Opinion
Nos. FA 98-0165911S, AC 24521
April 19, 2004
MEMORANDUM OF DECISION RE THE PLAINTIFF-APPELLEE'S MOTION TO TERMINATE STAY AND/OR FOR FINDING OF NO STAY
The plaintiff-appellee has moved that the trial court terminate, in whole or part, any stay existing because of the appeal taken by the defendant-appellant or, in the alternative, find that no stay exists as to certain orders. The court assigned the motion for hearing, which was held on two days in December 2003 and January 2004, at which both parties appeared and testified. That motion is granted, in part, as set forth below.
I Plaintiff's Request for Findings of No Stay
The court finds that no stay exists with regard to the court's order as to "prior pendente lite orders" of unallocated alimony and support, contained in subsection (f) of the court's orders regarding Equitable Distribution of Property. That order was in the nature of alimony and child support. Therefore, Practice Book § 61-11(b) precludes an automatic stay of this order.
"Prior Pendente Lite Orders. The pendente lite support order remains in effect through the date of this decision. Arrearages through December 2002 are merged into this judgment but any additional arrearage for months after December 2002 are not merged into the judgment and survive the judgment. In the event the parties are unable to agree as to the amount of any such arrearages owing for 2003, and how they are to be repaid, then either party may file an appropriate motion with the court." Memorandum of Decision, pp. 41-42.
Practice Book § 61-11(b) provides that "no automatic stay shall apply . . . to orders of periodic alimony, support, custody or visitation in domestic relations matters brought pursuant to chapter 25 or to any later modification of such orders."
The plaintiff-appellee has also requested a finding that no stay exists of the court's order on "Preservation of the Equity," contained in subsection (a)(3) of the court's orders regarding Equitable Distribution of Property. She asserts that such order was in the nature of alimony and child support, but this court does not so find.
"Preservation of the Equity: In view of the pending foreclosure on the marital premises, and the need to preserve the full value of the parties' equity, the court hereby allocates responsibility for any arrearages or related expenses, the defendant shall immediately make any payments necessary to pay off arrearages and any expenses resulting from such arrearages (such as late charges, counsel fees, etc.) that may be owing on either the mortgage or home equity loan. (To the extent that he pays expenses assigned under these orders to be the responsibility of the plaintiff, those amounts will, under the previous paragraph, be the subject of an adjustment increasing his share of the equity.)" Memorandum of Decision, p. 36.
II Plaintiff's Motion for Stay
The criteria for terminating a stay are set forth in Practice Book § 61-11(c):
If the judge who tried the case is of the opinion that (1) an extension to appeal is sought, or the appeal is taken, only for delay or (2) the due administration of justice so requires, the judge may at any time after a hearing, upon motion or sua sponte, order that the stay be terminated.
The court is not persuaded that the appeal was taken only for delay, and therefore rejects any termination of the stay under § 61-11(c)(1). In considering the plaintiff's motion for stay pursuant to § 61-11(c)(2), the court must balance the equities after fully considering the factors set forth in Griffin Hospital v. Commission on Hospitals Health Care, 196 Conn. 451, 458-59, 493 A.2d 229 (1985). The court held an evidentiary hearing on the plaintiff's motion, and now finds that the due administration of justice requires a stay of certain financial orders because of the best interests of the minor children and in order to preserve the full value of the parties' most significant asset, the marital home.
Some factual background is necessary to understand why the "due administration of justice" requires a stay. When this court issued its decision dissolving the marriage and entering financial orders, the most recent financial affidavits of the two parties showed combined marital assets, other than the marital home and personal property, of more than one million dollars. Virtually all of these assets, except the marital home and its contents, were in the exclusive control of the defendant, most in the form of stocks, options and deferred compensation from his former employer. The parties stipulated at trial that the marital home had a fair market value of $2,825,000 and the financial affidavits showed mortgage indebtedness of $926,000 and a home equity loan of $237,000. The total due monthly for the mortgage, repayment of a home equity loan, real estate taxes and property insurance on the marital home was $8,094.
Before the case was assigned for trial at the regional family docket, the local court ordered the defendant to pay the plaintiff $40,000 per month pendente life in unallocated alimony and support, which was the plaintiff's sole source of income. The plaintiff's monthly expenses were almost $32,000. At the end of 2001, the defendant fell $90,000 behind in support, which he paid after being held in contempt. In September 2002, he again stopped paying pendente lite support, thereby leaving the plaintiff with no pendente lite income after that, except for $68,000 that he paid to her late in the year 2002.
The evidence at trial showed total gross income between the two parties then of slightly less than $21,000 per month and total monthly expenses between them of between $58,000 and $65,000. It was not surprising, therefore, that the defendant's different financial affidavits filed at various times during the pendente lite period showed a steady reduction in his assets. The defendant was obviously paying for his monthly expenses out of income plus reduction in assets. Without regular pendente lite support payments, the plaintiff did the same thing, but in a different manner. She added to the indebtedness on a home equity loan. At some point she also stopped paying the monthly mortgage payment — although she would have had sufficient funds to pay her mortgage and home equity obligations if the defendant had remained current in his pendente lite support.
In the years before the parties separated, the defendant had regularly earned between $1.2 million and $1.5 million per year. After leaving employment at Morgan Stanley in mid-2001, the defendant took another job paying him $250,000 per year, which his financial affidavit reported as providing him with $20,833.23 per month gross income and $12,091.78 per month net after-tax income. His personal living expenses after he left Morgan Stanley ranged from between $25,000 to $33,000 per month (not including the support obligation).
"The defendant's arrearage in his pendente lite support obligation therefore may reasonably be inferred to have affected her continuing ability to meet all her monthly expense, although it is possible that she may have liquidated resources to do so . . . The plaintiff would have had sufficient funds to meet the mortgage and home equity obligations if the defendant had remained current in his pendente lite support." Memorandum of Decision, p. 24, f.n. 9.
The postjudgment period shows the same pattern. The defendant now claims to be earning nothing, and it appears to be undisputed that in July 2003, he lost his job at Aetos, where he had been earning $250,000 per year. His personal expenses continue at $14,000 per month, plus the court-ordered postjudgment monthly payment of $12,000 in unallocated alimony and support. His most recent financial affidavit thus shows further reduction in assets from the last one filed during trial. The $12,000 that the plaintiff receives monthly from the defendant in unallocated support is not enough to meet her monthly living expenses of $23,000, and in 2003, her father lent her $255,000, which paid for counsel fees for the appeal and postjudgment litigation ($155,000), credit card debt ($40,000), a new car ($40,000) and her general expenses ($20,000).
The plaintiff is not yet meeting her earning capacity of $70,000 per year, but appears making good faith progress to do so, having recently obtained a realtor's license and operating her own decorating business.
Meanwhile, the foreclosure action instituted early last year has gone to judgment, with a foreclosure sale date set for this June. The three children in this case have suffered greatly because of the conflict between their parents. They have lived in the marital home for their entire lives. The court finds credible the testimony of the plaintiff that having to leave that home would be emotionally devastating to the children. The court thus finds that it is in the children's best interest to preserve the home for the children.
This court awarded the plaintiff two-thirds of the equity in the marital home and gave her an opportunity to retain possession of the home. Her most recent financial affidavit shows an arrearage of almost $160,000 on the mortgage. From September 2002 through April 2003, the defendant paid only $68,000 toward his court-ordered pendente lite payments of $40,000 per month in unallocated support, thereby depriving the plaintiff of $252,000 in income during that nine-month period. That shortfall obviously affected the plaintiff's ability to reinstate the mortgage and avoid foreclosure. In its orders, the court merged the defendant's $92,000 arrearage for September 2002 through December 2002 into the judgment, but the defendant still owes plaintiff $160,000 in pendente lite support for January 2003 through April 2003. That amount would come close to paying off the mortgage arrears, but at hearing on this motion, his attorney claimed that he lacked the funds to pay the full $160,000 immediately and suggested a partial payment thereof each month, a result that would probably not provide enough funds to the plaintiff to reinstate the mortgage before the final date of foreclosure.
The defendant's last financial affidavit showed liquid assets of almost $90,000 plus vested units and options with net after-tax value of at least another $160,000. Even if still unemployed, as a graduate of the Harvard Business School and former managing partner of Morgan Stanley, he obviously has significant earning capacity.
Thus, the question is, how to save the marital home? The loss of the marital home has adverse consequences both for the children and the ultimate distribution of the parties' assets. This court took judicial notice, and does so again, that "a foreclosure sale may not net the full fair market value of real property." The court's distribution of equity in the marital home to the parties — two-thirds of net equity in the property to the plaintiff and one-third to the defendant — will be worth considerably less to each party if the foreclosure goes through than if either party retains title.
"The court takes judicial notice that a foreclosure sale may not net the full fair market value of real property. See, e.g., New England Savings Bank v. Lopez, 227 Conn. 270, 271ff, 630 A.2d 1010 (1993) (noting that and explaining why `the usual notion of fair market value is inconsistent with the notion of a foreclosure sale')." Memorandum of decision, p. 25, n. 10.
Since the defendant controlled most of the liquid or soon-to-be liquid assets of the parties at the time of dissolution, he was the only one of the two parties with sufficient resources to pay off the mortgage arrears. Because the plaintiff had been awarded exclusive use pendente lite of the marital premises, the court's final orders assigned her financial responsibility for each unpaid mortgage payment. The court assigned financial responsibility to the defendant for any charges resulting from late or non-payment of the mortgage or home equity loan because the plaintiff would have had sufficient resources to keep the mortgage current if the defendant had kept his pendente lite obligation current. Lifting the stay on orders regarding equitable distribution of the marital home would permit the plaintiff to maintain the marital home.
In terminating portions of the stay, this court has balanced the equities after fully considering the factors set forth in Griffin Hospital v. Commission on Hospitals Health Care, supra, 196 Conn. 458-59. The first Griffin factor is the likelihood of success on appeal. In view of the broad discretion afforded trial courts in dissolution actions, the defendant's appeal in this action faces an uphill battle. See Casey v. Casey, 82 Conn. App. 378, 379 (2004) (stating that this case represents "one of the very rare matrimonial cases in which a disappointed party successfully argues that the financial orders entered incident to a dissolution action exceed the broad discretion of the trial court"). The order terminating the stay here has ordered the plaintiff to preserve enough equity in the premises to protect the one-half interest in equity in the marital home that the defendant sought at trial in his claims for relief, plus any additional amounts that may be credited to him because of the court's orders regarding preservation of the equity. Such an order takes into account the defendant's claims on appeal. Any appeal regarding custody and visitation issues is probably moot now in view of this court's recent decision modifying the parenting orders.
The defendant's claims for relief, filed May 23, 2002, proposed that the court order sale of the marital home and distribution to him of one-half of the net proceeds, with an adjustment in his favor for the pendente lite finding of the court, Novack, J.T.R., on January 29, 2002, that "$198,956 drawn down [by plaintiff from home equity loan] in violation of automatic orders. Division to be decided at trial." The memorandum of decision merged that order into the judgment, along with the court's finding that the defendant had an arrearage of $92,000 in pendente lite support from August 2002 through December 2002.
The order for "preservation of the equity" (see footnote 3 of this decision) directed the defendant to use resources in his control to reinstate the mortgage in order to protect the parties from reduction in the value of their equity in the premises due to a foreclosure sale; but any such payments he made would not cause a reduction in the net equitable distribution the defendant would receive. Any payment he made pursuant to that order toward financial obligations assigned to the plaintiff would result in a corresponding increase in his share of the equity in the marital home.
The second factor set forth in Griffin Hospital v. Commission on Hospitals Health Care, supra, 196 Conn. 458-59, irreparable harm to the appellee, strongly militates in the plaintiff's favor. In view of the defendant's continuing reduction of assets under his control during the appeal period, it becomes ever more important to preserve the full value of the equity in the marital home for the financial welfare of the plaintiff and her minor children. The third Griffin factor, the effect of delay in implementing the judgment on other parties to the action, also supports terminating the stay. The events of the last year show that terminating the stay is probably the only way to ensure preservation of the equity. Delay in implementing this aspect of the judgment will have the same effect on both parties — probable foreclosure and loss of significant equity in the marital premises.
The children would also be significantly harmed emotionally by the loss of the marital home through foreclosure. The Connecticut legislature has adopted a public policy in favor of the best interest of the children. This criterion, for example, determines custody and visitation orders; General Statues § 46b-56(b); and whether parents lose their parental rights. General Statutes § CT Page 5589 17a-112(j). In Griffin Hospital v. Commission on Hospitals Health Care, supra, 196 Conn. 458, the court specifically rejected a claim that courts must apply a "rigid formula" in deciding whether to grant a stay. Even if the best interests of the three minor children here do not quality as the sort of "public interest" that Griffin mandates considering when applicable, in balancing the equities, this court concludes that their interest in continuing to live in their home must be considered. The parties have been unable to work together to save the marital home; terminating the stay will not only protect the parties' own financial interests, but also serve the best interests of these three children, already so wounded by the conflict between their parents.
The equities do not flow exclusively in the plaintiff's direction, however. The defendant argues that the plaintiff's use of loans she received from her father should balance the equities against terminating the stay. More than one-half of the loans from her father were used to pay for counsel fees, an expenditure that is reasonable in light of the continuing litigation during the appeal and postjudgment proceedings. It is reasonable for her to want representation by counsel in these various proceedings and it is unreasonable to expect her counsel to donate their services. Their fees must come from somewhere. With the defendant in control of most liquid or near-liquid marital resources and depleting those resources, and the plaintiff herself without many liquid resources, she could only pay counsel fees with the assistance of others. The plaintiff used the remaining $100,000 lent by her father for credit card debt, a new car and living expenses. Her testimony at the hearing on this motion showed that she used this money in this way because she regards it as the defendant's responsibility to pay off the mortgage arrears. Since the court's order regarding preservation of the equity has been stayed by the appeal, the plaintiff's use of this $100,000 subjected her and the children to the risk that the court might reject her motion to lift the stay. None of these expenditures was inherently unreasonable, however. The pending appeal has stayed distribution to the plaintiff of her portion of marital resources in the defendant's control that the plaintiff could have used toward these expenses. On balance, the court concludes that her use of the loans from her father does not outweigh the other equities that justify lifting the stay.
The plaintiff used $40,000 of her father's loans to repay credit card debt rather than mortgage debt. She used another $40,000 from her father for a new car when the lease expired on the car that she had been using. The lease had cost her $739 per month, and now she has no such monthly expenses. The final $20,000 loaned to her by her father went toward her living expenses. She is not making any payments toward the loans from her father.
Thus, after balancing the equities and fully considering the factors set forth in Griffin Hospital v. Commission on Hospitals Health Care, supra, 196 Conn. 458-59, the court finds that the due administration of justice warrants terminating the stay as ordered herein. The court therefore terminates the stay on its orders (a) as to the marital home that are contained in Section (1)(a) of its original orders, set forth in appendix one to this decision, and (b) that are contained in paragraphs one and two of the court's decision on the defendant's postjudgment motions to reargue and for clarification, set forth in appendix two to this decision upon the following conditions:
a. Upon completion of transfers required by the orders, there shall be no transfer, encumbrance or liquidation of the marital home during the pendency of the appeal unless such action is required to fulfill obligations imposed by an existing court order or otherwise expressly allowed by court order.
b. However, notwithstanding the previous sentence, if the plaintiff takes title to the marital home pursuant to the existing orders, she shall be permitted, during the pendency of the appeal, to take all reasonable action to preserve the equity in the marital home and prevent foreclosure thereon, including but not limited to reasonable refinancing, except that she may not include her tax liabilities in any refinancing of the marital home.
c. Any such refinancing shall not permit equity in the premises to diminish below one million dollars less any payments the plaintiff makes to the defendant under these orders; nor shall the plaintiff permit any encumbrances on the property that would reduce equity in the property below that amount.
For example, if the plaintiff refinanced the home and transferred $554,000 to the defendant as the one-third interest in equity awarded to him by the court, she would only have to keep equity in the home of $1,000,000 minus $554,000, or $446,000.
SO ORDERED.
BY THE COURT
STEPHEN F. FRAZZINI, J.
APPENDIX I COURT'S ORDERS REGARDING EQUITABLE DISTRIBUTION OF THE MARITAL HOME Memorandum of Decision, April 23, 2003
The court's orders regarding the marital home provide as follows:
"a) Marital Home:
"(1) Allocation of Equity — The court orders the equity in the marital home divided between the parties such that defendant receives one-third and plaintiff two-thirds of the equity therein, subject to adjustments set forth in these orders.
"(2) Adjustments — Any expenses assigned below as a party's responsibility that have not been paid by that party shall cause an adjustment in the parties' respective shares of the equity. Each of the following paragraphs shall be the basis for adjusting the two-thirds/one-third allocation of equity in the marital home (or the payment of $554,000 described below).
The plaintiff is responsible for paying any arrearages in the mortgage, home equity loan, or taxes owing for periods she has occupied the premises during the pendente lite period or after the date of this judgment.
The defendant is responsible for paying any late fees and any other charges incurred or imposed because of late payment, or nonpayment, of installments due under either the home equity loan or first mortgage during the pendente lite period and for the first thirty days after the date of this judgment.
Each party shall be responsible for all payments on the mortgage, home equity line, real property taxes, routine maintenance costs, and utilities incurred during that party's occupancy of the premises for periods they have exclusive use of the marital home after the date of this judgment. While occupying the house, the party shall also be responsible to pay for all minor repairs that cost less than $500; the parties shall split equally the cost of major or structural repairs costing more than $500. Except as set forth in the immediately preceding paragraph, each party shall also be responsible for late fees or other fees imposed by a court or mortgagee because of late or non-payment of payments that are the responsibility of that party. CT Page 5592
"(3) Preservation of the Equity: In view of the pending foreclosure on the marital premises, and the need to preserve the full value of the parties' equity, the court hereby allocates responsibility for any arrearages or related expenses, the defendant shall immediately make any payments necessary to pay off arrearages and any expenses resulting from such arrearages (such as late charges, counsel fees, etc.) that may be owing on either the mortgage or home equity loan. (To the extent that he pays expenses assigned under these orders to be the responsibility of the plaintiff, those amounts will, under the previous paragraph, be the subject of an adjustment increasing his share of the equity.)
"(4) Distribution of the parties' share of the equity:
"(a) Payment by plaintiff of defendant's share: If plaintiff transfers the sum of $554,000, adjusted as required in these orders, to defendant by the last day of the sixth month following issuance of this decision, defendant shall simultaneously convey by quitclaim deed all of his right, title and interest in such property; and plaintiff shall thereafter indemnify and hold defendant harmless thereon. During that six-month period, defendant shall cooperate with any efforts of plaintiff to refinance said property.
"(b) Sale of Marital Home: If plaintiff does not so transfer said sum to defendant by that date, the court orders the parties to sell the marital home. The parties are to cooperate in the listing, showing, and closing of the property. The parties shall immediately list the property for sale at its fair market value with a real estate agent familiar with real property values in the Greenwich area. If the parties cannot agree on a listing broker, price, terms of the listing or like details, either party may move this court for further orders. The parties shall accept the first bona fide offer within 5% of the asking price. Upon sale of the home, the plaintiff shall receive two-thirds and the defendant one-third of the net proceeds after all expenses from sale of the home (gross proceeds less realtor commissions, attorney fees for sale, conveyance taxes, and recording charges) have been paid, subject to adjustments set forth in these orders. The court retains jurisdiction over the issue of sale of the house.
"(5) Interim Orders — The following orders shall be in effect until plaintiff pays to defendant his share of the equity as set forth in these orders or until sale of the marital home.
"(a) The wife shall have the right of sole and exclusive use of the premises until the sale of the property or unless she vacates the premises before then.
"(b) If the plaintiff vacates the property before its sale, defendant may re-occupy the house and be subject to all the same above orders. Otherwise, if plaintiff vacates the premises, both parties shall equally be responsible for all mortgage, home equity, tax, insurance, maintenance and upkeep expenses of the house, and shall equally share in any rental income the house may produce.
"(c) Either party occupying the house must, upon vacating it, leave the premises broom clean. Any party occupying the house after this date shall not permit waste or damage to the property."
APPENDIX II RELEVANT POSTJUDGMENT ORDERS July 24, 2003
"1. Except as specified in paragraph three below with regard to the Morgan Stanley Brokerage Account, plaintiff is awarded one-half the value of each of those assets and shall have the right to elect, as set forth below, either of the following times and methods of distribution:
"a. First Alternative: Plaintiff may subtract the gross, pre-tax amount of the value of those assets, as set forth in defendant's November 2002 financial affidavit, from that portion of the equity in the marital home that she must transfer to the defendant pursuant to the court's orders. If plaintiff elects this alternative, defendant is under no obligation to transfer to her any portion of these particular assets before such date. To the extent that defendant's share of the equity is less than the amount of these assets he must transfer to her, the balance of her share shall be transferred to her pursuant to the second alternative.
"b. Second Alternative: Defendant shall transfer to plaintiff one-half the net value, after taxes incurred by defendant in connection with the sale or cashing in of such asset, of each of those assets, each of which defendant shall sell or cash in at the first time he is able to do so. Plaintiff shall receive her share of each asset within two weeks of defendant cashing in or selling each asset. If plaintiff elects this option, defendant shall give plaintiff a copy of his tax returns for each year in which he sells or cashes in such an asset simultaneously with his filing of each such return.
"2. Plaintiff shall notify defendant in writing within thirty days which alternative she has elected."