Johnson v. Chapin

• Decision Date: 13 March 2008
• Docket Number: 9859.,9858.
• Parties: JANET M. JOHNSON, Respondent, v. ALLAN M. CHAPIN, Appellant.
• Court: New York Supreme Court — Appellate Division

49 A.D.3d 348

854 N.Y.S.2d 18

2008 NY Slip Op 02203

JANET M. JOHNSON, Respondent, v. ALLAN M. CHAPIN, Appellant.

9858.

9859.

Appellate Division of the Supreme Court of the State of New York, First Department.

Decided March 13, 2008.

Judgment of divorce and money judgment, Supreme Court, New York County (John E.H. Stackhouse, J.), entered May 17 and September 23, 2005, inter alia, distributing the parties' marital property and awarding plaintiff maintenance, child support and counsel fees, modified, on the law and the facts, (1) to reduce the wife's share of the enhanced value of the Claverack property to 25%; (2) to vacate the credit to the wife for 50% of the difference between the sum expended on the Claverack renovations and the property's appreciated value; and (3) to credit the husband (a) $548,460 for excess temporary maintenance payments and (b) $484,370.50, 50% of the mortgage and maintenance paid for the Fifth Avenue cooperative during the pendency of the divorce action, and otherwise affirmed, without costs.

The parties, both attorneys, were married in January 1991. In October of the same year, they had a son. The husband was the father of four children by a prior marriage, which ended in divorce in 1990. The wife, who had graduated from law school in 1979, worked as an associate at a large New York City law firm for six years. She then left private practice and began to work in house at the Walt Disney Company (Disney). In 1991, when she married the husband, she was the corporate vicepresident in the motion picture and television department of Disney. Her salary in that position was $220,000 per year. The wife stopped working outside the home when the parties' son was three years old.

At the time of their marriage, the husband was a partner at another major New York City law firm, where he remained until the end of 1999. He then left the practice of law and became a managing director at Lazard Freres & Company, where he earned an annual average salary of $2.1 million over the approximately 11 years that the parties were married. Throughout the marriage, the husband also served on the Board of Directors of a number of publicly traded companies, from which he obtained additional income.

The parties lived an affluent life together that included fine dining, shopping at upscale stores, taking lavish vacations, employing household help, and sending their son to private school. They purchased a 3,700 square foot opulent cooperative apartment on Fifth Avenue between 94th and 95th Streets in Manhattan. At the time of trial, the apartment was worth between $10 and $12 million.

Before the marriage, the husband owned a small home and a tenant house on approximately 160 acres of land in Claverack, New York. During the marriage, the parties invested close to $2 million to remodel the house and make substantial improvements on the surrounding property. The house was expanded, and was fitted with a new large kitchen with indoor and outdoor cooking facilities, a two-story living room, a darkroom, a hot tub, a sauna and a wine cellar. A tennis court and a pond were also built into the property.

The parties agree that the husband played a larger role in the conceptualization and oversight of the Claverack improvements. However, the couple brought their son to Claverack for many weekends and holidays while the renovation was being completed, and, while at Claverack and taking care of the parties' son, the wife participated in some of the project's details, and provided food for the workers as well as the family. For example, she testified that she "order[ed] pizza and ma[de] coffee for the guys who were working" on the restoration. The wife also stated that she personally designed the entire interior of one of the new structures on the property, and that she matched the kitchen tiling to the plants that she grew in her organic vegetable garden on the property. She also related that much of the parties' weekend and vacation time was spent in Claverack and devoted to "going over plans or bills or budget or proposals or finished work for various workmen." The renovation project spanned virtually the entire 11-year period that the parties were married.

At some point after the wife left Disney, the husband's travel schedule changed. It allegedly required him to work longer hours and travel internationally more frequently, leaving plaintiff as sole parent in charge of raising the parties' son. Sometime in 2001, the husband began an affair with a woman he met while traveling. In November of the same year, the wife commenced this action for divorce. In response, the husband immediately cut off her financial support. The wife specifically alleges that the husband hid the family car, and "launched an insidious campaign to alienate [the parties' son] from his mother." She claims that the husband committed adultery and that his treatment of her was cruel and inhuman. Her complaint demands a divorce judgment, equitable distribution of the parties' marital property, title to her separate property, custody of the parties' child, exclusive occupancy of the marital apartment, maintenance and child support.

In December of 2001, one month after the wife commenced this action, the husband left his position with Lazard Freres. Soon thereafter, he began working at Compass Advisors, a boutique investment bank and venture capital firm. The record and the transcript from the trial, which took place between 2003 and 2004, reflect that when defendant joined Compass, its "Deal Log" listed $97 million of deals at various stages of completion. The parties dispute whether Compass will be retained on all of the deals in the Deal Log, as well as Compass's future. However, at the time of trial, the husband was promised an annual base salary at Compass of $200,000 with a quarterly draw of $100,000. The terms of his employment also included an equity interest in the company, various related bonuses, and other investment opportunities. While Compass's CFO testified that as of 2003 the Compass partners had not yet received their quarterly draws, she also testified that the company's performance improved substantially between 2001 and 2003, the last year for which the parties had evidence. It remains the wife's position that the husband anticipated "paper losses" in the early years at Compass which would be "handsomely rewarded" as deals matured and business grew. Compass's CFO gave testimony which supported this position. For example, Compass's CFO testified that the company's retainers in 2003 were $5,057,837 (items the firm had been contracted for), 10 times its retainers for 2001. She also stated that from 2001 to 2003, the company's revenue grew from approximately $2 million to $11.8 million, that it expanded its offices and hired additional staff.

In 2002, prior to the trial, the wife made an application for interim relief. In response, the husband insisted that he could not afford to pay the amount requested. He alleged that he was not earning much and had no future expectation of making the millions of dollars he had earned during the marriage.

The court recognized the husband's deception and nondisclosure of assets, and imputed an average annual income to him of $2,273,680. In an order entered May 16, 2002, the IAS court awarded the wife $18,465 per month in pendente lite maintenance. The court also ordered the husband to pay $10,625 per month in child support beginning June 1, 2002, plus the costs of private schooling, tutors, summer camp, extracurricular and recreational activities and transportation expenses. It found the husband responsible for "all medical, dental and other health-related insurance coverage on behalf of [the wife] and the child" as well as "all unreimbursed, non-discretionary medical, dental, pharmaceutical, optical, [and] psychotherapy expenses for [the wife] and the child." The husband was also required to pay for all household expenses for the marital residence. This included responsibility for all outstanding and ongoing carrying charges, utility bills, upkeep and maintenance of the marital residence and expenses attributable to household help. Further, the husband was ordered to pay the wife's counsel fees of $100,000. The husband appealed. This Court affirmed, stating: "[T]he motion court, when confronted with [the husband's] apparently self-created unemployment and questionable claim of limited future earnings, was warranted in imputing income to him on the basis of his past earnings and earning capacity" (299 AD2d 294, 295 [2002] [emphasis supplied]). In a stipulation which was "so-ordered" and entered October 16, 2003, the parties resolved all issues of custody and visitation.

The husband failed to pay the sums as ordered and built up arrears totaling more than $200,000. As a result, the wife was forced to move for an order enjoining the husband from transferring or spending money for any purpose other than to satisfy his outstanding support obligations. The husband cross-moved for a downward modification of the maintenance and child support awards and cancellation of his support and maintenance arrears. The IAS court denied the husband's application and set the arrears owed at $207,857.74 plus interest. It also directed that the husband not transfer certain funds out of his IRA accounts, and it restrained the husband from dissipating the parties' 2000 tax refund, which had an estimated value of $510,000.

The court noted concrete evidence showing that, in fact, for the prior five years, the husband had an average income of approximately $3 million a year, that he was receiving revenue "from numerous corporations ..., and [was] a partner in a very active rising investment banking company." It found the husband's "allegations of poverty to be spurious," noting that he spent approximately $63,000 a month on himself. It also stated: "I find [the husband's] argument that his earning position has...