In DeSouza v. DeSouza, 2018 N.Y. App. Div. LEXIS 5173, the Third Department Appellate Division upheld a Broome County Supreme Court decision to award the wife 50% of the husband’s 75% interest in the business identified as Halifax Fan. For context, the parties were married for nine years before the wife moved out of the marital residence and commenced the action for divorce. At the commencement of the action, there were three children, ages three to six years. Wife had resigned as vice-president of supply-chain for Endicott Interconnect in 2010 (one year after the last child was born) to raise the couple’s children.

The Broome County Supreme Court did not disagree that husband’s purchase of Halifax Fan was almost entirely with separate property, but still denied any separate property credit. The Appellate Division’s reasoning in upholding the award turns on “the joint nature of the parties’ decision to invest in Halifax Fan and the extent of the wife’s nonmonetary contributions in caring for the children during such time.” The “joint nature of the parties’ decision” refers to the finding that the parties had “extensive discussions” regarding the purchase of Halifax Fan and that the husband provided the wife with revenue projections and assurance that the acquisition of Halifax Fan would be a lucrative long-term investment.

By statute, property acquired in exchange for separate property is separate property DRL § 236(B)(1)(d)(3). And it is well established that commingling of separate property with marital property can transmute separate property. But, to the best of my knowledge, there are no cases up to this point where separate property has been transmutated on the basis of a discussion. The wife’s input on the investment decision, along with her indirect contribution of raising the children is certainly a factor to be weighed in the distributive award, but it is entirely unclear how any amount of contribution justifies reclassification of separate property to marital property.

Another interesting data point gleaned from the decision is that the husband’s child support payment was set at $2,562 per month. With three children, this indicates that the Court assessed only $106,00 of his income. The case indicates that husband had earned as much as $700,000 per year in 2005 and subsequently had a guaranteed annual salary of $150,000 when he first joined Halifax Fan.

The wife was represented by Elizabeth A. Sopinski of Levene Gouldin & Thompson, LLP. Husband was represented by Robert F. Julien.