Decisions of Interest

Parenting Agreement Can't Substitute for Separation Agreement

Holding that a “parenting plan agreement” does not constitute a “separation agreement,” the Appellate Division, Fourth Department, ruled that a separated couple's agreement concerning custody and visitation for their three children did not satisfy the “agreement” element of the state's only no-fault grounds for divorce, which requires couples to live apart for at least one year, according to the terms of either a separation agreement or judicial judgment of separation. Scully v. Haar, 67 AD3d 1331, — N.Y.S.2d —-, 2009 WL 3790417 (4th Dept. 11/13/09) (Hurlbutt, J.P., Fahey, Peradotto and Pine, JJ.).

In its unsigned opinion, the three-member majority wrote, “We conclude, particularly in light of the circumstances in which the agreement was made, that it does not 'evidenc[e]' the parties' agreement to live separate and apart.” Therefore, they found that the agreement did not satisfy the statutory requirement that there be a separation agreement in force during the one-year term of living apart.

The one holdout, Justice Erin M. Peradotto, wrote in her dissenting opinion that the majority had overlooked the legislative purpose behind the separation-agreement requirement. “[I]t is the physical separation of the parties, not the written agreement, that supplies the ground for a divorce pursuant to Domestic Relations Law ' 170 (6),” she wrote. “Indeed, the written agreement is simply intended as evidence of the authenticity and reality of the separation.” (Internal quotes omitted.) Here, there was no dispute that the parties had been living separate and apart for much longer than the statutory one-year period. Under these circumstances, Justice Peradotto argued, the parenting agreement should have constituted enough evidence of the separation, in spite of the fact that it dealt only with issues concerning the couple's children.

Adoption Is Final Only When Final

Family Court, Kings County, refused to back date its order of adoption, although doing so would have rendered the adopted child a naturalized citizen, because doing so would require it to fictitiously claim that the adoption matter had been concluded earlier than it was. Matter of the Adoption of Sade, Slip Copy, 25 Misc.3d 1236(A), 2009 WL 4546645, (Fam. Ct., Kings Cty. 12/1/09) (Weinstein, J.).

Over the course of several years, the petitioner worked through the process of adopting her niece. There were numerous delays, most due to the failure of the petitioner to provide all of the required documents. As her niece's 16th birthday approached, the aunt attempted to expedite the adoption, as doing so prior to the child's 16th birthday would make the girl a naturalized citizen upon adoption. Any later and her citizenship would not be automatic. When it became clear that all of the proper paperwork and proceedings could not be completed prior to the child's 16th birthday, the aunt petitioned the court seeking to have the adoption order dated nunc pro tunc to May 1, 2009, three days prior to the child's birthday. The court noted that nunc pro tunc orders are used either to correct irregularities and procedural errors contained within existing orders, or to enter an order that otherwise should have been entered based on a ruling that had already been made. However, courts are not authorized to use a nunc pro tunc order to record a fact as if it were true on a prior date. Matter of MacEwan, 280 App.Div. 193 (4th Dept., 1952). In addition, the court noted that the fundamental purpose of an adoption is to establish the legal status of parent and child. That status does not become final until the order of adoption is signed pursuant to Domestic Relations Law (DRL) ' 114. The statutory language of DRL '114 states, in part, “the child shall thenceforth be regarded and treated in all respects as the child of the parent.” The court read this and found that the word “thenceforth” was prohibitive in that it means “from this time forward, that is, from the time of the making of the order.” Thus, an order that relates back in time would be contrary to the express statutory provisions and would therefore be void. Consequently, the court denied the request, reasoning that the exigency in this matter was not created by the court's actions, and the law did not support it back-dating its order.

Deferral of Incentive Fees Comes Back to Haunt

The appellate court held that deferred incentive fees, earned during a couple's marriage and owed to the husband's investment management company, should have been treated as income to the husband rather than as business assets for divorce distribution purposes. Wyser-Pratte v. Wyser-Pratte, — N.Y.S.2d —-, 2009 WL 4910682 (1st Dept. 12/22/09), 2009 N.Y. Slip Op. 09531 (Mazzarelli, J.P., Sweeny, Catterson, Freedman, Rom'n, JJ.).

Supreme Court, New York County (Joan B. Lobis, J.), distributed the couple's assets in the following manner: The husband's business assets went 65% to him and 35% to his wife, while other marital assets were divided equally. The court's reasoning for the disparity concerning business assets was that the husband already held substantial business assets at the time of the couple's marriage, and he also already possessed the strong business acumen that allowed the couple to live a lavish lifestyle during their marriage. The wife appealed concerning some deferred incentive fees owed to the husband's investment management company. She said they should not have been treated as business assets subject to the 65%/35% division, but should have been distributed on a 50/50 basis. The appellate court noted that although the subject fees, which totaled $31,020,400, were earned by the husband's company for managing a hedge fund from 1996 through 2000, he had caused the company to defer receipt of payment from the fund, and it remains unpaid. Upon eventual payment to the company (which is a Subchapter S corporation), the fees will be taxable to the husband as income. The husband acknowledged that he deferred their receipt to postpone paying personal income tax. He also claimed, however, that the deferral was intended to benefit the fund's performance by increasing the amount available for investment. Despite this, the court held that “under the circumstances, where [the husband] chose not to realize profits from his business that were earned years before the commencement of this action, the deferred fees constitute marital property to be divided equally.”

The deferred fees in question are subject to a 48.77% tax, leaving an after-tax value of $15,896,135. Dividing this to give each party 50%, the appellate court determined the wife should have been awarded $7,948,067, an increase of $2,384,420 from the lower court's award to her of a 35% share, or $5,563,647.

Parenting Agreement Can't Substitute for Separation Agreement

Holding that a “parenting plan agreement” does not constitute a “separation agreement,” the Appellate Division, Fourth Department, ruled that a separated couple's agreement concerning custody and visitation for their three children did not satisfy the “agreement” element of the state's only no-fault grounds for divorce, which requires couples to live apart for at least one year, according to the terms of either a separation agreement or judicial judgment of separation. Scully v. Haar , 67 AD3d 1331, — N.Y.S.2d —-, 2009 WL 3790417 (4th Dept. 11/13/09) (Hurlbutt, J.P., Fahey, Peradotto and Pine, JJ.).

In its unsigned opinion, the three-member majority wrote, “We conclude, particularly in light of the circumstances in which the agreement was made, that it does not 'evidenc[e]' the parties' agreement to live separate and apart.” Therefore, they found that the agreement did not satisfy the statutory requirement that there be a separation agreement in force during the one-year term of living apart.

The one holdout, Justice Erin M. Peradotto, wrote in her dissenting opinion that the majority had overlooked the legislative purpose behind the separation-agreement requirement. “[I]t is the physical separation of the parties, not the written agreement, that supplies the ground for a divorce pursuant to Domestic Relations Law ' 170 (6),” she wrote. “Indeed, the written agreement is simply intended as evidence of the authenticity and reality of the separation.” (Internal quotes omitted.) Here, there was no dispute that the parties had been living separate and apart for much longer than the statutory one-year period. Under these circumstances, Justice Peradotto argued, the parenting agreement should have constituted enough evidence of the separation, in spite of the fact that it dealt only with issues concerning the couple's children.

Adoption Is Final Only When Final

Family Court, Kings County, refused to back date its order of adoption, although doing so would have rendered the adopted child a naturalized citizen, because doing so would require it to fictitiously claim that the adoption matter had been concluded earlier than it was. Matter of the Adoption of Sade, Slip Copy, 25 Misc.3d 1236(A), 2009 WL 4546645, (Fam. Ct., Kings Cty. 12/1/09) (Weinstein, J.).

Over the course of several years, the petitioner worked through the process of adopting her niece. There were numerous delays, most due to the failure of the petitioner to provide all of the required documents. As her niece's 16th birthday approached, the aunt attempted to expedite the adoption, as doing so prior to the child's 16th birthday would make the girl a naturalized citizen upon adoption. Any later and her citizenship would not be automatic. When it became clear that all of the proper paperwork and proceedings could not be completed prior to the child's 16th birthday, the aunt petitioned the court seeking to have the adoption order dated nunc pro tunc to May 1, 2009, three days prior to the child's birthday. The court noted that nunc pro tunc orders are used either to correct irregularities and procedural errors contained within existing orders, or to enter an order that otherwise should have been entered based on a ruling that had already been made. However, courts are not authorized to use a nunc pro tunc order to record a fact as if it were true on a prior date. Matter of MacEwan, 280 App.Div. 193 (4th Dept., 1952). In addition, the court noted that the fundamental purpose of an adoption is to establish the legal status of parent and child. That status does not become final until the order of adoption is signed pursuant to Domestic Relations Law (DRL) ' 114. The statutory language of DRL '114 states, in part, “the child shall thenceforth be regarded and treated in all respects as the child of the parent.” The court read this and found that the word “thenceforth” was prohibitive in that it means “from this time forward, that is, from the time of the making of the order.” Thus, an order that relates back in time would be contrary to the express statutory provisions and would therefore be void. Consequently, the court denied the request, reasoning that the exigency in this matter was not created by the court's actions, and the law did not support it back-dating its order.

Deferral of Incentive Fees Comes Back to Haunt

The appellate court held that deferred incentive fees, earned during a couple's marriage and owed to the husband's investment management company, should have been treated as income to the husband rather than as business assets for divorce distribution purposes. Wyser-Pratte v. Wyser-Pratte, — N.Y.S.2d —-, 2009 WL 4910682 (1st Dept. 12/22/09), 2009 N.Y. Slip Op. 09531 (Mazzarelli, J.P., Sweeny, Catterson, Freedman, Rom'n, JJ.).

Supreme Court, New York County (Joan B. Lobis, J.), distributed the couple's assets in the following manner: The husband's business assets went 65% to him and 35% to his wife, while other marital assets were divided equally. The court's reasoning for the disparity concerning business assets was that the husband already held substantial business assets at the time of the couple's marriage, and he also already possessed the strong business acumen that allowed the couple to live a lavish lifestyle during their marriage. The wife appealed concerning some deferred incentive fees owed to the husband's investment management company. She said they should not have been treated as business assets subject to the 65%/35% division, but should have been distributed on a 50/50 basis. The appellate court noted that although the subject fees, which totaled $31,020,400, were earned by the husband's company for managing a hedge fund from 1996 through 2000, he had caused the company to defer receipt of payment from the fund, and it remains unpaid. Upon eventual payment to the company (which is a Subchapter S corporation), the fees will be taxable to the husband as income. The husband acknowledged that he deferred their receipt to postpone paying personal income tax. He also claimed, however, that the deferral was intended to benefit the fund's performance by increasing the amount available for investment. Despite this, the court held that “under the circumstances, where [the husband] chose not to realize profits from his business that were earned years before the commencement of this action, the deferred fees constitute marital property to be divided equally.”

The deferred fees in question are subject to a 48.77% tax, leaving an after-tax value of $15,896,135. Dividing this to give each party 50%, the appellate court determined the wife should have been awarded $7,948,067, an increase of $2,384,420 from the lower court's award to her of a 35% share, or $5,563,647.