Opinion
6975/98.
Decided June 29, 2005.
This matrimonial action was tried on August 2, 3, 5, 6, 9, 10, 12, 16, 17, 18, 19, 20; September 7; and October 4 and 12, 2004. Trial minutes and memoranda were completed as of February 14, 2005.
Procedural Background
Plaintiff commenced this action on March 2, 1998. It has been extensively litigated, with the parties cumulatively making more than 25 motions; prior to the commencement of the trial, the case appeared on the court calendar on more than 50 occasions. Defendant has been represented by ten different attorneys and a total of four different judges have been assigned to this matter. The history of the proceeding was discussed at length in the decision of this court dated April 15, 2004 (the April 2004 decision), which was rendered on a motion by defendant seeking an order declaring certain property to be her separate property and/or allowing her to conduct additional discovery and a motion by plaintiff seeking entry of a judgment of divorce; accordingly, the facts will not be discussed in detail herein. Rather, the prior proceedings will be referred to only as is necessary to dispose of the issues raised by the parties during the trial.
As is pertinent, however, an inquest was conducted on November 9, 2000 on plaintiff's cause of action seeking a divorce on the ground of abandonment; the decision was reserved pending determination of the equitable distribution claims. Subsequently, after numerous adjournments were granted at defendant's request, a trial was commenced and testimony was taken on October 24, 2001. By decision rendered on the record on January 18, 2002, following numerous additional adjournments, also at defendant's request, plaintiff's application for a default was granted when defendant failed to appear. By decision dated May 1, 2002, the default was vacated and a mistrial was declared. The case was subsequently assigned to this Judge and after additional motion practice between defendant and one of her former attorneys and the parties, the trial began on August 2, 2004.
Facts
Plaintiff Chaim Sieger and defendant Helen Sieger were married on March 5, 1972 in the State of New York. There are two emancipated children of the marriage, Abraham Sieger, born March 19, 1973, and Chanie Sieger, born March 11, 1975.
In July 1995, plaintiff obtained a Heter Me'ah Rabbonim (Heter), a divorce granted by a Jewish Rabbinical Tribunal. Defendant left the marital residence on December 4, 1995. On March 2, 1998, plaintiff commenced the instant action. Plaintiff currently resides with another woman and their two children in the former martial residence, located on Tauber Lane in Monsey, New York (the marital residence).
During the course of their marriage, the parties accumulated significant wealth. They disagree, however, with regard to which assets are marital property, subject to equitable distribution, and which are defendant's separate property, so that plaintiff is not entitled to share in their value.
The Issues
It is defendant's contention that she and plaintiff amassed much of their wealth because of gifts made to her by her late father, Michael Tenenbaum (Mr. Tenenbaum), and/or by trusts created by her family. More specifically, summarizing defendant's position as it is reflected in her Statement of Proposed Disposition dated August 10, 2004 and by the evidence introduced during the trial, defendant asserts that her father gave her the money to purchase Kingsbridge Heights Rehabilitation Care Center, Inc. (Kingsbridge), the nursing home that she owns and operates, and that her interest in the Parkhouse Hotel (Parkhouse or the hotel) was purchased for her by a family trust, so that these properties are her separate property, or are owned by her father or her family. Similarly, defendant claims that her father gave her the money to purchase the one-half interest in Lyden Nursing Home (Lyden) held in plaintiff's name and Rofay Nursing Home (Rofay), held in its entirety in plaintiff's name; although title to these properties was put in plaintiff's name, defendant argues that the facilities also belong to her, her father or her family. Defendant further claims that other assets in her name, including the Chaya Foundation (the Foundation), a Northern Leasing bond, a Merrill Lynch account, Les Terrasses de la Chaudiere (Les Terrasses) and Tentrees Enterprises (Tentrees) are also her separate property.
Mr. Tenenbaum died after his deposition was taken, but before the trial was commenced. Accordingly, his deposition was read into the record, without objection, where deemed appropriate by the parties. In addition, the entire transcript was introduced into evidence.
As is discussed more fully hereinafter, Mr. Tenenbaum and Paula (his wife and defendant's mother), created several family trusts which allegedly provided the funds that the parties used to purchase their interests in the subject nursing homes.
In addition, defendant identifies numerous assets that she claims are marital and which she asserts should be equally divided: the marital residence; various items of jewelry; a Galaxy IRA account; a Chase Bank account held in joint names; a 401 (k) account from Resort Nursing Home (Resort), a nursing home owned by defendant's father, where defendant was employed for some period of time during the marriage; RPT Penn Equities; a Fleet Bank account; two apartment units located on East 85th Street in Manhattan, New York (the Manhattan apartments); Samara Associates (Samara); various stocks; plaintiff's life insurance policy; foreign bank accounts maintained in Switzerland, Israel and Lichtenstein; and an apartment building located on 14th Avenue in Brooklyn (the 14th Avenue property).
In her Statement of Proposed Disposition, defendant places a value on only the Chase account and the Resort 401 (k) account.
In contrast, summarizing plaintiff's position, as is reflected in his Statement of Proposed Disposition, also dated August 10, 2004, and by the evidence adduced at trial, plaintiff claims that the above assets are marital and are subject to equitable distribution. Plaintiff, however, does not mention RPT Penn Equities, Samara, life insurance, or Les Terrasses; plaintiff made no demand for the distribution of Tentrees as a marital asset.
Plaintiff annexes a Schedule of Assets to his Statement of Proposed Disposition in which he sets forth a value for each of the assets in which he claims an interest.
The Honorable Barbara Irolla Panepinto appointed several neutral experts to aid the court and the parties in valuating their assets: (1) John Hogan was appointed to value Kingsbridge, Lyden and Rofay; Mr. Hogan is a real estate appraiser associated with Jacques O. Tuchler and Associates (Tuchler) who specializes in the health care business and who has published several articles pertaining to the valuation of nursing homes; (2) Doris Silber, the sole proprietor of Tuchler, was appointed to value Parkhouse and the 14th Avenue Property; and (3) Deeanna Lynn Kotlarich, a real estate appraiser, was appointed to value the marital residence. All of the properties were valued as of December 31, 1998; the April 2004 decision directed that the appraisals of the parties' real estate holdings be updated so that the valuation would be as of the date of the trial. Robert Aretz, a gemeologist, testified as an expert on plaintiff's behalf with regard to the value of the parties' jewelry. Robert Adler testified on defendant's behalf with regard to the value of the marital residence and William A. Lockwood testified as an expert on her behalf with regard to the value of Kingsbridge.
When each court appointed expert appeared to testify at trial, defendant questioned him or her with regard to communications had with Paul Siminovsky, Esq., who had previously been appointed to serve as a Special Referee to supervise discovery by a Judicial Hearing Officer. These questions were apparently intended to establish wrongdoing or bias on the part of the appraisers, premised upon his or her association with Mr. Siminovsky and emanating from the latter's involvement in ongoing criminal proceedings and investigations with regard to judicial improprieties in certain matrimonial actions. In the April 2004 decision, however, this court denied that branch of defendant's motion seeking to obtain new appraisals because of Mr. Siminovsky's involvement in this proceeding, finding that there was no evidentiary support for her claim that the appraisals were tainted ( see April 2004 decision, pp 22-23). Further, by decision dated July 30, 2004, this court denied defendant's motion seeking a fact finding hearing or a deposition of Mr. Siminovsky and a stay of the trial pending the deposition or hearing, holding that defendant's conclusory assertions of manipulation of the real estate appraisers and/or wrongdoing were lacking in merit; by decision dated September 1, 2004, defendant's motion for leave to depose a nonparty witness and to stay the trial pending the hearing and determination of the appeal from the July 30, 2004 decision was denied by the Appellate Division, Second Department. Inasmuch as defendant's questioning of the experts at trial similarly failed to substantiate any of defendant's claims, the court adheres to these earlier determinations and will not further address that issue or those lines of questioning.
The Law
While each of the parties raise numerous arguments with regard to the specific assets that each claims must be valued and distributed, the court will first address the basic framework against which each of the parties' contentions must be determined.
Equitable Distribution
In recognizing a marriage as an economic partnership, the Domestic Relations Law (DRL) mandates that the equitable distribution of marital assets be based on the circumstances of the particular case and directs the trial court to consider a number of statutory factors listed in DRL § 236 (B) (5) (d) ( see generally Holterman v. Holterman, 3 NY3d 1, 7-8).
As is relevant here, DRL § 236 (B) (5) (d) provides that; "In determining an equitable disposition of property under paragraph c, the court shall consider: "(1) the income and property of each party at the time of marriage, and at the time of the commencement of the action; "(2) the duration of the marriage and the age and health of both parties; "(3) the need of a custodial parent to occupy or own the marital residence and to use or own its household effects; "(4) the loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution; "(5) any award of maintenance under subdivision six of this part; "(6) any equitable claim to, interest in, or direct or indirect contribution made to the acquisition of such marital property by the party not having title, including joint efforts or expenditures and contributions and services as a spouse, parent, wage earner and homemaker, and to the career or career potential of the other party; "(7) the liquid or non-liquid character of all marital property; "(8) the probable future financial circumstances of each party; "(9) the impossibility or difficulty of evaluating any component asset or any interest in a business, corporation or profession, and the economic desirability of retaining such asset or interest intact and free from any claim or interference by the other party; "(10) the tax consequences to each party; "(11) the wasteful dissipation of assets by either spouse; "(12) any transfer or encumbrance made in contemplation of a matrimonial action without fair consideration; "(13) any other factor which the court shall expressly find to be just and proper."
"Although in a marriage of long duration, where both parties have made significant contributions to the marriage, a division of marital assets should be made as equal as possible, there is no requirement that the distribution of each item of marital property be made on an equal basis" ( Chalif v. Chalif, 298 AD2d 348, 349 [citations omitted]; accord Arvantides v. Arvantides, 64 NY2d 1033, 1034; Adjmi v. Adjmi, 8 AD3d 411, 412; Graves v. Graves, 307 AD2d 1022, 1024; Meza v. Meza, 294 AD2d 414; Saasto v. Saasto, 211 AD2d 708, 709; Ehrlich v. Ehrlich, 184 AD2d 400). Further, it is proper for the court to consider the parties' relative economic contributions to the marriage in arriving at a formula for the distribution of the marital property ( see e.g. Kaplinsky v. Kaplinsky, 198 AD2d 212, 213, citing DRL § 236 (B) (5) (d) (1); Palmer v. Palmer, 156 AD2d 651; Michalek v. Michalek, 114 AD2d 655; Kobylack v. Kobylack, 111 AD2d 221, 222). In this regard, the fact that one party may have made greater economic contributions to the marriage than the other does not necessarily mean that the former is entitled to a greater percentage of the marital property ( Bartek v. Draper, 309 AD2d 825, 826). Rather, "`[e]quitable distribution presents matters of fact to be resolved by the trial court, and its distribution of the parties' marital property should not be disturbed unless it can be shown that the court improvidently exercised its discretion in so doing'" ( Johnson v. Johnson, 261 AD2d 439, 440, quoting Oster v. Goldberg, 226 AD2d 515, appeal denied 88 NY2d 811).
Marital v. Separate Property
DRL § 236 (B) (1) (c) defines marital property as "all property acquired by either or both spouses during the marriage and before . . . the commencement of a matrimonial action, regardless of the form in which title is held" ( see Seidman v. Seidman, 226 AD2d 1011, 1012). Separate property, on the other hand, is defined, in part, as "property acquired before marriage or property acquired by bequest, devise, or descent, or gift from a party other than the spouse" (DRL § 236 [B] [1] [d] [1]). It must also be recognized, however, that the term "marital property" is to be broadly construed, while the phrase "separate property" is to be narrowly construed ( see e.g. Judson v. Judson, 255 AD2d 656, 657, citing Price v. Price, 69 NY2d 8, 15). Hence, the law favors the inclusion of property within the marital estate ( compare DRL § 236 [B] [1] [c] and [d]; see Burns v. Burns, 84 NY2d 369, 374; Majauskas v. Majauskas, 61 NY2d 481, 489), and, accordingly, "the party seeking to establish that a particular item is indeed separate property bears the burden of proof" ( LeRoy v. LeRoy, 274 AD2d 362, citing Seidman, 226 AD2d at 1012; Heine v. Heine, 176 AD2d 77, 83, lv denied 80 NY2d 753). As is also relevant herein, "[i]t is clear from the language of the statute that the Legislature intended that a gift from a third party to one spouse be considered the separate property of that spouse" ( Ackley v. Ackley, 100 AD2d 153, 155, appeal dismissed 63 NY2d 605, motion dismissed 63 NY2d 772).
Valuation Date
DRL § 236 (B) (4) (b) provides that "[a]s soon as practicable after a matrimonial action has been commenced, the court shall set the date or dates the parties shall use for the valuation of each asset." In so doing, it is well settled that "[a] trial court possesses discretion to select valuation dates for marital assets which are appropriate and fair under the circumstances, limited only by the requirement that the date be set sometime between the commencement of the action and the date of the trial" ( D'Angelo v. D'Angelo, 14 AD3d 476). Hence, the trial court has broad discretion in selecting the dates for the valuation of marital assets and, depending on the particular circumstances of the case, may appropriately fix different valuation dates for different assets ( see e.g. Kirshenbaum v. Kirshenbaum, 203 AD2d 534, 535, citing Siegel v. Siegel, 132 AD2d 247, appeal dismissed 71 NY2d 1021, appeal denied 74 NY2d 602; Wegman v. Wegman, 123 AD2d 220).
As a general rule, "active" assets are valued as of the date of commencement of the action, while "passive" assets are valued as of the trial date (see e.g. Ferraioli v. Ferraioli, 295 AD2d 268, 270). In making the determination with regard to the appropriate valuation date for each asset, "`[c]ourts have consistently recognized that assets such as undeveloped real estate or mutual funds, which appreciate in value strictly as a result of random market fluctuations or the efforts of others, constitute passive assets, while assets that appreciate due to the efforts of the titled spouse are active [citations omitted]'" ( id. at 270, quoting Greenwald v. Greenwald, 164 AD2d 706, 716, lv denied 78 NY2d 855; see generally McSparron v. McSparron, 87 NY2d 275, motion dismissed 88 NY2d 916; Trivedi v. Trivedi, 222 AD2d 499; Grunfeld v. Grunfeld, 255 AD2d 12, 17).
Credibility
"Evaluating the credibility of the respective witnesses is primarily a matter committed to the sound discretion of the Supreme Court" ( Varga v. Varga, 288 AD2d 210, 211, citing Diaco v. Diaco, 278 AD2d 358; Ferraro v. Ferraro, 257 AD2d 596, 598). The court's assessment of the credibility of witnesses is entitled to great weight ( see generally Wortman v. Wortman, 11 AD3d 604, 606). "In a nonjury trial, evaluating the credibility of the respective witnesses and determining which of the proffered items of evidence are most credible are matters committed to the trial court's sound discretion" ( Ivani v. Ivani, 303 AD2d 639, 640, citing L'Esperance v. L'Esperance, 243 AD2d 446; accord Krutyansky v. Krutyansky, 289 AD2d 299, 299-300; Diaco, 278 AD2d at 359; Solomon v. Solomon, 276 AD2d 547).
Valuing a Business
"There is no uniform method of fixing the value of an ongoing business for equitable distribution purposes and valuation is properly within the fact-finding power of the trial court" ( Miness v. Miness, 229 AD2d 520, 521, citing Amodio v. Amodio, 70 NY2d 5; Rice v. Rice, 222 AD2d 493). "`"The determination of a fact-finder as to the value of a business, if it is within the range of the testimony presented, will not be disturbed on appeal where valuation of the business rested primarily on the credibility of expert witnesses and their valuation techniques"'" ( Ferraro v. Ferraro, 257 AD2d 596, 598, quoting Dempster v. Dempster, 236 AD2d 582, appeal denied 90 NY2d 806, quoting Matter of Penepent Corp., 198 AD2d 782, 783; accord L'Esperance, 243 AD2d 446 at 447).
Wasteful Dissipation of Assets
Pursuant to DRL § 236 [B] [5] [d] [11], "the wasteful dissipation of [marital] assets by either spouse is one of the factors which may be considered in determining equitable distribution of marital property" ( see generally O'Sullivan v. O'Sullivan, 247 AD2d 597, citing Wilner v. Wilner, 192 AD2d 524).
The Parties' Marriage
Defendant's Testimony
At the time of the marriage, plaintiff was 20 years old and defendant was 18; both were high school graduates. Defendant was employed in the administrator's office of Rofay, where her brother was the administrator; she thereafter began working in the business office at Caton Park Nursing Home (Caton), her father's facility. Plaintiff continued to attend religious college for approximately one-half year after the marriage; he then began working in the bookkeeping department at Vanderbilt Nursing Home, another facility owned by defendant's father. Thereafter, defendant's father arranged for plaintiff to begin working as an administrator at Lyden; defendant alleges that she was employed at Lyden on a part-time basis for approximately three months as the accounts payable clerk, until she hired a full-time employee, prior to plaintiff's ownership of the facility, although plaintiff testified that to his knowledge, defendant never worked in either Lyden or Rofay. Defendant began working for Resort in October 1983; she is still employed there as an assistant administrator.
Plaintiff obtained his license as a nursing home administrator in approximately 1974. After taking a course, plaintiff failed the exam; he was embarrassed and did not want to go back to work. Thereafter, defendant studied with him for about three weeks and he passed the test on the second or third attempt. After he passed, plaintiff thanked defendant for "making it possible for him."
During the 1990s, plaintiff's income came predominantly from Lyden and Rofay; defendant's income came primarily from Resort and Kingsbridge.
Kingsbridge Nursing Home
This decision will first address Kingsbridge, since the facility is the most valuable of the parties' assets. In addition, much of the testimony and evidence introduced with regard to Kingsbridge concerns the businesses owned by defendant's family and the manner in which the family businesses and family trusts are operated and is also relevant to a consideration of the parties' other assets.
Plaintiff's Evidence
Plaintiff testified that Kingsbridge is located at 3400 Cannor Avenue in the Bronx and has 400 beds. He further testified that he approached the owners, Albert Schwartzberg, Arno Boritzer and Rose Boritzer, and negotiated the sale to defendant; a copy of the contract of sale, dated May 26, 1993, was introduced into evidence. The contract provided a formula for the calculation of the purchase price, but did not set forth a sum certain. Plaintiff also testified that he executed a guarantee of payment in connection with the sale, although no such document was produced or introduced into evidence. The purchase also included the "Lombardi Program," which offered off premises health care; Lombardi operated out of Kingsbridge for a period of time, until it grew to the point that further space was needed and a lease for 295 West 231st Street was executed on August 8, 1996.
Kingsbridge was purchased in defendant's name because plaintiff already had two nursing homes in his name and it was the "safest, rightist thing to split it up and put it in her name." The sale of the facility did not close until 1995 because defendant had to obtain an administrator's license prior to the transfer of title. Plaintiff further explained that the real property on which Kingsbridge is located is owned by CG Partnership (CG). Tentrees is the general partner of CG and 99% of the stock is owned by the Michael and Paula Tenenbaum Trust, as limited partners. As is evidenced by its business certificate, Tentrees consists of defendant and her siblings and its address is that of the Parkhouse Hotel.
At the time that the purchase contract was executed, defendant was employed as the assistant administrator at Resort. The parties' son, Abraham, was placed at Kingsbridge for the two-year period between the signing of the contract and the closing of the sale to learn the business and to insure that no other contracts or deals were entered into. Abraham consulted daily with plaintiff with regard to the business. After the purchase, plaintiff claims that he assisted defendant in the administration of the nursing home, including helping her with staffing and hiring, until the parties stopped talking in September 1997.
Plaintiff further testified that because Kingsbridge had more than 300 beds, the Medicare and Medicaid reimbursement was $6 to $10 more per day than that paid to smaller facilities. Plaintiff also offered defendant's W-2 Statements from Resort from 1992 to 1999, which established her earnings as follows:
1992 $1,051,169.66
1993 949,560.08
1994 154,468.73
1995 209,563.20
1996 260,600.16
1997 300,600.16
1998 600,600.16
1999 292,523.24
Plaintiff testified that the drop in defendant's salary for 1994 and 1995 occurred because she had to pay back the $1,500,000 loan that she took from the family trusts to purchase Kingsbridge.
Defendant's deposition testimony was also read into the record, which established that Kingsbridge was held only in her name and that she did not have an interest in any other nursing home. Further, the money for the purchase of Kingsbridge came from one of the Tenenbaum family trusts in the form of a loan; defendant believed that the loan was evidenced by a writing, although she was unable to locate the loan documents. She further testified that the property on which Kingsbridge is located is owned by CG; the rent paid was "150,000 something" per month, which was only paid when Kingsbridge had the money.
On cross examination of plaintiff, defendant's counsel read extensively from the transcripts of the first trial and plaintiff's depositions. Without addressing each of the issues raised, since the cross examination took place over the course of four days and generated approximately 500 pages of transcript, the court notes that some inconsistencies were revealed. As is of particular relevance, however, plaintiff's earlier testimony established that the value of a nursing home with real estate was approximately $40,000 to $60,000 a bed and the value of one without real estate was $20,000 to $40,000 a bed. Counsel further established that on his Net Worth Statement, plaintiff valued Kingsbridge at $13,500,000, which is equivalent to approximately $33,000 per bed.
Defendant's Evidence
Defendant testified that she is the CEO of Kingsbridge, which she owns in her name; her father alone negotiated the purchase from Mr. Schwartzberg. Defendant claims that she purchased the facility using money given to her from her family's trust, the Michael and Pola Tenenbaum Trust. She deposited the $1,500,000 check given to her by the trust into her separate account and wrote checks payable to the three owners of Kingsbridge at the closing; copies of these checks are included with the statement for her individual account at Fleet Bank dated July 28, 1995 and were introduced into evidence. Defendant also testified that she and plaintiff, along with her other siblings, paid the premiums on her father's life insurance policy because her family owned all of the nursing homes and the payment was made in proportion to the sibling's ownership interest. Defendant further testified that the reduction in her income from Resort during 1990 to 1995, which plaintiff testified reflected repayment of the loan, had nothing to do with the purchase of Kingsbridge. Instead, her income in 1992 and 1993 reflected the increased responsibilities that she took on because her father was spending less time at the facility as the result of her mother's deteriorating health. In addition, defendant was responsible for the institution of a pilot program with the Department of Health, she increased the "case mix index," and she negotiated with the union, all of which served to increase the income at Resort. Thereafter, in 1995, defendant's salary returned to its regular rate. Since the closing, defendant was not asked to return the money that she borrowed to the trust and she never paid back the loan. Defendant further testified that money borrowed from the trust was used for the purchase of all of the nursing homes owned by her family, which were held in the name of a sibling or the spouse of a sibling.
In addition, defendant testified that the parties' son was not her "eyes and ears" at Kingsbridge, since she had conversations with the Boritzers, the sellers, who were still operating Kingsbridge pending the closing of the sale. Defendant began working at the facility two half-days a week in March 1995 and her hours slowly increased thereafter. Defendant denied plaintiff's assertion that he provided assistance with respect to personnel or that he discussed the operation of the nursing home with her.
Defendant also testified that Kingsbridge was audited by the Department of Health for the period of June 1995 to June 1996 and that the audit found that the Department had overpaid Kingsbridge by approximately $10,000,000 during the period of 1995 through 2001. The Department began to recoup this overpayment by withholding 10% of each Medicaid payment made to Kingsbridge, plus interest; this recoupment has the effect of diminishing annual income.
Since the documentary evidence presented established that the Department of Health did not issue its preliminary report until May 28, 2002, which was after the appraisal reports and the first trial were completed, neither Mr. Hogan nor Mr. Lockwood was aware of this overpayment when they valued Kingsbridge. Further, neither appraiser was asked to update his appraisal for the second trial to reflect the effect, if any, that the finding of a significant overpayment had on the value of Kingsbridge.
In addition, during the period that Mr. Lockwood and Mr. Hogan were performing their valuations, litigation was pending against the former owners. The litigation resulted in the obligation to pay just under $1,000,000 more to the sellers for the purchase of the facility. Further, the difference between the rental amounts reflected in the income statements relied upon by the appraisers in valuing Kingsbridge and the $150,000 per month rent that defendant testified at her deposition was paid was the result of an addendum to the lease pursuant to which she renovated the elevators and built a new kitchen; although the addendum to the lease was marked into evidence, the lease itself was not.
Defendant further testified that based upon her experience, the going rate for a bed in a nursing home with land is $30,000 to $40,000; the going rate for a bed in a nursing home without land is about $20,000. Defendant also explained that it was Kingsbridge's practice to write off bad debt after two years, after attempts to collect the money had been made and failed. In 2000, $1,742,263.23 was so written off, which reflected the debt that could not be collected in 1998.
Turning to defendant's cross examination, the court notes that on numerous occasions, defendant was admonished for her refusal to answer the question posed to her, when she instead answered in a way that was intended to convey information that she wished to get across. The court also notes that defendant had to be told that she could not rule on objections addressed to the court and she could not interject herself into the legal arguments between counsel and the court.
Hence, for example, defendant repeatedly stated that her father and/or her family's trust paid for and owned Kingsbridge, as well as all of the other nursing homes that they purchased. Nonetheless, she is the licensee of Kingsbridge. After the court reporter read back a question asking defendant who, other than her father, owned an interest in Kingsbridge in 1995, defendant refused to answer. When asked if Morris Tenenbaum had an interest in Kingsbridge in 1995, defendant replied that she did not know the workings of her family holdings, but she knew that the trust paid for the facility. Defendant also testified that she was aware that neither a corporation nor a trust could own a nursing home in New York State. In addition, she testified that plaintiff executed a guarantee with regard to the purchase of the property for Kingsbridge.
When presented with a copy, defendant identified an annual disclosure form filed with the Department of Health for Kingsbridge in which she did not list any family trust or family member as an owner of the facility, stating that "[n]obody else has a controlling interest except myself." The form, however, is not so limited, requiring the owner of the facility to "[l]ist names, addresses for individuals or the EIN for organizations having direct or indirect ownership or a controlling interest in the entity."
The court notes that the date on the copy of the form introduced into evidence is illegible.
Plaintiff also introduced into evidence a disclosure statement filed by Mr. Tenenbaum for Resort and Vanderbilt. Inasmuch as this statement is dated February 13, 1985, years before the parties acquired Lyden, Rofay or Kingsbridge, and neither party established when the other nursing homes owned by Mr. Tenenbaum and/or other family members were purchased, this statement is of no relevance herein.
It was also established that in her Net Worth Statement, defendant asserted that she was "the licensee for one hundred percent of Kingsbridge." The statement further indicates that on June 1, 1995, defendant incurred a debt of $1,500,000 for the purchase of Kingsbridge, which was payable with 6% interest. Defendant further acknowledged that on her Net Worth Statement, she indicated that her interest in Kingsbridge was subject to arbitration because her father was contemplating taking her to the religious tribunal; she testified both at her deposition and at the trial that the statement was made in error. Defendant also testified that in her interrogatories, she had similarly indicated that her interest in Kingsbridge was subject to arbitration in error.
When presented with a copy of the statement for the bank account into which she deposited the $1,500,000 that she received from the family trust to purchase Kingsbridge, defendant noted that the account already had a balance of $343,605; she did not remember where that money came from. Accordingly, after defendant wrote checks totaling $1,300,000 to pay the prior owners, approximately $500,000 remained in the account.
A portion of defendant's deposition testimony was also read into the record, which established that she received the capital contribution for Kingsbridge from her family trust, by check, as a loan. When asked if she recalled so testifying, defendant stated that "I remember being asked a series of questions about it and you wanted to hear loan and I said loan because I didn't know what it was because I don't know how my family trust works."
Further, financial statements for the years ending December 31, 1996, December 31, 1997 and December 31, 1998 for the Michael and Pola Tenenbaum Trusts lists a note receivable in the name of "C. Sieger" in the amount of $1,599,000; defendant testified that "C. Sieger" could refer to plaintiff, though she was sometimes known as Chaya Sieger. When asked if she submitted the financial statement as evidence, defendant responded "[a]ll the documents in evidence were submitted from my side. Chaim submitted no documents." Defendant further elaborated, stating that she "knew that Chaim owed 1.8 million dollars so this might be Chaim. I don't know what this means."
A portion of the deposition testimony of defendant's late father was also read into the record. Therein, Mr. Tenenbaum testified that the trust does not give gifts, that everything that he gives to the children has to be paid back. He further testified that the trust loaned defendant $1,500,000 for the purchase of Kingsbridge, which she had to pay back; he had asked defendant for the money, but she told him that she was still struggling. In contrast, defendant testified that she never paid back the loan and she was never asked to do so.
Defendant further testified that her father purchased Rockaway Care Center (Rockaway), Caton, Horizon Nursing Home (Horizon), and Kings Harbor Nursing Home (Kings Harbor). Each of the facilities is owned in the name of a family member; nonetheless, defendant testified that her father or her family has an interest in each. A portion of Mr. Tenenbaum's deposition testimony was read into the record, however, which established that neither he nor defendant had any interest in Rockaway, Caton, Horizon or Lawrence Care Center. When asked if that testimony indicates that Mr. Tenenbaum had not believed that the family owned the nursing homes, defendant replied "No. That indicates to me you were badgering him and you didn't like his I don't know answer and you were pressuring him to an answer you wanted."
When questioned with regard to when the trust that purchased Kingsbridge was formed, defendant repeatedly stated that she did not know, that there are several trusts. A Fleet Bank statement for CG dated November 30, 1994 was introduced into evidence, however, that indicated that the statements were sent to her home for some period of time. On redirect examination, defendant introduced a copy of a motion to compel the production of documents relating to her father's trusts that was made in the Surrogate's Court, after his death, which was intended to demonstrate defendant's lack of knowledge and understanding of the identity and operation of her family's trusts.
The Hogan Appraisal
Mr. Hogan, the court appointed neutral appraiser, valued Kingsbridge as of December 31, 1998 as a going concern, including the off-premises health care business, at $47,500,000. In reaching this determination, Mr. Hogan utilized the income stream, less expenses, and capitalized that into a value using a rate of 13.5%. Mr. Hogan defined a going concern valuation as including the operation of the facility, the license, real estate, land, building and good will. He opined that since a nursing home is a special purpose property, the going concern approach provides the best value.
In reaching his conclusion, Mr. Hogan relied upon figures in the financial statements for 1998 as provided by plaintiff and determined the income of the facility to be $6,417,044. Further, he valued the land and buildings at $20,300,000, utilizing the cost approach. Mr. Hogan further testified that the property on which the facility was located was owned by CG; he believed that defendant was a major owner of CG. Hence, the value of the business was $25,200,000, i.e., the value as a going concern, less the value of the land. Mr. Hogan also testified that he was aware that there was a per day increment in the Medicaid reimbursement received for nursing homes having over 300 beds; 78.8% of the beds at Kingsbridge were Medicaid beds and he believed that the increment was $6 per day, but he was not certain.
Although this distinction is not clear from a reading of the report, it was made clear in Mr. Hogan's testimony during the trial.
On cross examination, Mr. Hogan testified that his valuation was based upon financial statements received, since he had difficulty obtaining documents. He valued Kingsbridge as of December 31, 1998, the date given to him by the referee, utilizing income and expense figures for 1998. Mr. Hogan further stated that he did not include the rent of $3,174,146 for 1997 and $2,570,190 for 1998 as an expense because the lease agreement was not an arm's length transaction, since defendant owned the property, and the rental amount was too high. Similarly, Mr. Hogan did not include a management fee in his expenses; said fee, if included, would be about 5% per year, or $1,500,000. If those expenses were included in his analysis, the value of Kingsbridge would be $17,907,000. If a valuation date of March 1, 1998 had been utilized, Mr. Hogan would have used 1997 figures, since the 1998 figures would not have been available; in preparing the report, however, he looked at operating expenses for three years.
On redirect examination, Mr. Hogan testified that Kingsbridge's expenses included an administrative fee of $2,770,000, which he considered high. The amount of this expense was a consideration in his determination that no management fee at all would be included.
The Lockwood Appraisal
Mr. Lockwood, the expert retained by defendant, testified on her behalf with regard to his report, dated October 10, 2001. Therein, he valued Kingsbridge at $6,835,000, premised upon a fair value basis as of December 31, 1998. During cross examination at the first trial, Mr. Lockwood admitted that this figure should be raised to $11,000,000 to adjust for a double counting of the 20% adjustment that he made to value due to the difficulty involved in marketing the business, which increased the value by approximately $5,000,000; he repeated this adjustment in his testimony during this trial. Mr. Lockwood further testified that his approach differed from the going concern valuation used by Mr. Hogan because Mr. Lockwood opined that Mr. Hogan's methodology relates to real estate valuations, and not to business valuations. The two valuations also differed in that Mr. Hogan did not include rent and he did not consider a marketability discount.
In reaching his valuation, Mr. Lockwood recognized that Kingsbridge did not own any real estate, since the land and building which housed the operation were owned by CG. Mr. Lockwood believed that CG is owned by a group of five trusts, one of which is the Helen Sieger Trust and the other four are for her siblings; a company named Tentrees is the owner of CG's 1% managing interest and is itself equally owned by the five trusts. Like Mr. Hogan, Mr. Lockwood relied upon the financial statements of the facility; he did not look at the actual books. He used the figures for only 1997 and 1998 because 1995 was a partial year and 1996 reflected start-up costs.
In arriving at his valuation, Mr. Lockwood relied upon the capitalization of adjusted debt free income, from which federal, state and city income taxes were deducted. He utilized an income base of $1,424,829 and capitalized it by a rate of 16.01%, for a value of $8,898,510. In his calculation, Mr. Lockwood utilized a rental rate of $2,300,000, or 10% of the value of the real estate as determined by Mr. Hogan. Mr. Lockwood also adjusted expenses to exclude defendant's salary, but to include a management fee of 5%; he made no adjustment for $976,000 in bad debt listed on the 1998 financial statement, so that said amount was deducted from the income of the facility. Mr. Lockwood then reduced the value by 20% to reflect the difficulties involved in marketing a nursing home, which resulted in a value of $7,118,808.
Mr. Lockwood also relied upon the capitalization of adjusted earnings before interest or tax depreciation and amortization (EBIDTA) and utilized a capitalization rate of 13.5%. For this calculation, Mr. Lockwood utilized an income base of $4,868,573 and capitalized it by a rate of 13.5% for a value of $36,063,504. This income base added back the cost of depreciation, amortization and rent, and deducted a management fee of 5%. Applying a 20% discount for the difficulty that would be encountered in marketing the business, the value of Kingsbridge becomes $28,850,803. Subtracting the value of the real estate, the remaining value was set at $6,550,803. After equally weighting the two values, Mr. Lockwood determined that the value of Kingsbridge was $6,835,000, or $90,159 per bed, which is at the high end of the range at which nursing home facilities sold.
Mr. Lockwood further testified that he was aware that a state audit had been conducted at Kingsbridge, but he did not consider the results, since the findings had not yet been released when he completed his report. He opined, however, that if the state mandated that additional sums be given to the nursing home after the audit, Kingsbridge's revenue would increase, which would in turn increase the income, unless offset by other expenses, so that its value would increase. Conversely, if the audit resulted in the conclusion that the nursing home was given too much money, so that a payback was required, income would decrease, which would result in a lower valuation.
Continuing, Mr. Lockwood testified that if he utilized Mr. Hogan's figures, but included rent of $2,300,000, included a 5% management fee and tax impacted the figures at 46%, Mr. Hogan's valuation of Kingsbridge would be $9,449,316 when capitalized at 13.5%, the rate employed by Mr. Hogan; when a 20% deduction was taken for the difficulty in marketability, the value would be $7,559,463. When capitalized at 16%, the rate employed by Mr. Lockwood, Kingsbridge would be valued at $6,378,288.
On cross examination, Mr. Lockwood confirmed his testimony at the earlier trial with regard to the value of nursing homes sold in the northeast, i.e., that the average price was $50,000 to $100,000 per bed and that nursing homes in New York City are more profitable than nursing homes anywhere else in New York State. Mr. Lockwood further testified that although he valued Kingsbridge as a C corporation, it was an S corporation; as an S corporation, the taxes would be paid by defendant, not by Kingsbridge. In addition, defendant did not take a salary in 1998 and as an S corporation, all of the income of the facility would pass through to her. Mr. Lockwood further testified that if he had the findings of the audit conducted by the Department of Health available to him and a repayment was required for a specified year, he would adjust his findings for that year to so reflect.
Mr. Lockwood further explained that he included a management fee in Kingsbridge's expenses because an owner who works in her business is entitled to both a salary and to the profits. Mr. Lockwood also deducted $976,000 in bad debt in 1998, although he was aware that the debt had been carried on the books for a number of years; if the deduction of that debt was eliminated, the value of Kingsbridge would increase by approximately $3,000,000, before taxes. If he had utilized the rental of $150,000 per month, as testified to by defendant at her deposition, the value of the facility would be increased by over $2,000,000, without taxes. Finally, if Mr. Lockwood had valued Kingsbridge using a gross income multiplier of 1.2, the average and median in 1998, its value would have been $40 million.
The Parties' Contentions
Plaintiff claims that Kingsbridge is marital property, since it was purchased utilizing funds borrowed from defendant's family trusts and that he participated in its acquisition and operation. Plaintiff further argues that the facility should be valued utilizing Mr. Hogan's appraisal.
Defendant claims that the facility is her separate property, having been purchased for her by her family, or that Kingsbridge is owned by her father and/or her family. She further argues that Kingsbridge should be valued in reliance upon the Lockwood appraisal or, in the alternative, the Hogan appraisal should be adjusted to reflect the inclusion of rent and a management fee, it should be reduced by a discount for lack of marketability and the value should be tax impacted.
Marital v. Separate Property
In making the determination of whether Kingsbridge is to be considered marital or separate property, the court first notes that its analysis is complicated by the fact that defendant inexplicably changed her position during the course of the litigation. Initially, as is reflected in her Net Worth Statement, her deposition testimony and her father's deposition testimony, defendant took the position that the money utilized by her to purchase Kingsbridge was a loan from the family trust that had to be repaid, with interest. During this trial, however, defendant argued that the money was a gift to her or, in the alternative, that her father or her family own the facility. Inasmuch as the court is obligated to determine ownership of Kingsbridge for purposes of equitable distribution, it must accordingly do so in reliance upon its assessment of credibility. In this regard, it must be noted that defendant's change in position, without explanation or reason, must be viewed as seriously compromising her overall credibility.
The court rejects defendant's claim throughout the trial that Kingsbridge, as well as Lyden and Rofay, were owned by her father or by her family. Assuming, arguendo, that Mr. Tenenbaum had an ownership interest in Kingsbridge, defendant points to no statutory authority or case law precedent that would allow her to claim that her now deceased father's alleged interest therein, or that of any other family member, is hers in this equitable distribution action. In fact, the law is to the contrary ( see e.g. Prince v. Prince, 247 AD2d 457 [it was incorrect for the trial court to direct that the balance of the proceeds from the sale of marital investment property held in escrow be used to pay down the debt owed to the plaintiff's parents, since before the court could grant affirmative relief to a third party, that party must subject himself or herself to the jurisdiction of the court]; Reinisch v. Reinisch, 226 AD2d 615, 616 [the court erred in directing the husband to pay the wife's mother and stepfather money for loans made to the wife during the pendency of the action, since before the court could grant affirmative relief to a third party, that party must submit himself or herself to the jurisdiction of the court and neither were parties to the action or moved to intervene]; Zimberg v. Zimberg, 215 AD2d 313, 314 [although the court properly determined that the husband should have been solely responsible for repaying the wife's father for having purchased the lien resulting from a judgment against the husband and for paying, on the husband's behalf, the amount drawn by him on a letter of credit, affirmative relief directing such payment to the wife's father was inappropriate because that beneficiary had never subjected himself to the jurisdiction of the court]; Kirk v. Kirk, 177 AD2d 619 [judgment was modified to delete the provision thereof which awarded money to the plaintiff's mother upon sale of the marital residence]; Adams v. Adams, 129 AD2d 661, 662 [although the credible evidence supported the court's conclusion that the parties agreed to reimburse the plaintiff's parents for the costs incurred in building an extension onto the marital residence, the court erred in directing repayment to the plaintiff's mother upon the sale of the marital residence, since it was without the power to grant affirmative relief to a third party who had not subjected himself or herself to the jurisdiction of the court and if the mother wished to pursue her claim, she should have moved to intervene and affirmatively asserted her claim]). Although Mr. Tenenbaum moved to intervene to establish that he held an interest in Lyden and Rofay, as more fully discussed hereinafter, he did not seek to intervene to establish that he held an interest in Kingsbridge and he was not made a party to the action. Hence, the court may not properly determine that Mr. Tenenbaum or any other member of the Tenebaum family owned Kingsbridge.
For the same reason, the court declines to address defendant's claim that plaintiff improperly appropriated $1,300,000 from one of her father's accounts in the late 1980s or early 1990s. In this regard, it is also noted that in the April 2004 decision, this court already declined to allow discovery into plaintiff's alleged appropriation of Mr. Tenenbaum's brokerage account, finding that "funds that belonged to defendant's father prior to his unfortunate recent death are not marital assets to be distributed herein" (April 2004 decision, p. 30); hence, this decision constitutes law of the case.
The conclusion that Kingsbridge is not owned by defendant's father or by her family is further supported by defendant's testimony that she was aware that a trust could not own a nursing home and by the disclosure statement that she filed with the Department of Health, in which she failed to identify any others as owners of Kingsbridge. Defendant's attempt to explain her failure to report other owners by relying upon her subjective interpretation of the information sought by the form is yet another example of her persistence in seeking to testify in a manner that she believed would advance her position. Nor did defendant explain why Kingsbridge did not pay income to any of the alleged family owners, or why the family would be willing to forego millions of dollars in income, if they were, in fact, owners.
For the same reasons, defendant's claims that her father owned Lyden and Rofay are rejected and the arguments will not again be addressed herein with regard to these two assets for the reasons discussed above.
The court thus concludes that the evidence presented compels the conclusion that the Kingsbridge nursing home business, including the off-premises health care business associated therewith, is marital property. "`In identifying nothing less than "all property" acquired during the marriage as marital property [Domestic Relations Law § 236 (B) (1) (c)] evinces an unmistakable intent to provide each spouse with a fair share of things of value that each helped to create and expects to enjoy at a future date'" ( Palumbo v. Palumbo, 10 AD3d 680, 681, lv dismissed 3 NY3d 765, quoting DeLuca v. DeLuca, 97 NY2d 139, 144). "There is a `presumption in favor of marital property, premised on the contemporary view of marriage as an economic partnership, crediting each party's contributions, whether monetary or not, to the growth and value of the marriage'" ( Bartha v. Bartha, 15 AD3d 111, 116, quoting DeJesus v. DeJesus, 90 NY2d 643, 648). Further, "[t]he party seeking to overcome the marital property presumption, here the defendant, has the burden of proving that the property in dispute is separate property" ( Palumbo, 10 AD3d at 681-682, citing Farag v. Farag, 4 AD3d 502; Barone v. Barone, 292 AD2d 481). As is also relevant, it is well settled that "the separate property exception to marital property is to be construed narrowly" ( D'Angelo v. D'Angelo, 14 AD3d 476, citing Domestic Relations Law § 236 [B] [1] [d]; Price, 69 NY2d at 15; Majauskas, 61 NY2d at 489; Farag, id.; Saasto, 211 AD2d 708).
In finding that Kingsbridge is marital property, the court concludes that defendant has failed to sustain her burden of proof of demonstrating that it is separate property ( see generally Haynes v. Toma, 300 AD2d 357 [court did not err in finding that money advanced from the plaintiff's father for a down payment on the marital residence was a gift to both parties, since defendant failed to meet his burden of proving that the money was separate property]; Icart v. Icart, 186 AD2d 918, 919 [court did not err in failing to treat contributions by defendant's mother to a mortgage as being marital property, since there was ample evidence in the record that the funds constituted a gift or loan to both parties that came to them by reason of the marriage, particularly because the funds were placed in a joint account and used to satisfy a joint debt and in contrast, the funds inherited by plaintiff were not placed in a joint account but were kept by plaintiff in a separate account; at best, defendant's evidence created a credibility issue which the court properly resolved in plaintiff's favor]). In fact, the record is devoid of any evidence whatsoever that supports defendant's claim that the money that she used to purchase Kingsbridge was intended to be a gift to her, so as to be treated as separate property ( Kaplan v. Levin, 276 AD2d 528, 529 [it is well settled that an inter vivos gift requires donative intent, delivery, and acceptance, which were not present in the instant case]). Accordingly, the court concludes that Kingsbridge is marital property ( see e.g. Morse v. Morse, 12 AD3d 425, 426 [the court properly concluded that the funeral home that plaintiff husband acquired from his father during the marriage was marital property where the defendant contributed to both its acquisition and operation]; Antes v. Antes, 304 AD2d 597, 597-598 [the court's determination that the down payment for the land upon which the subject home was built and the money and labor expended to design and construct the house were not separate gifts to plaintiff wife rested largely on its assessment of the credibility of the witnesses and is afforded great weight on appeal]).
In so holding, it is also significant to note that there is no dispute that the contract of sale for the purchase was executed and the closing of the transaction occurred during the marriage. Further, also significant is the fact that no documentary evidence is offered to substantiate defendant's initial assertion that the $1,500,000 used to purchase the facility was a loan; indeed, if the money was intended to be a loan, the parties received a windfall, since the trust was never repaid. In addition, although defendant deposited the $1,500,000 check that she received from the trust into her separate bank account, that account already had a balance of $343,605 and defendant did not remember where that money came from; since she wrote checks that totaled only $1,300,000 at the closing, an additional $200,000 remained in the account. It must therefore be determined that defendant commingled the funds that she received to purchase Kingsbridge with monies earned during the marriage, albeit for an indeterminate period of time, so that the money used to acquire Kingsbridge should be characterized as marital property for this reason as well ( see e.g. Diaco, 278 AD2d at 359 [the court properly found that plaintiff comingled separate funds with marital funds and that he failed to overcome the presumption that those assets available for distribution constituted marital property]; Blechman v. Blechman, 234 AD2d 693, 694 [court's finding that the money that plaintiff inherited lost its character as separate property through commingling with marital funds had ample support in the record]).
The court reaches a different conclusion, however, with regard to the real estate upon which Kingsbridge is located, since the evidence clearly establishes that the property is owned by CG. While defendant is admittedly a partner in CG, the court concludes that by placing the property in the name of a family owned business, and not in the name of defendant, individually, the intent of defendant's father and/or the trust that purchased the property was to make a gift to her of an ownership interest, to be held by her individually, as her separate property. Indeed, if Mr. Tenenbaum and/or the trust had intended that the real estate be purchased along with the nursing home business, as a single entity, there would have been no reason to structure the transaction so that CG purchased the property. Having so held, defendant's claimed ignorance with regard to the operation of the trusts, whether accepted as credible or not, is not relevant.
Accordingly, the court concludes that the nursing home business valued by Mr. Hogan and Mr. Lockwood as Kingsbridge is marital property, while the land upon which it is located is defendant's separate property, held in the name of a trust with other family members.
Valuation Date
The evidence before the court unequivocally establishes that defendant is actively involved in the operation of Kingsbridge. Accordingly, were the court to follow the general rule, Kingsbridge should be valued as of the date of commencement of the action ( see generally Caffrey v. Caffrey, 2 AD3d 309, 310 [the court properly considered the appreciation in defendant's IRA account to be marital property since defendant actively managed the investments in the account]; Kerzner v. Kerzner, 264 AD2d 338 [the husband's business was properly valued as of the commencement of the action where the business was owned solely by the husband and its value was thus plainly affected by his active participation therein]; Myers v. Myers, 255 AD2d 711, 713 [court did not err in choosing the date of commencement as the valuation date for the family's home oil business]; cf. Barbuto v. Barbuto, 286 AD2d 741, 743-744 [the court improvidently exercised its discretion in valuing certain investment accounts as of the date of commencement of the action rather than as of the date of the trial, since defendant failed to prove that any change in the value of such accounts prior to trial was due solely to his efforts, rather than, for example, to market forces]; Finkelstein v. Finkelstein, 268 AD2d 273 [the record supported the trial court's determination that the appreciation in defendant's accounts was passive in nature so that the valuation of these assets should be made as of the time of trial]).
In seeking to explain why the nursing homes were valued as of December 31, 1998 by Mr. Hogan, however, plaintiff's counsel, who represented plaintiff throughout the litigation, stated on numerous occasions during the trial that the parties had so agreed because the facilities prepare annual financial statements, so that valuing the businesses as of March 2, 1998, the date of commencement, would be problematic. Plaintiff has not, however, produced a court order or stipulation that embodies this alleged agreement.
The parties and plaintiff's counsel are the only persons who have been involved in this dispute since its inception. As is discussed in more detail in the April 2004 decision, when the action was first commenced, it was assigned to the Honorable William Rigler. When he retired, it was assigned to Judge Panepinto. When she was assigned to act as the Supervising Judge of the Richmond County Civil Court, the action was assigned to the Honorable Maryellen Fitzmaurice. The matter was thereafter assigned to this part by the Honorable Ann T. Pfau, in her capacity, at that time as the Administrative Judge of the Second Judicial District; the assignment occurred when the 25 oldest cases in Judge Fitzmaurice's part were transferred to this jurist for trial or other resolution. Defendant has been represented by ten different attorneys (April 2004 decision, p. 16, n. 8), with her current attorney being retained in late 2003.
While not controlling on the precise issue before the court, the court took judicial notice, on consent, of a decision dated October 12, 2000 which provided that property owned by plaintiff and located in Canada would be valued as of December 31, 1998, which lends further credence to counsel's representation that the parties' assets would be valued as of that date. No evidence was offered with regard to the Canada property at trial, however, nor did defendant include a demand for an interest therein in either her Statement of Proposed Disposition or her memorandum of law.
Nonetheless, the court concludes that the valuation date of December 31, 1998 is appropriate. In so holding, it is noted that the financial statements relied upon in valuing Kingsbridge were, in fact, annual financial statements prepared by Kingsbridge's accountants on the basis of a calendar year. This substantiates the explanation for the agreement to utilize that date as offered by plaintiff's counsel. Further, defendant did not acquire Kingsbridge until 1995, so that 1995 was only partial year, and the expenses and income during 1996 and 1997 reflected start up costs ( see Basile v. Basile, 199 AD2d 649, 651 [valuation of a professional corporation 11 months after commencement of the action was not error, since the court was not constrained to value the asset as of the commencement date of the action, but had discretion and flexibility to determine the most appropriate date; in view of the fact that defendant was disabled totally from October 1985 to March 1986, it is apparent, as plaintiff's expert found, that the corporation's tax return would not accurately reflect 1986 income]; see generally Poster v. Poster, 4 AD3d 145, 146, appeal denied 3 NY3d 605 [a trial court must have the discretion to select a valuation date appropriate to the particular circumstances of the case before it]; Stern v. Stern, 5 Misc 3d 1027A [2004] [in the final analysis, the court's determination of a valuation date should be based upon producing a just result in a particular case]).
Moreover, although defendant now objects to this date, the appraisal prepared by her expert, Mr. Lockwood, utilized the December 31, 1998 valuation date as well. If defendant had intended to argue that a different valuation date was more appropriate, it must be presumed that Mr. Lockwood would, at a minimum, use defendant's chosen alternative valuation date and explain why that date provided a more accurate determination of value. Further, that the parties so agreed finds support in the fact that the appraisal reports have been in the possession of the parties since at least late 2000 and neither objected to the chosen date. Moreover, no objection was raised to December 31, 1998 being the valuation date for the nursing homes at the first trial. Similarly, neither party submitted a motion pursuant to DRL § 236 (B) (4) (b) seeking to establish the propriety of a different valuation date. Finally, the court was presented with no evidence that would allow the nursing homes to be valued on a different date ( see generally Myers, 255 AD2d at 713 [court did not improperly set the valuation date of the family home oil business as the date of commencement of the action under circumstances where the court provided a sound basis for its choice of dates and neither party presented any proof of the value of the family business as of the date of trial]).
Although defendant requested permission to conduct new appraisals in the motion that resulted in the April 2004 decision, her request was predicated upon an alleged bias on the part of the appraisers, which was argued to stem from their association with Mr. Siminovsky. Defendant did not argue therein that the valuation date of December 31, 1998 for the nursing homes was improper for any reason.
Indeed, since defendant was in control of Kingsbridge and its financial records throughout the pendency of the trial, she was able to give her expert access to any information that was needed for him to prepare an appraisal using any valuation date that she believed was appropriate, so that the evidence could have been presented at trial and considered in making the determination of the proper date.
Accordingly, the court finds that the nursing homes should be valued as of December 31, 1998. Value
For the same reasons, the court finds that the valuation date of December 31, 1998 shall also be used for Lyden and Rofay and the issue will not be further addressed.
Inasmuch as Mr. Lockwood relied upon Mr. Hogan's valuation of the real estate at $23,200,000, so that there is no other evidence of the land's value before the court, and both experts agreed that the value is reasonable, this figure is accepted. In valuing the businesses, however, the court has before it Mr. Hogan's determination that the Kingsbridge businesses should be valued at $25,200,000 ($47,500,00-$23,200,000), while Mr. Lockwood values the businesses at $11,000,000. In determining which of the two appraisals presents a more persuasive valuation, the court first notes that both Mr. Hogan and Mr. Lockwood relied upon the financial statements compiled by Kingsbridge's accountants, so that neither personally inspected its books, records or accounts.
The court finds, however, that Mr. Lockwood failed to adequately explain how he arrived at the income base of $1,424,829 utilized when he calculated the value of Kingsbridge in reliance upon the capitalization of adjusted debt free income, or the income base of $4,86,573 utilized when he calculated value in reliance upon the capitalization of EBIDTA. More specifically, the tables and graphs that he presented to support these income levels are far from self explanatory and a review of Kingsbridge's financial statements fails to reveal support for these figures. In addition, although Mr. Lockwood deducted taxes in the amount of $1,213,744 in one of the tables annexed to his report, he offers no further explanation with regard to how he arrived at that figure, what tax rate he used or why that rate was chosen. Most significantly, however, the court must consider the fact that Mr. Lockwood conceded, when cross examined during the first trial and reiterated at this trial, that his valuation was $5,000,000 lower than it should have been because the marketability adjustment was deducted twice. Since an error of such magnitude clearly calls into question the reliability of the remaining findings, the court will rely upon the methodology, operating income and operating expenses as set forth by Mr. Hogan is his report. The court further finds, however, that some of the adjustments urged by Mr. Lockwood are appropriate.
Although Mr. Lockwood may well have based his valuation upon the financial statements annexed to Mr. Hogan's report, no explanations of the procedure employed was set forth in the report, nor were the numbers used explained at trial.
Thus, in reviewing the operating expenses of Kingsbridge, the court agrees with Mr. Lockwood's contention that a management fee should be added to Kingsbridge's expeses, since it is reasonable for an owner who works in a facility to be entitled to both a salary and to the profits of the business; the fee of 5% is agreed to be appropriate by both appraisers. The court further finds that the inclusion of a rental expense is appropriate, since Kingsbridge did not own the property on which it was located and therefore had to pay rent of some amount. The court declines to set the rental rate as reflected in Kingsbridge's financial statement for the reasons recognized by Mr. Hogan, i.e., the rent paid was not established by an arm's length lease agreement, no lease was provided, the amount actually paid varied excessively from year to year and the amount paid was excessive. In addition, the court also notes that defendant's explanation of the rent as reflected in the financial statements as including the cost of renovating the elevators and the kitchen is unpersuasive, since such expenses would more properly be characterized as capital improvements, repairs or an adjustment to the purchase price than as additions to rent. The court similarly declines to utilize a rental amount equal to 10% of the value of the real estate as urged by Mr. Lockwood, since defendant testified at her deposition that she paid approximately $150,000 per month in rent. Accordingly, the court finds that it is more appropriate to utilize the amount of rent actually paid.
The court also finds Mr. Hogan's determination that payroll and benefits for 1998 total $13,700,000 was flawed, since Mr. Lockwood's total of $13,367,903 is mathematically correct, utilizing the figures provided in the financial statements relied upon by Mr. Hogan. Similarly, since it must be assumed that some amount of bad debt will be deducted in any given year, Mr. Lockwood's determination to include the $976,000 reduction of income as reflected in Kingsbridge's 1998 financial statement is deemed to be appropriate. The court declines to deduct the bad debt actually incurred in 1998, however, since defendant testified that the actual amount of that debt would not be ascertained until 2000, or two years after efforts to collect the outstanding balance had passed. Moreover, since that amount, when ascertained, would be deducted as a business expense in 2000 for tax purposes, the court finds it more appropriate to deduct the debt incurred during the years preceding 1998, as reflected in Kingsbridge's financial statements and as presumably reflected in determining taxable income for 1998, as was done by Mr. Lockwood.
The court rejects Mr. Lockwood's finding, however, that a marketability deduction of 20% should be made because it would be difficult to sell Kingsbridge in a short period of time. In this regard, defendant made no showing that Kingsbridge must be immediately sold, nor could such a need be established in view of the value of the parties' assets and the income generated by them. Further, a "discount for lack of marketability' should only be applied to the portion of the value of the corporation that is attributable to goodwill'" ( Cohen v. Cohen, 279 AD2d 599, 600, quoting Matter of Whalen v. Whalen's Moving Stor. Co., 234 AD2d 552, 553; accord Wagner v. Dunetz, 299 AD2d 347, 349). The discount herein was not applied for this reason. Likewise, since it was established that defendant operates Kingsbridge as an S corporation, so that the income passes directly to her, the court also rejects Mr. Lockwood's determination that income should be reduced by 46%, representing taxes paid, since such a deduction must be characterized as an unnecessary expense included for the purpose of reducing income, and hence the value of the business. In this regard, it is also noted that Mr. Lockwood offers no explanation of why he utilized the rate of 46%.
In this regard, it is noted that Mr. Lockwood explained that his reason for tax impacting his valuation was because another owner may not be qualified to operate Kingsbridge as an S corporation or defendant may change her mind about the way in which the income of Kingsbridge is to be taxed and decide to operate Kingsbridge as a C corporation instead. The court finds, however, that the more appropriate valuation to be placed on the facility is its value as currently operated by defendant.
Although not available to either Mr. Hogan or Mr. Lockwood when the above discussed appraisal reports were prepared, defendant established that the Department of Health has since determined that a downward adjustment of her rates is required for 1998. As is evidenced by the certified letter admitted into evidence, the adjustment for 1998 totals $1,310,509. In accordance with Mr. Lockwood's testimony and as supported by common sense, since the income of Kingsbridge for 1998 should be $1,310,509 less than that indicated on its financial statements, the appraisal shall be so adjusted. In so holding, the court rejects plaintiff's contention that since the reduction in the reimbursement rate could have been due to the inclusion of "bogus expenses" which would have no net effect on income for 1999, since this claim is purely speculative and lacking in any evidentiary support whatsoever.
The court also notes that while defendant did not offer any break down for the $10,000,000 that she claims had to be repaid, the $1,310,509 due for 1998 is only a small portion of that amount. This testimony further impacts negatively upon defendant's credibility.
The court further concludes that a reduction of the value of Kingsbridge to reflect repayment of the $1,500,000 loan obtained by defendant to purchase it is inappropriate. Most significant in this regard is the fact that plaintiff claimed that the loan was already repaid by the reduction in defendant's salary from Resort and defendant fails to address the issue at all, claiming that the money was a gift, so that no expert opinion was offered with regard to how the loan should be reflected in the asset's value. Further, inasmuch as the loan was made in 1995, no demand for repayment was ever made, Mr. Tenenbaum is now deceased and the Statute of Limitations has run on an action seeking repayment, it must be concluded that repayment has been forgiven and that the parties received a windfall. Finally, the court finds that the additional sum that had to be paid to the former owners as the result of litigation commenced against defendant premised upon the contention that additional monies were due in accordance with the adjustments to the purchase price as set forth in the contract of sale should not be deducted from income in calculating the value of the facility as urged by defendant because an increase in the purchase price cannot reasonably be construed as a decrease in the income of the facility in any given year.
Accordingly, utilizing the methodology of Mr. Hogan, adjusted as discussed above, Kingsbridge should be valued at $16,822,904, utilizing a capitalization rate of 13.5%, calculated as follows:
Operating income $7,206,778
Rent (1,800,000)
Management fee (1,825,177)
Department of Health recoupment (1,310,509)
Adjusted operating income $2,271,092
In so holding, the court notes that the value per bed would be $42,057, just above the high end of the range of price that plaintiff testified could be expected in New York City for the sale of a nursing home that did not own land.
Lyden Nursing Home
Plaintiff's Evidence
Plaintiff testified that Lyden is located at 27-37 27th Street in Astoria and has 114 beds. In 1990, the facility was owned by Abraham Grossman, defendant's first cousin, and plaintiff was the administrator; the property was owned by Patrick Denihan and leased to Mr. Grossman. In approximately 1992, plaintiff became aware that Mr. Denihan was interested in selling the property; plaintiff negotiated its purchase and it was conveyed to Lyden Care Realty Co., Inc., by deed dated December 17, 1992. A copy of mortgage executed on the same day indicated that Mr. Denihan gave plaintiff a mortgage of $2,000,000 to purchase the property; plaintiff testified that the mortgage was approximately that amount at the time of commencement of the trial. Plaintiff thereafter negotiated a deal with Mr. Grossman, pursuant to which each became a 50% owner of the realty and a 50% owner of the nursing home; a written agreement dated August 16, 1993 so indicated. The two men applied for a license from the Department of Health, which they received in 1993. Copies of the operating certificate for February 1, 1996 through January 31, 1998 and commencing December 7, 2000 indicate that the facility was operated as a partnership by Mr. Grossman and plaintiff. Plaintiff also produced copies of income tax returns for Lyden for 1994, which indicated that he was a 50% owner with Mr. Grossman and plaintiff testified that in subsequent years, his ownership interest in Lyden was 50%. The joint tax returns that the parties filed for 1993 and 1994 similarly indicate that plaintiff was the proprietor of Lyden.
This operating certificate has no expiration date.
On cross examination, plaintiff testified that until 1986, Astoria Realty held the lease for the property occupied by Lyden; Astoria Realty consisted of a Mr. Klein and defendant's father. Lyden, through Mr. Grossman, had a sublease with Astoria Realty. When plaintiff purchased his interest in Lyden, he paid $250,000, which was a loan from a man named "Rizzo". Although plaintiff characterized this money as a loan at his deposition, he explained at the trial that Mr. Rizzo supplied certified checks at the closing because plaintiff brought only personal checks.
A portion of defendant's deposition testimony was read into the record, which established that Lyden was owned by plaintiff and Mr. Grossman, her cousin. A further portion of defendant's deposition testimony that was read established that she testified that her father filed a disclosure statement for Resort in which he did not claim that he held any interest in Lyden.
Counsel also referred the court to the decision dated August 2, 2000, rendered on Mr. Tenenbaum's motion to intervene in this divorce action. Therein, Judge Panepinto denied the application, finding that Mr. Tenenbaum failed to prove that he had an interest in Lyden or Rofay. That decision was affirmed on appeal by the Appellate Division, Second Department ( 297 AD2d 33), and the Court of Appeals dismissed the motion for leave to appeal "upon the ground that the order sought to be appealed from does not finally determine the action within the meaning of the Constitution" ( 99 NY2d 651, 651). In addition, plaintiff argues that Mr. Tenenbaum did not commence a separate action against plaintiff in an effort to establish that he had an ownership interest in the nursing homes held in plaintiff's name.
Defendant's Evidence
During cross examination, defendant identified her answer to interrogatories in which she stated that she had no ownership claim to Lyden. Defendant then testified that she was not the operator or licensee of Lyden, but that Lyden is a family business, and hence is her separate property, because no marital funds were used to purchase it. More specifically, defendant contends that Tentrees purchased Lyden for $500,000 by check dated March 25, 1991. When shown copies of the licenses that indicated that plaintiff and Mr. Grossman were licensees and asked if Lyden was owned by Mr. Grossman and plaintiff, defendant responded "[l]icensee versus owners. You want me to say what you want me to say, but it is not fact." When asked if her father could have put her name on the license for Lyden and Rofay, defendant testified that "until there were difficulties in my sister's marriage my father always put the husband's name on the license. Until that time. After that time my father would only put it into the immediate family's name."
As discussed infra, p. 14, Tentrees is owned by the Michael and Paula Tenenbaum Trust as limited partners. As is evidenced by its business certificate, Tentrees consists of defendant and her siblings and its address is that of the Parkhouse Hotel.
On redirect examination, defendant testified that by check dated March 25, 1991, her father paid $500,000 or $550,000 to purchase Lyden. She further testified that prior to that time, her father gave plaintiff a check for $60,000 for a binder on the property and plaintiff "blew it." No evidence to support these contentions was ever offered.
In response to a subpoena issued by defendant, Mr. Grossman testified that during the 1980s or 1990s, defendant's father held the master lease for the property on which Lyden was located and Mr. Grossman's mother was employed at the facility as a recreation worker; Mr. Grossman's mother was Mr. Tenenbaum's sister. Mr. Grossman also testified that plaintiff acquired a 50% interest in the real estate and nursing home business in 1992; he did not recall if any cash was exchanged in that transaction. Mr. Grossman further testified that Lyden was sold approximately two years ago for $3.5 or $4 million. On cross examination, Mr. Grossman testified that he and plaintiff were the licensed owners of Lyden from 1994 through 1999 and that Mr. Tenenbaum never held any interest in Lyden or its lease.
The Hogan Appraisal
Utilizing the cost approach, Mr. Hogan concluded that the value of the land and buildings owned by Lyden was $5,775,000 and that the value of Lyden as a going concern was $7,810,000, or an average of $68,500 per bed. Hence, the value of the business, without the land, was $2,100,000.
In valuing Lyden, Mr. Hogan did not utilize the sales comparison approach, opining that property of this type does not sell frequently. Mr. Hogan did, however, utilize the sales comparison approach to value the land at $60 per square foot, or $948,000, which he rounded off to $950,000. In utilizing the reproduction cost of the building as new, and utilizing a land value of $950,000, Mr. Hogan valued Lyden at $5,774,480, which he rounded off the $5,775,000, which he asserted represents the value of the real estate, and not of the going concern.
Mr. Hogan accordingly concluded that the income capitalization approach yielded the most reliable value. Hence, he applied the 1998 Medicaid and Medicare reimbursement rates and used the historic vacancy rate of 1% to calculate an effective gross annual income of $7,646,890. He then deducted total expenses of $6,651,100, for a net operating income of $995,790, which he divided by a capitalization rate of 12.75%, for a total value of $7,810,000, or $68,500 per bed.
The Parties' Contentions
Plaintiff alleges that Lyden is marital property; for purposes of equitable distribution, it should be valued at 50% of its appraised value, less the amount of the mortgage, which plaintiff claims was $2,400,000 and which is so indicated on his Statement of Proposed Disposition.
Defendant argues that her family is the true owner of Lyden and that her father placed plaintiff there to watch over the business, so that Lyden is her separate property, or was owned by her father and/or her family.
Marital v. Separate Property
Herein, the evidence establishes that Lyden is a martial asset. In so holding, the court again rejects defendant's contention the facility was owned by her, her father and/or her family for the same reasons discussed above with regard to Kingsbridge. In addition, as was discussed above with regard to Kingsbridge, Mr. Tenenbaum testified that neither he nor defendant had an interest in Lyden. Similarly, the disclosure statement that defendant filed for Kingsbridge did not state that she held an interest in Lyden and defendant testified at her deposition that the statement filed by her father on behalf of Resort failed to indicate that he owned an interest in Lyden, Rofay or Kingsbridge. In this regard, it must also be recognized that Mr. Tenenbaum's motion for leave to intervene in this action premised upon his claim that had an ownership interest in Rofay and Lyden was denied, with Judge Panepinto finding that Mr. Tenenbaum had "not sufficiently set forth any ownership interest in the nursing home cognizable at law;" that decision, which was affirmed on appeal, is law of the case.
Also significant to the finding that Lyden is a marital asset is the fact that the facility was acquired by plaintiff during the marriage, that plaintiff contributed to its acquisition and that plaintiff and Mr. Grossman operated the facility. Further, the record does not establish that plaintiff received the money to purchase the property on which Lyden was located from defendant's family and/or family trusts, since no checks or bank statements that substantiated this claim were produced at trial. In addition, the license for the facility was held in the names of Mr. Grossman and plaintiff. Moreover, Mr. Grossman's testimony corroborated plaintiff's contention that he and Mr. Grossman owned Lyden. Mr. Grossman's testimony is accorded great weight, since he was a part of the Tenenbaum family and can be presumed to understand how the "family businesses" were owned and handled.
In the alternative, even assuming, arguendo, that the money was given to plaintiff by Mr. Tenenbaum or one of the family trusts, the money was utilized to enable plaintiff to purchase the facility and to put the license to the facility in his name. As was the case with Kingsbridge, however, plaintiff failed to establish that Lyden was his separate property. In fact, since plaintiff argued that the facility should be characterized as marital property, the court accepts his characterization ( see generally Holterman v. Holterman, 307 AD2d 442, 444, affd 3 NY3d 1 [since the record fails to indicate that defendant claimed certain property as his separate property, the court did not err in failing to award it to him]; Beach v. Beach, 158 AD2d 848, 849 [court properly failed to distribute household furnishings and to make certain tax-related apportionments between the parties under circumstances where there was insufficient proof as to these items in the record so that an informed decision on these matters was not possible and the parties' statements of proposed disposition made no reference to the household items]; Holcomb v. Holcomb, 148 AD2d 915, 916 [plaintiff's claim that he was aggrieved by the court's determination to award to defendant the only marital asset, the residence, without taking into account its actual value and its furnishings, was without merit under circumstances where the distribution was urged by plaintiff in his statement of proposed disposition submitted to the court]).
The court therefore concludes that Lyden is a marital asset subject to equitable distribution.
Value
Defendant offered no evidence to challenge the value of $7,810,000 that Mr. Hogan placed on Lyden or the amount of the outstanding mortgage. Accordingly, since the court finds this value to be reasonable, it is accepted ( see generally Ventimiglia v. Ventimiglia, 307 AD2d 993, 994, appeal denied 1 NY3d 508 [the court properly relied on the opinion of the court-appointed evaluator, who employed acceptable valuation methods to determine the value of the defendant's partnership interest]; Krutyansky, 289 AD2d at 299-300 [the evaluation of the defendant's real properties, based on the testimony of the plaintiff's expert witness, should not be disturbed on appeal where determination of value rested primarily on the credibility of the expert witness and his valuation technique]; Kennedy v. Kennedy, 256 AD2d 1048, 1049 [plaintiff's testimony that the furnishings were worth $6,902 was credible and was not disputed by defendant, thereby establishing a sufficient basis upon which to make an award]; see generally Anonymous v. Anonymous, 222 AD2d 305, 306 [the court properly refused to hold plaintiff responsible for the possible capital calls attributable to the parties' marital tax shelter investments, since defendant failed to provide a basis for such calculation]). Hence, since Mr. Hogan valued Lyden at $7,810,000, plaintiff's 50% interest of $3,905,000 is determined to be marital. From this, 50% of the mortgage of $2,400,000, or $1,200,000, must be deducted. Thus, the value of Lyden for purposes of equitable distribution is $2,705,000.
Rofay Nursing Home
Plaintiff's Evidence
Plaintiff testified that Rofay is a 120 bed facility located at 946 East 211th Street in the Bronx. Plaintiff had been appointed to act as the receiver of the facility when its former owner had problems with bankruptcy and was under investigation for a felony. By contract dated August 10, 1987, this seller agreed to allow plaintiff to purchase Rofay; the transaction closed in 1988. Plaintiff did not purchase the real property on which the facility is located, however, since the owner, SJW Associates (SJW), did not wish to sell.
Plaintiff further explained that the prior owner had operated the facility on the premises pursuant to a lease that expired in 1990; the lease contained an option to renew. Contending that it had not received timely notice of the intention to renew, SJW refused to negotiate for a new lease and commenced an eviction proceeding against Rofay when the lease expired. Although a warrant of eviction was obtained, SJW nonetheless allowed plaintiff to remain in occupancy as a month to month tenant while plaintiff attempted to locate another building out of which to operate the nursing home and SJW sought to locate an organization to rent the facility. In May, June or July of 1998, plaintiff received a notice indicating that he had to vacate the premises and SJW commenced another eviction proceeding; written notices so advising plaintiff are dated December 10, 1998 and December 31, 1998. Rofay did not vacate the premises in response to those notices, however, but instead continued to look for another building.
In May 1999, a Dr. Leffer came to plaintiff with a proposition that plaintiff sell the facility to Columbia Presbyterian Hospital. Dr. Leffer did not need a building for the facility, he needed only a license. Defendant thereafter made a motion seeking to stop the transfer; due to the resulting time delays, Dr. Leffer reneged on the offer. Plaintiff further testified that:
"I had a conversation [with defendant] after the motion and said, if you stop the deal, then none of us will gain anything about the selling of the license. So I lost, you lost, we both get nothing.
"But she responded that she didn't care if I get nothing, if she gets nothing, as long as I get nothing."
Subsequently, plaintiff learned that the Sisters of the Poor owned a facility that was up for sale; the building was able to accommodate 207 beds. In 1999, the parties' children purchased the Sisters' building and plaintiff became the operator of the nursing home, the Regeis Care Center (Regeis). Plaintiff further testified that when defendant learned of the impending sale, she tried to purchase the building; no proof to substantiate this allegation was introduced.
At the time that the instant action was commenced, there was a $2,000,000 mortgage on Rofay. Based upon copies of the licenses for Rofay, the parties stipulated that plaintiff was the licensed operator from December 6, 1987 through February 1, 1997. Joint tax returns filed by the parties indicated that plaintiff was the sole proprietor of the facility in 1992, 1993, 1994 and 1995; individual tax returns filed by plaintiff in 1996, 1997 and 1998 also indicate that he is the owner.
The last license did not have an expiration date.
On cross examination, plaintiff testified that in the decision rendered in the eviction proceeding brought against Rofay by SJW, the court found that Rofay did not seek to exercise its option to renew the lease in a timely fashion. Plaintiff further testified that when he was notified that SJW did not intend to renew the lease, he began to explore his options so that his license would not be lost. His negotiations with Columbia Presbyterian Hospital were a part of his efforts. Plaintiff further testified that he made a proposal to the State of New York for the construction of a $26,000,000 facility and the transfer of his license under a certificate of need as a means of preserving the value of the license; he withdrew his application when he learned that the State would not increase the number of beds that he could place in the proposed new facility above 120, so that the project was not feasible for him. Plaintiff also tried to sell the beds under the Rofay license, as he subsequently did with Lyden, but was unable to find a purchaser. In addition, commencing in 1990, when plaintiff first became aware that SJW did not intend to extend his lease, he began to negotiate with Mr. Freedman, the owner of SJW, to extend the lease or to purchase the building; plaintiff did not recall how often these conversations took place. Mr. Freedman's attorney prevented any such agreement, however, instead guiding Mr. Freedman to deal with a voluntary home, not a proprietary one.
The parties stipulated that a copy of the transcript of the eviction proceeding against Rofay and the decision rendered therein on December 30, 1991 would be admitted into evidence. As is relevant to the issues now before the court, the transcript clearly establishes that plaintiff was the owner of Rofay. Operating certificates for the facility for February 1, 1991 and December 31, 1995 and from February 1, 1997 forward indicate that plaintiff is the individual proprietor of the premises.
This certificate does not have an expiration date.
Defendant's Evidence
Defendant testified that sometime in the late 1980's, plaintiff told defendant that he did not renew the lease with SJW for the premises. A portion of defendant's testimony at the prior trial was read into the record, during which plaintiff stated that the lease was not renewed because SJW refused to negotiate. After the eviction trial, at which plaintiff failed in proving that the return receipts that were offered were for a renewal lease, SJW permitted Rofay to remain in the premises as a month-to-month tenant. Defendant then testified that she continuously had conversations with plaintiff in which she urged him to try to negotiate for an extension, since there was no assurance that Rofay would be able to continue to operate without a lease.
Defendant further explained that she filed a motion to prevent plaintiff from leasing the operating certificate of Rofay for five years because the Department of Health would not allow the certificate to be returned; it was her understanding that the significance of the five-year lease was to take the certificate out of the divorce action. Plaintiff thought that the certificate would be returned to him, so he was attempting to build a facility that would be ready at that time; accordingly, a certificate of need was filed with the Department of Health. Defendant further testified that she did not discuss the sale of the license with plaintiff in 1998 or 1999.
On cross examination, defendant testified that her family, more specifically her father, purchased Rofay for the family; hence, although her father allowed plaintiff to be the licensee, her father was the owner of the nursing homes. Further, her father owned Rofay Realty Corp. in 1985 and SJW owned the land on which it was located; SJW leased the land and building to Rofay Realty Corp., who leased it to Rofay Nursing Home. Defendant did not know if her father or any other member of her family was ever a licensee of Rofay.
On redirect examination, defendant explained that her father put Rofay in plaintiff's name because he was "European and with the European mentality . . . you generally put things into the man's name." Defendant further elaborated, stating that the family was under the impression that one needed to have an administrator's license to be an operator of a facility and she did not have such license. Rofay was not a gift to plaintiff because her family "didn't give Chaim gifts. Chaim took his own gifts," and "in this action [Rofay] belongs to me." Defendant further explained that in a previous action, her father had sought to arbitrate the claim of ownership of Rofay and Lyden in a religious tribunal; her father claimed Rofay for himself in this action as well.
The Hogan Appraisal
Utilizing the income approach, Mr. Hogan valued Rofay at $6,810,000. Mr. Hogan was aware that the land upon which Rofay was located was owned by SJW, so that the value of the land was not included. In reaching this determination, Mr. Hogan inspected the facility on October 19, 2000, when it was vacant and appeared that it had been vacant for some time; access to the interior of the building was not available. In valuing Rofay, Mr. Hogan did not employ the cost approach, since no comparable sales were available. He analyzed the income for 1996, 1997 and 1998 and utilized the 1998 reimbursement rates for Medicaid and Medicare, along with a vacancy rate of 2%, as had been historically experienced by the facility. Mr. Hogan then calculated the gross income to be $8,536,868 and total expenses to be $7,685,709, resulting in net income of $851,159; applying a 12.5% overall capitalization rate to the net income, Mr. Hogan arrived at a going concern value of $6,809,272.65, or $6,810,000, which approximates an average of $56,750 per bed.
The Parties' Contentions
Plaintiff contends that Rofay is marital property that should be valued for equitable distribution purposes. He further argues that the court should consider defendant's attempts to destroy the value of the facility by moving to enjoin the sale to Columbia Presbyterian Hospital and reduce her share accordingly.
Defendant claims that Rofay is her separate property, and/or the property of her father or her family, because her family purchased the facility and no marital funds were used. Defendant also argues that plaintiff's share of the asset should be reduced because he failed to protect the future of Rofay when he failed, for a decade, to find a place in which to house it.
Marital v. Separate Property
As was the case with regard to Kingsbridge and Lyden, and for the same reasons, the court finds that Rofay is marital property. When the facility was purchased in 1988, plaintiff became the licensee and owner of the facility; there is no evidence to support defendant's claim that Rofay is owned by her, her father or her family. This conclusion is also supported by Mr. Tenenbaum's deposition testimony.
Economic Fault or Waste
Although defendant adduced extensive testimony and introduced evidence with regard to plaintiff's alleged failure to negotiate a new lease with SJW in 1990, the court finds that testimony to be irrelevant to the issues to be determined herein. In the first instance, the evidence establishes that in 1990, the lease was held by Astoria Realty, not by plaintiff; hence, defendant failed to establish that the responsibility for negotiating a new lease fell upon plaintiff, instead of upon either her father or Mr. Klein, as the owners of Astoria Realty. More significantly, although the actions taken by plaintiff in seeking to protect Rofay apparently did not satisfy defendant, plaintiff ultimately succeeded in obtaining a new building from which to operate the nursing home. Accordingly, since there was no diminution of value in Lyden as a result of plaintiff's action or inaction, the court determines that his conduct in connection with the lease for the premises will not be characterized as economic waste.
The court also notes that even if plaintiff had been evicted from the building owned by SJW and lost the value of the license and the nursing home after the commencement of this action, Rofay would still be valued as of the date of commencement for purposes of equitable distribution ( see generally Reik v. Reik, 280 AD2d 372 [2001], appeal denied 96 NY2d 714 [2001] [where the court's valuation of the marital property was properly based on the value of that property as of the time of the trial, post-trial changes in value were properly treated as irrelevant]).
The court reaches the same conclusion with regard to defendant's motion seeking to stay the sale of the license to Columbian Presbyterian Hospital. In explaining her conduct, defendant claims that it was her intention to preserve the license as a marital asset, since she believed that the license would be lost if it was sold; being so motivated, defendant cannot be said to have engaged in economic waste. Further, even if defendant's conduct made it more difficult for plaintiff to negotiate a deal to preserve the value of Rofay, her conduct did not prevent him from so doing, since he was ultimately successful in locating a new facility before the license was lost. Accordingly, defendant's actions in seeking to enjoin the sale will similarly not be construed as economic waste.
Value
The court accepts the value of $6,810,000 as determined by Mr. Hogan, inasmuch as his methodology, as discussed above, appears to be reasonable, and his testimony is accepted as credible. Moreover, defendant offered no evidence to challenge the value of Rofay as determined by Mr. Hogan.
Parkhouse Hotel
Plaintiff's Testimony
Plaintiff testified that defendant owns a 20% interest in the Parkhouse Hotel Corp., with her four siblings owning the remaining interests. In 1987, plaintiff brought the hotel to the attention of defendant and her family, who then purchased it for approximately $2,000,000 in cash and notes; the notes were guaranteed by plaintiff and Helen and Michael Tenenbaum. Joint income tax returns filed by the parties indicate that they received interest and passive income from the hotel in 1992 and 1993. Defendant's K-1 statements for the hotel indicate that she received income in the amount of $23,286 in 1994; $48,889 in 1995; and $22,076 in 1996 and 1997. The 1997 return filed by the hotel was also produced, which included K-1 Statements for defendant and her family members, which indicated income of $22,076; the 1998 return revealed income of $217,087.
Defendant's deposition testimony was read into the record, establishing that plaintiff brought the venture to defendant's father; she did not know if he was part of the negotiations. Defendant's Testimony
Defendant testified that Parkhouse was first purchased by her father for $800,000 pursuant to a contract of sale dated April 27, 1987 between the Parkhouse Hotel Corp. and Tenfam Enterprises (Tenfam); Tenfam was a co-partnership consisting of defendant's father and mother. The contract was signed by Rabbi Landau on behalf of Parkhouse and by defendant's father on behalf of Tenfam. After the purchase, the hotel was transferred to Tentrees, a partnership consisting of defendant and her siblings that was created in December 1987. Defendant further testified that plaintiff had no involvement in negotiating the Parkhouse venture; she knew this because she was with plaintiff at the time that her father was negotiating.
On cross examination, defendant testified that plaintiff told her father that Rabbi Landau wanted to sell. She knew that plaintiff did not negotiate the deal because her father told her so and because she arranged for the meeting between the Rabbi and her father. Further, at her deposition, defendant testified that plaintiff brought the deal to her father; she did not know for a fact whether he was part of the negotiations. She then testified that there may have been a second meeting to finalize the deal, at which plaintiff was present.
Plaintiff's counsel also submitted a copy of an assignment dated December 3, 1987, pursuant to which Tenfam transferred the contract to Tentrees, which assignment was signed by Morris Tenenbaum on behalf of Tenfam and by defendant on behalf of Tentrees. A copy of the deed, dated December 21, 1987, which indicated that Tentrees purchased the property, was shown to defendant. Defendant testified that she did not know if a deed was given to Tentrees for the purchase; she and her siblings did not own the Parkhouse Hotel; she was not familiar with the holdings of her family or her family trust; she was not certain that an assignment of the contract of purchase was submitted into evidence; despite the existence of the assignment, she believed that Tenfams purchased the hotel; she was not certain who owned the hotel in 1998; she did not receive income from the hotel; and she knew nothing about the hotel.
Defendant also identified K-1 statements indicating that her two sisters, her nephew and her brother each received a 20% share of the earnings of Parkhouse Hotel Corp. as income; she did not know when the corporation obtained title to the hotel. Defendant further testified that her tax returns for 1994 through 1998 included K-1s for the hotel, although she asserted that she never got any income from the Parkhouse. In addition, a portion of the deposition of defendant's father was read into the record, establishing that he thought that plaintiff probably was "instrumental" in making the deal for Parkhouse.
Silber Appraisal
Ms. Silber, the court appointed appraiser, was called to testify by plaintiff. In her report dated November 2, 2000, she valued the Parkhouse Hotel as of December 31, 1998, the date requested by the court, as a going concern in fee simple at $2,750,000, utilizing the income approach. Ms. Silber testified that she had difficulty appraising the property because no guest register was maintained, so she was unable to determine vacancy and occupancy rates. Ms. Silber also opined that real estate in the Borough Park section of Brooklyn, where the hotel was located, had increased since December 31, 1998, though she was not aware of the amount of the increase. Further, she could not say that the value of this specific property increased without looking at its financial records, including its occupancy rate; she could not testify as to the value of the real estate alone, since she did not so segmetize her valuation.
On cross examination, it was established that the referee advised Ms. Silber of the valuation date. While she may not have reviewed tax returns for the property, that was not unusual, since she could rely upon the financial statements provided.
The Parties' Contentions
Plaintiff contends that the Parkhouse Hotel is martial property; defendant contends that it is her separate property.
Discussion
The court finds defendant's testimony, in which she denied any knowledge with regard to the purchase, ownership, operation or income of Parkhouse, as well as all knowledge of the family businesses in which title was held, despite being presented with documentary evidence, to be incredible. Nonetheless, the court finds that Parkhouse, like the property upon which Kingsbridge is located, was purchased by one of defendant's family's trusts and is owned by a corporation owned by defendant and her siblings; whether the property was purchased by Tenfam or Tentrees is of no relevance, since both entities are owned and controlled by defendant's family. Further, there is no assertion that any marital funds were used for the purchase or the payment of any mortgages or notes taken by Parkhouse in connection with the sale. These facts support the finding that defendant's interest in the Parkhouse Hotel is her separate property.
Similarly, there is no evidentiary support for plaintiff's assertion that he signed a guarantee of the hotel's indebtedness, nor is there any allegation that plaintiff was called upon to make any payments on the alleged guarantee. In this regard, it has been held that a party who signs a guarantee as a mere accommodation to another, while liable to the principal, may not be held liable to the party accommodated ( Kristiansen v. Kristiansen, 280 AD2d 584, 585). From this it follows that even assuming, arguendo, that plaintiff signed a guarantee in connection with the family's purchase of Parkhouse, which never resulted in liability on his part, is insufficient to transform defendant's interest in Parkhouse into a marital asset in which plaintiff is entitled to share. Similarly, while the evidence establishes that plaintiff brought the sale to the attention of Mr. Tenenbaum and/or participated in the negotiations, such evidence is legally insufficient to convert a gift of said property into marital property.
Accordingly, the court finds that the Parkhouse Hotel is defendant's separate property, and thus is not subject to equitable distribution.
Pursuant to DRL § 236 (B) (1) (d) (3), separate property includes "the increase in value of separate property, except to the extent that such appreciation is due in part to the contributions or efforts of the other spouse." Although defendant accordingly could have sought to share in the appreciation of the hotel if he made an active contribution to the increase in value, his failure to do so indicates that he did not believe that he could succeed on such a claim ( see generally Cowles v. Stahmer, 255 AD2d 103, 106 [1998] [it is well settled that the appreciation in value of separate property resulting from the contributions, either direct or indirect, of either or both spouses is marital property]; see also Kurtz v. Kurtz, 1 AD3d 214, 215 [2003] [the court properly denied the husband a distributive share in his wife's business, which was separate property established before the marriage, notwithstanding the claim that the husband had contributed to it, since he made no showing in satisfaction of his burden to demonstrate the baseline value of the business and the extent of its appreciation]; Rubin v. Rubin, 309 AD2d 846, 847 [2003] [defendant's conclusory assertions that his contributions resulted in the increase in value and the amount of the increase of plaintiff's separate property failed to sustain his burden of proof, so that defendant was not entitled to an equitable distribution of the appreciation of the plaintiff's interest in her separate property]; Mutt v. Mutt, 242 AD2d 612, 612-613 [1997] [defendant was not entitled to an equitable distribution of the appreciation in the value of the subject real property, since there was no evidence that the property actually increased in value, and he did not sustain his burden of demonstrating the manner in which his contributions contributed to any alleged increase]; Miness, 229 AD2d at 521 [defendant wife failed to meet her burden of showing that she contributed directly or indirectly to the husband's nursing home business so as to entitle her to share in any appreciation in its value]).
The Marital Residence
Plaintiff's Evidence
Plaintiff and defendant own the property located on Tabuer Terrace in Monsey, New York, which was purchased in 1995 for approximately $300,000. It is a one family house situated on one acre of land. At the time of the trial, plaintiff resided in the house with his children; defendant had not been in the house since the divorce action began in March 1998. After the action was begun, plaintiff paid all costs incurred in maintaining the house, including the payment of the real estate taxes of approximately $9,000 per year.
On cross examination, plaintiff was questioned about the checks tendered at the closing and the closing statement; he testified that he did not recall how the closing costs were paid and he was unable to locate a copy of the closing statement during the trial.
Defendant's Evidence
Defendant testified that the purchase price of the Tauber Terrace home was $410,000; she participated in negotiations that lowered the asking price from $420,000. Defendant, however, had no personal knowledge of the how the house was paid for or if a down payment had been made. After the house was purchased, the parties installed an Olympic size swimming pool at the cost of $65,000 and had landscaping work performed at approximately the same cost. The house was purchased in July 1995 and the family lived there for the summer; defendant has not returned since she left in December 1995.
On cross examination, defendant noted that her appraiser indicated that the purchase price of the house was $350,000 "per public records." Defendant did not make any expenditures for the house after December 1995. Although the certificate of occupancy for the pool was dated April 1998, defendant ordered the pool, but she never swam in it; the pool cost $60,000 and defendant wrote the check to pay for it.
The Kotlarich Appraisal
Ms. Kotlarich, the court appointed appraiser who was called to testify on behalf of plaintiff, testified that she appraised the former marital residence in September 2000; on May 7, 2004, she was told that an updated appraisal was needed. As of May 7, 2004, she determined that the market value of the property was $650,000.
On cross examination, Ms. Kotlarich described the former marital residence as being about 3,000 square feet, of good quality construction, at the end of a cul-de-sac and nicely landscaped. She did not see the interior of any of the comparable sales that she relied upon in making her valuation. She further testified that since the market had been flattening during the first half of 2004 as the result of rising interest rates, the value of the house in August 2004 would be similar.
The Adler Appraisal
By report dated July 19, 2004, Mr. Adler, an appraiser retained by plaintiff, valued the marital residence at $800,000. He testified that he visited the premises for about 35 minutes and described the home as a 1992 colonial, in good condition, having a stucco front; four bedrooms and two bathrooms upstairs; a living room, kitchen, family room and bedroom downstairs; a finished basement; a wood deck; an in ground pool; fencing; and a paved driveway. Mr. Adler testified that he was familiar with the interiors of the comparable sales that he relied upon, valuing them in the range of $735,000 to $852,000, after the requisite adjustments were made. All of the comparable sales occurred since December 2003 and two of the homes were on smaller parcels of land. Mr. Adler further opined that three of the comparables utilized in the Kotlarich appraisal are inferior in condition, size and/or location.
On cross examination of Mr. Adler, plaintiff established that three of the comparables that he relied upon are newer and larger than the marital residence.
The Parties' Contentions
Plaintiff contends that he should be awarded a 50% interest in the house, as valued by Ms. Kotlarich. He further asserts that he should be granted the option to purchase defendant's 50% interest in the property so that he can continue to live there. During the trial, plaintiff testified that he is not seeking a credit for any expenses that he paid to maintain the property after defendant left and he made no such demand in his memorandum of law. Defendant does not oppose plaintiff's request that he be awarded title to the property; she claims that she should be credited with one-half of the value, as determined by Mr. Adler.
The court notes that there is authority upon which plaintiff could have sought to recover one-half of the carrying costs that he paid for the property after defendant vacated the premises ( see e.g. Goddard v. Goddard, 256 AD2d 545, 547 [1998] [the court did not err in requiring the parties to share equally in any late charges or legal fees associated with the mortgage on the house, since it was the responsibility of both parties to maintain it, and in awarding defendant a credit for money she spent after the parties separated to repair and renovate the marital residence so that a certificate of occupancy could be obtained and the house sold]; Barr v. Barr, 210 AD2d 192, 193 [1994] [the court properly determined that upon the sale of the marital premises, the wife would be entitled to a credit of one-half of any mortgage and tax payments that she made with respect to the premises]).
Discussion
Inasmuch as there is no dispute that the parties purchased the marital residence during the marriage, utilizing funds generated by their earnings, the property is clearly marital in nature ( see e.g. Palumbo, 10 AD3d at 68 [properties purchased during the marriage were properly deemed to be marital and subject to equitable distribution]; Farag, 4 AD3d at 503 [since the former marital residence was purchased during the marriage, the trial court properly deemed it to be marital property subject to equitable distribution]).
Further, since plaintiff has been residing in the marital residence with his children, he is awarded the option of purchasing defendant's equitable share of the residence ( see e.g. Bowen v. Bowen, 202 AD2d 1062, 1063, appeal denied 84 NY2d 805 [because plaintiff continuously resided in the marital residence and paid all the maintenance charges on it, the court should have directed that plaintiff could purchase defendant's share in the residence, rather than direct that it be sold and the proceeds divided]; Ierardi v. Ierardi, 151 AD2d 548 [under circumstances where the husband had been continuously residing in the marital residence; he paid all the maintenance charges; he, unlike the wife, expressed a desire to purchase the home; and there was no showing that either of the parties lacked the financial resources to meet their living expenses and to pay their marital debts, so that no sale of the marital residence was financially required, the court should have given the husband the option of purchasing the wife's equitable share of the residence's value]; Shahidi v. Shahidi, 129 AD2d 627, 629 [defendant wife should have been given the option of purchasing the plaintiff's equitable share of the value of the residence from plaintiff husband, since she expressed the desire to remain in the former marital residence]).
Valuation Date
The law is clear that the marital residence should be valued on a date as close to trial as possible ( see e.g. D'Angelo, 14 AD3d 476 [where property values had changed between the date of the appraisal and the date of trial, the court should have granted the plaintiff's request for a new appraisal as of the date of the trial or the sale of the residence]; Bartek, 309 AD2d at 826 [in light of the inordinate length of time that passed between the testimony of the appraiser as to the value of the marital residence, the apartment should have been reappraised as of the last date of testimony]; Poster v. Poster, 287 AD2d 411 [in view of the uncommon circumstance that the trial in the divorce action spanned more than three years, the motion court properly determined that the parties would be permitted to obtain more current appraisals for consideration by the court in connection with its valuation of the marital apartment]; Ierardi, 151 AD2d at 548-549 [where the asset to be valued was the marital residence, the court has generally held that the valuation date employed should be the date of trial]). The court accordingly adheres to the direction contained in the April 2004 decision that the appraisal should be updated to the date of the trial.
Value
The court adopts the value of the property as determined by defendant's expert, Mr. Adler. In so holding, the court notes that Mr. Adler's appraisal considered five comparable sales, while the Kotlarich appraisal considered only four. Further, the sales as considered by Mr. Adler are closer in time to the trial than are those considered by Ms. Kotlarich. Also significant to the court's holding is the fact that Mr. Adler testified that he was familiar with the interiors of the comparables sales that he relied upon, while Ms. Kotlarich was not.
Accordingly, the court values the marital residence at $800,000.
14th Avenue Property
Plaintiff's Evidence
Plaintiff testified that he owned a 42% interest in 14th Avenue Realty Corporation, which owns the 14th Avenue property; his memorandum of law and Statement of Proposed Disposition indicate that he owns a 43% interest. Plaintiff further testified that he has no management responsibility for the building.
Defendant's Evidence
Leibish Lemel is one of plaintiff's partners in the 14th Avenue property. Mr. Lemel produced documents and testified with regard to the building after being served with an order to show cause seeking to punish him for contempt, premised upon his alleged failure to appear after having been served with a subpoena by defendant. Mr. Lemel testified that he owns 20% to 21% of the building, that he managed the property since approximately 1991 and that he provided the documents that defendant requested. He further testified that no improvements were made to the apartments when a tenant moved out; because apartments were rare in the area, the tenants made all improvements to the apartments themselves.
Inasmuch as Mr. Lemel had not been served with a court ordered subpoena, the court declined to hold him in contempt.
The Silber Appraisal
Ms. Silber, the court appointed appraiser, was called to testify by defendant. In a report dated August 5, 2004, Ms. Silber appraised the 14th Avenue property as of July 29, 2004 at $2,330,000 using the sales comparison approach and at $1,885,000 using the income capitalization approach; she gave the greatest weight to the income capitalization approach, and thus concluded that the property should be valued at $1,885,000. She described the building as having 35 units, six stories, a basement, and an elevator.
In utilizing the sales comparison approach, Ms. Silber looked to a comparable sale and divided the gross annual income into the sales price to obtain a potential gross income multiplier (GIM). That multiplier was 10.44 for the building that she found to be the most comparable in location; in determining the value, however, she used a multiplier of 7.53 from another comparable sale, since it was a median multiplier. Ms. Silber further testified that the market was higher on the date of trial.
In utilizing the income capitalization approach, Ms. Silber used some actual expenses and estimated those that she believed were unreasonable; her analysis was based upon the rent roll for the building on July 30, 2004, a schedule of income and expenses for 2003 and her analysis of said expenses. She then applied a capitalization rate of 8%, which she divided into $15,572. Accordingly, using a lower rate would result in a higher value. Hence, if a capitalization rate of 7% was used, the value would be $2,151,000, close to the value as determined in reliance upon the sales comparison approach.
On cross examination, plaintiff established that Ms. Silber conducted an earlier appraisal that resulted in a report dated December 31, 1998, in which she valued the property at $1,600,000. She attributed the increase between the 1998 valuation and the 2004 valuation to the increased income and the lower capitalization rate. Ms. Silber further testified that her valuations did not take the mortgage into account, so that the mortgage would have to be subtracted from her valuations to obtain the equity.
The Parties' Contentions
Plaintiff contends that the property should be valued as of December 31, 1998 at $1,600,000, since plaintiff is not active in the operation of the asset and the property is not held in joint names, as is the martial residence. Plaintiff further argues that his 43% share of the $800,000 mortgage, as set forth in his Statement of Proposed Disposition, should be deducted from the value of the property before calculating the value of his interest.
Defendant contends that as a passive asset, the subject property should be valued as of July 29, 2004. Defendant further asserts that Ms. Silber used an inappropriately low GIM in arriving at the value of the property in reliance upon the sales comparison approach, since utilization of a GIM of 10.44 would have resulted in a value of $3,230,866. Defendant further argues that Ms. Silber should have used a capitalization rate of .07 in valuing the property in reliance upon the income capitalization approach, which would have resulted in a value of $2,151,028. In addition, defendant urges the court to draw an adverse inference against plaintiff, premised upon the alleged failure of Mr. Lemel to provide information that defendant claims was necessary to value the apartment. Finally, defendant asserts that the court erred in not permitting defendant to subpoena Ms. Silber's telephone records, since the conduct of plaintiff and Ms. Silber at trial evidenced the possibility of an inappropriate relationship. Defendant thus concludes that the property should be valued at not less than $3,230,866.
Defendant's counsel asserted on the record that he and his client observed plaintiff signaling approval and/or disapproval of Ms. Silber's answers while she was testifying and that he and his client overheard Ms. Silber say to plaintiff "how did you like the way I turned around?" when she was leaving.
Valuation Date
The court adheres to the determination made in the April 2004 decision that the 14th Avenue Property should be valued as of the date of trial ( see Bartek, 309 AD2d at 826; see also Breese v. Breese, 256 AD2d 433, 433-434 [where the value of the asset at issue appeared to be essentially that of the real property and there was no evidence to support a finding that any change in the value was due solely to the efforts of the titled spouse, rather than to, for example, market forces, the asset should have been valued as of the date of trial]). Value
The court accepts the value of $1,885,000 as determined by Ms. Silber, since she properly considered the income and expenses of the building in determining its value. Moreover, although defendant attempted to impeach Ms. Silber's opinion and testimony, defendant failed to produce any competent evidence to refute this valuation or to conduct her own appraisal, although she had more than ample opportunity to do so throughout the course of the proceeding. In this regard, as a general principle, defendant, as the nontitled spouse, has the burden of proving an asset's value so as to afford the court a sufficient basis upon which to make a distributive award ( see e.g. Vainchenker v. Vainchenker, 242 AD2d 620, 621; Iwahara v. Iwahara, 226 AD2d 346, 347). Although defendant objects to the expenses utilized by Ms. Silber in arriving at her value in her memorandum of law, it must be emphasized that the opinions offered are those of defendant and/or her counsel, unsupported by any evidence, documents, expert testimony or expert opinion adduced at trial. As such, the court will adopt the only expert opinion as to the value of the 14th Avenue Property presented to it ( see generally Amisson v. Amisson, 251 AD2d 274, 275 [the court correctly refused to distribute the value of the plaintiff's professional social work license and practice inasmuch as the defendant failed to prove the asset's value so as to afford the court a sufficient basis upon which to make a distributive award]; Harris v. Harris, 242 AD2d 558, 560 [where the court reasonably rejected the wife's expert's testimony, it was left with only the unrefuted testimony of the husband's expert, which it properly relied upon in the valuation of the dental practice given by the husband's expert]; Iwahara, id. [since the expert testimony provided by the wife was completely immaterial to the case, the only remaining competent testimony as to the value of the license was that of the expert who testified on behalf of the husband, so that the testimony as to the value of the subject medical license provided by the husband's expert stood uncontroverted]). Thus, inasmuch as defendant failed to offer any proof as to the value of the building, and Ms. Silber's opinion is found to be reasonable and supported by the facts, the court accepts the valuation placed on the property by her ( see generally Vogel v. Vogel, 156 AD2d 671, 672 [the court erred in evaluating the largest marital asset under circumstances where the wife conceded that she did not offer any present valuation for the limited partnership interest other than its actual cost basis, which left the court with no method for such complicated evaluation]).
In so holding, the court declines to draw an adverse inference against plaintiff by reason of Mr. Lemel's alleged failure to cooperate with defendant's counsel in seeking to impeach the valuation of the property as determined by Ms. Silber. In this regard, the court notes that Mr. Lemel ultimately appeared at trial and responded to the subpoena served upon him. Although defendant is unhappy with the documents and testimony adduced, particularly Mr. Lemel's testimony that all capital improvements made to the building were paid for by the tenants, Mr. Lemel provided copies of the documents sought and answered all questions posed to him. More specifically, Mr. Lemel provided a copy of the rent roll as of July 30, 2004 and a schedule of income and expenses for 2003, so that Ms. Silber had recent income and expense figures available.
The court further notes that any improvements made by the tenants would contribute to the overall condition of the building. Accordingly, the valuation offered by Ms. Silber presumptively considered such improvements, since they would have been observed by her during her inspection of the property.
Further, the court finds defendant's assertions of bias and/or improper conduct on the part of Ms. Silber to be specious. In the first instance, the only interaction that the court observed when Ms. Silber left the stand was her shaking the hand of defendant's counsel and plaintiff helping her on with her jacket. Further, the alleged observations by defendant and her counsel of what is argued to be inappropriate conduct were not immediately brought to the attention of the court, but were instead raised on the next day, when Ms. Silber was no longer present to be recalled. Moreover, counsel was urged by the court to recall Ms. Sibler to the stand to further explore defendant's allegations and was given leave to do so. Inasmuch as defendant made no effort to recall Ms. Silber, despite having been granted numerous continuances, defendant's allegations of bias will not be afforded any credence.
Accordingly, that portion of the value of the 14th Avenue property deemed to be marital is found to be $466,550 (43% of the appraised value of $1,885,000, or $810,550, reduced by plaintiff's 43% share of the mortgage of $800,000, or $344,000).
The Manhattan Apartments
Plaintiff's Evidence
Plaintiff's evidence was intended to establish that his interest in the Manhattan apartments had no value. On cross examination, defendant introduced a document dated October 23, 2000 from Brown and Goldberg, Counselors at Law, into evidence. The letter stated that plaintiff transferred his beneficial ownership of the cooperative apartments; plaintiff continued to hold title in his name, as nominee; and after January 2, 1995, plaintiff had no financial interest in the apartments. On redirect examination, counsel for plaintiff pointed out that no interest in these apartments appeared on plaintiff's tax returns after 1995. Defendant's Evidence
On redirect examination, defendant testified that she made a search of the website of the Office of the City Registrar with regard to the apartments for the period from 1994 through 1996. The print out from her search reflected that there was no sales activity for either apartment.
On cross examination, defendant admitted that the print out that she relied upon reveals only UCC filings and mortgages. When asked if a transaction would be on the print out if it took place without a mortgage, financing or security interest, defendant replied by stating "[w]ell, there should be more than just a letter from a lawyer saying the "poof, your apartment disappeared."
The Parties' Contentions
Plaintiff contends that he has established that the apartments were sold in 1995, so that they had no value as of the date of the trial. Moreover, no appraisal of the apartments was made or requested by defendant because she was aware that they had been sold prior to the divorce action. Hence, there is no asset or fund to be distributed.
Defendant states only that plaintiff acknowledged owning shares in two cooperative apartments in Manhattan, but claims that he received no proceeds from their sale.
The Law
As discussed above, the party seeking the distribution of an asset has the burden of establishing its value ( see e.g. Vainchenker, 242 AD2d at 621; Amisson, 251 AD2d at 274; Harris, 242 AD2d at 560; Iwahara, 226 AD2d at 347; Kaye, 192 AD2d 365; Vogel, 156 AD2d 671). Thus, inasmuch as defendant failed to offer any proof as to the value of the apartments, the court cannot place a value on the property or order its distribution ( see id.).
The Chaya Foundation
Plaintiff's Testimony
Plaintiff testified that defendant was known to her family as Chaya. In 1997, defendant earned $2,387,315; in 1998, she earned $5,557,000. Defendant formed the Foundation in 1997 for tax purposes; she told plaintiff that she would figure out ways to get back the money that she gave to the Foundation. Defendant's tax returns indicate that in each of 1997 and 1998, she donated $1,500,000 to the Foundation. In addition, the 1997 tax return for the Foundation indicates that a contribution of $1,500,000 was received, the 1998 return indicates that $10,000 was received and the 1999 return indicates that $1,300,000 was received.
Further, the January 30, 1998 Fleet Bank statement for the Foundation indicates that a deposit of $1,500,000 was made on January 2, 1998. A statement for the period ending February 28, 1998 from another account maintained by the Foundation at Fleet Bank indicates that a credit memo of $1,000,000 was processed on February 12, 1998. A statement for the period ending February 28, 1998 for a third account maintained by the Foundation at Fleet Bank indicates that credit memo in the amount of $500,000 was processed on February 12, 1998. Plaintiff believes that the money for these contributions came from defendant's earning at Resort and Kingsbridge. When defendant created the Foundation in December 1997, the parties were not talking, proceedings had begun in the religious court and defendant was aware that plaintiff wanted a civil divorce.
Plaintiff further testified that the Northern Leasing bond was acquired in June 1997, it has a value of $500,000 and was owned by defendant. Defendant's Net Worth Statement indicates that she purchased the bond in June 1997, using her savings; plaintiff testified that defendant accumulated her saving from her income at Kingsbridge.
An excerpt of defendant's deposition testimony was read into the record, which established that when the Foundation was created in 1997, she funded it with $1,500,000, which money came from her earnings. Additional contributions of between $1 and $1.5 million were made in each of 1998 and 1999. Defendant also testified during her deposition that she purchased the Northern Leasing bond in June 1997; it was thereafter transferred to the Foundation.
Defendant's Evidence
Defendant testified that she set up the Foundation "to prevent and to help other people from having to go through what I was put through by Chaim Sieger," "for women that have been, that have had their lives destroyed by some people that had their own agendas." In addition, since defendant did not know about the Foundation until 1997, she did not discuss it with plaintiff, as he testified. Defendant further testified that the Northern Leasing bond, valued at $500,000, was transferred to her Foundation in 1999.
Documents from the New York State Office of the Attorney General dated December 30, 1998, April 5, 1999 and May 8, 1999 indicate that the Foundation had obtained an employer identification number and Section 509 (a) status; tax returns for the Foundation for 1997, 1998 and 1999 were introduced into evidence.
On cross examination, a portion of defendant's deposition testimony was read into the record in which she stated that the purpose of the foundation was to "set up a charity fund, to give to a charity to a cause that I feel is appropriate." Upon looking at the records for the donations that were made in 1998, however, defendant conceded that none of them were for women's causes and no expenses were shown for either 1998 or 1999. Further, defendant noted that the 1997 tax return was filed on January 4, 2000; the 1998 tax return was filed on July 18, 2000; the 1999 return was filed on July 30, 2001. Further, defendant's 1997 and 1998 income tax return indicated that she contributed $1,500,000 to the Foundation during each of those years. In addition, sometime in 1999, she transferred the Northern Leasing bond in the sum of $500,000 to the Foundation.
The Parties' Contentions
Plaintiff claims that defendant's Foundation was a sham, set up so that defendant could save on taxes and still have use of the money for herself; plaintiff claims that this contention is supported by the fact that the Foundation did not keep proper records and did not file tax returns until 2000. Further, at the time that defendant contributed the money to create the Foundation, she knew that she and plaintiff were getting divorced. Accordingly, plaintiff has an interest in the $3,000,000 that defendant gave to the Foundation in 1997 and 1998, since the money came from her earnings and if it had not been donated to the Foundation, it would be in the parties' bank account. Plaintiff similarly claims an interest in the Northern Leasing bond that was transferred to the Foundation, since it was also acquired during the marriage, although it was not transferred until after the commencement. Defendant argues that while "[o]rdinarily, Mr. Seiger would be entitled to a $1,500,000 credit for the $3,000,000 contributed, he should not receive any because of his alleged refusal to remove barriers to defendant's remarriage." Defendant does not specifically address the bond.
Discussion
Although the testimony, income tax returns and bank statements are inconsistent, the court finds that the bank statements most accurately reflect the date that money was transferred to the Foundation. Accordingly, the court finds that $3,000,000 was transferred into the Foundation by defendant during January and February of 1998 and that this money, which came from defendant's earnings, is a marital asset. Indeed, defendant so concedes when she avers that plaintiff would be entitled to share in these assets were it not for his alleged misconduct with regard to the Heter and the Get. Similarly, the evidence clearly establishes that the Northern Leasing bond, which is valued at $500,000 and which was acquired during the marriage utilizing marital funds, is a marital asset.
Thus, the court finds that these transfers of assets constitute dissipation of marital assets because if the money had not been diverted into the Foundation, it would available for equitable distribution. Defendant's diversion of these funds into the Foundation are funds to which plaintiff is entitled to share because the evidence establishes that the funds transferred to the Foundation were from defendant's earnings and that the bond was also acquired during the marriage ( see generally Shyue v. Tarn, 6 AD3d 521 [where the evidence established that the plaintiff husband withdrew funds from a joint mutual fund account in order to purchase real property in his own name and acquired a 401(k) retirement plan during the course of the marriage, this property constituted marital property that the court should have equitably distributed]; McComish v. McComish, 227 AD2d 454, 455 [to the extent that the wife took back $7,000 from funds that she withdrew and put them to her personal use, the husband was entitled to a credit of $3,500]).
Jewelry
Plaintiff's Evidence
Plaintiff testified that during the marriage, he bought jewelry for defendant, which he purchased using his earnings. The jewelry is currently located in a safe deposit box held in defendant's name. Plaintiff further testified that a ring characterized as an engagement ring and valued at $80,000 by Mr. Artez, who appraised the jewelry on behalf of plaintiff, was purchased during their marriage; neither plaintiff nor defendant had sufficient funds to buy a ring of that value at the time that they got engaged.
Defendant's deposition testimony was read into the record, which established that most of the jewelry that was appraised by Mr. Artez was acquired during the marriage. Defendant identified a yellow gold flower broach (number 31); a yellow gold rope chain with a four leaf clover pendant (number 35); a tricolor green, rose and white necklace (number 40), a tricolor green, rose and white bracelet (number 41); and a yellow gold smokey quartz broach (number 51) as having been acquired prior to the marriage. The remaining items were purchased either by defendant alone or with plaintiff and were paid for using income earned during the marriage.
Defendant's Testimony
Defendant testified that plaintiff told her that she deserved the engagement ring, which was purchased in approximately 1992. Item number 79 was wedding rings that were received in approximately 1990; the rings replaced her gold wedding band, which she did not wear, because she broke out from it.
The Aretz Appraisal
Mr. Aretz, who appraised the jewelry on behalf of plaintiff, testified that he inventoried the jewelry at the bank where it was kept by defendant and took photographs of each piece. By report dated September 25, 2000, he valued the jewelry at $224,910. The appraisal utilized the market data approach, which involves the comparison of property with similar items which sold in the market.
On cross examination, Mr. Aretz stated that he did not physically see a few items ( e.g. a watch valued at $4,000). Mr. Aretz further testified that the cost of gold increased approximately 25% between 1998 and 2000.
On redirect examination, Mr. Aretz testified that the jewelry that he had appraised would probably have a greater value if it were purchased in the retail market. He further explained that in characterizing the ring that he appraised at $80,000 as an engagement ring, he was referring to the style of the ring; he could not testify with regard to whether it was "used for an engagement."
The Parties' Contentions
Plaintiff contends that all of the jewelry except items number 31 ($200), 36 ($150), 40 ($250), 41 ($250) and 51 ($400) is marital and should be kept by defendant, with plaintiff receiving a credit in the amount of 50% of its value.
Defendant contends that the jewelry should be given to plaintiff and she should be awarded a credit of one-half of its appraised value of $224,910 or, in the alternative, the jewelry should be sold and the proceeds of the sales should be equally shared. Regardless of how the jewelry is disposed of, however, defendant claims that she is entitled to a credit of $80,000 for the engagement ring and $8,000 for the gold wedding rings that were purchased during the marriage and which served as a replacement for the originals, particularly since the jewelry may have been purchased with her separate funds.
Discussion
The evidence herein establishes that items numbered 31, 35, 40, 41 and 51 in the Aretz appraisal, having been acquired by defendant before the marriage, are her separate property and hence are not subject to equitable distribution.
"[G]ifts given by one spouse to another during the marriage do not constitute separate property and are subject to equitable distribution" ( Feldman v. Feldman, 204 AD2d 268, 269, citing Foppiano v. Foppiano, 166 AD2d 550; accord Chase v. Chase, 208 AD2d 883, 885). From this it follows that the remainder of the jewelry, which was purchased during the marriage by either plaintiff or defendant, using marital earnings, is found to be marital property ( see Ferina v. Ferina, 286 AD2d 472, 474 [inasmuch as it is well established that interspousal gifts made during the marriage constitute marital property subject to equitable distribution, where plaintiff testified that the value of the jewelry that she had received from the defendant was $20,000, her distributive award should be reduced by half that amount, or $10,000]; Brugge v. Brugge, 245 AD2d 1113 [interspousal gifts made during the marriage constitute marital property subject to equitable distribution]; Morrongiello v. Paulsen, 195 AD2d 594, 596-597, motion granted 195 AD2d 597 [the court erred in failing to credit the husband for half of the value of the rings which were marital property and awarded to the wife; although it is not improper to allot martial assets to one of the spouses individually, the value thereof should have been accounted for by an appropriate adjustment to the distributive award]).
Having so held, defendant's request for a credit for the "engagement ring" purchased during the marriage is rejected, since DRL § 236 (B) (1) (d) (1) does not permit the court to characterize property as separate in response to an assertion by the spouse requesting such determination that he or she is deserving. Further, defendant's claim that she may have purchased the jewelry with her separate property is rejected, since she offers no evidentiary support for this assertion ( see generally Murphy v. Murphy, 4 AD3d 460, 461 [although defendant claimed that a portion of the down payment for the marital residence was paid with his separate funds, he offered no evidentiary support for this assertion beyond his own testimony]; Grotsky v. Grotsky, 208 AD2d 676, 678 [the court erred in holding that the husband was entitled to a credit for the dollar amount of his contribution toward the purchase of shares of the subject fund, since there was insufficient evidence in the record to support such a finding]). In fact, to the contrary, defendant's testimony establishes that the jewelry may have been purchased by her, utilizing funds from the parties' joint bank account; all of the funds deposited into the account were marital, having been earned by the parties during the marriage.
Retirement/Pension Funds
Plaintiff's Testimony
Plaintiff testified that a statement from Fleet Bank as of December 2, 1997 indicates that defendant maintained IRA accounts valued at $65,541.83. A statement from MFS Investment Management indicates that as of November 24, 1998, defendant had a balance of $10,464.60 in a pension plan from Resort.
Defendant's deposition testimony was read into the record, which established that the Galaxy Fund is an Individual Retirement Account that she held for 12 to 15 years. She also had a pension plan with Resort that she valued at $10,000.
Defendant's Evidence
Defendant introduced a statement date March 31, 1998 from an unnamed institution that indicates that she had a balance of $3,622.77 in a Resort 401 (k) plan as of that date.
The Law
A pension earned during a marriage and prior to the execution of a separation agreement or the commencement of a matrimonial action is marital property subject to equitable distribution ( see Olivo v. Olivo, 82 NY2d 202; accord Fagan v. Fagan, 2 AD3d 394, 395; see also Silver v. Silver, 278 AD2d 478, 479 [the court providently exercised its discretion in limiting the wife's equitable share of the plaintiff's pension plans to 50% of that portion earned during the period beginning with the date of their marriage and ending with the date of commencement of this action]).
Accordingly, defendant's pension/retirement funds, valued as of the date of commencement of this action, are marital property in which plaintiff is entitled to equally share with defendant entitled to share, i.e., the Fleet Bank IRA in the amount of $65,541.83, the MFS Resort pension plan in the amount of $10,464.60 and the unidentified Resort pension plan in the amount of $3,622.77.
Other Assets
Plaintiff's Evidence
In reliance upon bank statements, plaintiff testified that as of December 31, 1997, Kingsbridge had $6,002,807.51 on deposit in various accounts maintained in Citibank; the statement as of February 28, 1998 indicated a combined total of $1,632,658.41; the statement as of March 31, 1998 indicated a combined total balance of $2,964,823.65. Kingsbridge also maintained an account at Banco Popular that had a balance of $288,751.59 as of February 28, 1998.
Further, defendant's individual account at Merrill, Lynch, Pierce, Fenner Smith, Inc. (Merrill Lynch) had a value of $573,435.61 as of December 31, 1997. A statement from Citibank indicates that defendant maintained an account having a balance of $357,044.43 as of February 24, 1998 and a balance of $357,416.50 as of March 23, 1998. A statement from Fleet Bank as of December 2, 1997 indicates that defendant maintained a checking account in the amount of $231,999.32.
Plaintiff further testified that he gambled leisurely with defendant during the 1990's; he did not gamble when he was not with her.
On cross examination, lengthy portions of plaintiff's deposition testimony were read into the record, wherein plaintiff was questioned about numerous checks that he drew against his bank accounts, transfers from his accounts, deposits into the account, loans made, loans received and loans repaid during 1994, 1995 and 1996. Plaintiff's deposition testimony established that some of the money was spent for investments and some checks were drawn to make loans; he made money on some of the investments, lost money on others and all of the loans that he gave were repaid. Plaintiff testified at the trial that he believed that all of the money that he lent was repaid, that he had turned over all documentation relevant to these transactions to his attorney years ago and that he was not in possession of any additional documents that could further explain the activity in his account.
In reliance upon a statement from a joint bank account dated January 17, 1998 through February 17, 1998, plaintiff further testified on cross examination that between January 23, 1998 and January 28, 1998, he made seven withdrawals which totaled $965,000. He explained that he loaned $945,000 of the money to people who had accounts at Independence Savings Bank so that they could buy stock, since the bank was going public; for each withdrawal, a check was cut and made payable to Independence Savings Bank and a subscription offering stock order form was executed. Plaintiff repeated that all of these loans were repaid.
In addition, plaintiff could not identify documents evidencing the transfer of $515,000 and $249,972 from Credit Suisse to him on January 26, 1998 and January 27, 1998, respectively, although plaintiff did recall that one David Berger sent money to plaintiff's account from overseas so that plaintiff could buy stock in Independence Savings Bank for him. On redirect examination, plaintiff explained that the $765,000 that was transferred into his account from Credit Suisse was then withdrawn and checks in the amounts of $250,000 and $500,000 were made payable to Independence Savings Bank for two of his associates. Plaintiff further explained that a $400,000 check from European American Bank dated January 23, 1998 and made payable to Independence Savings Bank came from a line of credit that he had at that bank. Plaintiff denied that he ever had a Swiss bank account.
On cross examination, plaintiff also stated that he maintained a brokerage account with Precision Edge Securities, LLC. Pursuant to a statement for the period November 27, 1998 through December 31, 1998, defendant contended that the account had a value of $1,342,911.05, while plaintiff testified that the statement indicated that he had a balance of zero.
A portion of defendant's deposition testimony was read into the record, which established that throughout the period that the parties' checking account was open, she was authorized to write checks against it.
Defendant's Evidence
Defendant testified at length that during the marriage, plaintiff gambled, which resulted in the parties going into debt. All of defendant's earnings were given to plaintiff, who would deposit them; plaintiff had the bank statements sent to his office; if defendant wanted to write a check for more than approximately $200, she would have to ask plaintiff if it would be covered. Defendant testified that she knew that plaintiff gambled because he put them into bankruptcies so many time; she convinced him to seek therapy for his gambling on two separate occasions.
On cross examination, defendant explained that when she testified that plaintiff put them into bankruptcy, she meant that they were in debt for a tremendous amount of money; she admitted that they had never officially filed for bankruptcy. For example, in 1983, she had to go back to work; Black Monday in 1987 was another time that they had no money; if plaintiff made money, he lost it. Nonetheless, plaintiff bought her an $80,000 engagement ring in 1992. Upon being shown a copy of a Chemical Bank statement for a joint account that was mailed to the parties' residence, defendant asked to see the originals because the statements never came to the house.
Defendant also testified that she and plaintiff went to the Tropicana and to the Taj in Atlantic City on two occasions, when plaintiff remained at the "craps" table until 3 AM. She further testified that plaintiff was very well known at the hotels and that he got "comped" rooms, food and whiskey. While at the Taj, defendant was surprised at how well known plaintiff was and that they were given a duplex suite and platters of food without charge. While at the Tropicana, defendant observed that plaintiff would loose money, but continue to keep putting money back in and losing more; after losing the $20,000 that he brought with him, he went to the ATM the following morning to get more cash. When defendant spoke to plaintiff about his gambling, plaintiff told her that he could not help himself.
On cross examination, defendant testified that on the two occasions that she accompanied plaintiff to Atlantic City, she stayed with him in the casino until closing while he was gambling because she did not want to stay alone in the room. Although she stated that she didn't do any gambling, she testified that plaintiff "had a thing about beginners luck and I was very lucky so he had me rolling the dice and he was putting the bets down" because "I was a lucky roll."
In addition, defendant testified that plaintiff took losses of over a million dollars each year on his OEX stock trades and that he asked his broker not to allow him to trade OEX. Defendant very rarely traded on the market between 1992 and 1998 and she did not have an active account during that period, so that the losses reflected on the parties' joint tax return were the result of plaintiff's trading activities; her review of the parties' tax returns for those years indicated that he sustained losses. Defendant also testified that plaintiff had a relationship with Rabbi Landau pursuant to which the Rabbi would give plaintiff money to trade on the market, plaintiff would cover his losses, but the two would split the gains equally; plaintiff was so sure that he would win the money back that he did not believe there was any exposure for the parties.
Defendant also testified that she maintained only one account with Merrill Lynch, although the account number listed on her Net Worth Statement is different than the account number indicated on her statement. Defendant testified that plaintiff told her that he had accounts with his friend's bank in Lichtenstein and that Lichtenstein is a good place to hide money. She learned of plaintiff's transactions transferring funds from Credit Suisse Bank during the course of discovery in the case that she had commenced against the Rabbis in New York County Supreme Court. Kleinman's Testimony
This action is discussed more fully hereinafter when addressing defendant's contention that plaintiff should be economically sanctioned for obtaining the Heter and withholding a Get.
Defendant called Bernard D. Kleinman, a certified public accountant who reviewed the parties' tax returns for 1992 through 1997, to testify on her behalf. Kleinman testified that during that period, the parties' trades totaled $1,660,190.61. Further, the tax returns showed a loss of $1,096, 229 for 1992; a loss of $1,090,818 for 1993; a loss of $981,336 in 1994; a loss of $198,104 in 1995; a loss of $255,837 in 1996; and a loss of $58,347 in 1997.
The court has taken the figures as set forth in the documents prepared by Kleinman, since the numbers in the transcript seemingly indicate trades totaling billions of dollars. As the trier of fact who heard the testimony, the court is aware that billions of dollars were not in issue.
On cross examination, Kleinman testified that most of plaintiff's trades were short term, with plaintiff sometimes making ten or fifteen trades within minutes. Further, in 1997, there was a profit of $132,160.00; in 1996 there was a loss of $161,000; in 1995 there was a profit of $760,355; in 1994 there was a profit of $89,961; and in 1992 there was a loss of $96,000. There was a net loss for 1997 because losses had been carried forward from a prior year; a large amount of the losses were actually incurred prior to 1992, since in that year, there was almost a $1,000,000 carry over. Hence, for the period from 1992 to 1997, plaintiff's trading was profitable.
The Parties' Contentions
Plaintiff argues that all of the above referenced accounts are marital property and should be shared equally. He further asserts that defendant's contention that he wasted assets by gambling is without merit, since he only gambled when he was with her and her account of his losses is premised upon unsubstantiated allegations. Similarly, his trading on the stock market did not constitute a waste of marital assets, since his trading was profitable between 1992 and 1997; indeed, Kleinman testified that in 1995, plaintiff declared a gain of $760,000 from trading. Further, defendant was aware that plaintiff traded on the stock market and she had no complaints when he was making money. In addition, plaintiff's prior losses sheltered the parties' income and profits in subsequent years.
Defendant argues that the transactions about which she adduced testimony establish that plaintiff transferred over $5,413,000 from marital accounts to various individuals without sufficient documentation as to the purpose of the transaction or the alleged return of the money. In addition, plaintiff traded up to $20,000,000 a year and had an agreement pursuant to which he would cover all losses, but the lender would receive 50% of all winnings. Defendant accordingly argues that the court should conclude that these sums went directly to plaintiff.
Economic Fault or Waste
As a threshold issue, it must be noted that evidence throughout the trial, established the shocking informality with which the parties conducted business, entering into transactions that involved millions of dollars without any written agreement. As an example, when defendant agreed to purchase Kingsbridge, the contract did not set forth the purchase price as a sum certain, but instead contained a formula for its calculation. Similarly, no written agreement was produced to reflect the $1,500,000 that defendant contended was loaned to her by her family trusts to purchase Kingsbridge and no lease agreement was introduced to reflect the annual rent of $1,800,000 paid by Kingsbridge to Tentrees. Hence, plaintiff's conduct in handling his alleged loan agreements and business transactions without any written agreements and/or other documentation is consistent with the way that both parties conducted their finances throughout the marriage.
Moreover, although defendant pointed to numerous withdrawals of money from the parties' account to support her assertion of waste, she made no reference to any deposits. In contrast, in seeking to explain these transactions, plaintiff's testimony established that money was continuously going into and out of the parties' account and that he was repaid for all loans that he made, testimony which the court finds to be credible. Thus, since defendant made no effort to trace the money that went into the parties' account during the same period that she contends that over $5,000,000 was withdrawn, there is no evidence to refute plaintiff's assertion that all of the loans that he made utilizing these sums were repaid. The court accordingly declines to find that any of the above referred to transactions constitute a dissipation of assets. In so holding, it is also significant to note that all of the transactions referred to were made from the parties' joint account, so that defendant had access to it and the funds therein at all times, as well as did plaintiff.
Defendant's claims with regard to plaintiff secreting money in foreign bank accounts is also found to be unpersuasive. In the first instance, the two transfers that defendant relies upon to support her allegations fail to establish that the transferred funds came from over-seas accounts maintained by plaintiff, and instead indicate that the transfers were from the accounts maintained by third parties. Similarly, defendant's conclusory assertion that plaintiff maintained accounts in Lichtenstein is completely lacking in evidentiary support ( see generally Kirschenbaum, 264 AD2d at 344-345 [there was no evidence to support plaintiff's claim that defendant placed marital property beyond the reach of the court]; cf. Maharam v. Maharam, 245 AD2d 94, 95 [a 65%-35% division of marital property was appropriate where the record was replete with evidence that defendant husband secreted assets in a foreign bank account and thus prevented the court from making an accurate assessment of the size of the marital estate, and that he squandered sizable sums on luxury items and in admitted adulterous affairs]).
Defendant's claims that plaintiff gambled away huge sums of money is also found to be lacking in evidentiary support and speculative in nature. In this regard, defendant refers to only two occasions on which she knows that plaintiff gambled ( see generally Collura v. Puglisi, 204 AD2d 589, 590 [much of the evidence adduced by the plaintiff wife, which tended to depict the defendant husband as an alcoholic, a gambler, and a libertine, was unsubstantiated and incredible; more fundamentally, even assuming that defendant husband was guilty of the dissolute behavior attributed to him by the plaintiff wife, the evidence was insufficient to warrant the conclusion that the parties' marital assets were in fact dissipated as a result of the defendant's gambling or his other alleged escapades, so that the husband's fault should not have been considered as a factor affecting the distribution of marital property]; cf. Wilner v. Wilner, 192 AD2d 524, 525 [the court did not err in awarding 75% of the marital assets to the wife, since it was well established that the wasteful dissipation of assets by either spouse is one of the factors which may be considered in determining equitable distribution of marital property and the record supported the finding that the husband dissipated substantial sums of money by gambling, since the evidence presented at trial revealed, inter alia, that the husband was a "heavy roller", who enrolled in Gamblers' Anonymous in 1985, made frequent trips to Atlantic City gambling casinos, regularly wagered on sporting events, and removed an estimated $10,000 to $20,000 per month in unrecorded cash receipts from his company safe, and that he used at least some of these funds to satisfy his gambling debts, so that the parties were left with virtually no assets at the end of their 32-year marriage]). Further, it is disingenuous of defendant to condemn plaintiff's actions during the trips to Atlantic City when she stood by him and rolled the dice, since such conduct on her part clearly compels the conclusion that she was a willing participant. The court also notes that in view of the fact that the parties' income ranged between $486,077 and $2,179,137 during the period from 1992 through 1995, the loss of $20,000, while certainly not trivial, is not of great significance when viewed in light of the parties' income.
Similarly lacking in merit is defendant's current assertion that plaintiff traded excessively on the stock market during the parties' marriage. In this regard, defendant's contention that she advised plaintiff of her dissatisfaction is unconvincing, particularly since plaintiff earned $760,000 from his trading in 1995.
Accordingly, the court finds that defendant failed to establish economic fault or waste.
Value
The court finds that the funds maintained in the bank accounts of Kingsbridge immediately preceding the commencement of this action are subject to equitable distribution. In so holding, it must be emphasized that both Mr. Hogan and Mr. Lockwood valued Kingsbridge in reliance upon the income stream generated by the facility. Neither appraiser indicated that he was aware that more than $6,000,000 was on deposit in bank accounts maintained by Kingsbridge as of December 31, 1997. Further, neither defendant nor her experts offered any evidence to establish that the funds in the Kingsbridge accounts were her separate property. Thus, as discussed above, in the absence of such proof, the money in the accounts must be characterized as marital. In addition, defendant offers no explanation as to why it was necessary to maintain so large a balance in these accounts, whether the funds were used to meet operating expenses, or what happened to the money when the funds were withdrawn from the Kingsbridge accounts.
Moreover, the court determined that defendant was entitled to a management fee of $1,825,117 from Kingsbridge for 1998, although she did not take any salary for that year. Further, the appraisals revealed that Kingsbridge had an income of $3,151,661 for 1998; since the business was maintained as an S corporation, this income would pass directly to defendant. Accordingly, the money on deposit in Kingsbridge's bank accounts in early 1998 reflects money that, in effect, belonged to plaintiff, and which was apparently transferred to her personal accounts thereafter. This conclusion is further supported by defendant's 1998 income tax return, which reveals that she reported $4,638,185 as income from S corporations, which included income received from Kingsbridge. Hence, the failure to include the money on deposit in the Kingsbridge bank accounts as a marital asset would allow defendant to shelter over $6,000,000 by virtue of her failure to withdraw the monies from the business accounts prior to the commencement of the action.
The court therefore values the Kingsbridge account maintained at Citibank at $6,002,807.51, the amount of money on deposit on December 31, 1997. Although the balance in this account was $1,632,658.41 as of February 28, 1998 and $2,964,823.65 as of March 31, 1998, the court concludes that the account should be valued with the higher balance, since defendant offers no explanation of why the balance declined by approximately $4,500,000 shortly before the commencement of the instant action. The Kingsbridge account maintained at Banco Popular is valued at $288,751.59 as of February 28, 1998.
In addition, defendant's Merrill Lynch account is valued at $573,435.61 as of December 31, 1997 and her Fleet account is valued at $231,999.32 as of December 2, 1997; defendant does not argue that the balances on either of these accounts differed significantly from the balance as of the date of commencement. Defendant's Citibank account is valued at $357,044.43 as of February 24, 1998; inasmuch as the difference between the balances in this account on February 24, 1998 and March 23, 1998 is only $372.17, the court will utilize the earlier date, since it is closer to the date of the commencement.
The court values plaintiff's brokerage account with Precision Edge at 0. Examination of the statement supports plaintiff's testimony that the balance was 0 as of the date of the commencement of this action, since that is the last balance indicated on the statement. Given the obvious discrepancy created by the inclusion of two balances on the statement, which was introduced into evidence by defendant, and considering that the burden of establishing the value of an asset in which she seeks to share is on the non-titled spouse, defendant's failure to offer testimony or other evidence to resolve the issue compels the conclusion that the account has no value.
Distribution
Factors Considered
In addressing the issue of how the parties' marital assets should be distributed, the court first notes that this is a marriage of long duration, as the parties were married for 23 years before this action was commenced; at the time of trial, plaintiff was 52 years old and defendant was 51. The court is not called upon, however, to address the need of the custodial parent to occupy the marital residence, since the parties' two children are married, with children of their own. The court also recognizes that neither party had assets of any significant value at the time of the marriage; defendant's family, however, was already in the nursing home business and their financial contributions to the parties during the marriage must be characterized as generous. Similarly, the court need not consider an award of maintenance or the future financial circumstances of either party, since each will leave the marriage with millions of dollars in assets, which assets are capable of producing more than sufficient income to allow each party to continue to live in the lifestyle to which each has become accustomed. In this regard, the court further notes that plaintiff's gross income was $1,154,015 for 1999 and $1,723,613 for 1998, while defendant's gross income was $2,387,315 for 1997 and $5,557,502 for 1998, the last years for which the court was provided with such information. With incomes of this magnitude, it is beyond dispute that each party is more than capable of being self-supporting without an award of maintenance. As is also relevant herein, this decision will not address the issue of the health or the tax consequences of any proposed distribution, since no evidence regarding these issues was presented during the trial ( see e.g. Kaye v. Kaye, 192 AD2d 365 [where plaintiff offered no proof concerning any tax loss suffered, she did not establish that she was entitled to any distribution for the value of her one-time tax exemption, since plaintiff, as the party seeking the financial interest, did not meet her burden of showing that the net increase in the value of defendant's retirement plan during the parties' marriage was higher than that shown by the documentary evidence]; Harmon v. Harmon, 173 AD2d 98, 107 [the court rightfully rejected the husband's potential tax liability claim as too speculative in view of the lack of probative worth of the one self-serving, posttrial submission which was before it]; Greenwald, 164 AD2d at 721 [court did not err in failing to consider the tax consequences of the wife's distributive award, as required by Domestic Relations Law § 236 (B) (5) (d) (10), where the husband failed to offer any evidence on this issue and the court was not persuaded that the husband would have a tax liability]).
The court notes that although defendant had sought numerous adjournments of the first trial on the grounds of serious health problems, no such claims were raised during this trial.
It also appears that both parties contributed to the marriage in various ways over the years. Little evidence was adduced concerning how the day-to-day child rearing and household responsibilities were allocated during the marriage, although it appears that defendant remained at home for some period of time while the children were young and thereafter worked at Resort and Kingsbridge. During the early years of the marriage, plaintiff worked at nursing homes owned by Mr. Tenenbaum, and thereafter worked at Lyden and Rofay. Both parties testified that he or she contributed to the marital assets and to the career of the other. In this regard, plaintiff testified that he sought out business opportunities for the parties, defendant and her family by, for example, bringing the availability of Parkhouse to the attention of Mr. Tenenbaum. Similarly, defendant testified that for three weeks, she helped plaintiff study for his administrators's license and that she talked to him about the administration of his nursing homes and assisted him in staffing the facilities.
As is discussed more fully hereinafter, the court rejects defendant's assertion that plaintiff's share in the any of the parties's assets should be reduced because he sought and obtained a Heter and/or is withholding a Get. Accordingly, because this was a marriage of long duration and both spouses contributed to the partnership, the court determines that the parties should share equally in all of the marital assets ( see e.g. Simmons v. Simmons, 301 AD2d 515, 516 [the court's determination that the defendant should receive a 50% distributive share of the marital residence less 50% of the reduction of the mortgage principal was justified under circumstances were no evidence was adduced which indicated that the defendant was financially irresponsible or contributed minimally to the marriage during the time the parties were together]; Wagner, 299 AD2d at 349 [based on the fact that the parties were married for 24 years, the court properly divided their liquid assets equally, including pension and retirement funds]; Krutyansky, 289 AD2d at 300 [the court properly awarded plaintiff 50% of the marital property based on the fact that the parties were married 34 years, they had two children, the age and health of the parties, and the paucity of the plaintiff's employment background]; Lipovsky v. Lipovsky, 271 AD2d 658, appeal dismissed 95 NY2d 886, appeal denied 96 NY2d 712 [where the marriage was of long duration and both parties made significant contributions to it, the court properly made the division of the marital assets as equal as possible]; Granade-Bastuck v. Bastuck, 249 AD2d 444, 445 [it was not an improvident exercise of the court's discretion to award plaintiff 50% of the marital property where the parties were married for 11 years and both made significant contributions to the marriage]; Lasaponara v. Lasaponara, 215 AD2d 448, 448-449 [court did not improvidently award husband one-half of the wife's interest in parcels of land under circumstances where the wife had earned a steady income during the marriage and the husband only earned money sporadically as a real estate agent and as the operator of a pizzeria, but there was no evidence in the record about the parties' respective incomes and the evidence established that the husband selected the parcels and structured the purchases to enable the wife to acquire her interests in the parcels with little or no down payment]; cf. K. v. B., 13 AD3d 12 [divorce judgment dividing the parties' martial property 65-35 percent in the wife's favor was upheld on appeal where the evidence was abundant that the wife contributed significantly to every single category of consideration, included being the primary wage earner, caretaker, homemaker, and child-rearer, with little contribution from the husband]; Sade v. Sade, 251 AD2d 646, 647 [defendant should have been awarded 20% of the marital assets under circumstances where the evidence established that defendant made only minor and insignificant economic and noneconomic contributions to the marriage; plaintiff was the sole wage earner during much of the marriage and also performed the usual and customary household duties throughout the parties' relationship; defendant did not directly or indirectly contribute to the plaintiff's career as a teacher, even though he was unemployed for lengthy intervals and there were no children of the marriage to care for; and defendant's conduct caused a decline in the value of the former marital residence]; Balsamo v. Balsamo, 200 AD2d 649, motion granted 200 AD2d 649 [court properly distributed 70% of the marital assets to the wife and 30% to the husband where the record demonstrated that the marriage endured for approximately 31 years, the parties had no children, the husband did not work after 1971, and that the wife worked throughout the marriage, was the principal wage earner for many years and performed substantially all of the usual and customary housekeeping duties during the parties' marriage]).
Hence, ownership of Kingsbridge shall remain with defendant and ownership of Lyden, Rofay and the 14th Avenue property shall remain with plaintiff. Defendant shall be credited with one-half of the value of Kingsbridge, or $8,411,489. Plaintiff shall be credited with one-half the value of the marital portion of the value of Lyden, or $1,352,500; one-half the value of Rofay, or $3,405,000; and one-half of the marital portion of the value of the 14th Avenue property, or $233,275.
Further, each party is award one-half of the value of the marital residence, or $400,000. Plaintiff is granted the option of purchasing defendant's interest in the property for $400,000; should plaintiff chose to exercise this option, defendant shall be credited with said $400,000 and she shall execute a deed transferring her interest in the property to plaintiff, said deed to be prepared by plaintiff and signed by defendant within ten days of its presentment to her. Plaintiff shall be responsible for the payment of all customary closing costs and expenses incurred in transferring title to him, individually.
Plaintiff is also awarded one-half of the money in defendant's savings and brokerage accounts, as discussed above, i.e., $3,001,404 in Kingsbridge's Citibank account, $144,376 in Kingsbridge's Banco Popular account, $286,718 in defendant's Merill Lynch account, $178,522 in defendant's Citibank account and $116,000 in defendant's Fleet account ( see e.g. Graziano v. Graziano, 285 AD2d 488, 490, appeal denied 97 NY2d 725). Plaintiff shall be awarded one-half of the value of each of defendant's pension and retirement accounts as of the date of the commencement of the action, or March 2, 1998, or $32,771 in the Fleet account, $5,271 in the MFS plan and $1,812 in the unidentified Resort plan. Plaintiff is directed to prepare and submit any Qualified Domestic Relations Orders (QDRO) necessary to effectuate this transfer; the orders shall be submitted with the judgment of divorce or, in the alternative, no later than 30 days after the judgment is entered; in the event that the amount of the distribution in the amount of one-half of the account as of March 2, 1998 differs from the above-stated amounts, the QDRO shall be controlling. In addition, plaintiff is award a credit of $1,500,000, or one-half of the funds that defendant contributed to the Foundation prior to the commencement of the action, along with one-half of the value of the Northern Leasing bond, or $250,000.
With regard to the jewelry, defendant is awarded possession of items numbered 31, 35, 40, 41 and 51 in the Aretz appraisal as her separate property. The remaining items shall be sold at fair market value within 30 days of service upon defendant of a copy of the judgment to be entered herein, with notice of entry The court further notes that no evidence was produced with regard to RPT Penn Equities, Samara Associates, Les Terrasses de la Chaudiere, or plaintiff's life insurance policy, property claimed to be marital on defendant's Statement of Proposed Disposition. Similarly, neither party presented any evidence with regard to these assets at the trial. Accordingly, the court cannot value or distribute them.
The Heter/Get
Defendant's Evidence
By letter from plaintiff's attorney dated December 26, 1997, defendant learned that plaintiff had obtained what is called a Heter. As a result of the Heter, defendant alleges that she was hurt financially, since many people would not do business with her, and she was ostracized by her community, since people would not associate with her.
On redirect examination, when asked to explain the interaction between a Heter and a Get, a religious document that allows a Jewish woman to remarry, defendant explained that she can never remarry because of the allegations that were written into the Heter, i.e., that she had no regard for practicing her religion and/or she is mentally insane. Hence, defendant believes that the Heter is a "scarlet letter." In addition, defendant testified that when she goes to a meeting, she has to take a chaperon because she can't be alone with a man. Defendant further testified that plaintiff obtained the Heter because "he wanted Rofay and Lyden Nursing Homes and therefore needed to take it out of the Beth Din so he can come to this court."
Defendant also introduced the testimony of Daniel Retter, an attorney who attended Yeshiva Chsan Sofer, did postgraduate work at Yeshiva Mkor Chaim and studied at the Yeshiva for seven years; Retter testified that he also lectures and writes on Talmudic law, including the Heter. The voir dire established that Retter was not an ordained Rabbi, however, and that he had represented defendant at one point in the instant divorce action. In addition, he wrote one article on the Heter, which was written after he was retained to represent defendant in the instant case. Retter never testified in court concerning a Heter, although he did testify approximately 25 years ago on the issue of what constitutes a synagogue in a zoning case. The court accordingly sustained plaintiff's objection to qualifying Retter as an expert, but permitted him to testify as a fact witness, on consent.
Retter then testified that a Get is a document which allows a Jewish woman to remarry. He further testified that a Heter is signed by 100 rabbis who were to have investigated a claim made by a husband and who find either that the wife is comatose or insane and is therefore incompetent to accept a Get, or that she is a rebellious woman who refuses to accept a Get. Retter explained that the Heter creates an exemption to the prohibition of polygamy or bigamy, since it is issued with a Get when a husband wishes to remarry but cannot do so because there is no Get for one of the above discussed reasons. Retter further testified that if the Heter was issued because the wife was rebellious in that, for example, she was unfaithful, committed adultery or served non-Kosher food, the practical effect is that she cannot remarry. In this regard, Retter spoke to two experienced matchmakers who had no interest in trying to help defendant remarry because she was a scandalized woman who could not be trusted to run a Jewish household.
On cross examination, Retter testified that when a Heter is given, a Get is deposited so that the husband does not have the ability to remarry while leaving the wife as an agunah, i.e., a woman who is considered to be chained, or forbidden to marry. Retter recalled reading a letter that indicated that a Get was available for defendant to pick up; he further testified, however, that when defendant arrived at the designated address, the document was not there.
The Parties' Contentions
Defendant argues that since plaintiff's action in obtaining the Heter was intended to avoid the financial impact that a ruling by the Beth Din would have had on his interests in Lyden and Rofay, he violated his statutory duty "to remove any barrier to [defendant's] remarriage," since his actions left her ostracized in her community and deprived her of the ability to marry. Defendant further opines that having obtained a Heter, plaintiff has invalidated any benefit that a Get might have provided for her. Having so impacted her life, defendant urges the court to consider plaintiff's conduct and reduce his share in the distribution of the parties' marital assets premised upon his conduct. Defendant further asserts that plaintiff should not be granted a divorce until he has taken all steps to remove all barriers, including the Heter, and consents to a Get after the Heter is removed. Thereafter, when the Heter is removed, plaintiff should be directed to return to the Beth Din so that the religious tribunal can adjudicate the parties' rights, as plaintiff had initially agreed, before commencing the instant action. Defendant also argues that the court should accept Retter as an expert in Talmudic law.
To refute defendant's contentions, plaintiff claims that he has been ready to give defendant a Get at all times; once he does so, he has fulfilled his obligations under DRL § 253. Further, the fact that he obtained a Heter in no way effects any Get that defendant will receive. In fact, it is plaintiff's position that defendant forced him to seek the Heter by her refusal to accept a Get at the inception of their dispute.
Discussion
In seeking to reduce plaintiff's share in equitable distribution, defendant is relying upon DRL § 236 (B) (5) (d) (13), which provides that the court may consider "any other factor which the court shall expressly find to be just and proper" ( see generally Schwartz v. Schwartz, 153 Misc 2d 789, 793 [Rigler, J.]). Further, although not mentioned by defendant, her application also implicates DRL § 253, which addresses the removal of barriers to remarriage, and which provides, in pertinent part, that:
"2. Any party to a marriage defined in subdivision one of this section who commences a proceeding to annul the marriage or for a divorce must allege, in his or her verified complaint: (i) that, to the best of his or her knowledge, that he or she has taken or that he or she will take, prior to the entry of final judgment, all steps solely within his or her power to remove any barrier to the defendant's remarriage following the annulment or divorce; or (ii) that the defendant has waived in writing the requirements of this subdivision.
"3. No final judgment of annulment or divorce shall thereafter be entered unless the plaintiff shall have filed and served a sworn statement: (i) that, to the best of his or her knowledge, he or she has, prior to the entry of such final judgment, taken all steps solely within his or her power to remove all barriers to the defendant's remarriage following the annulment or divorce; or (ii) that the defendant has waived in writing the requirements of this subdivision.
. . .
"8. Any person who knowingly submits a false sworn statement under this section shall be guilty of making an apparently sworn false statement in the first degree and shall be punished in accordance with section 210.40 of the penal law.
"9. Nothing in this section shall be construed to authorize any court to inquire into or determine any ecclesiastical or religious issue. The truth of any statement submitted pursuant to this section shall not be the subject of any judicial inquiry, except as provided in subdivision eight of this section."
In arguing that plaintiff should be ordered to remove the Heter before she receives the Get, defendant is seeking protection greater than that envisioned by the statute. In this regard, the court notes that in approving the bill enacting DRL § 253, the Governor wrote:
"The requirement of a get is used by unscrupulous spouses who avail themselves of our civil courts and simultaneously use their denial of a get vindictively or as a form of economic coercion.
"Concededly this use of our civil courts unfairly imposes upon one spouse, usually the wife, enormous anguish. (McKinney's Session Laws 1983 ch. 979, 2818, 2819; emphasis added.)"
( Perl v. Perl, 126 AD2d 91, 94-95 [Rigler, J.] [emphasis in original]). Also significant is that the cases dealing with the economic pressure asserted in connection with the Get and DRL § 253 do not mention or address the issuance of a Heter ( see e.g. Fischer v. Fischer, 237 AD2d 559; Kaplinsky v. Kaplinsky, 198 AD2d 212, 213; Golding v. Golding, 176 AD2d 20, 23; Shapiro v. Shapiro, 168 AD2d 491, appeal dismissed 78 NY2d 908; Perl, id.; Schwartz, 153 Misc 2d 789; Chambers v. Chambers, 122 Misc 2d 671, 675).
Thus, defendant is asking the court to interpret the Heter and determine that its issuance has the "practical effect" of acting as a barrier to her remarriage. This court, however, is without jurisdiction to inquire into the issue of the propriety of plaintiff's action in obtaining a Heter. In reaching this conclusion, the court first notes that "[i]t is without question that when courts must touch upon questions of religious concerns, they may not consider religious doctrine" ( Presbyterian Church v. Hull Church, 393 US 440, 449). Further, the court recognizes that it is a basic tenet of constitutional law that "`civil courts are forbidden from interfering in or determining religious disputes. Such rulings violate the First Amendment because they simultaneously establish one religious belief as correct . . . while interfering with the free exercise of the opposing faction's beliefs'" ( Lightman v. Flaum, 97 NY2d 128, 137, cert denied 535 US 1096, quoting First Presbyt. Church v. United Presbyt. Church, 62 NY2d 110, 116, cert denied 469 US 1037).
In applying this doctrine to an issue similar to that now before the court, i.e., the limitations of the secular courts as it concerns the issuance or production of a religious divorce, it has been held that:
"This Court cannot preclude defendant from acting within the religious realm in seeking to obtain a religious dissolution of the parties' marriage. To do so would be an entanglement of the secular courts in the religious practice of defendant. Clearly this is improper and would be a violation of the Establishment Clause of the First Amendment to the United States Constitution."
( Moskowitz v. Moskowitz, NYLJ, June 10, 1997, p. 27, col 6 [Rigler, J.]). The court agrees with this holding. Thus, having determined that the court "cannot restrict the religious and quasi-religious actions of one of the parties" ( id.), it follows that the court cannot punish a party, economically or otherwise, for having obtained a religious divorce.
Similarly, the court denies defendant's request that the parties be directed to resolve the issues raised herein before the Beth Bin, since defendant fails to establish that plaintiff agreed to do so ( cf. Avitzur v. Avitzur, 58 NY2d 108, cert denied 464 US 817 [the court could enforce that portion of a "Ketubah," a document entered into as part of a religious marriage ceremony, in which the parties agreed to refer the matter of a religious divorce to a nonjudicial, religious forum, a Beth Din]).
In so holding, the court also notes that Mr. Tenenbaum previously made a motion in this action in which he sought leave to intervene and to compel the arbitration of his claims to Lyden and Rofay before a rabbinical court in reliance upon a clause in the parties' engagement contract. That motion was denied by decision dated August 2, 2000. In affirming that decision on appeal, the Appellate Division, Second Department held that it could not compel arbitration before a rabbinical court, explaining that:
"To do so under the circumstances of this case would violate the First Amendment because the engagement contract does not contain a provision that expressly provides for the resolution of disputes before a Beth Din, which would allow the court to decide the issue on neutral principles of contract law, without reference to any religious principles ( cf. Avitzur v. Avitzur, 58 NY2d 108, cert denied 464 US 817; Park Slope Jewish Ctr. v. Congregation B'nai Jacob, 90 NY2d 517, 522). Rather, the appellant based his claim upon the interpretation of the ambiguous phrase that the parties would resolve any disputes `in accordance with the "regulations of Speyer, Worms, and Mainz."' . . . `To permit a party to introduce evidence or offer experts to dispute an interpretation or application of religious requirements would place [the court] in the inappropriate role of deciding whether religious law has been violated' ( Lightman v. Flaum, supra at 137). Here, the appellant seeks to do precisely that by relying on the affidavit of Rabbi Rabinowitz to support his claim that the engagement contract required the husband to submit to arbitration before a rabbinical court."
( Sieger, 297 AD2d at 36-37). While defendant is not relying upon the engagement contract in making the instant demand, the rational and holding of the decision on the prior motion, as well as the decision affirming it, compel the same holding here, i.e., that this court cannot compel plaintiff to arbitrate his claims before the Beth Din under circumstances where plaintiff did not agree to submit to the religious tribunal.
Also of note is the court's recognition of the fact that although defendant referred to a marriage contract, she failed to submit one ( id. at 35, n). Hence, it must be presumed that defendant is not in possession of a written agreement pursuant to which plaintiff agreed to resolve all marital disputes before the Beth Din, or she would have presented it to the court.
The court also notes that defendant commenced an action in New York County Supreme Court in which she sought to obtain damages from five rabbis and from the rabbinical union for defamation and other torts allegedly committed in the context of the religious divorce proceeding and the issuance of the Heter ( Sieger v. Union of Orthodox Rabbis, Index No. 605638/98). In dismissing the complaint on appeal, the Appellate Division, First Department, stated that:
"`The right to organize voluntary religious associations to assist in the expression and dissemination of any religious doctrine, and to create tribunals for the decision of controverted questions of faith within the association, and for the ecclesiastical government of all the individual members, congregations, and officers within the general association, is unquestioned. All who unite themselves to such a body do so with an implied consent to this government, and are bound to submit to it. But it would be a vain consent and would lead to the total subversion of such religious bodies, if any one aggrieved by one of their decisions could appeal to the secular courts and have them reversed. It is of the essence of these religious unions, and of their right to establish tribunals for the decision of questions arising among themselves, that those decisions should be binding in all cases of ecclesiastical cognizance, subject only to such appeals as the organism itself provides for' Watson v. Jones, 80 US 679, 728-729."
( Sieger v. Union of Orthodox Rabbis, 1 AD3d 180, 182, appeal dismissed 2 NY3d 758, appeal denied 3 NY3d 604). Applying the above principles of law to defendant's instant application makes it clear that the court cannot sanction plaintiff for pursuing and obtaining relief in his religious tribunal, since such a holding would work to undermine the granting of the Heter.
It must also be recognized that the relief sought by defendant herein is specifically prohibited by DRL § 253 (9), which states, in pertinent part, that "[n]othing in this section shall be construed to authorize any court to inquire into or determine any ecclesiastical or religious issue." Resolution of defendant's claim that a Heter is a barrier to her remarriage, even after she obtains a Get, is such an issue.
The court further notes, however, that defendant is not without relief in the event that plaintiff refuses to provide her with an affidavit that he will remove all barriers to her remarriage or refuses to give her a Get prior to the entry of judgment of divorce. In this regard, it is clear that the court has the authority to compel a breaching party to comply by use of fines, the withholding of civil economic relief, a finding of contempt and/or imposing a term of imprisonment ( see Fischer, 237 AD2d at 560-561, citing Avitzur, 58 NY2d at 115; Kaplinsky, 198 AD2d 212; Golding, 176 AD2d 20; Waxstein v. Waxstein, 90 Misc 2d 784, affd 57 AD2d 863, appeal denied 42 NY2d 806). In addition, DRL § 253 (8) provides that if plaintiff falsely submits a sworn statement that he will remove all barriers to remarriage by giving defendant a Get, she is free to seek redress pursuant to Penal Law § 210.40. In the alternative, the court can stay the transfer of any property or money to plaintiff pursuant to the judgment of divorce to be entered herein until plaintiff complies with DRL § 253 (3) and gives defendant the Get ( see e.g. Friedenberg v. Friedenberg, 136 AD2d 593, 596). Any further relief that defendant seeks to obtain with regard to the alleged impropriety of obtaining the Heter must be addressed to the Rabbinical Tribunal that issued it.
Accordingly, the court declines to reduce plaintiff's share in the equitable distribution of the parties' marital assets premised upon his conduct in obtaining a Heter.
Attorneys' Fees
Herein, plaintiff seeks an award of attorneys' fees in the amount of $200,000, premised upon his assertion that defendant's alleged frivolous conduct unnecessarily delayed resolution of the parties' marital dispute, and as a consequence thereof, unnecessarily increased litigation costs. Plaintiff further points out that during the course of the litigation, defendant waived the right to seek attorneys' fees; consistent with this representation, no application for attorneys' fees was made by defendant.
Plaintiff's Contentions
In support of his application, plaintiff asserts that defendant protracted this action for over six years as the result of her constant delaying tactics, her frivolous motions and her appeals of the decisions rendered. Plaintiff provides a detailed account of the proceeding, which the court summarized in the April 2004 decision; indeed, it appears that much of the affidavit submitted in support of the instant application is identical to that submitted on the motions that resulted in that decision. Plaintiff further points to defendant's motion seeking to depose Mr. Siminovsky and to stay the trial, which motion was made on the eve of trial and which was discussed above. In addition, plaintiff argues that at the trial, he submitted his direct case in approximately two days. In contrast, defendant engaged in days of irrelevant cross examination. Plaintiff also contends that defendant ordered daily copy and then attempted to further delay the conclusion of the trial by going over previously adduced testimony.
Plaintiff also refers to additional delays concerning appraisers, many of which are not reflected in the record and accordingly will not be addressed herein.
Plaintiff thus concludes that as a result of defendant's delaying tactics, plaintiff was forced to incur considerable needless legal expenses. Plaintiff alleges that he has paid legal fees in the amount of $287,000 and still owes $122,000. Claiming that the fees would have been reduced by 50% were it not for the tactics employed by defendant to prolong the case, plaintiff seeks to recover $200,000 from her.
Defendant's Contentions
Defendant opposes this application, arguing that an award of attorneys' fees is not appropriate in a case where the final distribution leaves the applying party with sufficient assets to pay his or her counsel fees.
The Law
As a threshold issue, plaintiff's failure to submit an updated net worth statement renders his application for an award of an attorney's fee defective, so that the application would have to be denied without prejudice to renewal upon compliance with the applicable requirements ( Bertone v. Bertone, 15 AD3d 326, citing 22 NYCRR 202.16[k][2]; Fischer-Holland v. Walker, 12 AD3d 671). Under the circumstances of this case, however, renewal is unnecessary, since the award of an attorneys' fee to plaintiff would be an improvident exercise of discretion.
DRL § 237 (a) permits the court to direct either spouse to pay counsel fees to the other "to enable that spouse to carry on or defend the action or proceeding as, in the court's discretion, justice requires, having regard to the circumstances of the case and of the respective parties." The award of counsel and accountant's fees is controlled by the equities and circumstances of each particular case ( see e.g. Levy v. Levy, 4 AD3d 398, citing DRL § 237[a], [d]; DeCabrera v. DeCabrera-Rosete, 70 NY2d 879, 881; Kearns v. Kearns, 270 AD2d 392, 393, appeal denied 95 NY2d 760). "The intent of the provision is to ensure a just resolution of the issues by creating a more level playing field with respect to the parties' respective abilities to pay counsel, `to make sure that marital litigation is shaped not by the power of the bankroll but by the power of the evidence'" ( Silverman v. Silverman, 304 AD2d 41, 48, quoting Scheinkman, Practice Commentaries, McKinney's Cons Laws of NY, Book 14, Domestic Relations Law C237:1, at 6, citing O'Shea v. O'Shea, 93 NY2d 187).
Discussion
In this case, an award of attorneys' fees is inappropriate inasmuch as the equities dictate that each party should pay his or her own attorneys' fees ( see Fagan, 2 AD3d at 395, citing Matter of Mullen v. Just, 288 AD2d 476, 477, lv denied 97 NY2d 613, cert denied 537 US 820; accord Shahidi, 129 AD2d at 630 [the court did not abuse its discretion in denying defendant's request for counsel fees under circumstances where the record revealed that the defendant had sufficient funds to pay her own counsel fees]). While it not known which of the parties is currently earning the greater income, it is beyond dispute that each is leaving the marriage with millions of dollars in both liquid and non-liquid assets and that each has the capacity to earn annual incomes in excess of $1,000,000. Under such circumstances, the court declines to characterize defendant as the "monied" spouse because her assets exceed those of plaintiff by virtue of her separate property, when plaintiff himself is a millionaire, since it is beyond dispute that plaintiff does not need an award of attorneys' fees "to level the playing field."
In so holding, the court further notes that an award of attorney's fees is not proper pursuant to DRL § 237 under circumstances where the award is sought as a sanction for alleged improper or dilatory conduct, since a sanction can only be awarded pursuant to and in accordance with the Rules of the Chief Administrator of the Courts, 22 NYCRR § 130-1.1 ( see e.g. Landes v. Landes, 248 AD2d 268 [an award of $7,000 to the husband's attorney, described by the court as a "fine for this patently frivolous action," rendered it a sanction and not an award of attorney's fees, and as such, it must comply with the requirements of 22 NYCRR 130-1.1 (d)]; accord Gober v. Gober, 11 AD3d 261 [plaintiff's request for counsel and expert fees pursuant to DRL § 237, based upon defendant's allegedly obstructive litigation conduct, was properly denied on the ground that the divorce judgment put the parties in financial parity and made each a multi-millionaire; under the circumstances, plaintiff's remedy was to seek counsel and expert fees as a form of sanction under 22 NYCRR part 130]; Silverman, 304 AD2d at 47-49 [an award of counsel fees that did not serve to level the playing field, but would serve merely to punish the adverse spouse for what the court viewed as wasteful, frivolous litigation conduct, was impermissible as punitive nature; such award should instead be sought under 22 NYCRR 130-1.1]).
Conclusion
This court is aware of the great consternation that this case has caused to the parties and to their respective families. The years of litigation, ancillary lawsuits, and media attention, as well as the extensive litigation history, have made it all the more difficult for these parties and their families to move on with their lives, which has clearly disturbed both of them. The estrangement between the defendant and her adult children and the pain ensuing experienced by her are quite evident to the court.
Further, this court has pursued its mandate of bringing this case to trial and to final decision, something which has eluded both the courts, the parties and their respective counsel for quite some time. In so doing, the court allowed the trial to proceed for days, giving each party an extensive opportunity to be heard and to have his and her respective positions fully litigated. Matrimonial litigation by its very nature is often painful. Parties who were once joined in love, affection, peace and tranquility are often forced into the public courtroom to display their most difficult moments and their not so flattering behavior. Here, where these parties were clearly in a state of bitter acrimony and dispute long before the civil litigation began, it has been all the more difficult to bring this bitter dispute to a resolution. Unfortunately, the alleged refusal to accept a Get and the effects of that act on the plaintiff, and the obtaining of the Heter and the alleged effects of that act on the defendant, have made it impossible for there to be a voluntary resolution herein. Accordingly, the court has been called upon to render a decision.
In summary, the court finds that Kingsbridge; plaintiff's interest in Lyden; Rofay; the marital residence; plaintiff's interest in the 14th Avenue property; the $3,000,000 that defendant contributed to the Chaya Foundation in 1998 and the Northern Leasing bond that was thereafter transferred to the Foundation; the jewelry presently located in plaintiff's safe deposit box and appraised by Mr. Artez; and the retirement, pension and bank accounts are marital property subject to equitable distribution and shall be equally divided between the parties. The court further finds that the land upon which Kingsbridge is located, the Parkhouse Hotel and the items of jewelry that were purchased before the marriage and enumerated above are defendant's separate property, and hence are not subject to equitable distribution. Finally, the court finds that the Manhattan apartments were disposed of before the commencement of this action and that brokerage account that plaintiff maintained with Precision Edge had a value of 0 as of the date of the commencement of this action, so that neither has any value that can be distributed.
Plaintiff is awarded the right to purchase defendant's interest in the marital residence; the figures in the table below assume that he elected to exercise this option. Further, the retirement/pension accounts shall be equally divided, with one-half of the monies in each account being transferred to accounts opened in plaintiff's name; accordingly, these sums are similarly not included in the table below. Further, the jewelry determined to be marital shall be sold, with the proceeds distributed equally between the parties.
Accordingly, the parties' marital assets shall be distributed as follows: Asset Present Owner Value Credit to Credit to Plaintiff Defendant (1,200,000) (344,000) Chaya Assets Bank Accounts 231,999.32 116,000
This credit assumes that plaintiff elects to exercise his option to buy out defendant's interest in the marital residence.
Plaintiff's application for an award of attorneys' fees is denied.
The plaintiff is granted a judgment of divorce on the grounds of abandonment, based upon the inquest held on July 21, 2000, during which defendant remained silent.
Settle separate Findings of Fact and Conclusions of Law and Judgment of Divorce, and affidavit by plaintiff pursuant to DRL § 253 on notice, together with a copy of this decision within sixty (60) days.