Posts Tagged ‘separation agreement’

Ratification of Settlement and Separation Agreement

Saturday, January 14th, 2012

I have previously written about settlement agreements, their contents, modification, validity, and formalities related to their execution.

Even in situations where the agreement may have not been executed properly or otherwise invalid, if the party does not promptly act to challenge the agreement and accepts its benefits, the court may refuse to vacate the agreement. This is the situation that the Appellate Division, Second Department, addressed in Kessler v. Kessler, 89 A.D.3d 687 (2nd Dept. 2011).

In Kessler, the parties’ separation agreement was incorporated but not merged into the judgment of divorce. The parties entered into the separation agreement on June 10, 1980, after 25 years of marriage. The parties’ separation agreement, provided that the plaintiff husband would, among other things, make payments to the defendant wife for her support and maintenance and for the mortgage and carrying costs relating to the marital residence, where the defendant continued to reside. The plaintiff complied with the terms of the separation agreement and, in 2009, he commenced this action for a conversion divorce. In response to the plaintiff’s motion for summary judgment, the defendant submitted an affidavit asserting that the plaintiff had procured the separation agreement through fraud and duress, and that the agreement was unconscionable.

The defendant alleged, among other things, that the plaintiff had concealed from her his vast wealth, and had induced her to enter into the separation agreement at a time when, unbeknownst to her, New York’s equitable distribution law was about to be enacted. The Supreme Court granted the plaintiff’s motion for summary judgment, and subsequently entered a judgment of divorce, which, inter alia, directed the parties to comply with the terms of the separation agreement which was incorporated, but not merged into, the judgment of divorce. The defendant appealed.

The Appellate Division held that party who “accepts the benefits provided under a separation agreement for any considerable period of time” is deemed to have ratified the agreement and, thus, “relinquishes the right to challenge that agreement”. By contrast, when a party “received virtually no benefits from the agreement,” he or she “cannot be said to have ratified it”.

The Appellate Division further stated that assuming the truth of the allegations set forth in the defendant’s affidavit, the benefits she received pursuant to the separation agreement were far less than those she likely would have received had there been an equitable distribution of the assets accumulated during the marriage. The record, however, did not support a finding that the defendant received “virtually no benefits” from the agreement. Moreover, while “a spouse will not necessarily be held to have ratified an agreement if it is found to be the product of duress and overreaching”, the disadvantage to the defendant created by the alleged fraud and duress in this case cannot be deemed to have persisted throughout the 29-year period during which the defendant accepted the benefits of the separation agreement without challenging it.

The court held that the plaintiff made a prima facie showing that the defendant ratified the separation agreement and that the trial court properly granted the plaintiff’s motion for summary judgment.

There is a simple rule that applies to settlement and separation agreements. The party receiving substantial benefits under the agreement can’t challenge the agreement after a substantial period of time passes.

Divorce and Reformation of Settlement Agreement

Sunday, March 28th, 2010

I have previously written about vacating settlement agreements on the grounds of mutual mistake.  Here is a case where the court actually reformed the parties’ settlement agreement on the grounds of mutual mistake.

In Banker v. Banker, 53 A.D.3d 1105 (3rd Dept. 2008),  the parties’ oral stipulation of settlement, which was incorporated but not merged into their 2005 judgment of divorce, provided that the parties would subdivide a parcel of property located in Delaware County.  However, despite that provision, after the judgment of divorce was entered, the defendant refused to do so.  In response to a motion by plaintiff to enforce the stipulation, Supreme Court, in February 2006, ordered defendant to obtain subdivision approval from the Town.  The Planning Board denied defendant’s subsequent subdivision application after discovering that the property was encumbered by a restrictive covenant against further subdivision.  In March 2006, defendant moved to reargue and/or renew February 2006 order, and requested a hearing to determine equitable distribution.

Supreme Court reserved decision on all pending matters pertaining to the parties until an appraisal of the property was completed.  Because the parties could not agree on an appraiser, the court appointed one and directed the parties, once the appraisal was complete, to settle the matter in a private auction or buyout.  The appraiser completed the appraisal in June 2006.  By letter dated October 4, 2006, defendant requested the opportunity to offer further proof of value.  Plaintiff made a similar request and explained that the parties had not been able to settle the matter or agree on a private auction.

Plaintiff responded with a motion seeking that the parties’ interests in the property be declared in conformance with the terms set forth in the stipulation and the values established in the appraisal, as well as an order allowing her to buy out defendant’s share of the property.  Defendant opposed the motion, arguing that the appraisal should not be adopted without an opportunity by the parties to cross-examine the appraiser and submit other evidence of valuation.  Supreme Court ordered a hearing to permit the parties to cross-examine the appraiser, but made it clear that no other testimony or evidence of valuation would be permitted.

Following the hearing, at which Supreme Court again denied defendant’s request to submit further evidence, the court determined the interests of the parties in the property to be 83% for plaintiff and 17% for defendant.  The court, fixed the parties’ interests as indicated above, appointed a receiver, and ordered the   public sale of the property.  Defendant appealed.  The Appellate Division rejected defendant’s argument that Supreme Court exceeded its authority by reforming the parties’ stipulation of settlement.  Where, as here, a mutual mistake rendered a portion of the parties’ settlement agreement impossible or impracticable, “the relevant settlement provision was properly set aside”.  No dispute existed that the parties’ agreement to physically divide the property could not occur given the restrictive covenant; and even defendant was not attempting to have the parties’ stipulation enforced.  Thus, after giving the parties ample opportunity to reach a new agreement,  the trial court was correct to move forward by appointing an appraiser so that an equitable distribution of the property, in as close accordance as possible with the intent of the parties as expressed in their settlement, could be achieved.

The Appellate Division noted that to achieve reformation or recission of the stipulation of settlement, one of the parties should have commenced a plenary action, rather than proceeding by motion but, in the context of this matter, concluded the defect to be nonfatal.  However, the lower court erred in resolving this matter without a full hearing permitting the parties to offer proof of valuation.  The court is authorized to appoint an independent appraiser in a matrimonial action but, unless the parties have stipulated otherwise, the court must afford the parties the opportunity to review the appraisal, cross-examine the appraiser and offer additional evidence on valuation.  Although the record contained evidence that the parties consented to Supreme Court’s appointment of the appraiser, it did not suggest that the parties agreed to be bound by the resulting appraisal.

This is an example of a situation where the mutual mistake allowed the court to reform the parties’ settlement agreement.  While those circumstances tend to be limited, the lawyers in Banker recognized that since the property could not be subdivided, it had to be sold or one of the parties would buy out the other party’s interest.  The question of valuation was secondary to the remedy chosen by the court as a result of reformation of the agreement.  At the same time, it is rather surprising that neither divorce attorney was aware of the covenant, since both parties, presumably, had access to the real property records and the property’s abstract of title.

Determining Validity of Separation Agreements

Saturday, January 23rd, 2010

I have previously written about separation agreements and their validity, here, here and here.  Periodically, I see separation agreements that are extremely one-sided or I am asked to draft a separation agreement that is very one-sided.  In those situations a divorce lawyer is usually asked if the agreement can be set aside.  My usual response is that the court’s determination whether to set aside the agreement depends on a variety of factors.

The legal standard for setting aside separation agreements states that a separation agreement in a divorce proceeding may be vacated if it is manifestly unfair to one party because of the other’s overreaching or where its terms are unconscionable, or there exists fraud, collusion, mistake, or accident.  Separation agreements may be set aside as unconscionable if their terms evidence a bargain so inequitable that no reasonable and competent person would have consented to it.  Moreover, evidence that one attorney ostensibly represented both parties to a settlement agreement raises an inference of overreaching on the part of the party who is the prime beneficiary of the assistance of the attorney. Such an inference is, rebuttable, if it appears that the separation agreement is fair and equitable or that both parties freely agreed to it with a thorough understanding of its terms.

In a recent case of Pippis v. Pippis, 2010 N.Y. Slip. Op. 00492 (2nd Dept. 2010), the Appellate Division, Second Department vacated the separation agreement holding that plaintiff was guilty of overreaching with respect to the parties’ separation agreement.  The court found that the defendant was not represented by counsel at any point during the relevant time period.  According to the plaintiff, his attorney drafted the stipulation of settlement, and only one attorney was present at the signing.  Under these circumstances, and where the terms of the stipulation “evidence a bargain so inequitable” in favor of the plaintiff “that no reasonable and competent person” would have consented to the defendant’s end of the bargain, an inference of overreaching on the part of the husband was raised.  Since the plaintiff failed to rebut the inference, the Appellate Division held that the trial court properly determined that the stipulation was the product of his overreaching, and granted the defendant’s motion to set it aside.  The Appellate Division also held that the trial court properly rejected the plaintiff’s ratification argument, since the defendant “received virtually no benefits from the agreement and thus cannot be said to have ratified it”.

While occasionally I am asked to prepare a separation agreement in a situation where the opposing party is unrepresented, I advise my client that it is in his/her best interests that the other party is represented and that the agreement is not entirely one-sided.  As a divorce lawyer, I have to advise my client that any agreement that is extremely one-sided may be vacated by the court in any pending or subsequent divorce action.  If the agreement is reviewed by counsel and conveys some benefits to the other party, the likelihood of it being overturned by the court is greatly diminished.

What Is Required For A Document To Be Accepted As A Separation Agreement?

Sunday, November 29th, 2009

Periodically, I see documents that were prepared by the parties on their own while attempting to resolve whatever legal issues they were facing.  Occasionally, the parties will prepare their own separation agreements.  Unfortunately, in many cases, those self-prepared separation agreements do not meet the statutory requirement applicable to either child support, maintenance, or other significant issues.  A recent example of why such self-prepared agreements are problematic was illustrated in a recent case, Scully v. Haar,  2009 N.Y. Slip. Op. 08261 (4th Dept. 2009).

Plaintiff and defendant were married on May 8, 1993 and have three minor children.  The parties have lived apart since March 2005.  On March 4, 2005, plaintiff commenced an action for divorce.  After extensive and ultimately futile negotiations between the parties, plaintiff filed a complaint on August 11, 2006, that did not specify any misconduct on the part of defendant but requested that plaintiff be awarded custody of the parties’ children.  On September 15, 2006, Supreme Court granted defendant’s motion to dismiss the complaint based on the insufficiency of plaintiff’s allegations but “retained jurisdiction over ancillary issues.”

Thereafter, the parties entered into the agreement, the preamble to which provides that “the parties are now desirous of resolving custody and ancillary issues without a trial.”  The agreement granted sole custody of the parties’ children to defendant and establishes a detailed access schedule for plaintiff.  It further provided that the agreement “shall be submitted to any court in which either [p]arty may seek a judgment or decree of divorce and . . . shall be incorporated in such judgment or decree by reference.”  The agreement was signed by both parties, notarized, and filed with the Erie County Clerk’s Office on May 11, 2007.

On May 13, 2008, just over one year after the agreement was filed, plaintiff commenced this action fo divorce based on Domestic Relations Law §170(6), alleging that the parties had lived separate and apart pursuant to an agreement for a period of a year or more.  A copy of the agreement was attached to the complaint.  Defendant moved to dismiss the complaint on the ground that the agreement was not a “written agreement of separation” within the meaning of section 170(6) because it addressed only parenting issues, it did not expressly recite the parties’ intent to live separate and apart, and it was not intended to serve as a separation agreement.  Plaintiff cross-moved for summary judgment on the complaint, contending that the terms of the agreement clearly established that the parties were living separate and apart.  The trial court denied the relief requested by the plaintiff.

Domestic Relations Law §170(6) sets forth one of the two “no-fault” grounds for divorce in New York State.  Specifically, that section provides that an action for divorce may be maintained on the ground that “[t]he husband and wife have lived separate and apart pursuant to a written agreement of separation . . ., for a period of one or more years after the execution of such agreement”.  The section further provides that the agreement must be signed by the parties and “acknowledged or proved in the form required to entitle a deed to be recorded”. Moreover, the agreement must be filed in the office of the clerk of the county in which either party resides.

The Appellate Division affirmed the lower court’s decision holding that “No-fault divorce applies only where there is a previous decree of separation or a written separation agreement, as required by statute [and, here, t]he parties have neither”.  Plaintiff attempted to rely on a “Parenting Plan Agreement” executed by the parties after an earlier divorce action commenced by plaintiff was dismissed and the court in that action retained jurisdiction over ancillary issues.  The agreement related solely to matters of custody and visitation and, although it was signed and acknowledged by the parties and filed with the County Clerk by plaintiff, it neither purported to be a separation agreement as that term is generally understood, nor made any explicit reference to the parties’ separation.  The Fourth Department concluded, particularly in light of the circumstances in which the agreement was made, that the agreement did not “evidenc[e] the parties’ agreement to live separate and apart, [and] thus [it did not] satisfy[ ] the statutory requirement [with] respect to a separation agreement”.

As I stated previously, it important that the parties understand that New York does not make it easy for someone to prepare and execute a valid separation agreement.  In my opinion, even if someone decides to follow a self-help approach, any document should be reviewed by a family law lawyer to make sure that it fully represents the parties’ intent and complies with applicable law.  While it may be tempting for someone to do it for a variety of reasons, any future disputes involving such documents is likely to require involvement of lawyers.

All concur except Peradotto, J., who dissents and votes to reverse in accordance with the following Memorandum: I respectfully dissent and would reverse because I agree with plaintiff that the 30-page “Parenting Plan Agreement” (agreement) at issue in this matter constitutes a “written agreement of separation” within the meaning of Domestic Relations Law § 170 (6).
Plaintiff and defendant were married on May 8, 1993 and have three minor children. The parties have lived apart since March 2005. On March 4, 2005, plaintiff commenced an action for [*2]divorce by summons with notice. After extensive and ultimately futile negotiations between the parties, plaintiff filed a complaint on August 11, 2006 that did not specify any misconduct on the part of defendant but requested that plaintiff be awarded custody of the parties’ children. On September 15, 2006, Supreme Court granted defendant’s motion to dismiss the complaint based on the insufficiency of plaintiff’s allegations but, as noted by the majority, “retained jurisdiction over ancillary issues.”
Thereafter, the parties entered into the agreement, the preamble to which provides that “the parties are now desirous of resolving custody and ancillary issues without a trial.” The agreement, inter alia, grants sole custody of the parties’ children to defendant and establishes a detailed access schedule for plaintiff. It further provides that the agreement “shall be submitted to any court in which either [p]arty may seek a judgment or decree of divorce and . . . shall be incorporated in such judgment or decree by reference.” The agreement was signed by both parties, notarized, and filed with the Erie County Clerk’s Office on May 11, 2007.
On May 13, 2008, just over one year after the agreement was filed, plaintiff commenced this action for divorce based on Domestic Relations Law § 170 (6), alleging that the parties had lived separate and apart pursuant to an agreement for a period of a year or more. A copy of the agreement was attached to the complaint. Defendant moved to dismiss the complaint on the ground that the agreement was not a “written agreement of separation” within the meaning of section 170 (6) because it addressed only parenting issues, it did not expressly recite the parties’ intent to live separate and apart, and it was not intended to serve as a separation agreement. Plaintiff cross-moved for summary judgment on the complaint, contending that the terms of the agreement clearly established that the parties were living separate and apart.
The court granted defendant’s motion to dismiss the complaint and denied plaintiff’s cross motion. Although the court acknowledged that an agreement need not be in any specific form to qualify as a “written agreement of separation” pursuant to Domestic Relations Law § 170 (6), the court determined that defendant did not consent to the termination of the marriage by signing the agreement.
Domestic Relations Law § 170 (6) sets forth one of the two “no-fault” grounds for divorce in New York State. Specifically, that section provides that an action for divorce may be maintained on the ground that “[t]he husband and wife have lived separate and apart pursuant to a written agreement of separation . . ., for a period of one or more years after the execution of such agreement” (id.). The section further provides that the agreement must be signed by the parties and “acknowledged or proved in the form required to entitle a deed to be recorded” (id.). Moreover, the agreement must be filed in the office of the clerk of the county in which either party resides (id.).
Here, it is undisputed that the parties have lived separate and apart since March 2005, well in excess of the statutory period (see Domestic Relations Law § 170 [6]). It is also undisputed that the agreement was signed by both parties, acknowledged in the requisite manner, and filed in the County Clerk’s Office (see id.). Thus, the only issue before this Court is whether the agreement qualifies as a “written agreement of separation” pursuant to the statute (id.). In my view, the legislative history and intended purpose of Domestic Relations Law § 170 (6), the important public policies underlying the “no fault” divorce grounds, and the Court of Appeals’ precedent confirming the limited function of the written agreement, compel the conclusion that the agreement in this case constitutes a “written agreement of separation” within the meaning of section 170 (6).
In Gleason v Gleason (26 NY2d 28, 35), decided shortly after the enactment of Domestic [*3]Relations Law § 170, the Court of Appeals recognized that the “real purpose” of the statute’s no-fault provisions was “to sanction divorce on grounds unrelated to misconduct.” As the Court explained: “Implicit in the statutory scheme is the legislative recognition that it is socially and morally undesirable to compel couples to a dead marriage to retain an illusory and deceptive status and that the best interests not only of the parties but of society itself will be furthered by enabling them to extricate themselves from a perpetual state of marital limbo’ ” (id.).
Thus, it is the physical separation of the parties, not the written agreement, that supplies the ground for a divorce pursuant to Domestic Relations Law § 170 (6) (see Christian v Christian, 42 NY2d 63, 69; Littlejohns v Littlejohns, 76 Misc 2d 82, 86, affd on opn of Korn, J., 42 AD2d 957). Indeed, the written agreement “is simply intended as evidence of the authenticity and reality of the separation” (Gleason, 26 NY2d at 35; see Christian, 42 NY2d at 69; Harris v Harris, 36 AD2d 594). As the Court of Appeals reaffirmed in Christian, “[t]he vital and operative’ fact[] in subdivision (6) divorce cases[] is the actual living apart of the parties——pursuant to the separation agreement . . . Put a bit differently, the function of the document is merely to authenticate the fact of separation’ ” (42 NY2d at 69). The statutory requirement that the parties live separate and apart for the prescribed period pursuant to a written agreement is unique to New York State and “reflects legislative concern over the fraud and collusion which historically infected divorce actions involving adultery” (id. at 68; see Littlejohns, 76 Misc 2d at 86 ["the written agreement serves primarily as a means of preventing fraudulent or collusive claims of separation and so discourages quickie' divorces"]).
The statute does not define the term “written agreement of separation,” nor does it set forth any specific provisions that are required in such an agreement (see Littlejohns, 76 Misc 2d at 86). In light of the limited function of the written separation agreement, i.e., to document and authenticate the physical separation of the parties, and the public policy underlying the statute, “the courts, where the parties have parted permanently, should not be excessively rigid or demanding in determining whether a writing satisfies the statutory requirement for an agreement of separation’ ” (id. at 87). All that a party seeking a divorce pursuant to Domestic Relations Law § 170 (6) must prove “is that there is some kind of formal document of separation” (Gleason, 26 NY2d at 37). As one court aptly observed: “Too great stress has been placed upon the instrument, the indicia of proof of the separation of the parties, rather than the fact of separation. It is not the decree, judgment, or agreement that is the essence of the ground for divorce. They are merely the documentary proof” (Markowitz v Markowitz, 77 Misc 2d 586, 587-588).
In light of the legislative history and manifest purpose of Domestic Relations Law § 170 (6) and the decisions of the Court of Appeals that liberally construe the documentation requirement, I cannot agree with the majority’s conclusion that the agreement in this case does not constitute a “written agreement of separation” within the scope of the statute. The agreement clearly and unambiguously “contemplate[s] permanent separation” (Morhaim v Morhaim, 56 AD2d 550, 552 [Silverman, J., dissenting], revd on dissenting mem of Silverman, J., 44 NY2d 785, rearg denied 44 NY2d 949). Implicit and recognized throughout the agreement is that the parties were in fact living apart when they entered into the agreement and that they intended to continue to live apart for years to come. The agreement lists separate addresses for plaintiff and defendant in its preamble and repeatedly references the parties’ separate residences throughout the remainder of the document. In setting forth plaintiff’s visitation schedule, the agreement recites that “[a]ll access shall take place away from the custodial residence of [defendant].” The article of the agreement establishing plaintiff’s access schedule includes a clause that the parties are free to agree on additional access “without setting a precedent for other calendar years,” thus emphasizing the long-term duration of the physical separation. [*4]
Moreover, the agreement specifically contemplates the possibility of the parties’ eventual divorce and the remarriage of either or both of the parties. In particular, the agreement states that “the provisions of this [a]greement shall be submitted to any court in which either [p]arty may seek a judgment or decree of divorce and . . . shall be incorporated in such judgment or decree by reference and shall not merge . . . .” With respect to the possible remarriage of either of the parties, the agreement provides that the parties’ children “shall not, for any purpose or for any reason, assume or use the name of any subsequent Husband of [defendant].” Thus, viewed as a whole, the agreement “can be consistent only with the fact of the parties’ then existing and continued separation” (Littlejohns, 76 Misc 2d at 86).
The fact that the agreement is not entitled a “separation agreement” and does not explicitly recite that the parties shall live separate and apart is of no moment (see Sint v Sint, 225 AD2d 606, 607). ” [T]he validity of the agreement . . . depend[s] upon the existence of the fact [of living apart], not upon a recital of it’ ” (Morhaim, 56 AD2d at 552; see Littlejohns, 76 Misc 2d at 85). Here, the agreement serves as ” evidence of the authenticity and reality of the separation’ ” (Christian, 42 NY2d at 68, quoting Gleason, 26 NY2d at 35), thereby fulfilling the statutory purpose.
Contrary to the contention of defendant, it is irrelevant whether she intended the agreement to serve as the predicate for a subsequent divorce action pursuant to Domestic Relations Law § 170 (6). Indeed, the Court of Appeals has held that Domestic Relations Law § 170 (5), which supplies the other “no-fault” ground for divorce, i.e., that the parties have lived apart pursuant to a decree or judgment of separation for a certain period of time, applied retroactively to separation decrees rendered prior to the enactment of the statute (Gleason, 26 NY2d at 34-36). The Court in Gleason recognized that the defendant wife who prevailed in a separation action commenced prior to the enactment of section 170 (5) “had no warning that the separation decree granted to her might later furnish basis or ground for divorce by [her] guilty’ husband” (id. at 40). Likewise, in Morhaim, the First Department noted that the six-year delay between the execution and filing of the written separation agreement in question “may indicate that the parties at the time of the execution of the agreement did not realize that the agreement might qualify as a separation agreement under the no-fault divorce statute. But that does not alter the legal effect of the agreement or the public policy involved” (56 AD2d at 552 [emphasis added]).
In sum, the agreement in this case “evidenced the parties’ actual and continued separation and thus satisfied the requirements of the statute” (id.; see Littlejohns, 76 Misc 2d at 86-87). I therefore would reverse the order, deny defendant’s motion to dismiss, reinstate the complaint, grant plaintiff’s cross motion for summary judgment on the complaint, and remit the matter to Supreme Court to grant judgment in favor of plaintiff and to determine the remaining issues.
Entered: November 13, 2009
Patricia L. Morgan
Clerk of the Court

Making Deals in Divorce and Subsequent Change in Circumstances

Sunday, August 23rd, 2009

I am asked occasionally whether a separation agreement, which was perhaps incorporated in the subsequent judgment of divorce, entered into years ago can be vacated because of subsequent changes in the parties’ circumstances.  My usual response is no, since in order to have the agreement vacated, the party must show grounds sufficient to vitiate a contract.  The burden of proof in those situations is very high and may also be subject to time limitations.  Similarly, with respect to modification of a child support obligation included in a stipulation or a separation agreement, the party must show an unreasonable and unanticipated change in circumstances since the time of the stipulation to justify a modification, and that the alleged changes in that party’s financial position was not of his/her own making. A recent decision by a trial court, Debreau v. Debreau, 2009 N.Y. Slip. Op. 51750 (Sup. Ct. Nassau Co.), demonstrated a good illustration of the above principles, holding that if the parties make a deal as a part of their divorce settlement, provided that the settlement was arrived at fairly, the settlement will stand despite the fact that the circumstances have changed.

In Debreau, the wife accepted title to the family home as prepayment for 15 years of child support.  After the house sold for only two-thirds of the value estimated at the time of the divorce, she sued for child support arrears.  The court held that “[t]he law is clear that both [the Domestic Relations Law] and the public policy in favor of finality require the enforcement of property distribution agreements pursuant to their terms, absent fraud, regardless of post-agreement changes in the values of the assets.”  The court stated that “[t]he law views the equitable distribution of marital assets as a snapshot, not a movie… If an agreement distributing marital assets is not subject to vacatur, on the date of its execution, on grounds sufficient to vitiate a contract, it may not be modified or set aside on the ground that future events have rendered the division of assets inequitable.”

When the parties divorced in 2007, they agreed by stipulation to allow the husband’s share of the marital home serve as a prepayment of the child support he would owe for the couple’s four children over the next 15 years. Mr. Deabreu’s child-support obligation was set at $2,972 per month, or a total of about $535,000. The parties agreed that the husband’s share of the $1.85 million Melville house, after paying off its $400,000 mortgage and other expenses, was comparable to that obligation. They therefore stipulated that his obligation would be met by transferring over title. In June 2008, the house sold for only $1.2 million, netting the wife $734,000 rather than the $1.45 million she had anticipated. Ms. Deabreu subsequently filed a motion seeking child support arrears of $484,492, the amount she contends her husband owes to her from 2006 through 2021.

The trial court rejected Ms. Deabreu’s motion, ruling that any shortfall in the sale of the house should be taken from the wife’s share of the marital assets, not from the husband’s prepayment of child support. “While the prepaid child support sum…was specified and fixed pursuant to the parties’ stipulation of settlement, the value of the marital assets distributed to each party was determined only as of the date of the stipulation,” Justice Falanga held. The sum that the wife was to receive for her marital share “was not guaranteed by the husband, but rather, was subject to various factors such as market fluctuations and the manner in which the premises was maintained.” The decision also mentioned that Ms. Deabreu was not without other methods of seeking redress. According to the decision, “[t]he receipt by the wife, upon the sale of the [house], of approximately $650,000.00 less than she expected when entering into a stipulation of settlement…may constitute an unanticipated and unreasonable change in her financial circumstances, and may have left her, as she has alleged in her within application, unable to provide for the financial needs of the parties’ four children, entitling her to seek an upward modification of child support.”

In my opinion, it is not likely that Ms. Debreau would be able to establish an unanticipated and unreasonable change in circumstances in the above situation.  I am also left wondering why the house was not sold earlier.  I also would like to know if Ms. Debreau entered into this stipulation after discussing the risk of decline in real estate values with her divorce lawyer. Personally, I don’t think that I would recommend this type of an arrangement to a client.  The risk of decline in the value of any asset subject to market forces is too great. As a divorce attorney, I would also be concerned about giving advice to the client to retain a fixed asset as a prepayment of future child support or maintenance obligation.

Family Court Lacks Power to Modify Maintenance Provision in Separation Agreement

Thursday, August 21st, 2008

In a recent decision, Johna M.S. v. Russell E.S., the Court of Appeals held that the Family Court lacks power to modify maintenance provisions contained in the parties’ separation agreement. The separation agreement that the wife and the husband both signed, explicitly stated that the wife is “completely disabled” and will be in need of maintenance “for the remainder of her life”. The agreement provided for current maintenance payments of $100.00 per week payable to the wife and recited that this being only a determination of her “present” need and his “present” economic circumstances. It further stated that the wife could if need be seek a “modification” of those sums in a “de novo” proceeding in a court of “appropriate jurisdiction”. A divided Court of Appeals held that the Family Court is not such an “appropriate” court and that in respect of spousal (as opposed to child) maintenance, family court lacks subject matter jurisdiction of a “modification”.

The Court pointed out that there was no risk that the wife would become a public charge. According to the Court of Appeals, the danger of a spouse becoming a public charge is the only circumstance in which, under Family Court Act § 463, the Family Court can modify a separation agreement when the matrimonial action has not been brought as of yet.

A key factor in Johna M.S. was that Family Court lacks “equity” jurisdiction. As Judge Smith points out in his dissent, the prior cases held that Family Court’s attempt to “modify” such a separation agreement amounts to a kind of “reformation or rescission”, which are equitable remedies: they seek to alter the parties’ agreement and there was no effort by the wife to do that here. On the contrary, the agreement itself contemplated modification, wholly negating the “equity” analogy. As a result, the disabled wife’s only choice is to either accept maintenance of $100.00 per week as permanent, or to sue in supreme court for a divorce or separation, where she will be able to seek a greater amount of maintenance.