Opinion
No. 50/2013.
08-29-2017
S.M., Plaintiff, v. M.R., Defendant.
Steven Scavuzzo Esq., New York, for Plaintiff. Mitchell Newman Esq., Staten Island, for Defendant.
Steven Scavuzzo Esq., New York, for Plaintiff.
Mitchell Newman Esq., Staten Island, for Defendant.
CATHERINE M. DIDOMENICO, J.
Procedural History
By Summons and Verified Complaint filed on April 25, 2013, Plaintiff Wife, S.M.(hereinafter "Wife") commenced this action for divorce against Defendant Husband, M.R.(hereinafter "Husband"). (See Jud. Not. 1). Husband filed an Answer with Counterclaims in June of 2013. (See Jud. Not. 2). Wife filed a Reply to Husband's counterclaim on July 22, 2013. (See Jud. Not. 3).
The parties to this action first appeared before this Court on or about April 16, 2013. At that time, Wife had not yet commenced the present divorce proceeding. Rather, the parties appeared in this Court's Integrated Domestic Violence Part in relation to criminal cases that were then pending against both parties, and various Family Court dockets. By Short Form Order dated April 16, 2013, the parties agreed to a temporary visitation schedule for Husband. Moreover, in anticipation of the filing of the present divorce, the parties informed the Court that they had previously signed a "Separation Agreement," the validity of which would have to be litigated. (See SFO dated 4/16/13).
See Family Court Dockets V–00031/13, V–00032/13, V–00033/13, V–00034/13, O–00035/13, O–00036/13; Criminal Dockets40027M–2013, 40012M–2013, 40014M–2013, 40013M–2013,
A Preliminary Conference was held in this divorce action on September 24, 2013. On that date the parties agreed that Plaintiff Wife would be granted a divorce, but the parties failed to specify upon which ground that divorce would be granted. This omission was corrected on the first date of trial when Wife testified that the parties' marriage had broken down irretrievably for a period of six months in compliance with Domestic Relations Law § 170(7). (Tr. 7/21/16 pg.8). During their preliminary conference the parties further agreed to consolidate the various custody, visitation, and family offense dockets that were concurrently pending before this Court into the matrimonial proceeding.
By Family Court Petitions dated January 9, 2013 (Husband), and February 6, 2013 (Wife), both parties claimed that the other had committed a specified family offense against them. Husband was granted a limited temporary Order of Protection enjoining Wife; Wife was granted a temporary "full stay away" Order of Protection enjoining Husband. Both petitions were withdrawn, on consent, on October 30, 2014 and the related temporary orders were vacated. During the course of these proceedings, both parties were also defendants in various domestic violence related criminal cases. Wife was the subject of five criminal cases, with Husband being the subject of four cases. All of the criminal cases were dismissed by the People and sealed before adjudication.
Husband40027M–2013, 40096M–2014, 40084M–2015, 40015M–2014/ Wife40170M–2014, 40013M–2013, 40013M–2013, 40098M–2014, 40012M–2013, 40014M–2013.
In December 2013, Wife filed a motion to enforce the parties' purported "Separation Agreement" which was drafted, at the request of Wife, when the parties relationship soured in or around February of 2012. While Husband admittedly signed the agreement, he opposed the enforcement of the same. For the reasons set forth in a Decision and Order dated August 19, 2014, this Court found that the parties' separation agreement was null and void as a matter of law. Accordingly, it has no legal effect on the issues in this proceeding.
There are two subject children of this marriage, Y.R. (age 14) and M.R. (age 12). At the commencement of trial the issues of custody and visitation remained unresolved. However, on August 16, 2016 the parties entered into a mid-trial stipulation on the record, resolving those issues. Their agreement on the record was subsequently reduced to a writing which was signed by this Court on May 23, 2017.
Wife promptly settled an Order on Notice that was signed in 2016;A duplicate original Order was signed by the Court on May 23, 2017 and filed with the County Clerk when the original Order could not be located.
The Trial
During the course of this matrimonial action, Wife has been represented at all times by Steven Scavuzzo Esq.Husband was initially represented by Joseph Diperna, Esq. until May of 2015 when he was substituted by James Lambert, Esq.Mr. Lambert has been Husband's attorney of record since that date, however, at trial Husband was represented by Mitchell Newman Esq., as trial counsel. Mr. Newman appeared "of counsel" to Mr. Lambert.
The parties' claims for maintenance, child support, and equitable distribution were tried before this Court on July 21, 2016, July 22, 2016, August 23, 2016, September 14, 2016, September 15, 2016 and September 29, 2016. A non-trial appearance was scheduled on August 16, 2016 to resolve the issues of custody and visitation. Wife testified on her own behalf, and also called Husband and the court appointed business valuator, Heidi Muckler, as witnesses. Husband testified on his own behalf and called no other witnesses. Both parties submitted documents into evidence (Pl. Exs. 1–18; Def. Exs. A–U).
Factual Findings
The parties were married on July 30, 2001 in a religious ceremony. There are two children of this marriage: Y.R. (age 14) and M. R.(age 12). On the record of August 16, 2016, the parties agreed that Wife would have sole custody of the subject children, subject to a visitation schedule for Husband. (See Order dated 5/23/17).
A. Plaintiff Wife
Plaintiff Wife, S. M., was born in 1976. She is currently 40 years old. While Wife's sworn Statement of Net Worth indicates that she is in "good health" she testified at trial that she suffers from Post–Traumatic Stress Disorder and has been prescribed "Zoloft" for the same. In or around 1999, Wife obtained a medical degree in Mansoura, Egypt. Wife obtained this degree two years before her marriage to Husband.Wife immediately began working as a "general practitioner" medical doctor in Egypt. As explained by Wife, she was required by Egyptian law to work for a period of time for the government, for relatively low wages, before she could move into private practice. Wife testified that she earned the equivalent of approximately$50 (USD) a week in Egypt at that time.
The parties were married on July 30, 2001. Shortly after getting married Wife became pregnant with Y.R. At this time, Husband resided primarily in the United States to work and financially support his growing family. The parties lived separate and apart from one another for approximately two and one half years before Wife moved to the United States to join Husband. During her time in Egypt Wife primarily resided with her parents, although Husband had purchased an apartment in which they could co-habituate during his visits. Upon arrival in the United States, the parties initially lived in Brooklyn until they moved to Staten Island in 2009.
Wife credibly testified that the parties had a discussion in which they agreed that she would stop working as a medical doctor to raise the parties' children. Wife practiced as a medical doctor between the years 1999 and 2002, in Egypt. Wife credibly testified that after 2002 she became the children's primary caretaker and maintained the parties' household for the remainder of the parties twelve year marriage.Wife testified that since working as a doctor in Egypt in 2002, her only gainful employment has been a part time "English to Arabic" translation position that she held for most of calendar year 2015. Wife testified that she earned $20 an hour from this part time employment. Wife has never worked as a Physician in the United States.
Wife credibly testified that she has been taking steps to become licensed to practice medicine in the United States. Wife detailed the three requirements that are necessary practice medicine in the U .S. with a foreign medical license. Wife testified that two tests are required, the United States Medical Licensing Examination ("U.S .M.L.E.exam"), which she passed in 2010, and the Clinical Knowledge Part exam ("C.K.Part Exam"), which she passed in 2012. In addition to the above exams, Wife testified that she also needs to complete a "3 or 4 year" residency program in a hospital. In an attempt to do so, Wife has entered into a "national residency match" program, which seeks to find her a viable residency program. In order to increase her chances of finding a match, Wife has been working as an unpaid intern in a New Jersey Hospital since March of 2016.
B. Defendant Husband.
Defendant Husband, M.R., was born in May of 1968. He is currently 49 years old and self-reports that he is in "fair" health. Husband graduated from the University of Cairo (Egypt) in 1992 with a Bachelor's Degree in Physical Therapy. Husband is a licensed physical therapist in New York. In addition to his Bachelor's Degree, Husband obtained a Master's Degree in Physical Therapy from Rocky Mountain University in 1998 and a Doctorate in Physical Therapy from Seton Hall University in 2004. While this third degree was obtained during the marriage, neither party sought to value the same during the course of these proceedings, and the degree was never identified as an asset during trial.
While the State Legislature has since obviated the need to value a license obtained during a marriage as "enhanced earnings" are no longer a valid asset for equitable distribution purposes, the present case was commenced before the January 2016 enactment of the new statute.
Husband is currently a self-employed owner operator of a physical therapy business entity known as "S. Care Corp." Before starting S. Care in 2011, Husband was the owner operator of a similar business known as "Prolix Care Corp." Several of Husband's tax returns were offered as evidence during trial to establish a pattern of Husband's earning potential. According to his 2011 tax return, which was jointly filed with Wife, Husband earned the sum of $51,340 from his self-employment. Husband's 2012 tax return, which was also filed jointly indicated an income of $49,430. In 2013 Husband started filing as "single" and claimed to earn an income of $58,361. Finally, the most recent tax return filed by Husband, from 2015 indicates an income of $68,403. Husband's 2014 tax return was not offered by either party.
Husband's current physical therapy business, "S. Care Corp." was valued during the course of this litigation by HFM Valuation and Consulting Services, Inc. HFM provided a Valuation Report to the Court which was entered into evidence as "Plaintiff's 13." The principal of HFM, Heidi Muckler, concludes in that Report that Husband's 100% interest in "S. Care Corp." has a market value of $170,000. Ms. Muckler testified in support of her report on August 23, 2017.
In addition to this income from employment, Husband is also the landlord for the parties' prior marital home located on 10th Avenue in Brooklyn, New York. The Brooklyn property was purchased during the marriage in or around 2014. Husband is the titled owner of the property. The parties resided in this two-family home until 2009 when they moved to Staten Island. Husband currently rents out both units in this property to his "friends." Husband charges $2,800 total in monthly rent to his tenants. However, it is undisputed that Husband will not be collecting this rent in the near future, as the Brooklyn Property is currently on the market for sale. Notably, the impending sale of this property has been the subject of extended post-trial motion practice, including motions by Wife to set a sale price, and evict the current tenants. By Short Form Order dated July 6, 2017, the parties agreed to sell the property for the gross sum of $830,000. Pursuant to the terms of that Order, Husband is required to make certain repairs to the property, one half of the costs of which he will be entitled to recoup from Wife's share of the net proceeds.
Equitable Distribution
The Domestic Relations Law recognizes that a marriage relationship is an economic partnership. As such, during the course of a marriage, spouses share in both its profits and losses. When the marriage comes to an end, courts are required to equitably distribute both the assets and liabilities remaining from the marriage. See Fields v. Fields, 15 NY3d 158 (2010). A trial court considering the factors set forth in the Domestic Relations Law has broad discretion in deciding what is equitable under all of the circumstances. See Krolikowski v. Krolikowski, 110 AD3d 1449 (4th Dept.2013). Indeed, when it comes to the equitable distribution of marital property, Domestic Relations Law § 236(B)(5)(d)(13) authorizes the trial court to take into account "any other factor which the court shall expressly find to be just and proper." Consequently, the trial court has substantial flexibility in fashioning an appropriate decree, based on what it views to be fair and equitable under the circumstances. See Mahoney–Buntzman v. Buntzman, 12 NY3d 415 (2009). Equitable distribution does not necessarily indicate equal distribution. See Groesbeck v. Groesbeck, 51 AD3d 722 (2d Dept.2008).
When making its determinations as to equitable distribution, the Court has considered the factors enumerated in DRL § 236. See Henery v. Henery, 105 AD3d 903 (2d Dept.2013). In addition to any factor specifically considered in relation to a particular asset herein, the Court finds that: (1) this is marriage of moderate duration; (2) that Husband is the monied spouse in this action as the owner/operator of a company that provides physical therapy services, while Wife is currently unemployed; (3) both parties are in general good health, although Wife claims to be under treatment for post-traumatic stress disorder ; (4) Wife currently resides in the marital home together with the two children of this marriage; (5) Wife shall be entitled to an award of maintenance as delineated herein; (6) Wife has made indirect contributions to Husband's success by providing support as a spouse and primary caretaker of the parties' children and the marital home; (7) Wife has a considerable opportunity for financial growth as she is an Egyptian trained medical doctor who has completed most of the steps necessary to practice in the United States; and (8) that both parties have made allegations of domestic violence against one another in this proceeding, resulting in the arrest of both parties, and the issuance of cross Orders of Protection, but that all of criminal cases, and family offense claims, were dismissed or withdrawn before the commencement of trial.
a. Egyptian Property
At trial, Wife attempted to establish that Husband purchased three parcels of real property in Egypt during the course of the parties' marriage. However, Wife admitted that she had little to no personal knowledge of how Husband obtained each property, and no involvement with them after they were obtained. Wife indicated that she only knew about the properties because she retained a lawyer in Egypt, named Mustafa Mohammad, to investigate if Husband owned property there. Mr. Mohammad was not called as a witness at trial.
Wife testified that at the conclusion of Mr. Mohammad's investigation, he informed her that Husband owned, or owns, three parcels of property in Egypt. Other than this basic information, Wife failed to offer any credible testimony, or admissible documentation, regarding the actual location, value, purchase price, or time of purchase of these alleged properties. In that regard, the little documentation that Wife attempted to offer was strenuously objected to, in part because it was not properly certified or fully translated into English. (Tr. 7/21/16 pgs. 95–98). A review of the trial record reveals that Wife was unsuccessful in getting any of the documents regarding the alleged Egyptian property into evidence (Pl.Ex.9;10;11).
While Wife could not affirmatively establish the same through her own testimony, Husband admitted that he owns three parcels of real property in Egypt. The first property, a parcel of vacant land, is located in "Senaneya, Damietta Egypt" (the "Senaneya property"). Husband testified that he purchased the same in 2006 or 2007 for one million Egyptian Pounds. According to Husband, one million pounds would have equated to approximately $200,000(USD) at the time of purchase. This property was purchased in Husband's name only. At the time of purchase the land included a building, however Husband paid to have that building demolished. The Senaneya property currently exists as vacant land. Husband argues that he purchased this property without obtaining a mortgage, using cash that he obtained from the sale of two other Egyptian properties in 2005. Husband claims that these prior properties were purchased by him in 1998, before the date of his marriage to Wife.
Husband identified the second parcel of Egyptian property as being located in a place called "Menya" (the "Menya property"). Husband testified that he obtained this property in or around 2010 from his father. While Husband repeatedly used the word "inheritance" in his testimony, he clarified that the property was transferred to him, his brother and his sister, while his father was still alive, in anticipation of his passing. Husband currently shares title to this property along with his brother. Husband testified that he and his siblings jointly agreed to removed his sister from ownership after his father died, as she obtained a different parcel of land. The Menya property consists of a three story building, which is currently occupied by Husband's brother and step mother. No credible evidence was offered by either party as to the current value of this property.
Husband identified the third piece of Egyptian property as an apartment located in a region known as Ras El Bar (the "Ras El Bar property"). Husband testified that he purchased this property in April or June of 2001, before the parties were married. Husband paid approximately £50,000 Egyptian Pounds, which he claims would have amounted to $15,000 to $20,000 United States Dollars at the time of purchase. This apartment is currently vacant, as it was intended for use as the parties residence before Wife moved to the United States to join Husband. Wife offered no evidence to contest that this property was purchased before the marriage. Neither party offered a current value for this property.
In her Summation after trial, Wife makes a claim that all three pieces of Egyptian property are martial, and offers, for the first time, speculative values that are unsupported by the record. Notably, Wife admits that no real estate appraisals were submitted into evidence at trial. Moreover, it is undisputed that Husband is the titled owner of all three properties, including one that is co-owned with his brother and inhabited by his brother and step mother. Wife admitted at trial that she knew virtually nothing about the Egyptian properties, and had nothing to do with their purchase. The record further supports a finding that Wife had very little involvement with the properties after they were purchased.
Wife, as the non-titled spouse seeking an interest in the Egyptian properties, bears the burden of establishing the existence, marital nature, and value of those properties. See Antoian v. Antoian, 215 A.D.2d 421 (2d Dept.1995) ; See also, Barnhart v. Barnhart, 148 AD3d 1264 (3rd Dept.2017). However, Wife correctly states that there is a presumption that any property that was admittedly purchased during the marriage is marital property and thus subject to equitable distribution. See Matter of McNair v. Fenyn, 149 AD3d 747 (2d Dept.2017). Once it was established that a parcel of property was acquired during the marriage, it became Husband's burden to rebut the marital presumption. See Mistretta v. Mistretta, 138 AD3d 1075 (2d Dept.2016).
The first parcel of property identified during trial was the vacant land located in Senaneya, Damietta Egypt. This property was admittedly purchased during the marriage, although it was titled in Husband's name only. Neither party offered evidence of the current value of the property, though Husband indicated that it was purchased in or around 2006 or 2007 for the Egyptian Equivalent of $200,000 USD.
Husband attempted to establish that he purchased the Senaneya property by using "separate property" funds obtained from the sale of two parcels of property that he acquired in 1999, prior to the marriage. However, in light of the strong presumption that property purchased during the marriage is marital, the Court finds that Husband failed to offer evidence sufficient to "trace" his alleged use of separate property funds. See Hymowitz v. Hymowitz, 119 AD3d 736 (2d Dept.2014). Husband's testimony, without any admissible documentary evidence tracing those funds, was insufficient to rebut the presumption that the property was obtained by marital funds. See Steinberg v. Steinberg, 59 AD3d 702 (2d Dept.2009) ; See also D'Angelo v. D'Angelo, 14 AD3d 476 (2d Dept.2005). In so ruling, the Court notes the general rule that "marital property" is to be construed broadly, while "separate property" is to be viewed narrowly. See Saasto v. Saasto, 211 A.D.2d 708 (2d Dept.1995).
The second parcel of real property identified at trial was the Menya property which Husband claims he obtained from his father, in anticipation of his father's passing. Husband testified that he obtained this property in 2010, and that his father passed away in December of that year. While the property was initially transferred to Husband, his brother and his sister in equal parts, Husband testified that the family distributed the property a second time "for religious reasons" after his father's death. As a result of this second "religious" distribution, Husband's sister was removed from the title. (Tr. 9/15/16 pgs. 88–90). The property is currently titled in Husband' name, along with the name of his brother, and is currently inhabited by his brother and his step-mother.
While Husband repeatedly used the word "inheritance" in his trial testimony, and he indicated that the inheritance took place in 2010, the documentation that he offered in support of his claim actually indicates that the transaction was a "sale." According to the documents offered by Husband (See Def. Ex. T), Husband's father, who is indicated as "seller," sold the property to Husband, together with his brother and sister, for "consideration" in the sum of £ 100,000 Egyptian Pounds in August of 2005. In fact, despite his earlier testimony, which was confusing at best (Tr. 7/22/16 pg. 88), Husband later admitted that the three siblings were "sold" the property while his father was still alive. (Tr. 9/15/16 pg.89).
The second "religious distribution" testified to by Husband, which occurred after his father's passing, also appears to have been a "sale." According to the real estate contract, once again offered by Husband, on or about November 20, 2012, Husband and his brother purchased their sisters' one third share of the Menya property for the sum of £150,000 Egyptian Pounds. (See Def. Ex. T). Husband credibly testified that since this transfer, he has not visited the property, or been involved with it in any meaningful way. Husband's brother pays all of the expenses for that property. (Tr. 9/15/16 pg. 93).
At trial, Wife did not address the nature of these transfers. In fact, it was clear from her testimony that she knew very little, if anything, about how Husband obtained the Menya property. However, in her Summation after trial Wife concludes that the property is "marital property" and should be subject to equitable distribution. Notably, neither party offered any evidence as to how the initial £100,000 Pound purchase price was split between the siblings, and the contract does not address the same. The second sale, that occurred between siblings, also remains unexplained. However, as both transactions occurred during this marriage, there is a rebuttable presumption that any funds contributed by Husband were marital in nature. See Yerushalmi v. Yerushalmi, 136 AD3d 812 (2d Dept.2016) ; See also Patete v. Rodriguez, 109 AD3d 595 (2d Dept.2013).
Martial property is defined as "all property acquired by either or both spouses during the marriage and before the commencement of a matrimonial action, regardless of the form in which title is held." See DRL § 236 B(1)(c). However, martial property shall not include separate property, which includes "property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse." See DRL § 236 B(1)(d)(1).
As indicated above, Husband's repeated use of the word "inheritance" is misleading, as an inheritance from his father, or an inter vivos gift made in anticipation of his father's passing, would arguably become Husband's separate property. See Zaretsky v. Zaretsky, 66 AD3d 885 (2d Dept.2009) ; See also, Allen v. Allen, 263 A.D.2d 691 (3rd Dept.1999). Here, however, it is clear from the documents offered by Husband at trial, that the two transfers, one in 2005 and the other in 2012, were both real estate sales. As these sales both took place during the marriage, there is a presumption that any funds contributed by Husband were marital funds. Husband has failed to rebut this presumption by tracing the nature and amount of funds he utilized to obtain the property. See Massimi v. Massimi, 35 AD3d 400 (2d Dept.2006). Accordingly, Husband's one half share of the Menya property is hereby deemed to be marital in nature and thus subject to equitable distribution.
The third parcel of Egyptian property addressed at trial is an apartment that was purchased by Husband in or around April or June of 2001 in an area known as Ras El Bar.Husband credibly testified that he purchased the Ras El Bar property "prior to the marriage" so that the parties could stay there after they got married. (Tr. 7/22/16 pg. 95). Husband testified that the parties used the apartment for a short period of time when Husband visited Egypt to see Wife in the first two years of their marriage, but that it has since been vacant. Husband credibly testified that the apartment is in "bad condition." Wife did not contest the date that the Ras El Bar property was purchased, nor did she establish that she in any way contributed to the purchase of that property, or its upkeep. In fact, it was established at trial that Wife did not primarily reside there during the first two years of her marriage, as she lived with her parents before moving to the United States.
Separate property is most commonly defined as property purchased by one party before the marriage. See Turco v. Turco, 117 AD3d 719 (2d Dept.2014). Here, Husband has established through credible, and uncontroverted, testimony that he purchased the "Ras El Bar" property before the parties married. Wife has not offered any credible testimony, or evidence, to refute Husband's claim, or to show that she somehow contributed to any alleged appreciation in value. Notably, no value for the property was offered by either party at trial. After considering the trial record, the Court finds that the property located in "Ras El Bar" Egypt is Husband's separate property, and not subject to equitable distribution. See Rizzo v. Rizzo, 120 AD3d 1400 (2d Dept.2014).
In contrast, as the property located in Senaneya, Damietta, and Husband's share of the Menya property have been deemed marital, they are subject to equitable distribution. However, equitable distribution does not necessarily indicate equal distribution. See Lowe v. Lowe, 151 AD3d 956 (2d Dept.2017). Here, Husband failed to establish his claim that the Senaneya property was his separate property because he failed to produce any admissible documentation that would be required to undertake the difficult task of "tracing" the transfer of separate property funds. See Matter of McNair v. Fenyn, 149 AD3d 747 (2d Dept.2017) ; See also Spera v. Spera, 71 AD3d 661 (2d Dept.2010). Husband failed to establish that the Menya property was his separate property because the "inheritances" that he spoke of were actually two separate real estate transactions, for monetary consideration, between members of his family.
However, it is clear from the trial record that Wife did not contribute to the purchase of either property at issue, nor has she contributed in any way to either properties' upkeep. Wife clearly indicated during trial that she knew virtually nothing about the purchase of the properties. Moreover, Husband's testimony that at least some amount of separate property was utilized to purchase the Senaneya property is credible, and uncontroverted. Accordingly, the Court has determined that Husband is entitled to a "greater percentage share" of the property at issue. See Shkreli v. Shkreli, 142 AD3d 546 (2d Dept.2016) ; See also, Butler v. Butler, 171 A.D.2d 89 (2d Dept.1991) ; Murphy v. Murphy, 4 AD3d 460 (2d Dept.2004).
After consideration of the factors indicated above, and the evidence in the trial record, the Court finds that Husband shall be entitled to 60% of the current value in the Senaneya Damietta property and that Wife shall be entitled to 40% of the same. As neither party has offered a value for the property at trial, Husband is hereby directed to obtain a fair market appraisal from an reputable Egyptian real estate broker (or the equivalent) within 90 days from service of this Decision after Trial. As the monied spouse in this action, Husband is hereby directed to pay for 100% of this appraisal's cost. Upon receipt of the appraisal, Husband is hereby directed to serve a copy upon Wife. In the event that Wife does not agree with the amount indicated therein, she shall have 20 days to notify Husband in writing that she will be seeking a counter appraisal. If Wife fails to properly give notice within 20 days, Husband's appraisal shall be deemed the market value of the property. In the event that Wife seeks a counter appraisal, she shall be 100% responsible for the cost of the same and must have the same completed within 90 days from the date of her written notice. If the parties cannot agree upon a value after receiving both appraisals, either party may commence post trial litigation regarding the same.
Once a value for the Senaneya Damietta property is established (or agreed upon), Husband shall have the right of first refusal to purchase Wife's equitable share of the property by paying her 40% of the established value. In the event that Husband does not wish to buy out Wife's interest in the property, he shall be required to sell the property on the open market at a fair market value utilizing a real estate broker in Egypt. Once all liens associated with that property and costs related to the sale are paid, Husband shall distribute 40% of the net proceeds to Wife.
In regards to the "Menya" property, the Court finds it equitable under the circumstances that Husband be awarded the entirety(100%) of the one half (50%) share of this property that has been deemed marital herein. In so ruling, the Court notes that the Menya property has been in Husband's family for over 34 years and is co-owned with his brother. Moreover, the property is currently located in a foreign country, and inhabited by Husband's brother, and his widowed step-mother. Husband has not had any meaningful involvement with the property since 2012, and Wife has never had any meaningful involvement with the property whatsoever. The record supports a finding that the transaction between Husband's father and his children that resulted in Husband's ownership was clearly intended to be an inter vivos transfer of property in lieu of an inheritance. While neither party endeavored to explain why the property was sold between family members (twice), rather than gifted, it is clear that Husband's father intended that it be left for his children and his widow's use.
Moreover, unlike the "Senaneya" vacant land, which can easily be sold on the open market, the Menya property is currently inhabited by persons (one of whom is a half owner of the property) who are not, and should not be, involved in this litigation. The Court finds that it would be inequitable, and unduly burdensome, to place Husband in a position where he would be required to commence a partition action in Egypt (or the equivalent) and attempt to force a sale of a property inhabited by his relatives.
It is true that in lieu of ordering a partition and sale, the Court could theoretically grant Wife a distributive award. However, in order to do so, the Court would need to establish a reasonable market value for Husband's share of the Menya property. At trial, Husband repeatedly made it clear that he did not know what the Menya property was worth, and indicated a fear that any value that he offered would be inaccurate and purely a "guess."
"Wife, as the nontitled spouse, had the burden of proving the asset's value so as to afford the court a sufficient basis upon which to make a distributive award." Vainchenkerv. Vainchenker, 242 A.D.2d 620 (2d Dept.1997). This is generally achieved through a comparative market analysis provided by a real estate expert. In her Summation, Wife admits that no such appraisal was offered into evidence at trial. Accordingly, as Wife failed to establish the value of the marital one half interest in the Menya property, the Court cannot fashion a distributive award. See Elsayed v. Edrees, 141 AD3d 503 (2d Dept.2016) ; See also, Seckler–Roode v. Roode, 36 AD3d 889 (2d Dept.2007) ; Halley–Boyce v. Boyce, 108 AD3d 503 (2d Dept.2013).Notably, any value mentioned by Husband at trial was clearly speculative in nature, as Husband repeatedly indicated that he had no idea what the property was worth.
This Court's decision to divide the Egyptian property on an unequal basis, as indicated above, will be specifically considered as a factor when determining equitable distribution of the marital home (see below).
b. S. Care Corp.
At the time the parties were married, Husband owned and operated a business known as "Prolix Care Corp." Husband opened this business in or around 1997 and operated it until 2012. Wife credibly testified that while Husband was wholly in charge of the marital finances, that she occasionally, but rarely, helped him with billing for Prolix. Husband denied that Wife had any involvement with Prolix whatsoever. After Prolix ceased its operations, Husband formed a new corporation by the name of "S. Care. Corp." While the details are unclear, both Prolix and S. Care Corp. were engaged in providing physical therapy services to both public entities and private clients. It is undisputed that "S. Care Corp." was formed during the marriage, and thus is a marital asset subject to equitable distribution. See Wasserman v. Wasserman, 66 AD3d 880 (2d Dept.2009).
In support of her claim for equitable distribution of S. Care, Wife argues that she "contributed to the increased value of the asset." (Pl.Sum.pg.5). However, Wife admitted that she knew very little about S. Care's operation. While Wife claims that she occasionally did billing for Husband's prior business, she admitted that she never did any work whatsoever in relation to S. Care. Wife failed to establish that she made any direct contributions to Husband's business, accordingly, Wife's claim to an equitable portion thereof must be based solely upon her "indirect contributions." See Charap v. Willett, 84 AD3d 1000 (2d Dept.2011). In that regard, Wife admitted that at the time Husband opened S. Care, the parties' marital relationship was already breaking down. (Tr. 7/22/16 pg.23). However, Wife makes a general claim that throughout their marriage she has always been the subject children's primary caretaker, and primarily responsible for the maintenance of the marital home, two facts that are uncontested by Husband.
By Order dated March 20, 2015, HFM Valuation & Consulting Services, Inc. was directed to conduct a forensic appraisal of S. Care Corp. HFM Valuation issued a report which was admitted into evidence at trial along with the expert's file of "documents relied upon." (See Pl.Ex. 13 & 14). According to the valuation report, Husband did not provide all of the documentation that was requested from him. However, despite these deficiencies, and after conducting as detailed an analysis as possible under the circumstances, Ms. Muckler attributed a fair market value of $170,000 to Husband's 100% ownership of S. Care Corp. as of December 31, 2012. This valuation date was utilized by Ms. Muckler because it represented the closest year end to the commencement of this action. The Court finds that a "time of commencement" valuation date is appropriate under the circumstances. See Morton v. Morton, 69 AD3d 693 (2d Dept.2010).
On August 23, 2016, Wife called Ms. Muckler as a witness to testify in support of her report. As she indicated in her report, Ms. Muckler confirmed that she was not given the full amount of information that she requested from either party in this action. (Tr. 8/23/16 pgs.13–15). Notably, the only missing discovery from Wife was a Statement of Net Worth, which Ms. Muckler indicated that she "really didn't need" to conduct her analysis. Ms. Muckler did admit that if she was provided additional information, the value of Husband's business might have been different. However, Ms. Muckler further she testified that she believes that her valuation was "accurate." (Tr. 8/23/16 pg.25). Notably, Wife did not offer any alternate value for Husband's business at trial.
When determining the equitable distribution of a business, the Court is mandated to consider both the direct and indirect contributions of the non-titled spouse. See Perdios v. Perdios, 135 AD3d 840 (2d Dept.2016). After considering the testimony offered by both Husband and Wife, the Court finds that Wife made no direct contributions to the business. However, Wife credibly testified that she was primarily responsible for the care of the subject children, which allowed Husband to devote himself to his career. Wife also made significant indirect contributions to support Husband, as she was the primary caretaker of the marital home. See Hymowitz v. Hymowitz, 119 AD3d 736 (2d Dept.2014). Notably, Wife slowed the advancement of her own career while taking on the role of a mother and homemaker.
Husband argues that Wife did more to damage his ability to earn income than she did to support it. Husband testified that when Wife made a domestic violence related criminal complaint against him in or around 2011, it resulted in the Administration for Children's Services suspending his ability to work for the Department of Education. While the allegations against Husband were ultimately deemed unfounded, Husband claims that his reputation was damaged as a result, and that he was forced to close Prolix Care Corp., and start over with S. Care Corp. Husband established that when he was working for Prolix he was able to charge $90 an hour, while S. Care Corp. is only capable of charging $60 per hour. While this Court is not persuaded that Wife maliciously or intentionally harmed Husband's ability to do business, it is undisputed that Husband started his new corporation in or around 2011, during a time of marital strife. Notably, Wife admitted that Husband opened S. Care Corp. during a time when their marriage "had already started to break down." (Tr. 7/22/16 pg.23).
After considering the totality of the circumstances presented, including the indirect contributions of Wife, and after consideration of the other factors indicated above, the Court finds that Wife is entitled to a 15% share of the value of the marital business, S. Care Corp. See Giokas v. Giokas, 73 AD3d 688 (2d Dept.2010) ; See also, Schwartz v. Schwartz, 67 AD3d 989 (2d Dept .2009) ; Peridos v. Peridos, 135 AD3d 840 (2d Dept.2016). This Court has concluded that this percentage is fair under the circumstances because it acknowledges that Wife only made minimal indirect contributions to Husbands' business during the end of the parties' marriage, while not ignoring her contributions as the primary caretaker for the parties' children. See Gordon v. Gordon, 113 AD3d 654 (2d Dept.2014). Accordingly, Wife is entitled to 15% of the established value of the business ($170,000) which calculates to a distributive award in the amount of $25,500.
This award shall be paid directly out of the net proceeds of the sale of the former marital home, however will be subject to credits as indicated herein (see below).
c. Former Marital Home (Brooklyn, N.Y.C.)
It is undisputed that during the course of the parties' marriage Husband purchased a parcel of real property located at * * 10th Avenue in Brooklyn, New York ("the Brooklyn Property"). This parcel of land includes a two-family house. The property was purchased in 2004 for $545,000. Although it was purchased during the marriage, it is titled in Husband's name alone. Husband obtained a mortgage to purchase the property in the initial amount of $436,000. Husband paid the balance of the purchase price in money that he received from his self-employment. (Tr. 7/22/16 pg.61). Husband credibly testified that he paid off the initial mortgage in 2011. However, this did not negate the indebtedness related to the property. In 2006 Husband opened a home equity "line of credit" and utilized the same in 2008 to withdraw equity in the amount of $305,000.(See Pl.Ex. 6).
On the fifth day of trial, September 15, 2016, the parties agreed to place the Brooklyn Property on the market for sale with a local real estate broker. Pursuant to a Short Form Order issued on consent that date, the parties agreed that the broker's fee and any liens on the property would be satisfied at closing out of the proceeds of the sale, with the net proceeds to be held in escrow by Wife's attorney.
Since the close of the trial record, both parties have filed applications regarding the sale of the property. The sale of this property has been frustrated by disagreement between the parties on a reasonable sale price, and complicated by the reluctance of its current tenants to move. The parties post trial issues were resolved by Short Form Order of this Court dated July 6, 2017 which directed the parties to accept an offer for the sum of $830,000. In addition to setting a sale price, the Court ordered Husband to make certain repairs to the property, and "take all steps necessary" to remove the tenants from the property before the closing date. Pursuant to the terms of that Order, Husband shall be entitled to recoup one half of the cost of any necessary repairs from Wife's share of the net proceeds at closing.
In her Post Trial Summation, Wife argues that she should be awarded 100% of the proceeds from the sale. However, Wife offers no support for her request other than to state that it will be the only source of liquid proceeds available for distribution. At the onset, the Court finds that such a distribution would be clearly erroneous. See Bricker v. Bricker, 69 AD3d 546 (2d Dept.2010).
While equitable distribution does not necessarily mandate equal distribution, it is generally preferable that marital assets be divided as equally as possible. See Repetti v. Repetti, 147 AD3d 1094 (2d Dept.2017). However, after consideration of the factors indicated above, including a specific consideration of the unequal distribution of the Egyptian Property indicated herein, the Court finds it equitable that Wife be distributed 55% of the net proceeds from the sale of the former martial home with Husband receiving the remaining 45%. See Fielder v. Fielder, 230 A.D.2d 822 (2d Dept.1996).
In addition to the distribution of the former marital home indicated above, Wife shall be entitled to collect her distributive award, as related to her equitable share of "S. Care Corp" from Husband's share of the net proceeds at closing, subject to an adjustment for any distributive awards owed to Husband (See "Miscellaneous" below).
d. Wire Transfers
In her Statement of Proposed Disposition, and in her Summation after Trial, Wife makes a claim sounding in equitable distribution for the return of certain funds that Husband wire transferred to Egypt during the course of the marriage. Wife seeks a distributive award, or credit, in the amount of at least $263,000, representing one half of the amounts transferred.
Wife's testimony on the subject of wire transfers was speculative, at best. Wife testified that she only learned of the financial transfers in 2013 upon discovering certain financial documentation in the marital home. (See Pl.Ex. 5). According to the documentation she found, Wife surmised that Husband had wired the approximate sum of $526,000 to himself and his brother in Egypt in 2008 and 2009.
A review of the documentation entered into evidence indicates that between August 4, 2008 and December 15, 2009, Husband made twelve wire transfers utilizing a branch of Sovereign Bank located in Brooklyn, New York. All of these transfers were sent to a branch of Barclay's Bank in Egypt. Two of these transfers were between Husband and his brother in the combined sum of $55,000. The balance of the transfers were between Husband and himself, in the combined sum of $471,000. Only one of these financial documents (8/25/08) has an indication of a purpose for the transfer, the "reference" area of that transfer document contains the words "To Buy a House." While Wife admitted that she could only "guess" as to where this money came from, she suggested that it might have come from a home equity line of credit taken against the Brooklyn Property.
In addition to the documentation indicating wire transfers, Wife further testified that in 2014 she was contacted by the Internal Revenue Service regarding a tax debt that was somehow related Husband's money transfers. After reviewing the IRS documentation, Wife speculated that Husband must have transferred between $800,000 and $1,000,000 to Egypt, however, Wife did not specify how she came to this calculation, nor did she provide any documentation regarding the same. The only information provided by Wife regarding an IRS debt was an Order from the United States Tax Court absolving her from liability. (See Pl Ex. 8). There is no indication in that document as to why the parties had a tax deficiency.
In relation to the wire transfers, Husband credibly testified that in 2006 he took out a home equity line of credit against the parties' property located in Brooklyn. In 2008 he utilized the line of credit to withdraw the sum of $305,000 for the purpose of transferring the same to Egypt for a business venture. (Tr. 7/22/16 pg.65). Husband further credibly testified that this business venture was a private medical clinic from which Wife could run her practice.The clinic would also employ other doctors as an additional source of income to the parties. Husband claims that Wife was aware of the plan, and that she agreed with it as she no longer wished to reside in the United States due to her difficulty in becoming licensed to practice medicine here. Husband detailed at least one occasion when Wife visited the clinic's proposed location and she indicated that it was a good size. The Court does not credit Wife's claim that she knew nothing about Husband's plan to open a clinic.
As Husband was practicing in the United States while the clinic was being renovated, he partnered with a man by the name of Dr. Yasser Assal to handle the Egyptian end of the transaction.In accordance with their business contract, Husband would be primarily responsible for funding the venture, while Dr. Assal was handling the day to day operations in Egypt. Husband testified that the total amount that he sent to establish this clinic was in the vicinity of $520,000. Husband claimed that the money was used primarily to rent and renovate a building, and to purchase medical equipment and furniture for the same. When posed with a question as to where he obtained the balance of the funds in excess of the $305,000 taken from the Brooklyn property, he indicated that he funds came from his business profits.
Husband testified that the clinic opened in 2009 and was "partially operational" throughout 2010. The clinic had employees, including nurses and doctors. (Tr. 7/22/16 pgs. 72–73;116). As to the ultimate outcome of the venture, Husband credibly testified that he had to exit the partnership in or around 2011. Husband claims that he cut ties with his partner, and was forced to end this joint venture because he could not come up with additional money required. Under his business contract, Husband owed an additional 4 Million Egyptian Pounds to his partner that he could not produce. As Husband's failure to provide additional funds was arguably a breach of the contract, he was sued by Dr. Assal. That lawsuit is still pending in Egypt, with Husband allegedly facing incarceration if he does not pay the rest of the money he owes under the contract. (Tr. 7/22/16 pgs.118–120).
While Husband's story regarding the outcome of his alleged Egyptian business venture was inconsistent at times, Wife did not offer a counter narrative as to what occurred with the money.This is relevant because it is the basic burden of a party seeking equitable distribution of an asset to establish the existence of that asset, that the asset is marital and nature, and to offer a value for the same. See Rudish v. Rusish, 150 AD3d 1291 (2d Dept.2017). Here, Wife failed to establish anything other than that fact that Husband transferred money to Egypt during the marriage, a fact that Husband admits. She did not offer any testimony, or documentation to establish that the money still exists in an account, or in some other tangible form (such as real property). She further offered nothing that would disprove Husband's claim that he attempted to start a clinic in Egypt, but that the business venture failed and the money lost.
After consideration of the facts indicated above, Wife's request for equitable distribution of the sum of $263,000, representing one half of the monies transferred by Husband to Egypt during the course of the parties' marriage is hereby denied. Generally, a court determining equitable distribution "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." Caracciolo v. Chodkowski, 90 AD3d 801 (2d. Dept.2011) ; See also, Kessler v. Kessler, 118 AD3d 946 (2d Dept.2014). Here, Wife could not offer any evidence that a sum of money, or any tangible asset related to the expenditure of that money, was in existence at the commencement of this action. Accordingly, Wife failed in her basic burden of proof to identify the existence of a marital asset that would be subject to equitable distribution, and to establish its value. See Elsayed v. Edrees, 141 AD3d 503 (2d Dept.2016) ; See also, Weiss v. Weiss, 106 AD3d 491 (1st Dept.2013) ; Allocco v. Allocco, 152 Misc.2d 529 (Sup.Ct. N.Y. Cty.1991).
Moreover, Wife's general claim that Husband's money transfers during the marriage amounted to "marital waste" is unsupported by the record. Even if the Court were to go back in time and second-guess the parties' financial decisions, the Court does not credit Wife's account that she knew nothing about Husband's plan to open a clinic. While she may not have known the financial details of the same, or may not have anticipated that the venture would fail, the Court credits Husband's account that Wife was aware of the business venture, and that it would have allowed her to practice medicine in Egypt.
e. 2008/2009 I.R.S. Tax Debt
During trial, Wife established that in or around 2014 she received documentation from the Internal Revenue Service which indicated that she and her Husband jointly and severally owed the Federal Government a tax debt, with penalties, representing underpayments in tax years 2008 and 2009. Wife, in response, contacted the Legal Aid Society who assisted her in filing for innocent spouse relief under I.R.C. § 6015(c). Wife now seeks a ruling from this Court finding that any tax debt owed to the Federal Government for these two years be deemed 100% attributable to Husband for purposes of equitable distribution.
Husband testified that in 2008 or 2009 he was contacted by the IRS due to a tax debt. Husband claims that this tax debt occurred because he had hired a new accountant in Brooklyn by the name of "Raymond" who made an error on his tax return. (Tr. 7/22/16 pg.80). Husband established that as of the time of trial he still owed the federal government "tens of thousands" of dollars relating to both his business taxes and his personal taxes. As of Husband's direct testimony on September 14, 2016, the IRS audit was still ongoing. Husband testified that he owes approximately $62,000 for tax year 2008 and $49,000 for tax year 2009. Husband has hired an attorney to represent him in his ongoing settlement negotiations with the IRS.
Like assets, debts incurred during a marriage are subject to the principles of equitable distribution. See Morales v. Carvajal, 2017 N.Y. Slip Op 05945 (2d Dept.2017). Tax liabilities generally fall under the category of debts that should be distributed. See Schack v. Schack, 128 AD3d 941 (2d Dept.2015). However, when a prior Court has determined that a party is entitled to "innocent spouse" protection, the Matrimonial Court has discretion to determine that the protection afforded by the prior Court should be extended to the principles of equitable distribution. See Cooper v. Cooper, 84 AD3d 854 (2d Dept.2011).
By Order of the United States Tax Court dated July 1, 2015 (Pl.Ex.8), Wife was adjudicated to be an innocent spouse under the terms of I.R.C. § 6015(c) and found to be not liable for tax debts and penalties for tax years 2008 and 2009. Accordingly, after consideration of the factors above, including the fact that Wife was granted innocent spouse protection by the Federal Tax Court, 100 % of any tax liability from calendar years 2008 and 2009 are hereby distributed 100% to Defendant Husband.
On September 15, 2016, Husband testified that he was unsure if the IRS had put a lien on the marital home in relation to the tax debts, but that they had threatened to lien this property. (Tr. 9/15/16 pg. 117). In the event that a tax lien has been placed on the property, the same shall be paid out of Husband's share of the net proceeds of the sale of the marital home (to the extent that those proceeds are sufficient), at closing.
f. Miscellaneous Personalty; Credit Card Debt; Parking Tickets .
There is virtually no information in the record regarding the equitable distribution of personalty, and absolutely no evidence as to the value of any personalty. Accordingly, the Court declines to specifically distribute any personal property owned by the parties.See Moller v. Moller, 188 A.D.2d 807 (3rd Dept.1992) ; see also, LaBarre v. LaBarre, 251 A.D.2d 1008 (4th Dept.1998). Instead, the Court finds that each party shall be entitled to the items of personal property currently in their possession, including all of the property in their current residences and the cars that they are currently driving.
During trial, Husband indicated that he has various outstanding credit card debts consisting of both marital debts and debts incurred during these divorce proceedings. Generally, credit card debt incurred during the marriage is subject to the principles of equitable distribution. See Rizzo v. Rizzo, 120 AD3d 1400 (2d Dept.2014). Here, however, there is insufficient evidence in the record for the Court to determine the amount, and purpose, of debt that existed at the commencement of this action to allow an equitable distribution of the same. For these reasons, all credit card debt shall remain the responsibility of the person who owes it by operation of contract. See Bernholc v. Bornstein, 72 AD3d 625 (2d Dept.2010).
During the course of the pre-trial proceedings in this action Husband was ordered to transfer one of the marital vehicles, a 2000 Nissan Quest Van, to Wife. (See SFO 4/16/13). At trial, Husband credibly testified that he complied with this Court's Order, but that Wife responded by abandoning the Van on the street where it accumulated $2,100 in tickets, was booted, towed, and ultimately destroyed by the City Marshall. (Tr. 9/15/16 pgs. 103–105). Husband now seeks reimbursement for the tickets, which were issued in his name, plus money that he paid for insurance on that vehicle in the amount of $4,000, together with reimbursement for repairs made to that vehicle in the amount of $1,100.
In response, Wife attempted to establish that the tickets should be Husband's responsibility because he never switched the registration over to her name, and thus that she couldn't drive the van. In sum and substance, Wife argues that since she couldn't drive the van, leaving it in the street while it collected tickets was her only option. The Court finds Wife's argument to be unpersuasive for three reasons. First, and foremost, it is not a requirement in the State of New York that a car be registered in your name before you can legally drive it. In this case, Wife would have simply been diving her Husband's car. Second, even assuming that Wife's logic were correct, Husband was never ordered to change the registration. The Short Form Order at issue, dated April 16, 2013, simply required Husband to "leave the Nissan Quest (2000) along with the keys and supporting documentation with Ms. M. at * * Pamela Lane." It is undisputed that Husband complied with this Order. Finally, Wife could have, and should have, parked the vehicle in a place where it would not have acquired tickets, or sought relief from this Court. Crediting Wife's testimony, the Court finds that Wife's abandonment of the marital vehicle, which ultimately resulted in its destruction, amounted to the wasteful dissipation of that asset. See Renck v. Renck, 131 AD3d 1146 (2d Dept.2015).
After consideration of the facts above, the Court finds that Husband is entitled to a credit in the amount of $2,100 representing the sum of the tickets and fees levied against him due to Wife's abandonment of the marital vehicle. As neither party offered evidence as to the market value of the vehicle, the Court cannot distribute the same. However, the Court find's Husband claim for reimbursement for insurance payments and prior repairs unpersuasive, as they did not result from Wife's wasteful dissipation. Rather, Husband's obligation to maintain insurance for the vehicle originated due to the "automatic orders" set forth in 22 NYCRR 202.16–A. Husband's obligation to maintain insurance for the vehicle existed whether or not Wife chose to drive it. In regard to the repairs, Husband voluntarily made those repairs before giving the vehicle to Wife.
Husband shall be entitled to apply this $2,100 credit against the sum he owes Wife in relation to the distribution of "S. Care Corp.," thus reducing that distributive award from the sum of $25,500 to the sum of $23,400 to be paid out of the proceeds of the sale of the former marital home (see above).
Maintenance
Wife's first application for maintenance was made in her Summons and Verified Complaint dated April 25, 2013. In her Summation after Trial, Wife requests the sum of $1,000 a month in durational maintenance until both children become emancipated. Considering the age of the parties' youngest child, Wife arguably seeks maintenance for a duration of approximately nine years. While Husband admits that he is currently Wife's only source of income, he objects to the award sought by Wife, claiming that it is inconsistent with the fact that she is a Medical Doctor who is in the process of becoming licensed in New York State. In sum and substance, Husband argues that Wife should be capable of supporting herself in the near future.
"The overriding purpose of a maintenance award is to give the [receiving] spouse economic independence, and it should be awarded for a duration that would provide the recipient with enough time to become self-supporting." Sirgant v. Sirgant, 43 AD3d 1034 (2d Dept.2007). The amount and duration of maintenance is a matter committed to the sound discretion of the trial court based upon the unique facts of a case. See Lamparillo v. Lamparillo, 12 N.Y.S.3d 296 (2d Dept.2015). While a maintenance award is intended to support the receiving spouse, it should also be of a limited duration such that it encourages the receiving spouse to become self-sufficient and economically independent. See Niak v. Niak, 125 AD3d 734 (2d Dept.2015) ; See also Sprole v. Sprole, 145 AD3d 1367 (3rd Dept.2016). When determining a maintenance award, the Court is directed to review a list of enumerated factors, and indicate which factors it considered in making its award. See DRL § 236(B)(6)(a)(1–20). Notably, this case was filed some three years before the recent 2016 legislation that mandates the use of statutory calculations when determining post-divorce maintenance awards.
If one were to calculate the 2016 post-divorce maintenance guidelines utilizing Husband's 2015 income of $68,403 and Wife's income of $0, the result would be an award of $1,140 for a discretionary period of time equal to 15% to 30% of the length of this marriage (between 1.8 years and 3.6 years).
In the case at bar the Court has considered the following factors (1) the standard of living of the parties; (2) the comparative income of the parties; (3) the equitable distribution of property; (4) the duration of the marriage; (5) the age, health, education, and future earning capacities of the parties; (6) the ability of the party seeking maintenance to become self-supporting; (7) allegations of domestic violence;(8) the need for one party to incur education or training expenses and; (9) the presence of children in the recipient spouses' household. See Carroll v. Carroll, 125 AD3d 710 (2d Dept.2015) ; See also, Brian v. Brian, 36 AD3d 847 (2d Dept.2007).
a. Age, Duration, Health
The parties were married July 30, 2001 making this a marriage of moderate duration. Wife was born on November 1, 1976, and thus is currently 40 years old. Wife testified she suffers from post-traumatic stress disorder and is currently under the care of a Psychiatrist. Wife has been prescribed Zoloft which she takes once a day. During the course of this proceeding, Wife has checked herself into the hospital, claiming to have panic attacks. Husband was born on May 11, 1968, and thus is currently49 years old. There is no testimony in the record regarding Husband's health, however, he self-reports that his health is "fair" in his sworn Statement of Net Worth. (See Pl.Ex. 3).
b. Comparative Incomes/Ability to Become Self Supporting
When examining the comparative current incomes, and future income potential of the parties, the Court credits Wife's testimony that she has been out of the workforce since the birth of the parties' first child in 2002. However, it is undisputed that Wife is a trained physician who was trained, and is licensed to practice medicine in Egypt. While Wife has not yet been licensed to practice in the United States, she credibly testified that she has taken two out of the three steps necessary to do so. Wife has passed the U.S.M.L.E. Exam and the C.K. Part Exam and is only awaiting an available residency program. Wife has taken considerable steps towards obtaining a residency position, as she has entered the "residency match program" and has been working full time as an unpaid medical intern to increase her employability. After three or four years as a paid medical resident, Wife would be fully able to practice medicine in the United States and earn at least as much, if not considerably more, than Husband. The Court finds that Wife should be capable of supporting herself in the near future if she continues upon her current career path.
Wife testified that it was her understanding that medical residents earn approximately $35,000 to $45,000 a year.
Husband is currently gainfully self-employed as the sole owner of a physical therapy practice known as S. Care Corp. As indicated by the report of the business evaluator, Heidi Muckler, the business has a value of approximately $170,000. According to Husband's 2015 tax return, Husband earned the gross sum of $68,403 from his self-employment through S. Care Corp.Husband's corporate tax return from 2015 indicates that S. Care Corp. earned gross receipts of $123,833 with a net business income of $66,758. Husband testified at trial that this divorce has had a negative effect on his earning capacity, and that he has not established a regular system for paying himself. (Tr. 9/14/16 pg.48). Rather, Husband takes whatever business profits that he can at the end of each month and deposits them into his personal account as income.
At trial, Wife attempted to establish that Husband earned, or was capable of earning, an annual gross income of $135,161. However, Wife was unclear as to how she calculated that figure. Wife first suggested that she obtained this sum from Husband's tax return, however, as indicated above, Husband's 2015 tax return indicates income of $68,403. Wife then clarified that she remembered that figure from either a 2008 or 2009 tax return. (Tr. 8/23/16 pg.36). However, Husband's 2008 or 2009 tax return was not offered into evidence. Moreover, it is undisputed that in 2008 and 2009 Husband was the owner / operator of a different business, known as "Prolix Care Corp." This business closed in 2012 shortly after the creation of "S. Care Corp." Husband credibly testified that he could charge $90 an hour for his services when he owned Prolix, as he had a lucrative contract with the Department of Education. However, Husband has since lost that contract due to child protective services' involvement with this family. Husband's current corporation is only capable of charging $60 an hour due to the nature of its work and the lack of this lucrative contract.
While it is undisputed that Husband is the monied spouse in this action, Wife's "belief" as to his earning potential is unsupported by the record. It is clear from his tax returns over the last few years that Husband is capable of earning a gross income in the vicinity of $50 to $70 thousand dollars a year from his business. Accordingly, the Court finds that Husband's 2015 tax return is a fair reflection of his earning capacity. Notably, Husband earned more in 2015 than he has in the three preceding years.
In 2011 both parties jointly filed taxes indicating Husband's income of $51,340, in 2012 the parties again jointly filed taxes indicating Husband's income of $49,430, in 2013 Husband filed on his own and claimed $58,361, and in 2015 Husband claimed $68,403. Husband's 2014 tax return was not offered into evidence.
c. Standard of Living
When determining a maintenance claim, the Court's primary concern is whether the spouse seeking maintenance can become self-supporting. See Walter v. Walter, 38 AD3d 763 (2d Dept.2007). However, in so determining, the Court is directed not to limit their consideration to a basic level of self-support. Rather, the Court is directed to consider the parties' established standard of living. See Hartog v. Hartog, 85 N.Y.2d 36 (1995). A spouse in a marriage of moderate to long duration is entitled to an award of maintenance that will allow him or her to become self-supporting at a level approximate to the standard of living that they enjoyed during the marriage. See Summer v. Summer, 85 N.Y.2d 1014 (1995).
At trial, little to no evidence was offered by either party to describe their standard of living, or the standard of living of the parties' children. Accordingly, the Court has very little information from which it can properly consider this factor. From the little evidence available, such as the fact that the parties drove a late model Nissan van, it appears that the parties lived a relatively modest lifestyle. However, Husband does not contest that he has been Wife's sole source of income throughout the marriage. Husband testified that during their marriage he would provide "whatever money she needed" for her reasonable expenses (Tr. 7/22/16 pg.132).
d. Equitable Distribution
Among the factors to be considered by the Court when determining a maintenance award is a contemporaneous award of equitable distribution. See Falgoust v. Falgoust, 15 AD3d 612 (2d Dept.2005).
The assets that were accumulated by the parties during their marriage have been equitably distributed as indicated at length herein. For the reasons set forth above, this Court has determined that Husband should receive a larger portion of the real property located in Egypt, while Wife will receive more liquid assets in the form of a substantial distributive award from Husband's business, and 55% of the net proceeds from the sale of the parties' former marital residence.
As related to Wife's request for an award of maintenance, the Court notes that Wife will have access to considerable liquid funds after the sale of the marital home. While Husband will be left with more real property, that property is located in Egypt, is of unknown value, and is at least co-owned with his siblings.
e. Domestic Violence
Among the factors to be considered by the Court when determining maintenance, is the presence of domestic violence that has prohibited, or hindered, the applying spouse's ability to become self-supporting.See DRL § 236(B)(6)(a)(7) ; See also, D.L. v. K.G., 41 Misc.3d 1231 (Sup.Ct.Kings.Cty.2013).
Here, both parties have claimed throughout this litigation that they were victims of domestic violence perpetrated by the other. Both parties have filed, and subsequently withdrawn, family offense petitions, and both have been the Defendants in various criminal cases related to domestic violence. Notably, all of the criminal cases have been dismissed and all civil and criminal orders of protection have been vacated.
Despite a general lack of attention to issues of domestic violence at trial, Wife credibly testified that Husband was at times cruel to her during the marriage, and that the parties got into at least two physical altercations. Wife further testified that the violence often occurred when she attempted to get involved in the parties' finances. (Tr. 7/21/16 pg.131). Wife credibly testified that Husband's actions caused her considerable stress, and ultimately caused her to seek the care of a Psychiatrist. Wife claims that she has been diagnosed with post-traumatic stress disorder, and has been prescribed Zoloft.
As related to Wife's claim for maintenance, the Court credits Wife's testimony and finds that Husband has undertaken actions that have hindered her ability to advance her career during the marriage. However, to Wife's credit, she has taken considerable steps towards becoming a licensed physician in the United States since the commencement of this divorce proceeding.
f. Subject Children / Foregone or Delayed Career Opportunities
Finally, the Court has considered the presence of children in the recipient spouses home. See Gordon v. Gordon, 113 AD3d 654 (2d Dept.2014). It is undisputed that Wife has been the children's primary caretaker during the course of the marriage. Both Husband and Wife credibly testified that they jointly decided that Wife would take care of the children at the expense of her career goals, While Husband would be the primary financial provider for the family.
While during the parties' marriage Wife delayed her career goals to raise her children, and maintain the house, she credibly testified that she is currently working a full-time internship at a local hospital. Accordingly, Wife has clearly established a schedule in which she can maintain employment, while still fulfilling her role as the children's custodial parent.
Rehabilitative Maintenance Award
After considering the factors above, with considerable weight being afforded to the parties' respective incomes, their earning potentials, and Wife's ability to become self-supporting, the Court hereby determines that Wife is entitled to an award of durational rehabilitative maintenance.See Hathaway v. Hathaway, 16 AD3d 458 (2d Dept.2005). Accordingly, the award of maintenance herein is intended to help Wife meet her reasonable needs while at the same time acting as an incentive for her to continue her diligent steps towards becoming licensed in the United States, such as undertaking additional volunteer positions or training. See Naik v. Naik, 125 AD3d 734 (2d Dept.2015) ; See also, Griggs v. Griggs, 44 AD3d 710 (2d Dept.2007).
Wife has credibly testified that the process of becoming a licensed medical doctor in the United States is extremely competitive and difficult, especially for a foreign trained physician. However, Wife has also indicated, at length, the various steps that are necessary, and established that she has fulfilled most of them. Wife only awaits being admitted into a residency program, and she has taken considerable steps to improve her chances to be granted such a position. Accordingly, the Court finds that Wife's demand for a nine-year duration is unsupported by the record. Wife did not suggest that it will take her nine years to become licensed. In fact, while Wife did not offer a time frame, the record supports a conclusion that through her impressive efforts, including working in a full-time position for free, that Wife should be employed shortly. Moreover, upon the sale of the marital home Wife will have considerable funds that she will be able to utilize for her own short term support.
Accordingly, Wife is hereby awarded a period of two and a half years of maintenance (30 months) at the sum of $1,000 a month. See Acosta v. Acosta, 301 A.D.2d 467 (1st Dept.2003). This award shall be considered rehabilitative maintenance to afford Wife the financial support necessary while she continues to take the necessary steps towards becoming licensed to practice medicine. See Ferraro v. Ferraro, 257 A.D.2d 596 (2d Dept.1999).This award, along with her equitable distribution award, will provide Wife a sufficient financial cushion to allow her to continue working as an intern, or obtain additional training, to improve her chances at being accepted into a residency program. See Samimi v. Samimi, 134 AD3d 1010 (2d Dept.2015).
This award of maintenance shall be payable as follows: The first payment of maintenance under this Decision shall be due on or before September 18, 2017. As the amount of maintenance awarded herein is the same amount that Husband has been paying pendente lite, he can continue paying in accordance the schedule that he has already been following. (See SFO dated 4/16/17).
The award of maintenance issued herein shall end upon the death of either party or Wife's remarriage. See In re Riconda, 90 N.Y.2d 733 (1997). This award shall be taxable to Wife and tax deductible to Husband. See Girgenti v. Girgenti, 81 AD3d 886 (2d Dept.2011).
Child Support
Wife seeks child support for the minor children of this marriage. Wife's first request for child support was made in her Summons and Verified Complaint dated April 25, 2013. There are two subject children of this marriage, Y.R. and M.R. By agreement of the parties placed on the record of August 16, 2016, the parties agreed that Wife would have sole custody of the subject children. (See SFO dated 5/23/17).
The Child Support Standards Act (CSSA) presumptively results in the correct amount of child support to be awarded to the custodial parent. Applying the statutory percentage of 25% (two children) to the combined parental income will provide the appropriate level of support to meet the basic needs of the subject children.
When determining child support under the guidelines, the Court is directed to utilize the income as it was, or should have been, reported on the parties most recent tax return. See DRL § 240(1–b)(b)(5)(i) ; See also, Matter of Miller v. Fitzpatrick, 147 AD3d 845 (2d Dept.2017) ; Matter of Lynn v. Kroenung, 97 AD3d 822 (2d Dept.2012).
The most recent tax information provided by Husband is his 2015 Federal tax return which indicates gross income of $68,403 from his employment with "S. Care Corp." While Wife attempted to establish that Husband is capable of earning the sum of $135,161, the trial record does not support the imputation of income to Husband. Rather, Husband's earning history in recent years is in accordance with his 2015 income. In fact, Husband earned more in 2015 than he has in recent history.
When determining child support, the Court must deduct payments of Social Security, Medicare and New York City taxes that have been "actually paid". See Kaufman v. Kaufman, 102 AD3d 925 (2d Dept.2013). However, when a party is self-employed, the proper deduction is the "self-employment tax." See Matter of Myesha M. v. Omel McL., 61 AD3d 534 (1st Dept.2009). Here, the trial record is devoid of information regarding the amount of applicable taxes that Husband "actually paid." In fact, Husband hasn't even indicated the method by which his business pays him, or he pays himself, other than a statement that he takes some of his business profits at the end of each month.(Tr. 9/14/16 pg.48).From the limited information available in the record, it appears that Husband is self-employed, however, the section for self-employment taxes in his 2015 tax return has been left blank. (See Def. Ex. L). Moreover, where Husband's 2015 New York State tax return would indicate the amount of "local tax" he paid, Husband has only provided his 2015 federal tax return. As Husband has not provided sufficient information for the Court to determine what applicable taxes he "actually paid" the Court will use the entirety of his gross income for purposes of calculating child support.
In addition to a deduction of allowable taxes, both the Family Court Act, and Domestic Relations Law allow for a deduction of prospective maintenance payments, so long as the Order includes an automatic adjustment in child support at the time the maintenance term ends. See FCA § 413(1)(b)(5)(vii)(c) ; DRL § 240(1–b)(b)(5)(vii)(c). According to the terms of this Decision Husband is required to pay rehabilitative maintenance to his Wife for a period of the next 30 months, or two and a half years. Thus, in the upcoming year Husband will be required to pay Wife the sum of $12,000. Deducting that amount from his gross income results in an adjusted income of $56,403 for the purposes of calculating child support.
The CSSA statutory formula for calculating child support also considers the income of the custodial spouse, in this case Wife. It is undisputed that Wife is currently unemployed, however, she admits that she has been receiving the sum of $1,000 a month as and for pendente lite maintenance since April of 2013. Under the United States Tax Code, maintenance is taxable as income to the receiving spouse. See 26 USCS § 71 ; See also, Chaudry v. Chaudry, 95 AD3d 1058 (2d Dept.2012) ; Markopoulos v. Markopoulos, 274 A.D.2d 457 (2d Dept.2000).
Wife has provided her 2015 tax return into evidence. (See Pl.Ex. 2). According to her return, Wife earned total income of $24,540. $12,000 of this income represents the pendent lite maintenance paid by Husband, while the remaining $12,540 is reflected as "business income." In regard to this business income, Wife credibly testified at trial that she worked for a few months between April of 2015 and January of 2016 as an Arabic translator earning approximately $250–$300 a week. (Tr. 7/21/16 pg. 143). However, Wife indicated that she had to end this employment in January of 2016 as she started a full-time medical internship at a local area hospital. Wife testified that she made this choice in order to better her chances of being accepted into a residency program, and becoming a licensed physician in the United States.
The starting point for a determination of a party's income for purpose of child support is their most recent tax return. See Matter of Dailey v. Govan, 136 AD3d 1029 (2d Dept.2016). However, the Court is authorized to utilize more recent income information, such as income from a tax year not completed, when available and appropriate. See Matter of Taraskas v. Rizzuto, 38 AD3d 910 (2d Dept.2007) ; See also Kellogg v. Kellogg, 300 A.D.2d 996 (4th Dept.2002).
Here, Wife's 2015 tax return is not reflective of her current earning capacity as she is currently working full time as an unpaid intern in order to further her career. Accordingly, while Wife will continue receiving $12,000 a year in maintenance pursuant to the terms of this Decision, it is undisputed that she is no longer working as a translator, and thus has not continued to earn the additional $12,540 indicated on her 2015 tax return. While Wife arguably could have continued to work as a translator, the Court agrees that her time is better spent working towards obtaining her medical license. Under these circumstances, the Court finds it appropriate that Wife's income should be limited to the maintenance award in the amount of $12,000. Moreover, while Wife paid the sum of $1,772 in self-employment tax in 2015, the Court finds that it would be inappropriate to deduct the same from the $12,000, as that would result in an inflated tax deduction. The self-employment tax directly relates to Wife's income from translation, which the Court has not considered.
Wife's self-employment tax of $1772 is reflective of a deduction based upon a total income of $24,540.
Utilizing the income figures indicated above, the combined parental income for purposes of calculating child support is $68,403. Applying the statutory percentage of twenty five percent (25%) to the combined parental income results in a combined child support obligation of $17,101 for the two subject children of this marriage. Husband's pro rata share of this guidelines child support obligation is 82% and Wife's share is 18%. Accordingly, Husband's child support obligation equates to 82% of $17,101 which calculates to the sum of $14,023 a year, or $1,169 a month. For the reasons set forth above, Husband is hereby ordered to pay child support in the amount of $1,169 per month commencing with a first payment due on or before September 18, 2017.
As the final award of child support herein is different from the pendente lite amount of child support, a Short Form Order shall be issued in conjunction with this Decision modifying the pendente lite amount to reflect the amounts herein until such time as the Judgment of Divorce is signed.
This child support award may be revisited by a Court of competent jurisdiction upon a showing of "(i) a substantial change in circumstances; or (ii) that three years have passed since the order was entered, last modified or adjusted; or (iii) there has been a change in either party's gross income by fifteen percent or more since the order was entered, last modified or adjusted." See Mejia v. Mejia, 106 AD3d 786 (2d Dept.2013). Moreover, either party is hereby authorized to make an application, before any Court of competent jurisdiction, for an "automatic" recalculation of child support when the term of maintenance indicated herein ends. See FCA § 413(1)(b)(5)(vii)(c) ; DRL § 240(1–b)(b)(5)(vii)(c).
1. Retroactivity
The awards of child support and maintenance Ordered herein shall be retroactive to the first time an application for support was made. See Schack v. Schack, 128 AD3d 941 (2d Dept.2015).Wife's applications for child support and maintenance were first made by her Summons and Verified Complaint, which was filed on April 25, 2013.
On the record of April 16, 2013, the parties entered into a Pendente Lite Order on consent. While the present divorce action was not yet technically filed, the parties were before this Integrated Domestic Violence Court in relation to then pending Family Court and Criminal Court actions. The parties agreed to enter into the Pendente Lite Order in anticipation of the commencement of this divorce action, which occurred a few days later. By the terms of the parties' agreement, Husband would pay the sum of $3,000 a month to Wife on or before the 18th of each month thereafter. While this support was unallocated at the time, the parties clarified at trial that it was understood to represent $1,000 a month in maintenance, and $2,000 a month in child support. Husband established that he was up to date with his pendente lite payments as of the time of trial.
These figures were derived from a Separation Agreement that existed between the parties at that time. Wife moved to enforce that alleged agreement by Notice of Motion dated 12/24/2013, Husband opposed that application. By Decision and Order dated August 19, 2014, this Court held that the parties' agreement was unenforceable as a matter of law. However, the parties continued the amount of support contained therein.
As indicated above, Husband is required by the terms of this Decision after Trial to pay the sum of $1,000 a month in prospective rehabilitative maintenance, and the sum of $1,169 a month in prospective child support. As these figures are equal to, or in excess of, the pendente lite support amounts, and the payments started before the commencement of this action, there is no need to determine the issue of retroactivity.In any event, Husband is clearly entitled to credits for pendente lite payments that would exceed any retroactive award. However, despite the fact that the pendente lite amount of child support is in excess of the final award of child support, Husband is not entitled to reimbursement, as public policy prohibits reimbursement for overpayments of child support. See Johnson v. Chapin, 12 NY3d 461 (2009) ; See also, Kaplan v. Kaplan, 130 AD3d 576 (2d Dept.2015).
2. Children as Tax Dependents
While not specifically addressed at trial, the Court would be remiss if it were not to address the subject of who can claim the subject children as Tax Dependents. After considering the totality of the circumstances, the Court finds that the parties shall have the right to claim the subject children as tax dependents on alternating years.Husband shall have the right to claim the subject children in 2017. In 2018 Wife will claim both children, with the parties alternating years from then on.
3. Life Insurance.
As requested in Wife's Verified Complaint, Husband shall be required to maintain life insurance in the amount of at least $129,000($30,000 for maintenance and $98,161 for child support) to insure the payment of his maintenance and child support obligations in the event of his death. See Alleva v. Alleva, 112 AD3d 567 (2d Dept.2013) ; See also, Sutaria v. Sutaira, 123 AD3d 909 (2d Dept.2014). The beneficiary of this policy shall be Wife.
Husband shall have a right to adjust the amount of this life insurance policy (declining term) once a year to reflect the amount due under the balance of the maintenance and child support terms. See Levitt v. Levitt, 97 AD3d 543 (2d Dept.2012). Husband shall also be able to adjust the amount of this insurance policy upon the end of maintenance, and upon the emancipation of either child.
4. Additional Child Support Expenses
The trial record is devoid of discussion of additional child support expenses. However, the Court notes that once Wife obtains gainful employment the subject will likely become relevant. Accordingly, the Court shall adhere to the general rule that the cost of all reasonable and necessary unreimbursed medical and reasonable and necessary childcare expenses should be split on a pro rata basis. See Cassano v. Cassano, 85 N.Y.2d 649 (1995) ; See also, Leuker v. Leuker, 72 AD3d 655 (2d Dept.2010). Husband's pro rata share shall be 82% and Wife's pro rata share shall be 18%. See Harris v. Harris, 97 AD3d 534 (2d Dept.2012). As the custodial parent, Wife shall have the obligation of sending Husband any bills to which she seeks financial contribution. Husband shall be obligated to pay the same within 20 days of receipt, unless the specific bill provides for a longer period of time.
Counsel Fees
At trial, Wife seeks a final award of counsel fees in the sum of $43,000 for her attorney's handling of the entirety of this divorce proceeding. Wife bases this claim upon DRL § 237(a), and argues that she is the non monied spouse in this action. In support of her claim, Wife has offered a copy of her attorneys' retainer agreement, together with legal billing. (See Pl. Exs. 16 & 17).
Husband, in opposition, does not address the issue of whether or not he should be considered the monied spouse in this action. Rather, Husband bases his objection to an award of counsel fees on the language used in Wife's retainer. As argued by Husband, Wife and her attorney agreed to "cap" counsel fees at the sum of $10,000. Husband argues that this agreement between Wife and her attorney should inure to his benefit. In sum and substance, Husband argues that since Wife can never be charged more than $10,000 in this divorce proceeding, he cannot be responsible for any more than that amount, as a matter of law. Husband goes on to state, and Wife's attorney admits, that Husband has already paid the sum of $11,500 in pendente lite counsel fees to Wife's attorney, and that Wife has paid the sum of $7,500 directly to her attorney. Husband further argues that since this combined amount is in excess of the $10,000"cap" Wife's attorney should be required to refund the amount of $6,469 into the marital estate for purpose of equitable distribution.
The relevant language in the retainer agreement between Wife and her attorney, Steven Scavuzzo Esq. is located on page two of the contract. It reads as follows:
"You agree to pay Your Attorney for legal services at the rate of $250.00 per billable hour and $750.00 per each half-day appearance in Court by Steven Scavuzzo Esq. The foregoing rates are valid for services rendered in calendar years 2013 and 2014. In the event that such rates are modified you will be advised and requested to execute an amendment reflecting the new rates. Legal fees in this matter shall be capped at $10,000, not including costs, disbursements, post-judgment enforcement and any appeal You wish to pursue." (See Pl.Ex. 16) (emphasis added).
The issue of Wife's request for counsel fees was argued on the last two days of trial. On September 15, 2016, Wife offered direct testimony as to how much she owed her attorney in counsel fees. Wife twice testified that she owed her attorney the sum of $42,281 as and for attorney's fees related to the present divorce. (Tr. 9/15/16 pgs. 147–148). At no point did Wife address the language in her retainer agreement that indicates that she actually only owed her attorney the sum of $10,000. However, at a bench conference at the conclusion of the record, the issue of the cap was raised by Husband's counsel. As the issue appeared to be of a novel nature, the Court requested memorandum of law from any party who wished to offer one. Wife's counsel provided a memo of law in support of his claim on or about September 28, 2016. Husband's counsel provided opposition on September 29, 2016.
Counsel fees were addressed for a second time on the trial record of September 29, 2016. Husband, in opposition to Wife's claim for counsel fees, raised the "cap" language contained in Wife's retainer agreement. Husband argued that the language precluded an award of counsel fees. In response, and over Husband's objection, Wife re-took the stand to "explain" the agreement. Wife then admitted, for the first time, that she and Mr. Scavuzzo had agreed to a counsel fee cap. However, Wife further testified that she "understood" the language to mean that Wife's attorney would seek any remaining balance over the $10,000 cap from her Husband. (Tr. 9/29/16 pgs. 14–15).
A final award of reasonable counsel fees at the conclusion of a trial is a matter within the sound discretion of the trial court. The issue of counsel fees is controlled by the equities and circumstances of each particular case. See Nicodemus v. Nicodemus, 98 AD3d 605 (2d Dept.2012) ; see also DRL § 237(a). While DRL § 237 permits consideration of many factors, paramount amongst these factors is financial need. See O'Halloran v. O'Halloran, 58 AD3d 704 (2d dept.2009) ; See also, Silverman v. Silverman, 304 A.D.2d 41 (1st Dept.2003). "An award of an attorney's fee will generally be warranted where there is a significant disparity in the financial circumstances of the parties." Cohen v. Cohen, 73 AD3d 832 (2d Dept.2010). The purpose of DRL § 237 is to "redress the economic disparity between the monied spouse and the non-monied spouse. See O'Shea v. O'Shea, 93 N.Y.2d 187 (1999). Other factors to be considered include the relative merits of the parties' positions, and if either party engaged in conduct that resulted in a delay of the proceedings or unnecessary litigation. See Vitale v. Vitale, 112 AD3d 614 (2d Dept.2013). For cases commenced after October of 2010, there is a rebuttable presumption that an award of counsel fees should be granted to the non monied spouse. See Hof v. Hof, 2015 N.Y. Slip Op 06573 (2d Dept.2015) ; See also, Vantine v. Vantine, 125 AD3d 1259 (3rd Dept.2015).
Before considering the merits of Wife's application, Husband's argument regarding the counsel fee "cap" contained in Wife's retainer agreement must be addressed. As indicated above, Husband argues that Wife's attorney should be prohibited from seeking an award of counsel fees due to the clear language in his retainer agreement, and the fact that he has already received counsel fees in excess of the amount permitted therein. As neither party could find relevant caselaw regarding this issue to present in their respective memoranda of law, and this Court could not find applicable precedent in its own research, this appears to be a matter of first impression.
Wife does not contest that she and her attorney agreed to a $10,000 cap. Moreover, despite her efforts to "explain" her "understanding" of the language used in the contract, any such explanation amounts to little more than impermissible parol evidence. See Pavarini McGovern, LLC v. Tag ct. Sq., LLC, 62 AD3d 680 (2d Dept.2009). The Court finds that the language in Wife's retainer agreement is clear and unambiguous on its face, and thus should be enforced in accordance with its terms, with the intent of the parties to be gleaned from the four corners of the document, and not from extrinsic evidence. See Scheriff v. Scheriff, 2017 N.Y. Slip Op 05760 (2d Dept.2017) ; See also Rosenberger v. Rosenberger, 63 AD3d 898 (2d Dept.2009).
Accordingly, When Wife testified that she was obligated to pay her attorney the sum of $42,281, she was at best mistaken. Pursuant to the clear terms of their agreed upon retainer, Wife owes her attorney no more than $10,000, of which she has already paid $7,500. Notably, there is no language in the retainer that would indicate that Wife's attorney "reserves the right" to seek any balance of counsel fees from Husband. Moreover, the retainer does include language indicating that Wife has "not relied on any oral statement" and that the agreement can only be "modified in writing ... signed by both of the parties hereto." (See Pl.Ex. 16).
However, the question remains as to whether the clause capping counsel fees, which was negotiated between Wife and her attorney, inures to the benefit of Husband. Husband argues that he is akin to a "third party beneficiary" to Wife's retainer agreement as he is being asked to pay the hourly amount indicated therein, to the attorney who drafted the agreement. Wife argues that the retainer was drafted for her benefit, and therefore cannot be used to protect Husband.
While this appears to be a matter of first impression, the Court does not find itself without guidance. Matrimonial retainers are highly regulated, and thus are often the subject of scrutiny at trial. These regulations, which were "designed to address abuses in the practice of matrimonial law and to protect the public" are contained in 22 NYCRR 1400. See Hovanec v. Hovanec, 79 AD3d 816 (2d Dept.2010). A failure to abide by these regulations, such as a failure to provide a written bill every 60 days, or the failure to provide a written retainer agreement, or a "statement of client's rights" may preclude an attorney from recovering a legal fee from his or her client. See Matter of Grald v. Grald, 33 AD3d 922 (2d Dept.2006).
In the First, Third and Fourth Judicial Departments, the Appellate Courts have held that the protections of 22 NYCRR 1400, which must be set forth in a written retainer agreement, are protections that only run between attorney and client, as signatories to the retainer contract. For example, the First Department has held that "it is the right of the client, not the adversary spouse, to be billed every 60 days, and the client may waive that right." See Rivacoba v. Aceves, 110 AD3d 495 (1st Dept.2013) ; See also Harrington v. Harrington, 93 AD3d 1092 (3rd Dept.2012) ; Petosa v. Petosa, 56 AD3d 1296 (4th Dept.2008).
However, this Court sits in the Second Judicial Department, which has taken a markedly different view as to the applicability of the provisions set forth in a retainer agreement to the adversarial spouse. In the Second Department, the failure to substantially comply with the retainer requirements set forth in 22 NYCRR 1400 will preclude an attorney's recovery of a legal fee from his or her client, "or from the adversary spouse." See Montoya v. Montoya, 143 AD3d 865 (2d Dept.2016) ; See also, Wagman v. Wagman, 8 AD3d 263 (2d Dept.2004) ; Vitale v. Vitale, 112 AD3d 614 (2d Dept.2013). The Appellate Division has explained the reasoning behind this ruling by holding that "since the plaintiff's counsel was precluded from seeking unpaid fees from the plaintiff, the plaintiff's spouse may not be required to pay such fees." See Rosado v. Rosado, 100 AD3d 856 (2d Dept.2012). This Court finds that while the facts of the cases cited above are different, the reasoning is equally applicable to the issue presently before this Court.
Husband has not argued that Wife's counsel is not in compliance with the rules required for a matrimonial retainer. However, following the Rosado logic, Husband argues that since plaintiff's counsel is precluded from ever seeking more than $10,000 from Wife, that he cannot be required to pay more than that amount, as the protections of the retainer apply equally to him in the Second Department. This Court agrees and finds that clauses of Wife's retainer agreement apply to Husband, so long as Husband is being asked to contribute to the counsel fees owed under that retainer.
Wife's attorney argues in the alternative, that the Court should grant legal fees to Wife under the spirt of DRL § 237 because of "public policy concerns." Wife's attorney argues that non-monied matrimonial litigants would be somehow hindered in acquiring representation if they could not seek counsel fees from the monied spouse in a matrimonial proceeding. (Tr. 9/29/16 pgs. 10–11). While this argument effectively sets forth part of the reasoning behind DRL § 237, it is not persuasive in the unique circumstance before this Court. Husband is not arguing that he cannot be compelled to pay Wife's counsel fees. In fact, he has already paid $11,500 to Wife's attorney. Husband simply argues that he cannot be forced to pay a fee in excess of what Wife would ever have to pay under the retainer. Therefore, a ruling agreeing with Husband does affect the reasoning behind, or purpose of, DRL § 237.
It is well settled law that the main purpose behind DRL § 237 is to level the playing field between the monied spouse and the non-monied spouse. See Kaufman v. Kaufman, 131 AD3d 939 (2d Dept .2015). "The courts are to see to it that the matrimonial scales of justice are not unbalanced by the weight of the wealthier litigants wallet." Saunders v. Guberman, 130 AD3d 510 (1st Dept.2015).
Contrary to Wife's counsel's public policy argument, Wife effectively leveled the playing field the minute she signed the retainer agreement. Wife obtained a competent trial attorney for the sum of $10,000, no matter how difficult, or lengthy the litigation became. Husband, on the other hand, has been required to pay his attorney an hourly rate during the course of this proceeding, without the benefit of a cap. Thus, if anyone was at a financial disadvantage when it came to the issue of counsel fees, it was Husband, not Wife.
Moreover, the Court finds that public policy also favors "predictably and clarity" in regard to contracts, especially matrimonial retainers. See Sport Rock Int'l v. Am. Cas. Co. of Reading, 65 AD3d 12 (1st Dept.2009) ; See also, Moran v. Erk, 11 NY3d 452 (2008). Here, Husband was entitled to rely upon a fair and usual reading of Wife's retainer agreement. Upon reading that agreement it would be fair for him to conclude that since his Wife was not required to pay more than $10,000, and since the retainer did not contain a provision authorizing Wife's attorney to seek fees in excess of the cap (from either spouse), that he would not have to pay any more than $10,000.
For the reasons set forth above, and after careful consideration of the arguments raised by Wife and Husband, the Court finds that Husband was entitled to rely upon the aspect of Wife's retainer that limited her counsel fee exposure in this matter. As Wife could not be charged more than $10,000, it would be inequitable to require Husband to pay her attorney more than that contracted for sum. See Mulcahy v. Mulcahy, 285 A.D.2d 587 (2d Dept.2001) ; See also, Wagman v. Wagman, 8 AD3d 263 (2d Dept.2004) ; Bentz v. Bentz, 71 AD3d 931 (2d Dept.2010). As it is undisputed that Husband has already paid the sum of $11,500 to Wife's counsel, Wife's application for a final award of counsel fees is hereby denied.
Husband's application for a return of $6,469 to the marital estate for purposes of equitable distribution is hereby denied. While Husband paid slightly more than the $10,000 cap, the retainer limitation at issue above did not include "costs and disbursements." Wife's attorney has indicted that he has expended the sum of $2,531 in costs and disbursements throughout this litigation. Accordingly, Wife's attorney had a right to seek those costs and disbursements from Husband. The Court hereby finds that the sum paid by Husband above the cap, in the amount of $1,500 shall be deemed his contribution towards those costs and disbursements. As to the balance of the monies paid by Wife over the $10,000 cap, the Court notes that she has not made an application for a return of the same. Thus, the Court need not address that issue.
Conclusion
For the detailed reasons set forth above, a Judgment of Divorce is granted to Plaintiff Wife on the grounds that the marriage has broken down irretrievably pursuant to DRL § 170(7). As to ancillary relief: Wife is granted rehabilitative maintenance in the amount of $1,000 a month for a period of 30 months. Wife is hereby granted an award of child support in the amount of $1,169 a month. As these amounts are equal to, or less than, the pendente lite amounts, there shall be no retroactive award. The equitable distribution of the assets that the parties accumulated during the marriage shall be distributed as delineated herein. Wife's application for counsel fees is denied for the reasons set forth herein.
All other issues not specifically addressed or decided herein are hereby denied. The Court has considered all aspects of motions that have been referred to trial and finds that they have been adjudicated by the terms of this Decision. To the extent that any application has not been specifically addressed herein, that application is hereby denied.
Plaintiff Wife is hereby directed to file a Judgment of Divorce together with Findings of Fact and Conclusions of Law, annexing this Decision within 60 days. Counsel is directed to file the Judgment of Divorce directly to chambers. In the event that Wife fails to do so, Husband may file the Judgment of Divorce.
This Constitutes the Decision of the Court after trial. The aspects of this Decision that are intended to start immediately will be reduced to a simultaneously issues Short Form Order modifying the temporary orders of this Court until such time that the Judgment of Divorce can be signed.