Opinion
12-15-2014
M.K., Plaintiff, v. S.K., Defendant.
Barton LLP, by Cynthia B. Rubin, Esq., New York, Attorney for the plaintiff. Larry M. Carlin, Esq., New York, Attorney for the defendant.
Barton LLP, by Cynthia B. Rubin, Esq., New York, Attorney for the plaintiff.
Larry M. Carlin, Esq., New York, Attorney for the defendant.
Opinion
DELORES J. THOMAS, J.
The following papers numbered 1 to 12 read herein:
| Papers | Numbered |
|---|---|
| Notice of Motion/Order to Show Cause/Petition/Cross Motion and Affidavits (Affirmations) Annexed | 1–7 |
| Reply Affidavits (Affirmations) | 8–11 |
| Other Papers Transcript dated May 7, 2014 | 12 |
Upon the foregoing papers, motion sequence numbers 1 and 2 are consolidated for disposition. Defendant S.K.(“Defendant”) moves for an order: (1) awarding her the sum of $10,000 for services to be performed by Joan A. Lipton of ParenteBeard LLC for the purpose of ascertaining the value of the interest owned by plaintiff M.K. in B & V LLC (the Hostel); (2) appointing an independent real estate appraiser to appraise the value of (i) the parties' former marital residence, an apartment located in Brooklyn (the Apartment); and (ii) the real property on which the Hostel is located; and (3) granting Larry M. Carlin, Esq. counsel fees in the sum of $84,000. Plaintiff M.K. (“Plaintiff”) moves for an order: (1) determining that the Apartment is his separate property; and (2) determining that the investments that he made in the Hostel during the marriage are his separate property.
Facts and Procedural Background
The parties were married on August 9, 1999 in San Francisco, when plaintiff was a student at Stanford University. During the marriage, the parties had two sons, one who is nine years old and the other who is eleven. The Apartment was purchased on August 10, 2004 for $610,000 and title was taken in the names of both parties; a mortgage in the amount of $135,000 was obtained. Defendant and the children moved out of the Apartment, which is now occupied by plaintiff, in May of 2012.
Prior to the commencement of this action, the parties entered into a permanent custody/visitation agreement and agreed to the amount of pendente lite support that defendant would receive each month, i.e., $5,000 in maintenance, and plaintiff directly pays her rent and utilities ($3,830); health insurance ($346); school tuition for the children ($4,400); and therapy for himself, defendant and one of the children ($1,035), for a total of $14,611. Plaintiff commenced this action on November 13, 2013.
The court will first address plaintiff's motion, since a finding that the Apartment and the Hostel are separate property will render defendant's motion moot.
Plaintiff's Claim that the Apartment and Hostel are His Separate Property
Plaintiff's Contentions
In support of his motion for summary judgment, plaintiff explains that from a very early age, he received substantial money gifts from his grandparents. These funds were deposited into the Sequoia Fund, which was established on January 11, 1995. No deposits were made into that Fund after the parties were married. Prior to withdrawing any money to pay for the Apartment, plaintiff maintained the sum of $1,830,332 in the Sequoia Fund. By June 28, 2010, the balance in the Fund had decreased to $65,382. Plaintiff claims that the withdrawals evidence the fact that he paid for the Apartment and the investment in the Hostel using his separate property.
More specifically, plaintiff alleges that between June 10, 2004 and August 2, 2004, he withdrew $475,000 from the Sequoia Fund and deposited it into a joint account that the parties maintained at Cititbank (the Citibank Account). Plaintiff alleges that he utilized this money to purchase the Apartment, i.e., to make the down payment of $414,000 and to fund the initial escrow account of $61,000. Plaintiff explains that the transfer from the Sequoia Fund into the Citibank Account was necessary because he could not write checks against the Sequoia Fund. He thus asserts that his separate funds were only channeled through the Citibank Account for convenience. Moreover, prior to this transfer, the Citibank Account had a balance of $3,995. Plaintiff further avers that between October 5, 2004 and December 9, 2005, he withdrew an additional $185,000 from the Sequoia Fund to pay for renovations to the Apartment and for other family expenses. Thus, plaintiff contends that a total of $665,074 was withdrawn from the Sequoia Fund between June 2004 and December 2005, with all of the expenses being paid using checks drawn on the Citibank Account.
Plaintiff also alleges that he refinanced the Apartment three times. The first was on January 9, 2006, for $500,000, which he notes was less than the money that he spent on the Apartment when it was purchased and renovated. Plaintiff also emphasizes that he is the only signatory on that mortgage. The proceeds obtained from that refinancing, after paying off the existing mortgage, were $357,987; this money was transferred into the Citibank Account, and then invested in the Hostel. Plaintiff refinanced the Apartment again on July 19, 2010, for $600,000, and again on September 14, 2011 for $594,000, at which time the Apartment was appraised at $1 million; he was again the only signatory on the note. The balance on the mortgage is currently about $570,000. Plaintiff thus concludes that since he paid for 100% of the purchase price of the Apartment and for the renovations made thereafter with money withdrawn from the Sequoia Fund, the Apartment is his separate property.
Plaintiff further asserts that between January of 2006 and February of 2009, he invested $820,968 of his separate property in the Hostel, a building that was formerly used for industrial purposes and was renovated into the Hostel. He owns a 28.125% share in that property. Plaintiff also contends that he used his separate funds to pay for his investment in the Hostel. He asserts that this contention is corroborated by the fact that between September 16, 2005 and February 13, 2009, $1,194,882 was moved from the Sequoia Fund into the Citibank Account, of which $815,535 was invested in the Hostel.
Plaintiff also argues that the money he invested in the Apartment and in the Hostel could not be marital because his earnings were not sufficient to pay for the Apartment, the Hostel and to meet the parties' living expenses. More specifically, plaintiff alleges that his earnings were $114,037 in 2004, $126,470 in 2005, $148,800 in 2006, $156,091 in 2007, $156,919 in 2008 and $154,175 in 2009; defendant did not earn any money during the marriage. Further, plaintiff asserts that throughout the marriage, his earning were deposited into an ETrade account. To finance the investment in the Hostel, plaintiff would move $10,000 to $25,000 from the Sequoia Fund into the Citibank Account within two to three months of making a capital contribution to the Hostel. He emphasizes that some of the money in the Citibank Account was also used to meet day-to-day living expenses and that his salary was never deposited into the Sequoia Fund. Plaintiff also explains that for a brief period of time, he maintained an account in the name of L.K., Inc., at Citibank and transferred funds from the Sequoia Fund into that account before investing the money in the Hostel; he closed that account shortly after it was opened because he found it to be an unnecessary extra step. Plaintiff notes that defendant's name was never on the L.K. account.
Defendant's Contentions
In opposition to plaintiff's motion, defendant argues that the Apartment and the Hostel are marital assets. To support this conclusion, defendant alleges that the Apartment and the Hostel were paid for utilizing funds from the parties' joint Citibank Account, as discussed above; since both were paid for using marital funds, defendant argues that both are marital property. Defendant asserts that her claim that the Hostel is marital property is further supported by the fact that plaintiff withdrew the sums of $275,000, $393,021 and $50,000 from the joint Citibank Account to pay for his interest. Defendant contends that once plaintiff's separate funds were deposited into the joint Citibank Account, they were transmuted into marital funds. From this it follows that she holds an interest in both the Apartment and the Hostel. Defendant argues that this conclusion is further supported by the fact that the deposits into the Citibank Account do not correspond directly with the investments made to the Hostel. Defendant also alleges that plaintiff borrowed and repaid $100,000 from a friend during the marriage; she asserts that discovery is necessary to determine whether this money was invested directly into the Hostel.
The Law
Summary Judgment
It is well established that summary judgment may be granted only when it is clear that no triable issues of fact exist (Alvarez v. Prospect Hosp., 68 N.Y.2d 320 [1986] ). The party moving for summary judgment “bears the initial burden of making a prima facie showing of its entitlement to judgment as a matter of law” (Holtz v. Niagara Mohawk Power, 147 A.D.2d 857, 858 [1989] ). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers (see e.g. Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985] ; District Attorney v. City of New York, 271 A.D.2d 635, 635 [2000] ).
Once such a showing has been established, “the burden shifts to the party opposing the motion for summary judgment to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial of the action” (Alvarez, 68 N.Y.2d at 324, citing Zuckerman v. City of New York, 49 N.Y.2d 557, 562 [1980] ). It is equally well settled that in making the determination of whether a movant has satisfied the requisite burden of proof, the nonmovant is entitled to the benefit of every favorable inference (see e.g. Negri v. Stop & Shop, 65 N.Y.2d 625 [1985] ; Louniakov v. M.R.O.D. Realty, 282 A.D.2d 657 [2001] ). Further, “the motion should not be granted where the facts are in dispute, where conflicting inferences may be drawn from the evidence, or where there are issues of credibility” (Scott v. Long Is. Power Auth., 294 A.D.2d 348, 348 [2002], citing Dolitsky v. Bay Isle Oil Co., 111 A.D.2d 366 [1985] ). On such a motion, the court is not to determine credibility, but whether a factual issue exists (Capelin Assoc. v. Globe Mfg., 34 N.Y.2d 338 [1973] ).
Marital Property Defined
“[A]lthough the manner in which marital property is distributed falls within the discretion of the trial court, the initial determination of whether a particular asset is marital or separate property is a question of law ...' “ (Fields v. Fields, 15 NY3d 158, 161 [2010], rearg. denied 15 NY3d 819 [2010], quoting DeJesus v. DeJesus, 90 N.Y.2d 643, 647 [1987] ). Domestic Relations Law § 236 defines “marital property” as “all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held” (Domestic Relations Law § 236[B][1][c] ). Thus, “the definition of marital property includes a wide range' of tangible and intangible interests (DeJesus, 90 N.Y.2d at 647 ). “It is telling that the Legislature chose to initially categorize all property, of whatever nature, acquired after parties marry as marital property” (Fields, 15 NY3d at 161–162 ).
In contrast:
“Separate property', an exception to marital property, should be construed narrowly; therefore, the exclusion from separate property for increases in value due partly to contributions or efforts of the nontitled spouse (see, Domestic Relations Law § 236[B][1][d][3] ) should be broadly construed and should include indirect contributions made as parent or homemaker, as opposed to increases in value due to unrelated market forces (Price v. Price, 69 N.Y.2d 8, 15–18 [1986] ; see, Majauskas v. Majauskas, 61 N.Y.2d 481, 488–490 [1984] ; Wegman v. Wegman, 123 A.D.2d 220, 228–229 [1986] ).”
(Sarafian v. Sarafian, 140 A.D.2d 801, 804 [1988] ).
It has also been recognized that when separate property “is transferred into a joint account bearing the name of both parties, a presumption will arise that the funds in that account are marital property. “To overcome this presumption, defendant [has] to establish, by clear and convincing proof, that a joint account was established solely for the purpose of convenience” (Kay v. Kay, 302 A.D.2d 711, 713 [2003], citing Banking Law § 675[b] ; Rosenkranse v. Rosenkranse, 290 A.D.2d 685, 686 [2002] ; Gundlach v. Gundlach, 223 A.D.2d 942, 942 [1996], lv denied 88 N.Y.2d 802 [1996] ).
Discussion
Applying the above general principles of law to this case, the court finds that plaintiff is not entitled to summary judgment finding that the Apartment and the investment in the Hostel are his separate property. In arguing that the Apartment is his separate property because it was purchased using his separate property, i.e., funds on deposit in the Sequoia Fund, plaintiff fails to address the fact that title to the Apartment was taken in both names. Thus, plaintiff does not refute the showing that the Apartment was intended to be jointly owned marital property when it was purchased.
Even if this were not the case:
“New York courts have long treated a marital residence that was purchased after the marriage as marital property subject to equitable distribution. Even where one spouse contributed monies derived from separate property toward the acquisition of the marital residence, this has not precluded its classification as marital property where the other spouse made economic or other contributions to the residence and the marriage; the contributing spouse generally has received a credit for that contribution.”
(Fields, 15 NY3d at 165–166 [internal citations omitted). The court in Fields goes on to discuss the case of Heine v. Heine (176 A.D.2d 77 [1992], lv denied 80 N.Y.2d 753 [1992] ), which presents facts strikingly similar to those at issue herein:
“[I]n Heine, the parties purchased a townhouse containing several apartments during their marriage. The husband used separate property to meet the down payment expense and the parties secured two mortgages to pay the balance of the purchase price; however, title was placed solely in the husband's name. The couple lived in an apartment in the townhouse and at least one of the units was always rented to a tenant. The wife was involved in several renovations to the building and she undertook primary care of the family's domestic and social needs. The Appellate Division credited the husband with the amount of the down payment, designating it as separate property. Nevertheless, the court held that husband was not entitled to the appreciation in value of his separate property contribution because that appreciation was not attributable to the down payment but to market forces, renovations and mortgage payments paid for with marital funds (see id. ). Thus, the court viewed the townhouse, less the husband's initial contribution, as marital property subject to distribution between the parties.”
(Fields, 15 NY3d at 166 [internal citations omitted] ). Herein, the facts supporting the finding that the Apartment is marital property is even stronger than in Heine, since in this case, title was taken in joint names.
It must also be noted that in arguing that the Apartment is his separate property, plaintiff makes no mention of how the mortgage or other carrying charges were paid. In this regard, a review of the financial documentation submitted in support of plaintiff's motion indicates that many of the costs, including the mortgage and the home owners' fees, were paid from the parties' joint checking accounts at Citibank and/or ETrade. The money deposited into these accounts undeniably came from plaintiff's salary, since defendant earned little if any money, during the marriage further weakens his contention that the Apartment is his separate property.
The court similarly finds that plaintiff does not establish that he is entitled to summary judgment declaring that his investment in the Hostel is his separate property. In this regard, all of the money used to fund this investment, with the possible exception of the loan that plaintiff received from a friend and the two transfers made through L.K., was channeled through the party's joint account. Moreover, one of the largest sums invested was the $347,987 that the parties received when plaintiff refinanced the Apartment in 2006. In addition, a review of the withdrawals from the Sequoia Fund that were deposited into the joint account does not establish any distinguishable pattern to support plaintiff's claims that his separate money was merely transferred through the joint account for investment in the Hostel as a matter of convenience (see e.g. Spathis v. Dulimof–Spathis, 103 AD3d 599, 601 [2013], lv dismissed, lv. denied 22 NY3d 913 [2013], rearg. denied, motion dismissed 22 NY3d 1054 [2014], cert denied 83 USLW 3188 [2014] [the court correctly held that stock purchased with money placed in the parties' joint checking account from the exercise of stock options that were received prior to the marriage was marital property, since the stock was purchased using marital funds from the parties' joint account; plaintiff failed to demonstrate that the stock was not purchased with marital funds nor did he overcome the presumption that monies commingled with marital funds are marital property]; Popowich v. Korman, 73 AD3d 515, 516–517 [2010] [the court erred in determining that plaintiff's separate property included the right to repayment of the subject loans, as she failed to demonstrate that the loans were not made with marital funds, since the court found that plaintiff's separate property was commingled with marital property in the brokerage account of plaintiff from which the loans were made; further, the court correctly concluded that two properties, a beach house and a townhouse purchased in whole or in part with funds from the brokerage account were marital property subject to equitable distribution]; Kay, 302 A.D.2d at 713 [2003] [the court found the subject investment account to be marital property; although the court acknowledged that the vast majority of funds in the subject investment account came from defendant's family and plaintiff never withdrew from or deposited funds into this account, the dividends emanating therefrom were continuously placed in the parties' joint checking account] ).
In addition, a factual issue is raised with regard to whether the appreciation on the Apartment and the Hostel, if any, is also marital property subject to equitable distribution. In this regard, it has been held that:
“The question under section 236(B)(1)(d)(3) as to indirect contributions of the nontitled spouse as parent and homemaker is whether there was an appreciation of separate property due to the efforts of the titled spouse during the period when it is shown that those efforts were being aided or facilitated in some way by these indirect contributions. If so, the amount of appreciation during that period is considered a product of the marital partnership over which the trial court retains the flexibility and discretion to structure [a] distributive award equitably' (O'Brien v. O'Brien, 66 N.Y.2d 576, 588, [1985] ). The nature and measure of the services performed by the nontitled spouse as parent and homemaker and the degree to which they may have indirectly contributed to the appreciation of separate property, are matters to be weighed and decided by the trial court—not in making this initial determination under section 236(B)(1)(d)(3) —but in making its distribution of the appreciation as marital property under section 236(B)(5).”
(Price, 69 N.Y.2d at 18–19 ). Thus, plaintiff also fails to establish that any appreciation in the Apartment and Hostel is his separate property.
Accordingly, for these reasons, plaintiff's motion is denied in its entirety. Having held that plaintiff fails to establish that the Apartment and the Hostel are his separate property, the court now turns to defendant's motion seeking appraisal and attorneys' fees.
Although plaintiff cites cases that discuss the appropriate credit to be given to a spouse for contributing his or her separate property to marital property, this issue is not raised in plaintiff's motion and is not addressed herein.
Attorneys' Fees/Expert Fees
Defendant's Contentions
In support of her request for attorneys' fees, defendant argues that since she was not employed during the marriage, plaintiff should be ordered to pay her attorneys' fees and the cost of appraising the marital assets. Counsel asserts that he was retained pursuant to a retainer agreement that defendant signed on July 3, 2012, effective as of January 31, 2012. He began to negotiate a permanent resolution of the issues of custody and visitation and a pendente lite agreement with regard to support; the agreement that the parties reached is discussed above. Counsel then began to trace plaintiff's contributions to the Apartment and to the Hostel. Plaintiff's insistence that the properties were not marital necessitated the instant motion. Counsel also asserts that fees were incurred when he met with Ms. Lipton.
Counsel concludes by asserting that his bill for services rendered through April 9, 2014 totals $29,110. He estimates that additional fees in the amount of $55,000 will be necessary to litigate this action. He accordingly requests an award of attorneys' fees in the amount of $84,000. Counsel goes on to argue that plaintiff is able to afford such an award, as he has earned approximately $300,000 per year during recent years. Counsel also notes that plaintiff's attorney has been advanced fees in the amount of $20,000.
In her affidavit, Ms. Lipton explains that although the Hostel was appraised as of August 10, 2012, the appraisal evaluated only the “bricks and mortar” of the building, so that it is now necessary to do an income capitalization analysis to determine the income stream of the Hostel. She will also have to determine if there was any appreciation of the business due to market forces. Ms. Lipton estimates that the cost of the services needed will be in the range of $20,000 to $30,000; to date, services valued at $5,488 have been rendered.
Based upon her assertion that the Apartment and the investment in the Hostel are marital property, defendant withdrew $10,000 from the Citibank Account on September 16, 2013 to retain ParenteBeard; defendant paid the firm a $7,500 deposit and $2,500 was held in her attorney's escrow account.
Plaintiff's Contentions
Plaintiff contends that defendant is not entitled to an award of counsel fees because he has already paid a significant amount in fees on her behalf, i.e. $20,000, and he sought to resolve this matter for two years. Moreover, after defendant receives the payments of the pendente maintenance and child support that he agreed to pay, he is no longer the “monied spouse.” Plaintiff also opines that defendant has “no skin in the game,” since he has also been paying all expenses for her and the children. In this regard, plaintiff alleges that he has agreed to pay defendant that sum of $14,611 per month. He also incurs expenses in the amount of $4,396 per month for his mortgage and maintenance, for a total of $218,084 ($165,332 + $52,752), without including any of his other expenses. Plaintiff asserts that making these payments leaves him with a deficit for 2013, since his earning were only $125,147, so that he has been forced to borrow money to pay his expenses. He further asserts that only $82,068 remains in the Sequoia Fund. In contrast, defendant receives $5,000 per month to spend as she sees fit, after plaintiff pays all of the substantial expenses for her and the children.
Plaintiff also contends that defendant's counsel has failed to comply with the court rules pertaining to the payment of attorneys' fees in matrimonial actions. Plaintiff goes on to argue that while plaintiff's attorney claims that he has already incurred $50,000 in fees, plaintiff does not believe this is a reasonable charge for the amount of work performed.
Plaintiff further argues that there is no need for any appraisals to be conducted in this action, since there are recent neutral appraisals for both the Apartment, as of June 30, 2011, and the Hostel, as of August 10, 2012, which can be updated for far less money. With regard to the appraisal of the Hostel, plaintiff argues that defendant's claim that only the building was appraised is without merit, since the business was appraised using the income approach method.
Discussion
“An award of interim counsel fees is designed to create parity in divorce litigation by enabling the nonmonied spouse to litigate the action on equal footing with the monied spouse” (Palmeri v. Palmeri, 87 AD3d 572, 572 [2011], citing O'Shea v. O'Shea, 93 N.Y.2d 187, 193 [1999] ; Gaffney–Romanello v. Romanello, 82 AD3d 930 [2011] ; Meltzer v. Meltzer, 63 AD3d 702 [2009] ; Prichep v. Prichep, 52 AD3d 61, 65 [2008] ). Further, an award of an attorney's fee is a matter committed to the sound discretion of the trial court (see e.g. Vitale v. Vitale, 112 AD3d 614, 614–615 [2013], citing Cusumano v. Cusumano, 96 AD3d 988 [2012] ). “In determining whether to award such a fee, the court should review the financial circumstances of both parties together with all the other circumstances of the case, which may include the relative merit of the parties' positions' “ (Gruppuso v. Caridi, 66 AD3d 838, 839 [2009], quoting DeCabrera v. Cabrera–Rosete, 70 N.Y.2d 879, 881 [1987] ).
As a threshold issue, the court notes that plaintiff cannot avoid paying an award of attorneys' fees on the ground that defendant's attorney did not comply with the court rules. In this regard, it has been held that it is the right of the client, not the adversary spouse, to be billed at least every 60 days, and the client may waive that right (see e.g. Rivacoba v. Aceves, 110 AD3d 495, 495–496 [2013] ; Johnner v. Mims, 48 AD3d 1104 [2008], citing Matter of Winkelman v. Furey, 281 A.D.2d 908 [2001], affd 97 N.Y.2d 711 [2002] ). The court does, however, agree that an award of $84,000 is excessive. Accordingly, in view of the fact that defendant presently has no income, that she not did earn any income during the marriage, that plaintiff earns a significant amount of money and that he still has over $80,000 in the Sequoia Fund, he is ordered to pay defendant's counsel an additional $20,000 in interim counsel fees, subject to reallocation at trial. The payment of said counsel fees is to be made within thirty (30) days of the date of service of this decision and order with notice of entry. Upon plaintiff's failure to make payment, the Clerk of the Court is directed to enter judgment upon defendant's counsel affirmation of default without further notice to plaintiff or his attorney.
The court, however, declines to award defendant any appraisal fees. In refusing to make such an award, the court first notes that defendant made no effort to secure the appointment of a single, neutral appraiser before she retained ParenteBeard. Thus, plaintiff may well have to expend funds to retain an appraiser of his choice. Moreover, defendant offers no basis upon which the court can conclude that the recent appraisals of both the Apartment and the Hostel do not accurately reflect the fair market value of the assets, so that no appraisal is needed or, as a less costly alternative, these appraisals can be updated. Further, the court assumes that ParenteBeard will take the value of the property upon which the Hostel is located in valuing that asset. Finally, as noted above, defendant has been and continues to receive $5,000 per month as maintenance, while plaintiff pays the vast majority of her expenses and the expenses of the children. Accordingly, under the circumstances of this case, the court finds that defendant has the financial means to compensate the appraiser(s) of her choice.
Conclusion
Accordingly, it is hereby ORDERED that plaintiff's cross motion for summary judgment is denied; and it is further
ORDERED that Defendant's motion is granted only to the extent of ordering plaintiff to pay her attorney the additional sum of $20,000 in interim counsel fees within thirty (30) days of the date of service of this decision and order with notice of entry. In the event, the counsel fees are not timely paid, the clerk of the court shall enter judgment upon defendant's counsel affirmation of default without further notice. This award is subject to reallocation at trial; and its further
ORDERED that all further relief requested is denied.
The foregoing constitutes the order and decision of this court.