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Seale v. Seale

Supreme Court of New York, Third Department

April 6, 2017

MARY SEALE, Appellant,
MICHAEL SEALE, Respondent.

          Calendar Date: February 17, 2017

          Wardlaw Associates, PC, Saratoga Springs (Donna E. Wardlaw of counsel), for appellant.

          Bartlett, Pontiff, Stewart & Rhodes, PC, Glens Falls (Paula Nadeau Berube of counsel), for respondent.

          Before: McCarthy, J.P., Egan Jr., Lynch, Devine and Clark, JJ.


          McCarthy, J.P.

         Appeal from a judgment of the Supreme Court (Breen, J.), entered March 25, 2014 in Warren County, granting, among other things, equitable distribution of the parties' marital property, upon a decision of the court.

         Plaintiff (hereinafter the wife) and defendant (hereinafter the husband) were married on April 6, 2002 and are the parents of two children (born in 2003 and 2007). Less than eight years later, in January 2010, the parties separated and began living apart, and, before this action was commenced, on April 13, 2010, Family Court entered a temporary support order directing the husband to pay child support and spousal maintenance and to make all payments related to the marital home. The wife commenced this matrimonial action on May 5, 2010, after which it was removed to Supreme Court, and, on November 4, 2011, the parties stipulated to sharing legal custody of the children and awarding the wife primary physical custody. Prior to the trial, the wife made multiple unsuccessful motions to preclude the husband from presenting evidence of the value of disputed assets, which included, among other things, multiple motels, car washes and other real property. Following 30 days of testimony, in March 2014, Supreme Court granted the wife a divorce on the uncontested ground of cruel and inhuman treatment, equitably distributed the marital property and adjusted the pendente lite order by modifying child support and maintenance. The wife now appeals.

         First, the wife argues that Supreme Court erred in denying her motions to preclude the husband from offering evidence as to the value of disputed assets at trial and in denying her motion to sanction the husband by deeming proven her allegations regarding the value of said assets. A trial court "is vested with broad discretion in controlling discovery and disclosure, and generally its determinations will not be disturbed in the absence of a clear abuse of discretion" (Gold v Mountain Lake Pub. Telecom., 124 A.D.3d 1050, 1051 [2015] [internal quotation marks and citation omitted]; see Kumar v Kumar, 63 A.D.3d 1246, 1248 [2009]). However, "the remedy of preclusion is reserved for those instances where the offending party's lack of cooperation with disclosure was willful, deliberate, and contumacious" (Kumar v Kumar, 63 A.D.3d at 1248 [internal quotation marks and citations omitted]; see CPLR 3126 [2]; Armstrong v Armstrong, 72 A.D.3d 1409, 1410 [2010]). Moreover, it is axiomatic that a party cannot be compelled to produce documents that the party does not have or that do not exist (see Matter of Scaccia, 66 A.D.3d 1247, 1250 [2009]; Moak v Raynor, 28 A.D.3d 900, 904 [2006]).

         In June 2010, the wife moved to preclude the husband from offering evidence or testifying as to any financial information that he failed to thus far disclose. Supreme Court ordered the husband to provide certain requested items and delayed ruling on the preclusion motion. In March 2011, the wife again moved to preclude the husband from presenting evidence, this time related to his income or the value of his businesses, based on the allegation that he continued to fail to disclose requested information. By an order dated April 12, 2011, Supreme Court found that the husband had not provided adequate financial information to the wife and conditionally precluded him from "opposing the testimony of [the wife] and her experts or from introducing evidence at trial regarding [his] unreported or underreported income and the value of his businesses" unless he disclosed the information requested in certain of the wife's notices of discovery, a letter from the wife's counsel, and, more generally, "other outstanding demands" within a specified time frame.

         Without seeking any subsequent ruling on whether the husband had complied with the April 2011 preclusion order, in June 2011, the wife sought an even broader preclusion order awarding her a default judgment consistent with the allegations in her complaint. Supreme Court granted the wife's order to show cause in regard to this request, and both parties submitted evidence in regard to the husband's compliance with discovery. As is relevant here, in December 2011, the wife requested that the court clarify what the husband would or would not be precluded from presenting at trial and, again, moved to preclude the husband from offering evidence as to his undisclosed financial information. In May 2012, the court ruled that the husband would not be precluded from presenting any evidence at trial, but specified that the wife could make further motions during the trial as to specific evidence. Thereafter, the wife made additional unsuccessful motions at the trial to preclude the husband from opposing her evidence of the values of property and businesses, and she argued that the husband should be precluded from presenting evidence about the vacancy rates of certain resorts at issue since he had previously testified that he did not know what they were.

         The evidence before Supreme Court regarding the husband's compliance with discovery requests was largely contested. Each party submitted evidence indicating that the other had either destroyed or hidden records related to the businesses and properties at issue. The wife submitted the affidavit of a computer expert who averred, among other things, that the husband had generally not allowed him to conduct the type of examination of the husband's computers that the expert desired and further concluded that it was "highly unusual" how little data he was able to find on the computers. The husband maintained that the "few records" he had regarding his motels had been corrupted, along with his work computer, and that he did not back-up his business computers after 2005. He further averred that he had used printed-out daily reports as an alternative to digitally backing up his computers, but that the wife had removed those documents from the family home.

         Independent of these assertions, the husband disclosed, among other things, his personal and business tax returns, schedules of income, expenses and balance sheets for his businesses, mortgage documents for the marital home, copies of insurance documents and guaranty agreements for his businesses, credit card and bank statements, promissory notes related to his businesses, real property tax bills, mortgages and deeds related to his businesses, Social Security earnings statements, contracts and leases regarding his businesses, titles to vehicles he or his businesses owned, and computer files. The husband averred that, at the time of the order to show cause, he had provided more than 30, 000 documents in response to the wife's demands for financial and business records and testified for more than 20 hours during depositions. The husband explained that he had met with the wife's real estate appraisers to allow them to view properties at issue and met with the wife's computer expert when he examined the husband's computers. In regard to those discovery requests that he did not fulfill, the husband averred that he did not have the requested documents or that such documents never existed. We are unable to conclude, upon this record, that Supreme Court abused its considerable discretion in accepting the husband's representations and finding that he had meaningfully attempted to comply with the wife's discovery demands, and that, as a result, the wife's requested sanctions were unwarranted (see Matter of Scaccia, 66 A.D.3d at 1250; Kumar v Kumar, 63 A.D.3d at 1249). Likewise, as to the wife's additional trial motions, we cannot say that the court abused its discretion in finding that the wife failed to establish that any lack of cooperation with disclosure on the husband's part was willful, deliberate and contumacious so as to warrant the drastic remedy of preclusion (see Armstrong v Armstrong, 72 A.D.3d at 1410-1411; Matter of Blauman-Spindler v Blauman, 68 A.D.3d 1105, 1107 [2009]).

         Next, Supreme Court did not err in concluding that certain property that the husband took title to during the marriage was separate property due to the fact that the husband received it in exchange for separate property. Separate property includes property "acquired in exchange for... separate property" (Domestic Relations Law § 236 [B] [1][d] [3]). During the marriage, the husband assigned his 50% ownership interest in a particular car wash (hereinafter the Queensbury Car Wash) and its lot to his business partner, Kenneth Ermiger, in exchange for Ermiger's half share of Boulders Co., LLC, Adirondack Car Wash, LLC and SE Realty. The Queensbury Car Wash and its lot were purchased in 2001, prior to the parties' marriage, and therefore constituted the husband's separate property (see Domestic Relations Law § 236 [B] [1][d] [1]). Moreover, the mere fact that said property exchange was negotiated during the marriage - as would generally be true of a separate property transfer pursuant to Domestic Relations Law § 236 (B) (1) (d) (3) - does not, on its own, make the exchange active management that would entitle the wife to a portion of Boulders Co., Adirondack Car Wash or SE Realty. Further, there is no evidence here that the transfer was the result of any considerable or unusual negotiation efforts on the husband's part during the marriage. Moreover, to the extent that the wife argues that the active appreciation of Queensbury Car Wash after the marriage and prior to the transfer renders some or all of the property received in the transfer marital, we disagree. Any evidence suggesting that the Queensbury Car Wash appreciated in value between the marriage and the date of the property transfer was provided by one of the wife's experts. Notably, Supreme Court specifically held that it did "not find credible [this expert's] valuation report... regarding the businesses of the [husband]." Deferring to that credibility determination, the wife failed to prove that the Queensbury Car Wash appreciated in value during the relevant time period (see Van Dyke v Van Dyke, 273 A.D.2d 589, 592 [2000]).

         Further, we find no error in Supreme Court's conclusions that certain property was the husband's separate property [1] and that it did not appreciate in value during the course of the marriage. More particularly, Supreme Court specifically credited the valuations of the husband's expert appraiser and his conclusions that Route 146 Car Wash, Inc. and its related car wash, the Quaker Road Car Wash and the Warrensburg Car Wash did not appreciate in value during the marriage. Moreover, the court discredited the valuation of the wife's expert appraiser that the Broad Street Car Wash appreciated in value during the course of the marriage and, therefore, found that the wife failed to meet her burden of establishing an appreciation in value of separate property. Deferring to the court's credibility determinations, we find ...

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