Joel R. Brandes and Carole L. Weidman
FOR SOME TIME NOW, family law commentators have participated
in fashioning elaborate formulas to simplify the notoriously complex Child
Support Standards Act. Lawyers have fumbled with the calculations largely
because of legislative shortcomings in clarifying and defining the act. With
never-ending twists and turns, attorneys take great comfort every so often in
coming across case law that helps solve the seemingly endless mysteries of the
CSSA. Weary matrimonial lawyers take comfort from some recent cases on the
subject of additional child support awards.
The CSSA provides that where a parent is or may be entitled to
receive non- recurring payments from "extraordinary sources," which are not
otherwise considered as income, the court may allocate a portion of it to
child support. [FN1] This provision is mandatory. It is not appended to the
basic child support obligation. It is in addition to any support award that
may be made. These "extraordinary sources" include, but are not limited to,
life insurance policies [FN2]; discharge of indebtedness [FN3]; recovery of
bad debts and delinquency amounts [FN4]; gifts and inheritances, and lottery
winnings. [FN5] Of course if the non-recurring payments from extraordinary
sources are considered as income, they cannot be parlayed into a double hit
but will be excluded from the application of this provision.
Either or Both Parents
Unlike other support provisions, the CSSA does not confine
orders of this nature to the noncustodial parent. [FN6] Either or both parents
may be directed to make such payments. Entitlement is not automatic. Once the
court is convinced that a child is entitled to a piece of the pie, and
exercises its discretion to award additional child support, discretion is at
the heart of it. The court must exercise its discretion with regard to the
amount and method of such payments. It may direct that the amount be paid in
one payment or several payments. This provision is new to New York law. It
authorizes the court to direct a parent to make a "lump sum" child support
payment that would, like all child support payments, be non-deductible to the
payor.
In DSS v. LaBarge,In DSS v. LaBarge, [FN7] the Family Court
held that a $1.3 million personal injury award did not qualify as a
nonrecurring payment. In endorsing respondent's interpretation, the court
reiterated that the statute specifically defines a nonrecurring payment as
only including sources not otherwise considered as income. All of respondent's
current income, from which child support was paid, was derived from income
generated by the investment of the award.
The court found no authority to order a distribution of the
underlying asset, since adequate income existed from which child support was
being paid. In laboring to be consistent with legislative intent, the court
noted that receipt of compensatory damages in a personal injury award is
intended to put the injured party in the position in which he was before he
was injured and that a portion of the award is for past lost wages and pain
and suffering. The court reasoned that this distinguishes the personal injury
award, and makes it less likely that the Legislature meant to include it as a
one-time nonrecurring payment.
In S.G. v. D.M. [FN8] the petitioner and his current spouse
reached a settlement agreement as "compensation for his personal injury, pain
and suffering and the spouse's loss of consortium claims which occurred as a
result of an automobile accident." He was guaranteed $533,000 with an expected
payout of $1 million. The payment schedule included an initial payout, monthly
benefits and substantial disbursements in the future. The Hearing Examiner
refused to include in income the proceeds of the personal injury settlement,
in calculating the amount of child support, declaring the funds did not
constitute income pursuant to Family Court Act (FCA) Sec. 413 (1)(b)(5).
The Family Court agreed with the respondent that the
Legislature intended to provide the courts with the discretion to include as
income items other than those specifically enumerated. It found that the
portion of the petitioner's settlement that provided him with payments of
$1,350 a month from Oct. 1, 1995, for life, could be considered as income for
the support of the children.
Nonrecurring Payments
The court held that the nonrecurring payment that he received
pursuant to the settlement was not "income." Relying on LaBarge, the court
concluded that it was not permitted to allocate for the support of the child a
portion of the "non-recurring payment" from extraordinary sources that
otherwise would be considered as income.
In Kramler v. Kramler, [FN9] the Second Department held that
while distributive awards are not specifically included in "income" for
purposes of calculating the basic child support obligation, they appeared to
fall, if at all, within the category of nonrecurring payments. This type of
payment offers the Supreme Court the option of allocating a portion of the
nonrecurring payment to child support, without the affirmative obligation to
do so.
In Bryant v. Bryant, [FN10] decided last month, the Third
Department provided further guidelines. Petitioner and respondent had two
children. They separated in August 1994 and subsequently stipulated that they
would have joint custody of the children with primary physical custody to
petitioner.
During the child support hearing, ample testimony was given to
explore the parties' finances thoroughly. Among the families' treasures was an
inheritance that respondent received, which was valued at $400,000.
The Hearing Examiner ordered, among other things, that
respondent pay $115 a week in child support, together with an additional $100
payable to the petitioner in two installments, representing an award of
additional child support pursuant to Family Court Act Sec. 413[1] [e].
Respondent was also required to maintain health and dental insurance for the
children, at a about $25 to $35 a week, and, to continue such insurance for
petitioner until the parties were divorced.
Family Court modified the Hearing Examiner's decision,
directing that $75,000 be placed in a trust for the parties' minor children,
with the income from the trust to be distributed in quarterly installments to
defray the cost of supporting the children. Petitioner was named as trustee
and was permitted to invade the principal in a sum equal to one-eighteenth the
amount until the youngest child attained majority. Petitioner was required to
provide an annual accounting. No further restrictions were placed on the
trust. Petitioner received the remaining $25,000 outright.
On appeal, respondent contented that Family Court erred in
directing that the children be awarded a share of his inheritance as
additional child support. He argued that the lump-sum distribution ordered by
Family Court was not permitted and that the court erred in failing to treat
the money generated by his inheritance as "income" for purposes of calculating
his basic child support obligation.On appeal, respondent contented that Family
Court erred in directing that the children be awarded a share of his
inheritance as additional child support. He argued that the lump-sum
distribution ordered by Family Court was not permitted and that the court
erred in failing to treat the money generated by his inheritance as "income"
for purposes of calculating his basic child support obligation.
The Third Department while seemingly rejecting respondent's
arguments, agreed that a court awarding additional child support pursuant to
FCA Sec. 413(1)(e) should consider the impact that a lump-sum award would have
on the affected parent. The appellate court pointed out that the statute does
not preclude such an award and makes clear that the manner of payment is a
matter committed to the court's discretion. [FN11]
The court found merit to respondent's claim that the $100,000
awarded as additional child support was inappropriate. It represented a
significant portion of respondent's overall inheritance, and Family Court's
decision to provide for a lump-sum distribution, although permissible,
required respondent to liquidate substantial assets. It also found merit to
respondent's contention that Family Court erred in failing to consider the tax
consequences of a lump- sum award and that the valuation figure adopted by it
was erroneous.
Family Court also mistakenly failed to consider whether the
additional expense in providing health and dental insurance for the children
warranted deviation from the basic child support obligation imposed by the
statute. Respondent's basic child support obligation came to $115 a week,
while the cost of providing health and dental insurance for the children cost
$25 to $35 per week. In view of petitioner's then impending loss of
employment, it had no quarrel with Family Court's directive that respondent
obtain and bear the cost of such insurance for the children. It held, however,
that health insurance premiums are not proper add-ons to the basic child
support obligation. [FN12]
Family Court missed the mark when it failed to consider this
additional expense in determining whether respondent's basic child support
obligation was fair and just and, having failed to do so, the court's award of
child support was fundamentally flawed.
At oral argument of the appeal it was brought to light that
the parties' son was residing with respondent. The Third Department remitted
the matter for a new hearing on child support, including consideration of an
award of additional support, and it offered Family Court "some guidance in
this regard."
The court recalled that FCA Sec. 413 (1)(e) provides that
"where a parent is or may be entitled to receive non-recurring payments from
extraordinary sources not otherwise considered as income pursuant to this
section, including but not limited to *** [g]ifts and inheritances *** the
court, in accordance with paragraphs (c), (d) and (f) of this subdivision may
allocate a proportion of the same to child support, and such amount shall be
paid in a manner determined by the court."
It pointed out that the statute contemplates reference to FCA
Secs. 413(1)(c), (d) and (f). Thus, Family Court may, in exercise of its
discretion, allocate a portion of a respondent's inheritance to child support
provided the award "does not run afoul" of those sections. When the court taps
into "extraordinary sources," it has a host of considerations under those
sections.
Among the factors to be looked at are the parties' combined
parental income and their pro rata basic child support obligation; whether
such an award would reduce respondent's income below the poverty level or
self-support reserve; and whether such an award would be unfair or unjust in
light of the basic support obligation already imposed.
The court said that should Family Court determine that an
additional award of support was warranted and that a lump-sum payment was
appropriate, the court should give careful thought to the impact such an award
would have on respondent and consider whether, in light of whatever assets
respondent may hold, the award could be fashioned in such a manner as to avoid
invading the principal.
Significantly, in a footnote, the court expressly rejected
counsels' assertion that such an award may be made without any regard to the
actual needs of the children, because FCA Sec. 413(1)(e) did not stand for the
proposition that a child is automatically entitled to share in any economic
windfall that my come the way of his or her noncustodial parent. While the
facts of the case may establish that an award of additional support is
justified, the mere fact that respondent inherited a sizeable sum of money
does not, standing alone, provide an adequate basis for such an award.
In the final analysis, any award of additional support must
consider a number of relevant factors including, among others the parties'
respective standards of living and the actual needs of the children. In
another footnote the court observed that any outright grant of funds to
petitioner, such as the $25,000 previously awarded by Family Court as
additional child support, would be looked upon with disfavor by it.
FN1. FCA Sec. 413 (1)(e); Domestic Relations Law Sec.
240(1-b)(c).
FN2. FCA Sec. 413 (1)(e)(1); DRL Sec. 240 (1-b)(c)(1).
FN3. FCA Sec. 413 (1)(e)(2); DRL Sec. 240 (1-b)(c)(2).
FN4. FCA Sec. 413 (1)(e)(3); DRL Sec. 240 (1-b)(c)(3).
FN5. FCA Sec. 413 (1)(e)(3); DRL Sec. 240 (1-b)(c)(3).
FN6. FCA Sec. 413 (1)(e); DRL Sec. 240 (1-b)(c).
FN7. Erie County DSS v. LaBarge, 159 Misc2d 806 (1993).
FN8. 171 Misc2d 169 (Fam. Ct., 1996).
FN9. 199 AD2d 901 (3d Dept. 1993).
FN10. 663 NYS2d 401 (3d Dept. 1997).
FN11. Citing 2 Foster, Freed and Brandes, Law and the Family
Sec. 2:12.5, at 450 [2d ed. 1996 supp.,] noting that Family Court Act Sec. 413
(1)(c) "authorizes the court to direct a parent to make "lump sum" child
support payments."
FN12. Citing Matter of Eastburn v. Eastburn, 222 AD2d 898,
900; Matter of Gray v. Gray, 199 AD2d 644, 645; Chasin v. Chasin, 182 AD2d
862, 863.
FN----------
Joel R. Brandes and Carole L. Weidman have law offices in New
York City and Garden City. They co-authored, with the late Doris Jonas Freed
and Henry H. Foster, Law and the Family New York, and co-authored Law and the
Family New York Forms (both, Lawyers Cooperative Publishing).
FN----------
12/23/97 NYLJ 3, (col. 1)
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