| Owens v Owens |
| 2013 NY Slip Op 04380 [107 AD3d 1171] |
| June 13, 2013 |
| Appellate Division, Third Department |
| Tara A. Owens, Appellant, v Frank J. Owens,Respondent. |
—[*1] Baum Law Offices, LLP, Monticello (Morton I. Baum of counsel), forrespondent.
Spain, J. Appeal from a judgment and amended judgment of the Supreme Court(Meddaugh, J.), entered October 24, 2011 and October 26, 2011 in Sullivan County,granting plaintiff a divorce and ordering, among other things, equitable distribution ofthe parties' marital property, upon a decision of the court.
Plaintiff (hereinafter the wife) and defendant (hereinafter the husband) were marriedin 1985. At that time, the husband owned an apartment building in Manhattan(hereinafter the NYC rental property), as well as a one-half interest in real propertylocated in the Town of Tusten, Sullivan County (hereinafter the marital residence), wherethe parties resided for the duration of their marriage. The husband inherited the otherone-half interest in the marital residence in 1986, following his father's death. After thebirth of the parties' first child in 1987, the husband gradually gave up his photographybusiness, and the family lived on the income generated by the NYC rental property. Asecond child was born in 1993 and, in 1998, the wife earned a Bachelor's degree innursing and obtained her license as a registered nurse. During the marriage, aside fromvery brief periods of employment, the wife was not employed as a nurse or otherwise. In2007, the husband sold the NYC rental property for $6 million and, thereafter, the familywas supported by the proceeds.
The parties separated in 2008 and, in 2009, the wife commenced the instant actionfor divorce. In October 2010, the wife was granted pendente lite spousal support of$3,500 per month and $7,500 in interim counsel fees. At the time of the bench trial inMarch 2011, the [*2]parties' oldest child wasemancipated and the youngest child, who had reached the age of 18, was residing withthe husband in the marital residence. Following a trial and on the consent of the husbandto the wife's allegations of constructive abandonment, Supreme Court granted the partiesa divorce. The court subsequently adjudged both the NYC rental property and the maritalresidence to be the separate property of the husband, awarded him a 30% share of thewife's enhanced earning capacity as a nurse and awarded her a 40% share of theappreciation of the marital residence during the marriage which, when offset by thehusband's enhanced earnings share, resulted in a net equitable distribution award to thewife of $100,400. The court further awarded the wife maintenance of $18,000 to be paidover a period of nine months, as well as additional counsel fees in the amount of$25,000.[FN1]The wife now appeals, challenging the court's separate property determinations andcontending that the amounts awarded to her for equitable distribution, maintenance andcounsel fees were inadequate.
First, addressing Supreme Court's classification of certain property as separateproperty not subject to equitable distribution, the Domestic Relations Law definesseparate property as that "acquired before marriage or . . . by bequest,devise, or descent, or gift from a party other than the spouse" (Domestic Relations Law§ 236 [B] [1] [d] [1]). Separate property also includes "the increase in value ofseparate property, except to the extent that such appreciation is due in part to thecontributions or efforts of the other spouse" (Domestic Relations Law § 236 [B][1] [d] [3]; see Keil v Keil,85 AD3d 1233, 1235 [2011]). Moreover, "property [that is] acquired in exchangefor [separate] property, even if the exchange occurs during marriage, is separateproperty" (Chernoff vChernoff, 31 AD3d 900, 902-903 [2006]; see Domestic Relations Law§ 236 [B] [1] [d] [3]), and " 'the initial determination of whether a particular assetis marital or separate property is a question of law' " (Armstrong v Armstrong, 72 AD3d 1409, 1415 [2010],quoting DeJesus v DeJesus, 90 NY2d 643, 647 [1997]).
Here, it is undisputed that the husband purchased the NYC rental property in1978—seven years prior to the marriage—for $130,000 and, when he sold itfor $6 million in September 2007, he ultimately received $4.6 million. The husbandtestified that he utilized an absentee management system wherein tenants of the rentalunits would communicate directly with maintenance and utility workers, and that thewife never had any involvement in managing the property. While the husband may havetreated the rental income as marital income, the proceeds from the sale of the propertywere wired to a bank account that was in his name only. Insofar as the wife failed tocarry her burden of demonstrating that the property or the sale proceeds transmuted tomarital property (see Keil v Keil, 85 AD3d at 1235; Armstrong vArmstrong, 72 AD3d at 1415; Chernoff v Chernoff, 31 AD3d at 902-903),or that she contributed in any significant way to the appreciation in the property's value(see Bonanno v Bonanno,57 AD3d 1260, 1261 [2008]; Chernoff v Chernoff, 31 AD3d at 903), therecord fully supports Supreme Court's conclusion—crediting the husband'stestimony—that this property constituted separate property. The court alsoproperly concluded that the marital residence, which remained in the husband's namealone throughout the marriage, was his separate property. As the husband has notchallenged the court's determination that the wife was entitled to a share of theappreciation in value of the marital residence, we need not address that issue.
The next contention that the wife places squarely before us is whether a court is[*3]empowered to consider one spouse's wastefuldissipation of separate property during the marriage as a relevant factor whenlater resolving equitable distribution and maintenance. Supreme Court found that thehusband had wastefully dissipated his substantial separate property, but concluded that,because it was separate property, as distinguished from marital property,such dissipation was not encompassed in the statutory factors of Domestic Relations Law§ 236 (B); thus, the court did not consider this dissipation in its otherwisethorough determination of the wife's equitable distribution and maintenance awards. Weagree with the wife, however, that—in appropriate circumstances—evidenceof egregious economic fault in mismanaging, dissipating and wasting separateassets can and should be considered under the statutory catchall "just and proper" factorfor equitable distribution and maintenance, respectively Domestic Relations Law §236 (B) (5) (d) (former [13]) and Domestic Relations Law § 236 (B) (6) (a)(former [11]),[FN2]and the husband presents no argument to the contrary.
It is beyond cavil that the wasteful dissipation of marital assets and othereconomic fault related to marital assets is a relevant factor in equitabledistribution and maintenance awards (see Domestic Relations Law § 236[B] [5] [d] [former (11)]; [B] [6] [a] [former (9), (10)]; Brzuszkiewicz vBrzuszkiewicz, 28 AD3d 860, 861-862 [2006]). Although separate propertyitself is not subject to equitable distribution, it may be taken into consideration inequitably distributing marital property under the statutory factors pertaining to eachparties' income and property at the commencement of the action, the potential loss ofinheritance rights, and both parties' probable future financial circumstances (seeDomestic Relations Law § 236 [B] [5] [d] [former (1), (4), (8)]; Armstrong vArmstrong, 72 AD3d at 1416; Petrie v Petrie, 143 AD2d 258, 259 [1988],lv denied 73 NY2d 702 [1988]; Brennan v Brennan, 103 AD2d 48,54-55 [1984]; Alan D. Scheinkman, Practice Commentaries, McKinney's Cons Laws ofNY, Book 14, Domestic Relations Law C236B:25 at 234, 238). Likewise, separateproperty is taken into account in maintenance determinations under the statutory factorscontemplating consideration of each parties' income and property, the present and futureearning capacity of each party and the ability of each party to become self-supporting(see Domestic Relations Law § 236 [B] [6] [a] [former (1), (3), (4)];Carl v Carl, 58 AD3d 1036, 1037 [2009]; Alan D. Scheinkman, PracticeCommentaries, McKinney's Cons Laws of NY, Book 14, Domestic Relations LawC236B:8 at 128; C236B:36 at 295; see e.g. Saia v Saia, 91 AD3d 1110, 1111 [2012]; Penna v Penna, 29 AD3d970, 972 [2006]; Kearns v Kearns, 270 AD2d 392, 393 [2000], lvdenied 95 NY2d 760 [2000]). Indeed, "the fact that a portion of [a spouse's] incomeis derived from an asset determined to be separate property not subject to equitabledistribution does not render that income immune from consideration in calculating aparty's maintenance obligation" (Carl v Carl, 58 AD3d at 1037). We further notethat financial disclosure pertaining to separate property can be compelled as relevant toboth distribution and maintenance (see Jaffe v Jaffe, 91 AD3d 551, 554 [2012]).
Considering that "[e]conomic fault, which [includes] conduct [that] unfairly preventsthe court from making an equitable distribution of marital property, has generally beenconsidered relevant to the distribution" (Blickstein v Blickstein, 99 AD2d 287,293 [1984], appeal dismissed 62 NY2d 802 [1984]; see Brzuszkiewicz vBrzuszkiewicz, 28 AD3d at 861; Griffin v Griffin, 115 AD2d 587, 588[1985]; see also Maharam v Maharam, 245 AD2d 94, 94-[*4]95 [1997]), and that the catchall factors provide"substantial flexibility [to] fashion[ ] an appropriate decree based on what i[s]. . . fair and equitable under the circumstances" (Mahoney-Buntzman vBuntzman, 12 NY3d 415, 420 [2009]), we conclude that, in compellingcircumstances, a spouse's wasteful dissipation of his or her separate assets, may "just[ly]and proper[ly]" be considered relevant to equitable distribution and maintenance(Domestic Relations Law § 236 [B] [5] [d] [former (13)]; [B] [6] [a] [former (11)];see Alan D. Scheinkman, Practice Commentaries, McKinney's Cons Laws ofNY, Book 14, Domestic Relations Law C236B:36 at 300; see also Mulverhill vMulverhill, 268 AD2d 948, 949 [2000]; Rheinheimer v Rheinheimer, 235AD2d 742, 743 [1997]). Recognizing that "[a] trial court has substantial discretion tofashion [equitable distribution and maintenance] awards based on the circumstances ofeach case" (Vertucci vVertucci, 103 AD3d 999, 1001 [2013]; see Williams v Williams, 99 AD3d 1094, 1096 [2012]) andthat our discretion in determining such issues is just as broad (see Majauskas vMajauskas, 61 NY2d 481, 493 [1984]; Moschetti v Moschetti, 277 AD2d838, 839 [2000]), we turn to whether modification of the wife's equitable distribution andmaintenance awards is warranted here.
By the time of the 2011 trial, most of the proceeds from the 2007 sale of the NYCrental property ($4.6 million) had been spent or lost as a result of the husband's poorlymade and/or mismanaged investments. It is troubling that he did not, in the record beforeus, account for exactly what happened to most of these proceeds. The recorddemonstrates, as Supreme Court found, that his incredible losses within a relatively shortperiod of time were not merely the product of market forces but, rather, were alsoattributable to his gross mismanagement and wasteful spending. For example, shortlyafter receiving the sale proceeds, the husband invested $2 million in one investmentaccount, and failed to monitor his losses or exercise any oversight over the funds; almostall of those funds had been lost or were being held in escrow, out of his control, at thetime of trial. In addition, the husband set up one brokerage account that was worthalmost $1.2 million in May 2008, but was fully depleted by June 2009. Another of hisbrokerage accounts, worth $621,000 in May 2009, had been depleted to $10.91 byDecember 2010. Upon our review of the record before us, we agree with the court'sfinding that the husband wastefully dissipated millions of dollars of his separate propertyand was "extremely cavalier" about the condition of his investments.
Moreover, Supreme Court also found that there were numerous withdrawals of largesums of cash from the husband's accounts over the year leading up to the parties'separation, for which he offered no explanation. Indeed, the "evidence suggest[s] that[the husband's] claimed . . . poverty was contrived[, which] provide[s] anample basis for [our] determination that [he] was guilty of economic fault, [and] which isclearly a factor that may be considered" (Griffin v Griffin, 115 AD2d at 588[citation omitted]). Although the husband apparently qualified for Medicaid eight monthsbefore trial, the court found, and the record confirms, that he "continued to makesignificant expenditures[,] . . . still had several hundred thousand dollars inliquid assets" and that, as of the time of trial, he had "been able to preserve somesemblance of the parties' former lifestyle."
Turning, then, to the determination of the wife's maintenance award, her ability to beself-supporting must be considered within the context of the parties' predivorce standardof living (see Domestic Relations Law § 236 [B] [6] [a] [former (4)]; Ndulo v Ndulo, 66 AD3d1263, 1265 [2009]). Here, the parties' marital residence was a well-furnished,4,500-square-foot home overlooking the Delaware River, situated on five acres of land,with superior amenities. The record further establishes that, throughout the majority oftheir marriage, the parties and their [*5]children enjoyeda very comfortable lifestyle in a dwelling that was beyond the average home. Indeed, itwas not necessary for either party to be employed to sustain that lifestyle, and thehusband conceded, at trial, that this more than comfortable lifestyle became lavish afterhe sold the NYC rental property.
By contrast, from the time of the parties' 2008 separation to the time of the 2011 trial,the wife was virtually without assets or a steady income. Although she had a 2004Mercedes station wagon, it was not operable and needed extensive costly repairs, whichshe testified compounded her difficulty in finding suitable employment. While she heldseveral part-time or per diem positions during the pendency of this action, she alsotestified that she was without health insurance, owed her mother $15,000, owed herattorney approximately $49,000 and had only about $1,000 in her checking account.Significantly, Supreme Court recognized that the maintenance award of $2,000 permonth for nine months was "insufficient" to meet the wife's basic monthly expenseswhile she prepared to reenter the nursing field. The husband, on the other hand, wascollecting Social Security and held in excess of $80,000 in documented assets in banksand in E-trade accounts at the time of trial. He owned a 2005 Mercedes that he hadpurchased in 2007 for $42,000 and a 1995 Jaguar convertible with no stated value.Additionally, he held title to the marital residence—which was not encumbered byany mortgage or liens and was valued by the court at $465,000—had paid over$65,000 to his matrimonial attorneys and was virtually debt free.
Our review of the record supports the conclusion that, under the circumstances ofthis case, "[t]he fact that [the] wife has the ability to be self-supporting by some standardof living does not mean that she is self-supporting in the context of the marital standardof living" (Ndulo v Ndulo, 66 AD3d at 1265; see Hartog v Hartog, 85NY2d 36, 52 [1995]). In modifying this award we determine "the amount of earningsnecessary to enable the [wife] to become self-supporting [by] . . . referenceto the standard of living of the parties, as well as the earning capacity of each party; andthese factors carry more weight in [this] marriage of long duration" (Garvey vGarvey, 223 AD2d 968, 970 [1996]). Imputing to the husband the substantialincome that he would have earned had he not been so cavalier and wasteful in themanner in which he blatantly risked virtually all of his capital (see Scala v Scala, 59 AD3d1042, 1043 [2009]; Rogersv Rogers, 52 AD3d 354, 354 [2008]), and affording the wife more time toprepare for and find suitable employment, we extend the wife's maintenance award of$2,000 per month for nine months to a period of 24 months, for a total of $48,000. Wefurther modify the award of equitable distribution—taking into account the parties'assets at the commencement of the action and the husband's economic fault—toaward the wife 50%, rather than 40%, of the appreciation in the value of the maritalresidence. We decline, however, to modify Supreme Court's award to the husband of30% of the enhanced earnings attributable to the wife's nursing degree, as he encouragedher to pursue her dream, financed her education and was the primary caregiver for thechildren while she pursued her degree full time (see generally Farrell vCleary-Farrell, 306 AD2d 597, 599 [2003]).
Supreme Court's finding that the husband was able to maintain his previous lifestylewith thousands of dollars in liquid assets—which conflicts with its rationale thathe was unable to pay a more substantial portion of the wife's counselfees—justifies an increase in the award of counsel fees to the wife (seeArmstrong v Armstrong, 72 AD3d at 1416). Supreme Court found that theapproximately $64,000 in counsel fees incurred by the wife were "necessary based on thecomplexity of the issues" and warranted by her attorney's experience, ability andreputation. Accordingly, we award her an additional $10,000 in counsel fees.[*6]
Rose, J.P., McCarthy and Egan Jr., JJ., concur.Ordered that the judgment and amended judgment are modified, on the law and the facts,without costs, by reversing so much thereof as awarded plaintiff (1) maintenance in theamount of $2,000 per month for nine months, (2) 40% of the $335,000 of appreciation inthe marital residence, and (3) $25,000 in counsel fees; award plaintiff (1) maintenance inthe amount of $2,000 per month for 24 months, (2) 50% of the $335,000 appreciation inthe marital residence ($167,500) and (3) $35,000 in counsel fees; and, as so modified,affirmed.
Footnote 1: A technical amendmentwas made to the original judgment to correct a typographical error.
Footnote 2: The citations toDomestic Relations Law § 236 herein are to the version of the statute in effect atthe commencement of this action in January 2009.