SUPREME COURT OF THE STATE OF NEW YORK

Appellate Division, Fourth Judicial Department

979 

CA 12-01791 

PRESENT: SCUDDER, P.J., FAHEY, SCONIERS, AND VALENTINO, JJ.

 

 

GEORGE R. MARLINSKI, PLAINTIFF-RESPONDENT, 

V MEMORANDUM AND ORDER

NANCY A. MARLINSKI, DEFENDANT-APPELLANT.

 

LAW OFFICES OF STEVEN H. GROCOTT, WEST SENECA (STEVEN H. GROCOTT OF

COUNSEL), FOR DEFENDANT-APPELLANT. 

MICHAEL J. STACHOWSKI, P.C., BUFFALO (MICHAEL J. STACHOWSKI OF

COUNSEL), FOR PLAINTIFF-RESPONDENT.

 

Appeal from a judgment of the Supreme Court, Erie County (Janice

M. Rosa, J.), entered December 22, 2011 in a divorce action. The

judgment, inter alia, equitably distributed the marital property of

the parties. 

It is hereby ORDERED that the judgment so appealed from is

modified on the law by vacating the eighth and ninth decretal

paragraphs and directing that the parties are jointly responsible for

the remaining debt on the Discover Card line of credit and that

defendant is not required to compensate plaintiff in the amount of

$3,569 and as modified the judgment is affirmed without costs. 

Memorandum: Defendant wife appeals from a judgment of divorce

that, inter alia, equitably distributed marital assets, allocated

marital debt and calculated the child support for the parties’ minor

children. Contrary to the wife’s contention, Supreme Court did not

abuse or improvidently exercise its discretion in determining that

plaintiff husband was entitled to an equitable share of the marital

funds used to discharge the mortgage on the wife’s separate residence,

which had been used as the marital residence for the entire duration

of the marriage. As the court noted in its decision, the parties

engaged in “complex financial dealings,” which often consisted of

acquiring new lines of credit to pay off existing lines of credit. 

The testimony at trial established that, although the wife purchased

the marital residence prior to the marriage, the parties used marital

funds to pay for improvements and to discharge the mortgage on that

residence. The husband is thus “entitled to recoup [his] equitable

share of the marital funds used to reduce the indebtedness and pay for

improvements to the marital abode” (Massimi v Massimi, 35 AD3d 400,

402, lv denied 9 NY3d 801; see Markopoulos v Markopoulos, 274 AD2d

457, 458-459; Zelnik v Zelnik, 169 AD2d 317, 330).
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We agree with the wife, however, that the court abused it

discretion in awarding the husband $3,000, which represented one-half

of the parties’ 2008 tax refund. The entire tax refund had been used

to pay down debt on a Discover Card line of credit. While it is

undisputed that, after the divorce action was commenced, the wife took

a cash advance from the Discover Card line of credit and deposited the

money into her separate checking account, the evidence at trial

established that the wife used that money to make payments toward

marital debt. We thus conclude that the Discover Card debt was

marital debt, and the husband was not entitled to credit for his share

of the marital funds that were used to reduce that debt. We further

conclude that the court abused its discretion in awarding the husband

$569, the amount withdrawn by the wife from the parties’ joint

checking account in September 2008 and January 2009. The evidence at

trial established that the wife used the money for household bills and

also to reduce the Discover Card debt. We therefore modify the

judgment accordingly.

Contrary to the wife’s contention, the court did not err in

vacating the child support and maintenance provisions of the parties’

October 2009 stipulation. In that stipulation, the parties had agreed

to impute income to the wife in the amount of $15,000, and the husband

had agreed to maintenance and child support awards to the wife based

on that imputed income. Although “[s]tipulations of settlement are

favored by the courts and not lightly cast aside” (Hallock v State of

New York, 64 NY2d 224, 230; see Krupski v Krupski, 168 AD2d 942, 943,

lv denied 77 NY2d 804; see generally CPLR 2104), “[a] stipulation of

settlement should be closely scrutinized and may be set aside upon a

showing that it is unconscionable or the result of fraud, or where it

is shown to be manifestly unjust because of the other spouse’s

overreaching” (Cruciata v Cruciata, 10 AD3d 349, 350; see Krupski, 168

AD2d at 943). We agree with the court that “a reasonable inference

exists that the [wife did not] fully disclose[] h[er] financial assets

. . . , and, as a result, the terms of the agreement were so

inequitable as to be manifestly unfair to the [husband]” (Cruciata, 10

AD3d at 350; see Chapin v Chapin, 12 AD3d 550, 551; cf. Label v Label,

70 AD3d 898, 900; see also Cervera v Bressler, 85 AD3d 839, 841-842). 

It is undisputed that the wife had not been employed outside the home

since the birth of the parties’ children, but it is likewise

undisputed that she had inherited large sums of money during the

course of the marriage. Moreover, the wife failed to disclose her

significant stock earnings, which, by October 2009, had totaled over

$48,000 for that year. By the end of 2009, the wife had an adjusted

gross income of $121,901. Thus, the wife had over $100,000 more in

income than was imputed to her in the stipulation, and her income was

more than two times what the husband had earned in any of the years

before the stipulation. We thus conclude that, regardless whether the

wife can be said to have committed fraud, the wife’s failure to

disclose her earnings in the stock market resulted in an agreement

that was manifestly unfair to the husband.

The wife further contends that, after partially vacating the

stipulation, the court erred in imputing an annual income of $50,000

to her. We reject that contention. The court did not abuse its
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discretion in considering the wife’s gross income as “reported in the

most recent federal income tax return” (Domestic Relations Law § 240

[1-b] [b] [5] [i]), including investment income (see § 240 [1-b] [b]

[5] [ii]), as well as “such other resources as may be available to the

[wife]” (§ 240 [1-b] [b] [5] [iv]), including non-income producing

assets such as real property she inherited (see § 240 [1-b] [b] [5]

[iv] [A]) and money, goods or services provided by relatives and

friends (see § 240 [1-b] [b] [5] [iv] [D]), such as the large monetary

gifts provided to her by family members. While the wife contends that

her capital gains in 2009 are an anomaly that is not likely to recur,

we conclude that the court properly took into consideration the

volatility of the stock market when it imputed less than half of the

wife’s actual earnings to her as annual income. The decision whether

to consider capital gains as income is a discretionary determination

(see Orofino v Orofino, 215 AD2d 997, 998-999, lv denied 86 NY2d 706;

compare Matter of Gluckman v Qua, 253 AD2d 267, 270, lv denied 93 NY2d

814 with McFarland v McFarland, 221 AD2d 983, 983-984) and, under the

circumstances of this case, we see no basis upon which to disturb the

court’s exercise of its discretion.

We have reviewed the wife’s remaining contentions and conclude

that they are lacking in merit. 

All concur except SCONIERS, J., who dissents and votes to modify 

in accordance with the following Memorandum: I agree with the

majority with respect to all but two of the issues being decided on

this appeal, and I therefore respectfully dissent in part. In my

view, Supreme Court erred to the extent it vacated a portion of the

parties’ partial settlement and also erred when it imputed an annual

income of $50,000 to defendant wife. I would therefore further modify

the judgment accordingly. 

On October 21, 2009, the parties entered into a partial

settlement on the record in court. Pursuant to that agreement,

plaintiff husband would pay $175 per week in child support for the

parties’ three children and $100 per week in maintenance for three

years. The parties’ stipulation imputed an annual income of $15,000

to the wife. Subsequently, during the trial on unresolved issues, the

husband learned that in 2009 the wife had begun investing her

inherited funds and, by the time of the stipulation, the wife had

capital gains of $48,684 through 14 sales of stock and an adjusted

gross income of $121,901 by year’s end. However, as was revealed

during the trial, despite having significant capital gains in 2009,

the wife had losses of $27,740 between January 1 and June 29, 2010 and

her unrealized losses had totaled $61,352 at the time of trial. 

Based solely on the wife’s recent and indisputably short-term

success investing in the stock market, the court vacated the child

support and maintenance provisions of the partial settlement and

imputed an annual income to her of $50,000. “Stipulations of

settlement are favored by the courts and not lightly cast aside”

(Hallock v State of New York, 64 NY2d 224, 230; see Borghoff v

Borghoff, 8 AD3d 519, 520; see also CPLR 2104). This is equally true

with respect to agreements entered into by the parties to a divorce
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CA 12-01791 

action (see Batson v Batson, 277 AD2d 750, 751). Hence, “ ‘[o]nly

where there is cause sufficient to invalidate a contract, such as

fraud, collusion, mistake or accident, will a party be relieved from

the consequences of a stipulation made during litigation’ ” (Chernow v

Chernow, 51 AD3d 705, 706, lv dismissed 11 NY3d 780, quoting Hallock,

64 NY2d at 230; see Przewlocki v City of Lackawanna, 112 AD2d 757,

757). 

The record here is devoid of proof that the wife was aware of the

extent of her capital gains as of the October 21, 2009 stipulation. 

Moreover, while the wife had $48,684 in capital gains on the

settlement date, capital gains, unlike salary or wages, are offset by

any investment losses that occur during a given tax year. Thus,

treating the wife’s capital gains on October 21st as income is the

functional equivalent of declaring the margin of victory in a football

game based on the score early in the fourth quarter. While, as it

turned out, the wife’s capital gains increased through the end of

2009, it was, as of October 21st, possible that she could have

sustained losses that would have reduced or even completely negated

those gains by the end of the year. The losses the wife sustained in

the first half of 2010 alone support that potential outcome. Thus, in

my view, it was error for the court to void the partial settlement

based on the wife’s capital gains as of the date of the settlement.

As to imputed income, “ ‘[c]ourts have considerable discretion to

. . . impute an annual income to a parent’ . . . , and a court’s

imputation of income will not be disturbed so long as there is record

support for its determination” (Lauzonis v Lauzonis, 105 AD3d 1351,

1351). As the majority observes, the decision whether to consider

capital gains as income is discretionary (see Orofino v Orofino, 215

AD2d 997, 998-999, lv denied 86 NY2d 706). However, in my view, there

must be more than one year of capital gains to warrant imputing income

for years into the future. We can take judicial notice of the fact

that, on March 9, 2009, the Dow Jones Industrial Average hit a 12-year

low at the end of what has been called the Great Recession, but that

by the end of that year the Dow rose by almost 60% from that low point

(see For Dow, another 12-year low,

http://money.cnn.com/2009/03/09/markets/markets_newyork/index.htm; see

also Dow Jones Indus. Average [DJIA] History,

http://www.fedprimerate.com/dow-jones-industrial-average-history-djia.

htm; see generally Destiny USA Holdings, LLC v Citigroup Global Mkts.

Realty Corp., 69 AD3d 212, 222-223). In contrast, while the Dow was

relatively more stable during 2010 than it had been in 2009 (see Dow

Jones Indus. Average [DJIA] History), the wife nevertheless sustained

significant losses in that year. The wife has a two-year degree, had

not worked outside the home since 1994, and had never earned more than

$18,000 from employment. At no time from the beginning of the

marriage, even after inheriting significant sums, had the wife ever

demonstrated any particular knowledge of or success with investing. 

This would explain why the parties’ partial settlement attributed

income to the wife of only $15,000 per year. The only reasonable

conclusion based on this record is that the wife’s capital gains in

2009 were a fluke resulting from a rapidly rising stock market. Given

her losses in 2010, it is clear that the wife was about as likely to
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CA 12-01791 

repeat her 2009 success as someone who wins the lottery or has a lucky

streak at a casino. As a result, the court also abused its discretion

in imputing an annual income of $50,000 to the wife based on nothing

more than one year of capital gains income. 

Entered: November 8, 2013 Frances E. Cafarell

Clerk of the Court