Gann v. Gann

• Decision Date: 09 December 1994
• Citation: 163 Misc.2d 345,620 N.Y.S.2d 707
• Parties: Sherry GANN, Plaintiff, v. Michael GANN, Defendant.
• Court: New York Supreme Court

Page 707

620 N.Y.S.2d 707

163 Misc.2d 345

Sherry GANN, Plaintiff, v. Michael GANN, Defendant.

Supreme Court, New York County,

IAS Part 18.

Dec. 9, 1994.

Barry N. Berger, New York City, for plaintiff.

Bressler, Amery & Ross, New York City, (David H. Pikus, of counsel), for defendant.

DAVID B. SAXE, Justice.

In this relatively short, childless marriage (seven years), the second for both parties, in which it is conceded that they lived well beyond their means, the principal issue for determination is whether the defendant's disability insurance proceeds are marital property, subject therefore to equitable distribution.

A short factual overview follows. The parties are already divorced; this action concerns maintenance, equitable distribution, and counsel fees. At the commencement of this action, the defendant was 40, the plaintiff 45. The parties had initially come together in a business venture known as Galyn Associates ("Galyn"), in 1978. The firm was started to take advantage of the defendant's unusual skill and experience in analyzing trades and investments in a split second on the trading floor, without the benefit of a computer, and to negotiate complex and costly trades effectively and profitably.

The plaintiff, who had prior work experience as a flight attendant and medical assistant, made an initial investment of approximately $25,000.00-$30,000.00, which she had borrowed from her then father-in-law.

Galyn did fabulously well for a few years until the stock market crash of 1987, from which the business never recovered. Their marriage began to go downhill from that point also and the parties separated in 1988.

Apparently, the stresses of business disabled the defendant with a severe gastroesophageal disorder, and in 1990 he left Wall Street and moved to Arizona and returned to school. He graduated summa cum laude from the University of Arizona and thereafter he was accepted in a Ph.D. program in psychology at the University of Southern California.

At the time of their separation, there were few assets remaining; as indicated previously, the parties had lived a lavish lifestyle, well beyond their means. What remained was approximately $300,000.00 in aggregate retirement plans (divided between them with approximate equality), approximately $200,000.00 in jewelry, and $57,500.00 in furs.

At the time of the trial, the retirement plans, aggregating $282,104.00 were largely intact. Plaintiff holds $138,104.00, defendant $144,000.00.

With respect to the jewelry and furs, the plaintiff contends that with the exception of a watch (worth about $10,000.00), she sold her entire collection, valued at over $250,000.00, during a period of a year or two. In most instances, the plaintiff claims that she sold the items for less than their declared valued, usually to friends and acquaintances, without attempting to maximize the sale prices.

The plaintiff did not declare the capital losses for these sales in her tax returns, which is required by federal law. She never told the defendant about these sales, nor did she obtain his consent. It is likely under the circumstances testified to that the plaintiff either hid or parked these assets or sold them at much higher prices than she disclosed; if in fact she sold these items at the distress prices she testified to, she committed waste. I discount her testimony that she had to sell the jewelry to sustain herself during this two-year period because both her lawyers had become ill.

It is noted that during the marriage, the parties shared the Galyn profits equally and maintained separate checking accounts out of which they paid their respective individual expenses.

In 1985, the defendant acquired a disability insurance policy. It provided insurance for the defendant in the event that he were to become unable to perform his then occupation as a floor trader, due to illness. The testimony establishes that the premiums for the insurance policy were paid for by the defendant out of his share of Galyn receipts. The defendant, thereafter became disabled and applied for disability insurance payments under the two policies on account of his claimed inability to continue working as a floor broker or trader. He presently receives tax free payments of $10,200.00 per month ($122,400.00 per year) according to the terms of the policy. As long as he cannot return to his trading career due to his medical condition, he will continue to receive these payments. The plaintiff claims that these payments are marital property arising out of their marital partnership and that she is entitled to a 60% interest in the policies. Her contentions miss the mark.

Section 236(B)(1)(d)(2) of the Domestic Relations Law defines as separate property "compensation for personal injuries." If the defendant had not suffered a physical injury, there would be no payment under the policies. The fact that the payments are measured by lost earnings is of no consequence.

In Dolan v. Dolan, 78 N.Y.2d 463, 577 N.Y.S.2d 195, 583 N.E.2d 908 (1991), the Court of Appeals considered this issue in the context of a disability pension. In Dolan, supra, the court held that the portion of the award that constituted the usual deferred earnings component of the pension, would be marital property, but the additional component triggered by the personal injury would be separate property.

The defendant's disability payments are not, according to Dolan, deferred income. These disability payments did not commence until after Galyn had ceased operating. The parties were both paid equally during the time of Galyn's operations. Accordingly, these payments of insurance proceeds are not deferred income.

The plaintiff additionally argues that the disability payments are not a personal injury award, but, instead, lost earnings, and are therefore marital property. This argument likewise is wrong. The law in New York (see, Olivo v. Olivo, 82 N.Y.2d 202, 604 N.Y.S.2d 23, 624 N.E.2d 151 [1993] is clear that future earnings paid after the commencement of the matrimonial action, are not marital property. The Court of Appeals in Olivo, supra, analyzed a situation involving a corporate insurance package granted to an employee, which altered pre-existing pension benefits and created new retirement incentives, all occurring after commencement of a divorce action.

The Court in Olivo distinguished between modification of pension payments earned and accrued during the marriage, which understandably remained marital under the deferred income theory established in Majauskas v. Majauskas, 61 N.Y.2d 481, 474 N.Y.S.2d 699, 463 N.E.2d 15 [1984], and new compensation created after commencement of the action.

The reasoning of Olivo is applicable in this case. The disability payments are not deferred income. The right to...