Opinion
350312/01.
Decided January 5, 2005.
Donald Frank, Esq., Blank Rome LLP, New York, New York, for the Plaintiff.
Robert Dobrish, Esq., Dobrish Wrubel LLP, New York, New York, for the Defendant.
Pamela Sloan, Esq., Herman Sloan Robarge Sullivan LLP, New York, New York, Law Guardian for the Children.
Based on the foregoing the decision and order of the court is as follows:
On June 9, 2003 the disputed financial issues in this divorce action and the inquest on the divorce grounds were referred for hearing before and report by a Special Referee. The specifically referred issues included: [1] an inquest on the divorce, [2] equitable distribution; [3] maintenance; [4] child support; and [5] attorney's and other professional's fees. Thirteen days of testimony were heard and post trial submissions made. On October 15, 2004 Special Referee Howard Leventhal rendered a 67 page report containing his findings and recommendations. Defendant had moved to confirm in part and reject in part. Plaintiff has cross-moved to confirm in part and reject in part.
Referee Leventhal e-mailed a clarification of his report in response to inquiries by both parties' attorneys. The clarification, however, was never filed with the County Clerk and otherwise is not in a form that can be considered by the court. Consequently this motion only addresses the report as written and filed in the New York County Clerks office.
DISCUSSION
It is the function of a referee to determine the issues referred, as well as to resolve conflicting testimony and matters of credibility. Pursuant to CPLR § 4403 the court may confirm or reject in whole or in part any report made by the Special Referee. The court may also make new findings with or without the taking of additional testimony, provided it has the benefit of the transcripts and trial exhibits (which it has in this case). As a general rule, however, the court will not disturb the Referee's findings, and the report should be confirmed, if his or her findings are supported by the record and if s/he has clearly defined the issues, and fairly resolved matters of credibility. Kaplan v. Einy, 209 AD2d 248 (1st Dept. 1994); Freedman v. Freedman, 211 AD2d 580 (1st Dept. 1995); The Board of Managers of the Boro Park Village-Phase I v. Boro Park, 284 AD2d 237 (1st Dept. 2001). The Referee's recommendations are entitled to great weight since s/he was the trier of fact and had the opportunity to see and hear the witnesses, and observe them on the stand. Frater v. Lavine, 229 AD2d 564 (2nd Dept. 1996).
I. Inquest on the Divorce
Plaintiff seeks to confirm that part of the Special Referee's report recommending that she be granted a divorce based upon defendant's cruel and inhuman treatment of her. DRL § 170. Defendant does not oppose the granting of a divorce. Thus the court confirms that part of the report which recommends that plaintiff obtain a divorce in her favor.
II. Equitable Distribution
A. Marital Residence
The marital residence is a townhouse located at 6 East 10th Street in Manhattan. It is the flashpoint for the biggest financial disputes between the parties. The parties lived there with their children during their marriage. In addition, there are also other apartments in the townhouse, that produce rental income.
Plaintiff contends that the Special Referee erred in finding that the former marital residence was marital property as opposed to her separate property. She is, nonetheless, willing to accept and seeks confirmation of the Special Referee's recommendation that defendant receive $1,899,200 as and for his equitable interest. She believes that the Referee's recommendation is a reasonable compromise of the parties' conflicting legal claims.
Defendant claims that the Special Referee was correct in finding that the residence was marital property and that the down payment had been made with personal funds and gifts given by others to both parties. He claims that the Special Referee then made an error of law by permitting plaintiff to recoup the entire purchase price of the marital residence before equitably distributing the appreciation thereon. Defendant collaterally claims that the Special Referee incorrectly concluded that the mortgage money, obtained in order to make the initial purchase, was part of the down payment that the plaintiff was entitled to recoup. Defendant further objects to the Special Referee's use of the September 2002 value of the residence in calculating equitable distribution. He also objects to the distribution of the remaining equity as 60% to plaintiff and 40% to defendant. Defendant believes that the equity should be split 50% to each of them. Finally defendant objects to the recommendation that plaintiff be entitled to buy out defendant's interest and that such buy out occur over a three year period. He argues that the marital residence should be immediately sold and that the current equity be distributed 50% to each of them.
Plaintiff argues that the Special Referee's findings about the marital residence should be completely rejected because they are "cut and paste" job from defendant's proposed findings of fact and they are inconsistent with the legal conclusions the Referee drew therefrom. She insists that the erroneous legal conclusions are evidence that the referee did not actually intend to make the findings of fact that he made. This blunderbuss argument is rejected. It is the referee's job to sift through the parties' differing factual contentions and then make recommendations as to which contentions he finds more believable. The fact that the referee found defendant's factual contentions more believable than plaintiff's is not a basis for rejecting the report particularly where, as here, there is ample support for such factual findings in the record. Nor is the fact that the referee may have made legal mistakes a basis for a wholesale rejection of the Special Referee's factual findings.
The Special Referee's finding that their former marital residence is martial property is fully supported by the record developed at trial. It was purchased only after the parties' married and before this divorce action was commenced. Consequently it is presumptively marital property and the burden is on plaintiff to establish it as separate property. Judson v. Judson, 255 AD2d 656 (3rd dept. 1998); Heine v. Heine, 176 AD2d 77 (1st dept. 1992). Plaintiff failed to sustain her burden of proof that the marital residence was purchased and maintained only with her separate property.
Plaintiff's argument that the marital residence is really hers alone is based upon her contention that the down payment was made with gifts she alone received from her mother. There is ample evidence and law for the Referee to have rejected plaintiff's self serving document purportedly gifting the monies for the townhouse to plaintiff alone. At best for plaintiff the letter was a legal nullity, at worse for plaintiff it is an out and out forgery. There is further evidence to support the Referee's conclusions that other monies for the down payment came from the parties' personal funds and from gifts made by third parties, including plaintiff's mother, to both plaintiff and defendant. The mortgage taken to effectuate the purchase was paid jointly by the parties partly from the rental income and partly from the parties pooled financial resources. Subsequent machinations by the parties in changing title, etc. does not change this asset's fundamental character as marital property for purposes of equitable distribution.
Once the Special Referee made the factual finding that the entire martial residence was a marital asset, there was no legal basis for allowing plaintiff to recoup the entire purchase price before distributing the equity. The effect of such an award is to treat the purchase price as if it were separate property, which is was not. Murphy v. Murphy, 4 AD3d 460 (2nd dept. 2004); Butler v. Butler, 171 AD2d 89 (2nd dept. 1991). Under the circumstances, the purchase price should have been equitably distributed in the same percentages as the rest of the equity in the marital residence. Consequently the report is rejected to the extent that it did not make such a distribution.
In calculating the distributive award, the Special Referee relied upon the value of the marital residence as being $5,750,00. This value was pursuant to an appraisal made in September, 2002. Defendant now complains that the marital residence has gone up in value since that time. In fact it is the reason that he insists that the asset should be sold and that he be entitled to recoup a percentage of the entire net proceeds realized upon sale.
DRL § 236 [B][4][b] requires the finder of fact to chose a valuation date any time between the date of commencement of an action and the date of trial. Where, however, no proof of a trial date value is presented, then the Special Referee may justifiably rely upon the only proof of value in the trial record when making his calculations. See: Dugue v. Dugue, 172 AD2d 974 (3rd dept. 1991); Shapiro v. Shapiro, 151 AD2d 559 (2nd dept. 1989). Consequently the court confirms the Special Referee's finding that the value of the martial residence is $5,750,000 for equitable distribution purposes.
The court also confirms that Special Referee's finding that plaintiff is entitled to 60% and defendant is entitled to 40% of the net equity in the marital residence. Ultimately the issue of the percentage given in equitable distribution is a matter of equity and discretion based upon consideration of the factors enumerated in DRL § 236 part B. The court will not supplant the discretion of the Special Referee in determining such distribution percentages if they otherwise find support in the record. Here the Special Referee figured that plaintiff's contributions to the purchase, maintenance and operation of the premises was slightly less than plaintiff's contributions. This finding is supported by the record and should not be disturbed.
Inasmuch as the Special referee erroneously awarded the first $875,000 of value in the martial residence only to plaintiff, the distribution must be increased by 40% of $875,000 or $350,000. Plaintiff's distribution should be concomitantly reduced. Thus defendant's equitable distribution on account of the marital residence should be calculated as follows:
Value of the Marital Residence $5,750,000 less outstanding mortgage $ 127,000 Total equity constituting marital property $5,623,000 Defendant's 40% interest $ 2,249,200
The Special Referee recommended that the former marital residence either be sold or that, at plaintiff's option, she be entitled to buy out defendant's equity over a three year period. Defendant objects to plaintiff having the right to buy out his interest. He also objects to a three year payout.
Certainly the court has the discretion to order that there be a payout of a distributive award. DRL § 236 part B [5][e]; Harmon v. Harmon, 173 AD2d 98 (1st dept. 1992). A payout, however, should bear some rational relationship to the payor's ability to pay in the time allotted. Gober v. Gober, 4 AD3d 175 (1st dept. 2004). The court also has the discretion to permit one party to buy the other out of their equity in the former marital residence. Rado v. Rado, 298 AD2d 887 (4th dept. 2002). In the case at bar, while there is some support for permitting the plaintiff an opportunity to preserve her ability to stay in the marital residence, there is simply no legal or equitable basis for an extended payout.
Plaintiff has lived in the marital residence since it was purchased. It has been a home for the children since each one of them was born. It provides a source of revenue for plaintiff. While there is no reason to believe that the plaintiff cannot find adequate housing for herself and the children if she were required to move, there is also no basis to deny her a reasonable opportunity to maintain the marital residence, if possible.
It is beyond dispute, however, that plaintiff has absolutely no financial ability on her own to buy out defendant's interest either at this time or in the foreseeable future. Even after imputing certain income to plaintiff, the Special Referee found that she only earned approximately $62,000 annually. She cannot on her own buy defendant's interest out now or over the next three years. Thus the three year pay out bears no relationship to her ability to pay and is arbitrary.
If she is going to buy out defendant's interest at all, plaintiff will undoubtedly have to obtain financial assistance from her mother or elsewhere. This is consistent with how she has managed her finances in the past. There is no reason or legal basis, however, to hold defendant's substantial equity interest hostage for three years to the largesse of some third party who may or may not be willing to help plaintiff. Consequently while the court confirms the Special Referee's recommendation that plaintiff be given an opportunity to buy defendant's equity, it rejects the Special Referee's recommendation that such buy out be made in three annual installments.
Plaintiff is given 180 days from the date of entry of the judgment to pay defendant the sum of $2,249,200 plus interest (see decision, infra) as and for his distributive share in the martial residence. In the event no such payment is made within the applicable period then the former marital residence shall immediately thereafter be listed for sale with a reputable broker familiar with the neighborhood at an asking price calculated to fetch a fair market value. The marital residence shall as promptly as possible be sold at its then fair market value. The proceeds, net of customary and usual closing costs, shall be distributed as follows: Taxes, not otherwise paid at closing but due on account of the sale, shall be placed in a escrow account and paid at the appropriate time to the appropriate taxing authorities. Defendant's distributive share, as calculated herein, plus interest (see decision infra), and as then adjusted for expenses and taxes shall be paid to or on behalf of defendant. The balance shall be paid to or on behalf of plaintiff.
The Special Referee recommended that defendant pay his proportional share of net closing costs and taxes. This recommendation, as clarified below, is confirmed. Defendant's proportional share of expenses does not include the payment of any mortgage which is plaintiff's sole responsibility (see decision infra). Defendant's proportional share of expenses is to be calculated by comparing his distributive share to the actual contract price. This is to accommodate any fluctuations in the market that may have occurred since the valuation date and to make sure that each party pays his or her fair share of the expenses associated with the sale.
Incident to the martial residence, a series of collateral issues occur with respect to post commencement expenses including mortgage, debt on account of the marital residence, earnings on the marital residence, interest due on defendant's distributive share, and monies in Blue Spruce Co. These issues are analytically similar and should be handled consistently.
The effect of the Special Referee's choice of a valuation date of the marital residence closer to the date of commencement of the action than the date of trial, is that the benefits and risks of ownership of such asset should pass over to plaintiff at or about the time of it valuation. Plaintiff is obtaining the financial benefit of a rising real estate market since that time. While no actual date of trial value of the marital residence was adduced, the court takes notice of the robust real estate market in Manhattan. Consequently the post commencement costs to maintain that property should be the responsibility of plaintiff alone. Thus the mortgage was and is her sole responsibility, as is any debt she incurred in connection with the operation of the marital residence, either in her own name or through Blue Spruce, Co., the "dba" she used to manage the marital residence.
Likewise the accounts of Blue Spruce Co. should be divided as of the date of commencement and the Special Referee's recommendation in this regard is confirmed. The fluctuations, both positive and negative, are reflective of plaintiff's benefit and risk in having the marital residence valued as of the date of commencement. Plaintiff's arguments that Blue Spruce is her separate property, were properly rejected by the Special Referee. As the dba through which she operated the martial residence, it is, like the martial residence, marital property. The fact that it was titled in her sole name is of no legal significance in equitable distribution. Xenitelis v. Xenitelis, 241 AD2d 490 (2nd dept. 1997).
In keeping with this analysis, the Special Referee's recommendation that plaintiff is entitled to keep the post commencement rents received is confirmed.
The selection of the early valuation date also impacts issues regarding the payment of interest. The referee's recommendation that defendant is entitled to post judgment interest at the statutory rate of 9% is confirmed. Pre-judgment interest is also warranted in this case, at least from the date of valuation utilized to figure equitable distribution (September 15, 2002), because the asset continued to produce income and appreciate in value since that time. Povosky v. Povosky, 124 AD2d 1068 (4th dept 1986). Had this asset been distributed at the time of its valuation date, defendant could have invested the money and produced a positive rate of return. Moreover, failure to award interest would result in a windfall to the plaintiff, who under the referee's decision is getting all of the post valuation date appreciation. The court sets pre judgment interest at 5% based upon a review of the case law considering prevailing interest rates during the applicable period. Davenport v. Martin, 4 AD3d 873 (4th dept. 2004); Abiele Contracting, Inc. v. New York City School Construction Authority, 6 AD3d 366 (2nd dept. 2004); In re Settlement Capital Corp, 1 Misc.3d 446 (Queens Co. Sup. Ct. 2003); In re Petition of Settlement Funding of New York LLC, 195 Misc.2d 721 (Rens. Co. Sup. Ct. 2003). An award of interest is in keeping with the court's holding that the benefits and risks of ownership of the marital residence passed to plaintiff at or about the time of its value.
Plaintiff's exhibit 13.
B. 1996 Volvo
The Special Referee found that the 1996 Volvo which was purchased in 1996 and worth $9,965 is marital property. That finding is confirmed as supported by the record. Plaintiff is entitled to keep the automobile and defendant is entitled to an equalizing payment in the amount of $4,982. The court also confirms the Special Referee's recommendation that plaintiff pay defendant the amount of $1,462.35 which reflect expenses he incurred in connection with plaintiff's failure to follow this court's interim order regarding the sharing of the automobile.
C. Medical Malpractice award
In connection with the birth of the parties first child plaintiff suffered a broken hip. The parties then filed a medical malpractice action in which they were both named as plaintiffs. Plaintiff sought damages for her personal injuries and defendant sought damages for loss of consortium. The case was settled and the parties received an unallocated settlement check in the amount of $209,408.
The Special Referee distributed the settlement monies 90% to plaintiff and 10% to defendant. Plaintiff objects, arguing that she should get the full amount of the settlement as her separate property. Defendant objects claiming that it should be distributed equally. The positions of both parties are rejected and the Special Referee's findings as to the allocation of the settlement are confirmed.
Marital property is defined in DRL § 236[B][1][d][2], [5][a]. It specifically excludes monies received in connection with personal injury actions. Where, as here, an unallocated settlement of a law suit is made in which both spouses are named plaintiffs, the finder of fact in the divorce action must parse out what part of the settlement is due to each spouse. Richmond v. Richmond, 144 AD2d 549 (2nd dept. 1988). In this regard the court is not making a distribution of marital property because the settlement proceeds retain their character as separate property [ DeMarco v. DeMarco, 143 AD2d 328 (2nd dept. 1988)]. The court, however, must figure out which part of the settlement represents the separate property of which spouse.
At bar the Special Referee appropriately recognized that plaintiff's claim for personal injuries was a more substantial claim than defendant's claim for loss of consortium. This is in keeping with most awards of this nature since all loss of consortium claims are derivative in nature. St. Hilaire v. White, 305 AD2d 209 (1st dept. 2003); Patterson v. Kummer, 302 AD2d 873 (4th dept. 2003); Gubala v. Lee, 320 AD2d 911 (4th dept. 2003); see also: Paisley v. Coin Device Corp., 5 AD2d 748 (2nd dept. 2004). He recognized, however, that under our system of law, loss of consortium has some value. He also evaluated the claim in light of the undisputed facts that defendant is gay. While not rendering it zero, defendant's sexual orientation bears upon that component of loss of consortium that redresses loss of sexual companionship. Under these circumstances, the Special Referee's determination that 90% of the award is plaintiff's separate property, and 10% is defendant's separate property is supported by the record developed at the equitable distribution trial.
D. Defendant's business
The Special Referee declined to distribute Aston Associates, defendant's business, because there was no proof of its value offered at the trial. Plaintiff now claims that the Special Referee should have, on its own initiative, valued the business based upon the factual data in the record. The court disagrees. The Special referee's declination to distribute an asset about which he had no proof of value was fair and appropriate and is hereby confirmed. Dugue v. Dugue, 172 AD2d 974 (3rd dept. 1991); Shapiro v. Shapiro, 151 AD2d 559 (2nd dept. 1989).
E. Date of Payment
With the exception of payment due to pay defendant's distributive share in the marital residence, all other payments required for the facilitation of equitable distribution under the Special Referee's Report as modified and confirmed herein shall be made no later than 30 days after the date of entry the divorce judgment. Payment of defendant's distributive share in the marital residence shall be made no later than 180 days of the date of entry of the divorce judgment as previously set forth herein.
III. Maintenance
The Special Referee directed that defendant pay plaintiff durational maintenance in a declining amount over the first five years following the divorce judgment. A review of the trial record, and accepting the facts as the Special Referee found them to be, requires a conclusion that there is no basis for any award of maintenance in this case.
The Special Referee found that plaintiff had income in the amount of $64,500 per year. The income took into account the fact that she had $34,500 per year in profit in connection with her collection of rents at the marital residence. In addition the Special Referee also imputed $30,000 per year income based upon regular recurring gifts that plaintiff received from her mother. According to the Special Referee, defendant had reported income in the amount of $60,000 per annum. The Referee imputed $22,000 of additional income to defendant based upon personal expenses that were paid directly out of defendant's business.
While arguably there is strong evidence in the record to impute additional income to each of these parties, the Special Referee declined to do so. The Referee, as the trier of fact, has considerable discretion in imputing income and this court will not disturb such finding, which is supported by the record. Kelley v. Bovee, 9 AD3d 641 (3rd dept. 2004).
It is well settled that the amount and duration of maintenance is committed to the sound discretion of trier of fact. Maintenance should be awarded, as justice requires, considering the standard of living of the parties during the marriage, the income and property of the parties, the distribution of the marital property, the duration of the marriage, the health of the parties, the present and future earning capacity of both parties, the ability of the party seeking maintenance to become self-supporting and the reduced or lost lifetime earning capacity of the party seeking maintenance. Wilson v. Wilson, 308 AD2d 583 (2nd dept. 2003).
Clearly the lifestyle enjoyed by the parties during their marriage was not supported or supportable from their combined earned income. It is, therefore, inappropriate for defendant to have to maintain a lifestyle for plaintiff that he did not support and could not have supported during their marriage and which he cannot afford now. Cerrabona v. Cerrabona, 320 AD2d 306 (2nd dept. 2003). Given their roughly similar incomes, as the Special Referee found them to be, no maintenance is warranted. In addition the Special Referee failed to give appropriate consideration to the fact that plaintiff will receive more property than defendant in equitable distribution and that she also has more separate assets in her name.
Nor is there any record supporting the need for any rehabilitation for defendant to be self supporting. She presently has the ability to earn income as a family therapist. She is apparently abandoning her previously chosen profession in favor of pursuing a career in shoes. While everyone certainly hopes that her foray into footwear proves fruitful, rehabilitative maintenance should not be available to see an ex-spouse through a voluntary career change.
It is well established that in determining support issues, the payor may be charged with income that he or she is capable of earning, notwithstanding that his or her actual earnings may be less. Hickland. Hickland, 39 NY2d 1 (1976); Brown v. Brown, 239 AD2d 535 (2nd dept. 1997); Ciostek v. Ciostek, 186 AD2d 1087 (4th dept. 1992). A payee should be held to no less a standard.
In accordance herewith, the court hereby rejects the Special Referee's recommendations awarding plaintiff durational maintenance.
IV. Child Support
Both parties object to various aspects of the Special Referee's recommendation with respect to the payment of child support. The calculation of child support is complicated by the fact that under the court's custody decision the parties share roughly equivalent amounts of time with the children. Further complications arise from the fact that each parent has certain decision making responsibilities. (See: Gische, J. Decision After Trial, 11/24/03). The practical effect is that certain child related expenses will be paid, in the first instance, by the parent having responsibility for that sphere of decision making.
In the first instance the court rejects the methodology used by the Special Referee in calculating child support because it is based upon a variation of the proportional offset methodology of calculation that was rejected by the Court of Appeals in the seminal case of Bast v. Rosoff, 91 NY2d 723 (1998). While the court's ultimate conclusion sets the amount of basic child support at an amount very close to that set by the Special Referee, the methodology used by the Referee to reach that number is inconsistent with law and must be rejected. The Special Referee calculated the parties' relative child support obligations under the Child Support Standards Act ("CSSA") and then subtracted plaintiff's share of the child support obligation from defendant's share of the obligation to reach a net obligation of $366 per month. Under Bast, however, the court is required to follow the precise three step methodology in determining child support and then deviate from the fully calculated amount only if it is unjust or inappropriate.
In the context of shared custody arrangement the Court of Appeals held:
"As a threshold matter, we agree with the lower courts and the parties that the CSSA applies to cases of shared custody. . . . . The CSSA sets forth a 'precisely articulated, three step method' for determining the basic child support obligation. As we outlined in Cassano [ 85 NY2d 649, 652]: '[S]tep one of the three step method is the court's calculation of the "combined parental income". . . Second the court multiplies that figure, up to $80,000, by a specified percentage based upon the number of children in the household . . . and then allocates that amount between the parents according to their share of the total income . . . Third, where the combined parental income exceeds $80,000 . . . the statute provides that 'the court shall determine the amount of the child support for the amount of the combined parental income in excess of such dollar amount through consideration of the factors set forth in paragraph (f) of this subdivision and/or the child support percentage.' . . . After completing this three step formula, under the CSSA the trial court must then order the non-custodial parent to pay a pro rata share of the basic child support obligation, unless it finds that amount to be 'unjust of inappropriate' based on a consideration of the 'paragraph (f)' factors. Those factors include the financial resources of the parents and the child, the standard of living the child would have had if the marriage had not ended, nonmonetary contributions of the parents toward the child, extraordinary expenses incurred in exercising visitation and any other factors the court determines are relevant." Bast v. Rosoff, supra at 726. Citations omitted.Bast guides the analysis in this case on two other major points. First, the Court of Appeals rejected the application of an offset method of mathematically calculating child support. While the formula rejected in Bast was slightly different than the one used by the Special Referee in this case, the thrust of the Court of Appeals decision was that if the strict application of the CSSA formula produces an unjust or inequitable result, further adjustment in setting child support must be made as a matter of discretion pursuant to paragraph "f" factors. Further mathematical adjustments, like netting numbers, does not produce a correct child support.
Second the Court of Appeals made it clear that the trial court has the obligation to identify a custodial parent for child support purposes. The court held that in most instances the court should identify the custodial parent for purposes of child support according to which parent has physical custody of the children for a majority of the time. Bast, supra at 728. The court did not address what should be done, where as here, each parent has roughly equivalent time with the children and no parent can be said to operate "command central" for them. In such situations the cases have held that the parent who has less income, should be the custodial parent for child support purposes. Baraby v. Baraby, 250 AD2d 201 (3rd dept. 1998); Vuoncino v. Fuhrman, 3 Misc 3d 291 (Fam Ct Al Co 2004). In these cases, where no distinction can be drawn based upon time, identifying the custodial parent based on relative incomes is consistent with the object of the CSSA to make sure that the children enjoy a particular standard of living, wherever they happen to be residing at a particular time.
Applying these principals to the case at bar child support under the CSSA is calculated as follows:
Plaintiff's income as determined by the Special Referee is $64,500. No CSSA adjustments for taxes paid needs to be made, because there is no evidence that she pays taxes.
Defendant's income as determined by the Special Referee is $82,000. An adjustment is made for taxes paid pursuant to defendant's 2003 W2 in the amount of $13,578.89.
Defendant argues to this court that the Special Referee erred by not subtracting the maintenance award from his income before calculating child support. Had defendant been required to pay plaintiff maintenance, then the amount paid would have had to be deducted from the payor's income in order to calculate child support, provided, however, that child support is recalculated to increase as the maintenance decreases. Atweh v. Hashem, 284 AD2d 216 (1st dept. 2001); Block v. Block, 258 AD2d 324 (1st dept. 1999). Since, however, this court has rejected the Special Referee's award of maintenance, no such CSSA calculations/adjustments have to be done. It is worth mentioning, however, had the recommended maintenance award been confirmed, then in at least the four of the five years it was to have been paid, plaintiff would have then become the higher incomed parent and under Baraby, supra, the party obligated to pay child support. This incongruous result is yet another reason why an award of maintenance is not appropriate in this case.
After adjustments, the parties' relative incomes for child support purposes are as follows:
Under Baraby, supra, plaintiff is identified as the custodial parent for child support purposes because she has less adjusted income than defendant.
The parties' combined adjusted income is $132,921.11. The parties' relative proportional shares of child support are 48% to plaintiff and 52% to defendant.
On the first $80,000 of income plaintiff share of child support would be 25% of 48% of $80,000 or $9,600. Defendant's share of child of basic child would be 25% of 52% of $80,000 or $10,400. Defendant's monthly obligation on this calculation would be $866.
Calculating the child support on the parties' entire adjusted income, the parties relative child support obligations are 48% of $33,230.27 or $15,950.53 for the plaintiff and 52% of $33,230.27 or $17,279.74 for the defendant. Defendant monthly obligation on this calculation would be $1,439.98 per month.
The court finds that child support calculated under the CSSA formula both on the first $80,000 of income or the full combined income would be unjust and inappropriate in this case. While the defendant is the larger income earner, less than $4,000 separates their annual incomes, as adjusted under the CSSA formula. In addition, under equitable distribution, plaintiff gets more of the parties' martial assets and she has more separate assets. The parties both have the children for a roughly equivalent amount of time and both parents have the need to maintain an appropriate household for the children. Also to be considered is that, as further set forth below, the court is making defendant responsible for paying all of the children's extra curricular activities in which they are enrolled during the school year. These expenses are normally paid out of basic child support by the recipient parent. Consequently the court deviates from the CSSA formula and sets monthly child support at the amount of $320 per month. See: Kosovsky v. Zahl, 272 AD2d 59 (1st dept. 2000); Sheridan v. Sheridan, 174 Misc 2d 249 (Sup.Ct. 1997). This basic child support essentially shifts to plaintiff the additional income. This shift makes sense particularly given the court's ultimate assignment of responsibility for certain child related costs as hereinafter set forth below.
The payment of add on expenses is complicated in this case. In a more conventional custody arrangement, the CSSA contemplates that the party receiving the child support will have the children a greater amount of the time and will actually be paying the add on expenses. At bar, however, each party has the children for a roughly equivalent amount of time and has out of pocket expenses associated with their care when the children are with them. Thus, the Special Referee's recommendation that each party assume their own child care costs when the children are with each of them is fair and reasonable under the circumstances of this case and is hereby confirmed.
Medical decisions, including therapy decisions, are to be made by defendant. Consequently he is the one that will be incurring the medical expenses in the first instance, and plaintiff will be owing defendant money on account thereof. All reasonable un-reimbursed medical expenses, including therapy expenses, are a shared expense that must be paid by each party in accordance with the percentages of responsibility for child support, as calculated above. Expenses shall be shared 48% by plaintiff and 52% by defendant.
The Court, however, rejects the referee's $2,500 cap on therapy for each child. Having presided over the custody portion of this case, the court is painfully aware that the children are caught in the maelstrom of their parents' unrelenting hostility. The children's mental health is important and they should receive therapy appropriate to their needs and the parties' finances.
To the extent that plaintiff will owe defendant money on account of such shared expenses, defendant may recoup it against basic child support to be paid to plaintiff, provided he gives plaintiff documentation and an accounting for the expenses. This is in addition to any other remedies that defendant may have in connection with such shared costs.
The court declines to have plaintiff establish a security account for the payment of her share of the parties' shared child related expenses. Defendant has other, less drastic, remedies to ensure payment. His application may be renewed, however, if plaintiff fails to fulfill her obligations and the less drastic remedies prove unworkable.
The court, rejects the treatment of extra curricular expenses, including camp expenses, as being legitimate "add on" or shared expenses. Such expenses are not mandatory add ons under the CSSA. The sharing of these expenses in this case is not practical, nor is the $1,500 per child per year limit set by the Special Referee reasonable. In the context of this case it makes more sense for each parent to pay for the activities that they have the responsibility of choosing. Thus, defendant is responsible for paying for all extra-curricular expenses during the school year and plaintiff is responsible for paying for all extra-curricular expenses for the summer. In this way neither parent will choose an unaffordable activity with the view of pushing over the expense to the other parent.
The Referee recommended that plaintiff pay 100% of the children's private school tuition. Plaintiff seeks to have defendant pay 100% of such add on cost or to have him pay his proportionate share. Plaintiff's position is rejected and the Referee's finding in this regard is confirmed. Although the children have been in prestigious private schools, the parties cannot now (and never could) afford private school education. Consequently, private school education, which is a discretionary add on, is not warranted. DRL § 240 [1-b][c][7]; Peikon-Cotz v. Peikon, 232 AD2d 644 (2nd dept. 1996).
In the past the children's private school education was affordable only because plaintiff's mother provided the parties' with additional financial support. Since the commencement of this proceeding plaintiff's mother has continued to provide financial assistance to plaintiff and the children. The court, however, has no authority to order plaintiff's mother to continue these payments. Under the court's custody decision the plaintiff has the right to make educational decisions for the children. In the absence of continued financial assistance from her mother, public school is the only appropriate option. If plaintiff obtains financial support from her mother or some other source, she may decide to keep the children in private school. She cannot, however, choose private school and expect any reimbursement from defendant for this unaffordable expense.
The child support awards made herein are prospective from the date of this decision only. Basic child support shall be paid within 7 days of the date of this order and then monthly thereafter by at least the 10th day of each month. The parties' pendente lite arrangement provided for certain unallocated monies to be paid, some of which is certainly attributable to child support. It was structured in an entirely different manner. The children were adequately cared for throughout the pendency of this action and if this award were made retroactive, an untenable and possibly unresolvable situation would be created with respect to figuring credits and offsets.
Although not strictly related to child support, the parties raise a collateral issue regarding UGTM accounts for the children. During the marriage monetary gifts were made by third parties to the children. The monies were placed in UGTM accounts and the defendant was the named fiduciary. Plaintiff now seeks to have defendant removed as fiduciary and have herself named instead.
The accounts are not marital property, they are the children's separate property. In the absence of a separately commenced proceeding in which the children are joined, there is not basis for the court to recommend any relief with respect to these accounts. Hasegawa v. Hasegawa, 290 AD2d 488 (2nd dept. 2002). The court, therefore, confirms the Special Referee's report to the extent that it recommends that no change be made to the named fiduciary of the UGTM accounts. It appears that defendant is willing to commit the funds for the children's private school education. The parties can work out an agreement on this matter if they wish, but no court order is available in the context of a divorce action.
V. Legal and Professional Fees
Each seeks to have the other pay his or her legal fees. Each blames the other for the extraordinary high legal costs they incurred. With the exception of the divorce grounds themselves, every aspect of this case, financial and otherwise, has been litigated. The legal fees incurred are, indeed, staggering. Plaintiff incurred a total of $1,133.588.02 and presently owes various attorneys $979,477.98 and defendant incurred a total of $654,267.48 in legal expenses and presently owes his counsel $441,564.59. The Law Guardian is owed $140,000.
Each party will walk away from this trial with millions of dollars in equitable distribution. This is largely the result of their sharing of the equity in the marital residence. Plaintiff will have more assets than the defendant. Certainly, significantly less will be left for each of the parties once the parties honor their debts to the various professionals they hired. Thus the legal fees each party has incurred is affordable for them, albeit perhaps other more cooperative and less angry litigants could have achieved a better outcome with far less legal fees incurred.
The rational by each person for passing on to the other the debts they incurred to their own professionals is the "bad person" theory. They each hold the other responsible for the scorched earth litigation. Recently the "bad person" rationale for legal fees has been re-examined by the Appellate Division in this department. Gober v. Gober, 11 AD2d 261 (1st dept. 2004); Silverman Silverman, 304 AD2d 41 (1st dept. 2003). The First Department has held that where the parties are each capable of paying their own legal and professional fees, the court should only pass the costs over to the other party if there is sanctionable conduct. N.Y.Ct. Rules § 130.1.1. Both parties in this case were often intransigent, though perhaps plaintiff more so than defendant. They took legal positions, when compromise would have yielded a much better and more cost effective result. Their conduct and the legal positions they embraced, however, did not rise to the level of being "frivolous" within the meaning of Part 130. The parties can afford the legal fees each of them incurred. It was their individual decision to pursue costly litigation. The Special Referee's recommendation that each party pay his or her own legal and professional fees is hereby confirmed.
The Special Referee recommended that the Law Guardian's legal fees be apportioned between the parties according to their relative proportional responsibility for child support. While this decision will fix the parties' rights vis a vis each other in connection with the payment of Law Guardian fees, it does not change the court's prior ruling that the parties are jointly and severally liable to the Law Guardian herself. Moreover, since the court recalculated child support, the percentages determined by the Special Referee for the apportionment of the Law Guardian's fees are no longer germane to this analysis and are rejected.
The court actually observed the custody trial. Based upon the trial before the court and the record developed at the financial trial before the Special Referee, the court holds that each party is 50% responsible for the payment of the law Guardian's fees. Likewise and for the same reasons, the fees of Dr. Steven Herman, the court appointed forensic evaluator, are apportioned 50% to each party.
The apportionment of fees is retroactive. Each party is entitled to be reimbursed for 50% of the fees s/he paid to either the Law Guardian or Dr. Herman during the course of this litigation.
CONCLUSION
The Referee's report is confirmed in all respects, except as expressly rejected in this decision. This constitutes the decision and order of the court. Either party may settle the judgment of divorce, however, it must be settled within the applicable statutory time.
SO ORDERED.