Hartog v. Hartog

• Decision Date: 28 December 1993
• Parties: Katherine HARTOG, Plaintiff-Respondent-Appellant, v. Albert HARTOG, Defendant-Appellant-Respondent.
• Court: New York Supreme Court — Appellate Division

Page 749

605 N.Y.S.2d 749

194 A.D.2d 286

Katherine HARTOG, Plaintiff-Respondent-Appellant, v. Albert HARTOG, Defendant-Appellant-Respondent.

Supreme Court, Appellate Division First Department.

Dec. 28, 1993.

Stanley Plesent, of counsel (Stanley D. Heisler, with him, on the brief, Squadron Ellenoff Plesent Sheinfeld & Sorkin, attorneys), for plaintiff-respondent-appellant.

Herman Harris Tarnow, of counsel (Gretchen Leitzell Johnston, with him, on the brief, Tarnow & Cott, attorneys), for defendant-appellant-respondent.

Before SULLIVAN, J.P., and ROSS, KASSAL, RUBIN and NARDELLI, JJ.

KASSAL, Justice.

This appeal presents inter alia, the propriety of an award to the non-titled spouse of a share of the other spouse's interest in the appreciation during the marriage of certain assets, which are concededly separate property. It also addresses the appropriateness of an award of lifetime maintenance.

The parties were married on November 2, 1968 when plaintiff-wife was twenty-eight years old, and defendant-husband was thirty-eight years old. This was a second marriage for both parties and neither party had any children by their former spouses. There are two children of this marriage, Erik Albert Hartog, born December 24, 1969 and Kenneth Lewis Hartog, born June 22, 1971, both emancipated.

The wife was fifty-one years old at the time of trial. She had obtained a B.A. from New York University in 1963. When the parties married, the wife worked in the field of advertising at Compton Agency, earning under $10,000 a year. She left Compton Agency when she became pregnant with Erik and, during the next eleven years, she did occasional freelance work, wrote a novel and three short stories. From 1980 to 1985, the wife worked full-time as a copywriter and editor for Ogilvy & Mather earning up to $27,500. In 1985, she was diagnosed as having cancer in her right breast and had a modified radical mastectomy. The next year, she had the other breast removed. Plaintiff's health improved, and in 1990, she started a song-writing business. As of the date of trial, plaintiff had expended more than $5,000 in that endeavor, but had not earned any income. During the marriage, the wife had primary responsibility for the household and childcare.

The husband was sixty-one years old at the time of trial. He had obtained a B.A. and a J.D. from New York University, but never practiced law. Instead, throughout the marriage, he worked in the family jewelry business, F. Staal, Inc. (hereinafter "F. Staal") and became its president in 1985. He and his brother, Jack Hartog, each own fifty percent of the shares of F. Staal. The husband is also a director and shareholder of another family business, Hartog Trading Corporation (hereinafter "Trading"), in which he and his brother each own fifty percent of the stock. Shortly before the marriage, Trading created a division known as Hartog Foods International, Inc. (hereinafter "Foods"). The husband and his brother each own twenty-five percent of the stock of Foods. Although the husband is an officer and shareholder of both Trading and Foods, it is undisputed that he spends virtually all of his working hours at F. Staal. The husband does earn a substantial salary and bonuses from the three family businesses, and participates in their pension plans. Throughout, he has been the primary income earner for the family. In the course of this litigation, the husband was diagnosed with terminal metasticized prostate cancer with a very poor prognosis.

During the marriage, the parties purchased an eight-room cooperative apartment on East 79th Street in Manhattan's Upper East Side and a country house in Westport, Connecticut. In spite of the substantial income that accumulated during the parties marriage, they lived modestly. The parties maintained largely separate finances during the marriage and, except for one joint checking account, had separate banking and brokerage accounts.

Judgment After Trial

The court granted the wife a divorce on the ground of abandonment. In dissolving the marriage, the court determined the respective rights of the parties to their separate and marital property. After a trial on the financial issues, the trial court equitably distributed the marital property. The court annexed four different schedules of marital property covering four different options which were given to the wife. In each instance, the schedule sets forth the wife's distributive award, reflecting adjustments for any residence(s) retained: "A"--Sell both residences ($1,692,237); "B"--Wife sells Westport, Connecticut house and retains Manhattan apartment ($1,308,097); "C"--Wife sells Manhattan apartment and retains Westport, Connecticut house ($1,481,187); and "D"--Wife retains both residences ($1,097,047). The distributive award encompasses marital property, including securities and bank deposits, and portions of the appreciation on the husband's three family businesses.

With respect to the increased value of the husband's share of the family businesses, the court held that the following constitutes marital property: (1) one hundred percent of the increased value of the husband's fifty percent share of F. Staal [100% of $412,500]; (2) twenty-five percent of the increased value of the husband's fifty percent share of Trading [25% of $2.3 million totalling $575,000]; and (3) twenty-five percent of the increased value of the husband's twenty-five percent share of Foods [25% of $2,747,500 totalling $686,875]. Accordingly, the wife's fifty percent share of the appreciation of the three family-owned businesses, deemed to be marital property, constitutes $837,187.50.

With respect to other items held to be marital property, the court held that the wife was entitled to one-half of the following: (1) bank accounts in the husband's name totalling $188,599; (2) brokerage accounts in the husband's name totalling $911,885; (3) stocks and bonds in the husband's safe deposit box totalling $643,172; (4) the pro rata portion of the husband's annual bonuses from Trading and Foods, which accrued prior to commencement of the action and which were paid to him thereafter, totalling $119,997; (5) the parties Etruscan statuary valued at $45,250.

The court's judgment further provides that, in addition to the net distributive award, the wife's fifty percent interest in the husband's pension plans and an IRA account valued at $1,360,280 as of February 1, 1989, will be distributed pursuant to a Qualified Domestic Relations Order (QDRO) which the court signed contemporaneously with the judgment.

Finding that the wife was not likely to earn a substantial income and/or become self-supporting and that she would not be able to live on the interest alone from the equitable distribution award, the trial court also awarded her permanent maintenance of $650 per week [$2,816.66 per month] until her death. In addition, the husband was directed to maintain life insurance on his life for the benefit of the wife in the sum of $1 million to secure these payments. Additionally, the judgment provides that there is a $1 million lien on the husband's estate if the husband fails to maintain the life insurance policy.

Discussion

On appeal, the parties complain about various aspects of the court's distributive award. First, the husband argues that the court erred in deeming any portion of his interest in the appreciation of Trading and Foods as marital property since he was totally uninvolved in the operation of these companies. The wife, on the other hand, argues that the court erred in giving her only 12.5% of the appreciation in the husband's interests in Trading and Foods, insisting that her significant contributions as a spouse, parent and homemaker during a 20-year marriage justified an award of fifty percent (50%) of the appreciation of his interests therein.

In Price v. Price, 69 N.Y.2d 8, 17, 511 N.Y.S.2d 219, 503 N.E.2d 684, the Court of Appeals held that "where separate property of one spouse has appreciated during the marriage and before execution of a separation agreement or commencement of a matrimonial proceeding and where such appreciation was 'due in part' to the contributions or efforts of the nontitled spouse as parent and homemaker, the amount of that appreciation should be added to the sum of marital property for equitable distribution ( § 236[B][5]." Conversely, "where the appreciation is not due, in any part, to the efforts of the titled spouse but to the efforts of others ... the appreciation remains separate property, and the nontitled spouse has no claim to a share of the appreciation" (Id. at 18, 511 N.Y.S.2d 219, 503 N.E.2d 684). Although we agree, and the parties do not dispute, that the trial court correctly held that the husband's entire interest in the appreciated value of F. Staal constitutes marital property, we find, based upon the trial court's explicit findings of fact, that all of the husband's interest in the appreciated value of Trading and Foods constitutes his separate property, not subject to equitable distribution.

Significantly, the trial court made the following findings of fact with regard to the wife's entitlement to a portion of the husband's interest in the appreciated value of the family businesses. The court found that the husband spent six days a week devoting full working days at F. Staal. In contrast, the court stated "there was nothing to show any daily or even weekly contact between the husband and Trading." Further, the court found that the husband spent "little, if any, of his daily or weekly time on the day to day operations of [Foods]." The husband's brother, Jack Hartog, directed the day to day management and operations of Trading and Jack Hartog and Mike Rahal were active in the day to day operations of Foods. The husband's minimal role in the operations of Trading and Foods included being consulted on important issues regarding the family businesses and his attendance at a few Board...