Important New Decisions - April 23, 2012

First Department Holds Although Husband Retained All the Property, Court Will Not Set Aside Agreement on Ground of Unconscionability Where Inequitable Conduct Lacking    
                                              
          In Barocas v Barocas, --- N.Y.S.2d ----, 2012 WL 1293783 (N.Y.A.D. 1 Dept.) the Appellate Division rejected defendant's contention that the property division provisions of the parties prenuptial agreement were unconscionable. Defendant failed to establish that her execution of the agreement was the result of inequitable conduct on plaintiff's part. Rather, the parties fully disclosed their respective assets and net worth, and the agreement was reviewed by independent counsel, who defendant admitted had told her that the agreement was "completely unfair" and advised against signing it. The fact that plaintiff's attorney recommended defendant's counsel, and that plaintiff paid her counsel's fees, was insufficient to demonstrate duress or overreaching. Defendant's claim that she believed that there would be no wedding if she did not sign the agreement, that the wedding was only two weeks away and that wedding plans had been made, was insufficient to demonstrate duress. Although application of the provisions would result in plaintiff retaining essentially all the property, courts will not set aside an agreement on the ground of unconscionability where inequitable conduct was lacking and simply because, in retrospect, the agreement proves to be improvident or one-sided. The circumstances surrounding the execution of the agreement disclosed no issue of fact as to whether there was overreaching. It therefore adhered to the general rule that " '[i]f the execution of the agreement ... be fair, no further inquiry will be made' " (Levine v. Levine, 56 N.Y.2d 42, 47 [1982], citing  Christian, 42 N.Y.2d at 73).  Moreover, duly executed prenuptial agreements are accorded the same presumption of legality as any other contract" ( Bloomfield v. Bloomfield, 97 N.Y.2d 188, 193 [2001] ). The majority disagreed with the dissent's conclusion that there was an issue of fact as to whether the property division provisions of the instant agreement are unconscionable. They observed that an unconscionable contract is one "which is so grossly unreasonable as to be unenforcible because of an absence of meaningful choice on part of one of the parties together with contract terms which are unreasonably favorable to the other party" ( King v. Fox, 7 NY3d 181, 191 [2006] ). Here, meaningful choice was not an issue inasmuch as defendant knowingly entered into the agreement against the advice of her counsel.
The majority also held that although defendant's waiver of spousal support was not unfair or unreasonable at the time she signed the agreement, given her knowing and voluntary execution thereof with benefit of counsel, factual issues existed as to whether the waiver would be unconscionable as applied to the present circumstances (Domestic Relations Law  236[B][3][3] ). A Child support award for the parties' two children had not been established, and it was unclear whether defendant would become a public charge without spousal support. It was also unclear whether waiver of all spousal support would result in inequality "so strong and manifest as to shock the conscience and confound the judgment of any [person] of common sense" ( Christian, 42 N.Y.2d at 71). The evidence showed that, despite the 15-year marriage, under the agreement, plaintiff would be entitled to retain property valued at about $4,600,000, while defendant would be entitled to only an IRA account valued at approximately $30,550. She claimed that she had no other assets or sources of income, and could no longer work, given that she was now 50 years old and that plaintiff had thwarted her efforts to get a college education and pursue a career during the marriage. Plaintiff, contends that defendant chose not to get a college degree or pursue a career, and that, while he supported her various business projects, the projects failed or she would quit after losing interest. The majority found that issues of fact existed as to whether the maintenance waiver would be unconscionable as applied to the current circumstances. Justices Freedman and Manzanet-Daniels dissented in part in separate memoranda.


Finding of neglect does not require actual injury but, rather, an imminent threat that such injury or impairment may result.      


          In Matter of Lamarcus E.,--- N.Y.S.2d ----, 2012 WL 1211389 (N.Y.A.D. 3 Dept.)  Respondent, the father of the child (born in 2002), was granted custody in 2008 in a contested proceeding against the child's mother. In August 2009, while under petitioner's supervision, respondent informed petitioner that he intended to relocate to Connecticut in October 2009 to obtain employment and live with his girlfriend, but that he would not be taking his then seven-year-old son with him. Petitioner rejected respondent's request to accept the child into a voluntary placement. After Family Court and petitioner rejected three different plans proposed by respondent for the future care of the child, petitioner filed a neglect petition against him alleging that he intended to imminently implement his plan to permanently relocate to Connecticut without the child and without any viable plan for the child's care. Upon receipt of the petition, the court immediately removed the child and placed him in the temporary custody of petitioner, and respondent relocated to Connecticut as planned. Following a fact-finding hearing, respondent, who remained living out of state, was found to have neglected the child and, after a dispositional hearing, the court continued the child's placement with petitioner in foster care. The Appellate Division affirmed.  It observed that a finding of neglect does not require actual injury but, rather, an imminent threat that such injury or impairment may result. In addition, the impairment "must be a consequence of the parent's failure to exercise a minimum degree of parental care" ( Matter of Afton C. [James C.], 17 NY3d at 9; Nicholson v. Scoppetta, 3 NY3d at 368, 370). Parental behavior, in turn, is evaluated by asking whether, under the circumstances, a reasonable and prudent parent would have so acted.   Family Court based its determination of neglect upon respondent's plan to effectively abandon the care and custody of his child which, absent the intervention of petitioner, the court found would "certainly" have led to the impairment of the child's physical, mental or emotional condition. Upon learning of his plan to leave his child behind without a viable caretaker, petitioner's caseworkers had multiple discussions with respondent regarding the child's future. One caseworker testified that, during these discussions, respondent told her that he did not want to take the child along because he was "too much to handle" and he did not want to be responsible for facilitating,  from Connecticut,  visitation with the child's mother; he persistently requested that the child be placed in foster care.   Significantly, although Family Court had previously ordered respondent not to relocate with the child out of state, he told a caseworker that he would not be taking his child with him even if granted the court's permission to do so and he did not file a petition to modify that restriction. While respondent implied in his brief that petitioner's refusal to permit him to voluntarily place his child in foster care is the basis for the neglect finding against him, a voluntary placement is appropriate only where a parent is unable to care for his or her child, and not where a parent is simply unwilling to do so, as here (see Social Services Law 384-a).  Respondent's knowledge that his child would be placed in foster care upon his refusal to take him to Connecticut, fully aware that this placement would result in a charge of neglect against him, reflected his clear intention to abdicate his parental obligations, including his responsibility to adequately plan for his child's needs, thereby placing the child at risk. Respondent's suggested alternatives to placing his child in foster care reflected a glaring and fundamental misunderstanding of his responsibilities as a parent.  Respondent's blatant unwillingness to provide proper care and supervision for his child placed the child in imminent danger of impairment. 


Supreme Court Holds Agreement Provision Prohibiting Divorce until Apartment Sold Violated Public Policy Governing Divorces in New York


          In Filstein v Bromberg, --- N.Y.S.2d ----, 2012 WL 1167458 (N.Y.Sup.) the parties were married in 1989. They parties purchased the marital residence, a three-bedroom condominium located on West 23rd Street in Manhattan ("the apartment") in 1998. In October 2007 the wife brought an action for separation. On February 15, 2008, the parties entered into the separation agreement that settled the wife's action for separation. The separation agreement, at Article IV, Paragraph 4(G), provides, in relevant part: “ Prior to the sale of the Apartment, (i) the parties' attorneys shall prepare a  package of documents for the parties and counsel to sign, pursuant to which the Husband will be able to obtain an uncontested divorce based upon the Wife's having abandoned the Husband more than one year prior to the commencement of this action; and (ii) neither party shall file any papers to obtain a judgment of divorce.” More than four years after the parties entered the separation agreement resolving the 2007 action for separation, the apartment remained unsold and the parties remained married. The husband commenced an action in March 2011 for divorce and for a declaratory judgment determining that the no-divorce clause of the separation agreement was unenforceable. The husband moved pursuant to CPLR 3212 for partial summary judgment on his cause of action for declaratory judgment. He argued that conditioning the ability to obtain a judgment of divorce on the parties' ability to sell the apartment violated public policy. The wife argued in opposition that the clause is an enforceable contractual provision and that striking it would amount to the court finding that there is an absolute right to divorce. The wife also argues that if the no-divorce clause is held to be unenforceable, then she is entitled to have the entire separation agreement invalidated. 
Supreme Court held that Article IV, Paragraph 4(G) of the parties' separation agreement violated public policy governing divorces in this state. In  Gleason v. Gleason, 26 N.Y.2d 28 (1970), the Court of Appeals laid out New York's public policy position: “Implicit in the statutory scheme is the legislative recognition that it is socially and morally undesirable to compel couples to a dead marriage to retain  an illusory and deceptive status and that the best interests not only of the  parties but of society itself will be furthered by enabling them "to extricate  themselves from a perpetual state of marital limbo."  He observed that in   P.B. v. L.B., 19 Misc.3d 186 (Sup Ct, 2008), the trial court applied the policy enunciated in the Gleason case to a party's challenge of a separation agreement clause preventing the husband from filing for divorce for five years after the parties signed the agreement. The court found that the clause was unenforceable, stating that "no waiver of a person's right to seek a divorce for longer than the statutory one year after execution of a separation agreement will be enforced by the court." Subsequently, another trial court found that a separation agreement preventing either spouse from commencing a divorce action for five years was void for the same reasons. Corso v. Corso, 21 Misc.3d 1102(A) (Sup Ct, 2008).  The husband's motion for partial summary judgment was granted.
Supreme Court rejected the wife’s argument that if the court strikes the provision, then it must strike the entire agreement. The agreement contained a severability clause. Case law makes clear that when a clause in a separation agreement is voided, it can be severed and the rest of the agreement may stand. The court found the rest of the agreement was valid and remained enforceable.


Supreme Court Holds That  Breach of the Collaborative Law Participation Agreement Does Not Require Finding That Husband Overreached During Collaborative Law Process.


           In H.K. v A. K., 2012 WL 1232970 (N.Y.Sup.), 2012 N.Y. Slip Op. 50639(U) (Table, Text in WESTLAW), Unreported Disposition, the parties were married in 1980 and had three children, two of whom were emancipated. They encountered marital problems and entered into a collaborative law process, each retaining attorneys experienced in collaborative law, and signed a participation agreement.  The participation agreement executed by the parties and their attorneys, on September 8, 2009,  stated that the collaborative process "relies on honesty, co-operation, integrity, and professionalism" and that the parties will deal in good faith and "shall provide all relevant and reasonable information" which includes "sworn statement of net worth and supporting documentation of their income, assets and debts ." The parties acknowledge that they are setting aside "certain procedures" including "formal discovery proceedings." To assist in handling the couple's complicated finances, the parties retained a financial specialist who also signed the agreement.  A lengthy collaborative process ensued. It was undisputed that the husband was in charge of the couple's finances. He had significant assets, traceable to his family, which provided the backbone of their income, and held senior titles in various real estate based entities. The wife was a part-time college professor. Once the collaborative process commenced, the husband provided significant financial disclosure. He averred, without contradiction, that he provided income tax returns, financial statements, and detailed financial records to the attorneys and the retained financial specialist. 
The couple signed a separation agreement on June 10, 2010. In it they acknowledged the role of the collaborative process, that they had "applied their individual standards of reasonableness and acceptability to the agreement," and that they believed the agreement "to be fair, just, adequate, and reasonable." In the final paragraphs, the parties acknowledged that they had full and complete discovery and they "unequivocally waive" any further disclosure. The attorneys oversaw the preparation of the agreement and notarized their respective clients' signatures.   
After signing the agreement, the wife learned from a third-party that the husband had a girlfriend and allegedly used marital funds to finance that relationship during the time he was negotiating the separation agreement. According to the wife, she raised this issue with her counsel and the attorney probed the husband on it. The wife alleged that the husband then refused to negotiate and was unwilling to fully disclose his involvement in the alleged relationship. When the issue boiled over, the wife changed counsel and the collaborative process ended. Shortly thereafter, this action was commenced and the competing motions for summary judgment were filed.
The wife argued that the husband breached the collaborative agreement and such a breach constituted fraud or overreaching under the principles established by the Court of Appeals in Christian v. Christian, 42 N.Y.2d 63 (1977). The wife argued that the husband breached the collaborative law agreement by misrepresenting the status of his EMA asset and requiring his wife to transfer it to their children's trusts. The wife's argument that the collaborative agreement sets a standard of conduct, which when breached by the husband constituted overreaching, was an issue of first impression in New York. The Court observed that the "collaborative law" process is a relatively new concept in matrimonial practice. New York courts have never considered its application. Collaborative law attempts to foster an amiable rather than an adversarial atmosphere by creating a "four-way" agreement between each party and their attorneys "in which all are expected to participate actively". The question of the scope of the participant's voluntary disclosure, which commentators have suggested is at the "hallmark" of the collaborative process, remains somewhat unsettled. A party can unilaterally terminate  collaborative law at any time and for any reason, including failure of another  party to produce requested information. Thus, if a party wishes to abandon collaborative law in favor of litigation for failure of voluntary disclosure,  the party is free to do so and to engage in any court sanctioned discovery that  might be available.   In this case, the wife did not terminate the process prior to executing the agreement, nor did either attorney. Only after the agreement was signed, when the wife was told that the husband had financed his relationship with his girlfriend, did the wife terminate. For most intents and purposes the process had already reached its goal: the separation agreement was signed. Under these circumstances, the court declined to consider whether the husband's alleged breach of the collaborative agreement would subject the husband to a finding of overreaching under Christian v. Christian. The Court pointed out that if the wife or her attorneys suspected the husband was guilty of overreaching, they could have discontinued the process, but they chose not to. The Court held that a breach of the participation agreement did not require a finding that the husband overreached during the collaborative law process.


In Valuing Wife’s Law Decree Any Reliable Analysis of the Wife's Potential Earning Capacity Had to Assume That If She Had Not Attended Law School, She Would Have Sought Employment Commensurate with Her Education and Bachelor's Degree.

          In Shea v Shea, --- N.Y.S.2d ----, 2012 WL 1124582 (N.Y.A.D. 3 Dept.) after the parties married in 1991, defendant (husband) completed his studies in psychology and obtained his Ph.D. degree. During the marriage, plaintiff (wife), in addition to having two children, attended law school and earned a law degree. After this divorce action was commenced in December 2006, the wife passed the bar exam and received her license to practice law. After a trial, Supreme Court awarded the husband $12,600, 10% of the value it placed on the wife's law degree. The court also directed the husband to pay $1,200 a month in child support and decreed that he owed $17,363.51 in child support arrears dating back to when the divorce action was commenced. In addition, the court denied applications by the wife that she be awarded a distributive share of the husband's Ph.D. degree, and by the husband that the wife be removed as custodian of bank accounts held in trust for their children. 
On appeal the husband challenged Supreme Court's decision which adopted the opinion offered by the wife's expert that placed the value on her law degree at $126,000. He argued that since his expert's analysis was based in large measure on the wife's actual employment history, that analysis was more reliable, and the value of $252,617.82 that his expert placed on the degree should have been adopted by the court. The Appellate Division observed that  in analyzing the value of the law degree, both experts compared what they believed the wife should have been able to earn during the relevant time period with and without a law degree and then factored the wife's work-life expectancy into the difference between these two figures to determine the extent to which the degree served to enhance her earning capacity. The principal difference in the evaluations offered by both experts revolved around what each believed the wife's earning capacity would have been had she not obtained a law degree. The wife's expert focused on her actual employment history, as well as statistical data on what an individual with a Bachelor's degree could have earned in the area where she lived during the relevant time period, and concluded that, without a law degree, the wife would have had an annual earning capacity of $44,500. The husband's expert arrived at a significantly lower figure primarily because of the emphasis he placed on the wife's actual employment history in the period prior to obtaining her law degree. He assumed in his analysis that the wife would not have entered the work force until 2006, or after she was admitted to practice law, and that she would have continued to work as a clerk throughout this entire period, even though before attending law school she had obtained a Bachelor's degree and had been accepted into a doctoral program at Indiana University. He concluded, given this history and based on these assumptions, that the wife's potential earning capacity, even with a Bachelor's degree, would not have exceeded $22,827 per year.  Supreme Court rejected the opinion of the husband's expert and concluded, as did the wife's expert, that any reliable analysis of the wife's potential earning capacity had to assume that if she had not attended law school, she would have sought employment commensurate with her education and Bachelor's degree. The Appellate Division found that the decision to adopt the opinion of the wife's expert as to the value of her law degree was supported by credible evidence introduced at trial.
The Appellate Division rejected the husbands argument that he was entitled to a greater degree of the value of the wife's law degree because he was the family's primary wage earner during the parties' marriage and arranged his work schedule so that he could care for their children while the wife attended law school. It  observed that a nontitled spouse seeking a portion of the enhanced earning potential attributable to a professional license or degree of a titled spouse is required to establish that a substantial contribution was made to the acquisition of the degree or license". Where only modest contributions are made by the nontitled spouse toward the other spouse's attainment of a degree or professional license, and the attainment is more directly the result of the titled spouse's own ability, tenacity, perseverance and hard work, it is appropriate for courts to limit the distributed amount of that enhanced earning capacity". His sacrifices represented overall contributions to the marriage rather than an additional effort to support the wife in obtaining her license. In addition, the wife's own efforts in obtaining her law degree could not be minimized. For example, she worked in part-time positions throughout the marriage and was employed during the summer months while attending law school. She earned merit scholarships and paid a significant part of her law school tuition with an inheritance she received during the marriage. It reached a  similar conclusion as to the wife's claim that she should share in the value of the husband's Ph.D. degree. The husband had satisfied most of the requirements he needed to obtain this degree before the parties married and paid for it while providing financial support for his family. What assistance the wife may have provided in aiding him in acquiring this degree was simply not so significant or unique as to warrant awarding her a distributive share of its value.


Bonus Which Was Compensation for Future Services That Were Not Performed Prior to the Commencement of the Action  Was Separate Property Not Subject to Equitable Distribution


               In Ropiecki v Ropiecki, --- N.Y.S.2d ----, 2012 WL 1109179 (N.Y.A.D. 2 Dept.) the Appellate Division held that Supreme Court properly exercised its discretion in directing that the husbands maintenance obligations be retroactive to the date the action was commenced and properly awarded the defendant credit toward the maintenance arrears for voluntary payments he had made of $180,179.28. The defendant was not entitled to any further credit for voluntary payments, as the expenses from his net worth statement included payments made on behalf of himself and his emancipated children, payments for which the wife was not responsible (see  Horne v. Horne, 22 N.Y.2d 219, 224; LiGreci v. LiGreci, 87 AD3d 722, 724). The Appellate Division found that Supreme Court properly considered the relevant statutory factors in fashioning the distribution. The parties were married for 27 years, and the plaintiff's very limited earning potential was a result of her staying home and taking care of the parties' four children, including their daughter, who suffered from Retts Syndrome and was severely disabled. The defendant, by contrast, acquired considerable earning potential. Under the circumstances, the Supreme Court providently exercised its discretion in awarding the plaintiff 100% of the equity in the marital home. Similarly, the Supreme Court properly required the defendant to pay the remaining mortgage debt on the marital home in full before transferring title to the plaintiff. 
The Appellate Division agreed with the defendant that the Supreme Court improperly awarded the plaintiff a portion of his bonus in the sum of $200,000 as part of the equitable distribution of marital assets. The defendant's bonus, awarded in 2006, after the commencement of the action, was provided as an incentive for future services. Based on the defendant's testimony at trial, as well as the Executive Incentive Bonus Plan, the bonus plan was adopted by the defendant's employer in October 2006 as an incentive for certain employees, including the defendant, to meet certain goals and to ensure the successful sale of the company in the future. Accordingly, the bonus was compensation for future services that were not performed prior to the commencement of the action and, thus, was separate property not subject to equitable distribution. In light of the foregoing, the distributive award had to be reconsidered to ensure that the plaintiff was awarded her equitable share of the marital property, and the matter was remitted to Supreme Court for further review and a recalculation, if warranted, of the equitable distribution of marital property other than the marital residence.
The Appellate Division held that  under the circumstances of this case, including the monthly amount of the defendant's maintenance obligation and the ages of the parties, the $1,500,00 of life insurance the defendant was required to carry, as ordered by the Supreme Court, was excessive, and was reduced by substituting a provision directing the defendant to maintain a life insurance policy naming the plaintiff as an irrevocable beneficiary in the sum of $1,200,000 until the plaintiff reaches the age of 65, and in the sum of $600,000 thereafter for as long as the defendant is obligated to pay maintenance. It  also held that Supreme Court improvidently directed the defendant to pay 90% of the plaintiff's unreimbursed health care expenses, as such open-ended obligations have been consistently disfavored by the Court. It held that  Supreme Court should have directed the defendant to pay 90% of the plaintiff's unreimbursed health care expenses only for as long as he is obligated to pay maintenance.


Argument, That Child Should Have Attended  less Expensive College, Without Merit Where Parties Stipulation Did Not Require  Parental Consent to Child's College Choice, and Did Not Place Limit on  Tuition Amount 
          In Matter of Filosa v Donnelly, --- N.Y.S.2d ----, 2012 WL 1109332 (N.Y.A.D. 2 Dept.) the Appellate Division found that the father failed to establish, in accordance with the terms of the parties' stipulation of settlement of divorce, that he was financially unable to pay for the child's college tuition or that the mother did not comply with her obligation to encourage the child's use of financial aid, scholarships, and available student loans. Thus, Family Court did not improvidently exercise its discretion in granting the mother's petition and apportioning 50% of those expenses to him. It found his argument, that the child should have attended a less expensive college, without merit. The parties' stipulation did not mandate parental consent to the child's college choice, and it did not place a limit on the tuition amount for which the parties were responsible. Similarly, the father was not entitled to a credit toward his child support payment by virtue of the room-and-board component of the child's tuition, as no such credit was contemplated by the parties' stipulation of settlement.


Default must Be Vacated Once Movant Demonstrates Lack of Personal Jurisdiction, and  Movant Is Relieved of Obligation to Demonstrate a Reasonable Excuse for Default and  Meritorious Defense


          In Matter of Anna M, 940 N.Y.S.2d 121, 2012 N.Y. Slip Op. 01676 (2d Dept 2012) in an order dated October 24, 2008, the Family Court appointed the petitioner, the uncle of the subject children, as guardian of the children.   The father had failed to appear in these proceedings.   Almost two years later, the father moved, inter alia, to vacate the order of guardianship, arguing that the Family Court lacked personal jurisdiction over him.   The father argued, among other things, that he was not served with the order to show cause or petitions in this matter. In addition, his attorney argued that the affidavit of service stated that the father was served on September 28, 2008, which was a Sunday, rendering service void (see General Business Law  11). Family Court denied the father's motion without addressing the issue of personal jurisdiction. It found that the father had notice of the petitioner's request for guardianship but failed "to take action" and "explain his delay" in moving to vacate the order of guardianship and opposing the petitions.   The Family Court therefore determined that even if there was a defect in service," the doctrine of laches operated to bar the father from vacating the guardianship order.   The Appellate Division held that this was error.  CPLR 5015 provides that "[t]he court which rendered a judgment or order may relieve a party from it upon such terms as may be just," upon the ground of, inter alia, "excusable default" (CPLR 5015[a][1]) or "lack of jurisdiction to render the judgment or order" (CPLR 5015[a][4] ).   A court may not rule on  the excusable nature of a defendant's default under CPLR 5015(a)(1) without first determining the jurisdictional question under CPLR 5015(a)(4).   Where want of jurisdiction is the ground for a motion to vacate pursuant  to CPLR 5015, a default must be vacated once the movant demonstrates a lack of personal jurisdiction, and the movant is relieved of any obligation to demonstrate a reasonable excuse for the default and a potentially meritorious defense. Family Court failed to determine whether personal service was properly effected, or whether any defect in service could be disregarded as an irregularity under CPLR 2001 . The matter was remitted to the Family Court for a hearing to determine the issue of personal jurisdiction and thereafter for a new determination of the motion to vacate the order dated October 24, 2008.