The November 12, 2014 decision of the Appellate Division, Second Department, in Bibeau v. Sudick reversed the granting of summary judgment upholding the validity a 2000 prenuptial agreement, remanding the matter for a hearing on that issue.

In September 28, 2000, two days before their wedding, the 70-year old future husband and the 38-year old future wife executed a premarital agreement. It provided that in the event of a divorce, the wife would receive, in lieu of maintenance, support, and equitable distribution, the sum of $25,000 for each year of the marriage. The parties also agreed to waive their interest in the elective share of each other’s estate, and to make no claim to property titled in the other’s name.

According to financial statements attached to the premarital agreement, the future husband had assets of more than $10,000,000, while the future wife had assets of approximately $170,000. The agreement was signed in the office of the husband’s attorney, in the presence of another attorney who was purportedly representing the wife.

At the time of the marriage, the wife, who had a background in marketing works of fine art to corporations, had recently opened an art gallery in California. She closed this business and relocated to Pine Bush, New York, in order to reside with the husband in preparation for their marriage, and assist him in his business endeavors. These included real estate development, as well as breeding thoroughbred horses and managing polo ponies.

In October, 2010, within days of New York’s adoption of no-fault divorce, the husband commenced this action for divorce. There were no children of the marriage.

Continue Reading Another Prenup Bites the Dust, Maybe

The First Department, in its February 19, 2013 decision in David v. Cruz, threw out an entire settlement agreement because of its failure to include  language required by the Child Support Standards Act.

The C.S.S.A. sets out a presumptive formula for the calculation of a parent’s child support obligation.

Parents are free to agree to vary the formula and fix their own base periodic child support obligation. They may also fix the parents’ respective liabilities for addition health care, child care and add-on expenses, if not others. However if they so agree, the parents must recite in their agreement what would have been the results had the presumptive statutory formula been applied.

As noted by the First Department, an agreement purporting to opt out of the presumptive basic child support obligations set forth in the Child Support Standards Act must include a provision stating that the parties have been advised of the provisions of the C.S.S.A., must specify the amount that the basic child support obligation would have been, and must state the reason or reasons for the deviation (Family Court Act § 413 [1] [h]; Domestic Relations Law § 240[1–b][h]). That required recitation may not be waived by either party or by counsel.

Continue Reading Settlement Agreement’s Failure to Include C.S.S.A. Recitation Invalidates Entire Agreement

Mediation.jpgThe ex-husband brought this post-divorce civil action against his ex-wife and Alan L. Finkel, the attorney who mediated the spouses’ 2007 divorce settlement agreement, seeking to set aside that agreement.

In his July 12, 2012, decision in Valkavich v. Valkavich, Suffolk County Supreme Court Justice Ralph T. Gazzillo, granted summary judgment dismissing the complaint.

The husband complained that the child support provisions did not comply with the Child Support Standards Act (C.S.S.A.), that it contained erroneous statements concerning his earnings at the time.

Justice Gazzillo found that the ex-husband had not demonstrated that the Stipulation of Settlement was unfair when made or that there was overreaching in its execution. The Court placed heavy emphasis on the waivers and disclaimers signed by the parties at the time of their mediation. It was clear from the agreement between the parties and the mediator, as well as the Stipulation of Settlement, that the parties were advised to seek guidance from an outside attorney, if they so chose. This was certainly sufficient opportunity for plaintiff to have had the proposed agreement reviewed by an attorney and to have been advised of any questions he had as to its terms. By the terms of the agreement, plaintiff acknowledged that he had the right to obtain counsel, that he knew and understood what he was signing, and that he entered into it freely and voluntarily.

Pertinent portions of the agreement between the parties and The Divorce Mediation Center stated:

At the end … of the first session, you will be asked to complete a financial disclosure package. However, you are free to waive this homework assignment, provided you both agree to do so. … We highly recommend that prior to signing the final agreement, each of you spend sufficient time in fully reviewing it (and bringing it to your attorney, accountant, guru,, parent, sibling, or other adviser or confidant) to be confident that it contains everything you need, and that the agreement is fair.

Continue Reading Mediated Divorce Settlement Agreement Upheld In Light Of Waiver of Financial Disclosure

Tear up contract.jpgThe parties’ 2008 Separation Agreement which resolved their divorce provided for joint legal custody of the parties’ two children, with their primary residence being with the mother. Nine months after the divorce, the mother remarried and moved to her new husband’s residence in Florida. The children remained in New York with their father.

The parties planned for a change in primary residence in their Separation Agreement. Specifically, if the children moved in with the father, the mother would not be obligated to pay periodic child support. (The father was paying $5,000 per month in child support while the children lived with the mother.) Moreover, the change in primary residence resulted in an “emancipation event” under the agreement, terminating the mother’s obligation to equally share certain expenses of the children including private school tuition, various unreimbursed medical costs, extracurricular activities, summer camp and college tuition.

This proceeding involved the father’s request for child support and for the mother to pay her pro rata share of expenses. The mother argued that as the agreement contemplated a change in primary residence from the mother to the father, there was no unanticipated change in circumstances sufficient to effect a modification of the parties’ Agreement. No periodic child support obligation should be imposed upon her. Moreover, the mother claimed to have paid some $300,000 towards the children’s expenses over the past three years.

In her March 28, 2012 decision in Rome v. Rome, New York County Supreme Court Justice Lori S. Sattler noted that “parents cannot contract away the duty of support.” Similarly, the Court has noted that a parent may not eliminate or diminish his or her duty to support by way of separation agreement. The parties’ agreement to waive support from each other “is not binding and against the public policy of providing for the support of children. The relevant inquiry is whether the children’s needs are being met as their needs will take precedence over the Agreement.”

While the Defendant asserts that the Plaintiff’s application must be denied since he has failed to demonstrate a substantial change of circumstances, the Court finds that the Plaintiff does not need to meet that burden for this application to go forward. Under the terms of the Agreement, the Defendant is required to pay nothing on behalf of the children and has been under no obligation since some time in 2008. Such provision is not binding and against the public policy of providing for the support of children. The relevant inquiry is whether the children’s needs are being met as their needs will take precedence over the Agreement.

Justice Sattler was unable to determine whether the needs of the children have been met since 2008 or are presently being met. Moreover, the mother had failed to submit the “requisite” Net Worth Statement, leaving the Court with no ability to determine what the mother’s basic child support obligation would be on an ongoing basis. Accordingly, Justice Sattler set the matter down for a hearing. The mother was directed to submit a Net Worth Statement to the Court within ten days of the decision.

Comment:The agreement which resolves a divorce often reflects a delicate balance among issues of spousal and child support and asset and liability division. Years after the execution, a court should be extremely hesitant to alter one of those balanced issues. The court should not ignore that various trades may may have been made to arrive at the overall agreement. Focusing on only one aspect of the agreement, even a waiver of child support, does the entire agreement a disservice.

Certainly, Justice Sattler properly decided to look at whether the needs of the children are being met. However, if the father is able, alone, to meet the reasonable needs of the children, consistent with the children’s lifestyle, then the parties’ agreement should be honored. Where the agreement merely allocates responsibilities between the parties, and does not prejudice the children, the parties’ agreement should be upheld.

As the Court of Appeals has noted, there is a difference between an agreement that is directed solely to readjusting the respective obligations of the parents to support their child (Matter of Boden v. Boden, 42 N.Y.2d 210, 397 N.Y.S.2d 701 [1977]) and a court’s power to order support where a child’s right to receive adequate support is in issue (Brescia v Fitts, 56 NY2d 132, 138, 451 NYS2d 68 [1982]).

Not every waiver of child support, particularly one within the context of an overall divorce settlement between apparently wealthy spouses, should be void as against public policy. A separation agreement should be validated, unless it must yield to the welfare of the children.

Moreover, unless and until it is found that the needs of the children cannot be met if the waiver of support is honored, financial disclosure from the parent now not obligated by the agreement to pay support should be limited.

As noted in the previous blog, Gazzillo Ralph.jpgagreements which resolve marital rights and obligations are encouraged. They will be enforced absent demonstrable improprieties.

In his January 23, 2011 decision in Capone v. Capone (pdf), Suffolk County Supreme Court Justice Ralph T. Gazzillo granted summary judgment dismissing a wife’s action to rescind and declare null and void a November, 2008 Separation Agreement.

In January, 2010 the husband commenced an action for divorce based on the parties living separate and apart pursuant to that agreement for a period in excess of one year (“grounds” for divorce under Domestic Relations Law §170[6]). The wife responded by bringing her own action in February, 2011 attacking the agreement on the grounds that it was the result of overreaching, coercion, and undue influence. She also alleged that it was manifestly unfair, unjust, inequitable and unconscionable.

The husband moved for summary judgment dismissing the wife’s action. Justice Gazzillo noted that summary judgment is a drastic remedy, only to be granted in the absence of any triable issues of fact. Justice Gazzillo held that the wife failed to demonstrate that the agreement was unfair when made or that there was overreaching in its execution. Quoting the 1977 decision of the Court of Appeals in Christian v.Christian, 42 NY2d 63, 396 NYS2d 817, Justice Gazzillo stated:

Judicial review of separation agreements is to be exercised circumspectly, sparingly and with a persisting view to the encouragement of parties settling their own differences in connection with the negotiation of property settlement provisions.

Here, the parties’ Separation Agreement had been entered with the assistance of Divorce Mediation Professionals (Lenard Marlow, J.D.). The parties only entered their agreement following at least 10 conferences, letters between the parties and the mediator, revisions, a written suggestion by the mediator to the wife that she consult with her own attorney to discuss changes to the agreement, and the valuation of the husband’s pension.

Continue Reading Wife's Attack on 2-Year-Old Mediated Separation Agreement Summarily Dismissed

Changes Coming.jpgYou’ve worked out your divorce settlement, executed your agreement, and had that agreement incorporated in your Judgment of Divorce. Then, the law changes. What impact does that have on your settlement? As a practical matter, none!

Most often, a change in divorce law can be the result of a judicial decision, but it can also be a result of an act of the Legislature.

A post-agreement change in law was the issue facing Kings County Supreme Court Justice Jeffrey S. Sunshine when reaching his December, 2011 decision in Russo v. Russo Willoughby. Justice Sunshine held that a decision by New York’s highest Court, the Court of Appeals, which changed controlling Appellate Division case law existing at the time the parties entered their divorce settlement agreement, did not provide the basis for an attack on that agreement.

In Russo, the parties had entered an agreement which had made no provision for the wife to share in the Variable Supplement Fund (“VSF”), a benefit the husband accrued working as a police officer. The rule of law when the parties entered into their stipulation was that the VSF was not a part of the New York Police Department pension benefit, and not a marital asset to be equitable distributed. The parties’ stipulation did provide for a division of the NYPD pension.

After signing the agreement, the Court of Appeals ruled for the first time ruled on the VSF issue, finding that a spouse’s interest in the NYPD VSF is a marital asset to be equitably divided and distributed.

Justice Sunshine ruled that that post-agreement Court of Appeals decision did not provide a basis to add a new term to the parties’ agreement or otherwise provide a basis for relief to the wife.

As was noted in Cutler v Travelers Ins. Co., 159 AD2d 1014, 552 NYS2d 998 (4th Dept. 1990):

It is well established that a party may not reopen a voluntary settlement agreement to take advantage of a subsequent change in the law.

Thus, for example, it has been held that a change in the case law governing the application of the Child Support Standards Act was not a change of circumstances warranting the modification of the parties’ child support agreement. Kneut v Kneut, 172 Misc 2d 647, 658 NYS2d 832 (Monroe Co. Fam. Ct. 1997).

The last few years have seen many changes in New York’s divorce law. No-fault divorce is here. There is a new statute concerning the award of spousal support while a divorce action is pending. Changes to post-divorce maintenance awards are expected. Rules on the appreciation in value of one spouse’s separate property are confusing and in flux. The list goes on.

New York’s public policy supports the finality of settlement agreements. While parties may want to anticipate changes in the law, at the end of the day, cases need to be resolved. Parties must be prepared to make the most prudent deal they can, now, and be grateful for being able to move on. Years, or even days in the future, parties should not look back and think, “Had I only waited . . . “

scissors contract 2.jpgWhat happens when only one provision of an agreement is invalid because it violates some statute or public policy?  The answer may depend on who the court wants to benefit, instead of consistently-applied rules of contract law.

Take, for example the April 5, 2011 decision of the Second Department in Duggan v. Duggan.  In that case, the parties had resolved their divorce by a surviving February 26, 2009 stipulation of settlement. Under that stipulation, the father, who had gross income of $475,000.00, agreed to pay a base monthly child support obligation of $8,000.00.  That amount deviated from the presumptive amount under the Child Support Standards Act (C.S.S.A.) of $11,929.54. The mother had no income.

Apparently, the stipulation also had a provision which called for the reduction in the father’s monthly obligation in the event his income was reduced.

In 2010, the mother brought a Family Court enforcement proceeding when the father ceased making the payments to which he originally agreed. The father raised the stipulation’s modification provision, arguing that his $8,243.00 annual reduction in income to $466,757.00 entitled him to a $76,800.00 annual reduction in child support (to $1,600.00 per month)!

Finding that the father’s interpretation of the stipulation modification provision was “not plausible,” Nassau County Family Court Judge Julianne S. Eisman denied the father’s objections to the Order of Support Magistrate Tejindar S. Kahlon which granted the mother’s arrears petition. Finding that the language of the Stipulation, as interpreted by the father, would violate the C.S.S.A., and was against the best interests of the children, the modification provision was ignored.

On appeal, the Second Department affirmed, holding that the Family Court had the authority to find that a provision in a stipulation of settlement violated the C.S.S.A. The appellate court found that a provision which called for a reduction in child support to 13% of the presumptive C.S.S.A. amount, merely because the father’s income dropped by 1.7% was “against the best interests of the children.”

It is noteworthy that the appellate court did not quote the startling modification provision. Equally noteworthy is that there was no discussion of any interpretation of the modification provision other than the one the Family Court considered implausible.

In order to have obtained the Judgment of Divorce, it would have been necessary to have made the recitation in the stipulation of settlement that the parties had been made aware of the C.S.S.A. and its presumptive formula in their case. D.R.L. §240(1-b)(h).  The parties would have had to have stated the reasons they agreed to deviate from the C.S.S.A guidelines. Specific Findings of Fact would have been made by the Supreme Court upholding those reasons.

It is understandable that the presumed failure of the Supreme Court to review the specific modification provision might not estop the mother from later attacking that provision when it was sought to be applied. Thus, the form language of a divorce judgment that “the parties are directed to comply with every legally enforceable term and provision” of the agreement incorporated into the judgment, does not mean that every provision is, in fact, legally enforceable.

What then is, or should be the impact of rendering unenforceable only one provision of a settlement agreement?

Continue Reading Severability: When Only One Provision of a Divorce Settlement Agreement Is Invalid