Thursday, July 22, 2010

Side Agreements

Flint Divorce Attorney comments on Washtenaw Divorce Court Issues:

Divorce; Motion for relief from provisions of the parties' property settlement agreement; Holmes v. Holmes; Contract interpretation; Klapp v. United Ins. Group Agency, Inc.; Dobbelaere v. Auto-Owners Ins. Co.; Frankenmuth Mut. Ins. Co. v. Masters; Hagen v. Hagen; Effect of a party's choice of labels for the action; Johnston v. City of Livonia;

Whether the Washtenaw Divorce court should have evaluated the property's current market value before ordering the transfer of the plaintiff-husband's interest; "Estimate" defined;

Whether the Washtenaw Divorce court's judgment amounted to an improper modification of or substitution to the settlement agreement; Request to appoint a receiver; Reed v. Reed; MCL 600.2926; Petitpren v. Taylor Sch. Dist.;

Attorney's fees; Unthank v. Wolfe

Court: Michigan Court of Appeals (Unpublished 07/06/10)
Case Name: Cook v. Cook
e-Journal Number: 46266
Washtenaw Circuit Court Lc No 05-001920
Judge(s): Per Curiam - Murray, Saad, and M.J. Kelly

PLAIN LANGUAGE
The Washtenaw Divorce Courtcourt correctly applied the plain language of the parties' settlement agreement by awarding in partial satisfaction of the plaintiff-husband's obligation the parcel of real property provided as security in the agreement for the payment of $1,750,000 to the defendant-wife. However, the court agreed with defendant the Washtenaw Divorce Courtcourt erred in not making any valuation of the property's current market value.

A SETTLEMENT AGREEMENT IS A CONTRACT

“A divorce judgment entered upon the settlement of the parties . . . represents a
contract, which, if unambiguous, is to be interpreted as a question of law.” Holmes v Holmes,
281 Mich App 575, 587; 760 NW2d 300 (2008) (quotation marks and citation omitted)

10 INSTALLMENTS
Pursuant to the settlement agreement, which was incorporated into the parties' consent judgment of divorce, plaintiff had to pay defendant $1,750,000 in 10 equal installments of $175,000 with the first payment due a year from the date of entry of the divorce judgment.
SECURITY ON THE DEBT
As security, the agreement required him to maintain a life insurance policy of not less than $1,750,000 designating defendant as the beneficiary until the agreement was satisfied. Also, his interest in a 40-acre parcel of property (with an estimated value of $1,500,000) served as additional security for the debt.
HE CALLED IT RELIEF FROM JUDGEMENT, COURT LOOKED BROADER
Plaintiff filed a motion entitled "relief from impossible property settlement provisions of judgment," asserting it was impossible for him to meet the payment schedule in the settlement agreement because his net worth had gone from $30,000,000 on the date of the divorce judgment to a "negative number." He requested the Washtenaw Divorce Court adjust his payment schedule to $5,000 a month with interest as provided in the agreement and reevaluate his ability to pay in 12 months.

The Washtenaw Divorce Court concluded since execution on the life insurance policy was not an option, plaintiff's inability to pay triggered defendant's security interest in the parcel of real property, rendering plaintiff's outstanding obligation to defendant $29,000 plus interest.
THE APPEAL
On appeal, defendant argued, inter alia, the Washtenaw Divorce court erred in partially granting plaintiff's motion and transferring the parcel to her in lieu of the cash payments required in the agreement. The court disagreed, concluding the agreement clearly contemplated the scenario of plaintiff being unable to meet his payment obligations where it provided 2 forms of security for the $1,750,000 obligation. As the Washtenaw Divorce court observed, the life insurance policy proceeds were unavailable, so the only remaining security was the real property. The Washtenaw Divorce court, after finding plaintiff was unable to make cash payments, applied the unambiguous language of the agreement's security provision. However, the court vacated in part the Washtenaw Divorce court's order and remanded the case for a determination of the actual value of the parcel at the time it was transferred to defendant. Once its value is determined, this actual value should be deducted from the amount plaintiff owed defendant under the divorce judgment.

INTENT OF THE PARTIES

The fundamental goal regarding the construction or interpretation of a contract, including
a settlement agreement, is to honor the parties’ intent by reading the document as a whole and
applying the plain language used in the contract. Dobbelaere v Auto-Owners Ins Co, 275 Mich
App 527, 529; 740 NW2d 503 (2007); Mikonczyk v Detroit Newspapers, Inc, 238 Mich App 347,
349-350; 605 NW2d 360 (1999).

IF THE LANGUAGE IS CLEAR THIS CONTRACT SHOULD NOT BE CHANGED
Where the contractual language is clear and unambiguous,
courts must interpret and enforce the contract as written. Frankenmuth Mut Ins Co v Masters,
460 Mich 105, 111; 595 NW2d 832 (1999). In such instances, despite a court’s equitable
authority to modify a judgment of divorce to reach an equitable result, Hagen v Hagen, 202 Mich
App 254, 258; 508 NW2d 196 (1993), a court may not modify an unambiguous settlement
agreement incorporated into a judgment of divorce to “rebalance the contractual equities” or
because it considers another interpretation more reasonable unless the agreement resulted from
fraud, duress, or mutual mistake, Holmes, 281 Mich App at 594-595.



Affirmed in part, vacated in part, and remanded.

Posted here by
Terry bankert
http://attorneybankert.com

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2 comments:

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