Recoupment of Maintenance After Successful Appeal

I have previously written about recoupment of pendente lite maintenance in a divorce action after the entry of a final maintenance award. The recent decision by the Court of Appeals in Johnson v. Chapin, previously discussed in this post, allowed recoupment of pendente lite maintenance as an adjustment to the equitable distribution award.

But what happens if the permanent maintenance award is overturned on appeal? In Rader v. Rader, 54 A.D.3d 919 (2nd Dept. 2008), the Appellate Division, Second Department, held that public policy prohibits recoupment of both pendente lite and permanent maintenance paid pursuant to court order or judgment which is subsequently set aside on appeal.

In Rader, the plaintiff stopped paying the defendant maintenance in January 2006, contending that the parties’ judgment of divorce entered September 18, 1998 required him to pay maintenance only for a period of 10 years, retroactive to the commencement of the divorce action in January 1996. The defendant claimed that she was entitled to maintenance until July 2007-10 years after the date of the decision awarding her maintenance.

In an order dated July 7, 2006 the Supreme Court granted the defendant’s motion, directed the plaintiff to pay the defendant maintenance for a period of 10 years, retroactive to July 1997, when the decision awarding her maintenance was made, and granted the defendant leave to enter a money judgment for maintenance arrears, plus the sum of $1,500 as an attorney’s fee. A money judgment was subsequently entered on July 26, 2006. The plaintiff appealed, and after some additional litigation between the parties, ultimately paid the sum of $54,000 in maintenance for the period from July 2006 until April 2007, plus the sum of $2,000 as an attorney’s fee, for a total sum of $56,000, while the appeal was pending.

In a decision dated April 17, 2007, the Appellate Division reversed the money judgment, and modified the order dated July 7, 2006 upon finding that the plaintiff’s obligation to pay maintenance terminated on January 9, 2006, or 10 years after the divorce action was commenced. Subsequently, the plaintiff moved for reimbursement of the sums of $54,000 in maintenance and $2,000 in attorneys’ fees he paid. In opposition, the defendant noted, inter alia, that she already spent the disputed $56,000 on her living expenses and attorneys’ fees. The Supreme Court denied the plaintiff’s motion.

The Second Department held that there is a strong public policy against recoupment of both pendente lite and permanent maintenance paid pursuant to a court order or judgment which is subsequently set aside on appeal. The reason for this policy is that maintenance and child support payments are “deemed to have been devoted to that purpose, and no funds exist from which one may recoup moneys so expended” if the award is thereafter reversed or modified. The Court further noted that if there were unpaid arrears of other obligations, such as carrying charges for the marital residence, the payor spouse may be granted a credit against those arrears for maintenance paid pursuant to an order which was reversed on appeal.

Is Rader still good law after the Court of Appeals’ decision in Johnson v. Chapin?. I believe that it is, especially with respect to the final maintenance awards. However, it is likely that we will see divorce lawyers making arguments for recoupment even with respect to the final maintenance awards overturned on appeal. I am familiar with a divorce case that is currently pending here in Rochester that may raise issues identical to those in Rader after the Court of Appeals’ decision in Johnson v. Chapin. I will post on that case once it has been resolved.

Payments on Pre-Marital Debt and Right of Recoupment – Update

I have previously written about the case of Mahoney-Buntzman v. Mahoney, 51 A.D.3d 732 (2nd Dept. 2008), which stood for the proposition that that marital property used to pay one spouse’s obligations incurred either prior to the marriage, or benefitting only one spouse, could be recouped.  In Mahoney-Buntzman, the Appellate Division held that the husband’s maintenance obligation to his first wife and the boat loan constituted debts incurred by him prior to the parties’ marriage and were solely his responsibility. Accordingly, the court granted to the wife a credit for one half of the payments made.

Last week, the Court of Appeals issued its decision in Mahoney-Buntzman v. Mahoney, __ N.Y.2d __, 2009 N.Y. Slip. Op. 03629 (2009), and reversed the Appellate Division holding that that marital property used to pay maintenance and child support to the husband’s wife from a previous marriage should not be recouped to the marital estate.  The opinion used very broad language which is likely to eliminate any kind of recoupment of marital money expended for separate property purposes.  Specifically, the Court of Appeals held that:

[D]uring the life of any marriage, many payments are made, whether of debts old or new, or simply current expenses. If courts were to consider financial activities that occur and end during the course of a marriage, the result would be parties to a marriage seeking review of every debit and credit incurred. As a general rule, where the payments are made before either party is anticipating the end of the marriage, and there is no fraud or concealment, courts should not look back and try to compensate for the fact that the net effect of the payments may, in some cases, have resulted in the reduction of marital assets. Nor should courts attempt to adjust for the fact that payments out of separate property may have benefitted both parties, or even the non-titled spouse exclusively. The parties’ choice of how to spend funds during the course of the marriage should ordinarily be respected. Courts should not second-guess the economic decisions made during the course of a marriage, but rather should equitably distribute the assets and obligations remaining once the relationship is at an end.

Expenditures made during the life of the marriage towards maintenance to a former spouse, as well as payments made pursuant to a child support order, are obligations that do not enure solely to the benefit of one spouse. Payments made to a former spouse and/or children of an earlier marriage, even if made pursuant to court order, are not the type of liabilities entitled to recoupment.

This is not to say that every expenditure of marital funds during the course of the marriage may not be considered in an equitable distribution calculation. Domestic Relations Law § 236(B)(5)(d)(13) expressly and broadly authorizes the trial court to take into account “any other factor which the court shall expressly find to be just and proper” in determining an equitable distribution of marital property. There may be circumstances where equity requires a credit to one spouse for marital property used to pay off the separate debt of one spouse or add to the value of one spouse’s separate property (see e.g. Micha v Micha, 213 AD2d 956, 957-958 [3d Dept 1995]; Carney v Carney, 202 AD2d 907[3d Dept 1994]). Further, to the extent that expenditures are truly excessive, the ability of one party to claim that the other has accomplished a “wasteful dissipation of assets” (DRL 236 [B][5][d][11]) by his or her expenditures provides protection. The payment of maintenance to a former spouse, however, does not fall under either of these categories.

Thus, it is unlikely that any recoupment will be allowed by the courts in the future.  This decision makes it even more important that each marital estate is carefully scrutinized by an experienced divorce lawyer to establish the respective rights and obligations of the parties.

Overpayment of Child Support and Right of Recoupment

Periodically, I am asked about situations where an overpayment of child support has taken place. Most of the time in those situations, I, as a lawyer, have to deliver to the client the unpleasant news that the amount overpaid cannot be recovered. This is true whether the child support was being paid pusuant to a judgment of divorce, separation agreement, or an order of Family Court. With respect to child support, there is a strong public policy against restitution or recoupment of any overpayment. See Katz v. Katz, 55 A.D.3d 680 (2nd Dept. 2008). The strong public policy considerations as decided by the New York courts, prevent recoupment or refund of child support paid. However, a parent may be entitled to a credit, enabling him or her to re-coup the overpayment of the child support payments against his/her share of the statutory add-on expenses – the portion of child support intended to cover child care and a child’s educational and special needs. See Coull v. Rottman, 35 AD3d 198 (1st Dept. 2007).

There are also certain limited circumstances in which a refund of child support may take place. For example, a refund may be directed when there was a mathematical error in the calculation of the amount of support (Colicci v. Ruhm, 20 AD3d 891 (4th Dept. 2005); when the support amount in the final order of support is less than in the temporary award (Maksimyadis v. Maksimyadis, 275 AD2d 459 (1st Dept. 2000)); or when it is shown that the subject child is not the biological child of the payor and there is no finding of estoppel (Thomas v. Commissioner of Social Services, 287 AD2d 642 (2nd Dept. 2001). There may be another category of cases where a refund of child support may be ordered. In Spencer v. Spencer, previously discussed on this blog, the Court of Appeals hinted that the recoupment may be available where it is ultimately determined that New York court lacked jurisdiction to order payment of child support.

If you are in a situation where you believe that child support was or is being overpaid, speak with an experienced family law attorney and find out what your options are and what can done in your particular case.