The opinion of the court was delivered by: Pigott, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the Official Reports.
In this divorce action, we are asked to resolve several equitable distribution issues. For the reasons that follow, we hold that plaintiff wife is not entitled to a 50% credit for payments made during the marriage towards defendant's maintenance obligation to his first wife nor for payments made towards husband's student loan, and thus we modify.
The parties were married in New York on September 24, 1993 and have two daughters. Wife has an adult child from a previous relationship. Husband was married once before, and has two adult children from that marriage. Pursuant to a divorce judgment, husband was obligated to pay his first wife maintenance.
During the present marriage, husband and another individual formed Educational Video Conference Inc. (EVCI), a New York Corporation that went public in 1999. At the time of the instant action, husband owned a number of shares and options of EVCI stock, all of which were acquired during marriage.
Prior to his marriage to plaintiff, husband had an interest in Arol Development Corporation (ADC), a real estate development company he founded with his father in 1971. In 1983, husband founded another company, Big Apple Industrial Buildings, Inc., 80% of which he sold to ADC in 1989. In 1998, husband entered into an agreement with his father whereby he agreed to relinquish his stock ownership in both corporations in exchange for a lump sum payment. The agreement provided that the payment would be reported on a "1099" form issued to him by the purchasing company. In order to account for the increased tax liability that husband would incur as a consequence of treating the payment as ordinary income rather than as a sale of stock, the payment was increased by 17 percent. This money, amounting to $1.8 million was received by husband during the marriage and reported on the parties' joint income tax return as self-employment business income.
In May 1996, husband obtained a doctorate in education from Fordham University for which he had taken out a student loan that was repaid two years later.
On May 19, 2003, wife commenced the instant divorce action and an eighteen-day trial ensued.
Supreme Court granted wife a divorce on the grounds of abandonment and in a detailed decision, dated October 3, 2006, considered and distributed the various assets and debts of the parties' marriage (13 Misc 3d 1216A [Sup Ct Westchester Co 2006]).
As it pertained to the EVCI stock and options, the court found that husband played a substantial role in changing the direction of the company and in its expansion. Nevertheless, the court rejected husband's claims that the appreciation in the value of the EVCI's stock was due solely to his efforts, holding that there were significant contributions of others to the operations of EVCI and no evidence directly linking the increase in the value of its stock solely to husband. Consequently, the court used the date of trial for valuation purposes of the EVCI stock and options.
With respect to maintenance paid by husband to his first wife during the marriage, the court declined to give wife credit for one-half of that amount. The court noted that both parties had used marital assets to assist other relatives. For instance, wife had used marital sums to provide support for her daughter and her father. The court stated "neither party may be heard to complain about the other's use of marital funds to pay for their own obligations or to aid other family members, when that approach was evidently an accepted part of their lifestyle."
For the same reasons, the court declined to give wife a credit for monies used to repay the student loan.
Supreme Court further held that husband is estopped from arguing that the funds received from the sale of his corporate interests to his father were proceeds from the sale of stock and thus, separate property, because he had reported the funds as business income on the parties' joint tax returns. The court also noted that in his 1993 Judgment of Divorce from his first wife, husband represented that he owned no stock at the time.
On appeal, the Appellate Division modified the judgment of Supreme Court by, among other things, holding that wife was entitled to an equitable distribution credit of one-half of the amount of court-ordered maintenance paid by husband to his former wife from marital funds (51 AD3d 732). The court held that the maintenance obligation to his first wife constituted debt incurred by him prior to the parties' marriage and is therefore his sole responsibility. The Appellate Division also awarded wife a 50% creditor $24,081.45for the student debt incurred by husband during the marriage to attain his degree, concluding that because a court-appointed expert had determined that husband's advanced degree did not enhance his earnings, wife received no ...