Title: Patricia A. Mahoney-Buntzman v. Arol I. Buntzman

State: new-york

Issuer: New York Appellate Court

Document:

- 1 -
=================================================================
This opinion is uncorrected and subject to revision before
publication in the New York Reports.
-----------------------------------------------------------------
No. 64  
Patricia A. Mahoney-Buntzman, 
            Respondent, 
        v. 
Arol I. Buntzman, 
            Appellant.
Howard Leitner, for appellant.
John P. Farrauto, for respondent.
PIGOTT, J.:
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
- 2 -
No. 64
- 2 -
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
- 3 -
No. 64
- 3 -
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
- 4 -
No. 64
- 4 -
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
- 5 -
No. 64
- 5 -
wife a 50% credit--or $24,081.45--for 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 benefit from it, and therefore, the student loan was
incurred to satisfy husband's separate property interest making
the loan his sole obligation.  As modified, the Appellate
Division affirmed.  
We granted leave and now modify the order of the
Appellate Division.
The Domestic Relations Law recognizes that the marriage
relationship is an economic partnership.  As such, during the
life of a marriage spouses share in both its profits and losses. 
When the marriage comes to an end, courts are required to
equitably distribute not only the assets remaining from the
marriage, but also the liabilities.  A trial court considering
the factors set forth in the Domestic Relations Law has broad
discretion in deciding what is equitable under all of the
circumstances.  Indeed, when it comes to the equitable
distribution of marital property, Domestic Relations Law §
236(B)(5)(d)(13) authorizes the trial court to take into account
"any other factor which the court shall expressly find to be just
and proper".  Consequently, the trial court has substantial
flexibility in fashioning an appropriate decree based on what it
views to be fair and equitable under the circumstances. 
- 6 -
No. 64
- 6 -
However, during the life of any marriage, many payments
are made, whether of debts old or new, or simply current
expenses.  If courts were to consider financial activities that
occur and end during the course of a marriage, the result would
be parties to a marriage seeking review of every debit and credit
incurred.  As a general rule, where the payments are made before
either party is anticipating the end of the marriage, and there
is no fraud or concealment, courts should not look back and try
to compensate for the fact that the net effect of the payments
may, in some cases, have resulted in the reduction of marital
assets.  Nor should courts attempt to adjust for the fact that
payments out of separate property may have benefitted both
parties, or even the non-titled spouse exclusively.  The parties’
choice of how to spend funds during the course of the marriage
should ordinarily be respected.  Courts should not second-guess
the economic decisions made during the course of a marriage, but
rather should equitably distribute the assets and obligations
remaining once the relationship is at an end.  With this holding
in mind, we review the four issues raised on this appeal.
Prior Maintenance
In this case, wife seeks to recoup money that was
expended during the marriage to pay husband's obligation to his
former spouse for maintenance.  We hold that wife is not entitled
to such recoupment.  Expenditures made during the life of the
marriage towards maintenance to a former spouse, as well as
- 7 -
No. 64
- 7 -
payments made pursuant to a child support order, are obligations
that do not enure solely to the benefit of one spouse.  Payments
made to a former spouse and/or children of an earlier marriage,
even if made pursuant to court order, are not the type of
liabilities entitled to recoupment.
This is not to say that every expenditure of marital
funds during the course of the marriage may not be considered in
an equitable distribution calculation. Domestic Relations Law §
236(B)(5)(d)(13) expressly and broadly authorizes the trial court
to take into account “any other factor which the court shall
expressly find to be just and proper” in determining an equitable
distribution of marital property.  There may be circumstances
where equity requires a credit to one spouse for marital property
used to pay off the separate debt of one spouse or add to the
value of one spouse's separate property (see e.g. Micha v Micha,
213 AD2d 956, 957-958 [3d Dept 1995]; Carney v Carney, 202 AD2d
907[3d Dept 1994]).  Further, to the extent that expenditures are
truly excessive, the ability of one party to claim that the other
has accomplished a "wasteful dissipation of assets" (DRL 236
[B][5][d][11]) by his or her expenditures provides protection. 
The payment of maintenance to a former spouse, however, does not
fall under either of these categories. 
Student Loan
Nor is wife entitled to a credit for payments made
during the marriage towards husband's student loan.  Husband
- 8 -
No. 64
1   If the student loan debt was still outstanding, however,
it may have been appropriate for the trial court to conclude that
defendant alone was required to bear the obligation of repayment
of the balance of his student loan. 
- 8 -
incurred the student loan during the parties' marriage, and had
his degree conferred an economic benefit, wife would have been
entitled to a share in its value (see O'Brien v O'Brien, 66 NY2d
576 [1985]).  Thus, the loan, which was both incurred and fully
paid for during the marriage, was a marital obligation for which
responsibility was to be shared between the parties.1
EVCI Stock
We further hold that the trial court providently
exercised its discretion by setting the valuation date for the
EVCI stock and options as the date of trial (see generally
McSparron v McSparron, 87 NY2d 275 [1995]).
Estoppel
Similarly, the trial court properly exercised its
discretion when it classified the money received by husband
pursuant to the settlement agreement as marital property, given
the fact that husband made representations that the money was
business income for tax purposes.  A party to litigation may not
take a position contrary to a position taken in an income tax
return (see Meyer v Insurance Co. of Am., 1998 WL 709854 [SDNY
1998]; Naghavi v New York Life Ins. Co., 260 AD2d 252 [1st Dept
1999]; Zemel v Horowitz, 11 Misc3d 1058[A]*5 [Sup Ct, NY County
2006]).  Here, husband does not dispute that, in accordance with
- 9 -
No. 64
- 9 -
his settlement agreement, he reported the $1,800,000 in
settlement proceeds as business income on his federal income tax
return, in which he swore that the representations contained
within it were true.  We cannot, as a matter of policy, permit
parties to assert positions in legal proceedings that are
contrary to declarations made under the penalty of perjury on
income tax returns.
Accordingly, the order of the Appellate Division should
be modified, without costs, by remitting to Supreme Court for
further proceedings in accordance with this opinion and, as so
modified, affirmed.
*   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *   * 
Order modified, without costs, by remitting to Supreme Court,
Westchester County, for further proceedings in accordance with
the opinion herein and, as so modified, affirmed.  Opinion by
Judge Pigott.  Judges Ciparick, Graffeo, Read, Smith and Jones 
concur.  Chief Judge Lippman took no part.
Decided May 7, 2009