Mack v. Mack

169 A.D.3d 1214

94 N.Y.S.3d 683

Teresa Estrada MACK, Respondent,

v.Christopher Richard MACK, Appellant.

526924

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: January 9, 2019

Decided and Entered: February 21, 2019

Blatchly & Simonson, New Paltz (Bruce D. Blatchly of counsel), for appellant.

Bloom & Bloom, PC, New Windsor (Peter E. Bloom of counsel), for respondent.

Before: Egan Jr., J.P., Clark, Mulvey, Devine and Rumsey, JJ.

MEMORANDUM AND ORDER

Mulvey, J.Appeal from a judgment of the Supreme Court (Cholakis, J.), entered October 30, 2017 in Ulster County, ordering, among other things, equitable distribution of the parties' marital property, upon a decision of the court.

Plaintiff (hereinafter the wife) and defendant (hereinafter the husband) were married in 2002 and have two children (born in 2002 and 2004). After almost 15 years of marriage, the wife commenced this action for divorce. Following a bench trial, Supreme Court equitably distributed the parties' marital property and directed the husband to pay maintenance in the amount of $2,485.68 monthly until 2022 and child support in the amount of $2,238.50 monthly. The husband appeals.

Supreme Court did not abuse its discretion in its determination of which assets were marital property and the value it placed on them. "Whether a particular asset is marital or separate property is a question of law that a trial court must initially address to ascertain the marital estate" ( Smith v. Smith, 152 A.D.3d 847, 848, 57 N.Y.S.3d 769 [2017] ; accord Giannuzzi v. Kearney, 160 A.D.3d 1079, 1080, 74 N.Y.S.3d 123 [2018] ; see Fields v. Fields, 15 N.Y.3d 158, 161, 905 N.Y.S.2d 783, 931 N.E.2d 1039 [2010] ). Property acquired during a marriage is presumed to be marital property, and the party seeking to overcome that presumption must prove that the item in dispute is separate property (see Spera v. Spera, 71 A.D.3d 661, 664, 898 N.Y.S.2d 548 [2010] ; Seidman v. Seidman, 226 A.D.2d 1011, 1012, 641 N.Y.S.2d 431 [1996] ; see also Fields v. Fields, 15 N.Y.3d at 166, 905 N.Y.S.2d 783, 931 N.E.2d 1039 ).

The husband formed a corporation, Pragmatic Technologies, Inc. (hereinafter PTI), in 2000 (prior to the marriage) and remains its sole shareholder. Supreme Court correctly concluded that PTI is the husband's separate property, and the wife did not seek any portion of PTI or its appreciation in value during the marriage. The husband argues that the court erred in failing to account for a $200,000 debt owed by PTI to a foreign corporation, stating that this debt is "a real obligation of the husband" that must be repaid. Debts of PTI are corporate debts, however, not personal obligations of the husband and, just as the assets of PTI are separate property, the debts of that corporation should not be considered part of the marital estate.

The husband contends that Supreme Court erroneously considered a $200,000 debt owed by PTI to the husband as a marital asset subject to equitable distribution. The husband lent money to PTI from the parties' personal funds during the marriage. The record lacks any proof to support the husband's contention that such shareholder loans to corporations are often not counted as equity because they are rarely paid back. His argument that the corporation may not be able to repay the loan is belied by a $50,000 payment made during the pendency of this action. In any event, the mere possibility that a debtor may be unable to pay in the future cannot eliminate a debt as a marital asset. The husband would receive a windfall if he were able to lend marital money to PTI, thereby increasing the value of his separate property, and not count that loan as a marital asset. Hence, the court properly treated the debt owed to the husband by PTI as a marital asset.

During the marriage, the husband formed Mack Technologies, LLC (hereinafter MT) as a real estate holding company. Although the husband contends that MT should be considered his separate property because it was funded by PTI, the record supports Supreme Court's conclusion that the husband failed to overcome the presumption that MT is marital property (see Robinson v. Robinson, 133 A.D.3d 1185, 1190, 21 N.Y.S.3d 392 [2015] ). MT held ownership of a commercial building used by PTI, but also held title to the marital residence. Despite MT's title ownership of the residence, for tax purposes the parties treated that property as if it were owned by them personally (for example, deducting the property taxes on their personal tax returns).

Moreover, the money used to fund MT derived from PTI, but PTI's wealth was created by the husband's efforts and he extracted money from PTI as he liked. Contrary to the husband's argument that MT had no specific value that could be distributed, the court reasonably determined that MT's value consisted of its bank account balance and the appraised value of the marital residence titled to MT. Thus, that marital property was subject to equitable distribution.

The husband further asserts that Morgan Hill Ventures, LLC (hereinafter MHV) is his separate property, despite its creation during the marriage, because the purpose of that entity is to hold an investment individual retirement account that was funded by rolling over his separate property acquired from a premarital 401(k) account. Yet nothing other than the husband's testimony established the source of the assets held by MHV. Thus, Supreme Court did not err in determining that the husband failed to overcome the presumption that MHV is marital property (see DeSouza v. DeSouza, 163 A.D.3d 1185, 1191–1192, 81 N.Y.S.3d 630 [2018] ; compare Wallace v. Wallace, 154 A.D.3d 1078, 1081, 62 N.Y.S.3d 561 [2017] ).

"Supreme Court has substantial discretion in determining the fair and equitable distribution of marital property under the circumstances, and its award will not be disturbed absent an abuse of discretion or failure to consider the requisite statutory factors" under Domestic Relations Law § 236(B)(5)(d) ( DeSouza v. DeSouza, 163 A.D.3d at 1190, 81 N.Y.S.3d 630 ; see Fields v. Fields, 15 N.Y.3d at 167–168, 905...