Opinion
3757/05.
Decided December 5, 2007.
Attorney for Plaintiff: Philip Leimgruber, Esq., Caro Associates, PC, White Plains, New York.
Attorney for Defendant Charles Kleiner, Esq., Tiverton, Rhode Island.
Plaintiff commenced this action seeking an accounting and a judgment directing defendant to pay over all amounts received by her from custodial accounts created for plaintiff's benefit. Following a trial of the unresolved issues, this Court issues this decision and order addressing 29 separate categories of expenses for which defendant reimbursed herself from those accounts.
I. RELEVANT FACTUAL BACKGROUND
During 1992 defendant established several accounts for plaintiff's benefit, which she also funded (collectively hereinafter "the Accounts"). At the time that they were created, the Accounts were controlled by the Uniform Gifts to Minors Act. As the parties agree, the Accounts are now controlled by the Uniform Transfers to Minors Act (EPTL § 7-6.1 et seq. [hereinafter "UTMA"]).
In December 1994, defendant was sued for divorce by plaintiff's father, Joel Wagman (Mr. Wagman). Defendant and Mr. Wagman executed an agreement (the Separation Agreement) settling the divorce action in September 1996, although their divorce was not finalized until December of that year.
Plaintiff resided with defendant in the former family home in Ardsley, New York until it was sold in the summer of 1997. Thereafter, plaintiff lived with defendant in Weston, Connecticut, until the Fall of 2001, when Mr. Wagman obtained custody of him.
Over the course of several years, beginning in 1997 and continuing into 2003, defendant withdrew in excess of $140,000 from the Accounts. Complaining that defendant was not authorized to make those withdrawals, plaintiff commenced this lawsuit in March 2005.
On plaintiff's motion for summary judgment, Justice J. Emmet Murphy held that:
Plaintiff is entitled to be reimbursed for all funds defendant withdrew from custodial acts [sic] for expenses that were her personal obligation under the terms of the Separation Agreement, including: all withdrawals for tutors ($1120.00), medical care (opticare and eye glasses, $705.20), and summer camp ($2,710.50). (Post-Trial Exh.1K, Short Form Order, 12/29/05).
All other items of reimbursement that were in dispute between the parties were reserved for trial.
That trial was referred to this Court and was conducted on April 6, 2007. Defendant was the only witness who testified. At the conclusion of the trial, the Court established a schedule for the parties to serve and file their post-trial submissions. With all submissions before this Court, it now considers the specific financial issues in dispute. The relevant facts established by the credible evidence presented during the trial, as well as any pertinent stipulated matters, shall be discussed in connection with the Court's analysis of each issue.
II. THE DISPUTED ITEMS
At trial, there were 29 categories of reimbursements (collectively hereinafter "the 29 Items") that were in dispute. In general, the resolution of the parties' disputes as to the 29 Items turns upon application of the general principles that a custodian of an UTMA account may not appropriate to her own use the money of her children ( Spector v. Spector , 18 AD3d 380, 382 [1st Dept. 2005]), and "may not use funds in the account to pay or reimburse herself . . . for expenditures which she is legally obligated to make from her own funds for the benefit of the minor who is the beneficiary of the custodial account" ( Cohen v. Cohen, 258 N.J.Super. 24, 29, 609 A.2d 57, 59 [App. Div. 1992], certif. denied 130 N.J. 596 [Sup. Ct. 1992]). Guided by these principles, the Court addresses the 29 Items seriatim.
1. Cable Television: Defendant reimbursed herself $2,651.00 for payments made by her for cable television services. The Court finds that defendant was credible in her explanation that she watched television infrequently and that the services were intended primarily for plaintiff. Based upon that finding and the Court's conclusion that cable television is not a necessity that a parent must provide to a child, the Court concludes that the reimbursement for this category of expenses was permissible.
2. Pet Expenses: Defendant reimbursed herself $1,500 for expenses related to a cat that was plaintiff's pet. When plaintiff moved from her home following the change of custody in favor of Mr. Wagman, he took the cat with him. Considering that the cat benefitted plaintiff and was clearly intended to be his pet, the reimbursement for these expenses was proper.
3. School Donations: The sum of $1,949 was withdrawn from the accounts over time for donations made to the schools attended by plaintiff to help defray the costs of school trips and supplies. Because these expenditures primarily benefitted plaintiff and were not for necessities, defendant was entitled to reimburse herself for them.
4. Cash Allowances: Defendant also withdrew a total of $6,499 as cash allowances that she paid to plaintiff for doing chores around the house and as rewards for good behavior and achieving good grades in school. Clearly, by using the Accounts for that purpose she was simply giving him an allowance from his own funds. Because the use of the funds for that purpose was improper, plaintiff is entitled to reimbursement from defendant in the amount of $6,499.
5. School Expenses: This category of expenses involves expenditures made by plaintiff for books purchased at school book fairs, textbooks, and library books that were lost by plaintiff, and additional monies used by plaintiff for social purposes. Because the Court concludes that these funds were used primarily for plaintiff's benefit and did not constitute expenses that a parent is obligated to make for her child, the reimbursement of $3,200 made to herself by defendant was not improper.
6. Learning Jobs: This category is similar to the category for cash allowances. Specifically, defendant paid a total of $1,520 to plaintiff, for which she reimbursed herself from the Accounts, for learning various jobs that related to the maintenance of the house, such as shoveling snow, cleaning the garage and helping with the lawn furniture. Since the work performed by plaintiff directly benefitted defendant by easing her burden of maintaining their residence, it was improper for her to use plaintiff's funds for these purposes. Thus, defendant must pay plaintiff $1,520 for her withdrawal of those funds.
7. Clothing: Defendant reimbursed herself a total of $5,592 for clothing purchases for plaintiff. Her use of funds from the Accounts for this purpose was improper, since the purchases were for clothing for his daily needs, his regular extra-curricular activities and special events, such as a Bar Mitvah, which a parent is obligated to provide to a child ( see Malamut v. Malamut, 133 AD2d 101 [2nd Dept. 1987]). Accordingly, defendant must repay the sum of $5,592 to plaintiff.
8. Bar Mitzvah: Defendant asserts that she spent a total of $8,800 on the parties and events related to plaintiff's Bar Mitvah, and reimbursed herself $5,042 from the Accounts for those expenses. Although the Court agrees with defendant that she was permitted to use funds from the Accounts to meet those expenses, she offered proof of only $2,437.90 in payments for this purpose. Consequently, the Court finds that only that sum was properly withdrawn from the Accounts by defendant.
This determination resolves plaintiff's in limine motion for a ruling as to whether the use of the Accounts to pay Bar Mitvah expenses was permissible.
9. Computer: Defendant spent $1,546 to purchase a computer for plaintiff and reimbursed herself that amount from the Accounts. Notwithstanding that she has used the computer on a limited basis, it was clearly purchased for plaintiff's benefit, and he continues to use it when he visits defendant at her residence. For that reason, defendant was permitted to use the funds in the Account for this purpose.
10. AOL Fees: From the Accounts defendant also reimbursed herself $1,147.00 for the monthly AOL fees. Since it is conceded that both defendant and plaintiff accessed the internet through AOL on defendant's computer, she is entitled reimbursement for only half of these expenses. Thus, defendant must repay plaintiff $573.50 as her share of the AOL fees.
11. Library Fines: As a result of his failure to timely return books and movies borrowed from the public library, plaintiff incurred fines which were paid by defendant. She paid those fines and reimbursed herself $500 from the Accounts. Because the fines were paid solely for plaintiff's benefit, the use of funds from the Account for this purpose was permissible.
12. Books and Reading Materials: Plaintiff was a member of a book club and also purchased magazines and a substantial number of books at school fairs. These materials go well beyond the books that were necessary for his schooling and constitute pleasure reading that was solely for his benefit. Based upon that conclusion, the Court agrees with defendant that she acted within her fiduciary duties by reimbursing herself $1,185.87 from the Accounts for her payment for these books and other reading materials.
13. Gasoline for Psychology Appointments: Plaintiff received therapy from a psychologist whose office is located in Westchester County, New York. Because she incurred gasoline expenses in the total amount of $650 in driving plaintiff to that office from their Connecticut residence, defendant withdrew that sum from the Accounts. It cannot be credibly disputed that travel to a treating medical provider is part of the obligation to provide for the health needs of a child. Consequently, this reimbursement was improper and defendant must repay $650 to plaintiff for this item.
14. Piano Lessons: Plaintiff received piano lessons, the total cost of which is claimed by defendant to be $11,300, and she withdrew that amount from the Accounts to reimburse herself. Since these lessons are not part of the necessaries that a parent is obligated to provide to a child, the Court agrees with defendant that she was entitled to reimburse herself for the costs of lessons, but only to the extent that her record-keeping is sufficient to support that reimbursement. Here, defendant produced checks that were for payments totaling only $1,236.37. Because it was her burden to maintain proper records of the funds withdrawn from the Accounts, the Court finds that any withdrawals exceeding $1,236.57 were not authorized by law and must be repaid to plaintiff ( see EPTL § 7-6.12[e]).
15. Sports Expenses: Plaintiff was enrolled in several sports activities, including karate, baseball and soccer. The fees for those extracurricular activities, which covered, inter alia, his enrollment and insurance, totaled $7,230 according to defendant, who reimbursed herself that full amount from the Accounts. Although these extracurricular activities were solely for plaintiff's benefit, their costs come within the scope of expenses which a parent may be held obligated to meet. Indeed, these expenses are recognized as statutory "add-ons" under the Child Support Standards Act ( see Beth M. v. Joseph M., 12 Misc 3d 1188 (A), *21, 824 NYS2d 760 {12 Misc 3d 1188 (A)} [Sup. Ct. NY 2006] ["It is statutorily required that the Husband is, in addition to the child support payments, obligated to pay his proportionate share, 56% percent, and the Wife, 44%, of the statutory add-ons' for the expenses of child care, education, extra-curricular activities and non-reimbursable medical and dental costs"] [emphasis added]). Therefore, her reimbursement for these expenses was improper, and she must repay plaintiff the sum of $7,230 withdrawn by her.
16. Sports Equipment: Directly related to the previous category of expenses is the amount spent by defendant for equipment for the sports activities engaged in by plaintiff. Like the sports expenses, although these equipment expenses were incurred solely for plaintiff's benefit, they come within the extracurricular activity expenses for which a parent is responsible ( see ibid.). Accordingly, defendant's withdrawal of the sum of $1,057.00 from the Accounts was not authorized, and she must repay that amount to plaintiff.
17. Telephone Charges: Defendant reimbursed herself $2,605.00 for long distance calls made by plaintiff to his friends. Although it is clear that local telephone access is a necessity for a child, the Court agrees with defendant that her withdrawal of funds from the Accounts as reimbursement for her payments of these expenses was proper. But again, she was only entitled to reimbursement to the extent that her supporting proof established that these payments were made. As relates to this category, defendant only offered proof of payments in the total sum of $2,298.02. Thus, any withdrawals in excess of that amount were improper and must be repaid to plaintiff.
18. Cell Phone Charges: According to defendant, plaintiff used his cell phone to an extent that substantially exceeded the basic plan provided by her. Based upon that contention, she reimbursed herself a total of $900 from the Accounts for these expenses. The Court agrees with defendant that the excess use of the cell phone in this manner must be considered solely for plaintiff's benefit and beyond the necessary telephone access that she was required to provide to him. Therefore, her reimbursement was proper, but only in the amount of $427.01 that she proved at trial.
19. Child Care: Defendant reimbursed herself a total of $16,860.00 for child care expenses paid by her. Contrary to her position, these expenses come within the scope of basic child-rearing expenses that are the obligation of a parent, and plaintiff's funds should not have been used for this purpose ( see Gold v. Gold, 96 Misc 2d 481,483 [Sup. Ct. NY Co. 1978] ["Absent evidence of need, children should not be forced unwittingly to use their funds or diminish their assets to support themselves"]). Therefore, this reimbursement was improper, and the full amount must be repaid to plaintiff.
20. Half of Temple Fees: Plaintiff and defendant were members of their local Temple. Defendant reimbursed herself $1,423.00, representing plaintiff's one-half share of their annual membership fees. Although defendant was entitled to reimburse herself for paying the fees for him, at trial her evidence only supported reimbursement in the sum of $1,047.00. Therefore, defendant must repay $376.00 to plaintiff for this category of expenses.
21. Miscellaneous Expenses: This category includes various expenditures made to entertain plaintiff and his friends. The types of food and related expenses identified by defendant do not sustain her withdrawal of $1,938.00 from the Accounts. Therefore, she must repay that sum to plaintiff.
22. Travel and Vacations: Defendant incurred a total of $7,320 in expenses related to travel and vacations for plaintiff from 1997 through 2002, and she reimbursed herself that sum from the Accounts. The Court agrees with defendant that these expenses were solely for her son's benefit and are not within the scope of necessities that must be provided by a parent. Therefore, this reimbursement was proper.
23. Car Repairs: Claiming that plaintiff damaged the car that she permitted him to use, defendant withdrew a total of $1,512.00 from the Accounts. This reimbursement was improper because the car was never repaired and no proof was offered to establish that plaintiff was at fault for the damage claimed by defendant.
24. Tax and Accounting Fees: Defendant reimbursed herself a total of $3,700.00 for fees incurred for the preparation of tax returns for the Accounts and the payment of certain taxes owed with respect to the monies on deposit. Although most of these expenditures were properly chargeable to plaintiff, because certain of defendant's actions resulted in a $1,800 fee for the preparation of the return for the 2002 tax year, defendant is entitled to reimbursement of only $500 for that return. Therefore, of the total amount withdrawn from the account, only $2,400 was properly taken as reimbursement, and defendant must repay $1,300 to plaintiff for this category of expenses.
25. Expenses in Lieu of Child Support: The single largest item is the sum of $32,666 withdrawn from the Accounts to reimburse defendant for child support during the period when Mr. Wagman not paying child support as he was required to do. Obviously, this reimbursement was improper since it constituted the use of the child's own monies to provide support for him ( see Gold v. Gold, supra, 96 Misc 2d, at 483).
26. Additional Cell Phone Expenses: This category of expense relates to the costs of cell phone service provided to plaintiff by defendant after he began residing with his father until that service was terminated by defendant. Because the claims asserted by defendant as to these expenses were not supported at trial, the Court finds that the withdrawal of $2,333.08 as reimbursement to defendant was not authorized.
27. Damage and Theft: Defendant further asserts that plaintiff damaged certain property and stole several items of jewelry and some savings bonds from her. Based upon those claims, she reimbursed herself a total of $6,660 from the Accounts. Because defendant failed to substantiate these claims of damage and theft at trial, she must repay that sum to plaintiff.
28. School Household in Lieu of Child Support: After her former husband gained custody of plaintiff, the child visited with defendant at her home. Because she was continuing to provide a home to him during that period, she withdrew $2,000 per month for six months, which in her view represented the child support that she was no longer receiving. Clearly, this was an improper attempt to use the child's funds to provide basic support for him that was defendant's own obligation. Thus, she must repay $12,000 to plaintiff for this category of expenses.
29. Bed: Finally, defendant reimbursed herself $226.78 for a bed that plaintiff uses when he visits her. This reimbursement was improper, since the bed was an item that is a necessity which defendant was obligated to provide for plaintiff.
III. SUMMARY
The following is the Court's summary of the reimbursements that were permitted and not permitted under the applicable law.
A. PERMISSIBLE REIMBURSEMENTS
1. Cable Television:$ 2,651.00
2. Pet Expenses:1,500.00
3. School Donations:1,949.00
4. School Expenses:3,200.00
5. Bar Mitvah:2,437.90
6. Computer:1,546.00
7. AOL fees:573.50
8. Library Fines:500.00
9. Books and Reading Material:1,185.87
10. Piano Lessons1,236.37
11. Telephone Charges:2,298.02
12. Cell Phone Charges:427.01
13. Half of Temple Fees:1,047.00
14. Travel and Vacations:7,320.00
15. Tax and Accounting Fees2,400.00
Total$30,271.67
B. IMPERMISSIBLE REIMBURSEMENTS
1. Cash Allowances:$ 6,499.00
2. Learning Jobs:1,520.00
3. Clothing:5,592.00
4. Bar Mitzvah2,604.10
5. AOL fees:573.50
6. Gasoline for Psychology Appointments650.00
7. Piano Lessons:10,063.63
8. Sports Expenses7,230.00
9. Sports Equipment1,057.00
10. Telephone Charges:306.98
11. Cell Phone Charges:472.99
12. Child Care:16,860.00
13. Half of Temple Fees:376.00
14. Miscellaneous Expenses:1,938.00
15. Car Repairs:1,512.00
16. Tax and Accounting Fees1,300.00
17. Expenses in Lieu of Child Support: 32,666.00
18. Additional Cell Phone Expenses:2,333.08
19. Damage and Theft:6,660.00
20. School Household in Lieu of
Child Support:12,000.00
21. Bed:226.78
Total$112,441.06
As is evident, taken together with the amount determined by Justice Murphy, defendant improperly withdrew a total of $116,976.76 ($112,441.06 + $4,535.70) from the Accounts. Accordingly, plaintiff is awarded judgment in the principal sum of $116,976.76 against defendant. Plaintiff may submit a proposed judgment to the Court for entry, on notice to defendant.
The foregoing shall constitute the Decision and Order of the Court.