Opinion
203789/2002.
Decided July 19, 2004.
Married on July 26, 1985, Plaintiff Janet B. (hereinafter the "Wife") and Defendant John B. (hereinafter "Husband") have three children: John (DOB 01/25/86), Michael (DOB 7/12/88), and Alexandra (DOB 5/10/93). Throughout the marriage, the Husband has been the sole provider of the family as a successful entrepreneur and real estate investor, whose Long Island-based corporation, Josie's Auto Sales Inc., doing business as Parkway Car Stereo, made more than nine-million dollars in gross revenues in 1998 in the business of car stereo equipment, car phones, window tinting and other related installations and services both retail and wholesale. With this income, it is understandable that the couple had enjoyed a comfortable standard of living, affording the Wife the luxury of being a full-time homemaker and parent to the children, while residing in a million-dollar house in Lattingtown, New York.
Marital difficulties apparently ensued in 2000, prompting the Wife to commence and then discontinue, without prejudice, a matrimonial action in 2001. The reasons for the discontinuance are disputed, but the parties remained living separate and apart until October, 2002, when the Wife, then 43 years of age, commenced a second matrimonial action, seeking a divorce, equitable distribution and extensive ancillary relief against the Husband, then 45. By Preliminary Conference Order (Woodard, J.), dated December 16, 2002, the parties stipulated to permitting the Wife to retain exclusive use and occupancy of the marital residence and to having the parties' real estate properties appraised. All discovery proceedings were supposed to have been completed by May 6, 2003. Discovery, however, has proceeded slowly apparently as a result of the Husband's recalcitrance in providing sufficient or adequate responses about his financial interests and multiple businesses.
Subsequent motion practice for pendente lite relief culminated with a Short Form Order (Woodard, J.), dated March 11, 2003, granting the Wife, inter alia, sole custody of the parties' children, child support of $400, payment of all carrying charges for the marital residence, interim counsel fees of $10,000 and her request for the appointment of a neutral business appraiser, Financial Appraisal Services, Inc. (hereinafter "FAS"), to evaluate the Husband's business. No date for the valuation was stated. Relevantly, the Court imputed a yearly income of $170,000 to the Husband, who was to be solely responsible for the carrying charges of the marital residence, a two-million dollars life insurance policy, the children's educational expenses and medical expenses. In the meantime, according to the Husband, he suffered business reverses and, as of 2001, grossed three-million dollars in revenues and currently owns only one corporate store.
Upon reassignment of this matter to the undersigned in June 2004, a status conference was immediately scheduled. Following the conference where the parties and their counsel attended on July 7, 2004, an inquest on grounds was held and this Court heard uncontested testimony by the Wife regarding her abandonment for more than a year by the Husband, and granted a divorce to the Wife on the grounds of abandonment. The Judgment of Divorce was held in abeyance pending the resolution of the contested financial ancillary issues and equitable distribution.
Now, by Order to Show Cause returnable July 1, 2004, the Wife moves for an order of this Court: (1) directing FAS to evaluate the Husband's business as of January 18, 2000, the commencement of the initial discontinued matrimonial action; (2) precluding the Husband from offering any evidence at trial of his business interests based on his alleged failure to comply with discovery requests; (3) ordering the Husband to pay $100,000 to the Wife to cover for all the expenses incurred and to be incurred by her for marital credit card debt of $69,000 as well as the hiring of her own accountant to evaluate and investigate the Husband's dissipation of corporations and marital assets since the commencement of the initial divorce action to date; and (4) granting counsel fees to the Wife in the sum of $50,000.
In opposition to the Wife's motion, the Husband cross moves, by Notice of Cross Motion dated June 3, 2004, asking for: (1) the immediate issuance of the FAS report of the Husband's business; (2) the immediate sale of the marital residence to use the proceeds for the Wife's requested payments and the purchase of a smaller house; (3) a finding of contempt against the Wife for her sale of her marital jewelry; and (4) sanctions against her for bringing this allegedly frivolous and meritless Order to Show Cause. Contrary to the Husband's arguments, this Court finds that the Wife is entitled to most of the requested relief.
II
The first issue to be addressed by the Court concerns the proper valuation date for the Husband's business interests in Parkway Car Stereo and all its subsidiaries and affiliates. Although there is no dispute that those interests were acquired during the marriage, the parties disagree as to the date to be used to valuate those business assets for purposes of equitable distribution. Specifically, the Wife argues that the date of the initial matrimonial action of January 18, 2000, should be used to evaluate the Husband's corporate and business interests so as to truly reveal their value prior to any of his alleged subsequent dissipations, sales or gifts. For his part, the Husband claims that the 2002 commencement of the instant action better reflects the real value of his current businesses, which have significantly declined due to unrelated financial reverses. This Court disagrees.
Under the Domestic Relations Law, there is a presumption that all property acquired or enhanced by either spouse during the marriage's "economic partnership" is marital property, which has to be equitably distributed by the court (Domestic Relations Law § 236[B][1][c]; see Hartog v. Hartog, 85 NY2d 36, 47; O'Brien v. O'Brien, 66 NY2d 576, 585). In order to accomplish that mandate, the statutory framework authorizes the court to award a needy spouse funds to enable her to carry on or defend the action, as justice requires, having regard to the circumstances of the case and the parties (Domestic Relations Law § 237[b] ; Ahern v. Ahern, 94 AD2d 53, 58;). Among the tools available for the evaluation of the marital property, the court may discretionarily award funds payable by the monied spouse for, inter alia, neutral business evaluators, counsel fees, accountant and investigative fees and appraisal experts ( see Domestic Relations Law § 237[d]; Lightman v. Lightman, 253 AD2d 453; Gueli v. Gueli, 106 Misc 2d 877, 878).
Domestic Relations Law § 236(B)(4)(b) also grants the court great latitude with respect to the selection of a proper valuation date of the marital property "as soon as practicable" ( see Maddalena v. Maddalena, 217 AD2d 606; Cohn v. Cohn, 155 AD2d 412; Reina v. Reina, 153 AD2d 775, 776). The statute specifically provides that "the valuation date or dates may be any time from the date of commencement of the action to the date of trial" (Domestic Relations Law § 236[B][4][b]; see Anglin v. Anglin, 80 NY2d 553, 554). Indeed, courts have utilized the commencement date of a prior discontinued action absent a reconciliation of the litigants between the actions ( see Miller v. Miller, 304 AD2d 727; Thomas v. Thomas, 221 AD2d 621, 622), especially when there is a dramatic reduction in value as a result of dissipation or wasteful conduct of the owner spouse ( compare Tuccillo v. Tuccillo, ___ AD2d ___, 778 NYS2d 898; Wegman v. Wegman, 123 AD2d 220, 233, with Lamba v. Lamba, 266 AD2d 515, 516).
Applying the foregoing principles to the matter at bar, this Court believes that not only the earlier commencement date must be used, but that accountant fees are warranted, in order to properly to evaluate the Husband's myriad of business interests, including Parkway Car Stereo. Precedent supports the propriety of using the earlier valuation date of January 18, 2000, especially since there was no reconciliation between the parties between the discontinuance of the first and the commencement of the second matrimonial action ( see id.). The propriety of the first date is also supported by notions of equity and fairness in order to equitably distribute the marital assets herein.
The record reveals that during the marriage the Husband has amassed considerable assets from his ownership and active participation in the lucrative Parkway car stereo and cell phone business, which just prior to the commencement of the discontinued action posted revenues of almost ten million dollars and boasted at least four different locations. Not only was that business enterprise in existence, but the Husband also acquired several commercial and residential real estate properties, which he still currently owns and manages in a intertwined manner with his other companies. The Wife, on the other hand, has been the children's primary caretaker and homemaker through the 16-year marriage, and she is mostly unfamiliar with the origins and extent of the Husband's finances and businesses.
Despite the prior success of the Parkway business, the Husband claims that, since 2001, all those revenues and four locations have essentially vanished as a result of business downpours and gentlemen's agreements. There are no contracts, leases, franchise agreements or partnership covenants evidencing these corporate changes. In fact, the Husband claims that those businesses now belong to other individuals following transactions evidenced only by "just handshakes." The value of these businesses has been clearly affected by the Husband's participation or lack thereof, and his explanations for their decline in value over the course of the prior and this litigation must be examined by accounting professionals ( see Kerzner v. Kerzner, 264 AD2d 338). Without the earlier date, the court-appointed business evaluator, FAS, would be constrained to the Husband's untenable position that he has released all his ownership's rights and obligations and has only kept one store with very limited income since 2002.
Accordingly, this Court orders that FAS evaluate the businesses from the earlier commencement date of January 18, 2000. The Husband is directed to fully cooperate and provide all evidence and documents related to his business ventures for those dates, as needed by FAS, within 30 days from service of this Order with Notice of Entry upon him. If the Husband fails to comply with this directive in the allotted period of time, he would be precluded from providing any more proof and FAS would be hereby permitted to make any necessary inferences, negative or otherwise, in order to promptly complete the evaluative report of Parkway.
Even if the earlier date is used, however, FAS's job does not include a look at the history of Parkway's corporate entity, its business sector or an examination of all the other businesses and corporations apparently run by the Husband. A cursory corporate search was conducted by the Wife's attorney revealing the existence of previously unknown corporate entities under the Husband's name, such as: Boss Security, Inc., Car Audio Tunes, Inc., Paging America Corp., Jam Development Corp. and John Brian Satellites, Inc. There appear to be connections between those businesses and the commercial real estate properties owned or managed by the Husband. Indeed, the Husband has refinanced some of those properties whose monies have been unaccounted for and need to be traced and evaluated. Although the Husband's explanations as to the existence or bankruptcy of these entities could ultimately be credited at trial, the Wife has to be given the financial tools to corroborate or challenge those explanations and provide her own conclusions, through corporate searches, exploring cash flows, and ascertaining the existence of additional/hidden businesses.
For that reason, the Wife must be provided with her own accountant to be able to make sense of the financial and corporate maze, apparently only decipherable by the Husband.
The Wife is, thus, awarded a fee in the amount of $15,000 to employ the services of an accountant to be retained by the Wife's attorney in connection with the discovery of the Husband's business records and finances, with leave to apply to the Court for additional fees, if warranted ( see Lightman v. Lightman, 253 AD2d 453; Goodson v. Goodson, 135 AD2d 604, 605-606).
III
The Wife next asks for preclusion. It is well settled that a motion for preclusion or to strike pleadings based on the failure to provide disclosure must be accompanied by an Affirmation of Good Faith by counsel detailing any specific efforts or consultations with the other counsel undertaken "to resolve the issues raised by the motion" in order to reduce the burden on the adversary and the Court ( 22 NYCRR 202.7[a], [c]; see Sixty-Six Crosby Assocs. v. Berger Kramer, 256 AD2d 26; Matos v. Mira Realty Mgt. Corp., 240 AD2d 214). Failure to provide same results in the summary denial of the motion. Since the Wife's motion fails to include that type of separate affirmation, that portion of her motion seeking preclusion must be denied.
Nevertheless, both parties are entitled to a searching exploration of each other assets in accordance with the Domestic Relations Law ( see Domestic Relations Law 236[B][4]; Goodson v. Goodson, 135 AD2d 604, 605). The Preliminary Conference Order herein also obligates the Husband to provide all financial evidence within his control. According to the Husband, he has been forced to close some of his businesses due to business reverses. Even if the Husband's claims of financial distress were credited at this time, he is obligated to provide evidence of the previously lucrative companies as well as their current existence insofar as previously requested. The Husband must, therefore, provide to the Wife and her accountant all missing financial information about his current and prior companies within 30 days after service of this Order with Notice of Entry upon him.
Domestic Relations Law § 236(B)(4) provides for "Compulsory financial disclosure" as follows: "in all matrimonial actions and proceedings in which alimony, maintenance or support is in issue, there shall be compulsory disclosure by both parties of their respective financial states. No showing of special circumstances shall be required before such disclosure is ordered."
Finally, the Wife requests counsel fees incurred as a result of this proceedings. An award of counsel fees is well within the province and discretion of the court, as is the apportionment, if any, of the fees between the parties, having regard to their circumstances and the complexities of the case ( see DeCabrera v. Cabrera-Rosete, 70 NY2d 879, 881; Pascarelli v. Pascarelli, 283 AD2d 472, appeal denied 96 NY2d 937). In order to obtain counsel fees, the court must consider, among other things, the nature and extent of services rendered, the actual time spent, the nature of the issues involved and counsel's professional standing ( see Domestic Relations Law §§ 237[a], 238; Thomas v. Thomas, 221 AD2d 621, 623; Willis v. Willis, 149 AD2d 584).
Under the extant circumstances, this Court believes that the Wife is entitled to the payment of additional counsel fees by the Husband. This is a relatively difficult matrimonial action which has required counsel, respected members of the matrimonial bar, to spend a substantial number of hours in discussions and conferences, conducting legal research and writing, and in mustering patience and understanding in dealing with the parties and the issues involved; issues made more difficult by the Husband's failure to cooperate with discovery proceedings. With respect to the financial circumstances of the parties, it is clear that the Husband owns a multi-million dollar business, which has been and continues to be the sole provider of the family. Even if the Wife were to be working, as found by Justice Woodard, she would not be producing sufficient income at the present time to continue prosecuting this matter to the level that the Husband has been so doing while enjoying the benefits of free legal representation.
Accordingly, this Court grants the Wife's request and hereby orders the Husband to pay the sum of $20,000 directly to the firm of Goldman and Maurer, for services rendered, within 30 days from service of this Order with Notice of Entry. If the counsel fees are not paid as directed, the Nassau County Clerk is authorized to enter a money judgment in favor of counsel upon written affirmation. No further notice is required.
IV
Turning next to the Husband's cross motion, the Husband is first seeking to sell off the marital residence in order to pay off all the accumulated marital debt and to cover the Wife's needs. Precedent, however, consistently discourages the sale of marital assets prior to equitable distribution ( see Kahn v. Kahn, 43 NY2d 203, 210; Stewart v. Stewart, 118 AD2d 455, 457). As the Court of Appeals has stated in Kahn ( id.), "[u]nless a court alters the legal relationship of husband and wife by granting a divorce, an annulment, a separation or by declaring a void marriage a nullity, it has no authority to order the sale of a marital home owned by the parties as tenants by the entirety." This Court concurs.
In his cross motion, the Husband stresses the need to sell the marital residence to be able to afford all the related expenses of this proceeding. The Husband has failed to convince this Court that he does not have the resources available or business wherewithal to cover all the expenses incurred herein. Furthermore, it would be in the better interests of the children to remain in the marital residence in order to provide them with continuity and stability. This Court finds that it is not necessary to sell the house at this time.
Nor has the Husband provided sufficient proof to establish either that the Wife was in contempt of court for her sale of some jewelry to make ends meet during the pendency of this protracted action ( see McCain v. Dinkins, 84 NY2d 216, 226; Pereira v. Pereira, 35 NY2d 301, 308; Hoglund v. Hoglund, 234 AD2d 794), or that the instant application is frivolous or lacks any merit ( 22 NYCRR 130-1.1; see Williams v. Williams, 215 AD2d 980, 981; Brancoveanu v. Brancoveanu, 179 AD2d 614).
V
In accordance with the foregoing, the Wife's motion for several items of relief is granted in part. The Husband's cross motion is denied in its entirety. This constitutes the decision and order of the Court, which has examined and rejected any remaining contentions not expressly discussed.