BLOCK v. BLOCK (1999)

Order and judgment (one paper), Supreme Court, New York County (Lori Sattler, Special Referee), entered on or about June 15, 1998, which directed defendant to pay $2500 per month in maintenance until the parties' youngest child enrolls in kindergarten and $2145 per month in child support, and to maintain health insurance for the parties' children and pay their unreimbursed medical, dental and optical expenses;  declared that plaintiff, not defendant, could claim the children as tax exemptions;  distributed to plaintiff 50% of the value of defendant's law practice valued as of the commencement of the action except for cases in progress, 25% of the fees to be earned by defendant in contingency fee cases he commenced prior to the commencement of the action, and 50% of the proceeds to be realized on the sale of the marital home;  directed defendant to pay pendente lite arrears of $7668.31, a home equity loan in the amount of $26,859.65 plus interest, $2850 for plaintiff's psychologist, reimbursements of $821.46 for payments made on his behalf, and $60,000 of plaintiff's legal fees;  declared that plaintiff would effect the sale of the marital home;  directed that defendant continue making home mortgage and tax payments and that he be credited for such payments from the proceeds of the sale of the home;  and referred the issue of custody and visitation of the parties' children to the Family Court, which order and judgment brings up for review an order of the same court (Walter Tolub, J.), entered on or about January 12, 1998, which directed the Special Referee to consider as marital property defendant's contingency fee cases commenced prior to the commencement of this action, unanimously modified, on the law and the facts, to vacate the directives that defendant pay $26,859.65 plus interest for the home equity loan incurred by plaintiff and $2850 for her psychologist;  to provide that maintenance payments are not to be deducted from the calculation of defendant's child support obligations, and that he, not plaintiff, is entitled to claim both children as tax exemptions;  to provide that the value of the contingency fee cases commenced during the marriage is to be determined by comparing the percentage of time spent by defendant during the marriage with the total time he spent in reaching each ultimate recovery;  and the case is remanded for consideration of equitable distribution based on that methodology, along with consideration of defendant's application to enter the marital home to retrieve personal property;  and the order and judgment otherwise affirmed, all without costs.

Justice Tolub's January 12, 1998 order merely determined, after defendant had an opportunity to address the issue, a question of law appropriate for consideration before trial (see, DeJesus v. DeJesus, 90 N.Y.2d 643, 647, 665 N.Y.S.2d 36, 687 N.E.2d 1319), namely, that the contingency fee cases defendant had commenced prior to the commencement of the instant divorce action are part of his firm's assets or value, and therefore constitute marital property (see, Litman v. Litman, 123 A.D.2d 310, 312, 506 N.Y.S.2d 345;  Garrett v. Garrett, 140 Ariz. 564, 567, 683 P.2d 1166, 1169 [Ariz. Ct. App.];  In re Marriage of Vogt, 773 P.2d 631, 632 [Colo. Ct. App.];   see also, Burns v. Burns, 84 N.Y.2d 369, 376, 618 N.Y.S.2d 761, 643 N.E.2d 80).

 Although the parties and the Special Referee agreed that it would be prohibitively costly and time consuming, as well as speculative, to value the contingent cases based on the files, nevertheless, it was an improvident exercise of discretion to assign an arbitrary 25% of the net fees to be recovered as plaintiff's equitable share, the proper method being to compare the percentage of time spent by defendant during the marriage with the total time he spent in reaching each ultimate recovery (see, In re Garrett v. Garrett, supra, 140 Ariz. at 568, 683 P.2d at 1170;  In re Vogt, supra, at 633).   Accordingly, the case is remanded to the Special Referee to determine equitable distribution based upon that methodology, along with defendant's unaddressed request for access to the marital home to retrieve personal belongings.

 The capitalization of earnings approach to value the goodwill of defendant's practice was appropriate (see, Davis v. Davis, 128 A.D.2d 470, 475, 513 N.Y.S.2d 405), as was the application of a weighted average to reflect increasing income and a capitalization factor of 33 1/3% to reflect the risks and likelihood of success.   The Special Referee considered all the Domestic Relations Law § 236(B)(5)(d) factors in reaching an equitable distribution of 50% of the goodwill to plaintiff over the course of four years, which we decline to disturb.

 The Special Referee also properly weighed plaintiff's ability to re-enter the workforce, the income defendant is capable of earning and the parties' standard of living prior to the divorce in awarding maintenance of $2500 per month only until the parties' youngest child is enrolled in kindergarten (see, Kay v. Kay, 37 N.Y.2d 632, 637-638, 376 N.Y.S.2d 443, 339 N.E.2d 143;  Brownstein v. Brownstein, 167 A.D.2d 127, 129, 561 N.Y.S.2d 216, lv. denied 77 N.Y.2d 806, 569 N.Y.S.2d 610, 572 N.E.2d 51).

 The calculation of defendant's expected income, in determining child support, was well founded, but the amount of maintenance should not have been deducted from his income, since there was no provision for a concomitant increase in child support upon termination of maintenance (see, Lekutanaj v. Lekutanaj, 234 A.D.2d 429, 431, 651 N.Y.S.2d 154;  Huber v. Huber, 229 A.D.2d 904, 905, 645 N.Y.S.2d 211).   In addition, since defendant is bearing the entire cost of the children's financial needs, he, not plaintiff, should be permitted to declare them as tax exemptions (see, Burns v. Burns, 193 A.D.2d 1104, 1105, 598 N.Y.S.2d 888, mod. on other grounds 84 N.Y.2d 369, 618 N.Y.S.2d 761, 643 N.E.2d 80).

 The $26,859.65 home equity loan incurred by plaintiff effectively supplemented the pendente lite awards of maintenance, child support, counsel fees and necessary household expenses, and thus defendant should not be required to pay it.   The Special Referee misapprehended Justice Tolub's order with respect to plaintiff's psychologist bills, which also should not be borne by defendant.   The remaining arrears and reimbursements were proper expenses for which defendant is liable.

The award of $60,000 of plaintiff's counsel fees properly took into consideration her ability to pay them, as well as the obstructive tactics of defendant and his counsel observed by the Special Referee (see, DeCabrera v. Cabrera-Rosete, 70 N.Y.2d 879, 881-882, 524 N.Y.S.2d 176, 518 N.E.2d 1168;  Lammers v. Lammers, 227 A.D.2d 255, 642 N.Y.S.2d 658, lv. denied 89 N.Y.2d 860, 653 N.Y.S.2d 282, 675 N.E.2d 1235).

It was a proper exercise of discretion to direct plaintiff to effect the sale of the house and to credit defendant with the home mortgage and tax payments he was directed to continue making.

The issue of custody and visitation was properly referred to the Family Court for consideration of the best interests of the children.

MEMORANDUM DECISION.