Fordyce v. Fordyce

• Decision Date: 25 September 1974
• Parties: Dorothy M. FORDYCE, Plaintiff, v. Robert D. FORDYCE, Defendant. Dorothy M. FORDYCE, Petitioner, v. Robert D. FORDYCE and Pan American World Airways, Inc., Respondents.
• Court: New York Supreme Court

Page 323

365 N.Y.S.2d 323

80 Misc.2d 909

Dorothy M. FORDYCE, Plaintiff, v. Robert D. FORDYCE, Defendant.

Dorothy M. FORDYCE, Petitioner, v. Robert D. FORDYCE and Pan American World Airways, Inc., Respondents.

Supreme Court, Special Term, Nassau County, Part V.

Sept. 25, 1974.

Elliot D. Samuelson, Garden City, for Dorothy M. Fordyce.

Kadel, Wilson & Potts, New York City, by John J. Hallissey, Jr., New York City, for Robert D. Fordyce.

Simpson, Thacher & Bartlett, New York City, by Harold Parsons-Lewis, New York City, for Pan American World Airways, Inc.

BERTRAM HARNETT, Justice.

Dorothy and Robert Fordyce were separated eight years ago, but the alimony dispute left in the wake of that separation continues to toss. A chart of its course will focus some of the issues.

A 1966 separation decree awarded Dorothy $275 per week as alimony and $75 per week as support for the couple's then living son. Apparently, Robert met these payments at first, but then began to fall behind. He complained of financial inability. An order entered October 2, 1972 in part reduced the alimony prospectively to $150 per week. The son having earlier died, his support was terminated. The Appellate Division affirmed the alimony reduction, 43 A.D.2d 839, but despite this, Robert fell further into arrears.

Dorothy's motion to enter a money judgment for the arrearages pursuant to Domestic Relations Law § 244 resulted in a stipulation permitting her to enter judgment for $29,175, the amount of arrears due through March 19, 1973. That

With indifferent success, Dorothy 1, 1973, and after a later challenge by Robert, was sustained by an order entered January 7, 1974.

With different success, Dorothy has sought invocation of the Court's contempt power to force Robert to pay the alimony. She now seeks to enforce her right to support by sequestration and garnishment.

Dorothy presently lives on a large estate, but it is heavily mortgaged and apparently in danger of foreclosure. The rents she collects there are entirely used to pay the expenses of maintaining the property. As a practicing lawyer, she earns approximately $13,000 yearly. Robert was unable to prove any other income for her. Dorothy is age 57, her health is not good, and her practice income and prospects seem to be declining.

Robert owns little property, save for a painting valued at between one and seven thousand dollars. A former airplane pilot, he is entitled to a monthly retirement pension from Pan American World Airways. In 1974, this monthly payment was $983.61; this year it will be less because of variable features in the plan itself. He is also entitled to $267 monthly social security benefits. He had been an employee, shareholder and moving force, of Fordyce, Andrews and Haskell, Inc., an employment agency, but he is now unemployed. Dorothy was unable to prove any other income for him, although correspondence to this Court indicates he does receive unemployment insurance. Robert's health seems excellent, and his failure to have any employment income seems rooted more in a lack of desire than a lack of capacity. While he is 66 years old, his demeanor is vigorous and reflects capability and vitality. In 1969 he married a 26 year old woman employed as a model, but the Court has been informed since the close of these hearings she died suddenly and unexpectedly. Both Robert and Dorothy are now unmarried, and they have two grown daughters who are financially independent of them.

Dorothy has served a restraining notice on Pan American (CPLR 5222), tying up Robert's pension fund interest, and now wants:

(a) to attach both the principal and income of the pension fund, or to sequester them;

(b) security for payments of future alimony;

(c) a money judgment for the arrears since the terminal date of the last judgment;

(d) installment payments on the judgments;

(e) to garnish Robert's presumed salary from Fordyce, Andrews and Haskell;

(f) to sequester his stock in Fordyce, Andrews and Haskell; and

(g) counsel fees.

Robert claims he needs all his income just to survive in a reasonably modest manner. He seeks:

(a) reduction of the alimony; and

(b) lifting of the restraining notice on the pension fund.

Time and circumstances have resolved some of these issues. Robert has resigned from Fordyce, Andrews and Haskell and on the face of things no longer receives any salary or other compensation from them subject to wage assignment under Personal Property Law § 49--b. His shares in the corporation were attached and sold by the Sheriff. His current financial straits, as reflected in the proof, make it unreasonable to ask him to give any security for alimony payments. The request for installment payments is academic as this decision will otherwise account for all of Robert's known assets of value and known income.

The heart of the problem before the Court concerns Robert's entitlements from the Pan American Fund and Dorothy's ability to reach it. Actually, four distinct plans compose this Fund.

I. Cooperative Retirement Income Plan (CRIP)

Pan American and Robert Fordyce contributed to this plan as required by a labor contract. The plan simply pays a fixed $108.34 monthly benefit for life.

II. Pan American Pilots Plan--Composed of Two Trusts (1) 'A' Trust

Pan American and Robert Fordyce contributed to this plan, too, as required by the labor contract. This plan also pays a fixed monthly benefit for life, but of $382.16.

(2) 'B' Trust--Composed of Two Sub-Parts

(i) 'Regular B'

Pan American and Robert Fordyce again contributed here as required by the labor contract. This plan pays a variable amount monthly dependent upon the yield of trust investments. There is a relatively small lump sum death benefit to a designated beneficiary.

(ii) 'Supplemental B'

Here, Robert Fordyce made Voluntary contributions from his salary. Pan American made no contribution. This plan, too, pays a variable amount monthly dependent upon the yield of trust investments. Here, there is a more substantial death benefit payable to a designated beneficiary.

The legal problems in the creditor availability of these Fund payments are most complex. For analytical purposes they are best considered in the classifications of principal retained, and benefits payable each month.

I. Principal Retained

A. None of this Principal May Be Seized By Dorothy During Robert's Lifetime

Under all these plans, Robert is entitled to receive monthly installments, but he has no right to further distribution of any part of the principal during his lifetime. Only under the sub-parts of the 'B' Trust is there his right to designate beneficiaries of death benefits.

The principal was amassed from three sources: (1) Pan American's required payments; (2) Robert's required payments; and (3) Robert's voluntary payments. Robert never had a right to directly receive Pan American's contributions. He had no right to receive back his own contributions, whether required or voluntary. He receives only the stipulated fixed installments, and the variable income components.

As a judgment creditor, Dorothy can reach 'any debt, which is past due or which is yet to become due, certainly or upon demand of' Robert. CPLR 5201(a). Or, she can reach 'any property which could be assigned or transferred'. CPLR 5201(b). But, the contributions of the principal of all four parts of the Fund will never be a debt due to Robert, and he has no interest in that principal which he can transfer or assign, except for the death benefit designation which we shall discuss below.

Sequestration also fails. Even the compelling claim of a wife for alimony and support cannot reach a property interest unavailable to her husband. Rosenberg v. Rosenberg, 259 N.Y. 338, 182 N.E. 8.

Under ordinary circumstances, a person may dispose of his property however he sees fit, and leave subsequent creditors without recourse. Schenck v. Barnes, 156 N.Y. 316, 50 N.E. 967.

1. 'Self Settled' Trusts and Retained Interests

But Dorothy claims that her husband's contributions to the pension funds were 'self-settled', that they were voluntarily made by him to a trust of which he was the beneficiary, and that his transfer to the trusts were void as against the claims of creditors. Schenck v. Barnes, Supra; EPTL 7--3.1. In a sense she relies on the self-settlement concept which is the test as to whether a trust is creditor exempt under CPLR 5205(d).

However, the CRIP Fund and the Pilot's Plan 'A' and 'Regular B' Funds are in no event self-settled trusts. They are creatures of the collective bargaining agreement between Pan American and its pilots; they are maintained for the purpose of providing retirement income; they are wholly funded by required employer and employee contributions. See, Laborers Union Local 1298 v. Frank L. Lyon & Sons, Inc., 66 Misc.2d 1042, 323 N.Y.S.2d 229. They are voluntary only in the sense that continued employment by Robert with Pan American was his own voluntary act.

By contrast, the 'Supplemental B' Fund is a self-settled trust. Pan American makes no contributions. An employee's contributions are entirely voluntary, up to ten percent of his salary. Here, the employee on his own puts aside property for his own use later. The contributions are largely unrelated to his labor. Pan American is merely a conduit for this investment; its presence is not significant.

But, Dorothy is not entitled to the retained principal of this 'Supplementary B' Fund either. Because a trust does not fall within the exemption definition of CPLR 5205(d) does not mean it is necessarily reachable by creditors. As noted above, Robert has no interest in that principal. Even in the case of a self-settled trust, creditors can only reach the interest the settlor retained for himself. Dillon v Spilo, 250 App.Div. 543, 294 N.Y.S. 876, affd. 275 N.Y. 275, 9 N.E.2d 864; Colgate v. Guaranty Trust Co. of New York, 159 Misc. 664, 288 N.Y.S. 463.

2. Transfer in Fraud of Creditors

The issue of a transfer to...