Wegman v. Wegman

• Decision Date: 09 September 1985
• Citation: 494 N.Y.S.2d 933,129 Misc.2d 968
• Parties: Bernice WEGMAN, Plaintiff, v. Edwin WEGMAN, Defendant.
• Court: New York Supreme Court

Page 933

494 N.Y.S.2d 933

129 Misc.2d 968

Bernice WEGMAN, Plaintiff, v. Edwin WEGMAN, Defendant.

Supreme Court, Nassau County.

Sept. 9, 1985.

Jerome R. Halperin, P.C., New York City, for plaintiff.

Taylor, Atkins & Ostrow, Garden City, for defendant.

MEMORANDUM

ROBERT ROBERTO, Jr., Justice.

DECISION AFTER TRIAL

The parties appeared before this Court for trial on the issue of the equitable distribution of their marital property having been divorced as a result of this Court's granting reverse summary judgment in favor of the defendant. The aforesaid order was decided prior to the legislature's precluding the granting of reverse summary judgment in matrimonial actions; therefore, only the equitable distribution of the parties' marital property was at issue.

The primary issue before this Court centers on the valuation of the defendant's business, and inextricable entwined in such determination is the question of plaintiff's interest in defendant's business.

Before discussing the aforesaid issue, the Court believes a brief chronology of the parties' marriage and eventual separation, along with the history of defendant's business, is required.

The parties were married on June 20, 1943 in Kings County in the State of New York. At the time of their marriage the plaintiff and defendant were approximately 22 and 23 years old, respectively. It was the first marriage for both parties. After their marriage the parties resided and worked in Washington, D.C. Mrs. Wegman was employed as a social worker and Mr. Wegman worked for the federal government. Both parties possess undergraduate and advanced college degrees. The plaintiff has a B.A. degree from NYU and a M.A. degree from Smith College. The defendant possesses a Masters degree from Harvard University in Public Administration.

In the summer of 1947 the parties elected to return to New York since the defendant's job with the federal government was being phased out. In addition, during the latter part of 1946 the defendant's uncle, Samuel J. Wegman, died intestate leaving as distributees the defendant, the defendant's three brothers and three female cousins. Part of this estate included the S.J. Wegman Company (S.J.W.) which was essentially a mail order business selling women's foundation undergarments, and a dipilatory product.

The parties moved in with plaintiff's parents and plaintiff began working for the Jewish Family Services as a social worker earning approximately $4,000 per year. The defendant became involved in the operation of the S.J.W.

During the latter part of 1947 the defendant and his three brothers purchased the three sevenths ( 3/7) interest of their three cousins in S.J.W. for the sum of $7,200 with each brother contributing $1,800. The defendant, in light of his financial condition, was given the $1,800 by his brother Leonard to enable him to participate in the acquisition. The defendant now had a 25% interest in S.J.W. and devoted his working hours to the operation and expansion of S.J.W. The operation and expansion of S.J.W. will be addressed by the Court in due course.

The domestic lives of the parties continued to evolve and in 1949 the plaintiff ceased working and gave birth to the parties' first son. Shortly before the birth of their son the parties moved into their own apartment.

In 1958 the parties' second son was born and the parties purchased a house in Freeport (where plaintiff continues to reside). The purchase price was $41,000 and the $15,000 downpayment used to buy the house was derived from a $25,000 personal injury settlement which the parties received as a result of an automobile accident that the parties were involved in during 1947. The plaintiff had been injured in the accident and testified to having been hospitalized for 7 weeks as a result of the accident.

From 1949 until 1957 the plaintiff was not employed but was a homemaker and testified that she engaged in the typical activities which are associated with such title. The parties did also employ a live-in maid to assist plaintiff. In 1957 the plaintiff took a part-time job requiring her to work one day a week. This part-time position lasted until 1966 when she was employed full time at Queens Hospital. The defendant testified that the parties' marital difficulties began during the early 1960's and centered around the plaintiff's desire to resume her career as a social worker and also plaintiff's lack of desire to engage in sex.

In 1967 the plaintiff testified that she experienced a period of depression relating in part to certain physical ailments, and it was about this time that the defendant alleges the parties ceased sleeping in the same bedroom.

The parties continued, however, to reside together in the house in Freeport and, in fact, went on vacations with their children to Europe in 1966, 1969 and 1971. In September 1972, however, the parties' youngest son left for college and it was at this time that the defendant left the marital home and took up residence in a basement apartment in Rockville Centre.

The defendant continued to pay for the maintenance of the Freeport house and also for the educational and living expenses of the parties' two children.

In July of 1973, after attempts at settlement proved unsuccessful, Mr. Wegman commenced an action for divorce and Mrs. Wegman counterclaimed for the imposition of a constructive trust with respect to the marital residence and Mr. Wegman's business.

Almost four years later, in 1977, the action was tried before a jury which found in favor of Mrs. Wegman and dismissed Mr. Wegman's action for divorce. The trial court at that time made an award of support to Mrs. Wegman and directed an immediate sale of the house in Freeport. The husband paid his support obligations but did not compel the sale of the house, allowing plaintiff to continue to reside in the Freeport residence. Mrs. Wegman continued to refuse to grant her husband a divorce.

In July of 1981 the plaintiff served a summons commencing the present action.

As previously stated, the defendant, after relocating to New York, was totally committed to the operation of S.J.W.; and in 1951 Honor House Products Corporation (Honor House) was formed to handle a portion of the mail order business and to permit S.J.W. to operate as a corporate entity. All the shares of stock in Honor House were owned by S.J.W.

In or about 1953 S.J.W. moved its business location from the City of New York to 35 Wilbur Street, Lynbrook, New York. This property was and is owned by the Wilbur Street Corporation (a corporation wholly owned by S.J.W.) which leases the building to S.J.W.

The change in the location of the business foreshadowed a change in the nature of the products which S.J.W. would begin to develop. Sometime in 1956 the company expanded into the area of chemicals and biological materials. The financing of the expansion was derived primarily from the original mail order business which S.J.W. continued to engage in.

In 1957 Agricultural Biologics Corporation (ABC) was formed to develop and market a product known as gibberellic acid, which was alleged to stimulate plant growth. ABC was a subsidiary of S.J.W., all of whose stock was originally owned by S.J.W. The marketing of this product subsequently proved to be unprofitable.

The parties testified that sometime in 1957 or 1958 ABC became involved with the research and development of a drug product known as collagenase, an enzyme with certain properties useful for medical purposes.

In addition to the funding received by the profits of S.J.W.'s mail order business, which operated through the corporate entity Honor House, sometime in the early 1960's S.J.W. sold approximately 30% of the stock in ABC to various investors including the plaintiff's father. ABC, also during the early 1960's, changed its name from Agricultural Biologics Corporation to Advance Biofactures Corporation (ABC).

In 1960 ABC entered into a contract with Johnson & Johnson for the sale of collagenase for the purpose of research and in 1965 the FDA gave approval for the sale of collagenase to the public. Upon granting approval, ABC entered into a marketing contract with E.R. Squibb & Sons. ABC also sold collagenase to Knoll A.G., a European company, for resale of the drug in Germany.

Approximately one year later E.R. Squibb & Sons terminated the aforesaid contract due to alleged problems with collagenase and the product was taken off the market for additional clinical testing.

In February of 1969 the defendant and his three brothers entered into a partnership agreement regarding S.J.W., which essentially provided that the defendant would be a general partner with an 85% interest in S.J.W. and that his three brothers would be limited partners, each with a 5% interest. The Court notes that defendant's brothers were highly successful in their own careers and essentially allowed the defendant to operate S.J.W., Honor House and ABC.

The defendant testified that ABC attempted to obtain additional capital for its research into new products by a public stock offering sometime in 1970, but that the project was abandoned prior to obtaining S.E.C. approval.

A second attempt was made by ABC at the end of 1972 to go public, but once again the project was abandoned prior to S.E.C. approval. A preliminary prospectus was prepared in connection with proposed offering. (Plaintiff's Exhibit 22 in evidence).

ABC did succeed in 1972 in again obtaining FDA approval for the sale of collagenase and did enter into a distribution agreement in July of 1972 with Knoll P.C., the American subsidiary of Knoll A.G.

Another agreement, this time with Knoll A.G., was entered into in 1975 for the sale of collagenase worldwide.

During the mid- to late- 1970's ABC formed several corporate subsidiaries on the island of Curacao for the manufacture of collagenase on that island. This was allegedly done to enable Knoll A.G. to purchase the product without the imposition of...