| Kilkenny v Kilkenny |
| 2008 NY Slip Op 06964 [54 AD3d 816] |
| September 16, 2008 |
| Appellate Division, Second Department |
| Patricia Kilkenny, Appellant, v John J. Kilkenny,Respondent. |
—[*1] Ramo, Nashak & Brown, Glendale, N.Y. (Gregory J. Brown of counsel), forrespondent.
In an action for a divorce and ancillary relief, the plaintiff appeals, as limited by her brief,from stated portions of a judgment of the Supreme Court, Nassau County (Gartenstein, J.H.O.),entered April 3, 2007, which, upon a decision of the same court dated November 1, 2006, madeafter a nonjury trial, inter alia, imposed a constructive trust on the marital residence, directed thesale of the marital residence, awarded her durational maintenance in the sum of only $200 perweek from January 1, 2007 until September 1, 2007, determined that the balance of a loan takenby the defendant to finance a portion of the college education of his daughter from a priormarriage was marital debt, failed to award her any portion of the defendant's 401k, individualretirement, or cash management accounts, and did not award her an additional attorney's fee.
Ordered that the judgment is modified, on the law, on the facts, and in the exercise ofdiscretion, (1) by deleting the provision thereof directing the sale of the marital residence, (2) bydeleting the provision thereof specifying the sum of $480,678 as the net increase in the value ofthe marital residence to be equitably distributed and substituting therefor a provision specifyingthe sum of $420,139 as the net increase in the value of the marital residence to be equitablydistributed, (3) by deleting the provision thereof awarding the plaintiff maintenance in the sum of$200 per week from January 1, 2007 until September 1, 2007, and substituting therefor aprovision awarding the plaintiff maintenance in the sum of $200 per week, retroactive to May 2,2005, until the earlier of February 1, 2012, the death of either party, or the remarriage of theplaintiff, (4) by adding a provision thereto awarding the plaintiff the sum of $51,654,representing 50% of the marital portion of the defendant's 401k, individual retirement, and cashmanagement accounts, (5) by deleting the provision thereof awarding the defendant a credit equalto 50% of the reduction of the principal [*2]balance due on themortgage loan referable to the marital residence, representing mortgage payments of principaland interest made by the defendant from May 2, 2005 until December 31, 2006, and substitutingtherefor a provision awarding the defendant a credit, against any obligation created by theretroactive modification of the maintenance award, for all mortgage payments of principal onlyand real property tax payments he made after May 2, 2005, and (6) by deleting the provisionthereof specifying the sum of $69,675 as the marital debt to be paid by the parties in equal sharesand substituting therefor a provision specifying the sum of $37,675 as the marital debt to be paidby the parties in equal shares; as so modified, the judgment is affirmed insofar as appealed from,without costs or disbursements, and the matter is remitted to the Supreme Court, Nassau County,for the determination of a method of payment and a schedule of payment of the defendant'sequitable share of marital property and the entry of an appropriate amended judgment thereafter.
The marital residence was the separate property of the wife at the time of the parties'marriage, with a stipulated fair market value of $282,500, and was encumbered by a mortgage.The parties stipulated that the fair market value of the residence at the time of trial was $700,000,and that it was encumbered with a small remaining mortgage debt.
After a nonjury trial, the Supreme Court found that the parties' conduct had transmuted thatseparate property into marital property. The court determined that the elements necessary toestablish the existence of a constructive trust were present and, on that basis, also concluded thatthe marital residence was marital property, with the increase in its value over the course of themarriage subject to equitable distribution.
The increase in value of the marital residence is subject to equitable distribution, but not forthe reasons articulated by the Supreme Court. A constructive trust may be imposed " '[w]henproperty has been acquired in such circumstances that the holder of the legal title may not ingood conscience retain the beneficial interest' " (Sharp v Kosmalski, 40 NY2d 119, 121[1976] [citations omitted]; see A.G.Homes, LLC v Gerstein, 52 AD3d 546 [2008]; Osborne v Tooker, 36 AD3d 778 [2007]). "The elements of aconstructive trust are a confidential or fiduciary relationship, a promise, a transfer in reliancethereon, and unjust enrichment" (Williams v Eason, 49 AD3d 866, 868 [2008] [citations omitted]).The record does not support the Supreme Court's finding that all of those elements existed in thiscase (see Williams v Eason, 49AD3d 866 [2008]; Schwartz vSchwartz, 36 AD3d 604 [2007]; Doria v Masucci, 230 AD2d 764 [1996]).Moreover, and contrary to the Supreme Court's conclusion, the marital residence is the separateproperty of the wife, and remained her separate property. Since that residence is the wife'sseparate property, and not subject to the imposition of a constructive trust, there was no authorityto order its sale for the purpose of equitably distributing the proceeds.
The husband is nonetheless entitled to an equitable share in the increase in the value of themarital residence over the course of the marriage, notwithstanding that the residence is theseparate property of the wife. The increase in the value of separate property remains separateproperty "except to the extent that such appreciation is due in part to the contributions or effortsof the other spouse" (Domestic Relations Law § 236 [B] [1] [d] [3]; see Price v Price,69 NY2d 8 [1986]), at which point the increase in value becomes marital property, inaccordance with the rule that the definition of marital property is to be broadly construed, giventhe principle that a marriage is an economic partnership (see Mesholam v Mesholam, 11 NY3d 24 [2008]; Price v Price,69 NY2d 8 [1986]). The record establishes that the appreciation in the value of the maritalresidence was attributable to the joint efforts of the parties. The defendant is thus entitled to shareequitably in that increased value (see[*3]Michelini v Michelini, 47 AD3d 902 [2008]; Massimi v Massimi, 35 AD3d400, 402 [2006]; Falgoust vFalgoust, 15 AD3d 612 [2005]). Accordingly, the Supreme Court providently exercisedits discretion in awarding the parties equal shares in the increase in the value of the maritalresidence.
The Supreme Court arrived at the amount by which the marital residence increased in valueby subtracting the stipulated net value of the residence (i.e., the fair market value less theoutstanding principal balance of the mortgage loan) at the time of the commencement of themarriage, or $195,346, from the stipulated net value at the time of the trial, or $676,024, to arriveat a figure of $480,678. However, the Supreme Court also determined the husband was entitledto an award of $30,269.50, representing his 50% share of the reduction in the principal of themortgage obligation referable to the residence, until May 2, 2005, the date of the commencementof the action. That calculation was unchallenged by the wife on appeal and was correct in anyevent (see O'Donnell v O'Donnell,41 AD3d 447 [2007]; Massimiv Massimi, 35 AD3d 400 [2006]; Palumbo v Palumbo, 10 AD3d 680 [2004]). However, if that creditfor the increase in equity attributable to the payment of mortgage principal is made, that return ofequity should be subtracted from the increased value of the marital residence to arrive at the netincreased value. The net increase in value of the marital residence is thus $420,139, to be sharedequally by the parties. The husband is consequently entitled to an award in the sum of$210,069.50 for his equitable share in the increased value of the marital residence.
The Supreme Court also determined that the husband is entitled to 50% of the reduction inthe principal remaining on the mortgage debt, in order to account for the mortgage and realproperty tax payments he made from the commencement of the action on May 2, 2005 until thetermination date of the pendente lite order on December 31, 2006. Those payments were notmade with marital funds. The husband, in light of the further modification made herein to theaward of maintenance, is also entitled to a credit for all of the mortgage and real property taxpayments he made pursuant to the pendente lite order (see Grasso v Grasso, 47 AD3d 762 [2008]). In this instance,however, the credit should be limited to the principal portion of the mortgage payments plus thereal property tax payments, since the husband's mortgage interest payments have been taken intoconsideration in determining that aspect of the appeal related to arrears for "utility" payments.
The husband came into the marriage possessed of certain funds maintained in 401k,individual retirement, and cash management accounts (hereinafter the financial accounts). Thevalue of those accounts at the commencement of the marriage was $147,139. During themarriage, the husband expended approximately $40,800 from those accounts for the education ofone of his daughters from a prior marriage. At the time of the commencement of the action, therewas $209,647 in the financial accounts. The husband's separate property interest in the financialaccounts was $106,339. There was a significant reduction in the balance of those accounts by thetime of trial. It is appropriate to value the accounts as of the time of the commencement of theaction (see Mesholam v Mesholam,11 NY3d 24 [2008]; McSparron v McSparron, 87 NY2d 275 [1995]). Themarital portion of the accounts was $103,308. The wife is thus entitled to, and should have beenis awarded, a 50% share of that sum, or $51,654.
" 'The amount and duration of maintenance is a matter committed to the sound discretion ofthe trial court, and every case must be determined on its own unique facts'. 'The overridingpurpose of a maintenance award is to give the spouse economic independence, and it should beawarded for a duration that would provide the recipient with enough time to becomeself-supporting'. 'In determining the appropriate amount and duration of maintenance, the court isrequired to consider, among other factors, the standard of living [*4]of the parties during the marriage and the present and future earningcapacity of both parties' " (DiBlasi vDiBlasi, 48 AD3d 403, 404 [2008] [citations omitted], lv denied 10 NY3d 716[2008], quoting Haines v Haines, 44AD3d 901, 902 [2007]; seeGroesbeck v Groesbeck, 51 AD3d 722 [2008]; Sirgant v Sirgant, 43 AD3d 1034 [2007]; Walter v Walter, 38 AD3d 763[2007]). The Supreme Court providently exercised its discretion in determining the amount ofweekly maintenance, but it improvidently exercised its discretion in limiting the duration of theaward of maintenance so as to terminate on September 1, 2007. The extension of the duration ofthe award of maintenance should provide the wife with sufficient time to become self-supporting.Considering the wife's education and age, the number of years she has been out of the work forceraising the parties' two minor children, the standard of living of the parties during the marriage,and the present and future earning capacities of both parties, the duration of the award ofmaintenance should be extended to the earlier of February 1, 2012, the death of either party, orthe wife's remarriage. As noted in the wife's request for maintenance, the parties' younger childwill be 14 years old on that date and no longer in need of child care.
The Supreme Court also erred in determining that the $200-per-week maintenance paymentshould commence as of January 1, 2007. An award of maintenance is effective as of the date ofapplication therefor (see Domestic Relations Law § 236 [B] [6] [a]; see also Higgins v Higgins, 50 AD3d852 [2008]). The award of maintenance thus should have provided that the husband's$200-per-week obligation is effective retroactive to May 2, 2005, the date of the commencementof the action. As noted, the husband shall have an appropriate credit against the retroactiveobligation created by this modification (see Grasso v Grasso, 47 AD3d 762 [2008]).
The wife correctly contends the amount of the unpaid balance of a loan that the husbandobtained in connection with the college education of the second of his two daughters from hisprior marriage, in the sum of $32,000, should not have been included in the calculation of maritaldebt (cf. Grasso v Grasso, 47 AD3d762 [2008]). Accordingly, the marital debt to be paid by the parties in equal shares shouldhave been reduced to $37,675.
In determining the amount of the arrears related to the husband's pendente lite obligation topay the "utilities" for the marital residence, the Supreme Court made certain determinations withregard to the scope of that obligation and the credits to which the husband was entitled. We viewthe scope of the credits (see Miller vMiller, 25 AD3d 537 [2006]; Ferraro v Ferraro, 257 AD2d 598, 599 [1999];Verdrager v Verdrager, 230 AD2d 786, 788 [1996]) and the obligation of the husbandsomewhat differently from the Supreme Court. However, when the recalculation is made there isno basis for an increase in the amount determined by the Supreme Court.
The Supreme Court appropriately determined that the wife was not entitled to a further awardof an attorney's fee.
The award to the husband in the sum of $210,069.50, as his share of the increase in the valueof the marital residence, is partially offset by the award to the wife of the sum of $51,654, for hershare of the financial accounts. The husband is thus entitled to a net equitable distribution awardin the sum of $158,415.50, plus the sum of $30,269.50, awarded for his share of the reduction ofthe outstanding principal balance of the mortgage loan for the marital residence during the courseof the marriage. The only significant asset possessed by the wife is the former marital residence,which, as her separate property, is not subject to an order of sale as part of the judgment ofdivorce. Therefore, we remit the matter to the Supreme Court, Nassau County, for thedetermination of a [*5]method of payment and a schedule ofpayment of the husband's equitable share of marital property and the entry of an appropriateamended judgment thereafter. Fisher, J.P., Covello, Angiolillo and Belen, JJ., concur.