Bosworth v. Bosworth , 941 N.Y.S.2d 405 ( 2012 )

Appeal from an order of the Supreme Court, Erie County (John F. O’Donnell, J.), entered January 31, 2011. The order directed plaintiff to pay certain tax liabilities.

It is hereby ordered that the order so appealed from is affirmed without costs.

Memorandum: Plaintiff’s sole contention on appeal is that Supreme Court erred in concluding that the terms of the parties’ separation agreement, which was incorporated but not merged into the judgment of divorce, rendered him responsible for the tax liability of defendant arising from defendant’s status as a shareholder of PMC Gage, Inc. (PMC), a subchapter S corporation. Pursuant to the separation agreement, defendant’s shares in PMC were transferred to plaintiff in approximately June 2006. The separation agreement also provided that, in exchange for the transfer of defendant’s interest in PMC to him, plaintiff would “indemnify and hold [defendant] harmless from any claim or liability associated with or arising out of PMC.”

According to defendant, the transfer of her shares in PMC caused her to incur federal and state income tax liability in the amount of $227,915. By order to show cause, defendant sought, inter alia, to enforce that part of the separation agreement requiring plaintiff to indemnify defendant for any claim or liability associated with or arising out of PMC. The court granted the motion, and we affirm. “ ‘[A] separation agreement that is incorporated into but not merged with a [judgment of divorce] is an independent contract binding on the parties’ ” (Makarchuk v Makarchuk, 59 AD3d 1094, 1094 [2009], quoting Merl v Merl, 67 NY2d 359, 362 [1986]; see Matter of Gravlin v Ruppert, 98 NY2d 1, 5 [2002]). After giving effect and meaning to every term of the separation agreement (see Village of Hamburg v American Ref-Fuel Co. of Niagara, 284 AD2d 85, 89 [2001], lv denied 97 NY2d 603 [2001]), we conclude that the broad language of that agreement required plaintiff to indemnify defendant for the federal and state income tax liability at issue.

All concur except Centra, J.E, and Garni, J., who dissent and vote to modify in accordance with the following memorandum.