Show your work.
Mistakes happen, and probably a lot more often than any of us matrimonial lawyers would care to admit.
We all make mistakes. I am happy to say that most mistakes are alleviated by collegial adversaries working together to put things right.
However, sometimes the spouse benefiting from the mistake in marital settlement agreement will not acknowledge that a mistake was made.
When that happens, the burdened party must ask the court to reform the agreement to correct the mistake. That party has a heavy burden.
The burden, however, becomes a lot easier to meet if the parties have shown their work.
Consider, the February 21, 2012 decision of Kings County Supreme Court Justice Jeffrey S. Sunshine in Hackett v. Hackett. The parties had entered a marital settlement agreement in January, 2006. The parties’ marital estate was itemized in a schedule annexed to the agreement. The agreement expressly provided that the husband was to pay the wife $19,336.40, “in order to equalize the allocation of marital property so as to arrive in an equal division.”
Included among the parties’ property was their marital residence, a Brooklyn home valued at $465,000.00 against which there were two mortgages totaling $195,124.00. When listing the assets being received by the wife, the marital residence was included at a value equal to its net equity of $264,447.00. Including this amount for net equity, the wife was to receive $557,442.00 in assets. From this the wife was to be take on marital liabilities of $195,124.00. Thus, the wife was receiving assets net of liabilities of $382,318.00.
The problem was that these liabilities were the very same mortgages totaling $195,124.00 which were subtracted from the home’s appraised value to result in the equity value of $264,447.00 stated for the marital residence. The mortgages were double-counted. Moreover, there was another simple math error. Subtracting the $195,124.00 in mortgages from the $465,000.00 appraised value of the marital residence should have resulted in the wife being charged with receiving net equity of $269,876.00, not the $264,447.00 which was stated as the net equity value of the marital residence being received by the wife. Thus, the wife was under-charged $5,429.00, in addition to having benefited from the double-subtraction of the mortgages.
Instead, the wife should have been charged with receiving $562,871.00 in net assets (the originally stated $557,442.00, plus the $5,429.00 math error, without the second deduction for the mortgages already taken into account). The husband was properly charged under the agreement with receiving $400,990.00. Thus, the wife received $161,881.00 more than the husband. In order to equalize the division of assets, the wife would have to pay to the husband one half of this amount, or $80,940.50. Here, the agreement as originally drafted with its mistakes ended up with the husband paying the wife $19,336.00. To correct the error, the wife would have to repay this $19,336.00, and on top of that pay the husband $80,940.50, for a total of $100,276.50.
Justice Sunshine provided the husband relief, reforming the agreement to require the wife to make the requested payment of $100,276.50. To do so, the court rejected the recommendation of the Referee to home the matter was referred to “hear and report.”
Justice Sunshine carefully crafted a lengthy opinion which not only took the reader through the detailed computations, but also provided the context within which to assess the husband’s entitlement to relief. There was a a scholarly review of the law of reformation of agreements upon the grounds of mutual mistake.
Justice Sunshine found that the fact that the husband could have avoided the mistake by the exercise of reasonable care did not preclude reformation of the agreement. Rather, the husband’s failure to discover the computational error did not amount to a unilateral failure to act in good faith. He would not be required to bear the financial consequences of the parties’ mutual mistake. The husband established that the agreement contained a mutual mistake. He presented uncontroverted evidence demonstrating that the parties agreed, in no uncertain terms, to divide the marital estate equally. Both parties testified that the intent of the agreement was to equally divide the marital assets and liabilities. With the exception of the computational error, the agreement did just that.
Justice Sunshine would not have been able to reach this result without the agreement setting out the stated intention of the parties to equally divide assets and liabilities and the values ascribed to each asset and liability. It was vital that the draftsman took the time and effort to schedule the assets and liabilities and state the intention of the parties. The draftsman is to be commended.
Your elementary school math teacher was correct. Showing your work is important. Within the context of drafting a legal agreement, this not only requires the details needed to show how one gets to the end result, but also the saving of drafts, notes, and communications between counsel to show the course of negotiations.
This is an outstanding opinion, not only for its recitation of the facts, but for its scholarly presentation of the law of the reformation of contracts.
What is equally noteworthy is the tremendous (waste of) time and resources of the parties and of the judicial system that was taxed with the burden of redressing what was obviously a mistake.
The husband was required to commence a new “plenary” action to reform the 2006 agreement. The husband made a motion for summary judgment that was denied on the grounds that a question of fact existed as to whether the monetary distribution in the agreement expressed the intent of the parties. The wife moved for an order awarding interim counsel fees. That, too, was denied. Subsequent motions by the wife for summary judgment and by the husband to amend his complaint were both denied. The matter was then referred to a Referee to hear and report on the issues of whether there was a mistake in the calculation of the division of property and the wife’s claim for counsel fees. The hearing was held. The referee issued a report which found an insufficient basis to reform the agreement and would have awarded the wife $10,000 in counsel fees. The husband moved to reject that report; the wife moved to confirm the report. It was these motions which were resolved by Justice Sunshine’s decision.
In addition to the judicial resources, the wife apparently incurred some $45,000 in legal fees. It can only be presumed that the husband incurred a similar amount. Justice Sunshine once again rejected the report of the Referee; counsel fees were denied as a matter of law and discretion.
Mistakes are not rare. If the parties have stated what they intended their result to be, and how they got there, fixing mistakes may be a straightforward matter. The bitterness of matrimonial litigation may make such reasoned resolutions difficult. But consider the futility of the alternative.