In order to prevent the foreclosure of the marital residence, a court in a divorce action, and prior to judgment, may order the spouses to cooperate with a refinance application. Moreover, if the property is not successfully refinanced, the court, before divorce judgment, may compel a spouse to satisfy (at least) one half of the current mortgage in default.
Such was the holding of the Appellate Division, First Department, in its January 3, 2013 decision in Nederlander v. Nederlander. That decision unanimously affirmed the Order of New York County Supreme Court Justice Deborah A. Kaplan.
In this case, the bank was planning to foreclose on the marital residence. Until the wife made her motion, below, the husband had failed to submit a requested application and financial information to the bank. This was months after such was requested by the bank, and months after the wife submitted her information and application to the bank. The appellate court would not speculate whether the husband’s actions, which in effect contributed to the foreclosure, were by design or neglect.
The First Department based the authority to grant the wife her requested relief on Domestic Relations Law §234. That section empowers the court to determine questions of title to property and to “make such direction, between the parties, concerning the possession of property, as in the court’s discretion justice requires having regard to the circumstances of the case and of the respective parties.”
Incident to that authority, a court can not only order that a party turn over marital property, but also that he or she refrain from transferring or disposing of it. Further, the divorce court has the power to issue preliminary injunctions affecting property in divorce actions, protecting the “expectancy” in property that spouses have.
In order to protect that expectancy pending equitable distribution, to maintain the status quo, and to prevent the dissipation of marital property, the court must be able to issue orders to ensure that such marital property is protected should it later become the subject of equitable distribution.
Thus, the First Department held that Justice Kaplan providently exercised her discretion to ensure that the marital home would not be lost to foreclosure in ordering the husband to cooperate in obtaining an extension and/or refinancing of the loans. Moreover, Justice Kaplan properly exercised her discretion under D.R.L. §234 when ordering the husband to pay 50% of the balances owed on the mortgages in the event that he was unable to refinance the mortgages or obtain extensions of the mortgage notes.
Moreover, the appellate court noted that Justice Kaplan did not err when implicitly concluding that Mr. Nederlander had the ability to pay half of the outstanding mortgages. While he claimed to have modest earnings and substantial debt, the husband’s deposition testimony demonstrated that he actually had access to seemingly unlimited financial resources. Those resources can be, and were, justifiably imputed as income and/or assets.
The husband is a member of one of New York’s leading theater families. While Mr. Nederlander had claimed to earn only some $700 per week as an employee with his father’s company, all of his bills, both personal and business, were been paid by his father. There were distributions and/or support to the husband from his family’s business extending over several years. While the husband characterized his father’s aid as loans, totaling over $6.5 million by 2010, he nevertheless testified that he has not paid his father back.
The appellate court was careful to note that requiring the refinance or partial satisfaction of the mortgage did not constitute pre-judgment equitable distribution of marital property. There was no determination as to the parties’ interests in the marital residence, nor any pre-judgment distribution.