The Matrimonial 'Dating Game'

A closely related issue arises with respect to valuation. DRL ' 236(B)(4)(b) mandates that the court set the valuation date for each asset 'anytime from the date of commencement of the action to the date of trial.' As with classification, the question is whether the commencement date of a prior unsuccessful action can be used to shield value that may have accrued after commencement of the earlier action but before commencement of the current action.

Recent Appellate Decisions

No fewer than three appellate-level decisions have treated this issue in the past year. In Cozad v. Colonel, __ A.D.2d, 747 N.Y.S.2d 641 (Fourth Dept. 2002), the Appellate Division, Fourth Department, held that plaintiff's previously dismissed divorce action did not constitute a 'matrimonial action' for either classification or valuation date purposes. Such an action falls outside the meaning of both DRL ' 236(B)(1)(c) and DRL ' 236(B)(4)(b) because it neither ended the marriage nor resulted in equitable distribution of the parties' property.

The Third Department, in O'Connell v. O'Connell, 290 A.D.2d 774, 736 N.Y.S.2d 728 (Third Dept. 2002), held likewise, stating, 'The term 'matrimonial action' in Domestic Relations Law ' 236(B)(1)(c) does not include an action which, by virtue of a dismissal or discontinuance, neither terminates the marriage nor results in the equitable distribution of the parties' property.'

In Cater v. Cater, 294 A.D.2d 783, 742 N.Y.S.2d 718 (Third Dept. 2002), the Appellate Division reversed a trial court that used the commencement date of a dismissed action as the terminal date for measuring the marital portion of the husband's pension. Citing O'Connell, the Appellate Division stated, 'This Court recently made it clear that the economic partnership of a marriage will not end with the commencement of an unsuccessful matrimonial action and that it is the date of commencement of the current successful action that controls.'

These holdings are consistent with the Court of Appeals' determination, made a decade ago, in Angling v. Angling, 80 N.Y.2d 553, 592 N.Y.S.2d 630 (1992), that 'the commencement of a separation action does not close the marital estate because it neither dissolves the marriage nor does it determine equitable distribution rights. The court made clear that '[t] he economic partnership should be considered dissolved when a matrimonial action is commenced which seeks divorce, or the dissolution, annulment or declaration of the nullity of a marriage, i.e., an action in which equitable distribution is available [emphasis added].'

Because equitable distribution may not be granted until a court dissolves the marriage, it is not available in an action that ends in dismissal or discontinuance. Thus, the commencement date of such an action is irrelevant for purposes of classifying the assets. Much of the litigation discussed above emerged from the use of the arguably ambiguous phrase 'a matrimonial action' in the statutory definition of marital property given in DRL ' 236(B)(1)(c). DRL ' 236 (B)(4)(b), governing the valuation date, would seem to brook no such argument. It provides explicitly that the earliest point at which assets may be valued is 'the date of commencement of the action. 'To argue that legislative use of the specific article 'the' should be construed to refer to any action other than the one in which the valuation date is being fixed would strain the English language to the breaking point.'

Equitable Impulses Produce Anomalies

Yet, notwithstanding such clear statutory language, a number of decisions from the Appellate Division, Second Department, have expressed the view that the court has the discretion to exceed the expressed parameters of DRL ' 236(B)(4)(b) and use the commencement date of a dismissed or discontinued action as the valuation date in a subsequent divorce action. For example, in Martinique v. Martinique, 288 A.D.2d 444, 737 N.Y.S.2d 371 (Second Dept. 2001), the court stated, 'Trial courts have the discretion to select valuation dates 'which are appropriate and fair under the particular facts and circumstances presented” (Cohn v. Cohn, 155 AD2d 412, 413, 547 NYS2d 85). Under the circumstances of this case, the court providently exercised its discretion in denying the defendant's motion to fix the date of the commencement of the plaintiff's previous, dismissed action as the valuation date (see, Macron v. Macron, 240 AD2d 641, 658 NYS2d 702; Nee v. Nee, 240 AD2d 478, 658 NYS2d 440; Domestic Relations Law ' 236 (B)(4)(b)).'

While DRL ' 236(b)(4)(b) certainly grants the court discretion to designate a valuation date within the statutory parameters (see McCarran v. McCarran, 87 N.Y.2d 275; Bushman v. Bushman, 297 A.D. 333, 746 N.Y.S.2d 319 (Second Dept. 2002)), ie, between date of commencement of the action and the date of trial, the Second Department sees the court's discretion as extending beyond those statutory bounds. In Thomas v. Thomas, 221 A.D.2d 621, 634 N.Y.S.2d 496 (Second Dept. 1995), and Lambda v. Lambda, 266 A.D.2d 515, 698 N.Y.S.2d 715 (Second Dept. 1999), the court took the position that the commencement date of the earlier action controlled unless it was shown that following its termination 'the parties either reconcile or continue the marital relationship and continue to receive the benefits of the relationship.'

The rationale of these decisions is that the earlier action signifies the demise of the marital partnership and that sharing after-acquired assets would be a windfall to the non-titled spouse. McMahon v. McMahon, 187 Misc.2d 364, 722 N.Y.S.2d 723 (Sup. Ct., N.Y. Cty., Gauche, J., 2001).

Equitable Solution: Contribution/Distribution Analysis

One of the most articulate judicial clarifications of this issue is an opinion by Justice Gische in McMahon v. McMahon. In this case, after the wife commenced an action for divorce, the husband became substantially wealthier because his employer took the company public. The husband asserted that his newfound wealth was separate property because it was acquired after commencement of the action. Because no complaint had been served, the wife discontinued the litigation as a matter of right. In her subsequently commenced second divorce action, the husband moved to have the date of commencement of the discontinued action control classification of marital property.

In a carefully constructed opinion, Justice Gische rejected the husband's argument that the court had discretion to use the earlier commencement date to classify the assets: 'The statute was designed to present a clear standard by which the courts could classify the parties' assets for equitable distribution purposes. To the extent the statute refers to the commencement of a matrimonial action, husband assumes too much in arguing that it refers to any matrimonial action commenced at any time between the parties. A plain reading of the statute requires a conclusion that the matrimonial action referenced in the statute is the one actually pending before the court at the time equitable distribution is determined.'

In addressing the contrary Second Department decisions on which the husband relied, Justice Gische spoke to a fundamental principle of equitable distribution: 'Notably, the harm claimed is not as great as husband perceives. The court's right to exercise discretion in marital distribution cases does not lie in the statutory definitions that control classification of marital assets. The discretion lies in the court's power to determine a percentage of distribution that it considers equitable, depending upon the factors of each particular case. If husband succeeds in convincing this court that wife's contributions in obtaining the IPO benefits were negligible, then this court may take it into consideration when distributing this asset.'

This is indeed the critical point which, when missed, leads to erratic results. In Step 1 of the process, the only issue determined is whether an asset is to be included in the marital estate. Classification does not determine whether, in fact, the asset will be divided in any particular proportion or, indeed, divided at all. That discretionary determination must await Step 3, when the court applies the statutory distribution factors to the facts and circumstances of the case. The Court of Appeals has noted the distinction, stating, 'At the outset, we note that, while the method of equitable distribution of marital property is properly a matter within the trial court's discretion, the initial determination of whether a particular asset is marital or separate property is a question of law, subject to plenary review on appeal. DeJesus v. DeJesus, 90 N.Y.2d 643, 687 N.E.2d 1319, 665 N.Y.S.2d 36 (1997).'

In essence, DRL ' 236(B) is structured to tie the hands of the court in Step 1 ' classification ' binding it to the legal parameters specified in the statutory definition of marital property. In Step 2 ' valuation ' the judicial hands are also tied by DRL ' 236(B)(4)(b), though to a lesser degree, permitting a valuation date no earlier than the date of commencement of the action and no later than the date of trial. However, in Step 3 ' the distribution phase ' the statute frees the court's hands by investing substantial discretion, allowing it to 'do equity' to the parties, subject only to the statutory requirement that it consider the delineated distribution factors.

In making the distributive determination, there is neither a statutory mandate nor a doctrinal presumption of equal division. Arvantides v. Arvantides, 64 N.Y.2d 1033, 478 N.E.2d 199, 489 N.Y.S.2d 58 (1985). The court may properly award 100% of an asset to the spouse who acquired it based on the absence of contribution toward its acquisition by the other party.

An excellent example of this approach can be found in Musumeci v. Musumeci, 133 Misc.2d 139, 506 N.Y.S.2d 629 (Sup. Ct., Suffolk Co., Yachnin, J. 1986). 'There, the parties had been separated for many years before the divorce action was commenced. Though constrained to classify and value assets as of the commencement of the action, the court proceeded to draw a factual distinction between that portion of the husband's pension that was acquired while the parties were still together ' ie, when the economic partnership of the marriage was still factually extant ' and that which accrued after its factual demise. The court found that the wife had contributed to 50% of the first 29 months of the marriage but to 0% of the balance of 46.5 months, and fashioned its award accordingly. Like Justice Gische in McMahon, the court in Musumeci was cognizant of the critical distinction between the three discrete steps of the equitable distribution process.

Conclusion

The occasional confusion of these steps, and the concomitant strain on the statute imposed by decisions that reach back to moribund actions for classification and valuation purposes, is a consequence of the 'unwritten presumption' that marital property should be divided equally. Any seasoned practitioner can attest to the practical reality that a very heavy burden of persuasion rests on a litigant who seeks more than 50% of the marital estate. Though equal division may often be appropriate, the statute embraces no such presumption and contemplates that this should be a case-by-case determination based on analysis of the parties' respective contributions, as well as the other statutory distribution factors. Once the equitable distribution process is understood as comprising three discrete steps, with ample discretion being reposed in the third stage of the process, the equitable impulse to stretch the classification and valuation date rules is lifted, and the uncertainties of the matrimonial dating game are avoided.

Timothy M. Tippins is head of the matrimonial department of O'Connell & Aronowitz in Albany, NY.

A review of equitable distribution decisions in any given year can leave one reeling, if not from the novelty of the holdings, then certainly from the frequency with which certain fundamental issues are re-litigated with the predictability of the perennials of springtime.

One such recurrent issue is the impact of a dismissed or discontinued matrimonial action on the classification and valuation of marital property. The context of the issue is this: The matrimonial court, in administering the equitable distribution statute, must undertake a three-step process: 1) Classify assets as either marital or separate property; 2) Fix the value of each marital asset as of a designated valuation date; and 3) Determine the distributive percentage of marital property that each spouse will receive.

Classification is governed by DRL ' 236(B)(1)(c), which defines marital property as those assets acquired between date of marriage and the date of commencement of 'a matrimonial action.' Where a prior matrimonial action was dismissed or discontinued and is then followed by a second action, the question becomes which commencement date controls classification? If it is the earlier action, anything acquired between the two commencement dates will be immunized from distribution. If the latter action controls, those assets come into the marital estate.

A closely related issue arises with respect to valuation. DRL ' 236(B)(4)(b) mandates that the court set the valuation date for each asset 'anytime from the date of commencement of the action to the date of trial.' As with classification, the question is whether the commencement date of a prior unsuccessful action can be used to shield value that may have accrued after commencement of the earlier action but before commencement of the current action.

Recent Appellate Decisions

No fewer than three appellate-level decisions have treated this issue in the past year. In Cozad v. Colonel, __ A.D.2d, 747 N.Y.S.2d 641 (Fourth Dept. 2002), the Appellate Division, Fourth Department, held that plaintiff's previously dismissed divorce action did not constitute a 'matrimonial action' for either classification or valuation date purposes. Such an action falls outside the meaning of both DRL ' 236(B)(1)(c) and DRL ' 236(B)(4)(b) because it neither ended the marriage nor resulted in equitable distribution of the parties' property.

The Third Department, in O'Connell v. O'Connell , 290 A.D.2d 774, 736 N.Y.S.2d 728 (Third Dept. 2002), held likewise, stating, 'The term 'matrimonial action' in Domestic Relations Law ' 236(B)(1)(c) does not include an action which, by virtue of a dismissal or discontinuance, neither terminates the marriage nor results in the equitable distribution of the parties' property.'

In Cater v. Cater , 294 A.D.2d 783, 742 N.Y.S.2d 718 (Third Dept. 2002), the Appellate Division reversed a trial court that used the commencement date of a dismissed action as the terminal date for measuring the marital portion of the husband's pension. Citing O'Connell, the Appellate Division stated, 'This Court recently made it clear that the economic partnership of a marriage will not end with the commencement of an unsuccessful matrimonial action and that it is the date of commencement of the current successful action that controls.'

These holdings are consistent with the Court of Appeals' determination, made a decade ago, in Angling v. Angling , 80 N.Y.2d 553, 592 N.Y.S.2d 630 (1992), that 'the commencement of a separation action does not close the marital estate because it neither dissolves the marriage nor does it determine equitable distribution rights. The court made clear that '[t] he economic partnership should be considered dissolved when a matrimonial action is commenced which seeks divorce, or the dissolution, annulment or declaration of the nullity of a marriage, i.e., an action in which equitable distribution is available [emphasis added].'

Because equitable distribution may not be granted until a court dissolves the marriage, it is not available in an action that ends in dismissal or discontinuance. Thus, the commencement date of such an action is irrelevant for purposes of classifying the assets. Much of the litigation discussed above emerged from the use of the arguably ambiguous phrase 'a matrimonial action' in the statutory definition of marital property given in DRL ' 236(B)(1)(c). DRL ' 236 (B)(4)(b), governing the valuation date, would seem to brook no such argument. It provides explicitly that the earliest point at which assets may be valued is 'the date of commencement of the action. 'To argue that legislative use of the specific article 'the' should be construed to refer to any action other than the one in which the valuation date is being fixed would strain the English language to the breaking point.'

Equitable Impulses Produce Anomalies

Yet, notwithstanding such clear statutory language, a number of decisions from the Appellate Division, Second Department, have expressed the view that the court has the discretion to exceed the expressed parameters of DRL ' 236(B)(4)(b) and use the commencement date of a dismissed or discontinued action as the valuation date in a subsequent divorce action. For example, in Martinique v. Martinique , 288 A.D.2d 444, 737 N.Y.S.2d 371 (Second Dept. 2001), the court stated, 'Trial courts have the discretion to select valuation dates 'which are appropriate and fair under the particular facts and circumstances presented” ( Cohn v. Cohn , 155 AD2d 412, 413, 547 NYS2d 85). Under the circumstances of this case, the court providently exercised its discretion in denying the defendant's motion to fix the date of the commencement of the plaintiff's previous, dismissed action as the valuation date ( see, Macron v. Macron , 240 AD2d 641, 658 NYS2d 702; Nee v. Nee , 240 AD2d 478, 658 NYS2d 440; Domestic Relations Law ' 236 (B)(4)(b)).'

While DRL ' 236(b)(4)(b) certainly grants the court discretion to designate a valuation date within the statutory parameters ( see McCarran v. McCarran , 87 N.Y.2d 275; Bushman v. Bushman , 297 A.D. 333, 746 N.Y.S.2d 319 (Second Dept. 2002)), ie , between date of commencement of the action and the date of trial, the Second Department sees the court's discretion as extending beyond those statutory bounds. In Thomas v. Thomas , 221 A.D.2d 621, 634 N.Y.S.2d 496 (Second Dept. 1995), and Lambda v. Lambda, 266 A.D.2d 515, 698 N.Y.S.2d 715 (Second Dept. 1999), the court took the position that the commencement date of the earlier action controlled unless it was shown that following its termination 'the parties either reconcile or continue the marital relationship and continue to receive the benefits of the relationship.'

The rationale of these decisions is that the earlier action signifies the demise of the marital partnership and that sharing after-acquired assets would be a windfall to the non-titled spouse. McMahon v. McMahon , 187 Misc.2d 364, 722 N.Y.S.2d 723 (Sup. Ct., N.Y. Cty., Gauche, J., 2001).

Equitable Solution: Contribution/Distribution Analysis

One of the most articulate judicial clarifications of this issue is an opinion by Justice Gische in McMahon v. McMahon. In this case, after the wife commenced an action for divorce, the husband became substantially wealthier because his employer took the company public. The husband asserted that his newfound wealth was separate property because it was acquired after commencement of the action. Because no complaint had been served, the wife discontinued the litigation as a matter of right. In her subsequently commenced second divorce action, the husband moved to have the date of commencement of the discontinued action control classification of marital property.

In a carefully constructed opinion, Justice Gische rejected the husband's argument that the court had discretion to use the earlier commencement date to classify the assets: 'The statute was designed to present a clear standard by which the courts could classify the parties' assets for equitable distribution purposes. To the extent the statute refers to the commencement of a matrimonial action, husband assumes too much in arguing that it refers to any matrimonial action commenced at any time between the parties. A plain reading of the statute requires a conclusion that the matrimonial action referenced in the statute is the one actually pending before the court at the time equitable distribution is determined.'

In addressing the contrary Second Department decisions on which the husband relied, Justice Gische spoke to a fundamental principle of equitable distribution: 'Notably, the harm claimed is not as great as husband perceives. The court's right to exercise discretion in marital distribution cases does not lie in the statutory definitions that control classification of marital assets. The discretion lies in the court's power to determine a percentage of distribution that it considers equitable, depending upon the factors of each particular case. If husband succeeds in convincing this court that wife's contributions in obtaining the IPO benefits were negligible, then this court may take it into consideration when distributing this asset.'

This is indeed the critical point which, when missed, leads to erratic results. In Step 1 of the process, the only issue determined is whether an asset is to be included in the marital estate. Classification does not determine whether, in fact, the asset will be divided in any particular proportion or, indeed, divided at all. That discretionary determination must await Step 3, when the court applies the statutory distribution factors to the facts and circumstances of the case. The Court of Appeals has noted the distinction, stating, 'At the outset, we note that, while the method of equitable distribution of marital property is properly a matter within the trial court's discretion, the initial determination of whether a particular asset is marital or separate property is a question of law, subject to plenary review on appeal. DeJesus v. DeJ esus, 90 N.Y.2d 643, 687 N.E.2d 1319, 665 N.Y.S.2d 36 (1997).'

In essence, DRL ' 236(B) is structured to tie the hands of the court in Step 1 ' classification ' binding it to the legal parameters specified in the statutory definition of marital property. In Step 2 ' valuation ' the judicial hands are also tied by DRL ' 236(B)(4)(b), though to a lesser degree, permitting a valuation date no earlier than the date of commencement of the action and no later than the date of trial. However, in Step 3 ' the distribution phase ' the statute frees the court's hands by investing substantial discretion, allowing it to 'do equity' to the parties, subject only to the statutory requirement that it consider the delineated distribution factors.

In making the distributive determination, there is neither a statutory mandate nor a doctrinal presumption of equal division. Arvantides v. Arvantides , 64 N.Y.2d 1033, 478 N.E.2d 199, 489 N.Y.S.2d 58 (1985). The court may properly award 100% of an asset to the spouse who acquired it based on the absence of contribution toward its acquisition by the other party.

An excellent example of this approach can be found in Musumeci v. Musumeci , 133 Misc.2d 139, 506 N.Y.S.2d 629 (Sup. Ct., Suffolk Co., Yachnin, J. 1986). 'There, the parties had been separated for many years before the divorce action was commenced. Though constrained to classify and value assets as of the commencement of the action, the court proceeded to draw a factual distinction between that portion of the husband's pension that was acquired while the parties were still together ' ie, when the economic partnership of the marriage was still factually extant ' and that which accrued after its factual demise. The court found that the wife had contributed to 50% of the first 29 months of the marriage but to 0% of the balance of 46.5 months, and fashioned its award accordingly. Like Justice Gische in McMahon, the court in Musumeci was cognizant of the critical distinction between the three discrete steps of the equitable distribution process.

Conclusion

The occasional confusion of these steps, and the concomitant strain on the statute imposed by decisions that reach back to moribund actions for classification and valuation purposes, is a consequence of the 'unwritten presumption' that marital property should be divided equally. Any seasoned practitioner can attest to the practical reality that a very heavy burden of persuasion rests on a litigant who seeks more than 50% of the marital estate. Though equal division may often be appropriate, the statute embraces no such presumption and contemplates that this should be a case-by-case determination based on analysis of the parties' respective contributions, as well as the other statutory distribution factors. Once the equitable distribution process is understood as comprising three discrete steps, with ample discretion being reposed in the third stage of the process, the equitable impulse to stretch the classification and valuation date rules is lifted, and the uncertainties of the matrimonial dating game are avoided.

Timothy M. Tippins is head of the matrimonial department of O'Connell & Aronowitz in Albany, NY.