Sieger v SiegerAnnotate this Case
Decided on December 8, 2008
Supreme Court, Kings County
Chaim Sieger, Plaintiff,
Helen Sieger, Defendant.
Plaintiff's Counsel: Paul M. Sod, Eq. of the Law Offices of Paul Sod
Defendant's Counsel: Abe H. Konstam of Mallow, Konstam & Hager, P.C.
Jeffrey S. Sunshine, J.
Upon the foregoing papers, by order to show cause dated July 1, 2008, plaintiff Chaim Sieger moves for an order: (1) increasing the value of Kingsbridge Heights Rehabilitation & Care Center, Inc. (Kingsbridge) for the purpose of equitable distribution, from $16,823,348 to $21,493,318, pursuant to CPLR 5015(a)(2), as the result of newly discovered evidence, and pursuant to 5015(a)(3), as the result of fraud and (2) directing that the increase in value begin as of March 1, 1998. By separate order to show cause dated August 11, 2008, plaintiff moves for an order: (1) directing defendant Helen Sieger to deposit $190,645 with the Office of the Kings County Clerk, representing interest, to stay execution of the money judgment directed by this court or (2) providing that if the payment of interest is not made within 10 days of the order of this court so directing, the stay shall be lifted and plaintiff shall be entitled to obtain all money already deposited by defendant. By order to show cause dated August 12, 2008, defendant moves for an order determining that the entire of the balances held by Kingsbridge at Citibank and at Banco Popular on the date of commencement of this action, March 2, 1998, are owned by Kingsbridge, and that no portion of said sums represent undistributed earnings of the nursing home that are the property of defendant and subject to equitable distribution.
This matrimonial action has been extensively litigated since it was commenced. As is relevant herein, the parties tried the case on 15 days between August 2, 2004 and October 12, 2004 and submitted post-trial memoranda. By decision dated June 29, 2005, this court awarded plaintiff and defendant equitable distribution of the parties' marital assets (Sieger v Sieger, 2005 NY Slip Op 51348[U], 8 Misc 3d 1029[A], 806 NYS2d 448, 2005 NY Misc LEXIS 1808, 2005 WL 2031746 ) (the Trial Decision). More specifically, and as is relevant to the motions now before the court, this court held that Kingsbridge was a marital asset and valued it at $16,822,904 as of December 31, 1998. The court further determined that the money held by Kingsbridge in an account maintained at Citibank (the Citibank Account) as of December 31, 1997, i.e., $6,002,807.51, along with the money held by Kingsbridge in an account maintained at Banco Popular (the Banco Popular Account) as of February 28, 1998, i.,e, $288,751.59, would be characterized as marital property, subject to equitable distribution, and distributed equally between plaintiff and defendant. After adjusting the amounts due to each spouse for the sums awarded, the court directed defendant to pay plaintiff a distributive award in the amount of $8,497,697. The provisions of this decision were incorporated into the judgment of divorce dated August 11, 2005 and filed August 12, 2005 (the Judgment of Divorce). Defendant filed a notice of appeal on September 20, 2005 and perfected her appeal on March 27, 2006.
By decision dated February 13, 2007, the Appellate Division, Second Department, held that this court properly found Kingsbridge to be martial property; properly selected December 31, 1998 as the valuation date for the nursing homes owned by the parties; and properly valued Kingsbridge as a going concern, utilizing a 13.5% capitalization rate. The court further found, however, that this court's valuation of Kingsbridge was not supported by the record. Accordingly, the Appellate Division modified the judgment by deleting the provision that directed defendant to pay plaintiff a distributive award; affirmed the Judgment of Divorce, as so modified; and remitted the matter to this court:
"for the sole purpose of either supplementing its decision to set forth with specificity the
mathematical calculations employed and the basis therefor in light of this decision, or
determining de novo the proper valuation of Kingsbridge in light of the factors enumerated
herein, and for the entry of an appropriate amended judgment thereafter."
(Sieger v. Sieger, 37 AD3d 585, 588 ) (the 2007 Appellate Division Decision).
After reviewing the parties' submissions, by decision dated April 17, 2007, this court explained its calculation of the value of Kingsbridge, corrected a minor mathematical error made in the Trial Decision and valued Kingsbridge at $16,823,348 (the Decision After Remand). In addressing the issue of the $6,002,807.51 that Kingsbridge held on deposit in Citibank as of December 31, 1997 and the $288,751.59 that it held on deposit with Banco [*3]Popular as of February 28, 1998, the court again held that the entire $6,291,559.10 should be treated as a marital asset and should be equally divided between the parties. Accordingly, after crediting each party with his and her share of the marital assets, as set forth in the Trial Decision, as affirmed by the Appellate Division Decision, and as modified on remand, defendant was ordered to pay plaintiff the sum of $8,497,919, plus interest at the rate of 9% per annum from the date of entry, or August 12, 2005, to the date of payment. This court noted that because the calculations the court relied upon at trial were contained in a chart produced by the expert and admitted into evidence at trial. This exhibit was omitted from the record which was provided to the Appellate Division by defendant appellant. Defendant filed a notice of appeal with regard to this decision.
Defendant then made a motion to this court seeking to reopen the trial as the result of the alleged eviction of defendant, as operator of Kingsbridge, and a motion to reopen the trial on the ground that plaintiff allegedly hid his assets in a company called VCS Technologies, Inc. (VCS), which defendant claimed that she did not know about at the time of trial. This court denied both of plaintiff's motions (Sieger v Sieger, 2007 NY Slip Op 51787U; 17 Misc 3d 1101A, 2007 NY Misc LEXIS 6425, 2007 WL 2756966 ). Defendant appealed this decision.
By decision dated May 27, 2008, the Appellate Division, Second Department, affirmed this court's denial of defendant's request to reopen the trial and found no basis to disturb the valuation of Kingsbridge. With regard to the money held on deposit by Kingsbridge, the court held that:
"The Supreme Court determined that all funds held in Kingsbridge bank accounts were
marital assets, based upon a finding that these funds were the defendant's undistributed profits
from Kingsbridge, and selected valuation dates for these accounts preceding the date of
commencement of this action. As the defendant correctly contends, these accounts should have
been valued as of the date of commencement of this action (see Domestic Relation Law
§ 236[B][b]; D'Angelo v
D'Angelo, 14 AD3d 476, 476-477; see also Weissman v Weissman, 8 AD3d 264, 265; Wahl v
Wahl, 277 AD2d 445, 446). Moreover, certain funds held in these accounts properly
belonged to Kingsbridge to fund its business operating expenses, which funds would not be
distinct marital assets subject to equitable distribution. Consequently, we remit the matter to the
Supreme Court, Kings County, for a hearing solely for the purpose of determining the value of
the Kingsbridge bank accounts as of the date of commencement of this action and the extent to
which the funds held in these accounts represent the defendant's undistributed earnings which
would be subject to equitable distribution (see Domestic Relations Law §
236[B][c]) and for the entry of a second amended judgment thereafter."
(Sieger v. Sieger, 51 AD3d 1004, 1005 ) (the 2008 Appellate Division Decision). [*4]
The motions now before the court followed.
Plaintiff's Motion to Increase the Value of
In support of his motion seeking to increase the value of Kingsbridge, plaintiff argues that in the Trial Decision, this court relied upon a letter from the New York State Department of Health dated August 14, 2003, which indicated that an overpayment of $3,156,170 for the period from June 1, 1995 through December 31, 1997 was made, which in turn resulted in a reduction in income of $1,310,509 for 1998. At the time of trial, plaintiff had already appealed the August 14, 2003 determination. As a result of her appeal, on September 25, 2007, an administrative court ruled in defendant's favor and reduced the overpayment to Kingsbridge for the June 1, 1995 to December 31, 1997 period to $1,637,619.50. Plaintiff accordingly argues, in reliance upon a letter dated May 27, 2008 from Saul Schechter, a certified public accountant, that the reduction in income for 1998 would accordingly be only $680,003; after applying the 13.5% capitalization rate that the court used to calculate the value of Kingsbridge to the corrected amount of income for 1998, the nursing home should be valued at $21,493,318 instead of $16,823,348.
Plaintiff thus contends that the value of Kingsbridge should be so adjusted pursuant to CPLR
5015(a)(2) because he was not aware that defendant had filed an appeal of the August 14, 2003
determination of the Department of Health until March or April of 2008. In the alternative,
plaintiff argues that the value should be increased pursuant to CPLR 5015(a)(3) because
defendant fraudulently failed to advise him or the court that the August 14, 2003 determination
of the Department of Health was not final, although she knew, during the trial, that she had
appealed the determination.
In opposition to this motion, defendant argues that plaintiff's demand for relief should be denied as untimely, since the trial ended in 2004, this court rendered its Trial Decision on June 29, 2005, the first decision on appeal was rendered on February 15, 2007, the second decision on appeal was rendered on April 22, 2008 and this motion was not made until September 27, 2007. Moreover, the audit report upon which plaintiff relies has been available for nearly one year before plaintiff made the instant motion.
Defendant further argues, in reliance upon affirmations from counsel and from Raul A.
Tabora, Jr., an attorney representing Kingsbridge with regard to the pending rate dispute, that in
the event that this court determines that it is appropriate to dispose of the motion on its merits, it
should be denied on the ground that the numbers relied upon by plaintiff are inaccurate. More
specifically, defendant contends that the actual recoupment from Kingsbridge has not changed;
the actual impact on the income for 1998 is not yet known; interest has not yet been calculated;
and the matter is presently being appealed to the [*5]Appellate
Division, First Department.[FN1]
In reply, plaintiff argues that the determination upon which he relies in making the instant motion was not made until September 25, 2007, when an administrative court ruled in defendant's favor. Moreover, plaintiff did not learn about the determination until approximately March or April of 2008; he then obtained an impact statement from the accountants for Kingsbridge and his attorney made his motion promptly thereafter, so that the motion is not untimely.
Plaintiff further argues that it appears that defendant has filed additional appeals to further
modify the findings of the Department of Health; that the decisions rendered thereon will serve to
further reduce allowable deductions; and that a further reduction in allowable deductions will
further increase Kingsbridge's income, and hence its value. Plaintiff also argues that although the
$1,310,509 that the court deducted from Kingsbridge's income in the Trial Decision is not subject
to further challenge by defendant, the court should consider the new facts that have come into
existence to decrease the amount of previously disallowed expenses and to increase the income
of the nursing home for 1998. In addition, while defendant objects to the methodology and
computations offered by Schechter, by letter dated May 21, 2008, the Office of the Medicaid
Inspector General determined the exact impact based upon the rate adjustments found to be
appropriate, so that the court need not rely upon Schecter's opinion is revaluing Kingsbridge.
As is relevant herein, CPLR 5015, relief from judgment or order, provides that:
"(a) On motion. The court which rendered a judgment or order may relieve a party from it upon such terms as may be just, on motion of any interested person with such notice as the court may direct, upon the ground of . . .
"2. newly-discovered evidence which, if introduced at the trial, would probably have produced a different result and which could not have been discovered in time to move for a new trial under section 4404; or
"3. fraud, misrepresentation, or other misconduct of an adverse party."
As the Appellate Division, Second Department, held in affirming this court's [*6]
denial of defendant's motion to reopen the trial, "[i]n order to vacate a judgment pursuant to CPLR 5015(a)(2) on the grounds of newly-discovered evidence, the movant must establish, inter alia, that the evidence could not have been discovered earlier through the exercise of due diligence" (Sieger, 51 AD3d at 1005, citing Matter of State Farm Ins. Co. v. Colangelo, 44 AD3d 868, 868 ; Matter of Gartmond v. Conway, 40 AD3d 1094, 1095 ; Reed v. Reed, 13 AD3d 602, 603 ; Kleet Lbr. Co. v. Saw Horse Remodelers, 13 AD3d 414, 415 ; see generally Jonas v. Jonas, 4 AD3d 336 ). In addition, movant must demonstrate that the newly discovered evidence "would have changed the result" (Matter of Bernal v. Bernal, 45 AD3d 589, 590 , citing Matter of Mohammad v. Mohammad, 299 AD2d 363 ; Matter of Jenna R., 207 AD2d 403 ; Matter of Amina W. v. Curven W., 12 Misc 3d 1197[A] ).
As is also relevant herein:
"The newly discovered evidence provision of CPLR 5015 is derived from rule 60 (subd [b],
par ) of the Federal Rules of Civil Procedure (in US Code, tit 28, Appendix; 5
Weinstein-Korn-Miller, NY Civ Prac, par 5015.07; Legislative Studies and Reports, McKinney's
Cons Laws of NY, Book 7B, CPLR 5015, pp 581-582). The Federal rule permits reopening a
judgment only upon the discovery of evidence which was in existence and hidden at the time of
the judgment' (Ryan v United States Lines Co., 303 F2d 430, 434). In our view, the New
York rule was intended to be similarly applied. Only evidence which was in existence but
undiscoverable with due diligence at the time of judgment may be characterized as newly
(Commercial Structures v Syracuse, 97 AD2d 965, 966 ).
Further, in order for CPLR 5015(a)(3) to be applicable, "[a] defendant seeking to vacate a
judgment of divorce has the burden of establishing, by admissible evidence, the existence of
fraud, misrepresentation, or other misconduct on the plaintiff's part sufficient to entitle him or her
to vacatur" (Thakur v. Thakur, 49
AD3d 861, 861 , citing Mohrmann v. Lynch-Mohrmann, 24 AD3d 735 ; Badgett v Badgett, 2 AD3d 379
; Bergen v. Bergen, 299 AD2d 308 ; Cofresi v Cofresi, 198 AD2d
321 ). In addition, "[a]lthough there is no express time limit for seeking relief from a
judgment pursuant to CPLR 5015(a)(3), a party is required to make the motion within a
reasonable time" (Bank of New York v. Stradford, ___ AD3d ___, 2008 NY Slip Op
8076, 1 , citing Aames Capital v.
Davidsohn, 24 AD3d 474, 475 ; Miller v Lanzisera, 273 AD2d 866, 868
Herein, plaintiff's contention that the judgment should be modified to increase the value of Kingsbridge pursuant to CPLR 5015(a)(2) on the ground of newly discovered evidence must fail. Most significantly, the Department of Health determination of September [*7]25, 2007 does not constitute new evidence, since it was not in existence at the time of the trial (see generally Pezenik v. Milano, 137 AD2d 748, 748-749 , lv dismissed 72 NY2d 909  [a report of an Administrative Law Judge relied upon by the defendants could not constitute newly discovered evidence, as it was not issued and therefore was not in existence until after the judgments were entered]).
If the court were to construe plaintiff's motion as seeking to modify the Trial Decision and the Judgment of Divorce premised upon his contention that he only recently discovered that an appeal of the Department of Health September 2003 determination had been filed, plaintiff's demand for relief would still fail because plaintiff does not establish that the pendency of the appeal was not known to him at the time of trial, or could not have been discovered earlier through the exercise of due diligence. In so holding, the court notes that plaintiff himself was the owner of two nursing homes, Lyden and Rofay, so that he will be deemed to have knowledge of the process by which the Department of Health audits a facility and the facility's right to appeal a decision that it finds unfavorable.
Even if this were not the case, plaintiff must be presumed to have had an opportunity to retain an accountant or other expert who could have explained the significance of the Department of Health audit to him, so that he could determine whether to further pursue the findings at trial, since he was represented by experienced matrimonial counsel throughout this action. Also significant is the fact that the August 14, 2003 letter from the Department of Health that was introduced into evidence at trial clearly appraised plaintiff of defendant's right to seek review of the determination, since the letter stated, in pertinent part, that "[y]ou have the right to challenge this action and determination by requesting an administrative hearing within sixty (60) days of the date of this notice." Finally, both the court appointed expert and defendant's expert testified at trial, so that either could have been questioned with regard to the import of the Department of Health audit, including its finality.
Plaintiff also fails to demonstrate that the alleged newly discovered evidence would have changed the result, since the mere fact that an appeal of the Department of Health determination was pending does not compel the conclusion that the court would have valued Kingsbridge differently. In this regard, plaintiff offers no evidence or expert opinion to establish that it was reasonable to believe, at the time of trial, that the Department of Health determination was likely to be modified and that any modification, if it was obtained, would impact upon the value of the nursing home.
It also must be recognized that the Appellate Division, Second Department, has addressed the issue of the propriety of the valuation of Kingsbridge on two occasions. In its 2007 Decision, the court remitted the matter for the sole purpose of either supplementing its decision to set forth with specificity the mathematical calculations employed and the basis therefor, or determining de novo the proper valuation of Kingsbridge (Sieger, 37 AD3d at 588). In its 2008 Decision, the court rejected defendant's challenge to the court's valuation of Kingsbridge and held that "there is no basis to disturb the Supreme Court's valuation of [*8]Kingsbridge as set forth in the amended judgment. It is well-established that the determination of the value of business interests is a function properly within the fact-finding power of the court" (Sieger, 51 AD3d at 1004). In neither instance did plaintiff challenge the value of Kingsbridge as determined by this court. Accordingly, inasmuch as the Appellate Division has upheld the valuation of Kingsbridge in two decisions, without any objection or cross appeal by plaintiff, the findings with regard to the valuation of the business are binding upon plaintiff, so that he will not be permitted to challenge the valuation of Kingsbridge on another ground herein (see generally Sieger, 2007 NY Slip Op 51787U at 6, citing Preston Corp. v Fabrication Enters., 68 NY2d 397, 405  [the prior decision of the Appellate Division, which was not appealed, was law of the case, binding upon Special Term]; Luyster v. Joseph, 179 NY 53, 56  [the parties must abide by the law of that case as laid down by the Appellate Division]).
Indeed, in denying the earlier motion made by defendant in which she sought to reopen the trial to introduce evidence of the eviction of Kingsbridge and plaintiff's alleged fraud in concealing the existence of his ownership interest in VCS, this court stated that:
"[T]he court also recognizes the need for litigation in a matrimonial action to enter a state of
repose. If a spouse were permitted to reopen an action years after a judgment of divorce was
entered to reapportion the distribution of assets because of a change in value, the parties'
economic partnership, as well as their divorce action, would never end."
(Sieger, 2007 NY Slip Op 51787U at 7). Hence, the court declines to grant this branch of plaintiff's motion for the same reason.
Similarly, plaintiff fails to establish the existence of fraud, misrepresentation, or other misconduct on the defendant's part sufficient to entitle him to vacatur or modification of the Trial Decision and Judgment of Divorce pursuant to CPLR 50159(a)(3). In this regard, while it is beyond dispute that the Department of Health letter dated August 14, 2003 was admitted into evidence and was considered by the court, plaintiff fails to establish that defendant made any representation that the determination made therein was final. Nor does plaintiff allege that defendant represented that no appeal was planned or was pending. To the contrary, plaintiff points to no trial testimony that would compel this conclusion. Moreover, as was noted above, as a sophisticated business person who owned and managed nursing homes himself, and who was represented by experienced matrimonial counsel throughout this matrimonial action and trial, plaintiff must be presumed to have the knowledge, resources and/or personnel needed to ascertain the legal significance of the Department of Health audit and its effect on the value of Kingsbridge. This conclusion is further strengthened by the language in the August 14, 2003 letter, which unequivocally advised defendant of her right to appeal the determination. Hence, this court declines to find that defendant fraudulently concealed the fact that she was seeking review of the Department of Health's August 14, [*9]2003 determination at trial.
Accordingly, plaintiff's motion for an order increasing the value of Kingsbridge is denied.
Defendant's Motion for an Order Declaring that
Citibank and Banco Popular Accounts are Assets of KingsbridgeDefendant's Contentions
In support of her motion addressing the remand, defendant argues that the money held on deposit by Kingsbridge in Citibank as of the date of the commencement of this divorce action, between March 2, 1998 and March 31, 1998 , i.e., $1,582,551.01 to $1,612,046.57, and $288 751.59 to $290,440.29 held on deposit at Banco Popular between February 1, 1998 to February 28, 1991, should be found to be assets belonging to the nursing home. In so arguing, defendant relies upon an affidavit submitted by Joseph F. Martello, a certified public accountant specializing in nursing homes in the State of New York, in which he states that he obtained an opinion in a letter from the Department of Health, dated February 7, 2007, concerning another facility which was in the process of applying for a license to operate a nursing home. Therein, the Department of Health stated that "[w]orking capital requirements are set at two months' of first year expenses, of which a minimum of 50% must be provided as equity." Martello then states that while there are no guidelines from the Department of Health with regard to established facilities, he is of the opinion that Kingsbridge would be adequately capitalized with one month of working capital.
Martello further alleges that a review of the financial report of Kingsbridge that was prepared
by Jacques O. Tuchler and Associates that was introduced into evidence at trial establishes that
one month's operating expenses for Kingsbridge would be $2,655,541 ($31,866,492 divided by
12). Accordingly, it would be reasonable to expect Kingsbridge to hold approximately
$2,500,000 in its operating account. Martello further states that he is aware that many nursing
homes do not maintain one month's expenses in their cash reserve, but in his opinion, this is not
sound financial management and creates a risk of financial failure. He therefore concludes that
the entire cash balance of $1,872,302 on deposit in Citibank and Banco Popular as of the date of
commencement of the matrimonial action should be held to be assets of Kingsbridge.
Plaintiff's Contentions [FN2] [*10]
In opposition, plaintiff argues that this court properly
determined that the balance of $6,002,807.51 held in the name of Kingsbridge and on deposit in
Citibank as of December 31, 1997, plus the $288,751.59 on deposit with Banco Popular as of
February 28, 1998, should be treated as a marital asset and should be equally divided between the
parties for the reasons fully discussed in the Trial Decision and in the Decision After Remand.
Plaintiff further avers that the $4,390,764.94 that defendant withdrew from the Citibank Account
between December 31, 1997 and March 2, 1998, which he refers to as a "charge-back," is not at
issue herein. To support his conclusion, plaintiff alleges that in remanding this matter "solely for
the purpose of determining the value of the Kingsbridge bank accounts as of the date of
commencement of this action and the extent to which the funds held in these accounts represent
the defendant's undistributed earnings which would be subject to equitable distribution"
(Sieger, 51 AD3d at 1005), the Appellate Division did not address the money that was
taken out of the Citibank Account prior to the date of commencement of the divorce action.
Plaintiff also contends that the Appellate Division did not require this court to find that any of the
money in the Kingsbridge Accounts belonged to Kingsbridge. Finally, plaintiff argues that
Martello's assertion that "nursing homes must keep certain amounts of money on hand for their
purposes, in not law, or requirement," and his opinion is hence devoid of merit.
In reply, defendant argues that the Appellate Division decision does not address the issue of whether the money that defendant withdrew from Kingsbridge's Citibank account between December 31, 1997 and March 2, 1998 should be "charged back," so that a charge-back would be improper. Further, plaintiff fails to refute defendant's assertion, as supported by the affidavit of Martello, that the money on deposit in the Kingsbridge bank accounts as of the date of the commencement of this action belongs to Kingsbridge and is necessary working capital, needed to fund the business' expenses. Defendant thus concludes that this court should hold that the entirety of the Kingsbridge bank accounts are the property of Kingsbridge.
In her reply affirmation in opposition to defendant's motion seeking a further deposit of interest into the Office of the County Clerk to stay enforcement of the Judgment of Divorce, defendant asserts that "[i]t is submitted that from the face of the Appellate Division's second decision, the second amended judgment to be entered will [be] substantially less that the court's amended judgment." In so arguing, defendant reasons that:
"The court at trial found the amount of the Kingsbridge bank accounts to be [*11]$6,291,559.10 . . . In defendant's worse case scenario, and the
bank accounts are totally decided against the defendant, the total Kingsbridge bank accounts will
decrease from what the trial court found to [be] the $1,872,302 that they were on the date of
commencement. This will result in a decrease in the wife's assets available for distribution by
$4,420,256. Deducting one-half of that sum, or $2,210,128, from the judgment amount of
$8,497,919 would result in a new judgment amount of $6,286,791."
In so arguing, defendant thus concludes that the Appellate Division 2008 Decision should be interpreted as compelling the finding that the $4.4 million dollar decrease in the value of the Citibank Account between December 31, 1997 and February 2, 1998 "needs to be excluded from the marital estate."
This court in its trial decision stated that " . . . the Kingsbridge account maintained at Citibank at $6,002,807.51, the amount of money on deposit on December 31, 1997. Although the balance in this account was $1,632,658.41 as of February 28, 1998, and $2,964,823.65 as of March 31, 1998, the court concludes that the account should be valued with the higher balance, since defendant offers no explanation of why the balance declined by approximately $4,500,000 shortly before the commencement of the instant action."
However, the Appellate Division remand is very limited, i.e., the matter was remitted "solely for the purpose of determining the value of the Kingsbridge bank accounts as of the date of commencement of this action and the extent to which the funds held in these accounts represent the defendant's undistributed earnings which would be subject to equitable distribution" (Sieger, 51 AD3d at 1005). The Appellate Division stated, "[a]s the defendant correctly contends, these accounts should have been valued as of the date of commencement of this action." (Sieger, 51 AD3d Id. at 1005). The Appellate Division thus rejected this court findings that the accounts should not have been valued as of December 31, 1997(approximately two months prior to commencement), when the balance was $6,002,807.51, rather than the commencement date of March 2, 1998, when the balance was greatly reduced ($1,632,658.41 the statement balance as of February 28, 1998, and $2,964,823.65 the statement balance as of March 31, 1998) without an explanation for the decline in the account balance.
The instant divorce action was commenced on March 2, 1998. The evidence submitted at trial unequivocally establishes that the balance in the Citibank Account at the start of that day was $1,612,042.57 [FN3] and that the balance in the Banco Popular Account [*12]throughout that day was $288,751.59. Hence, in accordance with the directive of the Appellate Division, the ownership and distribution of this $1,900,794.16 is the only issue now before this court. Accordingly, since the Appellate Division determined that the monies held on deposit by Kingsbridge should have been valued as of March 2, 1998, the $4,390,764.94 that defendant withdrew from the Citibank Account between December 31, 1997 and March 2, 1998 should not have been characterized as a marital asset, so that the judgment must be further reduced by one-half of this amount, or $2,195,382.32.
Turning to the issue of the extent to which this $1,900,794.16 represents the defendant's
undistributed earnings which would be subject to equitable distribution, the court must consider
the opinion of Martello, who opines that it is reasonable that Kingsbridge, as an operating
nursing home, maintain working capital in the amount of one month's operating costs, or
affidavit accordingly raises an issue of fact with regard to whether the combined balances of the
Citibank Account and the Banco Popular Account, or $1,900,794.16, which is less than the
$2,500,000 that Martello finds is reasonable and financially sound to hold on deposit, should be
considered to be property of Kingsbridge, and hence not subject to equitable distribution as
defendant's undistributed earnings.
Accordingly, defendant's motion for an order determining that the entire amount of the balances held by Kingsbridge at Citibank and at Banco Popular on the date of commencement of the instant divorce action is granted to the extent of setting the matter down for a hearing at which each party will be afforded the opportunity of proffering testimony, documentary evidence and to meet their burden. It is defendant's burden to establish what portions of the funds on deposit constitute operating expenses and, therefore, are not subject to inclusion in the marital estate.
Plaintiff's Motion Seeking the Deposit of
In support of his request for an order requiring defendant to post additional interest in the amount of $190,645 to stay execution of the Judgment of Divorce, as modified by the decision dated April 17, 2007, as will be modified herein, plaintiff argues that pursuant to a Consent Order dated July 9, 2007, and the so ordered stipulations entered into between the parties, defendant is required to deposit interest on the judgment on a quarterly basis in order to continue the stay of enforcement. [*13]
Plaintiff further contends that pursuant to the Appellate
Division's 2008 Decision, this court's valuation of Kingsbridge at $16,823,348 was upheld, since
that decision remitted only the matter of the determination of the value of the Citibank and Banco
Popular Accounts held by Kingsbridge as of the date of commencement of this action and the
extent to which the funds so held represent the defendant's undistributed earnings which would
be subject to equitable distribution. Plaintiff accordingly argues that until such time as the court
redetermines the value of these bank accounts, the Judgment of Divorce dated August 11, 2005,
and the amended judgment, dated April 17, 2007, will remain in place, so that defendant is
required to continue to pay interest on the distributive award of $8,497,919. Plaintiff thus
concludes that in order to continue the stay of enforcement, defendant is required to continue to
deposit interest. Defendant, however, has refused to deposit any interest that accrued after July 1,
In opposition, as discussed above, defendant is of the opinion that the Appellate Division
2008 Decision compels the conclusion that the judgment that she is obligated to pay will be
reduced from $8,497,919 to $6,286,791. Defendant further argues that the motion to increase the
value of Kingsbridge as a result of the Department of Health revision of its audit should be
denied, so that there will no increase in value as a result of that motion. Defendant then alleges
that as of May 21, 2008, she had deposited $10,704,059.05 with the Office of the County Clerk.
If interest on the amended judgment of $6,286,791 is calculated through the return date of the
motion, or September 11, 2008, the amount of interest payable would be $1,745,483, so that she
would have to deposit $8,032,274 to stay enforcement of the judgment (principal of $6,286,791
plus interest of $1,745,483). Accordingly, since $10,704,059.05 is on deposit, no additional
money needs to by deposited to stay execution of the judgment. Defendant concludes by
asserting, however, that since she wishes to maintain the stay of execution of the judgment, she
should be afforded a reasonable time in which to deposit any funds that this court deems are
necessary to continue the stay.
In reply, plaintiff argues that defendant improperly interprets the Appellate Division 2008
Decision as mandating a reduction in the amount of the judgment that she is obligated to pay. As
discussed above, however, plaintiff does not believe that the judgment should be reduced at all,
so that defendant should be ordered to deposit the additional interest sought if she wishes the stay
to continue. Plaintiff does not refute or deny that defendant has already deposited $10,704,059
with the Office of the County Clerk.
In this decision, this court denied plaintiff's application to increase the value of Kingsbridge, so that the amount of money that defendant is ordered to pay plaintiff will not increase by reason of this motion. Further, as the above discussion reveals, and as is argued [*14]by defendant, the judgment must be reduced by at least one-half of the amount of money that was no longer held on deposit in the Kingsbridge account as of the date of commencement, i.e., one-half of $4,390,764.94, or $2,195,382.[FN5] Whether the second amended judgment will be further reduced upon a finding that the $1,900,794 held on deposit by Kingsbridge on March 2, 1998, is an issue of fact for the hearing.
Hence, the second amended judgment will be reduced to at least $6,302,537 ($8,497,919 minus $2,195,382 equals $6,302,537). From this it follows that defendant must deposit interest at the rate of 9% for three years, or $1,701,684 ($567,228 per year, times 3), plus interest for 118 additional days through December 8, 2008, (20 days in August plus 30 days in September plus 30 days in October plus 30 days in November plus 8 days through December 8), which is $183,372 ($567,228 divided by 365 equals $1,554, times 118 equals $183,372), for a total of $1,885,056 ($1,701,684 plus $183,372 equals $1,885,056) in interest. Hence, in order to continue the stay, defendant must have $8,187,593 on deposit (the principal amount of $6,302,537, plus $1,885,056 in interest equals $8,187,593).
Accordingly, since defendant already has $10,704,059 on deposit with the New York City
Department of Finance, but is required to have only $8,187,593, the New York City Department
of Finance is directed to release $2,516,466 to defendant when served with a copy of this order
with notice of entry ($10,704,059 minus $8,187,593, equals $2,516,466).
Plaintiff's motion for an order increasing the value of Kingsbridge for purposes of equitable distribution as a result of the modification of a Department of Health audit is denied.
Defendant's motion for an order holding that the entire of the balances held by Kingsbridge at Citibank and at Banco Popular on the date of commencement of this action, March 2, 1998, are owned by Kingsbridge, and that no portion of said sums represent undistributed earnings of the nursing home that are the property of defendant and subject to equitable distribution, is granted only to extent of setting the matter down for a hearing, at which the issue of what portion of the $1,900,794.16 on deposit in Kingsbridge's Citibank and Banco Popular accounts as of March 2, 1998, are the property of Kingsbridge, and hence are not subject to equitable distribution as defendant's undistributed earning, shall be determined.
Plaintiff's motion seeking an order directing defendant to post additional interest is denied and the New York City Department of Finance is directed to release $2,516,466 to defendant when served with a copy of this order with notice of entry. [*15]
The parties are directed to appear in this part on January 15, 2009, at 9:30 a.m., for a hearing.
The foregoing constitutes the order and decision of this court..
E N T E R:
Hon. Jeffrey S. Sunshine
Footnote 1: The papers annexed to the affirmations to support this claim, however, indicate that a petition has been filed in an Article 78 proceeding, which is returnable in the Supreme Court, Bronx County.
Footnote 2: In his affirmation is opposition to defendant's motion, plaintiff's counsel alleges that:
"On July 23, 2008, the parties met before the Supreme Court (Sunshine, J), and agreed that in lieu of a Hearing, the Defendant would make [a] motion to the Court in regard to the bank accounts, and the court would decide same on the papers submitted."
A review of the transcript of the court proceedings on July 23, 2008, however, does not support this assertion, since the minutes indicate only that the parties "agreed to disagree" and to submit motion papers.
Footnote 3: The court, at this juncture, will utilize the balance in the Citibank Account as of the start of the day as controlling herein, since a contrary holding would allow a spouse who learns of the commencement of a divorce action to deplete all assets by the close of business to obtain a windfall by removing those assets from the marital pot or to unfairly shift the burden to the other spouse to prove wasteful dissipation. At the hearing, defendant may produce evidence that the depletion on that day was for operating expenses.
Footnote 4: The court notes that during the trial, neither plaintiff nor defendant, nor either of the experts who testified, offered any opinion with regard to how much money Kingsbridge should maintain on deposit in its bank accounts in order to meet its operating costs.
Footnote 5: Since defendant valued the money held by Kingsbridge on deposit on Marc 2, 1998 at $4,420,256 and the court valued it at $4,390,764.94, the court's figures vary slightly from the figures proffered by defendant.