Responding to divorce where one spouse is ready to “burn down the (financial) house”. | Fox Rothschild LLP
Extreme times produce irrational responses. One day ago, a disgruntled orthopedic patient in Oklahoma decided it was time to kill his surgeon. He took three more lives and these people got “in his way”.
We find that kind of irrational and largely self-destructive behavior in the domestic world was fine. A few weeks ago, the Superior Court ruled on a case where the company’s books and records were so bizarre that no meaning could be made from them. In a bizarre twist, the Superior Court dismissed the case over concerns that the party keeping the books was treated unfairly. Snyder vs. Snyder (April 20, 2022)
The unprecedented crime case, decided on May 25, follows a similar theme. The Crimis married in 1992 and separated 21 years later in 2013. The husband filed for divorce in 2017 according to the court’s opinion, although the case number still bears a number from 2009 while there had had a previous filing.
The parties had an antique business called Best of France, Inc. The husband owned 90% of it; female 10%. Interestingly, while the matter was pending, Husband closed Best of France and then reopened as Edmondo Crimi, LLC. He did so in April 2019.
We mentioned that the case had a 2009 case number. While notifying us that the 2009 case was withdrawn in August 2010 (fn. 1), the trial court notice describes a 2014 order whereby the parties agreed that inventories of Best of France’s then-existing assets would be made and photos of the antiquities taken, oddly enough, to keep the facts “in amber”. This apparently happened when the woman presented her inventory and the photos during the trial in 2021.
Five months after the divorce was filed (or perhaps better said “reclaimed”), the parties were back in court in June 2017 where the court ordered the husband to provide his wife with a revised/current inventory and the woman had to account for what she had “taken” from the business. The order was ignored, so the parties returned for another hearing where the judge again ordered them to do what she said and to update the case inventory monthly We don’t know if either order was complied with only that the case proceeded to a master hearing no record as of late summer 2020. Note that somehow the business called Best of France was shut down by her husband in April 2019 and reconstituted in his name as an LLC As expected, the captain’s recommendation was appealed and a trial de novo was scheduled.
After several days of trial over several months in early 2021, the trial court ordered the husband to pay $836,394 as “equitable repayment child support” in 6 annual installments of $139,399. The husband appealed.
The heart of the appeal is the husband’s claim that the trial court divided the company’s assets while ignoring $3,329,000 in trade debts, nearly half of which were owed to one person. Predictably, this person claimed to have a vested interest in the antiquities inventory. At trial, the husband argued that the business (Best of France or Crimi LLC?) was worth less ($1,000,000). The wife said the business was worth $2,100,000. Thus, a delta of $3 million in values.
While telling us there was no separation until 2013, the trial court finds that the husband began in 2012 to dump the value of the business by taking loans from someone named Chance Worthington. The wife said she had no knowledge of these loans. The trial court held that as a shareholder wife, she should have been informed of the debt and consented to it. He also notes that in 2017, as the parties wrangled over inventories, the husband settled a lawsuit brought by another antique dealer by borrowing money from Chance Worthington and giving him a guarantee in the entire Best of France “machinery, equipment, inventory and accounts”. was supposed to secure an obligation owed to Worthington since 2014. The connection between the 2014 debt and the 2012 debt owed to Worthington is unexplained. But, the trial court notes that the husband never made payments to the two creditors (Worthington and another named Shapiro) and that no loan documents were submitted to the court during the trial and that these debts have not been entered by the accountant on the company’s balance sheet. At the risk of boring me, I note that the husband asserted that Worthington had a guaranteed interest in the assets under New York law. One has to wonder when and how New York adopted “paperless” warranties. Further, how did the assets of Best of France pass into the hands of Crimi, LLC in 2019 without addressing the so-called outstanding security interests.
The notice informs us that there was also a plot of land. The husband stopped paying the mortgage and taxes on this property after the “separation”. The property was sold by the sheriff and the mortgagee took title. The resourceful Chance Worthington appeared and struck a deal to buy the property from the bank for $700,000. Chance was lucky enough to find a party to rent out his newly acquired property. The husband agreed to pay Worthington $6,000 a month in rent. That’s almost double what it would have cost her husband to borrow $700,000 when the foreclosure/lease agreement was made. The trial court found that the husband had paid the rent promptly and that at the time of the seizure, his bank statement demonstrated Wells Fargo’s ability to pay his monthly mortgage. This foreclosure and lease was expressly considered a dissipation deliberately intended to deprive the wife of an equitable distribution.
The appeal opinion ends smoothly. The trial court has made decisions on credibility and these are entitled to the “highest consideration”. The appeals court concluded that it had not seen any document conclusively showing that the debts to Worthington or Shapiro had actually been incurred before the separation. It also enforces an agreement that the wife would have made with her husband as a condition of their reconciliation. “We agreed that he would not do anything with the company without my knowledge and that it was mainly to take out loans, whether it was business or personal loans or business loans. No loan period without discussion and he accepted that.
The case also presents a curious analysis on the valuation of “inventories”. Although there were two court orders in 2017 regarding the creation of an inventory of the assets, neither party produced an expert opinion regarding the value of this property. In fact, the husband did not produce inventory at all, but said he relied on his records of his acquisition costs. Meanwhile, he also told the court that there was “no way” to track what was in the company’s inventory on the date of the separation. The wife offered the court photos of the property she claimed was inventory and provided 2014 values for each item based on her “professional opinion”. His opinion was that the inventory had a wholesale value of $1,595,753. The trial court adopted these values and rejected the husband’s argument that his stated acquisition costs should have been used instead, noting that he had not provided this information. The Court refers to the Forms 1125-A filed with the business returns and finds that they are consistent with the wife’s assessment. (Notice p. 20). The problem this writer sees with this reconciliation is that year-end inventory for tax years 2013 and 2014 never exceeded $457,000.
In the end, the case is sent back and for this, the trial court must receive sympathy. It appears that the fair reimbursement alimony included what amounted to arrears of a spousal support/PLA action. The Superior Court rightly notes that alimony/apl arrears constitute a type of indemnity. Equitable alimony is limited to situations where the distribution of “existing marital assets…would be insufficient to compensate the recipient spouse for their contributions to the marriage.” Johnson v. Johnson, 864 A.2d 1224, 1230 (Pa. Super, 2004). The appeal panel notes that the court identified and valued the matrimonial property based on the wife’s inventory. The husband argued that these assets were subject to security, but he provided no documentation demonstrating the loans or the effectiveness of the security. In the meantime, the court proposes that if the woman were to cohabit, the alimony could be lost. (Opinion p. 32) But isn’t the whole point of this “reimbursement alimony” to eliminate this risk? Section 3701 of the Divorce Code states that alimony is based on need and that need is deemed lost by cohabitation. 23 Pa.CS 3706. Equitable reimbursement is really not alimony because it is based on equity and not on need. This is a subject where judicial clarity is needed. Suppose a court in New York finds that the inventory is physically located within the jurisdiction of that state and that there is some sort of valid lien due to Worthington or Shapiro? Isn’t the wife still entitled to her share of what the Pennsylvania court has ruled to be unencumbered marital property? Equitable reimbursement may be his only recourse and cohabitation must not cause these rights to be lost. The Superior Court was right to dissociate support arrears from equitable reimbursement. But the court could and should have simply clarified in a modified order that $836,394 was an irrevocable fair refund and that the balance of pendente lite support due under the December 2019 order ($21,780 per page 3 of notice) was not changed by the final divorce judgment. and order.
This is a troubling case. It is full of important legal issues, none of which have been fully resolved. Like the recent Snyder case, this is also a case where a party effectively led the court and a spouse on a wild goose chase to find the assets. At 1,600 words, the reader has endured this post enough. But, what must be remembered is that the courts must have control over cases such as this. In a future blog, we will explore the remedies to achieve this.
Crimi against Crimi 1349 EDA 2021 (unprecedented)
Snyder vs. Snyder 2022 Pa. Super.72; 2022 WL 1161756