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Decided on August 24, 2006
Supreme Court, Nassau County

05-200100 Anthony Falanga, J. This is a motion by the wife for an order declaring the real property in East Meadow and all assets derived directly or indirectly from a personal injury settlement to be her separate property. The parties were married on June 29, 1991. There are no children of the marriage. The wife is 53 and the husband is 59 years old. Both parties claim to suffer serious health problems. The wife has a daughter from a prior marriage. According to the wife, the parties did not reside together between 1992 and 1995; during the year 2003; or at any time after April 2005. The wife commenced the instant action in April 2005. In 1997, the wife was injured in an automobile accident. She underwent spinal fusion surgery
in 1999 and 2001. As a result of said accident, she and the husband commenced a negligence action, that was settled by check made payable to both parties, in the net sum of $402,918.33. Said check was endorsed by both parties and deposited into an account in the wife's name only on January 7, 2003. On May 1, 2003, the wife purchased the marital residence for $295,000.00, utilizing $29,500.00 of the negligence action proceeds as a down payment. There is a mortgage on the premises of approximately $226,000.00. The wife testified at her deposition that she thought she put $80,000.00 toward the purchase and obtained a mortgage for the balance of the purchase price. She refinanced the mortgage about two years ago, to obtain a more favorable interest rate, but did not recall if she took any cash out when she refinanced.
The husband contends that he and the wife operated a construction business together, between 1997 and 2003; that after she was injured in the automobile accident, she was disabled and he cared for her and supported her emotionally, physically and financially. He notes that the wife gave testimony during her deposition supporting his claims. He further notes that during her deposition, the wife admitted that some of the settlement proceeds were used to pay expenses for the husband's truck and his uncovered medical expenses when he developed prostate cancer. [*2]
As of August 2005, the wife had over $192,000.00 of the negligence proceeds on deposit, but by July 2006, she had only $65,000.00 in the account. She testified at her deposition that she had recently spent $85,000.00 on renovations to the marital residence.
Based upon all of the foregoing, the motion is decided as follows:
In defining marital property, DRL 236 (B)(1)(d)(2)(5)(a) specifically excludes compensation for personal injuries. Where, however, the unallocated settlement proceeds of a negligence law suit are made payable to both spouses, who were named as plaintiffs in such action, the court in a divorce action must determine what portion of the proceeds was paid to compensate the injured spouse for his or her damages, and what portion, if any, was paid to the other spouse for his or her loss of consortium claim (see, Richmond v Richmond, 144 AD2d 549; Kaye v Kaye, 6 Misc 3d 1005[A] [gay husband awarded 10% of unallocated negligence settlement proceeds in recognition of fact that wife suffered personal injuries, his claim was derivative, and as he was gay, his loss of consortium claim could not have included an award for loss of sexual companionship]; see also, Tirrito v Tirrito, 191 AD2d 686).
In the case at bar, the apportionment of the settlement proceeds received in January 2003, clearly requires a full evidentiary hearing. Accordingly, the wife's motion seeking an order declaring that the settlement proceeds, the marital residence, and all other assets derived from said proceeds, are her separate property, is referred to the trial of the action.
The Court notes that with regard to the marital residence, a determination will be required establishing 1) each parties' contribution of separate property toward the acquisition and improvement of the premises; and 2) the equitable distribution of any marital portion of the equity therein. The following hypothetical is offered to illustrate this concept:
Assume that the Court, after trial, allocates the settlement proceeds of approximately $400,000.00, 90% to the wife and 10% to the husband. If the wife in fact utilized $80,000.00 to purchase the premises and $85,000.00 to improve the premises, then the husband has a separate property contribution of $16,500.00 (10% of $165,000.00) and the wife has a separate property contribution of $148,500.00 (90% of $165,000.00). The wife would also be entitled to 90% and the husband 10% of any "passive" increase in equity, between the date of the purchase and the date of trial, due to market factors. Any "active" increase in equity, however, incident to the expenditure of marital income and or efforts, would be subject to equitable distribution (see, Falgoust v Falgoust, 15 AD3d 612).
This constitutes the decision and order of the Court. The parties and counsel shall appear for a pretrial conference on October 25, 2006.
E N T E R: [*3]
Anthony J. Falanga, Justice
Supreme Court, Nassau County
Dated: August 24, 2006
Mineola, NY

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