Nerayoff v. Rokhsar

168 A.D.3d 1071

93 N.Y.S.3d 96

Steven NERAYOFF, Appellant-Respondent,

v.Lillian ROKHSAR, etc., Respondent-Appellant.

2016–06939

2016–07240

Index 203157/12

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

Submitted—September 26, 2018

January 30, 2019

Schlissel Ostrow Karabatos, PLLC, Garden City, N.Y. (Joseph A. DeMarco, Jeanine M. Rooney, and Stephen W. Schlissel of counsel), for Appellant-Respondent.

Gassman Baiamonte Gruner, P.C., Garden City, N.Y. (Rosalia Baiamonte of counsel), for Respondent-Appellant.

ALAN D. SCHEINKMAN, P.J., RUTH C. BALKIN, FRANCESCA E. CONNOLLY, LINDA CHRISTOPHER, JJ.

DECISION & ORDER

In a matrimonial action, the plaintiff appeals from (1) a decision of the Supreme Court, Nassau County (Leonard D. Steinman, J.), dated December 24, 2015, and (2) a judgment of the same court entered May 24, 2016, and the defendant cross-appeals from the judgment. The judgment, insofar as appealed from, upon the decision, made after a nonjury trial, determined that certain assets were marital property and equitably distributed those assets, denied the plaintiff's application for a credit based upon the defendant's use of marital funds to purchase a new car after commencement of the action, imputed income to the plaintiff in the sum of $ 210,000 per year and imputed income to the defendant in the sum of only $ 70,000 per year for purposes of calculating maintenance and child support, directed the plaintiff to pay child support and 75% of the children's unreimbursed medical expenses, extra-curricular activities, schooling, and camp, and awarded the defendant attorneys' fees in the sum of $ 50,000. The judgment, insofar as cross-appealed from, inter alia, equitably distributed the marital property, awarded the plaintiff 85% of the capital loss carryovers generated by the plaintiff's securities trading activities during the marriage and awarded only 15% of those carryovers to the defendant, directed the plaintiff to pay maintenance and child support retroactive to April 1, 2014, in the sum of only $ 50,000, and awarded the defendant attorney's fees in the sum of only $ 50,000.

ORDERED that the appeal from the decision is dismissed, without costs or disbursements, as no appeal lies from a decision (see Schicchi v. J.A. Green Constr. Corp., 100 A.D.2d 509, 472 N.Y.S.2d 718 ); and it is further,

ORDERED that the judgment is modified, on the law, on the facts, and in the exercise of discretion, (1) by deleting the provision thereof equally dividing certain bank accounts representing the proceeds of the sale of Freedom Home Care, LLC, and the assets of Maple Ventures, LLC, and substituting therefor a provision determining that the plaintiff is entitled to 60% of those assets and the defendant is entitled to 40% of those assets, (2) by deleting the provision thereof determining that 40% of the value of a patent portfolio was marital property, and substituting therefor a provision determining that 100% of the value of the plaintiff's interest in the patent portfolio, as of the date the action was commenced, was marital property, (3) by deleting the provision thereof, in effect, awarding the plaintiff 100% of the value of his interest in the patent portfolio, and substituting therefor a provision awarding the defendant a credit of $ 10,519.50, equivalent to one-half of the value of the plaintiff's interest in the patent portfolio as of the date of commencement, (4) by deleting the provision thereof awarding the plaintiff 85% of the capital loss carryovers generated by the plaintiff's securities trading activities during the marriage and awarding the remaining 15% to the defendant, and substituting therefor a provision equally dividing the capital loss carryovers, (5) by deleting the provision thereof, in effect, denying the plaintiff's application for a credit based upon the defendant's use of marital funds to purchase a new car after commencement of the action, and substituting therefor a provision awarding the plaintiff a credit in the amount of $ 17,500, (6) by deleting the provision thereof directing the plaintiff to pay maintenance and child support retroactive to April 1, 2014, and substituting therefor a provision directing the plaintiff to pay maintenance and child support retroactive to July 19, 2013, and (7) by deleting the provision thereof awarding the defendant $ 50,000 in attorneys' fees, and substituting therefor a provision awarding the defendant $ 180,000 in attorneys' fees; as so modified, the judgment is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.

The plaintiff and the defendant were married on November 21, 2004, and subsequently had two children. On November 27, 2012, the plaintiff commenced this action for a divorce and ancillary relief. On July 19, 2013, the defendant served the plaintiff's attorneys with a notice of appearance demanding, inter alia, maintenance and child support.

At a nonjury trial on the issues of child support, maintenance, and equitable distribution, the evidence established that, in 2003, one year prior to the marriage, the plaintiff formed and was the sole member of Freedom Home Care, LLC (hereinafter Freedom), a provider of home healthcare. In 2004, the parties were married. In the summer of 2005, the plaintiff received a notice from the Internal Revenue Service (hereinafter IRS) indicating that he was being audited, and faced potential tax liabilities in excess of $ 6 million due to his participation in a certain security transaction in the late 1990's. In 2005, the plaintiff transferred his entire membership interest in Freedom to the defendant. The plaintiff testified that the purpose of this transfer was to preserve assets for the family while litigation pertaining to his potential tax liabilities was ongoing. The defendant testified that the plaintiff told her that Freedom was being transferred into her name because he had a gambling problem and placing the company in her name would protect it from his impulsive gambling behavior.

In 2008, Freedom, which was still in the defendant's name, was sold for approximately $ 11 million. The proceeds from the Freedom sale were placed into a bank account in the defendant's name. The money was used to fund the family's living expenses and to fund various investments and business ventures, including, inter alia, Maple Ventures, LLC (hereinafter Maple), a venture capital firm of which the defendant was the sole member. In 2012, the plaintiff prevailed in his tax dispute with the IRS, lifting the cloud of the potential $ 6 million tax liability. Thereafter, the parties entered into an agreement transferring the membership interest in Maple from the defendant to the plaintiff. As relevant to the issues on appeal, one of Maple's assets included a note payable by an entity named OS33, Inc. (hereinafter OS33), to Maple in 48 monthly installments of $ 3,000.59, commencing on January 15, 2012. Additionally, Maple loaned $ 50,000 to the defendant's uncle (hereinafter the Rokhsar loan), and the plaintiff testified that when the loan was repaid, he deposited the proceeds into Maple's bank account.

In April 2012, the plaintiff and a business partner applied for a provisional patent for technology used in motor-vehicle parking, and subsequently applied for related patents (hereinafter collectively the patent portfolio). After the commencement of the action, the plaintiff assigned his interest in the patent portfolio to CloudParc, an entity that was formed after the commencement of the action. The plaintiff presented expert testimony stating that, as of November 27, 2012, the date of commencement of this action, the plaintiff's interest in the patent portfolio was valued at $ 21,039. The defendant presented no evidence of the patent portfolio's value.

In a decision after trial, the Supreme Court, inter alia, found that the plaintiff had unclean hands in connection with his transfer of Freedom to the defendant for the purpose of shielding it from the IRS and, thus, was prohibited from arguing that all or a portion of the proceeds from the sale of Freedom were separate property. Accordingly, the court directed that the parties' holdings flowing from the sale of Freedom, in particular, Maple, and the funds in a Citigold bank account, be equally divided. The court held that the defendant was entitled to one-half of all post-commencement payments due from OS33 to Maple under the installment loan and, in effect, denied the defendant's application for a credit relating to the money repaid from the Rokhsar loan. The court held that "40% of the value of the patent portfolio ... is marital property," but awarded the plaintiff 100% of his interest in the patent portfolio without awarding the defendant a credit for the marital portion of that asset. The court denied the defendant's application for an award of an interest in Cloudparc, which was formed post-commencement. The parties possessed capital loss carryovers in excess of $ 16 million that were generated by the plaintiff's securities trading activities during the marriage. The court awarded the plaintiff 85% of the capital loss carryovers and awarded the remaining 15% to the defendant, based upon its reasoning that "[t]here is a greater likelihood that [the plaintiff's] future capital gains will be greater than [the defendant's]." The court directed the parties to equally divide all interest, dividend loss carryovers, and net operating losses. The court denied the plaintiff's request for a credit representing one-half of the amount the defendant spent post-commencement on a new car in excess of the amount agreed upon by the parties in a so-ordered stipulation. For purposes of calculating maintenance and child support, the court imputed $ 210,000 in annual income to the plaintiff and $ 70,000 in annual income to the defendant. The court directed that maintenance and child support payments were retroactive to April 1, 2014, the date ...