Lois R v. Richard R

• Court: New York City Court
• Writing for the Court: NANETTE DEMBITZ
• Citation: 414 N.Y.S.2d 846,98 Misc.2d 580
• Parties: In the Matter of LOIS R, Petitioner, v. RICHARD R, Respondent.
• Decision Date: 08 March 1979

Page 846

414 N.Y.S.2d 846 98 Misc.2d 580 In the Matter of LOIS R, Petitioner,
v.
RICHARD R, Respondent. Family Court, City of New York, New York County. March 8, 1979.

Court would not invade wife's share of joint assets for payment of her counsel fee, and, taking into account benefit to wife as well as means of husband, fee of $12,000 plus disbursements was awarded in wife's separation proceeding.

Page 847

Trubin, Sillcocks, Edelman & Knapp, New York City by Lola S. Lea, and Deborah A. Schwartz, New York City, for petitioner.

Norman Perlman, New York City, for respondent.

NANETTE DEMBITZ, Judge:

A major issue in this proceeding for support by a wife against her husband, is whether the report of his income on their joint tax return should be accepted as valid or whether petitioner-wife can and has shown that the return understated his income.

The couple, married in 1950, separated in 1977. Their joint tax returns for 1975 and 1976 and the husband's individual tax return for 1977 state his yearly income as $31,000 to $35,000. Petitioner, however, contends that the family's expenditures in 1976, the last year that they lived together, show that he must have had an income in that year of approximately $73,000. Neither party argues that there has been any substantial change in his financial situation since 1976 nor is there any evidence to that

Page 848

effect. Petitioner therefore contends that a support order should be entered for her on the basis of respondent's present estimated income of $73,000 rather than his reported 1977 income of $34,800.

Wife's Attack on Joint Returns

Respondent argues that petitioner cannot challenge the income tax returns in which she joined, invoking the rule that her joinder "in the returns is a circumstance calculated to uphold their accuracy." (Bernstein v. Bernstein, 36 A.D.2d 620, 319 N.Y.S.2d 376) However, a significant point in rejection of a wife's attack has been her failure to offer an "explanation of her joining in an income tax return which reported appellant's ((husband's)) income far below that which she now swears he had." Hodas v. Hodas, 286 App.Div. 1027, 145 N.Y.S.2d 40. See also Campbell v. Campbell, 7 A.D.2d 1011, 184 N.Y.S.2d 479.

Here, the evidence shows that petitioner was uninformed as to respondent's income nor did she participate with respondent and his accountant in the compilation of the joint tax returns. Under these circumstances it is understandable that she accepted the return as they prepared it, and her subscription to it does not foreclose her challenging it. As in Kay v. Kay, 37 N.Y.2d 632, 636, 376 N.Y.S.2d 443, 446, 339 N.E.2d 143, 145, petitioner can attempt to show that "the husband's true income was much higher than his reported" income. Compare Blauner v. Blauner, 60 A.D.2d 215, 217, 400 N.Y.S.2d 335, 336.

Expenditure Method of Proving 1976 Income

Respondent's income was in 1976 almost wholly derived from a family-owned incorporated retail drugstore in Manhattan, in which he worked as the sole salaried corporate officer and in which he employed nine (9) clerks. ¹ His customers paid him in cash and he paid his employees as well as his own salary in cash. Further, he paid in cash or money orders issued in his drugstore, or bank checks purchased with cash, for many of his and his family's substantial living expenses, including clothing, airline fares for vacations, and tuition for his son's private school. At the time of the trial respondent had no record of the money orders he had issued for himself or of the bank checks. Further, respondent habitually kept varying, unspecified amounts of cash in a bank safe deposit box, the amount at the time of petitioner's and respondent's separation in April, 1977 being $4,000.

Respondent's habitual reliance on cash or cash equivalents in substantial amounts "tends to obscure rather than clarify his true economic status" (Kay, supra, 37 N.Y.2d at p. 636, 376 N.Y.S.2d at p. 446, 339 N.E.2d at p. 146), and suggests a "handling of one's affairs to avoid making the records usual in transactions of the kind." (See Spies v. United States, 317 U.S. 492, 499, 63 S.Ct. 364, 87 L.Ed. 418) ² Under these circumstances it was as justifiable for petitioner to resort to the "cash expenditure" method of proving respondent's income as it is in tax cases where such a procedure is frequent when a taxpayer's records are inadequate. ³

However, while the present proceeding is not a criminal one, nevertheless the rule seems applicable that "great care and restraint" should be exercised in estimating income by the cash expenditure and similar methods. See Holland v. United States, 348 U.S. 121, 125, 129, 75 S.Ct. 127, 99 L.Ed. 150. Further, since petitioner in effect charges

Page 849

respondent with falsity, she must, in this Court's opinion, bear the burden of proving by clear and convincing evidence that respondent's income was in 1976 greater than he reported. Compare Richards v. Kaskel, 40 A.D.2d 804, 805, 338 N.Y.S.2d 279, 280, cases there cited, and Cave v. Green, 281 App.Div. 560, 120 N.Y.S.2d 865, 867, as to the quantum of evidence required to establish a civil fraud. The presumption provided in § 437 of the Family Court Act that "A respondent is prima facie presumed . . . to have sufficient means to support his wife," cited by petitioner, and the usual rule in civil cases of proof by a preponderance, therefore cannot control the burden of proof or required quantum of evidence in this case.

Petitioner's Proof of Respondent's 1976 Income

The Court concludes (on bases further detailed in the findings filed herewith) that the petitioner has sustained her burden of proving that respondent's income was in 1976 substantially more than the amount he claimed.

While petitioner could not produce documentary proof as to many family expenses, such as would have been available if respondent's practice had been to pay by check or charge account (see United States v. Caserta, 199 F.2d 905, 907, C.A.3), petitioner's reconstructions of the amounts spent for clothing and other items were credible, nor for the most part did respondent's attorney elicit contradictory testimony. Further, her estimates were consistent with the middle-class living standard that the family enjoyed; that standard was evidenced by conceded expenditures such as...