In the April 15th decision in FR v. AR, Nassau County Supreme Court Justice Edmund M. Dane ordered the pendente lite sale of the marital residence titled in the husband’s name after foreclosure proceedings had been commenced. The Court elected to preserve the asset by ordering the immediate sale, as the equity in the house was simply more important than the actual structure.
Last week’s post discussed the April 10th decision of the Third Department in Angello v. Angello, which upheld the trial determination that a wife’s refusal to approve a mid-action sale of the husband’s insolvent business constituted a wasteful dissipation of the largest marital asset. I asked whether the lower court could have simply approved the sale.
Here, to provide authority for the sale, Justice Dane wrestled with the 1977 (pre-Equitable Distribution) decision of the Court of Appeals in Kahn v. Kahn. There, it was held that while D.R.L. §234 authorized a court to decide questions of title, it did not authorize the sale of a marital residence held as tenants by the entirety unless there had been a change in a couple’s marital status that changed the interests of the parties to tenants in common. In the absence of a change in marital status, there could be no question of title between the parties, as the law treated tenants by the entirety as a single person. Nonetheless, the fiction is not applied when recognizing that a tenant by the entirety has the power to mortgage their interest. The Court also noted that prior to the enactment of D.R.L. §234 and its predecessor Civil Practice Act §1164-a, “no authority existed to permit a court to adjudicate a real property right in a marital action.”
Justice Dane held that Kahn did not preclude a sale and on the facts before the Court, an immediate sale was necessary.
The parties married in 2007. The marital residence was acquired after the parties’ marriage and prior to the commencement of this action. Title was taken solely in the name of the husband. The husband commenced this matrimonial action in May 2023 and stopped making mortgage payments in July 2023. The mortgagee bank commenced a foreclosure action on March 28, 2024.
The wife made a pendente lite application to sell the marital residence.
The husband denied that he had willfully avoided paying the mortgage, and stated that he did not want to lose the home where the parties’ child was raised. He claimed to be actively opposing the foreclosure action and argued that he was unable to bring the mortgage current immediately. Through the foreclosure action, he was attempting to pursue loss mitigation.
Justice Dane reviewed three post-Kahn decisions as conceivably standing for the notion that any property classified as the parties “marital residence,” irrespective of how title was held, could not be sold pendente lite, absent an agreement to the contrary. However, the Court noted, that that was not what Kahn stood for, nor was it what Kahn held. Kahn’s holding was strictly limited to property owned by the parties as tenants by the entirety.
The Court found that, based on myriad factors, it has the authority to direct the pendente lite sale of the marital residence in this matter.
First, because title was held solely in the husband’s name, the Court was not bound by Kahn. The Court of Appeals had reasoned in Kahn that “…the legislative history surrounding section 234 indicates clearly that the Legislature did not intend to alter existing substantive property law principles in enacting this section…” Here, as there was no need to alter a tenancy by the entirety, the Court could distinguish Kahn.
Second, honoring the text and spirit of the equitable distribution law, and given how title was held, D.R.L.§236(B)(5)(c), if a Court is required to distribute marital property equitably, then the marital property to be equitably distributed should be in existence at the time of distribution, not merely just in existence at the time of commencement of the action. It was incumbent upon the Court to ensure that neither party takes any affirmative action to diminish the equity. Moreover, the Court must consider, when equitably distributing marital property, whether the probable future financial circumstances of each party would be detrimentally impacted (see D.R.L. § 236[B][5][c][9]) by a diminution or complete loss of, equity. Moreover, the Court must consider the wasteful dissipation of assets by either spouse (see D.R.L. §236[B][5][c][12]). “But why even get to this point? While the matrimonial court may be able to recompense the aggrieved spouse by a money judgment, often times, such judgments are partially, or totally, uncollectible.”
Third, as the Court of Appeals itself recognized in 1993 in Kaplan v. Kaplan, 82 N.Y.2d 300 (1993), the “revolutionary enactment of the Equitable Distribution Law in 1980” recognizing that marriage is an “economic partnership.” In 2008, that Court recognized that “[t]he economic partnership should be considered dissolved when a matrimonial action is commenced which seeks divorce, . . . .” Mesholam v. Mesholam, 11 N.Y.3d 24 (2008). Justice Dane opined that the Court should be able to issue orders necessary during the pendency of an action to preserve assets that are the byproduct of an economic partnership, which are ultimately subject to distribution by the court.
Fourth, the law favored the preservation of marital assets. Here, the only way to preserve the residence was to order its sale. In 2015, the Court of Appeals recognized that D.R.L. §234 allowed courts to issue preliminary injunctions aimed at preserving marital assets pending equitable distribution. El-Dehdan v. El-Dehdan, 26 NY3d 19 (2015).
The Court declines to be hamstrung by an outmoded interpretation of D.R.L. § 234, and the Court does not find that § 234 prohibits the sale of a solely titled asset, especially if a directive that the asset be sold results in the preservation of the asset in question.
Here, citing Justice Victor Grossman in J.H. v. C.H., 82 Misc 3d 1202(A) (Sup. Putnam Co. 2024), the Court’s inaction at this juncture would be tantamount to countenancing marital waste.
Fifth, the Plaintiff’s admissions buttressed the need for the sale. He failed to append any that he was trying to pursue loss mitigation, or, for instance, that he had applied for a mortgage modification. He offered no defense for his cessation of mortgage payments.
Sixth, the Plaintiff’s conduct and earnings did not justify his failure to pay the mortgage.
Seventh, a line of authority, post-Kahn, established exceptions to Kahn. The Court referenced St. Angelo v. St. Angelo, 130 Misc 2d 583 (Sup. Suffolk Co. 1985): where the wife6 had produced a buyer who was ready, willing and able to purchase said premises; Gordon v. Gordon, 144 Misc 2d 27 (Sup. NY Co. 1989): dealing with a cooperative apartment that could not have been owned “by the entirety”; and D.R.D. v. J.D.D., 74 Misc 3d 237 (Sup. Monroe Co. 2021): where the marital residence needed repair, the wife refused to allow the husband in the home to make the repairs, the parties had signed a listing agreement, and the husband was paying carrying charges on the home which, inter alia, included the wife’s child from another relationship and the husband was, in effect, paying for housing costs for a nonmarital child.
Comment: It is note that various courts continue to apply Kahn’s rule, i.e, that the court has no authority to direct the sale of a marital residence held by the parties as tenants by the entirety prior to the alteration in the marital relationship. See, e.g., Moran v. Moran, 77 A.D.3d 443 (1st Dept. 2010); Adamo v. Adamo, 18 A.D.3d 407 (2nd Dept. 2005); Sanon v. Sanon, 51 Misc. 3d 1214(A), 37 N.Y.S.3d 208 (Sup. Monroe Co. 2016).
It may also be noted that under the Automatic Orders, “neither party shall sell, transfer, encumber, conceal, assign, remove or in any way dispose of, without the consent of the other party in writing, or by order of the court, any property (including, but not limited to, real estate, personal property, cash accounts, stocks, mutual funds, bank accounts, cars and boats) individually or jointly held by the parties . . . .” D.R.L. §236(B)(2)(b)(1). Does this not acknowledge that a court has the authority to order a sale of realty?
On the other hand, it is noted that D.R.L. §236(B)(5)(a) provides that absent an agreement, “the court, in an action wherein all or part of the relief granted is divorce, . . . shall determine the respective rights of the parties in their separate or marital property, and shall provide for the disposition thereof in the final judgment. Does this mean that the court is without authority to dispose of property before the final judgment?
Finally, it is noted that under our “no-fault” divorce statute, D.R.L. 170(7), “no judgment of divorce shall be granted under this subdivision unless and until the economic issues of equitable distribution of marital property, . . . have been resolved by the parties, or determined by the court and incorporated into the judgment of divorce.” Does this statute provide or limit the ability of a court to dispose of property while the action is pending?