Posts Tagged ‘lawyer’

Determining Validity of Separation Agreements

Saturday, January 23rd, 2010

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.

Disability Payments, Divorce and Equitable Distribution

Saturday, January 2nd, 2010

I have previously written about different classes of property that most of the time will be considered to be separate property of the party during the divorce.  Periodically, divorce lawyers have to deal with situations where one of the parties becomes disabled during the marriage and begins to receive disability payments, either social security disability or payments under a private disability insurance policy.

In a recent case, Masella v. Masella, 2009 N.Y. Slip. Op 08190 (2nd Dept. 2009), the Appellate Division, Second Department, held that the proceeds of the defendant’s disability insurance policies are his separate property. Similarly, the court held that the proceeds of the defendant’s Social Security disability benefits also are his separate property, and are not subject to equitable distribution.  The reason that Social Security benefits are not subject to equitable distribution, is because Social Security benefits are not a pension.  With respect to the disability insurance, any disability insurance payments constitute compensation for personal injury and would not be subject to equitable distribution.

In a situation where one of the parties is disabled and is receiving disability payments, the other party might not be able to obtain equitable distribution of such payment, regardless of the amount received.  While some may argue that this may not be fair to the other party, the above principles are uniformly applied in New York divorces and are unlikely to be overturned in the future.  When handling similar situations, divorce attorneys will need to investigate the source of payments, the reasons for them and try to figure out if the income can be reached in some other way, perhaps by a spousal maintenance claim.

Vacating Settlement Agreements on Grounds of Mutual Mistake

Sunday, December 27th, 2009

In is not unusual for a party to attempt to vacate a settlement agreement.  In order to do so, a party must meet a significant burden of proof that the agreement came as a result of a material, mutual mistake, fraud, or other relevant facts.  A interesting illustration of the above principles came in a recent decision, Simkin v. Blank, Sup. Co. New York County (December 22, 2009).

In 2006, Mr. Simkin, a partner at Paul, Weiss, Rifkind, Wharton & Garrison and his wife negotiated a settlement agreement in their divorce action.  One of the marital assets was an account the parties opened during their marriage with Bernard L. Madoff Investment Securities LLC which was worth $5.4 million.  As part of a 2006 equitable distribution agreement, Mr. Simkin  paid Ms. Blank $2.7 million, which represented what he thought was his ex-wife’s fair share of their Madoff investments.

After Mr. Madoff’s arrest, Mr. Simkin attempted to reform the agreement, claiming it was based on a “material, mutual mistake” and resulted in a “windfall” for Ms. Blank. He argued that the agreement did not accomplish the parties’ goal of ensuring that each would keep approximately half of the marital assets.  Ms. Blank responded that as long as Mr. Simkin could have redeemed the account for the value that the parties agreed to on the cut-off date, he received what he bargained for. Noting that Mr. Simkin had liquidated part of his investment to fund his ex-wife’s equitable entitlement, the court pointed out that in 2006 and “the several years after that plaintiff maintained this investment,” the account “could have been redeemed for cash, presumably significantly in excess of its 2004 value.”  While Mr. Simkin claimed the Madoff account held no assets, he did not allege it had no value, the judge wrote.  “An investor’s ability to redeem an account for value, was the assumption on which the parties relied in dividing their property and in doing so they made no mistake,” the court found.

Justice Evans agreed with Ms. Blank holding that while Mr. Simkin’s decision to retain the Madoff account may have been “improvident,” that did not give the court an equitable basis to set the agreement aside. In dismissing Mr. Simkin’s complaint, Justice Evans wrote, “There is no evidence that defendant was unjustly enriched. In 2006, at the time of their agreement, each of the parties received the benefit of his and her bargain.”

The lesson of the above case is that clients and their divorce attorneys should be careful in fashioning settlement agreements.  Even when significant mistakes are made at the time the agreements are entered into, it is very difficult to set them aside, even in such extreme circumstances as described above.

Return From Military Service and Reconsideration of Custody Orders

Sunday, December 20th, 2009
Laws of 2009, Ch 473, effective November 15, 2009, amended the Domestic Relations Law, the Family Court Act and the Military Law to provide that the return of a parent from activation or deployment by the military will automatically be considered a ’substantial change in circumstance’ for seeking reconsideration of a custody or visitation order. The amendment changes the law enacted last year which requires that all child custody orders issued when a parent is on active military duty be deemed temporary and subject to revision when the parent returns to civilian life.
Laws of 2009, Ch 473, § 1 amended Domestic Relations Law § 75-l ( entitled Military service by parent; effect on child custody
orders) to provide unless the parties have otherwise stipulated or agreed, if an order was issued under Domestic Relations Law § 75-l, the return of the parent from active military service, deployment or temporary assignment shall be considered a substantial
change in circumstances. Upon the request of either parent, the court shall determine on the basis of the child’s best interests whether the custody judgment or order previously in effect should be modified.
Laws of 2009, Ch 473, § 2 amended Domestic Relations Law 240, subdivision 1 to add a new paragraph (a-2) to read as follows:
(a-2) Military service by parent; effect on child custody orders.
(1) During the period of time that a parent is activated, deployed or temporarily assigned to military service, such that the parent’s ability to continue as a joint caretaker or the primary caretaker of a minor child is materially affected by such military service, any orders issued pursuant to this section, based on the fact that the parent is activated, deployed or temporarily assigned to military service, which would materially affect or change a previous judgment or order regarding custody of that parent’s child or children as such judgment or order existed on the date the parent was activated, deployed, or temporarily assigned to military service, shall be subject to review pursuant to subparagraph three of this paragraph. Any relevant provisions of the Service Member’s Civil Relief Act shall apply to all proceedings governed by this section.
(2) During such period, the court may enter an order to modify custody if there is clear and convincing evidence that the modification is in the best interests of the child. An attorney for the child shall be appointed in all cases where a modification is sought during such military service. Such order shall be subject to review pursuant to subparagraph three of this paragraph. When entering an order pursuant to this section, the court shall consider and provide for, if feasible and if in the best interests of the child, contact between the military service member and his or her child, including, but not limited to, electronic communication by e-mail, webcam, telephone, or other available means. During the period of the parent’s leave from military service, the court shall consider the best interests of the child when establishing a parenting schedule, including visiting and other contact. For such purposes, a “leave from military service” shall be a period of not more than three months.
(3) Unless the parties have otherwise stipulated or agreed, if an order is issued pursuant to this paragraph, the return of the parent from active military service, deployment or temporary assignment shall be considered a substantial change in circumstances. Upon the request of either parent, the court shall determine on the basis of the child’s best interests whether the custody judgment or order previously in effect should be modified.
(4) This paragraph shall not apply to assignments to permanent duty stations or permanent changes of station.
Laws of 2009, Ch 473, § 3 amended Family Court Act § 651 to add a new subdivision (f) which reads exactly the same as Domestic Relations Law 240, subdivision 1 (a-2).

On November 15, 2009, amendments to the Domestic Relations Law, the Family Court Act and the Military Law became effective that provide that the return of a parent from activation or deployment by the military will automatically be considered a “substantial change in circumstance” for seeking reconsideration of a custody or visitation order.  The amendments change the law enacted last year which requires that all child custody orders issued when a parent is on active military duty are deemed temporary and subject to revision when the parent returns to civilian life.

Specifically, Domestic Relations Law §75-l ( entitled Military service by parent; effect on child custody orders) provides that unless the parties have otherwise stipulated or agreed, if an order was issued under Domestic Relations Law §75-l, the return of the parent from active military service, deployment or temporary assignment shall be considered a substantial change in circumstances.  Upon the request of either parent, the court shall determine on the basis of the child’s best interests whether the custody judgment or order previously in effect should be modified.

Domestic Relations Law §240(1), was amended to add a new paragraph (a-2) as follows:

(a-2) Military service by parent; effect on child custody orders.

(1) During the period of time that a parent is activated, deployed or temporarily assigned to military service, such that the parent’s ability to continue as a joint caretaker or the primary caretaker of a minor child is materially affected by such military service, any orders issued pursuant to this section, based on the fact that the parent is activated, deployed or temporarily assigned to military service, which would materially affect or change a previous judgment or order regarding custody of that parent’s child or children as such judgment or order existed on the date the parent was activated, deployed, or temporarily assigned to military service, shall be subject to review pursuant to subparagraph three of this paragraph. Any relevant provisions of the Service Member’s Civil Relief Act shall apply to all proceedings governed by this section.

(2) During such period, the court may enter an order to modify custody if there is clear and convincing evidence that the modification is in the best interests of the child. An attorney for the child shall be appointed in all cases where a modification is sought during such military service. Such order shall be subject to review pursuant to subparagraph three of this paragraph. When entering an order pursuant to this section, the court shall consider and provide for, if feasible and if in the best interests of the child, contact between the military service member and his or her child, including, but not limited to, electronic communication by e-mail, webcam, telephone, or other available means. During the period of the parent’s leave from military service, the court shall consider the best interests of the child when establishing a parenting schedule, including visiting and other contact. For such purposes, a “leave from military service” shall be a period of not more than three months.

(3) Unless the parties have otherwise stipulated or agreed, if an order is issued pursuant to this paragraph, the return of the parent from active military service, deployment or temporary assignment shall be considered a substantial change in circumstances. Upon the request of either parent, the court shall determine on the basis of the child’s best interests whether the custody judgment or order previously in effect should be modified.

(4) This paragraph shall not apply to assignments to permanent duty stations or permanent changes of station.

The Family Court Act § 651 was amended to add a new subdivision (f) which contains identical language as Domestic Relations Law §240(1) (a-2).

If you are in the military service, the amendments provide some degree of comfort that any changes to the preexisting custody arrangements as a result of being called to the active duty can be reevaluated.  At the same time, in order to do so, the service person will be required to go to court and is likely to require assistance of a family law lawyer.

Constructive Emancipation, Burden of Proof and Contact With the Child By Non-Custodial Parent

Saturday, December 12th, 2009

I often see cases involving constructive emancipation which typically arise when the child refuses to have contact with the non-custodial parent.  If the contact cannot be reestablished after a period of time, the non-custodial parent can move to terminate the child support obligation, assuming that the non-custodial parent was not at fault for the breakdown in the relationship and the child is of the employeable age.  Burden of proof ofconstructive  emancipation rests on party making the assertion.  Constructive emancipation cases are not easy to prove and are factually intensive.  I have previously written about various issues in constructive emancipation here.

A recent example of such case was Dewitt v. Giampietro, 66 A.D.3d 773 (2nd Dept. 2009).  According to the Appellate Division, although the daughter refused to have contact with the father after some incident which was not described, the father ceased making attempts to reestablish contact with daughter after approximately one month.  According to the Appellate Division, one month period of trying to reestablish a relationship with the daughter could not be considered as a serious effort by the father.  The court also noted that the daughter testified that she loved her father and would be willing to re-establish visitation gradually through counseling.   According to the Appellate Division, the child’s reluctance to see parent is not considered to be abandonment.

Accordingly, if a non-custodial parent is in a situation where the child of employable age, generally high school graduate or older, is refusing to have any contact with the parent, the parent must keep on trying to reestablish contact for a period of time in excess of several months.  Any such contact may take several different forms, and phone calls, email, letters, postcards, and even text messages may be utilized.  It is important that the parent remembers the child’s birthdays and other special occasions.  Generally, the courts are reluctant to terminate child support and will do so only if the non-custodial parent will demonstrate that the continuing pursuit of the relationship with the child would be fruitless.

Can Social Abandonment By A Spouse Be Sufficient As Grounds For Divorce?

Saturday, November 21st, 2009

While New York continues to be the last state that insists upon fault-based divorce, that has not stopped various attempts to broaden present grounds for divorce available under the Domestic  Relations Law.  In a recent decision, Davis v. Davis, 2009 N.Y. Slip. Op. 08579 (2nd Dept. 2009), the Appellate Division, Second Department, held that “social abandonment” of one spouse by the other, does not meet the definition of constructive abandonment, and can not be used as grounds for divorce.  This case demonstrates why divorce lawyers and their clients, here in Rochester and elsewhere in New York, can be in situation where they cannot get their clients divorced, despite significant breakdowns in marital relationships.

In Davis, the wife alleged that the husband refused to engage in social interaction with the wife by:

refusing to celebrate with her or acknowledge Valentine’s Day, Christmas, Thanksgiving, and the wife’s birthday, by refusing to eat meals together, by refusing to attend family functions or accompany the wife to movies, shopping, restaurants, and church services, by leaving her once at a hospital emergency room, by removing the wife’s belongings from the marital bedroom, and by otherwise ignoring her.  The parties have been married for 41 years and they reside at the same address.

The above claims were included as a part of the wife’s cause of action for constructive abandonment.  The husband filed a pre-answer motion pursuant to CPLR §3211(a)(7) to dismiss the constructive abandonment cause of action and, alternatively, moved for summary judgment dismissing that cause of action. The husband, while contesting many of the wife’s factual allegations of “social abandonment,” argued that the complaint fails to state a cause of action for a divorce based on “constructive abandonment.”

Domestic Relations Law §170 sets forth six statutory grounds on which a spouse may seek to divorce another. The abandonment ground for divorce, set forth in Domestic Relations Law §170(2), provides that an action for a divorce may be maintained based upon “[t]he abandonment of the plaintiff by the defendant for a period of one or more years.”   The essence of abandonment is the refusal of one spouse to fulfill “basic obligations springing from the marriage contract”.  The court noted that a viable cause of action under Domestic Relations Law §170(2) has been recognized in three different factual forms: (1)  a defendant spouse’s actual physical departure from the marital residence that is unjustified, voluntary, without consent of the plaintiff spouse, and with the intention of the departing spouse not to return; (2) the defendant spouse locks the plaintiff spouse out of the marital residence, absent justification or consent;  (3) “constructive abandonment,” which has been defined as the refusal by a defendant spouse to engage in sexual relations with the plaintiff spouse for one or more years prior to the commencement of the action, when such refusal is unjustified, willful, and continual, and despite repeated requests for the resumption of sexual relations.

the complaint alleges that the husband refused to engage in social interaction with the wife by refusing to celebrate with her or acknowledge Valentine’s Day, Christmas, Thanksgiving, and the wife’s birthday, by refusing to eat meals together, by refusing to attend family functions or accompany the wife to movies, shopping, restaurants, and church services, by leaving her once at a hospital emergency room, by removing the wife’s belongings from the marital bedroom, and by otherwise ignoring her. The parties have been married for 41 years and they reside at the same address.
The husband filed a pre-answer motion pursuant to CPLR 3211(a)(7) to dismiss the constructive abandonment cause of action and, alternatively, moved for summary judgment dismissing that cause of action pursuant to CPLR 3212. The husband, while contesting many of the wife’s factual allegations of “social abandonment,” argued that the complaint fails to state a cause of action for a divorce based on “constructive abandonment.” The wife opposed dismissal arguing, [*2]inter alia, that social abandonment has been recognized as a ground for divorce in fairly recent trial-level decisions rendered by the Supreme Courts in Nassau, Queens, and Westchester Counties.

After analyzing the applicable case law and plain language of the statute, the Appellate Division concluded that the plaintiff’s allegations of social abandonment may appropriately be viewed as merely another way of claiming “irreconcilable differences” between spouses, that do not constitute a cognizable ground for divorce. The plaintiff’s allegations of a “social abandonment,” designed to mimic the abandonment language of Domestic Relations Law §170(2), “elevated the artificial title of the claim over the substance of the causes of action that are statutorily recognized and understood.”

The Appellate Division further noted that there are several reasons why the courts have not recognized social abandonment as a cognizable ground for divorce, including the longevity of the current definitional understanding of constructive abandonment; its concern for a judicial usurpation of legislative authority; the fact that a social abandonment of one spouse by another is a provision of the marriage contract that necessarily equates with a spouse’s refusal to engage in sexual relations.; and the practical difficulties associated with trying to define a social abandonment cause of action, and of how courts might conceptualize the cause as separate and distinct from traditional notions of constructive abandonment.  In court’s view, “social abandonment” cannot be easily defined and therefore defies consistent and easily applied definitional interpretation, resulting in the courts examining the conduct of couples on a case-by-case basis, and presenting significant variations as to “the degree of social interaction involving family events, meals, holidays, religious activities, spousal expectations, cultural differences, and communications.”

The Davis case is just one more illustration of the fact that New York needs to abandon its fault-based grounds for divorce.  No-fault divorce would significantly reduce divorce litigation and make clients’, and attorneys’, lives less frustrating.  Unfortunately, the New York Legislature has not shown much interest in this issue over the years.  What is also interesting, is that the Second Department’s position in Davis appears to be contrary to the Third Department’s position in Dunne v. Dunne, 47 A.D.3d 1056 (3rd Dept. 2008), discussed in an earlier post, which held constructive abandonment has taken place in a situation where one spouse took an uncompromising position that plaintiff choose to either adhere to the advice of his treating physicians or cease taking his anxiety medication in order to return to the marital residence, thereby risking his well-being. If forcing a party to choose between taking a medication and returning to the marital residence amounted to “an unreasonable condition as a term of their relationship,” which violated marital obligation to the husband, I believe that a refusal to participate in various activities with the spouse represents a similar violation of marital obligation.

Divorce, Equitable Distribution and Appreciation of Separate Property

Saturday, November 14th, 2009

One issue that comes up periodically in divorce cases has to do with appreciation of separate property brought into the marriage by one spouse.  If that separate property is a business that appreciated during the marriage, did that appreciation come as active spousal effort, which would render the appreciation marital property, or did the appreciation come as a result of passive, non-spousal effort, and therefore should be treated as separate property? In other words, what was the comparable economic contribution of each party to the appreciation of such asset?

While the courts do not utilize the terms active and passive appreciation as much as they did in the past, it is clear from the recent decisions that those concepts are still utilized.  In Smith v. Winters, 64 A.D.3d 1218 (4th Dept. 2009), the Appellate Division, Fourth Department, recently answered the above question by evaluating how much the efforts of the titled spouse increased the value of the asset in dispute, by looking at what specific efforts of the titled spouse led to the appreciation.  In Smith, the plaintiff owned a business that later on purchased another company, PNA.  PNA has appreciated significantly during the course of the marriage.  After discussing the facts related to the plaintiff’s efforts and involvement in PNA, the court stated:

With respect to PNA, the court found that the value of PNA appreciated by $20 million during the course of the marriage but that the increase in value attributable to plaintiff was minimal when compared to the increase attributable to those hired by plaintiff to run the company. The court thus determined that only 10% of the appreciation in value of PNA was marital property subject to equitable distribution.

Subsequently, the court held that the non-titled spouse was entitled to 40% of the appreciated marital value based on her contributions as a homemaker.  Thus, the titled spouse, in this case the husband, was able to retain 96% of appreciation of PNA.

The above represents continuation of the trend toward reevaluating the status of marital property on the basis of various forms of contribution by the parties to the marriage, or, perhaps, third parties as well.  The courts have long held that “an increase in the value of separate property of one spouse, occurring during the marriage and prior to the commencement of matrimonial proceedings, which is due in part to the indirect contributions or efforts of the other spouse as homemaker . . . should be considered marital property”.  See Price v Price, 69 N.Y.2d 8, 11 (1986).  However, the latest decisions in this area are refocusing on requiring  ”some nexus between the titled spouse’s active efforts and the appreciation in the separate property”, when a nontitled spouse’s claim to appreciation and the other spouse’s separate property is predicated solely on the nontitled spouse’s indirect contributions.  See Hartog v. Hartog, 85 N.Y.2d 36, 46 (1995).   Therefore in Smith, the Appellate Division Fourth Department held that the trial court properly considered the “active efforts of others and any additional passive or active factors” in determining the percentage of total appreciation that constitutes marital property subject to distribution.

The above case opens various possibilities to lawyers and titled-spouses contesting an appreciation claim.  Situations similar to the one in Smith will require a divorce attorney to evaluate carefully how the asset appreciated and what role each spouse or third parties played in that appreciation.

Non-Titled Spouse, Enhanced Earnings and Substantial Contribution

Sunday, November 8th, 2009

I have previously written about several issues related to distribution of enhanced earnings during the equitable distribution portion of the divorce action here, here, here and here.  One of the critical issues facing a divorce lawyer, seeking seeking equitable distribution of a portion of such earnings for his/her client, is the burden of proof with respect to the non-titled spouse’s contribution to enhanced earning capacity.  The non-titled spouse seeking a distributive share of enhanced earnings must demonstrate that he/she made a substantial contribution to the titled party’s acquisition of that marital asset.

In Kriftcher v. Kriftcher, 59 A.D.3d 392 (2nd Dept. 2009,) the trial court awarded the plaintiff-wife $828,699.20 as her 40% share of the husband’s enhanced earning capacity, an attorney’s fee of $30,000, declined to award her maintenance, awarded her $1,229.71 per week in child support, and failed to award her equitable distribution of the husband’s bonus for the calendar year 2005, which the husband received in 2006.  The Appellate Division found that trial court correctly concluded that the enhanced earnings resulting from the law degree and license obtained by the husband during the marriage were marital property subject to equitable distribution.  Nevertheless, it is incumbent upon the non-titled party seeking a distributive share of such assets to demonstrate that they made a substantial contribution to the titled party’s acquisition of that marital asset, and where only modest contributions are made by the non-titled spouse toward the other spouse’s attainment of a degree or professional license, and the attainment is more directly the result of the titled spouse’s own ability, tenacity, perseverance and hard work, it is appropriate for courts to limit the distributed amount of that enhanced earning capacity.  Here, the wife’s minimal contributions to the husband’s obtaining of his degree and license entitled her to a share of only 10% in the enhanced earnings that have resulted.

In determining the appropriate amount and duration of maintenance, the court is required to consider, among other factors, the standard of living of the parties during the marriage and the present and future earning capacity of both parties.  Although the wife earned a teaching license during the course of the marriage, she was, at present, primarily a homemaker, who worked only part-time as a substitute teacher earning approximately $10,000 per year.  In sharp contrast, the husband was an attorney making approximately $500,000 per year. It held that a maintenance award of $1,000 per week for 10 years was appropriate.

The above decision is a good illustration of the recent trend where the non-titled spouse has to present evidence of his/her contribution toward creation of the other spouse’s enhanced earning capacity.  When handling such situations, divorce attorney would do well to learn everything there is to know regarding non-titled spouse’s involvement in the titled spouse’s efforts to obtain a license or degree that ultimately resulted in enhanced earning capacity.

Child Support and High Income Non-Custodial Parent

Sunday, November 1st, 2009

I have previously written about various child support issues, here, here, here and here.  While the number of issues is substantial, one situation that comes up periodically, is the one where the non-residential parent earns a substantial income, placing the combined parental income well in excess of the basis economic support under the Child Support Standards Act.  While the income limit for basic economic support under the CSSA is about to increase substantially, what happens in situations where the nonresidential parent earns several hundred thousands dollars or more per year?

In a recent decision,  Jackson v. Tompkins, 2009 N.Y. Slip. Op. 06550 (2nd Dept. 2009), the Appellate Division, Second Department, held that in high income cases, appropriate determination under F.C.A. §413(1)(f) for an award of child support on parental income in excess of $80,000 should be based upon child’s actual needs and amount required for child to live an appropriate lifestyle, rather than upon wealth. See, Brim v. Combs, 25 A.D.3d 691, 693 (2nd Dept. 2006).  The Appellate Division affirmed the Family Court’s order which directed that the father pay $6,700 in monthly child support.

The above decision is consistent with the prior cases, such as Cassano,  and its progeny.  The Appellate Division cited Brim v. Combs in reaching its holding.  That case makes for an interesting reading since the respondent in Brim v. Combs was Sean “Puffy” Combs.  In Brim, the mother’s net worth statement and her extensive testimony at the hearing established that her expenses related to the child were $19,148.74 per month, exclusive of the child’s educational, health, medical, dental, school transportation, school supplies/books, security, and summer camp expenses, which in any case are paid by the father. The court further noted that this amount was deemed admitted as fact by the father due to his failure to comply with the compulsory financial disclosure requirements of Family Court Act § 424-a. Accordingly, the Appellate Division held that the Family Court erred in awarding $35,000 in monthly child support to the mother. Instead, the mother should have been awarded monthly child support in the sum of $19,148.74 to satisfy the child’s actual needs and to afford him an appropriate lifestyle (see Family Ct Act § 413).

Thus, if you earn a substantial income and you are obligated to pay child support, your family law attorney would do well to know what are the child’s needs and what are the actual expenses  associated with child, and be prepared to challenge any unsubstantiated claims at a hearing.

Enforcement of Child Support Arrears and Chapter 13 Bankruptcy

Sunday, October 25th, 2009
Support Magistrate determined that respondent willfully failed to pay $7,814.90 in child support arrears, and referred matter to Family Court for confirmation. Respondent’s commencement of Chapter 13 bankruptcy stays all actions and proceedings to collect pre-petition claims against debtor and his property. See, 11 USC § 362[a][1]. Although Family Court is precluded from exercising its enforcement powers pursuant to FCA § 454 to recover arrears while Chapter 13 bankruptcy plan is in effect, Family Court finds that it is not prohibited to confirm finding of willful violation already made by Support Magistrate and hold enforcement in abeyance pending completion of the Chapter 13 bankruptcy plan.
In the Matter of a Support Proceeding Marcia T., Petitioner,
v.
Raymond W., Respondent.
F-01769-08/08A
Family Court, Albany County
Decided on September 1, 2009
CITE TITLE AS: Matter of Marcia T. v Raymond W.
Marcia T., Matter of, v Raymond W., 2009 NY Slip Op 51883(U). Parent and Child-Support-Bankruptcy Proceedings Not Bar to Recovery of Arrears under Prior Determination of Support Magistrate. (Fam Ct, Albany County, Sept. 1, 2009, Maney, J.)
APPEARANCES OF COUNSEL
Bixby, Crable & Stiglmeier, PLLC (Carol Stiglmeier of counsel) for Marcia T.
Jeffrey S. Berkun, Esq. for Raymond W.
OPINION OF THE COURT
Gerard E. Maney, J.
By order dated January 14, 2009, the Support Magistrate determined that respondent Raymond W. willfully failed to obey an order of the Court pursuant to Family Court Act § 156 by failing to pay $7,814.90 in child support arrears. The matter was referred to this Judge for confirmation in accordance with Family Court Act § 439 (a).
Counsel for respondent maintains that because respondent filed for Chapter 13 Bankruptcy relief in November 2008, the confirmation hearing must be stayed. Counsel argues that the bankruptcy code contains an automatic stay provision that provides that the filing of a bankruptcy petition operates as a stay of actions or proceeding to recover a claim against the debtor that arose prior to the commencement of the case. Although certain exceptions to the automatic stay provisions exist, counsel argues that none apply in the instant family court proceeding.
The court agrees with counsel that the commencement of a case under Chapter 13 of the United States Bankruptcy Code stays all actions and proceedings to collect pre-petition claims *2 against the debtor and his property (11 USC §362 [a] [1]) or to obtain possession and control of property of the estate (11 USC §362 [a] [3]). The property of the estate, which is broadly defined, specifically includes “earnings” (11 USC §541 [a] [6]; §1306 [a];). Because payments to creditors must come from the debtor’s post-petition earnings, those earning are property of the Chapter 13 estate (11 USC §1306 [a] [2]). Thus, “[t]he claimant seeking to collect arrearages in support obligations is not free to pursue the Chapter 13 debtor’s post-petition earnings” (Margaret Howard, A Bankruptcy Primer for the Family Lawyer, Family Law Quarterly, Volume 31, Number 3, Fall 1997, at 380).
Although the court finds that it is precluded from exercising its enforcement powers pursuant to Family Court Act §454 to recover arrears while the Chapter 13 bankruptcy plan is in effect, it does not find that it is prohibited by the bankruptcy laws from confirming the finding of a willful violation already made by the Support Magistrate and holding its authority to enforce such finding in abeyance pending completion of the Chapter 13 bankruptcy plan.
It is this court’s understanding that petitioner has filed a claim in the bankruptcy proceeding for the support arrears and that such arrears will be payable under the bankruptcy plan. If the payment of arrears is not satisfied when the Chapter 13 bankruptcy plan is closed, petitioner may move to restore the matter to the family court calendar to have the court exercise its enforcement powers to compel the payment of arrears.
Accordingly, after examination and inquiry into the facts and circumstances of the case and after hearing the proofs and testimony offered in relation thereto and based on evidence that a lawful order of support was in effect and respondent had the ability to pay but willfully failed to do so, it is
ADJUDGED that Raymond W. failed to obey the order of this court for the support of his children , A. W. and S. W., and that such failure was willful;
ORDERED that the determination of the Support Magistrate pursuant to Family Court Act § 156 made herein that Raymond W. willfully failed to obey an order of the court is hereby confirmed; and it is further
ORDERED that if the payment of arrears as set forth in the Support Magistrate’s January 14, 2009 order is not satisfied when respondent’s Chapter 13 bankruptcy plan is closed, petitioner may move to restore the matter to the family court calendar to have the court exercise its enforcement powers pursuant to Family Court Act §454.

I have previously written about several different situations involving interaction between New York’s Family Law and bankruptcy.  The basics of divorce and bankruptcy were addressed in this post,  the issues related to the bankruptcy court’s handling of domestic support obligations were addressed in this post, and the issues related to attorneys fees and bankruptcy were addressed in this post.  Because of the complexity of the issues involved, New York courts continue to decide cases were the family law and bankruptcy law interact.  A recent case of Marcia T. v. Raymond W., 24 Misc.3d 1245(A) (Fam. Ct. Monroe Co. 2009), addressed whether Chapter 13 bankruptcy stay prevented recovery of child support arrears and a finding of willful failure to pay.

Respondent father filed for Chapter 13 Bankruptcy relief in November 2008.  Petitioner mother brought a willful violation petition based upon the father’s failure to pay several thousand dollars in child support arrears.  Support Magistrate determined that respondent willfully failed to pay $7,814.90 in child support arrears, and referred matter to Family Court for confirmation in accordance with Family Court Act § 439(a).  Respondent’s lawyer argued that because of Chapter 13 filing, the confirmation hearing must be stayed since automatic stay prevents recovery of any claims that arose prior to the commencement of the bankruptcy case.

The Family Court held that respondent’s commencement of Chapter 13 bankruptcy and resulting automatic stay stops all actions and proceedings to collect pre-petition claims against debtor and his property.   Because payments to creditors must come from the debtor’s post-petition earnings, those earning are property of the Chapter 13 estate, pursuant to 11 U.S.C. §1306 (a)(2).  Thus, the claimant seeking to collect arrearages in support obligations is not free to pursue the Chapter 13 debtor’s post-petition earnings.  It further held that although Family Court is precluded from exercising its enforcement powers pursuant to FCA §454 to recover arrears while Chapter 13 bankruptcy plan is in effect, Family Court found that it is not prohibited to confirm finding of willful violation already made by Support Magistrate and hold enforcement in abeyance pending completion of the Chapter 13 bankruptcy plan.

The court further noted that petitioner has filed a claim in the bankruptcy proceeding for the support arrears and that such arrears will be payable under the bankruptcy plan. If the payment of arrears is not satisfied when the Chapter 13 bankruptcy plan is closed, petitioner may move to restore the matter to the family court calendar to have the court exercise its enforcement powers to compel the payment of arrears.

The above is an excellent illustration of how a Chapter 13 bankruptcy can be utilized to prevent serious problems that a finding of willful violation may present.  Further, since the typical Chapter 13 plan lasts for 5 years, this allows the party paying child support to extend payment of child support arrears over 5 years.  A family law lawyer needs to be familiar with bankruptcy law issues since it is not uncommon for these areas of law to interplay.