In its May 25, 2016 decision in Fitzpatrick v. Fitzpatrick, the Appellate Division, Second Department, affirmed the denial of an ex-wife’s application to enforce a divorce settlement provision that called for an automatic increase in child support upon the ex-husband’s default in any other obligation of that settlement.
The parties entered into that separation agreement in 2012, which had been incorporated, but not merged into the judgment of divorce. In relevant part, the agreement provided that, in consideration of the husband’s agreement to pay 100% of the costs associated with maintaining the marital residence (in which the wife and the parties’ four children continued to reside), the husband would pay $1,500 per month in child support until the the sale of the marital residence, and $5,076.29 per month thereafter. However, the agreement continued, if at any time prior to the sale of the marital residence, the husband was not in compliance with “all of the terms” of the agreement, then his child support obligation would be increased to $5,076.29 per month.
Supreme Court, Westchester County Justice Francis A. Nicolai, after a hearing (Duffy, J.), denied that aspect of the ex-wife’s post-judgment application. The Second Department affirmed.
The appellate court recognized the agreement that there be automatic increase in child support as a liquidated damages clause. Generally, parties to an agreement may provide for the payment of liquidated damages upon its breach, and such damages will be upheld if:
(1) the amount fixed is a reasonable measure of the probable actual loss in the event of breach, and
(2) the actual loss suffered is difficult to determine precisely.
However, the Court held that if the liquidated damages do not bear a reasonable proportion to the loss actually sustained by a breach, they will constitute an unenforceable penalty.
Without discussion of how the marital residence expense clause and automatic child support increase were interrelated, the Court held that contrary to the ex-wife’s contention, the Supreme Court correctly determined that the subject provision, as drafted, constituted an unenforceable penalty clause and was unenforceable.