Source: http://www.jdbar.com/Cases/Holterman/holterman.html
Timestamp: 2017-02-21 03:07:15
Document Index: 299998461

Matched Legal Cases: ['§ 240', '§ 240', '§ 413', '§ 240', '§ 240', '§ 240', '§ 240', '§ 240', '§ 14', '§ 236', '§ 240', '§ 240', '§ 240']

Holterman v Holterman 3 N.Y.3d 1
356 Veterans Memorial Highway. Suite 3, Commack, NY 11725 Phone: (631) 864-2600 Email: lawyer@jdbar.com Amy N. Holterman, Respondent,v.Robert K. Holterman, Appellant.
April 28, 2004, ArguedJune 10, 2004, Decided
Friedman and Molinsek, P.C., Delmar (Michael P. Friedman of counsel), for appellant. Flaherty & O'Brien, Albany (Shawn D. Flaherty of counsel), for respondent. Bruce J. Wagner, Albany, Kenneth David Burrows, Arnold Davis, Christopher S. Mattingly and Stanley Plesent for American Academy of Matrimonial Lawyers, New York Chapter, amicus curiae.JUDGES: Opinion by Judge Graffeo. Chief Judge Kaye and Judges G.B. Smith, Ciparick and Rosenblatt concur. Judge R.S. Smith dissents in an opinion in which Judge Read concurs. OPINION
We are being asked in this matrimonial case to determine whether Supreme Court erred by declining to adjust defendant's child support obligation to account for the distributive award payments he was obligated to pay plaintiff for her share of the future enhanced earnings attributable to his medical license. We conclude that Supreme Court did not err as a matter of law and in particular, under the circumstances of this case, did not abuse its discretion in determining the distributive award or in its application of the Child Support Standards Act (CSSA). I. Plaintiff Amy Holterman (wife) and defendant Robert Holterman (husband) were married in 1981. At the time of the parties' marriage, husband was a third-year student at a medical school in Philadelphia. Wife, who had a Master's degree in business administration, was employed full time as a program analyst and her income contributed to the support of the household. Husband graduated from medical school in 1983 and obtained his license to practice medicine the following year. The parties then moved to another locale in Pennsylvania where husband began a three-year medical residency program. Shortly thereafter, wife began experiencing significant health problems and was eventually diagnosed with chronic fatigue syndrome and fibromyalgia. The parties agreed that wife would become a homemaker due, in part, to her chronic health problems. Their first child was born in 1985 and a second child was born in 1991.
II. On appeal, husband raises several challenges relating to the equitable distribution of the value of his medical license, which require that we address the award in some detail. Supreme Court and the Appellate Division determined that the marital portion of husband's medical license had a present-day value of $ 612,000 in accordance with testimony presented by wife's expert, a certified public accountant. 2 Husband did not challenge the methodology employed by the expert or the economic value of the license itself. In fact, he did not present any expert testimony. The court determined that wife was entitled to 35% of the value of husband's enhanced earning capacity as a licensed physician, which amounted to $ 214,200. The court then deducted $ 29,268.48 from that figure, representing the credit due husband for the conveyance of his interest in the marital residence, thereby establishing a net distributive award of $ 184,931.52 owed to wife. Husband was directed to pay the award in monthly installments over a 15-year period, at six percent interest per annum from the date of commencement of the action, resulting in annual payments of $ 21,288. Husband contends that Supreme Court abused its discretion by awarding wife 35% of the marital portion of the enhanced earning capacity derived from his medical license and asserts that her share should be reduced to no more than 10%. We disagree.
Husband next argues that the payment of $ 21,288 per year--the annual installment payment of wife's distributive award of her share of enhanced earnings from his medical license--should be deducted from the computation of his income in determining his child support obligation under the CSSA and, concomitantly, that amount should be included as income attributable to wife. 4 He claims that the failure of the courts below to perform such reassignment of income results in "double dipping" from the same income stream--i.e., awarding both child support and equitable distribution of his future enhanced earnings from the same income source, his salary as a physician. He therefore claims that the courts below erred as a matter of law in violating the antiduplication principles enunciated in McSparron v McSparron (87 N.Y.2d 275, 639 N.Y.S.2d 265, 662 N.E.2d 745 [1995]) and Grunfeld v Grunfeld (94 N.Y.2d 696, 731 N.E.2d 142, 709 N.Y.S.2d 486 [2000]). We hold that husband's proposed reallocation formula--or any formula that requires a deduction of a distributive award paid over a period of years from the licensed spouse's income for purposes of calculating child support--is impermissible under the CSSA. 5 The CSSA (see Domestic Relations Law § 240 [1-b]) was enacted in 1989 to establish a uniform method for calculating child support, recognizing that a parent's "[r]esponsibility for children does not end when a parent is absent from the household" (Governor's Program Bill Mem, at 1, Bill Jacket, L 1989, ch 567). The CSSA was designed to ensure that children "not unfairly bear the economic burden of parental separation" (Sponsor's Mem, Bill Jacket, at 1, L 1989, ch 567). Its aim is to maintain the children's marital standard of living after their parents separate: "Children should be protected as much as possible from the overall decline in living standards that results from parents maintaining two households" (id.). As we explained in Matter of Cassano v Cassano (85 N.Y.2d 649, 652, 651 N.E.2d 878, 628 N.Y.S.2d 10 [1995]), the CSSA provides "a precisely articulated, three-step method for determining child support." The first step requires the computation of "combined parental income" (Domestic Relations Law § 240 [1-b] [b] [4]; [c] [1]). "The amount of 'income' attributed to each parent is derived by adding gross income, as reported on the most recent Federal tax return, and, to the extent not included as gross income, investment income, imputed income and other 'income received' by the parent from eight enumerated sources" (Matter of Graby v Graby, 87 N.Y.2d 605, 609-610, 664 N.E.2d 488, 641 N.Y.S.2d 577 [1996], citing Family Ct Act § 413 [1] [b] [5]). 6 After computing statutory income, a limited number of deductions are allowable under Domestic Relations Law § 240 (1-b). The CSSA provides for eight categories of deductions from income, which include maintenance payments and Federal Insurance Contributions Act taxes paid (see Domestic Relations Law § 240 [1-b] [b] [5] [vii] [A]-[H]). 7 Significantly, the receipt of distributive award payments is not a statutory category of income, nor is the payment of a distributive award a recognized deduction. 8 The court next multiplies the combined parental income figure, up to a ceiling of $ 80,000, by a designated percentage based on the number of children to be supported, and then allocates that amount between the parents, applying each parent's respective portion of the total income to reach the amount of each parent's support obligation (Domestic Relations Law § 240 [1-b] [b] [3]; [c] [2]). In the final step, where combined parental income exceeds $ 80,000, "the court shall determine the amount of child support for the amount of the combined parental income in excess of such dollar amount through consideration of the factors set forth in paragraph (f) of [Domestic Relations Law § 240 (1-b)] and/or the child support percentage" (Domestic Relations Law § 240 [1-b] [c] [3]). In this case, Supreme Court utilized husband's 2000 gross income of $ 181,837 and deducted his maintenance obligation and FICA contribution, arriving at a combined parental income of $ 139,502.60, all of which was attributable to husband. Applying the child support mandated percentage of 25% for two children to this sum, the court determined that husband must pay $ 34,875.65 annually in child support. Husband asserts that his annual $ 21,288 installment payment of wife's distributive award should also be deducted from his income and included as income attributed to his wife for purposes of the CSSA computations. Although wife's expert opined that a reassignment of income adjustment should be undertaken to avoid double dipping of husband's income stream, the CSSA does not provide for the deduction of distributive awards from income, whether based on enhanced earning capacity due to a professional license or otherwise. Nor does the CSSA authorize the inclusion of a distributive award as income to the parent receiving the award. This lack of inclusion in either the list of permissible statutory deductions or the definition of income is understandable because distributive awards "reflect, not income, but a property distribution" of the marital assets (Scheinkman, New York Law of Domestic Relations § 14:36, 2003 Pocket Part, at 131 [11 West's NY Prac Series 1996]). Indeed, the Domestic Relations Law, which defines a distributive award as "payments provided . . . in lieu of or to supplement, facilitate or effectuate the division or distribution of property," makes clear that distributive awards should not be treated as income for tax purposes (Domestic Relations Law § 236 [B] [1] [b] ["Distributive awards shall not include payments which are treated as ordinary income to the recipient under the provisions of the United States Internal Revenue Code"]). Had the Legislature intended to make distributive awards deductible from one parent's income and includable in the other's, it could easily have so provided. Simply put, it appears that the Legislature did not wish to have a child's lifestyle and support altered based on a distributive award. In sum, husband's proposed methodology conflicts with the plain language of the CSSA.
Even if husband could overcome the statutory construction hurdle, his proposed methodology would be unworkable in many instances because it fails to address situations where a licensed parent satisfies a distributive award obligation by making a lump-sum cash payment or transfers a noncash asset (such as interest in real property) rather than making periodic cash payments over a number of years. For instance, in this case, if a lump-sum distributive payment had been ordered, under husband's methodology the payment would have been deducted from his income and applied to wife, offsetting all of husband's earnings or other income for that year and shifting the entire child support burden to wife, who is not employed. Wife then would necessarily have to meet the support obligation from the proceeds of her distributive award. Likewise, if a spouse satisfies a distributive award by transferring his or her title and equity in real property to the other spouse, the value of the one-time transfer would skew the transferor's income for CSSA purposes under husband's proposal. The result in these scenarios would clearly be inequitable to the recipient spouse and the children. Under husband's reassignment theory, the manner in which the distributive award is paid out would dictate whether or not it requires an adjustment in income allocation for purposes of child support. We see no reason to treat a distributive award paid in periodic installments differently than an award satisfied by the transfer of a noncash asset or lump-sum payment. Indeed, in this case the award was partially paid by transfer of husband's interest in the marital residence to wife. However a distributive award is paid--whether in installments derived from the license holder's income stream, by lump-sum payment or by other asset transfer--the CSSA does not permit the award to be viewed as income for the purpose of allocating combined parental income. McSparron and Grunfeld do not dictate a contrary result. In McSparron, this Court warned that "care must be taken to ensure that the monetary value assigned to the license does not overlap with the value assigned to other marital assets that are derived from the license such as the licensed spouse's professional practice," and cautioned the lower courts to "be meticulous in guarding against duplication in the form of maintenance awards that are premised on earnings derived from professional licenses" (87 N.Y.2d at 286, 639 N.Y.S.2d 265, 662 N.E.2d 745 [emphasis added]). In Grunfeld, this Court reaffirmed the McSparron prohibition against duplicative awards and noted that to avoid "double counting," courts must reduce either the income available to make maintenance payments or the marital assets available for distribution, or some combination of the two. Specifically, we held that "[o]nce a court converts a specific stream of income into an asset, that income may no longer be calculated into the maintenance formula and payout" (Grunfeld, 94 N.Y.2d at 705, 731 N.E.2d 142, 709 N.Y.S.2d 486 [emphasis added]). 9 Notably, neither McSparron nor Grunfeld discussed double counting vis-a-vis child support. Rather, in each case we held that a court may not award maintenance and the distribution of enhanced earnings attributable to a professional license from the same income stream. Unlike maintenance, child support is governed by a precise formula in the CSSA, which simply does not authorize a court to deduct a distributive award from the titled spouse's income. Husband also argues that Supreme Court abused its discretion by refusing to adjust his child support obligation upon its consideration of the distributive award of his medical license as a "paragraph (f)" factor with respect to parental income in excess of $ 80,000 (see Domestic Relations Law § 240 [1-b] [f]). In a related argument, husband claims that Supreme Court abused its discretion by failing to disregard the statutory child support formula as "unjust or inappropriate" in favor of a reduced child support award based on the distributive award. As earlier mentioned, step three of the CSSA's formula requires the trial court to consider the "paragraph (f)" factors for income in excess of $ 80,000. The "paragraph (f)" factors include "[t]he financial resources of the custodial and non-custodial parent," the child's "special needs and aptitudes," "[t]he standard of living the child would have enjoyed" if the marriage had not ended, any tax consequences, a determination that one parent's gross income "is substantially less than the other parent's gross income," and "[a]ny other factors the court determines are relevant in each case" (id.). Moreover, after completing the three-step formula, the trial court may adjust the amount calculated only if, after examining the "paragraph (f)" factors, it finds that the noncustodial parent's share is "unjust or inappropriate" (Domestic Relations Law § 240 [1-b] [a], [f]). Where the trial court concludes the amount calculated to be "unjust or inappropriate," it must order the noncustodial parent to pay an amount it deems "just and appropriate" and is required to set forth in its decision the "paragraph (f)" factors it considered (Domestic Relations Law § 240 [1-b] [g]). We agree with husband that a distributive award to be paid by one parent to the other pertains to the financial resources of the parties and therefore is an appropriate paragraph (f) factor that the trial court may consider when awarding child support. However, on this record, we cannot say that Supreme Court abused its discretion by failing to modify husband's child support obligation based on his distributive award obligation. Here, in carefully determining whether to apply the child support percentage of 25% to all income in excess of $ 80,000, Supreme Court expressly indicated that it considered the distributive award and maintenance obligations, the substantial disparity in gross income between the parties, as well as the upper middle-class lifestyle the children would have enjoyed had the parties not divorced. The family had taken frequent vacations, the children received allowances and engaged in extracurricular pursuits, and the daughter, who is musically talented, had taken private music lessons and had traveled with the Empire State Youth Orchestra. Under these circumstances, we cannot say Supreme Court abused its discretion by applying the statutory percentage of 25% to husband's income in excess of $ 80,000.
Nor did Supreme Court abuse its discretion in failing to deem husband's support obligation calculated under the three-step statutory formula "unjust or inappropriate." Although Supreme Court did not--and was not required to--explicitly state that it found the statutory formula just and appropriate, it necessarily found the formula to be so, by considering the effect of the distributive award in its decision to apply the full 25% to husband's income in excess of $ 80,000. Based on the aforementioned factors, including the preservation, to the extent possible, of the children's standard of living, Supreme Court appropriately applied the statutory formula. We are not unmindful of the financial burdens husband currently faces. We note, however, that husband's child support obligation will substantially decrease when the parties' older child turns 21 in April 2006 and will cease when the younger child reaches 21 in April 2012. Moreover, husband's maintenance obligation will decrease from $ 35,000 to $ 20,000 in 2007. Thus, although husband is now paying wife approximately $ 91,000 a year under Supreme Court's order, in 2006 his payments to wife will be reduced to about $ 80,000, and in 2007, those payments will be further diminished to approximately $ 67,000. When husband's child support obligation ends, his annual payments to wife will be about $ 41,000, presuming she does not remarry, which would terminate her receipt of maintenance. Moreover, although Supreme Court did not express a final computation representing husband's annual financial obligation to wife and his children, the court certainly was aware of the extent of its detailed findings of fact and conclusions of law underlying the judgment of divorce. In the exercise of their fact-finding authority, if the trial court or Appellate Division had concluded that husband faced an unjust financial burden based on the overall economic outcome in this case, either court could have reduced husband's maintenance obligation or wife's equitable share of husband's future enhanced earnings premised on his medical license. Based on the factual determinations in this case, however, it was not an error of law for the courts to decline to do so. IV. Husband's remaining contentions regarding attorney and expert fees are similarly without merit. Where, as here, the Appellate Division's affirmance of an award of counsel fees and expert fees "cannot be characterized as an abuse of discretion as a matter of law, the issue is beyond our review" (O'Brien, 66 N.Y.2d at 590, 489 N.E.2d 712, 498 N.Y.S.2d 743). Accordingly, the order of the Appellate Division should be affirmed, with costs. DISSENT BY: R.S. Smith
I In a 27 page opinion, Supreme Court made detailed findings of fact and a series of discrete rulings, including awards of maintenance, child support, equitable distribution and attorneys' and expert fees. In justifying each of these rulings, the Court referred to the appropriate statutory and other factors. Only one thing is missing from this otherwise meticulous analysis: Supreme Court never even mentions, much less evaluates, the cumulative impact of its rulings.
$181,837 Minus FICA (1233)
It is true that the burden on defendant remains at this level only for four years after the award; after that, child support will be reduced because the parties' older child will become emancipated, and a year later maintenance will drop to a lower level pursuant to Supreme Court's order. But even then, the burden will be a major one. My own calculations suggest that, assuming defendant's income does not much change (and again ignoring the attorneys' fee award) defendant is required to pay more than two-thirds of his after-tax income to plaintiff for the first four years; some 60% in the fifth year; about half of it in years 6 through 10; and nearly a third of it for five years after that. It is not until 15 years after the award that defendant's obligations (at that point consisting only of maintenance) diminish to something like 12% of his income (calculating both the income and the obligations on an after-tax basis). 1 I do not assert that the imposition of this level of burden on defendant is, as a matter of law, an abuse of discretion. It is possible that a careful comparison of defendant's resources and needs with the needs of plaintiff and the children would justify it. I do suggest, however, that it was an abuse of discretion for Supreme Court not even to consider whether the overall result of its various awards was fair. Indeed, it is not clear from Supreme Court's opinion that the court was even aware of the cumulative impact of its rulings. One portion of the opinion suggests that it was not: In awarding attorneys' and expert fees, the court listed the factors that it considered--the first of them being "the gross disparity between plaintiff's and defendant's income." Supreme Court may not have realized that, giving effect to decisions it had made earlier in its opinion, the "disparity" would be for several years in plaintiff's favor. I would therefore vacate Supreme Court's judgment and direct Supreme Court to reconsider it, giving due weight not just to the components of its rulings, but to their cumulative impact.
II In calculating child support, Supreme Court began, as the Child Support Standards Act (CSSA) requires, by considering the income of each party. It proceeded, however, on the false assumption that the income of each (prior to making the deductions permitted by statute) would be what it was before the divorce. This assumption was necessarily false, because Supreme Court's equitable distribution award required the transfer from defendant to plaintiff of 35% of the value of a significant income-producing asset. Supreme Court, applying our decision O'Brien treated as a marital "asset" what it described as "[t]he marital portion of the enhanced earning capacity of defendants's [sic] medical education, medical degree, medical license, residency and Board Certification in emergency medicine." In the next section of this dissent, I will try to show that it was error to apply O'Brien to this case, but Supreme Court did apply it, and I assume for purposes of this section of my opinion that Supreme Court was correct to do so. Indeed, to simplify matters, it is useful for present purposes to put aside the conceptual complexities of O'Brien and to analyze defendant's medical license as though it were any other income-producing asset--corporate stock, for example, or real property held for investment.
III The parties in this case were married for nineteen years before divorce proceedings began. Defendant was a doctor for more than sixteen of those years, and by the time of the divorce was earning an annual income of approximately $ 180,000. No suggestion was made by either party that that sum does not fully reflect the value of his medical license, or of other credentials he obtained in the early years of the marriage. In other words, this is not a case where one party made sacrifices to put the other through school, but was prevented by divorce from enjoying the resulting benefits. The benefits of the sacrifices both parties made have been enjoyed by both of them for more than a decade, and are fully reflected in defendant's current income.
Fourthly, a multi-year equitable distribution under O'Brien, unlike an award of maintenance, does not cease at the recipient's death or remarriage. It is possible to debate in particular cases whether, from the point of view of fairness, this is an advantage or disadvantage of the O'Brien approach. I do not think it will always be an advantage. In this case, for example, if the parties had remained married, and plaintiff had happened to pre-decease defendant, her estate would have had no claim on his law license, or the income derived from it. I do not see why divorce should change that. But even assuming that, in many or most cases, this feature of the O'Brien approach produces a more just result, I do not think the peripheral advantage thereby gained is worth the trouble. Where a court thinks the risk of injustice, in the event of death or remarriage, is significant in a particular case, devices much less cumbersome than O'Brien are available to mitigate the problem. Finally, it may be said that in characterizing annual payments to an ex-spouse as maintenance rather than a distributive award, the courts deny the recipient's status as "partner." The theory is that, to use this case as an example, plaintiff's contributions to defendant's attainment of his medical license make her equitably a 35% partner in the marital portion of that asset, and thus it is symbolically wrong to award her 35% of his income only as maintenance, rather than as something she owns. What is theoretically right or wrong in this area is a difficult, almost a metaphysical, question. 5 I do not propose to debate that question here. I think it enough to say that the pursuit of a theoretical or symbolic goal does not justify the practical burden involved in following the circuitous and confusing O'Brien route to a result which will be, in practical terms, usually no better and often worse than a simple award of maintenance.
We noted in McSparron that "in particular cases" the value of a professional license "may be nominal" (87 N.Y.2d at 285-286, 639 N.Y.S.2d 265, 662 N.E.2d 745). We quoted this language, italicizing the words "it may be nominal," in our later decision in Grunfeld (94 N.Y.2d at 704, 731 N.E.2d 142, 709 N.Y.S.2d 486). Cases like this one, I believe, exemplify the point that an O'Brien analysis will sometimes add nothing of substance to deciding the appropriate award in a matrimonial case. Where that is true, O'Brien should not be applied. IV
Accordingly, I would vacate the judgment below and remit the case for further proceedings consistent with the views I have expressed. Chief Judge Kaye and Judges G.B. Smith, Ciparick and Rosenblatt concur with Judge Graffeo; Judge R.S. Smith dissents in a separate opinion in which Judge Read concurs. Order affirmed, with costs
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