Agreements and Stipulations

A Thermos® keeps hot liquids hot and cold liquids cold. But how does it know?

When drafting a divorce settlement agreement (or any other contract), it is common to include conditions. But will the parties know when a condition has been met? How will the parties know if a promise has been kept? Sometimes it is obvious, or a party may think so. And sometimes it’s not.

Take the Second Department’s October 19th decision in Rosner v. Rosner. There the parties entered into a divorce stipulation of settlement. Pursuant to that agreement, the parties agreed that the husband would have the exclusive right to continue to reside in the former marital residence until five years from the execution of the stipulation, at which time the marital residence would be sold. The husband was required to pay all the expenses of the marital residence, except for the mortgage. The wife was required to pay the mortgage on the marital residence, as well as to pay the husband $1,500 in child support.

The stipulation also provided that if, “prior to the five years from the date of the execution” of the stipulation, the husband was “financially unable to pay for the expenses” of the marital residence, the marital residence would be sold.

In December 2013, the wife moved, among other things, to recover certain real estate taxes which the wife paid on the husband’s behalf, and to direct the sale of the former marital residence. After a hearing, Westchester County Supreme Court Justice Janet C. Malone granted those branches of the wife’s motion. The husband appealed.

A court should interpret a stipulation of settlement in accordance with its plain and ordinary meaning. Where such an agreement is clear and unambiguous on its face, the intent of the parties must be gleaned from the four corners of the instrument, and not from extrinsic evidence.

The Second Department affirmed, holding that the wife had established that the husband “failed to pay certain real estate taxes on the former marital property, as required by the stipulation. Thus, pursuant to the clear and unambiguous language of the stipulation, the Supreme Court properly directed that the former marital residence be sold.”

Comment: Here, the parties’ agreement could have said that if the husband fails to pay the required expenses, the marital residence would be sold. But it did not. Under the parties’ agreement, the sale was not triggered by a mere failure to pay, but only if the husband was “financially unable to pay for the expenses” of the marital residence. The opinion does not reveal whether the record demonstrated that inability. However, equating “failure” with “inability” as a matter of contract construction as a matter of law appears to be a stretch.

“Unable” is a loaded word. It requires that a judgment be made. Perhaps the parties would have been better served by setting out the test for inability. How will the parties know when the husband is “financially unable to pay for the expenses?”

The husband represented himself. The wife was represented by Brett Kimmel, P.C., of Manhattan.

In its August 24, 2016 decision in Maddaloni v. Maddaloni, the Appellate Division, Second Department, upheld the rulings of Supreme Court Suffolk County Justice Justice Carol Mackenzie that invalidated the all-but-complete maintenance waiver contained in a 23-year-old postnuptial agreement, awarding the wife maintenance for 10 years. The appellate court also upheld Justice Mackenzie’s award to the wife of 25% of the $2,000,000 appreciation during the marriage in the value of the husband’s pre-marital business, Maddaloni Jewelers of Huntington.

The Maddalonis were married in January, 1988. At the time of the marriage, the husband owned several cars, a house, and a jewelry business, and he was in contract to buy a shopping center. On August 22, 1988, less than eight months after the parties were married, they experienced marital difficulties and entered into a postnuptial agreement. Among other things, this agreement provided that, in the event that the parties divorced after the first five years of marriage, the wife agreed to accept the sum of $50,000, payable in five equal annual installments of $10,000, “in full satisfaction of any and all claims of whatsoever kind and nature she may have at that time for past or future support or for distribution of assets.”

Continue Reading Maintenance Provision of Postnuptial Agreement Voided; Wife Awarded 25% of Appreciation of Husband’s Premarital Business

Marital and divorce agreements have to be “notarized.” But does the notary have to be present and witness the actual signing?

New York’s Domestic Relations Law §236B(3) states “[a]n agreement by the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded.”

What does “acknowledged or proven in the manner required to entitle a deed to be recorded” mean.

In her June 1, 2016 decision in B.W. v. R.F., Westchester County Supreme Court Justice Linda Christopher upheld a prenuptial agreement in which the notary’s “acknowledgment” used the wrong wording.

Continue Reading Do Marital and Divorce Agreements Have To Be Signed in the Presence of the Notary?

A divorce settlement agreement requires clear language. It must also anticipate the thousands of details needed to complete the financial disentanglement and establish post-divorce rights and obligations. The parties must unceasingly ask their counsel “what if? Before signing their agreement, parties must envision how each type of transaction will actually be accomplished.

That need is made clear in the June 29, 2016 decision of the Appellate Division, Second Department, in Frances v. Frances.

The parties entered their divorce stipulation of settlement on January 19, 2010. On this post-judgment application, the ex-husband asked to enforce the stipulation by directing his former wife to pay him 50% of the refund received from the parties’ 2009 joint tax return, 50% of the school tuition and camp expenses for the parties’ youngest child, and 50% of the cost of certain repairs to the marital residence. Rockland County Supreme Court Justice William A. Kelly granted that relief and the wife appealed.

Continue Reading The Divorce Settlement Must Predict How Finances Will Actually Work

K-1-cropped-wideIn its May 11, 2016 decision in Eifert v. Eifert, the Appellate Division, Second Department, appears to discuss the interrelationship between the calculation of child support and the “income” shown on a partnership K-1 tax form. In truth, it does not.

In their divorce settlement agreement, the parties agreed that the father would pay child support consisting of two components. The first component required the father to pay $4,400 per month. As summarized by the Second Department in its opinion, the second component required the father to pay “25% of the income he derived from his ownership of stock in Eifert French & Co.”

Years later, the mother sought to recover child support arrears in the sum of $63,283.25 arising from the second component of the father’s child support obligation. The mother arrived at this sum by performing calculations based on K-1 statements received by the father from Eifert French & Co.

In opposition, the father contended that the second component of his child support obligation should be calculated based only on distribution checks he received from Eifert French & Co, rather than the income reflected on his K-1 statements. Based on that limitation, the father calculated that the correct amount of arrears he owed for this second component of his child support obligation was $21,137.49.

Supreme Court, Westchester County Justice Colleen D. Duffy agreed with the father and found arrears to be $21,137.49. The mother appealed.

Continue Reading K-1 Income and the Calculation of Child Support

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.

Ms. Fitzpatrick represented herself on the appeal. The ex-husband was represented by Joan Iacono, of Bronxville (Barbara Martensson, of counsel).

female graduate with her fatherWhen a divorce settlement contemplates paying child support throughout four years of college, what happens when the child graduates in three?

The statutory obligation to support a child ends at the child’s 21st birthday. It is common with divorce settlements to extend child support beyond the 21st birthday if the child is continuing to attend college on a full-time basis. However, defining when the periodic support obligation will end is not always made clear.

Take the March 30, 2016 decision of the Appellate Division, Second Department, in Fleming v. Fleming. The parties’ divorce stipulation of settlement required the father to pay periodic child support until the children reached the age of 21, or the completion of “four (4) academic years of college,” whichever occurred last, but in no event beyond the school year of the child’s 23rd birthday.

However, the parties’ daughter graduated from college after only three years of study, one month after her 21st birthday. The father stopped paying child support. The daughter went on to graduate school.

The mother moved to enforce the stipulation’s obligation for the father to pay periodic child support. She asserted that the stipulation required the father to continue paying child support during their daughter’s first year of graduate school. Suffolk County Supreme Court Justice Stephen M. Behar granted the mother’s motion, finding that the child had completed only three academic years of college. Justice Behar directed the father to continue paying child support until the child completed “four (4) full academic years of college, or until the child’s 23rd birthday, whichever occurs first.”

The Second Department reversed.

When interpreting a contract, such as a separation agreement, the court should arrive at a construction that will give fair meaning to all of the language employed by the parties to reach a practical interpretation of the expressions of the parties so that their reasonable expectations will be realized.

Continue Reading Support When the Child Graduates College in Three Years

NotaryA signature by a notary is not a proper acknowledgment. As a result “Promissory Note” deemed a postnuptial agreement was unenforceable. So held the Appellate Division, Second Department, in its March 2, 2016 decision in Ballesteros v. Ballesteros.

In this case, the parties were married on July 27, 2008. Prior to their marriage, on July 23, 2008, the parties had signed a prenuptial agreement, opting-out of New York’s statutory scheme governing maintenance and equitable distribution. Thereafter, in the summer of 2009, the husband told the wife he wanted a divorce and she needed to leave his home. The wife began looking for a place to live.

The husband then changed his mind and told the wife he did not want to get divorced and that they should try to resolve their problems. The wife did not want to get divorced and told the husband she was willing to work on their marriage, but she needed financial security from him. The husband agreed to sign a document entitled “Promissory Note” in which he agreed to purchase a condominium for the wife, in the event of a divorce, in an amount not less than $250,000. The wife drafted the agreement, and both she and the husband signed it on September 3, 2009. The husband told the wife he would return the agreement to her after he had it notarized. A notary signed the agreement, but did not attach a certificate of acknowledgment.

The parties continued to work on their marriage, but at some point thereafter, the husband again asked the wife to leave his home. The wife commenced an action on June 14, 2012, for a divorce and to enforce the promissory note.

After a hearing, Supreme Court, Putnam County Justice Francis A. Nicolai held that the document entitled “Promissory Note” was an enforceable agreement and directed the husband to pay the wife $250,000. The husband appealed.

The Second Department held that contrary to the wife’s contention, the agreement signed by the parties, despite its title of a “Promissory Note,” was an agreement between spouses subject to Domestic Relations Law § 236(B)(3). Pursuant to Domestic Relations Law § 236(B)(3):

[a]n agreement by the parties, made before or during the marriage, shall be valid and enforceable in a matrimonial action if such agreement is in writing, subscribed by the parties, and acknowledged or proven in the manner required to entitle a deed to be recorded.

A written agreement between parties made before or during a marriage which does not meet the formalities of Domestic Relations Law § 236(B)(3) is not enforceable. Therefore, the appellate court concluded that a postnuptial agreement that is signed but not acknowledged is invalid and unenforceable in a matrimonial action. Here, although the postnuptial agreement was signed by a notary public, it was not properly acknowledged and was unenforceable.

Notaries public commonly serve two functions relating to documents. First, they can administers oaths so that the author may swear to the truth of the contents. Second, authors may acknowledge their signatures before notaries who by then signing the acknowledgment form, verify the identity of the authors and their signatures. It is the latter that is required for marital agreements. That is the “form” entitling a deed to be recorded. The form recites:

On [DATE], before me, the undersigned, personally appeared [AUTHOR], personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that [HE/SHE] executed the same in [HIS/HER] capacity and that by [HIS/HER] signature on the instrument, the individual, or the person upon behalf of which the individual acted, executed the instrument.

Wilson Soto, Esq., of Soto Sanchez & Negron, LLP, of Yonkers, represented the husband. Daniel M. Miller, PLLC, of Mahopac, represented the wife.

A court will not provide for a reduction in child support upon the emancipation of the elder of two children when the parties’ divorce settlement stipulation, itself, does not provide for one. So held the Appellate Division, First Department, in its 3-2 December 29, 2015 decision in Schulman v. Miller.

That settlement stipulation required the husband to pay unallocated periodic child support for the parties’ two children, plus cost of living adjustments, as well as other expenses of each child, including education and college. It did not provide for the reduction or recalculation of the husband’s child support obligation upon the emancipation of the older child. The agreement did not allocate the husband’s child support obligation as between the children, nor provide a formula for a reduction in the event of one child’s emancipation.

Affirming the order of Supreme Court, New York County Justice Lori S. Sattler, the appellate court noted that the settlement stipulation did provide for a termination or reduction of certain of the husband’s financial obligations upon the happening of specified events, including, for example, his obligation to pay maintenance to the wife, his obligation to maintain medical insurance for each child, payments for car service, and the like. Thus, the settlement provision concerning medical insurance explicitly stated that the husband “shall have the right to terminate such coverage for either Child at the time she becomes emancipated.” The parties’ stipulation of settlement was an exhaustive, 62-page document. Both parties were represented by counsel during its negotiation (indeed, the husband himself is an experienced attorney).

Continue Reading Absent Provision in Divorce Agreement, No Reduction in Child Support on Emancipation of Elder Child

In its August 19, 2015 decision in Hof v. Hof, the Second Department, almost matter-of-factly, addressed a number of pendente lite and pre-nuptial agreement issues.

To begin, the Court affirmed the determination of Suffolk County Supreme Court Justice John B. Collins, that after a hearing upheld the parties’ prenuptial agreement. By that agreement, at least in part, the parties had waived interests in each other’s pensions. Contrary to the wife’s contention, that mutual waiver was not unconscionable, and was not necessarily one-sided when it was made, as both parties had accumulated approximately three years in their respective pensions at that time. Moreover, the Court stated that the husband’s threat to cancel their wedding if the agreement was not signed did not establish duress.

The Second Department modified Justice Collins’ order insofar as it deviated from the presumptive temporary maintenance formula. Domestic Relations Law § 236(B)(5-a) sets forth formulas for the courts to apply to the parties’ reported income in order to determine the presumptively correct award of temporary maintenance.

Here, the Justice Collins had downwardly deviated from the presumptive award by awarding the wife the sum of only $1,500 per month in pendente lite maintenance. While a court may deviate from the presumptive award if that presumptive award is unjust or inappropriate, the Second Department here held, however, that it was not proper to so deviate. It was an insufficient basis to deviate that the husband “was maintaining the marital residence where he was living after the wife vacated the marital residence with the children, and the fact that the wife stayed home during a portion of the marriage to take care of the children.” Such did not render the presumptive award of pendente lite maintenance unjust or inappropriate. Accordingly, the Second Department held that it must modify the award of pendente lite maintenance to provide the wife with the presumptive award of $2,549.70 per month.

On the other hand, Justice Collins was not required to apply the Child Support Standards Act to determine the award of pendente lite child support. In that regard, any perceived inequity in the temporary child support award can best be remedied by a speedy trial, at which the parties’ financial circumstances can be fully explored.

Finally, the Second increased the interim award of counsel fees from $2,500 to $20,000, the full amount of counsel fees incurred by the wife to date related to the divorce issues. The husband was the monied spouse and, thus, there was a rebuttable presumption that the wife was entitled to an award of attorneys’ fees. At the time the wife moved for her award of attorneys’ fees, the attorneys’ fees she had already incurred amounted to approximately $25,000. Domestic Relations Law §237 does not provide for an award of counsel fees in actions to enforce or rescind prenuptial agreements, and approximately $5,000 of the $25,000 in fees that she actually incurred were attributable to challenging the prenuptial agreement. Therefore, at this juncture, the Second Department held the wife should be awarded interim attorneys’ fees in the sum of $20,000, rather than only $2,500.

Arnold B. Firestone, of Firestone & Breud, PLLC, of Commack, represented the wife. C. Donald Shlimbaum, of Shlimbaum & Shlimbaum, of Central Islip, represented the husband.