatrtment, in Ceravolo v. DeSantis. In that case, the parties were married in July, 1996. The wife commenced the action for divorce in June, 2010. Acting Albany Supreme Court Justice Kimberly O’Connor determined, among other things, that the marital residence, which had been purchased by the husband prior to the marriage, was marital property and awarded the wife, among other things, half of its value. The husband appealed.

The Third Department agreed with the husband that Justice O’Connor erred in classifying the marital residence as marital property. Marital property is defined as “all property acquired by either or both spouses during the marriage” (Domestic Relations Law §236[B][1][c]), while “property acquired before marriage” is separate property (D.R.L. §236[B][1][d][1]).

Title is a critical consideration in identifying the nature of real property acquired before the marriage. The circumstances surrounding the purchase of the residence and the parties’ intent relative thereto are irrelevant to the legal classification of the residence as separate or marital property.

Here, the husband purchased the marital residence in January 1994 — 2½ years prior to the parties’ marriage — paying $130,000 of his own funds and borrowing an additional $100,000 from his father, secured by a note and mortgage. Although the wife contributed $30,000 of her separate funds to the initial purchase of the residence, the husband took title to the property in his name alone.

Continue Reading Title Controls Premarital Contributions To The Acquisition and Expenses of Property

Six years before the parties’ marriage in June 2000, the wife became the sole owner of real property, which would later become the parties’ marital residence. At the time of marriage, the wife owned the property free and clear of any liens or encumbrances. In 2005, apparently in an effort to consolidate debt, the husband and the wife jointly applied for a mortgage on the property (based upon her limited income, the wife was unable to qualify for a mortgage on her own). To satisfy the requirements of the mortgage lender, the wife executed a deed conveying ownership of the residence from her alone to both her and the husband and the mortgage was issued jointly to the parties that same day.

In December 2011, the wife commenced this action for divorce. The parties resolved all issues except the distribution of the marital residence and the debt attached thereto, which had amounted to approximately $160,000. Following a trial, Supreme Court Justice Gerald William Connolly issued a decision finding, among other things, that the marital residence and its accompanying debt should be equally divided between the parties. No credit for any separate property contribution was given.

The Appellate Division, Third Department, in its July, 2014 decision in Myers v. Myers, affirmed.

The wife acknowledged that the residence had become marital property when she deeded it to herself and her husband. The wife contended that it was error to deny her a separate property origination credit in the amount of $165,000 for the estimated value of the marital residence at the time she did so.

The Third Department held that to the extent that a prior decision of the Third Department in Campfield v. Campfield (95 A.D.3d 1429, 944 N.Y.S.2d 339 [2012], lv. denied 21 N.Y.3d 857, 969 N.Y.S.2d 443 [2013]), may be read to limit a court’s discretion to award a separate property credit to a spouse, like the wife, who transmutes separate property into marital property without changing the nature of the property itself, it should no longer be followed.

The appellate court noted that credits are often given for the value of the former separate property. The decision to award a separate property origination credit in such a situation is a determination left to the sound discretion of the trial court. A court is not precluded as a matter of law from giving a credit when separate property has been transmuted into marital property.

Nonetheless, the appellate court was unpersuaded that the denial of the wife’s request for a separate property origination credit under the specific circumstances herein constituted an abuse of discretion. Justice Connolly had found “the overall picture is of the parties engaging generally in a financial partnership, of which the marital residence, and the loans thereupon, was simply one agreed-upon portion.”

The funds received from the mortgage, as well as the subsequent refinancing and home equity loan, enabled the wife and the husband to consolidate their debts, go on numerous family vacations, make improvements to the marital residence and, generally, live a lifestyle that may have been above their means. Notably, the wife’s individual debt was eliminated by the proceeds of a new, jointly-held debt which, in turn, was primarily paid from the husband’s income for a number of years.

Inasmuch as a separate property origination credit “is not strictly mandated since the property is no longer separate, but is part of the total marital property,” the Third Department could not say that Justice Connolly improperly denied the wife a credit.

Comment: This is not a rare scenario, particularly with second marriages. Rather than leaving such matters to the discretion of a trial judge, dealing with assets brought into marriage is properly the subject of a prenuptial agreement, or a post-nuptial agreement entered at the time the “separate” asset is “transmuted.” At that time the parties would have been independently counseled to consider the effect of using the mortgage proceeds for various purposes and paying the mortgage debt.

Cynthia Feathers, of Glens Falls, represented the wife. Paul W. Van Ryn, of Maxwell & Van Ryn, of Delmar, represented the husband.

Requiring the wife to pay the carrying charges of the marital residence pendente lite was proper in light of the awards to the wife of temporary maintenance and child support. So held the the Appellate Division, Second Department, in its June 12, 2013 decision in Fini v. Fini, affirming the order of Orange County Supreme Court Justice Lawrence Ecker.

Moreover, Justice Ecker properly based his $7,500 per month temporary maintenance award upon the wife’s needs and the standard of living of the parties prior to commencement of the divorce action as the husband’s “evidence of his gross income was insufficient, and was not reconcilable with his prior spending habits or the parties’ standard of living.”

On appeal, the husband failed to demonstrate that the pendente lite award left him unable to meet his financial obligations. There was no basis in the record to disturb the award of temporary maintenance. Any perceived inequities would best be remedied by a speedy trial.

The husband was represented by William J. Larkin III of Larkin, Axelrod, Ingrassia & Tetenbaum, LLP, of Newburgh. The wife was represented by Adam W. Schneid of Most & Schneid, P.C., of White Plains.

In a May 8, 2013 decision in Mejia v. Mejia, the Appellate Division, Second Department, modified a divorce judgment’s provisions concerning the cap on combined parental income, the disposition of the marital residence, college expenses for three children ages 14, 10 and 6, and judgment inconsistencies with the underlying decision and judgment  formalities.

After the parties separated, they each petitioned the Family Court for custody of the children. The parties consented that they share joint legal custody, and that the father have primary physical custody.

After a non-jury trial on certain financial issues, the Family Court considered the first $200,000 of combined parental income in determining child support, based upon, among other things, “the economic reality of life in Rockland County,” and a determination that the gross income of the mother was substantially less than that of the father. The mother’s pro rata share of the basic child support obligation was 37% of 29% of the first $200,00 of combined parent income was fixed at $1,789 per month in the 2011 Family Court order.

The marital residence, titled in the parties’ joint names, was awarded to the father and the children, based upon the father’s claim that there was no equity in the house. The court further concluded in its decision that the father should maintain health insurance for the children, and that the mother should pay 37% of the college expenses of the children.

The Second Department lowered to $150,000 the applied cap on combined parental income, “considering the substantial difference between the parties’ income, the fact that the [mother] has less income than the [father], and the amount of parenting time awarded to the [mother].” Calculated on that basis, the mother’s pro rata share of the child support obligation was $1,341 per month.

Continue Reading The Second Department Rules on Child Support Parental Income Cap, Transfer of the Marital Residence, and Judgment Formalities

House divided.jpgIn its December 13, 2012 decision in Murrary v. Murray, the Appellate Division, Third Department, affirmed the determination to deny a husband an equitable distribution credit for the value of a home which he owned before the marriage and which, after the marriage, he deeded to himself and his wife jointly.

The parties were married in 1986 and have four children. 15 months before the marriage, the husband purchased a residence in Queens County. Tthe parties lived there together for several years after their marriage. In 1991, the husband conveyed the home to himself and his wife jointly. The parties thereafter refinanced the Queens County property and used the proceeds to purchase their ultimate marital residence in Sullivan County, keeping and renting out the Queens County property. In 2003 the parties separated. The husband commenced this divorce action in 2005.

In resolving equitable distrution issues, Sullivan County Supreme Court Justice Robert A. Sackett denied the husband a credit for the premarital value of the Queens County property. On appeal, the Third Department found that that determination was within Justice Sackett’s discretion.

The transfer of that property into joint ownership created a presumption that it was marital property, placing the burden upon the husband to rebut this presumption with clear and convincing proof that the transfer was solely a matter of convenience.

Here, the appellate court noted, the husband’s testimony regarding the Queens County property (characterized by Supreme Court as evasive and questionable) failed to rebut the presumption. The entire Queens County property was thus part of the parties’ marital property and subject to the court’s substantial discretion in fashioning an equitable distribution award.

While the appellate court noted that a credit is often given for the value of former separate property, such a credit is not strictly mandated. The property is no longer separate, but is part of the total marital property. Quoting the 2010 Court of Appeals decision in Fields v. Fields, 15 NY3d 158, it was stated:

There is no single template that directs how courts are to distribute a marital asset that was acquired, in part or in whole, with separate property funds.

Upon review of the record and the entirety of the equitable distribution award, the Third Department was unpersuaded that Justice Sackett abused his discretion.

Continue Reading Husband Gets No Separate Property Credit in Divorce for Pre-marital Home Deeded to Himself and His Wife Jointly

Calulator on 100s 3.jpgTwo decisions last month of Queens County Supreme Court Justice Pam Jackman Brown provide insights on how courts might cope with the overlap of the statutory temporary maintenance formula and the payment of marital residence carrying charges.

Yesterdays blog reported upon the Second Department’s November 21, 2012 agreement in Woodford v. Woodford with the First Department in Khaira v. Khaira that the statutory temporary maintenance formula is intended to include the portion of marital residence carrying costs attributable to the nonmonied spouse.

In the November 5, 2012 decision in Liebman v. Liebman, Justice Jackman Brown balanced the factors presented by directing the husband to continue to make the marital residence carrying charge payments, but deducting the full amount of those charges from the presumptive maintenance formula.

The wife had sought an award of temporary maintenance based upon husband’s 2011 W-2 income. The wife also asked that in addition to the calculated temporary maintenance sum, the husband should be directed to continue to pay the maintenance, mortgage and carrying charges on the marital residence.

The Court found that the presumptive temporary maintenance award would be $6,337.70 monthly. However, under the facts presented, Justice Jackman Brown found that the presumptive award would be unjust or inappropriate. Specifically, the Court adjusted the presumptive temporary maintenance award after considering factor: (q) any other factor which the court shall expressly find to be just and proper.

The Court noted that the statute is silent regarding whether the Court shall order the presumptive maintenance award in proceedings in which the payor spouse has agreed or is directed to maintain the mortgage and/or carrying charges on the marital residence. In Liebman, it was undisputed that the husband had been paying the carrying charges, including the mortgage, maintenance and insurance, in the sum of $1739.91 monthly.

The Court deducted the sum of $1,739.91 from the husband’s presumptive monthly temporary maintenance obligation $6,337.70, and awarded the wife $4,597.79 monthly. The Court also directed the husband to continue to pay the mortgage, maintenance and insurance on the marital residence.

Continue Reading Temporary Maintenance Awards and Marital Residence Carrying Charges: Justice Jackman Brown Weighs In

Calulator on 100s 5.jpgThe statutory temporary maintenance formula is intended to include the portion of marital residence carrying costs attributable to the nonmonied spouse. So concluded the Appellate Division, Second Department in its November 21, 2012 decision in Woodford v. Woodford.

Accordingly, the appellate court vacated so much of Suffolk County Supreme Court Justice James F. Quinn’s July 15, 2011 order as directed the husband to pay both 100% of certain carrying charges on the marital residence and temporary maintenance to the wife. The issue was sent back to Justice Quinn for a new determination of pendente lite relief as to maintenance and payment of the carrying charges on the marital residence.

The Second Department quoted with approval from the First Department’s May 25, 2012 decision in Khaira v. Khaira, the subject of an earlier blog. The court also cited with approval former Justice Anthony Falanga’s opinion in A.C. v. D.R., also the subject of an earlier blog.

The Second Department concluded:

Indeed, it is “reasonable and logical” to view the formulas set forth in Domestic Relations Law § 236(B)(5–a) “as covering all the spouse’s basic living expenses, including housing costs” (Khaira v. Khaira, 93 AD3d at 200).

The husband was represented by D. Daniel Engstrand, Jr., Esq., of Doniger & Engstrand, LLP, of Northport.


Marital Residence.jpgA spouse contributing separate property (most commonly pre-marital, gifted, or inherited funds) to the purchase of the marital residence does not make a gift of (half of) that payment to the other spouse, even if the residence is held by the parties jointly.

So was the holding of the Appellate Division, Fourth Department, in its September 28, 2012 decision in Pelcher v Czebatol. The appellate court affirmed the ruling of Monroe County Supreme Court Justice Joanne M. Winslow, who had granted the wife’s motion for an order determining that she was entitled to a credit from the proceeds of the sale of that residence in the amount of $149,500 used for the purchase of that home.

It is well settled that a spouse is entitled to a credit for his or her contribution of separate property toward the purchase of the marital residence, including any contributions that are directly traceable to separate property, even where, as here, the parties held joint title to the marital residence.

The wife had established that her mother had transferred approximately $150,000 in mutual funds to the wife’s mutual fund account. The wife withdrew the funds from that account and deposited them into her individual checking account. From that individual account, the wife paid $149,500 toward the purchase of the marital residence.

The appellate court noted that contrary to the husband’s contention, Justice Winslow properly determined that, although title to the marital residence was taken as tenants by the entirety (jointly-owned by the husband and wife), the wife did not contribute her separate property toward the purchase of the home as a gift to her husband.

Reading this decision, it would appear that the wife had died prior to the divorce. Thus, the divorce action should have “abated.” A divorce action must end if it is not completed before the death of a spouse (unless all that remained was the “ministerial” act of entering the Judgment of Divorce to reflect an otherwise completed matter).

However, Seema Ali Rizzo, Esq., of Gallo & Iacovangelo, LLP, of Rochester, counsel for the wife, advises that the hearing resulting in the decision was held in December, 2010. While the husband’s appeal from Justice Winslow’s decision was pending, the divorce was granted and judgment was entered. When the wife passed away, she was already divorced. The wife’s mother (executrix of the wife’s estate) was substituted for the wife on the appeal.

David A. Merkel, Esq., of Merkel & Merkel, LLP, also of Rochester, represented the husband.