In its January 7, 2016 decision in Fermon v. Fermon, the Appellate Division, Third Department, affirmed that part of the order of Rensselaer County Supreme Court Justice Raymond J. Elliott, III, that included in a permanent award of child support that the husband pay 25% of his future bonuses from his employer.

Here, the parties were married in 2000 and had two sons (born in 2002 and 2006). They were divorced in 2012 and, pursuant to a written stipulation of settlement that was incorporated but not merged with the judgment of divorce, they retained joint custody of the children and waived application of the Child Support Standards Act (see Domestic Relations Law § 240 [1-b]) to provide for no payments of basic child support.

Extensive motion practice ensued, with the wife seeking a variety of relief that included modification of the custody and child support provisions of the judgment, an assessment as to whether the husband committed fraud in the negotiations that led to the execution of the stipulation and an award of counsel fees to the wife. Justice Elliott conducted a hearing on the motions, after which he modified the provisions of the judgment to grant the wife sole legal custody of the children and directed the husband to pay the wife basic child support, arrearages and various add-ons> He further directed the husband to pay an additional $11,500 to the wife due to his alleged fraud in misrepresenting the value of his individual retirement account, and awarded the wife $35,000 in counsel fees. Both parties appealed.

The appellate court upheld the change from joint to sole legal custody by the wife. The parties had become unable to collaborate in a reasonable manner with regard to the children, an inability that was amply demonstrated by incidents such as the husband summoning the police to take the children from the wife’s home while they were eating dinner, his berating the wife in front of one of the children over a seemingly minor dispute, his arguing that the children should spend Christmas with him in contravention of the custody arrangement, and his ongoing refusal to honor the wife’s “right of first refusal” to care for the children if he was unable to do so during his custodial time. A psychologist who prepared an evaluation at the lower court’s request opined that it was “exceedingly difficult [for the parties] to directly interact with each other civilly” and, indeed, both parties acknowledged that the breakdown in communication had reached the point where regular collaboration was no longer advisable. Inasmuch as the wife continued to seek to foster a positive relationship between the husband and the children, a sound and substantial basis in the record supported the finding of Justice Elliott that the best interests of the children were served by awarding her sole custody and primary physical placement.

Turning to the question of child support, the Third Department noted that “a party seeking to modify a child support order arising out of an agreement or stipulation must first establish that the stipulation was unfair when entered into or that there has been an unanticipated and unreasonable change in circumstances leading to an accompanying need. The appellate court held the terms of the stipulation regarding basic child support were unfair when they were entered into, as they were premised upon his fraudulent misrepresentation that his annual income was $136,106 when, as the wife belatedly discovered, he had accepted a position that paid $170,000 a year plus bonuses. Justice Elliott therefore acted appropriately in modifying the award of child support. (Question: would not the change in custodial arrangements, alone, have warranted a new child support determination?)

The appellate court further held that Justice Elliott “properly directed that the husband remit 25% of any future bonuses as basic child support,” citing Quilty v Quilty, 169 A.D.2d 979, 981, 564 N.Y.S.2d 877 [1991]).

Comment: The award of a flexible, self-effectuating, open-ended, uncapped award of child support to include 25% of the husband’s future bonuses is problematic. It runs afoul of the pre-C.S.S.A. rule against such automatic change (Rubenstein v. Rubenstein, 155 A.D.2d 522, 547 N.Y.S.2d 380 [2nd Dept. 1989]; Bizzarro v. Bizzaro, 106 A.D.2d 690, 484 N.Y.S.2d 144 [3rd Dept. 1984]; Breen v. Breen, 99 A.D.2d 539, 471 N.Y.S.2d 617 [2nd Dept. 1984]). It eliminates the required consideration of the C.S.S.A. enumerated factors needed to order a child support award based upon combined parental income in excess of the statutory “cap.” Moreover, it flies in the face of the statutory grounds for a re-evaluation of child support upon a substantial change in circumstances, the expiration of 3 years from the order, or a 15% change in either party’s income under the 2010 amendment to D.R.L. §236(B)(7)(d). Finally, it is noted that the single authority upon which the Third Department relied when making this ruling, the 25-year old decision in Quilty, is questionable. Quilty was an award for temporary support while a divorce action was pending, for which adjustments might be made after trial, not a permanent award of support.

On other issues, the appellate court in Fermon did hold that Justice Elliott erred in modifying the agreed-upon division of assets in his individual retirement account. The parties had agreed to distribute the husband’s individual retirement account based upon its December 2011 value, the point at which the most recent account statement had been issued. The account had grown considerably by the time the stipulation was executed in March 2012, but the husband admittedly made no effort to learn the value of the account at that time and did not know that the appreciation had occurred.

It is well settled “that nondisclosure is not the equivalent of fraud” and, given that the wife acknowledged in the stipulation that she did not require further information from the husband in order to knowingly proceed, Supreme Court erred in setting aside that part of the stipulation dealing with equitable distribution of the husband’s individual retirement account.

Stephen L. Molinsek, of Friedman and Molinsek, PC, of Delmar, represented the husband. Melody A. Mackenzie, of Troy, represented the wife. Tracey A. Brown, of Clifton Park, served as attorney for the children.