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Monday, July 07, 2008

Error Not to Credit Wife with 50% of Husband's Pre-marital Debts Paid with Marital Funds During the Marriage

In Mahoney-Buntzman v Buntzman, --- N.Y.S.2d ----, 2008 WL 2066586 (N.Y.A.D. 2 Dept.) Supreme Court, among other things, fixed the wife's her distributive award at $2,467,151.43, awarded her 35% of the value of certain shares of stock and stock options issued to the defendant by his employer, and awarded her durational maintenance of $2,500 a month for 15 months. During the parties' marriage, the defendant took out a student loan in the amount of $48,162.90 to pay for a doctoral degree in education, which was satisfied with marital funds. The plaintiff contended on appeal that the trial court erred in failing to award her a 50% credit with respect to the student loan. The Appellate Division agreed. The defendant's expert testified that the doctoral degree earned by the defendant during the marriage did not enhance his earnings, and thus, provided no benefit to the marriage, and there was no distributive award of the value of the doctorate degree to the plaintiff in light of its zero enhanced earning capacity value. The student loan debt was incurred to satisfy the defendant's separate interest and therefore was his own separate obligation. Accordingly, the trial court erred in failing to award the plaintiff a 50% credit, or $24,081.45, for the student loan debt incurred by the defendant during the marriage to attain this degree. The Appellate Division agreed with plaintiff's contention that the trial court erred in not crediting her with 50% of the defendant's pre-marital debts paid with marital funds during the marriage: maintenance paid to the defendant's first wife in the total amount of $58,545, and $7,000 paid in 1998 as a settlement of a loan for a boat purchased by the defendant before the marriage but surrendered to the bank in 1993 prior to the marriage for nonpayment of the boat loan. The defendant's maintenance obligation to his first wife and the boat loan constituted debts incurred by him prior to the parties' marriage and were solely his responsibility. Accordingly, the trial court erred in failing to award the plaintiff additional credits of $29,272.50 as to the maintenance payments to the defendant's first wife and $3,500 as to the boat loan. It also agreed with the plaintiff's contention that the trial court improvidently exercised its discretion in declining to direct that the defendant pay the parties' children's college tuition and expenses until they reach the age of 21 upon finding that the children had sufficient resources of their own to pay for their college education from trust funds given to them by their paternal grandfather. In view of the defendant's own significant financial resources in contrast to the plaintiff's limited financial resources, and the defendant's own testimony that the parties agreed not to use the children's trust funds to pay for their college tuition and expenses, as well as giving due consideration to the factors listed in Domestic Relations Law s 240(1-b)(c)(7), the defendant should pay for the childrens' college tuition and expenses until they reach the age of 21.