O'Connell v. Corcoran: Valuation Dates Following a Foreign Divorce1

Elliott Scheinberg

The Court of Appeals' recent decision, O'Connell v. Corcoran,2 has resculpted the landscape of divorce litigation strategy for non-titled spouses. The facts are instructive. Plaintiff-wife's 1982 New York divorce action was dismissed for failure of proof. After establishing residence in Vermont she commenced an action under Vermont's no-fault divorce law. The husband appeared at the Vermont hearing regarding the divorce and property division.3 The wife informed the court that she was seeking only a divorce, that Vermont lacked jurisdiction to distribute their property because all of the marital assets were in New York and, as such, property distribution would be deferred to New York. Neither the court nor the husband contested her statement; the husband only challenged her grounds for divorce. The Vermont court granted her a judgment of divorce without addressing property distribution.

In 1995, she commenced a New York action seeking equitable distribution following a foreign divorce pursuant to DRL §236(B)(5)(a). The husband moved to dismiss on the ground of res judicata: Vermont's personal jurisdiction over both parties authorized it to distribute the marital assets, and, therefore, under the Full Faith and Credit Clause, New York was required to dismiss her complaint. Supreme Court denied the motion. The Third Department affirmed underscoring that the asset distribution remained unresolved. The Court of Appeals reversed.

The Court resolved the rift between the Third4 and Fourth5 Departments in favor of the Fourth Department which prohibits property distribution actions following bilateral actions. Citing Erhart, O'Connell held that a failure to petition for property distribution within the decree rendering state precludes such an application in New York – consistent with the Full Faith and Credit clause and with res judicata principles.

O'Connell emphasized that, within constitutional parameters, the broad language of DRL §§236B(2) and (5)(a) does not distinguish between ex-parte or bilateral foreign divorces. The Court of Appeals aimed at the fulcrum of the issue, that the Full Faith and Credit Clause mandates that a state court judgment have "the same validity and effect in every other court" which it has in the issuing state. "Thus, where a foreign decree bars a subsequent action for property distribution in the courts of the decree-rendering state, the decree also has that effect in New York." Vermont's jurisdiction over both parties arising from their personal appearance permitted asset distribution irrespective of its location. Furthermore, the parties's erroneously limiting statement (and possibly the Vermont court's too) as to Vermont's inability to effect property distribution was of no moment regarding its jurisdiction and ensuing judgment's entitlement to Full Faith and Credit.

Moreover, the Court found the similarity between Vermont's and New York's doctrines of res judicata compelling in that Vermont, too, resolves claims actually litigated as well as those that could have been litigated in a previous action. Furthermore, public policy in both states frowns upon forum shopping and the bifurcation of divorce and equitable distribution proceedings.

Relying on Boronow v. Boronow,6 the Court further observed that both states apply a transactional approach as a means to obviate forum shopping, and prohibit case dissection "into a myriad of single issue actions to obtain the desired judgment." Significantly, Boronow resolved the identical philosophical schism between the upstate and downstate Departments when it considered the breadth of DRL §234 to commence an action for asset distribution following a New York divorce judgment which had not made any property determinations. Boronow reversed the Third and Fourth Departments' liberally permissive construction of §234 to initiate multi-suits even after a divorce judgment because property issues are intertwined with the core issue and should be resolved therein. Accordingly, §§236B(2) and (5)(a) notwithstanding, Mrs. O'Connell's action was dismissed.

In essence, the Court of Appeals broadened §§236B(2) and (5)(a) to deem bilateral foreign actions as appropriate forums in which to fully litigate property issues so as to foreclose future litigation in New York.

O'Connell primarily impacts the litigation strategy and future residential plans of non-titled spouses contemplating out of state relocation. A titled spouse without grounds for divorce in New York remains free to relocate, obtain a no-fault divorce, and confront the issue of asset distribution in New York with no financial detriment; the non-titled spouse who has remained in New York is not thereby prejudiced. Until O'Connell many non-titled spouses could freely relocate outside the state, secure no-fault divorces, and litigate property distribution under §236B(5) (if the other spouse remained in New York.) Such actions are now perilous for non-titled spouses because titled spouses may now find it economically justifiable to appear in foreign jurisdictions, irrespective of escalated litigation and travel costs, if it ultimately compels a less generous property distribution if the sister state does not recognize certain categories of property, such as licenses and degrees or enhanced earning capacity.

O'Connell's Impact on Valuation Dates in Ex Parte Foreign Divorces

The explanation of how O'Connell impacts on valuation dates in ex parte foreign divorces must be developed incrementally.7 The statutory feature that tolls the acquisition of marital property is triggered upon the commencement of a specifically enumerated action set forth in DRL §236B(5)(a) all of which actions simultaneously contemplate marital dissolution. Next, §236B(4)(b) directs that asset valuation be either as of the commencement date of the action or the trial date. However, which valuation date pertains when more than one action has been commenced especially when a significant hiatus in time dramatically impels asset value? Otherwise stated, are valuation dates from prior New York actions immutable or irretrievably lost in future actions in the event there was no marital dissolution in a prior action? The answer is Department driven. In a full body of law, the Second Department8 firmly holds that, absent evidence of reconciliation, to wit, that no further benefits were derived from the marital partnership, the dates in the first action retain their vitality. The First, Third and Fourth9 Departments hold that the second (or final) date is correct because an action is not a "matrimonial action" within the meaning of §236(B)(1)(c) and (4)(b) if it neither (stated disjunctively) ends the marriage, i.e., the marital res, nor results in equitable distribution of property. According to the these Departments, the net affect of the commencement of an enumerated action temporarily tolls the acquisition of marital property and asset valuation contingent upon marital dissolution – the final decree then reaches back and permanently locks in the dates. In essence, marital dissolution is the key because it is settled law that property distribution is unavailable absent an alteration of the marital status.

In Sullivan v. Sullivan10 the First Department ignored the precept of the termination of the marital partnership upon divorce and created the fiction that a proceeding under §236B(5)(a) for property distribution following a foreign divorce represents the first time that property distribution is presented before a court and the New York commencement date is, therefore, the cutoff date. Sullivan reasoned that "§236(B)(1)(c)'s defin[ition] of 'marital property' as all property acquired before the commencement of a matrimonial action", and §236(B)(2)'s definition of "a matrimonial action to include 'proceedings to obtain maintenance or a distribution of marital property following a foreign divorce'" mandate this conclusion. This reasoning is flawed (in light of O'Connell's expansive reading that §§236B(2) and (5)(a) do not distinguish between ex-parte and bilateral foreign divorces) and inconsistent because, as we just saw, the aforementioned Departments hold that "a matrimonial action" must either terminate the marriage or distribute property, and an ex parte foreign divorce undeniably terminates a marriage; termination is termination irrespective of locale. Sullivan is, therefore, potentially devastating to the titled spouse when the gap between the ex parte divorce and the proceeding for property distribution is lengthy accompanied by a drastic rise in the value of a major asset.

Four years later, the First Department reached a contrary conclusion in Hargett v. Hargett.11 Mrs. Hargett moved to vacate an open court stipulation made during an action for property distribution following an ex parte foreign divorce. She argued that the agreement was invalid because it was neither in writing, subscribed by the parties, nor acknowledged in a manner required to entitle a deed to be recorded under §236(B)(3). Hargett upheld the agreement because it was made after the foreign divorce ended the marriage and not "before or during the marriage", thus, exempting it from the aforementioned procedural formalities.12 The foreign divorce pendulum swings unpredictably. Ex parte divorces should not impede fixing valuation dates as of the time of the commencement of the foreign action because New York and foreign decrees coextensively terminate the marital res and, ergo, the economic partnership. A New York proceeding does not "more divorce" the parties.

O'Connell's key premise is focused on uniform constitutional dynamics across jurisdictional boundaries. Although fixing dates raises neither constitutional nor res judicata issues, per se, it, nevertheless, constitutes a substantive environment keenly sensitive to procedural outcomes (marriage termination) even if occasioned outside the state. O'Connell cogently militates against legal fiction and inconsistent theories13 which drive an illogical wedge (regarding valuation and marital property dates) between local, bilateral, and ex parte foreign divorces – all of which equally terminate the marital res.

An important tenet of statutory construction requires that "a statute be construed as a whole and its various sections...considered together and with reference to each other so that they are internally compatible and must read the entire law and accord respect to the interlocking and interrelated features of all its parts and must read the entire law and accord respect to the interlocking and interrelated features of all its parts."14 DRL's substantive and procedural harmony, therefore, necessitate that §236B(4)(b)'s silence regarding foreign actions (like §§236(B)(2) and (5)(a)) be similarly upgraded to reflect O'Connell's expansive approach by including ex parte foreign actions.

It may, therefore, be argued that O'Connell has ushered in a new theory for earlier date selections in ex parte foreign divorces.