In this second of two blogs discussing Supreme Court Nassau County Justice Anthony J. Falanga‘s March 28, 2011 decision in A.C. v. D.R., we look at the Court’s temporary financial relief rulings under the recent amendments to D.R.L. §§236B(5-a) and 237. Last Monday’s blog discussed the joinder for trial of the wife’s post-no-fault action with the husband’s pre-no-fault action, as well as the Court’s denial of the wife’s partial summary judgment motion on her no-fault claim, although the Court recognized no defenses were available to a subjective irretrievable breakdown claim.
The parties were married in 1992 and have 3 children, ages 13, 10 and 7. The parties continue to reside in the marital residence.
The husband, a 52-year old physician, had 2009 earnings of $530,645.00, although the Court noted that he has $15,833.00 in monthly gross W-2 income from private practice. The wife, a 46-year old homemaker, had $8,516.00 in 2009 dividend income.
At the Preliminary Conference, the husband stipulated to pay the marital residence realty taxes (there is no mortgage), gas electric, telephone including cell, water, homeowner’s, automobile, umbrella, medical and disability insurance, cable TV and Internet, alarm, domestic help, gardening and landscaping, snow removal, sanitation and exterminating, and in-network health expenses. The husband claimed the fixed expenses totaled $7,274.00 per month ($87,288.00 per year).
Based on its determination that the husband’s income net of FICA and Medicare taxes was $529,857.00, the Court first applied the new temporary support formula to determine that the presumptive temporary maintenance award would be $148,297.00 (30% of $529,857.00 minus $8,516.00, as that result is less than 40% of the parties’ combined income less the wife’s income). The Court, then, noted that blind adherence to this formula was likely to lead to inequitable results:
. . . [I]n this court’s view, the statute requires some remedial language as strict application in almost every case will not effectuate the statute’s purpose and will result in awards that are unjust and inappropriate . . . .
The Court, also recited the 19 factors it was obliged to consider when deciding whether to first adjust the award for the husband’s income above the $500,000.00 income cap (D.R.L. §236B[5-a][c][a]), here $29,857.00. The Court also recognized that it could adjust a formula award it finds to be unjust or inappropriate based on its consideration of 17 enumerated factors (D.R.L. §236B[5-a][e]).
Justice Falanga noted, generally, that the presumptive formula does not consider who will paying the marital residence carrying charges [ed. note: for that matter, the formula does not consider whether the parties are living together]. Here, the Court found that the $87,288.00 per year which the husband stipulated to pay in marital residence overhead expenses was “no longer available as a maintenance source.” Accordingly, Justice Falanga re-ran the numbers after deducting this $87,288.00 from the husband’s uncapped income of $529,857.00.
It may be asked whether one should “gross up” the stipulated expenses, recognizing that the income taxes paid on the $87,288.00 in expenses were also not available as a maintenance source. To avoid the issue for the husband, the wife could pay all the expenses out of her award, with the award, itself, being fully deductible to the husband. However, that hurts the wife who will be paying the husband’s share of the expenses (he still lives in the house); she would also have to pay the $87,288.00 in expenses, as well as the income taxes on her receipt of the $87,288.00.
Does or does not the legislated formula consider that the temporary maintenancre recipient will or will not pay the marital residence expenses out of her award? The absence of direction from the Legislature compels an overall reality check by the court of the effect of its combined awards.
Justice Falanga’s re-calculation, after deducting the after-tax expenses paid by the husband from his gross income, resulted in an award of $130,767.50 ($10,897.00 per month), a reduction of $17,529.50. This is what the Court ordered. [Note: but for the fact that the husband's income exceeded the cap, the reduction could be calculated simply by deducting 30% of the amount of the expenses from the formula award].
As a result, because the husband volunteered to pay $87,288.00 in marital residence expenses, his maintenance obligation was reduced only by $17,529.50. Such invites the question, “should a husband stipulate to make such payments?” Once again, a proper overall reality check should avoid prejudice by such a stipulation.
Here, the Court noted that after paying the stipulated expenses and the maintenance award, the husband would be left with $311,000 to pay “child support and add-ons, unreimbursed medical expenses and taxes on his earnings.” [Deducting the maintenance award from his earnings, the husband would also be left to pay income taxes on $400,000.00. If the husband's total income tax marginal rate were, say, 35%, he would be paying some $140,000.00 in taxes, leaving $171,000.00 after taxes, before child support, add-ons and personal expenses.]
The Legislature did burden the Court with its consideration of the 36 factors needed to deal with the husband’s income in excess of the $500,000.00 cap and to vary the presumptive formula award. No such consideration is necessary to avoid use of the Child Support Standards Act (C.S.S.A.) formula on a temporary award of child support. Application of the formula is not required on a motion for temporary child support. Rubin v. Salla, 78 A.D.3d 504, 910 N.Y.S.2d 439 (1st Dept. 2010); George v. George, 192 A.D.2d 693, 597 N.Y.S.2d 129 (2nd Dept. 1993).
In fact, Justice Falanga did not apply the C.S.S.A. formula and awarded $3,000.00 per month ($36,000.00 per year) in temporary child support. (Note: the C.S.S.A. formula would subtract the $130,767.50 maintenance award from the husband’s $529,857.00 in income, and multiply the resulting $399,089.50 by 29% for the three children; yielding a C.S.S.A. presumptive award of $115,736.00. Applying the formula would, perhaps, leave the husband with some $57,000.00 to pay add-ons, medical and personal expenses.)
The reality check: Thus, the Wife will live in the marital residence with the overhead items paid, and receive her total annual award of $166,767.50, plus have her own income of $8,516.00 (a total of $175,283.50), on which she will pay taxes on $139,283.50. From his income of $529,857.00, the husband will pay the $166,767.50 in awards, another $87,288.00 in overhead expenses, and income taxes on $400,000.00 (say, $140,000.00). This leaves the husband living in the marital residence with the overhead items paid, and some $223,089.50 to pay add-ons and personal expenses. (Will these parties and their children still suffer the all-too-familiar, ”Ask your [father/mother] to buy you those sneakers”?)
Finally with respect to child support, Justice Falanga directed the parties to split on a 60(h)/40(w) basis the children’s enumerated add-on expenses: educational costs, tutoring expenses, Hebrew school expenses, summer camp, summer activities and extra curricular activities.
In fact, this appears to closely approximate the after-tax after-overhead relative incomes of the parties. Ironically, when computing the income of both parents for pro rata allocations, the C.S.S.A. would allow the husband to deduct the maintenance “to be paid . . . in the order to be entered” (D.R.L. §240[1-b][b][vii][C]), but the C.S.S.A. would not include in the income of the wife the maintenance to be received by her in the order to be entered. The courts have upheld this discrimination, following the statute’s direction to include in the income of the wife only that shown on her last filed return (with exceptions not here relevant). See, Lueker v. Lueker, 72 A.D.3d 655 (2nd Dept. 2010); Krukenkamp v. Krukenkamp, 54 A.D.3d 345, 862 N.Y.S.2d 571 (2nd Dept. 2008); Harrison v. Harrison, 255 A.D.2d 490, 680 N.Y.S.2d 624 (2nd Dept. 1998).
Finally, Justice Falanga granted the wife a $25,000.00 interim counsel fee, “with leave to apply to the trial court for additional sums if warranted.” The wife had paid her counsel a $15,000.00 retainer using claimed pre-marital funds. The husband had paid a $11,000.00 retainer to his counsel using marital funds.
Whether one thinks one side or the other did better than he or she should have is not the point. Rather, courts must, as Justice Falanga did, strive to reach the goals of the new provisions, but realize blind adherence to Albany-generated formulas simply does not work. Unfortunately, these formulas require Justices to take the time and effort needed to analyze whether, after a review of the resulting circumstances, an award, even a “temporary” award, is fair to all concerned. It just may be too easy to meet Standards and Goals by simply and blindly applying these formulas. As noted in my March 21 and March 23 blogs, other Justices have not tempered the formulas with such a reality check.