Posts Tagged ‘Supreme Court’

Credit for Payments Made to Satisfy the Other Spouse’s Legal Obligations

Saturday, October 25th, 2014

It is common for parties to make payments on their debts while their divorce action is pending.  Generally, each party is responsible for their own debts incurred after commencement of the divorce action, and, most of the time, the parties are jointly liable on any marital debt that preceded commencement of the divorce action. However, there are situations where one party is forced to make payment for the debts owed by the other party. Thus, it is important to know if one spouse pays for the other spouse’s legal obligations, does that spouse receive a credit for those payments?

In McKay v. Groesbeck, 117 AD3d 810 (N.Y.A.D. 2 Dept. 2014), the Appellate Division pointed out that a party’s maintenance and child support obligations are retroactive to the earlier of the date of filing or the date of application for them. Further, any retroactive amount due has to be paid, as the court directs, taking into account any amount of temporary maintenance or child support which has been paid as provided by DRL §236[B][6][a] and DRL § 236[B][7][a].

Generally, voluntary payments made by a parent for the benefit of his or her children may not be credited against amounts due under the court order or a judgment of divorce.  Only payments made pursuant to the judgment or order can be credited. Also, a party is not entitled to a credit for payments made to satisfy that party’s own legal obligations that were not made pursuant to a pendente lite order of support.

In McKay, there was a pendente lite order for temporary child support of $1,000 per month issued in 2006, but no payments were made pursuant to that order. However, a party is entitled to a credit for payments made to satisfy the other spouse’s legal obligations. The court held that the defendant should have received a credit towards arrears for any payments he made toward the plaintiff’s car payments and insurance, and for one half of the payments he made toward the mortgage and carrying charges on the marital home, as those payments were made to satisfy the plaintiff’s legal obligations.

Thus, the party paying legal obligations will receive a credit for those payments. This situation is likely to occur where the party receiving child support and/or spousal maintenance does not have sufficient financial resources to satisfy all of his or her debts. If the court grants this credit, both parties may benefit.

Temporary Maintenance and Payment of Additional Expenses by Monied Spouse

Sunday, September 7th, 2014

One issue that comes up fairly often in divorce cases is the issue of whether the monied spouse who is paying temporary maintenance is also responsible for additional expenses incurred by the non-monied spouse. At least some of the prior decisions held that when the temporary maintenance is being paid, the recipient was responsible for his or her living expenses, including any mortgage payments or housing expenses.

However, it appears that at least some of the appellate decisions hold otherwise. In Vistocco v. Jardin,116 A.D.3rd 842 (N.Y.A.D. 2 Dept.), the parties were married in 1995 and had three unemancipated children. The wife made a request for temporary maintenance as well as for payment of carrying costs on the marital residence. The trial court awarded the defendant $3,000 per week for child support and $3,000 per week in temporary spousal maintenance, directed the plaintiff to pay the mortgage and taxes on the marital residence where the defendant resided with the parties’ children, directed the plaintiff to pay the defendant’s car insurance, and awarded the defendant interim counsel fees and expert fees in the sums of $12,500 and $3,500, respectively. The Appellate Division affirmed.

The plaintiff argued that the Supreme Court erred in directing him to pay, in addition to spousal maintenance, the mortgage and taxes on the marital residence and the defendant’s car insurance. He contended that the pendente lite maintenance award is intended to cover the defendant’s basic living expenses, which include the mortgage, property taxes, and her car insurance. The Appellate Division held that the formula to determine temporary spousal maintenance that is outlined in Domestic Relations Law § 236(B)(5-a)(c) is intended to cover all of a  payee spouse’s basic living expenses, including housing costs, the costs of food and clothing, and other usual expenses (see  Khaira v. Khaira, 93 AD3d 194). It further held that it may be appropriate to direct payment by the monied spouse of the mortgage and taxes on the marital residence and other expenses of the nonmonied spouse under certain circumstances (see id.). In light of the evidence that the plaintiff’s income exceeded $500,000 and the gross disparity between the plaintiff’s income and the defendant’s income, the trial court properly awarded additional support in the form of a directive to the plaintiff to pay the mortgage and taxes on the marital residence (Domestic Relations Law § 236[B][5-a][c][2][a][ii] ), as well as the defendant’s car insurance.

Unfortunately, until the Court of Appeals hears a case involving these issues, it is likely that there will not be uniformity among the trial court decisions. If you are non-monied spouse, you have nothing to lose by making a request for carrying costs of the marital residence, provided that there is financial wherewithal on the part of the monied spouse. Ultimately, a decision of whether such additional should be requested should be made on case by case basis.

Standard of Living, Diminished Income, Spousal Maintenance and Child Support

Saturday, July 5th, 2014

The courts in New York have had some difficulty dealing with situations were a claim of recently diminished income has been presented to the court in response to a temporary spousal support application. In most situations, the courts would either impute income or deny downward modification. The courts have been concerned with the parties’ standard of living for the non-monied spouse and the children despite  the claims of the income-producing spouse of diminished resources and/or income. One trial decision, S.A. v. L.A., 2 Misc.3d 7441 (Sup. Ct. Westchester Co.), illustrates the situation where the present financial situation – the husband earning a lot less income than existed throughout the marriage, has led the court consider present circumstances and to caution the non-monied spouse that she would have to deal with a new economic reality.

In considering interim spousal support, the court had to determine if it would apply the husband’s 2012 income of $819,049 or his far lesser annualized 2013 income imputed at $240,000. The husband was 56 years old and employed in the financial services industry. The wife was 64 years old stay-at-home wife and mother, who has not had any significant for 23 years of the marriage. The husband claimed that he was terminated from his old job through no fault of his own and he was forced to find new employment at a much lower rate of pay. The wife argued that he had voluntarily left his former employment.

The court had to address the principles of utilizing the current income as opposed to the income on the last tax return on a presumptive temporary maintenance calculation. The court determined that according to the language of the Domestic Relations Law §240 (1-b) (b) (5), the income rules applicable in child support proceedings may be used to determine an application for temporary spousal maintenance, as is available for interim child support.

The second part of the court’s analysis, and of great significance, was the court’s view of the parties’ present diminished financial situation from their historic standard of living even as measured by the immediately preceding year. The reduction in the family’s income from the husband’s 2012 adjusted gross income of $819,049.00 to the annualized 2013 income of $240,000.00, was accepted by the court. As result, instead of presumptive temporary support of $17,000.00 per month as requested by the wife, the court awarded $5,737.00 per month. The court further found that with the requested amount of $17,000.00 exceeded the wife’s legitimate monthly expenses, rendering the presumptive award unjust and inappropriate. The court ruled that the issue of whether the husband had been discharged or voluntarily separated from his old employment was reserved for trial.

In its decisions, the court stated that:

The court recognizes that the spousal support provisions in this decision and order will greatly affect the parties’ respective post-separation standards of living. They need to consider the financial predicament they are in, and how to deal with the future. They are now suffering the consequences of their prior high standard of living. It is beyond dispute that two cannot live as cheaply as one, and that “hardship” at any economic level follows drastic losses of income. It is time for the parties to recognize the financial reality they may well face in the future, given their ages, work experience and future prospects for employment. The court urges that the parties’ focus should be on financial planning with asset and debt liquidation. The continuance of this costly litigation will not heal their wounds, both economic and emotional, already suffered, but rather will exacerbate them.

The decision in S.A. v L.A. illustrates that during the difficult economic times, the parties may have to temper their expectations. If a monied spouse can not earn past levels of income through no fault of his or her own, the non-monied spouse is likely to have to share the hardship as well.

Updates to New York’s Child Support Standards Chart

Saturday, May 3rd, 2014

According to the Child Support Standards Chart, prepared by New York State Office of Temporary and Disability Assistance, Division of Child Support Enforcement, and released March 12, 2014, the 2014 poverty income guideline amount for a single person as reported by the United States Department of Health and Human Services is $11,670 and the 2014 self-support reserve is $15,755. These numbers are highly relevant for child support calculations and may have a role in determining child support arrears in situations where payor’s income is less than the guideline amount for a single person. The Chart is found at this link. The Child Support Standards Chart is released each year on or before April 1.

Additionally, as required by the Child Support Standards Act, the combined parental income amount used to calculate basis economic support has been changed to $141,000. This figure is adjusted every two years (effective January 31st) based on the average annual percent changes to the federal Department of Labor’s Consumer Price Index for Urban Consumers. The basic economic support figure is highly relevant in the cases where combined parental income is substantially in excess of it since the court may utilize parental income in excess of the basic economic support figure under appropriate circumstances.

Transmutation of Separate Property into Marital Property

Sunday, March 23rd, 2014

One of the basic theories in equitable distribution and divorce litigation is that of transmutation. Transmutation theory holds that by their actions, the parties are able to modify the status of the property they own from separate property to marital property. Most of the time transmutation occurs when the parties commingle separate property with marital property or place what otherwise be separate property into both parties’ names.  This was demonstrated in Fehring v. Fehring, 58 A.D.3d 1061 (3rd Dept. 2009), where the money received on account of personal injuries by the husband, would be initially classified as his separate property. However, the husband deposited check in brokerage account held and used jointly by the parties. In January 2006, husband used $50,000 from account to purchase real property. The court held that transferring separate property assets into a joint account raises rebutable presumption that funds are marital property subject to equitable distribution and that the husband failed to rebut presumption of marital property given commingling of funds. It held that the lower court providently exercised discretion in distributing equally the value of interest in real property purchased with funds held in joint account.

Another example of how separate property may become a marital asset was addressed in a recent decision from the Appellate Division, Fourth Department. In Foti v. Foti, 2014 N.Y. Slip Op 00835 (4th Dept. 2014), defendant received several pieces of real property as gift from her father. Subsequently, tax losses associated with those properties were taken on the parties’ joint income tax returns. The court held that there was a question of fact whether defendant commingled her interests in the entities with marital property and whether a joint federal tax return in which defendant reported her interest in the entities as tax losses, precluded her from taking “a position contrary to a position taken in an income tax return”.

Unfortunately, the Foti decision does not give us enough facts to find out exactly what the tax returns stated. Nonetheless, this shows that even a seemingly innocuous act of filing a tax return may change the status of the property. In my view, decisions like this one, could have been prevented if the parties had signed either a prenuptial or a postnuptial agreement. If you are contemplating divorce, be careful to avoid taking any action that converts your separate property to marital property. Once transmutation takes place, it is highly unlikely that you would be able to change the property’s status back to separate property, even with a lawyer’s assistance.

Shared Custody and Child Support – Number of Overnights Controls

Monday, September 2nd, 2013

I have previously written about the case of Baraby v. Baraby, 250 A.D.2d 201, 681 N.Y.S.2d 826 (3d Dept, 1998), where the Appellate Division held that in an equally shared custody case the parent who has the greater income should be considered the noncustodial parent for purposes of child support. This has been the rule in shared custody cases for the last 15 years.

However, in a recent decision, Rubin v. Salla, 107 A.D.3d 60 (N.Y.A.D. 1 Dept. 2013), the Appellate Division held that based on the plain language of the Child Support Standards Act, that a custodial parent cannot be directed to pay child support to a noncustodial parent, and that the “custodial parent”, in an equally shared custody case, is “the parent who has the child the majority of the time, which is measured by the number of overnight time that parent has with the child.”

In Rubin, the parties were the unmarried parents of a 9–year–old son. The mother and father always lived separately. After trial, the court awarded primary physical custody to the father during the school year, with the mother having parenting time on alternate weekends (from Friday after school to Monday morning) and every Thursday overnight. During the summer, the schedule was reversed and the child would live primarily with the mother, but would spend Thursday overnights and alternate weekends with the father. The mother would also have the child each winter vacation, and the other vacations were evenly divided. Additionally, each parent had two weeks with the child during the summer. With respect to legal custody, the court awarded the father decision-making authority, after consultation with the mother, over educational and medical issues. The mother was given authority, after consultation with the father, over decisions on summer and extracurricular activities, and religion.

Following the custody decision, the father sought to dismiss the mother’s cause of action for child support. He argued that, by the terms of the custody order, he was the custodial parent because the child would spend the majority of the year with him. He argued that, as a matter of law, the court could not order him to pay child support to the mother, the noncustodial parent. The father established that during the period from July 2012 to June 2013 there were 206 overnights with the father and 159 with the mother. These custodial periods amounted to the child being with the father 56% of the time and with the mother 44% of the time.

The trial court denied the father’s motion for summary judgment, holding that an award of child support to the mother was not precluded because the parties had “parallel legal custody” of their son and both spent some time with the child, it was impossible to say, as a matter of law, that the father was the custodial parent for child support purposes. The court also focused on the disparity between the parents’ financial circumstances and concluded that, regardless of whether the father was the custodial parent, it had the discretion to award the mother child support because she needed funds to pay her monthly rent and to maintain the type of home she could not otherwise afford without the father’s assistance.

The Appellate Division reversed, holding that under the Child Support Standards Act, the father, as the custodial parent, cannot be directed to pay child support to the mother, the noncustodial parent. According to the decision, the CSSA provides for “a precisely articulated, three-step method for determining child support” awards in both Family Court and Supreme Court. Under the CSSA’s plain language, only the noncustodial parent can be directed to pay child support. Domestic Relations Law § 240(1–b)(f)(10) and FCA § 413(1)(f)(10) state that, after performing the requisite calculations, “the court shall order the non-custodial parent to pay his or her pro rata share of the basic child support obligation.”

After analyzing the applicable case law, the Appellate Division stated that only where the parents’ custodial time is truly equal, such that neither parent has physical custody of the child a majority of time, have courts deemed the parent with the higher income to be the noncustodial parent for child support purposes. Where parents have unequal residential time with a child, the party with the greater amount of time is the custodial parent for CSSA purposes. The great disparity in overnights here—56% to 44%—forced the court to make a finding that the mother was the non-residential parent.

Unlike the trial court which counted the waking hours each parent spent with the child, the Appellate Division decision held that the number of overnights, not the number of waking hours, is the most practical and workable approach. The court stated that:

Allowing a parent to receive child support based on the number of daytime hours spent with the child bears no logical relation to the purpose behind child support awards, i.e., to assist a custodial parent in providing the child with shelter, food and clothing (see e.g. Higgins v. Higgins, 50 A.D.3d 852 (2d Dept. 2008) [food, clothing and shelter costs are inherent to the basic child support obligation]). Furthermore, because a child’s activities are subject to constant change, the number of hours spent with each parent becomes a moving target. Outside of school hours, a child may participate in after-school activities, spend time with a child care giver, be enrolled in tutoring, or attend summer camp. During those times, the child may not be with either parent. The child’s activities may vary day to day and will change as the child ages, unnecessarily creating the need to recalculate the parties’ parenting time and possibly modify the custodial parent designation. Moreover, the use of this type of counting approach could also lead parents to keep their children out of camp or other activities simply to manipulate their time spent with the child so as to ensure that they are designated the “custodial parent”.

Thus, Rubin makes it clear that even in shared custody situations, the courts will seek to determine who is the residential parent for child support purposes.  In some respects, counting overnights makes it easier for the courts, however, under certain circumstances, counting overnights only does not represent a true picture of parental involvement.  At the same time, this decision introduces much needed clarity.

Future Changes to Spousal Maintenance

Sunday, June 9th, 2013

When New York Legislature passed the “no-fault” divorce statute in 2010, it created a formula for calculating temporary spousal maintenance under DRL §236[B]5-a. However, it did not set forth a formula or specific rules for establishing spousal maintenance post-divorce. At the same time, the Legislature directed that a law revision commission be set up to review New York’s spousal maintenance law and make recommendations to the legislature with regard to potential changes.

On May 15, 2013, the Commission issued its “Final Report on Maintenance Awards in Divorce Proceedings”.  The Commission recommended that that a mathematical formula be used to calculate a presumptive award of post-divorce income from one party to the other based on the parties’ combined adjusted gross income of $136,000. It stated that in awarding post-divorce income, the court can adjust the presumptive award based on a set of statutory factors if it finds that the presumptive award is unjust or inappropriate based on the circumstances of the parties.  If the parties’ combined adjusted gross income exceeds $136,000, the Commission recommended that the mathematical formula apply to that portion of the parties’ combined income which is at or less than $136,000, and that the court be guided by a set of factors in considering whether an additional award is justified based on any excess income.

The Commission also recommended that the duration of any post-divorce income award be based on consideration of the length of the marriage, the length of time necessary for the party seeking post-divorce income to acquire sufficient education or training to enable that party to find appropriate employment, the normal retirement age of each party as defined by the Internal Revenue Code and the availability of retirement benefits, and any barriers facing the party seeking post-divorce income with regard to obtaining appropriate employment, such as child care responsibilities, health, or age. The court would have to state the basis for the duration of the award in its decision granting the award. Further, the duration of temporary maintenance awards would be limited so that maintenance awards do not exceed the length of the marriage.

One suggestion that was made by the Commission that would be a significant departure from the existing law is that the Commission recommended that one party’s increased earning capacity, no longer be considered as a marital asset in equitable distribution under section 326B(5), and that any spousal contribution to the career or career potential of the other party be addressed in an award of post-divorce income. The concept of an “increased earning capacity”, also known as “enhanced earnings“, has created much prior litigation because of the asset’s intangible nature, the need for valuation, the speculative nature of its “value” as well as the costs associated with valuations, and problems of double counting increased earnings in awards of post-divorce income and child support.

The Commission additionally recommended that the provisions of a revised temporary maintenance statute in the Domestic Relations Law be mirrored in section 412 of the Family Court Act governing spousal support awards.

If the Legislature adopts the report, it is likely to represent some of the most significant changes to New York’s Family law since New York adopted its equitable distribution and child support statutes. It remains to be seen if the Legislature will accept some or all of the Commission’s recommendations.

Validity of Prenuptial Agreements in New York

Sunday, March 24th, 2013

I have previously written about prenuptial agreements and issues associated with them. Generally, in New York, a prenuptial agreement may be overturned only if the party challenging the agreement sustains the burden of proof, demonstrating that the agreement was the product of fraud, duress, or it was improperly executed.

In order to prove coercion or duress, a party must establish that he or she was somehow pressured into signing the agreement.  The threat that there will be no marriage unless the agreement is signed is not duress according to numerous court decisions.  If both of the parties were independently represented by counsel, and the agreement was the product of arm’s length negotiations, it may be nearly impossible to prove that the prenuptial agreement was procured by duress.

However, a recent appellate decision, Cioffi-Petrakis v. Petrakis, 2013 N.Y. Slip. Op. 01057 (2nd Dept. 2013), broke with the long-established line of cases and upheld a Long Island judge’s decision to void an prenuptial agreement that the wife of a millionaire says she was forced into signing by false promises made by her husband-to-be, 4 days before the wedding. The wife claimed that she believed her husband to be when he told her orally that his lawyers had made him get a prenuptial agreement signed to protect his business and promised to destroy the document once they had children and put her name on the deed to the house. She also claimed that her future husband gave her an ultimatum four days before the wedding for which her father had already paid $40,000, telling her to sign the document or it wouldn’t occur.

While the appellate decision is extremely brief, the trial decision is fairly detailed and provided the facts stated above. The key factor according to the trial judge was what he called a fraudulently induced contract and detrimental reliance on the part of the wife. Fraudulent inducement was the oral promise made by the husband to be and, according to the trial court, the bride relied upon that promise. However, most agreements in New York provide that the parties are only relying on the written representations contained in the agreement, and they are not relying on promises or representations not contained in the prenuptial agreement.

This decision is unprecedented. It is likely to create a great deal of litigation in cases where a party feels that his or her prenuptial agreement is unconscionable. I also suspect that it may get appealed to the Court of Appeals.

 

There Is No Right to Grounds Trial In A No-Fault Divorce Case

Sunday, January 6th, 2013

I have previously written on the issue of whether there was a right to trial in a divorce case brought under the no-fault grounds. Earlier, trial level decisions were split, with some courts holding that a party was still required to establish no-fault grounds at trial, and other courts holding that a sworn statement that the marriage was irretrievably broken for a period of 6 months or longer was sufficient to establish that party’s right to divorce.

Finally, the Appellate Division, Fourth Department, issued a decision resolving this issue. In Palermo v. Palermo, 2012 N.Y. Slip Op. 07528 (4th Dept. 2012), the court affirmed Justice Dollinger’s decision holding that there is no right to dispute an allegation of irretrievable breakdown under the no-fault divorce ground provided by DRL §170(7). Appellate Division agreed with the key language in Justice Dollinger’s decision which stated that:

Under DRL §170(7), the grounds cannot be disputed. Either a party swears the marriage is irretrievably broken or they do not. The grounds are established by the oath; there is no legislative requirement of a judicial finding on the reliability or veracity of the oath.

As the no-fault statute requires, in order for a judgment of divorce to be entered, all the issues relating to the divorce, including equitable distribution, maintenance, child custody and support need to be resolved before a party can be granted a divorce.

The Appellate Division’s decision in Palermo is significant since it clarifies the Legislature’s intent in creating a true no-fault divorce in New York. Further, as a result, the parties will be able to avoid costly grounds trials that usually result in added animosity between the parties.

Statute of Limitations and No-Fault Divorce

Monday, September 3rd, 2012

Since no-fault divorce became law in New York State almost 2 years ago, it was still unclear whether a statute of limitations would apply to to a cause of action under Domestic Relations Law §170(7), specifically, allegations that the relationship between the parties was irretrievably broken. Basically, this question can be asked in this way: from what date does the clock begin to run on this cause of action and when does the clock expire?  The answer was recently given by the Appellate Division, Fourth Department.

In a recent case, Tuper v. Tuper, 2012 N.Y. Slip Op 04467 (4th Dept. 2012), the Appellate Division held that the statute of limitations under DRL §170(7) does not begin to run while the relationship between the parties remain broken.  Specifically, the court held that a cause of action for divorce under the no-fault statute should be treated similarly to a cause of action for divorce based upon imprisonment of a spouse (DRL §170 (3), which is also governed by the five-year statute of limitations set forth in section 210).  In holding so, the Fourth Department relied upon the Court of Appeals’ decision in Covington v. Walker, 3 N.Y.3d 287, 291 (2004), which held that a cause of action for divorce based on imprisonment “continues to arise anew for statute of limitations purposes on each day the defendant spouse remains in prison for three or more consecutive years’ until the defendant is released.” The Appellate Division stated that “[l]ike a spouse serving a life sentence, an irretrievable breakdown in a married couple’s relationship is a continuing state of affairs that, by definition, will not change. After all, the breakdown is “irretrievable.” It thus stands to reason that a cause of action under the no-fault statute may be commenced at any time after the marriage has been “broken down irretrievably for a period of at least six months”.

I think that this is the correct result.  Alternatively, a contrary ruling would force a spouse to unwillingly remain in a dead marriage. If the accrual date of a no-fault cause of action were to be determined to arise only on the day that the relationship initially became irretrievably broken, assuming that an exact date could even be identified, the only couples who could get divorced under the no-fault statute would be those whose relationships irretrievably broke down within the past five years but not within the last six months. Couples whose relationships irretrievably broke down more than five years ago would have to remain married.  Clearly, the New York Legislature did not intend such result in passing the no-fault statute.