Broadway theater heir Eric Nederlander can be required to pay off half of a multimillion-dollar mortgage on a home he owns with his estranged wife Lindsey even though there has been no final allocation of assets in the couple’s divorce proceeding, a unanimous state appellate panel has ruled.
The panel in Nederlander v. Nederlander, 350510/07, held on Jan. 3 that Manhattan Supreme Court Justice Deborah Kaplan (See Profile) had the authority to order Eric to either refinance or pay half the mortgage before the distribution of the couple’s assets was litigated in order to preserve the assets and avoid foreclosure. The mortgage matured during the divorce proceeding, and the outstanding debt is more than $3 million.
The Appellate Division, First Department, panel consisted of Justices John Sweeny (See Profile), David Saxe (See Profile), Rosalyn Richter (See Profile), Sheila Abdus-Salaam (See Profile) and Nelson Roman (See Profile).
Eric, son of national theater conglomerate owner Robert Nederlander, had argued that the court’s power to order payments to maintain assets—for example, to order that a litigant make monthly mortgage payments—did not extend to ordering him to pay half of the entire balance of the mortgage.
Both Kaplan and the appeals panel disagreed.
“The power to issue preliminary injunctions affecting property in divorce actions stems from the recognition that while spouses have no legal or beneficial interest in marital property prior to a judgment of divorce, they nevertheless have an expectancy in that property,” the panel wrote. “Thus, in order to protect that expectancy pending equitable distribution, to maintain the status quo, and to prevent the dissipation of marital property, the court must be able to issue orders to ensure that such marital property is protected should it later become the subject of equitable distribution.
“Thus, the motion court, to ensure that the marital home would not be lost to foreclosure, prior to trial and a final judgment of divorce, providently exercised its discretion in ordering defendant to cooperate in obtaining an extension of the loans and/or a refinancing of the loans,” the panel said.
Eric also had argued that he could not pay the mortgage because he made only $700 per week working for his father’s company. The First Department held that Kaplan had rightly imputed assets to him on the basis of his lifestyle. Eric testified at his deposition that all of his bills are paid by his father. As of 2010, according to Eric’s statement of net worth, he had received $6.5 million from his father, which he characterized as loans. However, he has never paid his father back.
“Contrary to defendant’s assertion, the motion court did not err in implicitly concluding that defendant had the ability to pay half of the outstanding mortgages,” the panel said. “While defendant, pointing to his modest earnings and substantial debt, claims that he lacks the financial resources to comply with the court’s order, his deposition testimony belies his assertion, evincing instead that he actually has access to seemingly unlimited financial resources, which can be, and were, justifiably imputed to defendant as income and/or assets.”
In fact, Eric testified that all of his bills were mailed directly to his father’s company, and paid with company checks, the panel noted.
“Based on the foregoing, clearly, the substantial and ongoing financial aid provided to defendant by his father is either a gift, imputable as income…or a benefit provided to defendant by his father’s company, also imputable as income,” the panel said.
Eric also argued that ordering him to pay half the mortgage amounted to distributing property before judgment. The panel found “no merit” in this argument.
“While it is true that in an action for divorce the court cannot distribute property by pendente lite order and prior to a final judgment of divorce…here, the motion court never made any determination as to the parties’ interests in the marital residence,” the panel said. “Nor did the motion court order the equitable distribution of the marital property pendente lite.”
Martha Stine of Cohen Rabin Stine Schumann, who, along with her partner Bonnie Rabin, represented Lindsey Nederlander, said the decision was important because it made clear that judges could impute not only income, but assets to a litigant in a divorce case that is still pending.
“There are many cases where income has been imputed to a party, but we were unable to find a case where substantial assets, meaning, financial resources, had been imputed to a party pendente lite, although the Domestic Relations Law contemplates that,” she said in an email.
She also said it was significant in holding that Eric could be ordered to pay half the balance of a mature mortgage or to refinance the mortgage, rather than merely making monthly payments. The holding affirmed judges’ “broad powers to fashion powerful and creative pendente lite orders” to preserve marital assets in divorce cases, she said.
John Teitler of Teitler & Teitler, who represents Eric, could not be reached for comment.
@|Brendan Pierson can be contacted at firstname.lastname@example.org.