Jeshiva v Gross

[*1] Jeshiva v Gross 2009 NY Slip Op 50890(U) [23 Misc 3d 1122(A)] Decided on April 21, 2009 Supreme Court, Nassau County DeStefano, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on April 21, 2009
Supreme Court, Nassau County

Scott Jeshiva, Plaintiff,

against

Danielle Gross, Defendant



200621-07



COUNSEL FOR PLAINTIFF:

Paul Eisenstein, Esq.

7600 Jericho Turnpike

Woodbury, NY 11797

516-496-2828

COUNSEL FOR DEFENDANT:

Steven D. Kommor, Esq.

Gassman, Baiamonte, Betts & Tannenbaum, P.C.

666 Old Country Road

Suite 801

Garden City, New York 11530

(516) 228-9181

Vito M. DeStefano, J.

Findings of Fact and Conclusions of Law

In this matrimonial action for divorce and ancillary relief, the court (after inquest) granted a divorce judgment to the plaintiff Husband ("Husband"), staying entry thereof pending determination of the ancillary issues. After the parties waived maintenance and resolved various [*2]equitable distribution issues,[FN1] the court conducted a trial of the disputed issue on July 31, August 6, August 22, September 25 and October 20, 2008. Subsequently, the parties submitted post-trial memoranda and proposed findings of fact and agreed that the court would resolve the issue of attorneys' fees on submitted papers.

At the trial, the following witnesses testified: the Husband, the defendant Wife ("Wife"), and real estate appraisers Cynthia Diognardi and Steven Gutleber.

The court notes that the parties' testimony was consistent or uncontroverted on several essential points. In this regard, it is undisputed that the parties were married on January 3, 2004, that the Wife had a child from a prior marriage, that the Husband purchased a house prior to the marriage, that the house was separate property and that it had a value on January 3, 2004 of $545,000, that the Wife and her child lived with the Husband in his house, that the Wife worked as a nurse at North Shore Long Island Jewish Center and did not work in the Husband's plumbing business, that in 2005 and 2006, the Husband caused improvements to be made to the house [FN2] utilizing funds from his business and from a line of credit on the property, that the Wife did not pay for any improvements to the house, although she did contribute to the payment of certain utilities, and that the value of the house increased during the marriage as a result of the improvements. It is also undisputed that joint tax returns filed by the Husband and Wife and entered into evidence do not reflect the parties' true income in that monies utilized to fund the improvements to the house were not reported as income but were instead reported as expenses against the Husband's plumbing business.

The issues addressed at trial were whether and to what extent the Wife may be entitled to equitable distribution of the enhanced value of the house. Relevant to this issue is the date of valuation of the house (either March 2008, near the commencement of trial, or March 2007, when the matrimonial action was commenced), which, considering the volatility of the housing market, significantly impacted on the house's enhanced value. The Husband argues that valuation done nearer the commencement of trial ($675,000) should be relied on by the court if it determines that the Wife is entitled to equitable distribution of the enhanced value of the house. Alternatively, the Husband argues that if the court does not utilize the later valuation figure, it should rely on the earlier valuation made by his expert ($720,000 as of March 2007). In contrast, the Wife argues that the court should utilize the valuation report of her expert (Stephen Gutleber), which was based on the March 2007 date ($875,000). [*3]

Domestic Relations Law § 236 (B) (1) (d) (3) defines separate property as, inter alia, "property acquired in exchange for or the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse." Accordingly, any appreciation in the value of the separate property which is attributable, in some measure, to the contributions or efforts of the non-titled spouse, whether those efforts are direct or indirect is subject to equitable distribution.

A leading treatise on matrimonial practice states the following in regard to the equitable distribution of appreciated value of separate property (4-46 New York Civil Practice: Matrimonial Actions § 46.13A):

In general, if the non-titled spouse seeks to share in the appreciated value of the titled spouse's separate property based solely on the non-titled spouse's indirect contributions, the Court of Appeals and ensuing decisional authority have imposed a rigorous dual-prong test upon the non-titled spouse, which must be satisfied conjunctively. Significantly, although the non-titled spouse need neither prove the nexus nor value the nexus between the titled spouse's ''activity'' and the appreciation, the non-titled spouse must establish: (1) evidence of his or her own causality that is, a nexus between the non-titled spouse's indirect contributions and the appreciated property; in other words, the non-titled spouse bears the burden of proof to demonstrate the manner in which his or her own indirect contributions resulted in the increased value in the titled spouse's property; and (2) evidence quantifying the appreciation of the asset that is, the non-titled spouse must quantify, via expert testimony, the amount of the increase attributable to his or her indirect efforts, including baseline values; conclusory allegations are absolutely insufficient. Significantly, Hartog v. Hartog outright rejected the notion that there must be some causality between the non-titled spouse's contributions and the active appreciation of the separate property:

The causation requirement ... would result in an all or nothing contest ... and would defeat a central calibrating feature of Price and the Domestic Relations Law. That absolutist approach would often procedurally exempt appreciation from being considered marital property even when the titled spouse's active efforts substantively contributed to the appreciation to some degree. This would allow the titled spouse a windfall retention and, contrary to legislative intent, would nullify the indirect effort the non-titled spouse contributed to the circumstances, allowing for appreciation to that asset ... . We thus reject this approach and instead give effect to the Legislature's intent that a non-titled spouse be permitted to share in the ''indirect'' fruits of his or her labor, even if the connection between the titled spouse's activity and the appreciation is not established with mathematical, causative or analytical precision.

Stated differently, in order to establish entitlement to a share in the increased value of separate property, the party seeking equitable distribution must show that: the property increased in value; the appreciation in value was due in part to the efforts of the titled spouse; and the [*4]efforts were aided, directly or indirectly, by the non-titled spouse. Moreover, the fact that an "objective dollar value of the non-titled spouse's direct contribution to the * * * [enhanced value of the property] may well be incapable of valuation by any mathematical theory * * * such a mathematical correlation need not be provided' (Patricia B. v. Steven B., 186 AD2d 609, 614 [2d Dept 1992][Miller, J., dissenting]).

At bar, the court concludes that the Wife is entitled to equitable distribution of the enhanced value of the house. In this regard, it is undisputed that the house increased in value as a result of the improvements made by the Husband. Regarding the Wife's contributions thereto, the court finds that the Husband's efforts were aided indirectly by the Wife. Specifically, the Wife contributed to the payment of utilities and household expenses, which, given the relative parity in the parties' reported incomes, helped to enable the Husband to make improvements to the house. Under the circumstances, equitable distribution is appropriate. In so holding, the court is not unmindful of the fact that the Husband, under the parties' arrangement, was able to gain a tax advantage for his business by improperly deducting expenses for improvements to his house as business expenses.[FN3]

In awarding equitable distribution, the court will use the March 2008 valuation date to determine the value of the Husband's house. In this regard, the court notes the undisputedly depressed state of the housing market in New York and the diminished state of the economy that has prevailed since the trial of the matter began (see, Rachimi v Rachimi, 57 AD3d 277 [1st Dept 2008]; Wegman v Wegman, 123 AD2d 220 [2d Dept 1999]). Furthermore, having heard the testimony of the experts and considering the substance thereof, the court credits the testimony of the Husband's expert. Accordingly, the court will equitably distribute the amount of $130,000 ($675,000 less $545,000).

In light of the analysis above and in consideration of the other relevant factors set forth in Domestic Relations Law § 236[B][5][c], the court awards the Wife $20,000, which amount represents approximately 15 % of the increased value of the house. Significantly, the court has considered the incomes and property held by the parties at the time of the marriage and at the time of commencement (the Husband's actual income was greater than the Wife's although the reported incomes were similar and the Husband possessed substantially more property, including a house and business), the duration of the marriage (five years, though the parties were physically separated after three years) and the age and health of the parties (Husband and Wife are 39 and 38, respectively, and in good health), the probable future financial circumstances of each party (satisfactory as to both parties, although the Husband is apparently in a better financial situation). [*5]And, as to any other factor the court finds to be just and proper, it is relevant to again note that the Husband has previously paid $20,000 as an advance against equitable distribution and that the parties have settled the other aspects of equitable distribution (i.e., a cooperative apartment in Florida, etc.).

With respect to the other issues raised in the Wife's post-trial submissions, the following is noted: first, to the extent that the Wife claims entitlement to any portion of the Husband's pension and IRA, the court notes that virtually no evidence was presented at trial in regard to this property, owing to the fact that the equitable distribution issue presented at trial was limited at the parties' request to the "house", as discussed in detail above. At no time during the trial or in the Wife's statement of proposed disposition was request made for equitable distribution of the Husband's pension and IRA. As such, the Wife failed to meet her burden of establishing the value of her interest in the Husband's pension and, in any event, waived any interest she may have had therein (see, Leichtner v Leichtner, 18 AD3d 446 [2d Dept 2005]; Del Gado v Del Gado, 129 AD2d 426 [1st Dept 1987]). Second, to the extent that the Wife seeks an award of $2,400 as and for Pendente Lite arrears, the court notes that representations by counsel contained in the Wife's post-trial memorandum, without more, are insufficient to justify any award of arrears (see generally, Charles v Charles, 2009 NY Slip Op. 50376U [Supreme Court Queens County 2009]).

With respect to the Wife's request for attorneys' fees, the application is denied.

Domestic Relations Law § 237 states:

(a) In any action or proceeding brought * * * (3) for a divorce * * * the court may direct either spouse * * * to pay such sum or sums of money directly to the attorney of the other spouse to enable that spouse to carry on or defend the action or proceeding as, in the court's discretion, justice requires, having regard to the circumstances of the case and of the respective parties. Such direction must be made in the final judgment in such action or proceeding, or by one or more orders from time to time before final judgment, or by both such order or orders and the final judgment * * *.

In Prichep v Prichep (52 AD3d 61 [2d Dept 2008]), the Second Department stated:

An award of counsel fees pursuant to Domestic Relations Law§237(a) is a matter within the sound discretion of the trial court, and the issue "is controlled by the equities and circumstances ofeach particular case" (Morrissey v Morrissey, 259 AD2d 472, 473* * *; [*6]see Timpone v Timpone, 28 AD3d 646 * * * ; Walker v Walker, 255 AD2d 375, 376 * * *). In determining whether to award fees, the court should "review the financial circumstances of both parties together with all the other circumstances of the case, which may include the relative merit of the parties' positions" (DeCabrera v Cabrera-Rosete, 70 NY2d 879 * * *; see Ciampa v Ciampa, 47 AD3d 745 * * *). The court may also consider whether either party has engaged in conduct or taken positions resulting in a delay of the proceedings or unnecessary litigation (see Ciampa v Ciampa, 47 AD3d at 748; Timpone v Timpone, 28 AD3d at 646; Morrissey v Morrissey, 259 AD2d at 473; Walker v Walker, 255 AD2d 375, 376 * * *).

Other factors include the nature and extent of services rendered and the complexity of issues involved (see, Farrell v Cleary-Farrell, 306 AD2d 597 [3d Dept 2003]), the ability of each spouse to pay their own counsel fees (see, Sclafani v Sclafani, 178 AD2d 830 [3d Dept 1992]), whether an equitable distribution award was made (see, Zema v Zema, 17 AD3d 360 [2d Dept 2005]), and the earning power and assets of the parties (see, Kavanakudiyil v Kavanakudiyil, 203 AD2d 250 [2d Dept 1994]).

At bar, in light of the court's determination regarding equitable distribution, the relative parity in the parties' reported incomes, the Husband's voluntary payment of $20,000 as an advance against the equitable distribution award, and considering the parties' failure to accurately report their income on joint tax returns, the court declines to award attorneys' fees to the Wife. The parties will note that the court in fashioning an equitable distribution award and denying counsel fees, in justice and in equity, but, also, in effect, "leaves the parties where it finds them".

This constitutes the decision and order of the court after trial. The Husband is directed to submit a proposed judgment and findings consistent with this decision on notice pursuant to 22 NYCRR § 208.33.

Dated: April 21, 2009

________________________

Hon. Vito M. DeStefano J.S.C. Footnotes

Footnote 1:More specifically, the parties agreed to the disposition of a condominium acquired during the marriage. And, the Husband paid the Wife $20,000 as an advance against any equitable distribution claim she might have. Further, the Wife gave the Husband possession of a 2003 vehicle in consideration of the Husband's agreement to pay $300 to the Wife during the pendency of the action for the purpose of obtaining another vehicle.

Footnote 2:The improvements included adding a second floor, three bathrooms and converting a single car garage to a two-car garage.

Footnote 3:Inasumuch as the parties filed joint tax returns for at least two years, it appears that they both misrepresented their combined income. Nevertheless, the court finds that the Husband's testimony in regard to filing his tax returns and income was incredible and will draw unfavorable inferences against him with respect to the equitable distribution issue.