Divorce Actions and New Automatic Stay Orders

Since the enactment of Domestic Relations Law §236(B), often referred to as  the “Equitable Distribution Law,” divorce lawyers have had to deal with transfers of, or encumbrances on, marital property which might frustrate the eventual disposition of a divorce case.

Immediately after the enactment of the Equitable Distribution Law, attorneys attempted to prevent transfers and encumbrances of marital property by various means, such as seeking injunctive relief to prevent or undo any transfers, filing notices of pendency with regard to real property which would form part of equitable distribution, and seeking other forms of relief from the courts.  Eventually, the case law made clear that a notice of pendency cannot be filed in a divorce case since an equitable distribution action did not directly affect the title to, or the possession, use or enjoyment, of real property. This left injunctive relief as the only means to restraining transfers during the pendency of an action.  Since the burden of obtaining an injunction was considerable, the moving party had to make a requisite showing that the party to be restrained was threatening to dispose, or was already disposing, of marital assets so as to adversely affect the movant’s ultimate rights to equitable distribution.  Typically, the burden of making the application, and the expenses of doing so, fell on the non-titled spouse.

The different courts in New York State took different approaches to address this issue.  Here in Rochester, the supreme court justices handling matrimonial cases would issue, if requested, standing orders which restrained the parties from substantially altering their financial positions. However, the standing orders would be issued in most cases after a motion was brought or after a preliminary conference was held.

Now, effective Sept. 1, 2009, there is a statute which provides for an automatic stay in all matrimonial actions. The present DRL §236(B)(2) has been redesignated as DRL §236(B)(2)(a) and subparagraph (b) has been added, which reads:

b. With respect to matrimonial actions which commence on or after the effective date of this paragraph, the plaintiff shall cause to be served upon the defendant, simultaneous with the service of the summons, a copy of the automatic orders set forth in this paragraph. The automatic orders shall be binding upon the plaintiff in a matrimonial action immediately upon the filing of the summons, or summons and complaint, and upon the defendant immediately upon the service of the automatic orders with the summons. The automatic orders shall remain in full force and effect during the pendency of the action, unless terminated, modified or amended by further order of the court upon motion of either of the parties or upon written agreement between the parties duly executed and acknowledged. The automatic orders are a follows:

(1) Neither party shall sell, transfer, encumber, conceal, assign, remove or in any way dispose of, without the consent of the other party in writing, or by order of the court, any property (including, but not limited to, real estate, personal property, cash accounts, stocks, mutual funds, bank accounts, cars and boats) individually or jointly held by the parties, except in the usual course of business, for customary and usual household expenses or for reasonable attorney’s fees in connection with this action.

(2) Neither party shall transfer, encumber, assign, remove, withdraw or in any way dispose of any tax deferred funds, stocks or other assets held in any individual retirement accounts, 401K accounts, profit sharing plans, Keogh accounts, or any other pension or retirement account, and the parties shall further refrain from applying for or requesting the payment of retirement benefits or annuity payments of any kind, without the consent of the other party in writing, or upon further order of the court.

(3) Neither party shall incur unreasonable debts hereafter, including, but not limited to further borrowing against any credit line secured by the family residence, further encumbrancing any assets, or unreasonably using credit cards or cash advances against credit cards, except in the usual course of business or for customary or usual household expenses, or for reasonable attorney’s fees in connection with this action.

(4) Neither party shall cause the other party or the children of the marriage to be removed from any existing medical, hospital and dental insurance coverage, and each party shall maintain the existing medical, hospital and dental insurance coverage in full force and effect.

(5) Neither party shall change the beneficiaries of any existing life insurance policies, and each party shall maintain the existing life insurance, automobile insurance, homeowners and renters insurance policies in full force and effect.

The Office of Court Administration has  promulgated a Rule already and is in the process of issuing an Official Form incorporating the Notice required under the Statute.  Until the official form is issued, a divorce attorney should attach a notice to the summons stating that, upon service, an order is in effect and then reciting, word-for-word, the five elements listed above.  In my experience, the Monroe County Clerk’s Office will provide a form at the time the summons is filed, unless the requisite notice is already attached to the summons.

This legislation basically preserves the status quo during the pendency of a matrimonial action by shifting the burden of seeking relief from a spouse asking for the imposition of an injunction to a spouse moving to vacate or modify that restraint.  What is unclear at this time, is how this automatic order will be enforced, and what are the remedies for its violation.

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