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.

In Carvalho, after 33 years of marriage and raising four emancipated children, the wife commenced her divorce action. After determining to equally divide the marital assets, Ostego County Supreme Court Justice Brian D. Burns found that the wife had transferred or spent $103,000 of marital assets without compensating the husband. To account for these expenditures, Justice Burns increased the husband’s distributive award by one half of this amount and reduced the wife’s distribution by the same amount. The wife appealed.

On appeal, the wife did not deny that she transferred or spent $103,000 of the parties’ assets over the course of more than two years following the commencement of the action. Rather, she argued that Justice Burns abused his discretion by awarding the husband a distributive share of one half of this entire amount because he did not establish his claim that she had wastefully dissipated all of these funds. The Third Department agreed.

The appellate court acknowledged that when the courts fashion an equitable distribution award involving marital assets that are wastefully dissipated, as the husband claimed here, the other spouse is to be credited for his or her distributive share of those depleted assets.

However, when the depleted marital assets have been spent on legitimate household or living expenses, they are not included in the equitable distribution calculus.” Moreover, it was the husband’s burden to prove that the wife in fact wastefully dissipated any marital asset.

After reviewing the record, the Third Department reduced the claimed $103,000 by $5,000 for the double-counting of an asset. Of the remaining $98,000, the appellate court acknowledged that the wife wastefully dissipated $38,000 in marital assets through her use of $24,000 to unnecessarily purchase a new car, and another $14,000 for making an unnecessary landscaping improvement to her residence. However, the Third Department held that the husband failed to meet his burden of showing that any of the remaining $60,000 were used for something other than legitimate living expenses.

In our view, the only reasonable conclusion that this evidence supports is that the wife used the remaining $60,000 for legitimate living expenses and, further, that the husband failed to establish that the wife wastefully dissipated these funds. Accordingly, we find that Supreme Court abused its considerable discretion by awarding the husband one half of these funds — i.e., $30,000 — and reducing the wife’s award by the same amount, inasmuch as these funds should have been removed altogether from the pool of marital assets.

Conversely, the wife on appeal also contended that Justice Burns erroneously failed to value and distribute the proceeds of a Wells Fargo IRA in the husband’s name. The husband confirmed at trial that the account had once existed, and further admitted that he had liquidated it and deposited the funds into his checking account. The husband claimed he then used that account to pay his bills during the pendency of this action. The Third Department came to the analogous conclusion: the husband spent the funds on legitimate expenses. Accordingly, the appellate court did not disturb Justice Burns’ failure to value or distribute the proceeds of the husband’s Wells Fargo IRA among the parties.

Comment: Expenses accruing after the commencement of the divorce action are not “marital.” Interim and retroactive final orders are available to fix the support and expense obligations of the parties. If the court issues a pendente lite order directing a party to pay interim support, may the payor use marital assets to satisfy it?

As noted by Justice Jackman Brown in Questel v. Questel, 39 Misc. 3d 667, 671, 960 N.Y.S.2d 860, 864 (Sup. Ct. Queens Co. 2013):

The trend in the Appellate Division, Second Department, disfavors the use of marital funds to meet pendente lite obligations and requires that the payor reimburse the other party for his or her equitable share of marital funds used to satisfy pendente lite obligations. (Many v Many, 84 AD3d 1036, 1037, 925 NYS2d 87 [2d Dept 2011].) It is well settled in the Appellate Division, First Department, that pendente lite payments should be paid from the payor’s income, not marital funds. (See Elkaim v Elkaim, 176 AD2d 116, 118, 574 NYS2d 2 [1st Dept 1991]; McInnis v McInnis, 23 AD3d 241, 242, 804 NYS2d 70 [1st Dept 2005]; Azizo v Azizo, 51 AD3d 438, 440, 859 NYS2d 113 [1st Dept 2008].)

Nevertheless if the pendente lite obligor does use marital assets to meet the obligation, should there later be an adjustment to the division of assets? If in addition to the support being received, the recipient uses marital assets to pay other “legitimate” expenses while the divorce action is pending, should the recipient not be charged with having received those assets? With the power to retroactively fix support obligations, should the result be any different if there is no interim order? Can an income earner bank his or her post-commencement earnings and use marital assets (without being charged with their receipt) to pay living expenses during the action? If the parties themselves divide an account, and then one spouse uses his or her half for living expenses, may that spouse claim half of the other spouse’s half-account?

Post-commencement living expenses are not marital debt. The fact that marital assets may be used prudently to pay post-commencement “separate” living expenses should not change the character of those expenses. The trial court should not be tasked with analyzing every post-commencement expense of a party.

Patricia L. Canner of counsel to the Law Offices of Walter Terry, of Oneonta, represented the husband. Thomas F. Garner, of Middleburgh, represented the wife.