In its August 24, 2016 decision in Maddaloni v. Maddaloni, the Appellate Division, Second Department, upheld the rulings of Supreme Court Suffolk County Justice Justice Carol Mackenzie that invalidated the all-but-complete maintenance waiver contained in a 23-year-old postnuptial agreement, awarding the wife maintenance for 10 years. The appellate court also upheld Justice Mackenzie’s award to the wife of 25% of the $2,000,000 appreciation during the marriage in the value of the husband’s pre-marital business, Maddaloni Jewelers of Huntington.
The Maddalonis were married in January, 1988. At the time of the marriage, the husband owned several cars, a house, and a jewelry business, and he was in contract to buy a shopping center. On August 22, 1988, less than eight months after the parties were married, they experienced marital difficulties and entered into a postnuptial agreement. Among other things, this agreement provided that, in the event that the parties divorced after the first five years of marriage, the wife agreed to accept the sum of $50,000, payable in five equal annual installments of $10,000, “in full satisfaction of any and all claims of whatsoever kind and nature she may have at that time for past or future support or for distribution of assets.”
Thereafter, the parties reconciled and remained married for more than 25 years. They had two children, who were emancipated by the time of the trial.
The wife commenced this divorce action in 2011. A hearing with regard to the validity of the 1988 postnuptial agreement began, but the parties agreed to adjourn the matter so that they could pursue reconciliation.
Well over a year later, the hearing with regard to the validity of the 1988 postnuptial agreement resumed. After the hearing, Justice Mackenzie upheld the separate property provisions of the 1988 postnuptial agreement. However, the court determined that the $50,000 maintenance provision in that agreement, which purported to be in full satisfaction of all support claims, was unenforceable on the ground that it was unconscionable.
Justice Mackenzie went on to conduct the trial on equitable distribution and support issues. With regard to the appreciation of Maddaloni Jewelers, one of the husband’s businesses, Justice Mackenzie found that the 1988 postnuptial agreement was silent as to equitable distribution of the appreciation of the business. Moreover, the wife established that she made significant direct and indirect contributions to the value of Maddaloni Jewelers during the marriage. Justice Mackenzie awarded the wife the sum of $500,000, representing 25% of the appreciation of Maddaloni Jewelers, and monthly maintenance for a period of 10 years based upon the income of the husband which Justice Mackenzie imputed to be in excess of $600,000 per year.
On appeal, the Second Department noted that Domestic Relations Law § 236(B)(3) provides that a prenuptial or postnuptial agreement may validly include a “provision for the amount and duration of maintenance or other terms and conditions of the marriage relationship . . . provided that such terms were fair and reasonable at the time of the making of the agreement and are not unconscionable at the time of entry of final judgment.”
An unconscionable bargain is one which no person in his or her senses and not under delusion would make on the one hand, and no honest and fair person would accept on the other, the inequality being so strong and manifest as to shock the conscience and confound the judgment of any person of common sense.
The Second Department agreed that the maintenance provision of the 1988 postnuptial agreement, which provided the wife with only $50,000 in full satisfaction of all claims, would be unconscionable by the time a final judgment would be entered in this action. At the time that the parties executed the 1988 postnuptial agreement, the husband owned, among other things, a jewelry business worth at least $3 million, and he was in contract to buy a shopping center.
During more than 25 years of marriage, the husband’s jewelry business underwent tremendous growth while the wife worked there, and the parties lived what can easily be described as a lavish lifestyle. Among other things, they owned numerous high-end automobiles and took numerous international vacations. For a time, they traveled regularly to the Bahamas on the husband’s yacht. Under all the circumstances, the court properly determined that the maintenance provision in the 1988 agreement was unconscionable and, thus, unenforceable.
Contrary to the husband’s contention, Justice Mackenzie properly awarded the wife the sum of $500,000, representing 25% of the appreciation of Maddaloni Jewelers during the course of the marriage.
An increase in the value of separate property is considered separate property “except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse.” While spouses are free to opt out of that general rule, “the intent to override the rules of equitable distribution—whether by express waiver, or by specifically designating as separate property assets that would otherwise be considered marital property under New York law—must be clearly evidenced by the writing.”
Here, pursuant to the operative provisions of the 1988 postnuptial agreement, the wife waived her right to the husband’s separate property. However, the agreement neither expressly nor implicitly refers to a waiver of her right to an increase in value of the husband’s separate property, including Maddaloni Jewelers, to the extent that such appreciation was due to her contributions. Moreover, the agreement did not effect a mutual waiver of the parties’ equitable distribution rights generally. Accordingly, Justice Mackenzie properly determined that the increase in value of Maddaloni Jewelers during the marriage, which was due in part to contributions by the wife, was marital property subject to equitable distribution.
Moreover, the evidence at trial supported Justice Mackenzie’s determination that the wife made substantial direct and indirect contributions to the appreciation in value of Maddaloni Jewelers. Among other things, there was testimony that the wife worked at Maddaloni Jewelers four or five days a week for more than 20 years, performed all of the administrative tasks, set up the bookkeeping and advertising departments, and organized about 12 trunk shows per year. Moreover, the husband’s testimony demonstrated that the value of Maddaloni Jewelers increased by at least $2 million during the course of the marriage. Accordingly, the court providently exercised its discretion in determining that the wife was entitled to 25% of the appreciation of Maddaloni Jewelers, and in awarding her the sum of $500,000.
The Second Department also upheld Justice Mackenzie’s award of maintenance for 10 years. The amount and duration of maintenance is a matter committed to the sound discretion of the trial court, and every case must be determined on its own unique facts. In setting the amount and duration of maintenance, the court should consider, among other things, “the standard of living of the parties, the income and property of the parties, the distribution of property, the duration of the marriage, the health of the parties, the present and future earning capacity of the parties, the ability of the party seeking maintenance to be self-supporting, [and] the reduced or lost earning capacity of the party seeking maintenance.” “In general, an award of maintenance should be of a duration sufficient to permit the recipient to achieve economic independence.”
Justice Mackenzie considered the relevant statutory factors, including the income and assets of the parties, the long duration of the marriage, the wife’s extended absence from the work force outside of her employment at Maddaloni Jewelers, and the parties’ predivorce standard of living, and providently exercised her discretion in awarding maintenance to the wife for a period of 10 years. In light of Justice Mackenzie’s credibility determinations, which the appellate court found no reason to disturb, the court providently exercised its discretion in imputing income to the husband in the sum of at least $600,000 per year.
Philip J. Castrovinci, Katharine E. O’Dette, and Matthew Mady of Castrovinci & Mady, of Smithtown, represented the wife. Kenneth S. Sternberg, of Manhattan, represented the husband.