Opinion
350444-2004.
Decided on February 23, 2007.
For plaintiff: PETER E. BRONSTEIN.
For defendant: SHARON STEIN.
In August 2004, plaintiff-wife brought this divorce action against defendant-husband alleging constructive abandonment and cruel and inhuman treatment. Thereafter, the husband filed a counterclaim against the wife for divorce based on cruelty. The wife moved for pendente lite relief and was awarded $25,939 per month in tax-free temporary maintenance by Justice Laura Visitacion-Lewis. Justice Visitacion-Lewis also directed the husband to pay the premiums for any life, health and disability insurance policies which were in effect before the parties separated. The wife appealed that decision to the Appellate Division, First Department seeking an upward modification on the grounds that the award was inadequate. The First Department upheld Justice Visitacion-Lewis's decision finding that an increase in temporary maintenance was "not warranted since the amount awarded was not well below that which would be required to permit [the wife] to maintain her prior luxurious lifestyle." Hearst v. Hearst, 29 AD3d 395, 395 (1st Dept. 2006). The appellate court also concluded that the lower court had "properly found that some of the wife's expenditures were undocumented and/or inflated and accordingly exercised its discretion appropriately in awarding [her] less than she requested." 29 AD3d at 395.
In addition, Justice Visitacion-Lewis ordered the husband to pay for all of the wife's unreimbursed medical, dental, pharmaceutical and optical expenses. This aspect of the pendente lite decision is the subject of a separate motion, which was submitted recently.
The wife subsequently withdrew her complaint and Justice Visitacion-Lewis conducted a bench trial on the husband's counterclaim alleging cruel and inhuman treatment. On March 20, 2006, Justice Visitacion-Lewis issued a decision denying the husband's counterclaim for divorce. Subsequently, the wife sought an order of permanent maintenance and attorney's fees. The husband sought the reallocation of attorney's fees he had previously paid to the wife and reimbursement of certain funds he had advanced to cover marital upkeep expenses. The case was transferred to this Court which conducted a bench trial on the maintenance issues and the parties submitted comprehensive post-trial memoranda of law. The Court's findings of fact and conclusions of law are as follows.
The parties were married on June 21, 1990, several months after the husband had suffered a debilitating stroke. At the time of the marriage, the husband was fifty-six years old and an heir to the vast family fortune of his grandfather, William Randolph Hearst. The wife, on the other hand, was fifty years old, lived in a rental located on a farm, had recently filed for bankruptcy and was indebted to the IRS for about $50,000. Over the course of the marriage, nearly all of the husband's cash and investment accounts, which were funded from millions of dollars in distributions from the Hearst family trust, were transferred into accounts held solely in the wife's name. In addition, the husband's funds were used by the wife to purchase numerous pieces of real estate located in New York, South Carolina and North Carolina. Almost all of these properties were either purchased in the wife's sole name or ultimately ended up titled solely in her name.
A separate action has been commenced in Suffolk County alleging that the wife fraudulently made these transfers of money and real estate.
The evidence at trial showed that in or about September 2004, while in the midst of hosting a dinner party, the wife entered the husband's bedroom with two process servers to serve him in this divorce action. The wife told the husband: "[W]e can do it ugly, or we can do it nice . . . Remember one thing, I am much smarter than you are." Shortly thereafter, the husband moved out of the marital home. Since neither his pre-marital residence, nor most of the other homes the wife owned, could accommodate his physical disabilities, he was forced to temporarily move into a rental property. The wife, meanwhile, enjoyed the luxury of several homes, most of which the husband had never even set foot in.
At the time of the parties' separation, the wife had sole title to six pieces of real estate, partial title to two homes and controlled a trust that owned a ninth property. In contrast, the husband had only a part interest in two of the eight properties, although he remained liable for many of the mortgages secured by the homes. The wife also had nearly $8 million dollars in liquid investments in her sole name, whereas the husband had only approximately $400,000 in a joint account he shared with his daughter. Although the wife has the lion's share of the parties' assets, the husband enjoys a much larger income stream and currently receives five to six million dollars per year in distributions from the family trust.
One of those properties, a cooperative apartment in Manhattan known as River House, was sold after the parties separated but before the maintenance trial. That transaction is the subject of a separate lawsuit in which the husband has challenged aspects of the wife's conduct during the sale.
The wife now seeks an award of maintenance in the amount of nearly $90,000 per month. The husband argues that the Court should award the wife no maintenance at all. Under the Domestic Relations Law, a court may order maintenance "in such amount as justice requires, having regard for the standard of living of the parties established during the marriage, whether the party in whose favor maintenance is granted lacks sufficient property and income to provide for his or her reasonable needs and whether the other party has sufficient property or income to provide for the reasonable needs of the other and the circumstances of the case and of the respective parties." Domestic Relations Law § 236[B][6]. In determining the amount of maintenance to be awarded, in addition to the above considerations, the Court is also required to consider eleven specific factors enumerated in the statute. The court must consider all of these factors and, in its discretion, "fashion a fair and equitable maintenance award accordingly." Hartog v. Hartog, 85 NY2d 36 (1995); accord Allen v. Allen, 275 AD2d 225 (1st Dept. 2000).
The Court now makes the following findings with respect to the statutory factors.
1. The standard of living the parties established during the marriage.
The parties' marital standard of living was a central focus of the maintenance trial. The wife attempts to justify her extraordinary maintenance request by arguing that the Court must give her enough support to enable her to maintain a luxurious lifestyle. In so doing, the wife's papers essentially argue that the marital standard of living is the sole factor for the Court to consider. She impermissibly elevates this factor above the other statutory factors and thus would have this Court ignore the other considerations. In fact, the wife's main post-trial brief does not even address any of the other mandatory factors. However, the law is clear that the marital standard of living is just one of a myriad of factors to consider. See Naimollah v. De Ugarte, 18 AD3d 268 (1st Dept. 2005)("[w]hile the marital standard of living must be considered . . ., so too must the other factors");
Jensen v. Jensen, 299 AD2d 959 (4th Dept. 2002)(parties' standard of living is but one factor that must be considered when determining maintenance); Match v. Match, 179 AD2d 124 (1st Dept. 1992) (in awarding maintenance, trial court focused too narrowly on the prior standard of living without giving due regard to the equally important factor of the fairness of the award to the payor spouse).
Despite the wife's characterization of a rich and opulent marital standard of living, the evidence at trial showed that for much of the marriage, the wife enjoyed that lifestyle alone. The husband was sick and confined to a wheelchair for the last ten years of the marriage and did not share in much of his wife's opulence. Indeed, during his trial testimony, the husband described his decorating style as being "wall to wall carpet made of socks". He essentially stayed in two rooms of his house during most of the latter part of the marriage while his wife traveled, dined at expensive restaurants, spent time at numerous other residences and spent millions of dollars from the husband's trust distributions. Because of his physical limitations, the husband stopped traveling with the wife many years ago. For instance, despite the wife's claim that the couple spent time at the Hearst family compound in Wyntoon, the husband testified that he only went there once during the entire marriage. Likewise, the husband explained that he stopped dining regularly in restaurants with his wife in 1995. Thus, it cannot be said that the luxurious lifestyle the wife enjoyed was in any significant way shared with her husband, especially in the past few years.
Nor can it be said that the wife's alleged need for so many pieces of property is reflective of any marital lifestyle shared by the husband. The evidence showed that the wife purchased, using the husband's money, numerous pieces of real estate, much of it within the few years immediately preceding the parties' separation. The properties include a house in Sag Harbor, New York, two places in South Carolina and a residence in North Carolina in which the wife's mother resides. In her request for maintenance, the wife seeks money from the husband to pay for the mortgages, maintenance and upkeep of these four properties as well as an apartment in Manhattan, the former marital residence in Bridgehampton and a nearby lot of land. However, the evidence was undisputed that the husband has never even set foot in the Sag Harbor home or any of the three residences in North and South Carolina. Morever, some of the residences, such as the Sag Harbor house, do not accommodate the husband's disability, despite being in close proximity to the former marital home. In light of these factors, it strains credulity for the wife to argue that the use of all of these places reflects the couple's marital standard of living.
Furthermore, the evidence was clear that some of the real estate was purchased for, or is now being used as, an investment. The wife admitted that the Sag Harbor house was bought as an investment property, but is not currently being rented. Although she sometimes uses the place herself, she could not offer a convincing reason why she needed a separate residence so close to 170, where she also claims to reside. Indeed, the wife seemed focused on retaining the 170 home so she could rent it out in the summer, another example of her attempt to retain the real estate for its potential income and investment value. In addition, the wife also owns, and rents out, a studio apartment in Tudor City in Manhattan. She also is the owner of a vacant lot of land in Bridgehampton. Although this land has been titled in the wife's name for most of the marriage, she does not adequately explain why holding this piece of property was essential to the marital lifestyle. Put simply, the Court cannot see how the costs of keeping investment property titled solely in the wife's name can be properly viewed as maintaining the marital standard of living.
The exact addresses of the properties have been omitted from this decision.
2. The parties' respective incomes and property (including whether the wife lacks sufficient propertyand income to provide for her reasonable needs and whether the husband has sufficient property or income to provide for the wife's reasonable needs).
In July 2004, when the husband began planning to file for divorce, he contacted his attorney who determined that he only had $400,000 in assets in his own name, which had recently come from the repayment of a loan he had made to his daughter several years earlier. In addition, a number of the husband's bank accounts were overdrawn because of checks being written by the wife. This fact is significant since it was his wife who had a larger role in the household finances. Since the wife now no longer has control of his money, the husband has been able to build up his assets after the separation. He reports on his May 2006 net worth statement that his cash accounts total approximately $861,000, that his investment accounts are about $2.9 million and that he has approximately $220,000 in pension or IRA accounts. As noted, the overwhelming bulk of these assets were accumulated by the husband after the parties separated. In addition, the husband is a joint owner of the parties' former marital residence located at 170 in Bridgehampton, New York, which has approximately $2.3 million in equity. He also is the owner of several boats worth a total of $1.1 million. The husband reports about $2.5 million in mortgage debt, the bulk of it on the real estate titled solely in the wife's name. According to his net worth statement, the husband projected that his 2006 after-tax income from distributions from his family trust would be $5.7 million. He also reports that he receives about $150,000 in salary and director fees for his position on the Hearst Board of Directors and about $23,000 in social security benefits.
The husband does not specifically argue that he lacks the resources to meet his own current needs and pay the maintenance sought by the wife. Nevertheless, the Court notes that he testified that it was important for him to leave some of his money to his child and grandchildren, and the Court credited this testimony. In addition, the evidence at trial showed that the husband had almost reached the maximum of his health insurance policy and thus would have to pay significant medical costs, including 24 hour nursing care, entirely out of his own money.
The trial testimony showed that the husband's nurses cost $365,000 per year and that he only has $400,000 left of his lifetime maximum of his health insurance policy.
There is no dispute that the wife has substantial assets. Her May 2006 monthly statement from Euro Pacific shows that she has $7,124,596 in her brokerage account. In addition, she has cash accounts worth anywhere from $800,000 to $1.8 million, a Swiss annuity worth approximately $800,000 and a Roth IRA valued at about $7,200. At the time of the trial, the wife had sole title to six pieces of real estate: a house in Sag Harbor, a lot of land in Bridgehampton, an apartment in Manhattan, two properties in South Carolina and a home in North Carolina. In addition, she has joint title, with the husband, to a house in Bridgehampton. The total value of all of this real estate, after the mortgages are paid off, is approximately $6.5 million.
The wife's May 2006 net worth statement lists all of her cash accounts and values them at approximately $1.8 million total. At the time of trial, the wife's financial expert set that figure at $800,000. The Court notes, however, that the wife was making substantial attorney fee payments in this and other litigations in which she was involved, which may account for the difference.
The wife also controls a trust that owns another house in Bridgehampton where the husband currently resides. According to the wife's testimony, the house would go to the husband's grandchildren upon his death. However, she also testified that she could invade the trust during her lifetime if she needed the money.
In addition, the wife is the beneficiary on a number of life insurance policies that she took out on her husband's life, without his knowledge. In total, these policies have a cash surrender value of approximately $770,000 and a combined death benefit of approximately $3.6 million. The wife also is in possession of jewelry, art, antiques, precious objects, gold and precious metals worth a substantial amount of money. She lists these categories on her net worth statement but provides no actual or estimated value. Although no formal appraisal was submitted into evidence, the husband introduced a May 2005 property insurance rider which showed the value of at least some of this property was approximately $1.4 million.
The wife testified that one of the policies, having a death benefit of $1 million, recently lapsed. It is unclear if that policy can be reinstated.
A similar rider, however, dated May 2006, showed only $400,000 in insured arts and antiques. According to the wife's testimony, many of these items were sold at auction which may account for the million dollar reduction reflected in the insurance documents.
The wife presented a proposed annual budget of $1,420,089 (or $118,341 per month) that purportedly sets forth the amount of expenses she expects to incur going forward. At the outset, the Court notes that the wife introduced detailed historical spending documentation covering only 2003 through mid-2006 (which includes two years of post-separation spending). Thus, the evidence presented covered only 3 ½ years of this 16 year marriage. There was no such detailed financial evidence admitted showing that the wife had similar spending habits during the bulk of the marriage. Thus, the documentation presented does not establish the extent of the parties' marital spending during the vast majority of the marriage, but only shows a small snapshot of spending, at a time when the wife spent little time with the husband and his range of activities was quite limited.
The wife also presented an income analysis showing her expected future income. According to the wife's financial expert, her net income from her cash holdings and her investment account, as well as some rental income, after payment of certain attorneys fees and capital gains taxes from the sale of River House, was approximated at $343,460 annually. In reaching this figure, the expert assumed a 6% expected rate of return and taxes of 35%. Subtracting this income from her projected expenses noted above leaves, in the wife's analysis, a shortfall of $1,076,629, or $89,719 per month. It is this amount that the wife seeks in maintenance from the husband.
It is clear to the Court that the wife's proposed budget is not reflective of the marital standard of living and contains unreasonable and inflated expenses. First, the costs of maintaining the numerous properties forms a very large part of the budget. It would be inequitable, however, for the Court to require the husband to pay the costs associated with all of the real property titled solely in the wife's name. There is no good reason for the husband to be held responsible for the mortgage and upkeep of the house in Sag Harbor, a property where the wife stays only occasionally, which the husband never visited and which she admitted was purchased as an investment. The wife's claimed need for this property was particularly unconvincing since she has another home that is not very far away. Nor should he have to pay the costs of the Manhattan apartment which is also held by the wife for investment purposes and which she rents out. Likewise, any costs associated with the vacant lot of land, which undoubtedly is held for investment purposes, should be excluded from the wife's proposed budget. Finally, the Court cannot see the rationale for having the husband pay the costs of the wife's mother's home in North Carolina, another of the properties he never visited. The Court finds that the wife's reasonable needs can be met by allowing costs in the budget for her home at 170 in Bridgehampton, her winter home in South Carolina and her art studio in the same city.
There was evidence presented that due to the wife's health problems, she needed a place in the south during the winter.
There is no doubt that the Court can impute income to the wife based on her non-income-producing assets, such as the investment property at issue here. See Prill v. Mandell, 237 AD2d 445 (2nd Dept. 1997) (it is appropriate to impute income where a party fails to make assets productive); Pino v. Pino, 189 Misc 2d 331 (Sup.Ct. Nassau Cty. 2001)(same); Wechsler v. Wechsler, 2005 NY Misc. LEXIS 3473 (Sup.Ct. NY Cty. 2005) (in considering duration of maintenance award, court noted that many of the recipient's assets could be converted to income-producing assets). This is particularly appropriate in this case in light of the Court's conclusion that such property was not reflective of the marital lifestyle. The Court's observation of the husband inevitably leads to the conclusion that he was not in the physical shape required to easily travel from one home to another, even if they were wheelchair accessible.
The wife's investment properties here produce little or no income relative to their value and there is no convincing evidence that owning investment property was part of the parties' joint lifestyle. Since the Court has concluded that the husband should not be required to pay for the costs of these investment properties, the Court will impute to the wife income that could be realized if the homes were sold and the profits were placed in income-producing investments. In addition, the Court will impute income that could presently be realized by investing the approximately $800,000 currently in an income-deferred Swiss annuity.
The Court also notes that the wife could, even if she did not sell the properties, realize additional income by renting at least some of them year-round.
The wife's financial expert testified that he did not include any income from the Swiss annuity in the budget because the wife had deferred income to a future time. The wife admitted that in 2005, she was given the option of beginning to receive annual income from the annuity, but chose not to do so.
The wife's proposed budget includes other inappropriate or unreasonable expenses. First, the budget lists approximately $21,000 per month in premiums for the life insurance policies the wife holds on her husband's life. The wife has cited to no authority requiring that the husband directly pay the wife, as maintenance, money to cover the costs of such policies. However, as discussed later in this opinion, consistent with its statutory authority, the Court will require the husband to pay the costs of maintaining some of these policies. Therefore, this cost must be removed from the wife's budget. Another unreasonable cost in the budget is $ 1,635 per month for season tickets to football games in North Carolina, where the husband did not live and where the wife spent only some of her time. Since the wife admits that she mostly gives away, sells or barters these tickets, this cost should be removed from the budget. The budget also lists an income tax liability of $6,250 per month. However, since the wife's financial expert already deducted taxes, at a rate of 35%, from the wife's expected income, this figure cannot properly be included in the budget.
In addition to the houses, the life insurance, the sports tickets and the tax liability, the Court also notes that many other items in the wife's budget appear to be inflated or constitute unreasonable or excessive expenses. Indeed, the Appellate Division has affirmed a previous judge's finding that some parts of the wife's pendente lite budget were inflated. Hearst v. Hearst, 29 AD3d at 395. In particular, the Court questions the following purported expenses. The wife lists $2,000 per month in food and dining out expenses, however some of this includes her paying for guests. She claims to need $6,000 per year for wine storage despite the fact that she has a wine cellar. The Court also questions her $1,250 monthly expense for an accountant, especially in light of the fact that she includes the costs of both a bookkeeper and a personal assistant. Although she includes monthly expenses for her automobile, she also asks for $1,700 a month for a driver, which seems excessive, especially since she does not work and would not need to regularly commute to New York City. She also lists $6,000 per month in travel and entertainment expenses. However since the husband was unable to accompany his wife on almost all of her travel, and rarely entertained with her, this expense can hardly be viewed as part of the couple's marital lifestyle. Finally, the budget lists $2,233 per month in gifts, an amount that appears unreasonably high. Although the wife sought to convince the Court that the dining out, travel and entertainment expenses, like those involved in maintaining her vast real estate holdings, were typical of both parties' lifestyle, the Court did not credit this testimony. As noted below, Ellen Stahl, the husband's nurse, testified that for much of the marriage, the wife lived her lavish lifestyle while the husband remained secluded in his home.
3. Contributions and services of the wife as a spouse, parent, wage earner and homemaker, and to
the career or career potential of the husband.
The extent of the wife's contributions and services to the marriage was an area of sharp dispute between the parties. Although the wife tries to paint herself as having been a loving, caring dutiful and compassionate spouse throughout the entirety of the couple's marriage, the evidence at trial revealed quite a different picture. It is true that in the early part of the marriage, the wife did assist the husband with his health problems, in particular, taking care of him overnight after the nurses left. The Court also accepts that on occasion, during the many years of the marriage, the wife may have organized social events, such as the husband's birthday party. The husband, in his deposition testimony which was introduced at trial, mentions going to restaurants with his wife. It appeared, however, from his trial testimony that quite a few years ago, such activity was no longer viable for him on a regular basis. In any event, whatever contributions the wife made in these areas, they were not as significant as she described at trial and certainly do not require this Court to award her maintenance in the amount sought.
Starting in 1997 and continuing through today, the husband began receiving round-the-clock nursing care and so the wife's role in this area effectively ended. By that time, the wife was no longer sharing the marital bedroom, having left in 1995. Thereafter, the couple stopped almost all travel and dining out together. Indeed, the wife admitted that in 2003, the year before the separation, she did not go out to dinner with her husband even once. And, Ellen Stahl, his nurse, testified that starting in about 2001, the wife said she was not going out to lunch with him. Indeed, the husband typically would have lunch with John, his personal assistant.
The fact that the husband may not have been physically able to travel and dine out did not stop her from enjoying her lavish lifestyle. She continued to regularly travel and go on vacations and frequently dine out with friends. Stahl convincingly testified that the couple rarely ate together during most of the marriage. Indeed, the situation was go grave that Stahl once suggested to the wife that she actually share a meal with her husband. Although the wife may have provided some input into the husband's menu, the evidence showed that a full-time cook actually prepared the meals.
By the end of the marriage, Stahl stated that the husband would often not leave his bedroom while the wife was in the house and would ask the nurses to alert him when she came home. In 2001, the wife told Stahl that she no longer wanted the few hours of "alone time" she had shared with the husband because it conflicted with her art classes. The husband testified that from 2000 onwards, he mostly stayed in the kitchen and his bedroom trying to avoid confrontation with his wife. Although the wife testified that she never objected to the husband's spending, the Court found Stahl, who recalled how the wife would argue with the husband over his giving money to his daughter, more credible. It got so bad that the husband would have to write checks to his daughter when the wife was not home and then hide evidence of the payments.
4. The duration of the marriage and the age and health of both parties.
At the time of the maintenance trial, the husband was 72 years old and in poor health. The wife was 65 and healthier than the husband. The husband needs twenty-four hour health care and cannot travel independently. Conversely, the wife's health problems and her age have not impacted upon her active life and there is no reason to believe that she will have the extraordinary medical expenses incurred by the husband in the foreseeable future. The parties have been married for 16 years. Since no divorce was granted, the marriage has not ended. For this reason, the maintenance to be awarded by the Court cannot have a set term. See Garver v. Garver, 253 AD2d 512 (2nd Dept. 1998).
5. The present and future earning capacity of both parties.
The wife did not work during the marriage and has no realistic prospect of obtaining employment at this stage of her life. The husband is employed as a Board member of the Hearst Corporation and earns a salary of approximately $150,000 per year. Although there was some brief mention about the husband's continued Board service, this was not the focus of the trial testimony. Of course, if the husband were to lose this position, he would lose all of this income.
6. The ability of the wife to become self-supporting and, if applicable, the period of time and training necessary therefor.
Although it is not reasonable to expect that the wife will find employment, given her age and limited job experience, she has already become, in part, self-supporting since she earns significant income from her investments. In addition, as discussed above, the wife can become even more self-supporting if she sold some of her real estate holdings or if she began to receive distributions from her Swiss annuity, both of which would generate more income for her. And, of course, the wife could use some of her millions of dollars in assets to support her lavish lifestyle.
7. Reduced or lost lifetime earning capacity of the wife as a result of having foregone or delayed education, training, employment, or career opportunities during the marriage.
This factor is not relevant because the wife is not claiming that she lost career opportunities. Furthermore, as noted throughout this decision, her financial position radically improved during the marriage.
8. The presence of children of the marriage in the respective homes of the parties.
There are no children of the marriage. The husband has a daughter from a previous marriage and understandably has an interest in leaving some of his wealth to her. The wife has no children from her previous marriage and thus has no heirs.
9. The tax consequences to each party.
The wife seeks tax-free maintenance. Since the husband is opposing any award of maintenance, he has not addressed any possible tax consequences. In accord with the wife's request, the Court will make any award of maintenance tax-free to her. Since the husband has substantial income, an award of tax-free maintenance in lieu of tax deductible support will not have any appreciable impact on him.
10. The wasteful dissipation of marital property by either spouse.
Although neither party in their post-trial submissions has specifically alleged that this factor is applicable, as discussed above, the husband convincingly argues that the wife's excessive spending habits and her transfer of assets into her own name have dramatically reduced the funds available to him.
11. Any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration, and any other factors which the court shall expressly find to be just and proper.
In fashioning a maintenance award, the Court cannot ignore the husband's testimony that without his knowledge, the wife ensured that millions of dollars in real estate and investments, funded entirely by his trust distributions, were placed into her sole name, and that at the time of the parties' separation, he was left with just a small fraction of her wealth. As noted above, at the time of the separation, the wife had sole title to numerous pieces of real estate and nearly $8 million dollars in liquid investments in her sole name, whereas the husband had only approximately $400,000 in a joint account and half title to one property, and was saddled with millions of dollars in mortgage liability. The husband convincingly testified that he did not learn until after the divorce action began that the wife had made all of these transfers to herself and titled the properties in her own name. Even if the husband may have been aware that the wife was purchasing real estate, he was clueless about the fact that virtually all of it was placed in the wife's sole name. It is clear to this Court that the husband never intended for his wife to take all his money and place it in assets in her sole control.
The wife argues that the husband was aware of and consented to the transfers, but the Court rejects that testimony. She explained that she needed to place the assets in her sole name in order to be protected should the husband die. However, she was unable to satisfactorily explain, nor can this Court discern, why she could not have protected herself, and still have protected her husband, by holding the assets jointly with him with right of survivorship. She also did not adequately explain why she could not have been adequately protected by setting up additional trusts to give her income rather than transferring title outright to her. The wife also testified that the husband gave her $500,000 at one point to account for the fact that she could not inherit his share of the Hearst family fortune. She never explained to this Court's satisfaction why her husband would then give her more money, leaving himself without assets or real estate. Her argument was even less convincing when the Court considers the fact that she also purchased millions of dollars in life insurance, which also allegedly was financial protection for her after her husband's death.
In rejecting the wife's testimony, the Court notes that it did not seem logical that the husband, who was somewhat reclusive, would be that involved in restructuring his assets or planning for his wife's support after his demise, especially without including his child and grandchildren in the financial plan. His testimony was to the point and he was not one to mince words or shade his answers. For all his health problems, he also had business experience and it seemed doubtful that he would take on all the debt for the property while giving up all ownership. Thus, in setting its award of maintenance, the Court will consider not only the sizeable assets the wife has but also how she obtained them. See Kahn v. Kahn, 221 AD2d 320 (2nd Dept. 1995) (in upholding award of maintenance, court considered fact that the wife withdrew close to $ 150,000 from a bank account held in the parties' joint names).
After this litigation began, the husband paid substantial funds toward the upkeep of the properties held in the wife's name. Although this Court would reject the wife's extraordinary maintenance request even if the husband had not made these payments, it is worth noting that the wife's financial position benefitted from these payments during the pendency of the matter because she did not have to use her liquid assets to cover these costs.
Analysis
After reviewing all of the trial evidence, considering the arguments made in the post-trial submissions and applying the requisite statutory factors, for the reasons that follow, the Court concludes that the wife is entitled to an award of $20,000 per month in tax-free maintenance. Although no distributive award is involved here, the wife's ownership of substantial assets does not, per se, preclude a maintenance award. See, e.g., Kohl v. Kohl, 24 AD3d 219 (1st Dept. 2005). Nor should the maintenance awarded be the extraordinary amount sought by the wife given the Court's analysis of the wife's assets and how they were obtained.
In reaching the $20,000 figure, the Court starts with the wife's claim of monthly expenses in the amount of $118,341. From this figure, the Court subtracts $16,011, which represents the monthly cost of maintaining the four investment properties that the Court concluded constituted an unreasonable expense. These properties are the house in Sag Harbor, the vacant land in Bridgehampton, the apartment in Manhattan and the wife's mother's house in North Carolina. In addition, the Court subtracts the monthly expenses of $21,667 in life insurance premiums, $6,250 in income taxes and $1,635 in football tickets, all of which were found to be unsupported or unreasonable. The Court used the monthly expense figures listed in the wife's proposed budget. Because costs associated with household maintenance (furnishings, housewares, appliances, extermination) were not broken down by residence, the Court cannot calculate exactly which of these expenses are for the four properties, though obviously some reduction in this aspect of her budget is necessary. Thus, the total reduction in the budget is $45,563. Subtracting this figure from the proposed monthly budget yields $72,778 per month, or $873,336 per year.
The Court also must reduce her budget because it has, as noted earlier, found certain other expenses to be inflated or unreasonable. Although the dollar figure for the actual costs cannot be precisely calculated, she is not entitled to the amount sought for these inflated items.
The wife's financial expert testified that her yearly investment income, before taxes, is estimated at $443,400 per year. The Court adds to this figure investment income that could be realized from the value of the four investment properties and the Swiss annuity, income which this Court is imputing. The total equity in the four properties is $5,326,843 and the annuity is worth $803,309 for a total of $6,130,152. Applying the expert's estimated 6% return on the wife's investments would yield an additional $367,809 per year in imputed income for a total of $811,209 annually ($443,400 plus $367,809). After subtracting 35% for taxes, the wife's expert's approximation, the wife's total expected annual income is $527,286.
The Court reached the equity figure by subtracting the outstanding mortgages from the estimated or appraised values of the properties. The mortgage figures and property values came from the wife's most recent net worth statement, with the exception of the Sag Harbor home, whose value was established by a June 2005 appraisal.
This figure excludes the $85,000 in rental income contained in the expert's calculations, since the Court is imputing income based on those properties. As noted earlier, if the wife chooses not to sell the properties, she could increase her income by renting these homes.
The Court is ordering tax-free maintenance payments of $20,000 per month, or $240,000 per year. This maintenance award, together with the actual and imputed income that the wife's assets could generate, would be close to the wife's self-declared living expenses, as adjusted for reasonableness by the Court. Although, under this scenario, the wife might have a small potential shortfall if her extraordinary budget were not cut further, the Court believes that she could easily meet any such shortfall by spending some of her appreciable liquid assets. Indeed, such a conclusion would be fair since she obtained these assets in a highly questionable manner. In this regard, the wife's papers focus much too narrowly on her expected income and completely ignore her ability to draw from her sizeable assets. The wife cites to no authority for her proposition that she should not have to dip into her plentiful assets. Of course, the maintenance statute expressly requires the Court to not only consider the receiving spouse's income but also her property. See Domestic Relations Law § 236[B][6][a][1]. In light of the fact that the wife is 65 years old with no heirs, it would not be inequitable for her to use at least some of her assets to support herself. Indeed, without taking her real estate into account, she has close to $9 million. If she matched the maintenance being awarded here with her own funds, in twenty years, she still would not have used up all her liquid assets.
Furthermore, in reaching this maintenance award, the Court has considered the fact that the wife has transferred most of the couple's property and money into her own sole name leaving her husband with little or no real estate of his own. As noted throughout this opinion, the Court recognizes that the wife cannot accurately be described as the "non-monied" spouse, since each of the parties has significant income and assets. Moreover, the husband can comfortably pay the amount of maintenance being awarded and still replenish his own savings from his generous income stream.
The Court recognizes that the wife did, at least at some point early in the marriage, take care of her husband. Furthermore, the husband obviously enjoyed, at least when he was physically able, dining at fine restaurants such as the 21 Club and his deposition testimony indicates that he was aware that his wife was purchasing high-end clothing. He also has spent money on boating and has continued to do so, investing hundreds of thousands of dollars on this activity. The husband had no objection to the wife's spending time in a warmer climate during the winter. This Court is not awarding the wife an amount of money which would require her to live a spartan lifestyle, but rather, given her imputed income, her tax-free maintenance and her own substantial assets, the wife will be able to have a very comfortable lifestyle. In light of all of these factors, the Court concludes that the amount of maintenance awarded is just and appropriate.
The maintenance award of $20,000 shall be paid monthly on the first day of each month. Since the Court's award is lower than the pendente lite award, it shall be retroactive to the date the pendente lite order was vacated and the husband stopped paying the temporary maintenance ordered by Justice Visitacion-Lewis. See Cassese v. Cassese, 197 AD2d 605 (2nd Dept. 1993). The husband shall not be entitled to any credit for the difference between the two awards. See Fox v. Fox, 306 AD2d 583 (3rd Dept. 2003). All retroactive amounts due shall be paid in a lump sum within ninety days of this decision.
The husband's request for reimbursement of certain marital upkeep expenses he allegedly paid before the pendente lite decision was issued is denied. In that decision, Justice Visitacion-Lewis ordered the husband to pay $101,246 in retroactive temporary maintenance covering the period from the date of the wife's pendente lite application to the date the husband started paying temporary support. The judge also recognized that during that time period, the husband may have paid, out of his separate property, for certain housing expenses related to five pieces of marital real estate. Justice Visitacion-Lewis then ordered that the husband would be entitled to receive a credit for these amounts in equitable distribution. However, since there is no equitable distribution here, the husband is not entitled to reimbursement from the wife under the plain terms of Justice Lewis-Visitacion's order.
There is no dispute that the husband paid the full amount of retroactive maintenance ordered by Justice Visitacion-Lewis. Although Justice Visitacion-Lewis could have allowed the husband to receive a credit for the home expenses he had previously paid against the retroactive maintenance she awarded, see, e.g., Daniels v. Daniels, 243 AD2d. 254 (1st Dept. 1997), she did not do so. In light of the dismissal of the divorce action, this Court cannot alter Justice Visitacion-Lewis's order at this stage of the proceedings to provide for the reimbursement the husband now seeks. Moreover, the husband never sought to reargue the pendente lite decision and when the wife appealed the decision, the husband did not cross-appeal and ask for the credit he now seeks. Although the husband may have expected that there would be equitable distribution, there was no guarantee that a divorce would be granted. By failing to have challenged Justice Visitacion-Lewis's decision, either on rearguement or appeal, the husband is precluded from seeking reimbursement now. Nor would it be proper to award the husband a credit against post-divorce retroactive maintenance for payments he purportedly made before the pendente lite decision.
The husband also seeks to be reimbursed for certain home upkeep expenses he allegedly paid after the pendente lite order was signed. However, the husband may not receive any credit for voluntary payments made that were not pursuant to the pendente lite decision. See Ferraro v. Ferraro, 257 AD2d 598 (2nd Dept. 1999). The husband claims that to avoid foreclosure, he was forced to make mortgage payments that the wife failed to make and which were her obligation under the pendente lite decision. This issue was the subject of a motion before Justice Visitacion-Lewis. Although both parties have attached some of the motion papers, neither has provided this Court with Justice Lewis's decision, which was rendered on the record, the transcript of which is not contained in the County Clerk file. Without knowing how Justice Visitacion-Lewis ruled, this Court cannot make a determination as to whether the husband should be reimbursed for these expenses and therefore cannot grant his current reimbursement request.
In addition, the Court orders the husband to maintain life insurance in the total amount of $1 million in which the wife is designated as an irrevocable beneficiary. See Anonymous v. Anonymous, 283 AD2d 266 (1st Dept. 2001). The Court believes that this amount is sufficient to secure the Court's maintenance award. Furthermore, given the husband's age and health, ordering the amount of life insurance sought by the wife could produce a significant, and unfair, windfall for her. See, generally, Holterman v. Holterman, 307 AD2d 442 (3rd Dept. 2003), aff'd, 3 NY3d 1 (2004). The husband shall determine which of the various insurance policies owned by either him and/or his wife should be used to satisfy this obligation. The husband is directed to provide proof to the wife on a regular basis that the required payments for the insurance have been made and that the policy is current. The Court also orders the husband to continue to maintain and pay for the wife's medical, dental and optical insurance, relief which is not opposed by the husband in his post-trial brief.
The wife is directed to submit a proposed order to the Court and the husband by March 9, 2007. Rather than submit a counter-order, the husband shall, by March 19, 2007, submit a letter stating with specificity any objections and/or modifications to the wife's proposed order. The parties are also directed to retrieve the exhibits from the courtroom.
Ths constitutes the decision of the Court.