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(Redacted) DYM, Plaintiff, v. (Redacted) DYM, Defendant.
The defendant in this matter, (Redacted) Dym (hereinafter “Defendant”), filed an Order to Show Cause (Motion #5), seeking an order holding the plaintiff, (Redacted) Dym (hereinafter “Plaintiff”) in contempt for failing to pay $36,759.29 in arrears already ordered by the Court, plus interest; directing the payment of $4,379.00 in additional arrears; recalculating Plaintiff's child support obligation based upon increased income; awarding $5,032.00 for unreimbursed healthcare expenses; awarding $62,845.00 for educational expenses; and awarding $15,000.00 in counsel fees. Plaintiff filed opposition to Motion #5, to which Defendant filed a reply, along with a cross-motion (Motion #6) seeking $7,500.00 in counsel fees. In turn, Defendant filed opposition to the cross-motion, to which Plaintiff filed a reply. Oral arguments regarding both motions were heard on February 15, 2022, with both sides represented by counsel, and the Court's decision was reserved.
With respect to the arrears, certain facts are not in dispute. The parties were divorced by a Stipulation of Settlement dated November 25, 2013 (hereinafter “the Stipulation of Settlement”) and Judgment of Divorce dated June 25, 2014. On May 21, 2018, the parties appeared before Special Referee Robert Soos, whereupon Plaintiff was ordered to pay support in the amount of $1,428.41 biweekly, along with $36,795.29 in arrears, counsel fees, and other relief to Defendant. During the parties’ allocution before Special Referee Soos, it was agreed that the arrears would be paid from the sale of the marital residence located at (Redacted) Robinson Avenue in Staten Island, New York (hereinafter “the marital residence”).
Plaintiff subsequently filed for bankruptcy, which resulted in Defendant purchasing Plaintiff's share of equity in the marital residence.
I. Plaintiff's Obligation for to Pay Child Support Arrears Was Not Discharged or Satisfied by the Bankruptcy.
Prior to the bankruptcy, the marital residence was owned by Plaintiff, Defendant, and Defendant's mother in equal one-third shares. Plaintiff, Defendant, and Defendant's mother also owned a property located at (Redacted) Amboy Road in Staten Island, New York (hereinafter “the Amboy property”) in equal one-third shares. Plaintiff and Defendant also owned, with two other individuals, a property located at (Redacted) Seaview Avenue in Brooklyn, New York (hereinafter “the Seaview property”), in equal one-quarter shares. During the bankruptcy, Defendant and Defendant's mother paid $50,000.00 and transferred each of their shares of the Amboy property to the bankruptcy trustee in exchange for a split of Plaintiff's share in the marital residence and the Seaview property. Defendant and Defendant's mother now own the marital residence in equal one-half shares, and now own a portion of the Seaview property with three-eighths belonging to Defendant and one-eighth belonging to Defendant's mother.
Plaintiff argued that the arrears owed to Defendant have been more than satisfied through her acquisition of this equity, valued at approximately $107,000.00, from the bankruptcy trustee for $50,000.00, yielding a net gain of $57,000.00 in equity. Defendant countered that the arrears could not have been satisfied, because child support arrears are not dischargeable by law (11 USC § 523 [a] ), and Plaintiff was not a party to the transfer of equity in the marital residence between Defendant and the bankruptcy trustee.
The question presented is whether this Court can treat the child support arrears as resolved via the bankruptcy court proceeding. The Court looks to the Appellate Division for guidance.
The First Department dealt with a similar issue in Barax v. Barax, 246 A.D.2d 382, 667 N.Y.S.2d 733 (1st Dept. 1998), wherein a husband and wife faced a judgment for unpaid tuition for their children that was still unpaid at the time of divorce and, subsequently, the husband filed for and obtained a discharge in bankruptcy, which listed the unpaid tuition as a discharged debt. The Court held that this debt was “actually in the nature of alimony, maintenance, or support” and, accordingly, not dischargeable under 11 USC § 523 (a) (5) (B) (id. at 384, 667 N.Y.S.2d 733). The Court reasoned that if the husband were discharged, the wife would have to pay the entire judgment because it was entered against them jointly and, being that her sole source of income was the alimony and maintenance payments she received from the husband, his assumption of this debt was in lieu of higher alimony payments that would have enabled her to pay it, and the “inadequacy of her income and the child support payments to support herself and her child should she have remained primarily liable on the debts” weighed in favor of finding the debt non-dischargeable (id. at 385, 667 N.Y.S.2d 733, citing In re Petoske, 16 B.R. 412, 414 ).
In Topf v. Topf, 45 A.D.3d 760, 847 N.Y.S.2d 96 (2d Dept. 2007), the Second Department was required to consider the parties’ separation agreement which provided the defendant with a credit for childcare expenses, in exchange for the plaintiff's indebtedness to the mortgage on the marital residence. To the extent he made these payments on behalf of both parties, the separation agreement specified that he was to be credited with the plaintiff's share against his share of childcare expenses borne by the plaintiff. The Court found that the defendant's child support obligations were not dischargeable in bankruptcy, reasoning that if it found that the discharge included the mortgage, the plaintiff would then be required to make all of the mortgage payments and would be entitled to reimbursement for the defendant's share of childcare expenses thereafter, undiminished by payments he would otherwise have made on the mortgage.
The Court cannot simply extinguish a child support obligation when the mechanism emplaced to satisfy it is lost during a bankruptcy proceeding. In both of the aforementioned cases, the Courts evaluated how the custodial party would be impacted should the obligation be discharged. In Barax, the tuition obligation could not be discharged because the wife would be faced with the entire judgment held against her. In Topf, the mortgage could not be discharged because the plaintiff would be stuck with all of the mortgage payments. Here, the Court cannot simply assume that the arrears are satisfied through equity in certain real property that has not been liquidated, or that they will be satisfied upon some future liquidation.
According to the stipulation of settlement executed by Defendant, Defendant's mother, and the bankruptcy trustee on December 9, 2019 (hereinafter “the transfer agreement”), the marital residence was valued at $635,000.00 with $316,308.00 owed to Santander Bank, yielding total equity in the amount of $318,692.00. By increasing her share from one-third to one-half, Defendant realized a net gain of approximately $53,115.34 1 in equity. The transfer agreement valued the Amboy property at $326,456.00 with $191,023.00 owed to Nationstar Mortgage, LLC and $1,273.00 owed to the homeowners association, yielding total equity in the amount of $134,160.00. By transferring her one-third share of the Amboy property to the bankruptcy trustee, Defendant realized a net loss of approximately $44,720.00 2 in equity. Finally, the transfer agreement valued the Seaview property at $769,000.00 with $326,028.00 owed to Rushmore Loan Management and $8,040.00 exempted pursuant to 11 USC § 522 (d) (5), yielding total equity in the amount of $434,932.00. By increasing her share of the Seaview property from one-quarter to three-eights, Defendant realized a net gain of approximately $54,366.50 3 in equity.
In this case, Defendant appears to realize a total net benefit of approximately $62,761.84 4 through her increased equitable share in multiple parcels of real property. The valuations provided for those parcels, however, are unsubstantiated. The Court cannot make a finding of how much equity Defendant acquired through the transactions based simply on what the drafter of the transfer agreement decided to input. The Court has not seen any appraisals or any means by which the parties came to these valuations. Additionally, the Court is unable to determine how much cash was paid by either Defendant or Defendant's mother, as the relevant section of the transfer agreement merely states, “[Defendant] and [Defendant's mother] shall pay to the Trustee the sum of $50,000.00,” while the trustee's final report states that $50,000.00 was paid by Defendant's mother alone. The amount paid by Defendant, or a potential promise to pay her mother for some portion of that $50,000.00 outlay, further clouds the Court's view of how much of a benefit or loss she actually realized.
Furthermore, Plaintiff included the child support arrears as a priority unsecured claim on Form 106E/F, included in the bankruptcy petition, stating, “Child support arrears — per divorce settlement agreement ex-spouse is obligated to pay Debtor his share from buyout of [the marital residence], her child support arrears will be deducted from that buyout, but no arrears payment without buyout.” Correspondingly, the transfer agreement states, “The sale of the Trustee's right, title, and interest in [the marital residence] is subject to all liens, claims, and encumbrances on [the marital residence], including the mortgage held by Santander Bank and subject to higher and better offers.” It is evident that the arrears and the mechanism for their payment were contemplated by the bankruptcy court when the trustee and Defendant entered the transfer agreement.
The Court does not find that the arrears were discharged or satisfied through Plaintiff's bankruptcy proceeding.
With respect to the branch of Defendant's motion seeking further arrears, however, Plaintiff's offered no counterargument other than stating, “[Defendant] has been satisfied as to the arrears and actually was able to obtain $57,000.00 of my equity.” Accordingly, $4,379.00 in additional support allowed to accrue will be added to the arrears.
II. Plaintiff Will Not be Held in Contempt for Failing to Pay the Arrears.
Plaintiff's failure to pay child support as directed in the order dated May 21, 2018, constituted “prima facie evidence of a willful violation” of an order of support (Family Ct Act § 454  [a]; see Matter of Probert v. Probert, 67 A.D.3d 806, 888 N.Y.S.2d 181 [2d Dept. 2009]). The burden then shifted to Plaintiff to offer “some competent, credible evidence of [his] inability to make the required payments” (Family Ct Act § 454  [a]; Matter of Powers v. Powers, 86 N.Y.2d 63, 70, 629 N.Y.S.2d 984, 653 N.E.2d 1154 ). In this case, Plaintiff was clearly unable to pay because the only mechanism to facilitate that payment was lost in the bankruptcy, and the Court is not convinced that Plaintiff intentionally tried to frustrate Defendant's ability to correct the arrears by including his share of the marital residence in the bankruptcy.
In the absence of proof of an ability to pay, an order of commitment for willful violation of a judgment in a matrimonial action may not stand (Family Ct Act § 455 ; Bisnoff v. Bisnoff, 27 A.D.3d 606, 607, 811 N.Y.S.2d 442 [2d Dept. 2006]).
III. Healthcare Expenses, Education Expenses, and Upward Modification.
Section 7.9 of the Stipulation of Settlement requires that “The parties agree to consult with each other with respect to the education, religious training, health, welfare, and other matters of similar importance affecting the Children, whose well-being, education, and development at all times shall be the paramount consideration of the parties.” Section 8.6 of that agreement states that “[Plaintiff]’s pro rata share of future health care expenses not covered by insurance, child care expenses, educational and other extraordinary expenses is 85%,” and continues, “[Defendant] shall not incur any health care expenses not covered by insurance (except in cases of bona fide emergency), child care expenses, educational expenses, or other extraordinary expenses for the children without first receiving the advance consent of [Plaintiff] for the same, which consent shall not be unreasonably withheld.”
In the instant motion, Defendant seeks reimbursement of $5,032.00 paid for orthodontic work performed on their daughter, and $62,845.00 for education expenses.
Plaintiff argues that Defendant incurred these expenses without using an in-network provider for the orthodontic work, and without consulting him on either the orthodontic work or Defendant's decision to remove the children from public school and enroll them in a private school with tuition at or around $22,000.00 per year, in direct contravention of the Stipulation of Settlement. The Court agrees and, accordingly, Plaintiff will not be directed to reimburse Defendant for these expenses.
The Court also denies the branch of Defendant's motion seeking an upward modification of Plaintiff's child support obligation. Contrary to Defendant's contention, under the circumstances of this case the increase in Plaintiff's income does not constitute an unanticipated change in circumstances justifying an increase in child support (Friedman v. Friedman, 65 A.D.3d 1081, 1082, 885 N.Y.S.2d 720 [2d Dept. 2009], citing Matter of Boden v. Boden, 42 N.Y.2d 210, 213, 397 N.Y.S.2d 701, 366 N.E.2d 791 ; Matter of DiGiorgi v. Buda, 26 A.D.3d 434, 809 N.Y.S.2d 565 [2d Dept. 2006]). Nor was there a showing that the children's needs are not being adequately met (Matter of Imperato v. Imperato, 54 A.D.3d 375, 376, 862 N.Y.S.2d 585 [2d Dept. 2008]; Engel v. Jacobs, 297 A.D.2d 657, 658, 747 N.Y.S.2d 531 [2d Dept. 2002]).
IV. No Counsel Fees are Awarded to Either Party.
Regarding the branch of Defendant's motion seeking counsel fees, the record shows that Plaintiff's failure to pay the arrears owed to Defendant was not willful. Accordingly, that relief is denied (Domestic Relations Law § 237 [c]; Moheban v. Moheban, 149 A.D.2d 488, 540 N.Y.S.2d 717 [2d Dept. 1989]).
And although it has been determined that Defendant has not asserted a basis for the Court to make a finding of contempt, the Court does not find the motion frivolous (see Hae Sook Moon v. City of New York, 255 A.D.2d 292, 679 N.Y.S.2d 648 [2d Dept. 1998]). Accordingly, Plaintiff's cross-motion is also denied.
Based upon the foregoing, it is hereby:
ORDERED that Defendant's motion (#5) is granted to the extent that Plaintiff shall pay $4,379.00 in arrears to Defendant, in addition to the $36,759.29 in arrears previously owed to Defendant and neither discharged nor satisfied by Plaintiff's bankruptcy; and it is further
ORDERED that the branches of Defendant's motion (#5) seeking contempt, an upward modification of Plaintiff's child support obligation, reimbursement for healthcare expenses, reimbursement for education expenses, and counsel fees are all denied; and it is further
ORDERED that Plaintiff's cross-motion (#6) is denied in its entirety.
1. One-half of total equity ($159,346), less one-third of total equity ($106,230.66).
2. One-third of total equity ($44,720.00).
3. Three-eighths of total equity ($163,099.50), less one-quarter of total equity (108,733.00).
4. $53,115.34, less $44,720.00, plus $54,366.50.
Paul Marrone Jr., J.
Response sent, thank you
Docket No: Index No. 50474/2012
Decided: April 12, 2022
Court: Supreme Court, Richmond County, New York.
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