Validity and Finality of Custody Stipulations

Many custody cases are resolved by agreement. When this happens, the parties often place their agreement on the record, either as an oral stipulation recorded by court stenographer or reduce it to a written agreement. Sometimes, immediately after or some time later on, a party to the stipulation may change his mind and ask that the court vacate the stipulation.

In Jon v. Jon, 2015 N.Y. Slip. Op. 51118(U) (Sup. Ct. Nassau Co. 2015), the plaintiff, immediately after entering into a written settlement stipulation, regretted her decision and changed her mind and attempted to have the stipulation vacated. Plaintiff argued that since she was not represented by counsel, that her agreement was not knowing and voluntary, and it came as a result of overreaching by defendant or undue pressure placed on her.

The court heard testimony of the parties determined that although wife was not represented by counsel, the absence of independent legal representation, without more, did not establish overreaching or require nullification of an agreement. She had the opportunity in just a few hours to negotiate with defendant’s counsel in the presence and with the assistance of a court mediator. She decided to pass on that opportunity.

Furthermore, plaintiff was not significantly disadvantaged by the lack of counsel because she could have obtained equal parenting time with her children if she had only agreed to it. She declined because she did not want the children shuttling between their parents. If defendant was not going to agree to let plaintiff have custody of the children—and he wasn’t—she decided to do what in her opinion was the next best thing: let the children stay with defendant. And she did not identify a single thing she wanted in the stipulation that was not included. Given that the stipulation was drafted and signed in “neutral territory”—the courthouse within earshot of the judge—and since the attorney for the children was present throughout, the absence of an attorney did not render the stipulation unfairly made.

The court concluded that neither the terms of the stipulation nor the circumstances surrounding its execution evidence overreaching on the part of defendant. As a result, the court held that it may “not intrude so as to redesign the bargain arrived at by the parties on the ground that judicial wisdom in retrospect would view one or more of the specific provisions as improvident” or imprudent. Christian v. Christian, 42 N.Y.2d 63, 72 (1977).

The key finding that the court made was the following:

This court does believe plaintiff in one important respect: she freely and fairly made a decision and executed an agreement that she very quickly regretted and desired to change. But there is no statute or case that affords a contracting party the opportunity to change their mind, regardless of how quickly they desire to do so, in the circumstances presented here. This court sees the wisdom in affording to an unrepresented party the opportunity within a short window the absolute right to rescind a custody agreement. That would be plaintiff’s only salvation when faithfully applying the current statutory and common law to the facts in this matter.

Stipulations are meant to bring resolution and finality to the parties. They should not be taken lightly and should be thoroughly understood before being finalized.

Terminating Spousal Support Provisions After Divorce Due to Change In Circumstances

In New York, spousal support, also sometimes referred to as “alimony” or “spousal maintenance” can be granted in a divorce case to either spouse by the court pursuant to Domestic Relations Law §236. Alternatively, the parties can agree to a specific amount of maintenance, its duration, and the circumstances under which it will terminate in their settlement agreement.

Factors that a judge or the parties will consider in determining spousal support, among others, include:

The duration of the marriage and the age and health of both parties;
The present and future earning capacity of both parties;
The ability of both to become self-supporting;
The reduced or lost lifetime earning capacity resulting from having foregone or delayed education, employment training or career opportunities during the marriage;
The presence of children;
Tax consequences.

Even once the amount of maintenance is determined and included in the judgment of divorce or settlement agreement, spousal maintenance can be modified.

However, if the maintenance was set by the parties’ settlement  agreement, the party seeking its modification due to a change in circumstances will have to meet a significant burden of proof. Specifically, the party seeking the change will have to show prima facie evidence of “extreme hardship” before the court can hold a hearing to resolve these issues. Extreme hardship means that the payor’s circumstances are so adverse that the party can’t meet its living expenses without modifying spousal support. In a recent decision, McKelvey v. McKelvey, 2015 N.Y. Slip. Op. 02830 (3rd Dept. 2015), the Appellate Division found that the husband presented such evidence when he was able to show that “the undisputed proof indicating that the husband earns, after taxes, less than his monthly support obligation was sufficient to demonstrate prima facie evidence of extreme hardship, and Supreme Court should have held a hearing on his request to modify his support obligation.” Once such evidence is presented then the court hearing the case would hold a fact-finding to determine how spousal maintenance should be modified.

If spousal maintenance was set by a judge after a hearing, the party seeking the modification must establish a substantial change in circumstances and show that the needs of the dependent spouse or financial abilities of the paying spouse that warrant modification. The party making such request would face a significant burden and the court will have to consider such factors as the party’s current and past earnings, costs of living, financial obligations, as well as assets and liabilities.  In Klapper v. Klapper, 204 A.D.2d 518 (2d Dept. 1994), the Second Department held that, in determining whether there was a substantial change in circumstances sufficient to warrant downward modification, “the change is to be measured by a comparison between the payor’s financial circumstances at the time of the motion for downward modification and at the time of divorce or, as the case may be, the time that the order of which modification is sought was made.”

Further, a party who willfully or voluntarily reduces income will not receive a reduction in support payments. If evidence of such actions is presented to the court, the party seeking modification will not receive and is also likely to be ordered to pay the other spouse’s attorneys’ fees.

Tracing Method of Dividing Defined Contribution Retirement Assets

I have previously written about division of marital retirement assets which is traditionally done by computing a time based coverture fraction pursuant to the New York Court of Appeals’ decision in Majauskas v. Majauskas, 61 N.Y.2d 481 (1984). Majauskas was the seminal New York case that decided that the portion of the spouse’s pension or a retirement plan such as 401k, earned during the marriage, is marital property subject to equitable distribution. To the extent that a pension was earned or 401k contributions were made during the marriage, they are, for purposes of New York law, are considered to be marital property. The Majauskas decision sets forth the formula that normally is to be followed in dividing retirement assets and consists of a fraction computed on the basis of duration of the marriage and duration of the party’s employment.

While Majauskas has been the prevailing law for the last 30 years, a recent decision suggests that with regard to defined contribution retirement plans such as 401k or 403b plans, or their equivalents, the trial court has discretion to utilize a tracing method of equitable distribution. According to Jennings v. Brown, 43 Misc.3d 1229(A) (Sup. Ct. Seneca Co. 2014), “a small minority of cases have started to hold that use of a time-based fraction to determine the marital share of a defined contribution plan is permitted”. Tracing would allow the court to treat appreciation on any separate property portion of such retirement assets as separate property, thereby reducing the non-titled party’s interest in the asset. The court observed that utilization of time coverture fraction methodology utilized by the Court of Appeals in Majauskas may result in overvaluation of non-vested party’s interest and tracing method would remedy that problem.

In Jennings, the plaintiff argued that the tracing method should be utilized to establish defendant’s interest in plaintiff’s 401k plan. However, while accepting tracing methodology as valid, the court held that it was constrained by the terms of the parties’ judgment of divorce which referenced Majauskas method of dividing retirement assets.

While Jennings is a trial level decision, and I question at least one of the cases it relies on, it suggests that with regard to defined contribution retirement funds, tracing method could be accepted by the trial court. Under appropriate circumstances, tracing method may greatly benefit the titled spouse. It also suggests that when the case is tried, the party seeking to utilize tracing method will need to present expert testimony on this issue. In Jennings, an affidavit of a CPA was presented to the court.  Since Jennings is a trial level decision, it remains to be seen whether the appellate courts will agree with its reasoning.

Ratification of Settlement and Separation Agreement

I have previously written about settlement agreements, their contents, modification, validity, and formalities related to their execution.

Even in situations where the agreement may have not been executed properly or otherwise invalid, if the party does not promptly act to challenge the agreement and accepts its benefits, the court may refuse to vacate the agreement. This is the situation that the Appellate Division, Second Department, addressed in Kessler v. Kessler, 89 A.D.3d 687 (2nd Dept. 2011).

In Kessler, the parties’ separation agreement was incorporated but not merged into the judgment of divorce. The parties entered into the separation agreement on June 10, 1980, after 25 years of marriage. The parties’ separation agreement, provided that the plaintiff husband would, among other things, make payments to the defendant wife for her support and maintenance and for the mortgage and carrying costs relating to the marital residence, where the defendant continued to reside. The plaintiff complied with the terms of the separation agreement and, in 2009, he commenced this action for a conversion divorce. In response to the plaintiff’s motion for summary judgment, the defendant submitted an affidavit asserting that the plaintiff had procured the separation agreement through fraud and duress, and that the agreement was unconscionable.

The defendant alleged, among other things, that the plaintiff had concealed from her his vast wealth, and had induced her to enter into the separation agreement at a time when, unbeknownst to her, New York’s equitable distribution law was about to be enacted. The Supreme Court granted the plaintiff’s motion for summary judgment, and subsequently entered a judgment of divorce, which, inter alia, directed the parties to comply with the terms of the separation agreement which was incorporated, but not merged into, the judgment of divorce. The defendant appealed.

The Appellate Division held that party who “accepts the benefits provided under a separation agreement for any considerable period of time” is deemed to have ratified the agreement and, thus, “relinquishes the right to challenge that agreement”. By contrast, when a party “received virtually no benefits from the agreement,” he or she “cannot be said to have ratified it”.

The Appellate Division further stated that assuming the truth of the allegations set forth in the defendant’s affidavit, the benefits she received pursuant to the separation agreement were far less than those she likely would have received had there been an equitable distribution of the assets accumulated during the marriage. The record, however, did not support a finding that the defendant received “virtually no benefits” from the agreement. Moreover, while “a spouse will not necessarily be held to have ratified an agreement if it is found to be the product of duress and overreaching”, the disadvantage to the defendant created by the alleged fraud and duress in this case cannot be deemed to have persisted throughout the 29-year period during which the defendant accepted the benefits of the separation agreement without challenging it.

The court held that the plaintiff made a prima facie showing that the defendant ratified the separation agreement and that the trial court properly granted the plaintiff’s motion for summary judgment.

There is a simple rule that applies to settlement and separation agreements. The party receiving substantial benefits under the agreement can’t challenge the agreement after a substantial period of time passes.

Statute of Limitations and QDROs

One of the questions that I was asked several times during the last year was whether there is a statute of limitations applicable to Qualified Domestic Relations Orders (QDROs)? This question usually come up in situations where one former spouse was entitled to a portion of the other former spouse’s retirement benefits, however, the QDRO was never done, and a substantial period of time has passed. If there was an applicable statute of limitations, the former spouse who has failed to act would lose his or her right to collect a portion of the former spouse’s retirement.

However, a couple of recent decisions made it clear that with respect to QDROs, there is no applicable statute of limitations and a QDRO can be submitted to the court at any time. In Denaro v. Denaro, 2011 N.Y. Slip. Op. 04409 (2nd Dept 2011), the Appellate Division, Second Department, held that “the statute of limitations does not bar issuance of the QDRO.”  Relying on Bayen v Bayen, 81 A.D.3d 865 (2nd Dept. 2011), the court held that “[M]otions to enforce the terms of a stipulation of settlement are not subject to statutes of limitation… [B]ecause a QDRO is derived from the bargain struck by the parties at the time of the judgment of divorce, there is no need to commence a separate action in order for the court to formalize the agreement between the parties in the form of a QDRO”. Id. (citations omitted.)

While I would not recommend to anyone delaying preparing and submitting a QDRO, any such submission is not going to be barred by a statute of limitations. At the same time, any late submission is likely to cause another set of problems if the retirement asset is in pay status  and payments are being made to the other spouse.

Contempt and Enforcement of Court Orders

One remedy to a failure of one party to abide by existing court orders that is available to the parties in divorce and other family law actions is contempt of court. The power to punish for contempt arises out of the inherent power of the court, which is limited by §753(A)(3) of the Judiciary Law. It provides, in part:

753. Power of courts to punish for civil contempts
A. A court of record has power to punish, by fine and imprisonment, or either, a neglect or violation of duty, or other misconduct, by which a right or remedy of a party to a civil action or special proceeding, pending in the court may be defeated, impaired, impeded, or prejudiced, in any of the following cases:
3. A party to the action or special proceeding, an attorney, counsellor, or other person, for the nonpayment of a sum of money, ordered or adjudged by the court to be paid, in a case where by law execution can not be awarded for the collection of such sum except as otherwise specifically provided by the civil practice law and rules; or for any other disobedience to a lawful mandate of the court.
8. In any other case, where an attachment or any other proceeding to punish for a contempt, has been usually adopted and practiced in a court of record, to enforce a civil remedy of a party to an action or special proceeding in that court, or to protect the right of a party.

The power of contempt is exists to punish the party who engages in an evasion or a violation of duty, or misconduct, which resulted in defeating or prejudicing the other party’s rights. There are a number of procedural requirements that have to be strictly followed in order for the court to find a party in contempt. A motion to punish for contempt will be dismissed unless on its face it contains both a notice that the purpose of the hearing is to punish for contempt and that such punishment may consist of a fine or imprisonment. Without this notice and warning, the court is without jurisdiction to punish for contempt.

The party must also be advised by the court of the right to counsel and assigned an attorney if financially unable to obtain counsel. In addition, DRL §245 requires a finding that payment cannot be enforced pursuant to DRL §243 or §244 or CPLR §5241 and §5242 and the exhaustion of these remedies or a finding that they would be ineffectual as a prerequisite to a contempt for disobeying an order requiring payment of money in a matrimonial action.  The court must find that the violation was willful and find expressly that the actions of the defaulting spouse were calculated to or actually did defeat, impair or impede or prejudice the other spouses rights or remedies. Nonpayment alone does not establish the requisite willfulness to support contempt. DRL §246(3) provides that financial inability to pay is a defense to a contempt proceeding under DRL §245. A person who asserts in an opposing affidavit financial inability to comply with the order is entitled to an evidentiary hearing to determine whether he or she has an ability to pay.

The punishment for contempt for failure to make ordered payments is imprisonment until payment is made. The defaulting spouse may pay the money due and be released. If the court finds that the party committed the offense charged and that it was calculated to or actually did defeat, impair, impede or prejudice the rights or remedies of the other spouse, the court must make a final order directing fine, imprisonment or both, as it finds necessary.

Civil Rights Law §72 limits the length of imprisonment for nonpayment of alimony, maintenance, distributive award, special relief in a matrimonial action and counsel fees in a divorce case to three months for a default of less than $500, and to six months for $500 or more. Noticeably absent is any mention of child support. If a party has an actual loss or injury because of the proven other spouse’s misconduct, a fine must be imposed sufficient to indemnify the aggrieved party and when collected, paid to the aggrieved party.

In contrast to the DRL, the Family Court Act (FCA) takes a tougher approach by providing for commitment as one of the remedies for nonpayment of support. Section 454(2) provides that where a respondent is brought before the court for failure to obey any “lawful order” of the Family Court for support and following a hearing the court is satisfied that the respondent has failed to obey the order, it may enter a money judgment, make an income deduction order, require an undertaking, make a sequestration order or suspend the respondent’s driving, professional or business license.

Here is an example of how a contempt application will be viewed by the court. In a recent case, H.S.M. v J.T.M., 2011 N.Y. Slip. Op. 50069(U) (Sup. Ct. Nassau Co. 2011), the court was asked to hold defendant in contempt of Court for his willful failure to comply with the Judgment of Divorce entered in this action , and for his willful refusal to pay the sum of $43,351.87, together with interest. The parties’ marriage was dissolved pursuant to the Judgment of Divorce, entered June 24, 2008, which incorporated but did not merge with a Stipulation of Settlement, dated December 19, 2007. The Stipulation stated in pertinent part that:

The Husband shall pay to the Wife, as and for child support, the sum of One Thousand Seven Hundred Eighty-five ($1,785.00) Dollars per month … The parties agree that the child support payments will be made through the Nassau County Support Collection Unit. [Article XXVI]

Pursuant to the Order of the Hon. Denise L. Sher, J.S.C., dated October 4, 2006, the Court ordered pendente lite relief awarding to the Wife the sum of One Thousand Four Hundred ($1,400.00) Dollars per month temporary maintenance, as well as child support in the sum of Two Thousand ($2,000.00) Dollars per month. The award was retroactive to the date of service, which was July 18, 2006. [Article XXVII]

The Husband agrees that arrears for child support and maintenance as of the date of execution of this Agreement amount to Thirty-Eight Thousand Two Hundred ($38,200.00) Dollars, and agrees to the entry of judgment for said arrears. Said arrears shall be liquidated by the Husband paying to the Wife the sum of Three Hundred ($300.00) Dollars per month until all arrears are paid. The Father further agrees that in order to liquidate arrears, the Father shall remit to the Mother his income tax return refunds that he receives commencing with the tax year 2007 and shall pay over to the Mother the entire refund by June 1, 2008, and by June 1st every year thereafter until such time as his arrears have been liquidated. [Article XXII]

The Husband shall pay to the Wife, as and for spousal maintenance, the sum of Four Hundred ($400.00) Dollars per month…through support collection. [Article XXXVI]

Pursuant to the “So-Ordered” Stipulation of the parties dated May 19, 2010, “Def[endant] agrees to pay to Pl[aintiff] as and for child support arrears the minimum sum of $1,000.00 (One Thousand and no/100) by May 26, 2010.

Wife claimed that Husband has willfully failed to i) comply with the Judgment of Divorce dated August 6, 2008, which incorporates the Stipulation; ii) comply and pay the money judgment entered on February 3, 2010, in the sum of $49,746.27; and iii) comply with the “So-Ordered” Stipulation entered into by the parties on May 19, 2010. Wife claimed that subsequent to the entry of the money judgment, she contacted the Nassau County Office of Child Support Enforcement to seek payment of the child support obligation for the parties’ three children, as well as maintenance for herself. She claimed that notwithstanding the attempts of the Child Support Enforcement Bureau, no payments have been received from the defendant or his employer. She further alleged that the total sum now due and owing is $87,864.01, and that none of it has been paid.

In February of 2010, husband testified that he has no assets nor property which could be sequestered. In support of her application, wife claimed that nothing less than a fine and incarceration will persuade the husband to comply with the Court orders and judgments. She argued that other enforcement devices, including income deduction orders, income executions or sequestration will be unsuccessful in view of husband having made himself judgment proof; moving out of the State of New York; and failing to comply with any judgment or stipulation entered into by the parties.

Wife claimed that she is attending graduate school but that in the interim, she is completely dependent on her family for her support and the support of the parties’ three children. She claimed that the last time she received any funds from husband was in March of 2010, and that since that time she has received no support payments or maintenance. She argued that based upon those facts, husband’s intentional non-compliance with the judgment, orders and “So-Ordered” Stipulation has defeated, impaired and prejudiced her rights.

The court stated that a contempt citation is a drastic remedy which should not be granted absent a clear right to such relief.  Further, to prevail on a motion to punish a party for civil contempt, the movant must demonstrate that the party charged with contempt willfully violated a clear and unequivocal mandate of a court’s order, with knowledge of that order’s terms, thereby prejudicing the movant’s rights.  The court further held that pursuant to Domestic Relations Law §245, before a defaulting party can be held in contempt for the non-payment of a sum of money, it must appear “presumptively, to the satisfaction of the Court,” that the movant exhausted the less drastic enforcement remedies available under Domestic Relations Law §§ 243, 244 and 245, CPLR §§ 5241 and 5242, or such other enforcement mechanisms that would be ineffectual.  Once the movant has made a prima facie showing that the party against whom a contempt citation is sought has failed to pay a sum of money as ordered, the burden then shifts to the obligor to adduce some competent, credible evidence of his inability to make the required payments, in order to show that the failure to pay was not willful. The court determined that wife has satisfactorily demonstrated the existence of a clear and unequivocal mandate of the court, and that husband has knowingly violated the order’s terms, thereby prejudicing her rights. The court also found that other methods of enforcement would prove ineffective in light of husband having made himself judgment proof. The court, however, determined that it must conduct a hearing to determine husband’s willfulness in violating the subject orders. In order for a non-compliant party be incarcerated for his willful violation of the court’s mandates, the movant must prove such willfulness beyond a reasonable doubt.

The above decision illustrates that while contempt is a remedy, it may require a substantial motion practice and, most likely, a hearing.  Thus, contempt motions should not be brought unless all other remedies were exhausted.

Upcoming Changes to New York’s Child Support Law and Social Services Law

When New York’s Legislature finally passed the no-fault divorce law and made changes to temporary maintenance and attorneys fees awards, it also passed a number of less publicized changes to the Child Support Standards Act, and related laws, which govern child support in New York. The new legislation modified the Family Court Act, Domestic Relations Law and the Social Services Law, substantially altering the parties’ ability to modify child support awards. It also gave the Family Court additional powers in situations where the party paying child support is unemployed.

The following will describe the most significant changes included in the new legislation.

Family Court Act (FCA) §451 was amended to conform the language of the FCA provision governing the modification of child support orders to the Domestic Relations Law (DRL) so that both provisions provide for a “substantial change in circumstances” as a basis for modification of an order of child support.

This section further provides two new bases for modification of an order of child support: (1) the passage of three years since the order was entered, last modified, or adjusted; or (2) a 15 percent change in either party’s income since the order was entered, last modified or adjusted provided that any reduction in income was involuntary and the party has made diligent attempts to secure employment commensurate with his or her education, ability and experience. The parties may specifically opt out of the two new bases for modification in a validly executed agreement or stipulation. This section would provide that incarceration is not a bar to finding a substantial change in circumstances under certain conditions and also would clarify that retroactive support is paid and enforceable as provided under FCA §440.

DRL §236B(9)(b) was amended to separate out the “substantial change of circumstances” basis for modification of child support orders into its own section for clarity and would provide two new bases for the modification of an order of child support: (1) the passage of three years since the order was entered, last modified, or adjusted; or (2) a 15 percent change in either party’s income since the order was entered, last modified or adjusted provided that any reduction in income was involuntary and the party has made diligent attempts to secure employment commensurate with his or her education, ability and experience. The parties may specifically opt out of the two new bases for modification in a validly executed agreement or stipulation. This section provides that incarceration is not a bar to finding a substantial change in circumstances under certain conditions.

The bill also added a new FCA §437-a to authorize the Family Court to require the non-custodial parent of a child to seek employment, or to participate in job training, employment counseling or other programs designed to lead to employment, where such programs are available, if he or she is unemployed at the time the court is establishing the support order unless he or she is in receipt of supplemental security income (SSI) or social security disability (SSD) benefits.

Another section of the bill amended Social Services Law (SSL) §111-h to provide that if the respondent is required to participate in work programs or activities, and if the order of support is made payable on behalf of persons in receipt of public assistance, the support collection unit may not file a petition to increase the support obligation for twelve months from the date of entry of the order if the respondent’s income is derived from the work activity or program. FCA §461 was also amended to reflect the two new bases for modification of an order of child support.

Sections of the bill dealing with modification of child support only apply to child support orders which incorporate but do not merge stipulations or settlement agreements if the stipulation or agreement was executed on or after the effective date of the bill. The amendments, with exception of certain sections of the Tax Law, become effective 90 days after the passing of the bill.  The effective date of the amendments is October 14, 2010.

This bill represents a substantial change to the prior statutory provisions and case law dealing with modification of child support.  While New York’s child support orders were always subject to modification, these changes will make modification of child support easier. I do not know at this time how these provisions will apply to the orders already in place and whether the party seeking modification of child support will be able to use some of the new provisions to modify existing child support orders.

Divorce and Reformation of Settlement Agreement

I have previously written about vacating settlement agreements on the grounds of mutual mistake.  Here is a case where the court actually reformed the parties’ settlement agreement on the grounds of mutual mistake.

In Banker v. Banker, 53 A.D.3d 1105 (3rd Dept. 2008),  the parties’ oral stipulation of settlement, which was incorporated but not merged into their 2005 judgment of divorce, provided that the parties would subdivide a parcel of property located in Delaware County.  However, despite that provision, after the judgment of divorce was entered, the defendant refused to do so.  In response to a motion by plaintiff to enforce the stipulation, Supreme Court, in February 2006, ordered defendant to obtain subdivision approval from the Town.  The Planning Board denied defendant’s subsequent subdivision application after discovering that the property was encumbered by a restrictive covenant against further subdivision.  In March 2006, defendant moved to reargue and/or renew February 2006 order, and requested a hearing to determine equitable distribution.

Supreme Court reserved decision on all pending matters pertaining to the parties until an appraisal of the property was completed.  Because the parties could not agree on an appraiser, the court appointed one and directed the parties, once the appraisal was complete, to settle the matter in a private auction or buyout.  The appraiser completed the appraisal in June 2006.  By letter dated October 4, 2006, defendant requested the opportunity to offer further proof of value.  Plaintiff made a similar request and explained that the parties had not been able to settle the matter or agree on a private auction.

Plaintiff responded with a motion seeking that the parties’ interests in the property be declared in conformance with the terms set forth in the stipulation and the values established in the appraisal, as well as an order allowing her to buy out defendant’s share of the property.  Defendant opposed the motion, arguing that the appraisal should not be adopted without an opportunity by the parties to cross-examine the appraiser and submit other evidence of valuation.  Supreme Court ordered a hearing to permit the parties to cross-examine the appraiser, but made it clear that no other testimony or evidence of valuation would be permitted.

Following the hearing, at which Supreme Court again denied defendant’s request to submit further evidence, the court determined the interests of the parties in the property to be 83% for plaintiff and 17% for defendant.  The court, fixed the parties’ interests as indicated above, appointed a receiver, and ordered the   public sale of the property.  Defendant appealed.  The Appellate Division rejected defendant’s argument that Supreme Court exceeded its authority by reforming the parties’ stipulation of settlement.  Where, as here, a mutual mistake rendered a portion of the parties’ settlement agreement impossible or impracticable, “the relevant settlement provision was properly set aside”.  No dispute existed that the parties’ agreement to physically divide the property could not occur given the restrictive covenant; and even defendant was not attempting to have the parties’ stipulation enforced.  Thus, after giving the parties ample opportunity to reach a new agreement,  the trial court was correct to move forward by appointing an appraiser so that an equitable distribution of the property, in as close accordance as possible with the intent of the parties as expressed in their settlement, could be achieved.

The Appellate Division noted that to achieve reformation or recission of the stipulation of settlement, one of the parties should have commenced a plenary action, rather than proceeding by motion but, in the context of this matter, concluded the defect to be nonfatal.  However, the lower court erred in resolving this matter without a full hearing permitting the parties to offer proof of valuation.  The court is authorized to appoint an independent appraiser in a matrimonial action but, unless the parties have stipulated otherwise, the court must afford the parties the opportunity to review the appraisal, cross-examine the appraiser and offer additional evidence on valuation.  Although the record contained evidence that the parties consented to Supreme Court’s appointment of the appraiser, it did not suggest that the parties agreed to be bound by the resulting appraisal.

This is an example of a situation where the mutual mistake allowed the court to reform the parties’ settlement agreement.  While those circumstances tend to be limited, the lawyers in Banker recognized that since the property could not be subdivided, it had to be sold or one of the parties would buy out the other party’s interest.  The question of valuation was secondary to the remedy chosen by the court as a result of reformation of the agreement.  At the same time, it is rather surprising that neither divorce attorney was aware of the covenant, since both parties, presumably, had access to the real property records and the property’s abstract of title.

Child Support, Emancipation and Child’s Economic Independence

One of the most common questions I hear as a part of my family law practice is a question of when a child become emancipated for child support purposes.  My usual response is that emancipation of minors depends on a variety of circumstances.  The Child Support Standards Act’s provisions dealing with emancipation hold that the child becomes emancipated upon reaching the age of 21, joining military, or getting married. In addition, the child may become constructively emancipated by willingly abandons the parent and withdrawing from parental supervision and control. In addition, the child may become emancipated, assuming the child is of employable age, by becoming economically independent of the parents. If emancipation is sought for a child who is of employable age, and is working, I usually tell my client that the child has to work between 35 and 40 hours per week and generate sufficient income to be economically independent of the parents.  In some situations, however, even a full-time job may not be enough.

A recent case, Thomas B. v. Lydia D., 2009 N.Y. Slip. Op. 06789 (1st Dept. 2009), is an excellent illustration of these concepts.  In Thomas B., the Appellate Division held that two parents may not, by written agreement, terminate the child support obligation because of the child’s full-time employment, without a simultaneous showing of the economic independence of the child.

Pursuant to a stipulation of settlement entered into as part of the parties’ judgment of divorce, father was obligated to pay annual child support until the parties’ child reached the age of 21 or was otherwise “emancipated.”  The stipulation defined emancipation as “the Child’s engaging in full-time employment; full-time employment during a scheduled school recess or vacation period shall not, however, be deemed an emancipation event.”  The father brought a motion seeking to declare the child emancipated and argued that under the terms of the stipulation of settlement, the child became emancipated by reason of his full-time employment at a music store from July through December 2005.  The mother opposed the motion, arguing that during the time in question, the child was living in a halfway house as part of his treatment for substance abuse.  His employment at the music store was one of the conditions of that treatment.  She also argued that the child was not economically independent, as he received financial support from her in addition to her payment of 100% of his unreimbursed medical expenses.

The court stated that mere full time employment was not enough, and emancipation would require economic independence from the child’s parents which is not established by merely working a standard, full-time work week.  Thus, even where a child is working but still relies on a parent for significant economic support such as paying for utilities, food, car insurance, medical insurance and the like, the child cannot be considered economically independent, and thus is not emancipated. This is true even where the child is residing with neither of the parties, so long as the child is still dependent on one of the parties for a significant portion of his or her support.  Moreover, the parties cannot contract away the duty of child support.  The Appellate Division found insufficient evidence in the record to support a finding that the child was economically independent of his parents as a result of his working 35 hours per week while living in a halfway house. The child’s employment was one of the requirements of participation in the halfway house substance abuse program.  In Thomas B., it was clear, that although he was working 35 hours per week during the period of time in question, the child was not economically independent of his parents, and thus was not emancipated during that period of time.

One lesson of Thomas B. is that the lawyer dealing with this type of situation must present sufficient evidence to establish the child’s work hours and income, as well as his/her needs and expenses.  It is also critical to present testimony as to whether the other parent is meeting the child’s other financial needs, and whether such financial assistance is necessary or is merely voluntary.  If you believe that your child became emancipated due to employment, I would recommend consulting with a family law attorney.

Determining Validity of Separation Agreements

I have previously written about separation agreements and their validity, here, here and here.  Periodically, I see separation agreements that are extremely one-sided or I am asked to draft a separation agreement that is very one-sided.  In those situations a divorce lawyer is usually asked if the agreement can be set aside.  My usual response is that the court’s determination whether to set aside the agreement depends on a variety of factors.

The legal standard for setting aside separation agreements states that a separation agreement in a divorce proceeding may be vacated if it is manifestly unfair to one party because of the other’s overreaching or where its terms are unconscionable, or there exists fraud, collusion, mistake, or accident.  Separation agreements may be set aside as unconscionable if their terms evidence a bargain so inequitable that no reasonable and competent person would have consented to it.  Moreover, evidence that one attorney ostensibly represented both parties to a settlement agreement raises an inference of overreaching on the part of the party who is the prime beneficiary of the assistance of the attorney. Such an inference is, rebuttable, if it appears that the separation agreement is fair and equitable or that both parties freely agreed to it with a thorough understanding of its terms.

In a recent case of Pippis v. Pippis, 2010 N.Y. Slip. Op. 00492 (2nd Dept. 2010), the Appellate Division, Second Department vacated the separation agreement holding that plaintiff was guilty of overreaching with respect to the parties’ separation agreement.  The court found that the defendant was not represented by counsel at any point during the relevant time period.  According to the plaintiff, his attorney drafted the stipulation of settlement, and only one attorney was present at the signing.  Under these circumstances, and where the terms of the stipulation “evidence a bargain so inequitable” in favor of the plaintiff “that no reasonable and competent person” would have consented to the defendant’s end of the bargain, an inference of overreaching on the part of the husband was raised.  Since the plaintiff failed to rebut the inference, the Appellate Division held that the trial court properly determined that the stipulation was the product of his overreaching, and granted the defendant’s motion to set it aside.  The Appellate Division also held that the trial court properly rejected the plaintiff’s ratification argument, since the defendant “received virtually no benefits from the agreement and thus cannot be said to have ratified it”.

While occasionally I am asked to prepare a separation agreement in a situation where the opposing party is unrepresented, I advise my client that it is in his/her best interests that the other party is represented and that the agreement is not entirely one-sided.  As a divorce lawyer, I have to advise my client that any agreement that is extremely one-sided may be vacated by the court in any pending or subsequent divorce action.  If the agreement is reviewed by counsel and conveys some benefits to the other party, the likelihood of it being overturned by the court is greatly diminished.