Not “Ordinary Course”: Post‑Commencement Transfers of Marital Property to a Newly Formed LLC Violate New York’s Automatic Orders; Monetary Equalization via Maintenance Arrears Approved

Introduction

Reiser v. Reiser, 2025 NY Slip Op 05724 (App Div 3d Dept Oct. 16, 2025), addresses the intersection of New York’s Automatic Orders in matrimonial actions and equitable distribution where the principal marital asset has been encumbered and made illiquid by one spouse’s post‑commencement business maneuvers. The parties, Libby Corcoran Reiser (the wife) and Henry Reiser Jr. (the husband), were married for nearly four decades. During the marriage, the husband operated a construction/development enterprise centered around Reiser Builders, Inc. (RBI), while the wife contributed materially to the business and family as bookkeeper, salesperson, homemaker, and caregiver.

The core issue on appeal arose from the husband’s transfer of the parties’ 400‑acre development tract, “Grey Ledge,” into a new LLC formed after the divorce action began, HRRG Properties, LLC. In exchange for a 50% interest, an investor paid the husband $210,000 and separately loaned $100,000 secured by a mortgage on the marital residence. These moves complicated the trial court’s ability to equitably distribute the property. The Supreme Court (Rensselaer County) ultimately awarded the husband virtually all real property and business-related assets and debts, while setting spousal maintenance for the wife and offsetting the husband’s maintenance arrears by his share of proceeds from the sale of another residence (the “carriage house”).

The wife appealed, challenging the equitable distribution, the finding that the transfer to HRRG was in the ordinary course of business (and thus permissible under the Automatic Orders), and several ancillary rulings. The Third Department, per Aarons, J., modified the judgment, holding that the transfer and encumbrance violated the Automatic Orders and that a near‑equal distributive approach was warranted given the long marriage and the parties’ respective contributions. Constrained by the illiquidity of Grey Ledge and its encumbrances, the court employed a monetary equalization: it reinstated the full amount of the husband’s maintenance arrears rather than allowing an offset.

Summary of the Opinion

The Appellate Division affirmed most aspects of the trial court’s judgment but modified to better equalize the distribution:

Automatic Orders: The court held the husband’s post‑commencement transfer of the subdivision to HRRG and the new mortgage on the marital residence violated the Automatic Orders under DRL 236(B)(2)(b)(1); such actions were not in the “ordinary course of business.”
Equitable Distribution: Recognizing a long marriage with substantial contributions by both spouses, the court emphasized that distribution should skew closer to equal. Yet, Grey Ledge’s illiquidity, liens, judgments, and payment structure tied to lot sales made in‑kind distribution impractical.
Monetary Equalization: To effect fairness, the court reversed the trial court’s $83,226 offset of maintenance arrears, reinstating the full $122,782.50 in arrears payable in a lump sum or installments of $731 per month until paid. This effectively awarded the wife all net carriage house proceeds, aligning with the husband’s own proposed disposition.
Business Interests and Assets: The court declined to award the wife an ownership stake in RBI or HRRG, citing the desirability of leaving a business intact and the lack of proof of positive value. It also deferred to the trial court’s credibility finding that the husband leased, not owned, a bulldozer.
Procedural Issues: The court found no abuse of discretion in denying an adjournment for the wife to obtain new counsel mid‑trial or in denying counsel fees, given the lack of a proper financial need showing.
Separation Agreement: The panel noted that an unacknowledged separation agreement is invalid under DRL 236(B)(3) and cannot be enforced as a standard contract to sidestep statutory formalities.

Analysis

Precedents Cited and Their Influence

Mahoney-Buntzman v. Buntzman, 12 NY3d 415 (2009): The Court of Appeals’ framing of marriage as an “economic partnership” that shares both profits and losses underlies the Third Department’s insistence that, upon dissolution, courts must distribute not just assets but also liabilities. Here, that principle supports reviewing the entire Grey Ledge enterprise—including its encumbrances—when fashioning an equitable distribution.
King v. King, 202 AD3d 1383 (3d Dept 2022): Reinforces that “equitable” does not mean “equal.” The Third Department invokes this standard to acknowledge trial‑level discretion, while also recognizing that a long marriage with both spouses’ significant contributions often warrants an award closer to parity.
Mack v. Mack, 169 AD3d 1214 (3d Dept 2019); Kopko v. Kopko, 229 AD3d 974 (3d Dept 2024), appeal dismissed 42 NY3d 1086 (2025): Set the appellate standard of review—equitable distribution determinations stand unless there is an abuse of discretion or a failure to consider statutory factors. These cases provide the framework for the limited nature of the appellate modification here.
Kirshner v. Kirshner, 228 AD3d 923 (2d Dept 2024): Emphasizes that in nonjury trials, the appellate court’s power is as broad as the trial court’s, permitting it to render the judgment warranted by the facts while deferring on credibility. That principle enables the court to recalibrate the award through arrears rather than remand, given the cold record and financial constraints.
Giallo-Uvino v. Uvino, 165 AD3d 894 (2d Dept 2018): Supports denying an in‑kind business award where the spouse seeking it fails to prove value. The Third Department relies on this to decline the wife’s request for a share of RBI/HRRG where RBI was winding down with adverse judgments and no proven value.
Martin v. Martin, 178 AD3d 1339 (3d Dept 2019): Provides the deference standard for credibility findings, applied to reject the claim that the husband owned (rather than leased) a bulldozer.
Spencer-Forrest v. Forrest, 159 AD3d 762 (2d Dept 2018); Keren v. Keren, 201 AD3d 906 (2d Dept 2022): Affirm that in a long marriage, homemaking and supportive contributions are valued on par with wage‑earning, often warranting near‑equal distribution. These cases bolster the appellate court’s correction toward a more balanced outcome.
Turco v. Turco, 117 AD3d 719 (2d Dept 2014); Carder v. Ramos, 163 AD2d 732 (3d Dept 1990); Cuevas v. Cuevas, 110 AD2d 873 (2d Dept 1985): These procedural cases sustain the trial court’s discretion to continue with trial when a party elects to proceed pro se and has had opportunities to retain counsel.
Angello v. Angello, 237 AD3d 1318 (3d Dept 2025): Addresses counsel fee awards under DRL 237(a), requiring a showing of financial need with supporting proof. This supports denial of counsel fees to the wife here.

Legal Reasoning

1) Automatic Orders and “Ordinary Course” Exception. The Third Department squarely rejects the trial court’s conclusion that the husband’s transfer of the subdivision to HRRG and the new mortgage on the marital residence fell within the “ordinary course of business” exception to the Automatic Orders in DRL 236(B)(2)(b)(1). The dispositive facts: HRRG was formed after the divorce action was commenced and was used as a “creative” vehicle to secure investor funds. These post‑commencement acts materially altered the status quo of marital property, undermining the court’s ability to distribute Grey Ledge and the marital residence. As such, they violated the Automatic Orders.

2) Equitable Distribution Factors. Applying DRL 236(B)(5)(d), the court emphasizes factor (10)—the difficulty of evaluating business interests and the desirability of leaving them intact—to affirm the decision not to award the wife ownership stakes in RBI/HRRG. The record reflected RBI’s wind‑down, unpaid bills, and adverse money judgments; the wife did not carry her burden to show value. At the same time, the court found the trial court undervalued the wife’s contributions over a 38‑year marriage, which, per Spencer-Forrest and Keren, counsels toward a distribution closer to equal.

3) Illiquidity Constrains Remedies. Grey Ledge was illiquid: liens, judgments, and financing that required payments upon lot sales made partition or immediate sale unworkable. In addition, the husband’s investor transactions added encumbrances. Rather than unwinding transactions or ordering in‑kind distributions that could trigger defaults or affect third‑party rights, the court selected a pragmatic monetary equalization.

4) Monetary Equalization via Maintenance Arrears. To approximate fairness, the court reversed the trial court’s set‑off that had reduced maintenance arrears by $83,226 and reinstated the full arrears of $122,782.50, payable in a lump sum or in monthly installments of $731 until paid. This solution:

Offsets the husband’s unilateral asset maneuvering that violated the Automatic Orders;
Moves the distribution toward parity in light of the long marriage and the wife’s contributions;
Respects existing encumbrances and the realities of illiquid property;
Aligns with the husband’s own proposed disposition (awarding the wife all net carriage house proceeds).

5) Ancillary Rulings. The court found no abuse of discretion in denying an adjournment for counsel given the wife’s opportunities to retain an attorney and her choice to proceed pro se. It also affirmed denial of counsel fees due to the absence of a proper showing under DRL 237(a). Finally, it confirmed that a separation agreement lacking the statutory acknowledgment under DRL 236(B)(3) is invalid and cannot be enforced via ordinary contract principles—an important reaffirmation that parties cannot circumvent statutory formalities.

Impact and Practical Implications

This decision carries several important implications for matrimonial practice and equitable distribution in New York:

Automatic Orders: Clear Signal on “Ordinary Course.” Parties may not end‑run the Automatic Orders by creating new entities post‑commencement to receive marital property or by creatively refinancing/encumbering the marital residence to raise capital. Unless a transaction is demonstrably within a pre‑existing, ongoing business’s routine operations, post‑commencement transfers or encumbrances will be deemed violations.
Remedies for Violations When Assets Are Illiquid. Where unwinding transactions is infeasible and major assets are illiquid or heavily encumbered, appellate courts may turn to monetary equalization—here, by reinstating maintenance arrears—to approximate equitable distribution without precipitating defaults or impairing third‑party interests. Practitioners should expect creative, tailored remedies rather than rigid property reallocations in such scenarios.
Valuation and Business Interests. A spouse seeking an ownership award in a closely held business must marshal credible valuation evidence, particularly where the business is winding down or burdened by judgments. Absent such proof, and considering DRL 236(B)(5)(d)(10), courts will often leave the business intact with the operating spouse and compensate the other spouse via monetary means if possible.
Long Marriages and Near‑Parity. Reiser underscores that in long marriages, homemaking and supportive economic contributions weigh strongly toward near‑equal distribution, even where one spouse is the primary wage earner. Trial courts should articulate how statutory factors drive any significant departures from parity.
Procedural Discipline. Requests for adjournments late in the game face a high bar; parties proceeding pro se will be bound by their choice absent clear prejudice. Applications for counsel fees must be supported with evidence of financial need and statutory compliance.
Formalities Matter. Separation agreements that do not satisfy the acknowledgment requirement of DRL 236(B)(3) are unenforceable and cannot be repackaged as ordinary contracts. Counsel must ensure strict compliance at execution.

Complex Concepts Simplified

Automatic Orders (DRL 236(B)(2)(b)(1)): Upon service of a divorce summons, these orders automatically restrain both parties from transferring, encumbering, or disposing of marital property without consent or court order, subject to limited exceptions (e.g., ordinary course of business, customary household expenses, reasonable attorney’s fees).
“Ordinary Course of Business” Exception: Allows truly routine, ongoing business transactions consistent with past practice. Creating a new LLC after the divorce filing to move marital assets or to secure new investment financing is not “ordinary course.”
Equitable Distribution vs. Equal Distribution: “Equitable” means fair under the circumstances. Courts use statutory factors to decide whether division should be equal or depart from 50/50.
Illiquid Asset: Property that cannot be easily sold or divided into cash without significant delay, cost, or legal impediment (e.g., development land encumbered by liens and structured financing).
Distributive Award: A monetary award to balance inequities in the distribution of assets when in‑kind division is impractical or inequitable.
Spousal Maintenance and Maintenance Arrears: Maintenance is ongoing support paid by one spouse to the other; arrears are unpaid, past‑due maintenance amounts. Courts can use arrears as a lever to equalize an otherwise imbalanced property distribution when direct redistribution is impracticable.
DRL 236(B)(3) Acknowledgment Requirement: Separation agreements must be acknowledged with the same formalities as a deed to be valid. Failure is fatal; such an agreement cannot be enforced as a standard contract.

Conclusion

Reiser v. Reiser articulates two salient propositions of statewide significance. First, post‑commencement transfers of marital assets to newly formed entities, and related encumbrances on marital property, are not protected by the “ordinary course of business” exception and violate New York’s Automatic Orders. Second, when the principal marital asset is illiquid and heavily encumbered—rendering in‑kind distribution impractical—courts may craft monetary remedies, including restoring maintenance arrears, to steer outcomes toward equity, especially in long‑term marriages reflecting substantial contributions by both spouses.

The opinion reinforces the necessity of respecting the status quo of marital property once a divorce action is begun, the high premium courts place on long‑marriage contributions of both wage-earning and homemaking, and the importance of practical, enforceable remedies in the face of real‑world financial constraints. It also offers clear guidance to practitioners: comply scrupulously with DRL 236’s constraints and formalities, prove business value with competent evidence if seeking an interest, and expect courts to prefer tailored monetary equalization over disruptive property unwinds when third‑party interests and illiquidity loom large.

Case details: Reiser v. Reiser, 2025 NY Slip Op 05724, Appellate Division, Third Department (Aarons, J.; Garry, P.J., Clark, Reynolds Fitzgerald and Ceresia, JJ., concurring), decided October 16, 2025. Appeal from Supreme Court, Rensselaer County (Richard McNally Jr., J.). Counsel: Salazar and Erikson, LLP for appellant; Hodgson Russ LLP for respondent.