Should a court reinterpret a divorce settlement agreement in light of New York’s public policy? It is one thing to void a contract provision as violative of that policy. It’s another to pretend that the contract was intended to be consistent with that policy.
Take, Monroe County Supreme Court Justice Richard A. Dollinger’s recent decision in Luken v. Luken. There, the parties’ June, 2014 separation agreement provided that the couple would jointly finance the college education for their sons. At the time of the agreement the older son had completed his first year of college; the younger son was in high school. The husband was to pay 70 percent of the college cost, the wife the remaining 30 percent, up to a combined cap of $42,000. The agreement also gave the husband a college expense credit against his child support obligation:
The father shall be entitled to receive a credit against his child support for payments for college educational expenses as set forth herein.
The agreement had obligated the father to pay child support of $33,996 annually for his two sons. The amount was calculated using the $141,000 C.S.S.A. “cap,” even though the couple’s combined family income substantially exceeded that amount (the wife estimated the husband’s income at $600,000).
The husband may have interpreted the agreement to allow him a carryforward credit; a credit against child support in future years, if his share of college education expenses for one exceeded his child support obligation for that year. However, as the husband’s college obligation was 70% of $42,000, or $29,400, it is not clear how the husband’s $33,996 total child support obligation had been exceeded. [One would think that if the father paid sums in excess of his 70% share, as he stated, he did so as a volunteer and could not take a credit for those voluntary payments. That issue was not specifically addressed by Justice Dollinger.]
The wife argued that the “credit” was inconsistent with the child emancipation clause in the agreement. If the “credit” for one child’s expenses eliminated child support, the effect of the clause would be to constructively emancipate the older child and, by implication, the younger child as well. The wife added that the emancipation of either child would be contrary to the emancipation article in the agreement and that this conflict between these two clauses created an ambiguity.
The Court noted that a contract ambiguity is present if its language was written so imperfectly that it is susceptible to more than one reasonable interpretation. Here, Justice Dollinger noted the language of the “credit” was, standing alone, unambiguous. There was no limit on the amount of the credit. While there was no exact definition of what constitutes “college educational expenses” used in the credit provision, in the same article of the agreement, the parents did specify which expenses they would be obligated to pay: tuition, fees, room, board, books, school fees, and transportation to and from school.
There were no limitations in the agreement on what portion of the child support – for both sons – could be offset by the college educational expenses “credit.” Under these circumstances, Justice Dollinger noted, the credits clause standing alone would appear to be an unambiguous direction that the father, upon paying college expenses including tuition for one child in excess of his annual child support obligation for both sons, would have no further child support payments.
However, Justice Dollinger would not consider the clause in isolation. Within the four corners of the agreement was the emancipation clause. “Residency at college” was not an emancipation event. In addition, the divorce judgment contained a further direction when emancipation of one child occurred, child support was to be “recalculated.” To the Court, this portion of the agreement and the terms of the judgment were evidence that this couple only intended child support to be modified if “emancipation” occurred and they agreed that residency at a college would not constitute such an event. This portion of the judgment, read as a stand-alone declaration, completely contradicted the “college expense credit” in the agreement as interpreted by the husband. The former directly stated that college attendance – “residency away from home” – will not terminate child support for the college-aged child, much less the younger sibling. The “college expense credit,” standing along, has the practical consequence that when the expenses for college for either child exceed the annual support obligation for both sons, child support for both sons ceases. When read together, these clauses – read as part of the agreement and judgment – would seem to create an ambiguity that requires extrinsic evidence and a hearing to determine the parties’ intentions.
However, Justice Dollinger would have no hearing. The father’s reading of this “credit” also collided with strong public policies in New York under the C.S.S.A.. The New York courts have required an “express waiver” of child support before absolving a parent of their obligation to support their children. The party claiming a waiver must come forward with evidence of a voluntary and intentional relinquishment of a known and otherwise enforceable right to child support. There is no evidence in the affidavits before this court indicating that the mother, by signing the agreement, was agreeing that when her older child went to college she was voluntarily and intentionally relinquishing her right to support for the younger child. By agreeing to the “education expense credit” for her older child, the mother was not waiving her right to support for her other child.
Justice Dollinger noted that in addition, the wife’s interpretation of the contract language comported with the sentiment of the New York courts, in interpreting the C.S.S.A., that a “dollar-for-dollar” credit against child support for educational expenses – nearly identical to the language in the agreement before the court – is not enforceable.
[Although Justice Dollinger relied heavily on the 2005 opinion of the Second Department in Lee v. Lee, that case did not involve an agreement at all; it was a judicial determination of support and credits. Justice Dollinger also relied heavily on the 2008 opinion of the Second Department in Levy v. Levy. There, however, the parties’ agreement, itself, based the determination on an earlier decision that limited the credit to room and board expenses.]
Justice Dollinger ruled that under these circumstances, while the “education expense credit” was ambiguous in the context of the agreement, the Court could not resolve the ambiguity without reference to New York’s strong preference in favor of continuing child support when a child enters college. The phrase “educational expenses” in this section of the agreement can only be read to be limited to “room and board” costs for the older child. Furthermore, any such costs, while eligible to reduce the support paid for the older child, should not reduce the child support to be paid for the second child. The second child is entitled to his presumptive payments of child support and the credit rendered to the father should not reduce the support payments below that amount.
The Ccourt concluded that as a matter of contract law, there was an ambiguity in the agreement as to the meaning of “the college educational expense” credit and its interpretation under the emancipation clauses in the agreement and the judgment of divorce. However, when interpreted against the public policy of C.S.S.A. and the string of judicial decisions limiting the credit to only room and board expenses and applying the credit against those expenses for the subject child while leaving the support for the non-college-aged child in tact, the ambiguity must be resolved against the husband.
The Court found that the wife was entitled to a judgment in the amount of unpaid support from September 1, 2014, through April 1, 2014, with the husband to get a credit for room and board expenses paid both in school years 2013-2014 and 2014-2015.
Comment: It is not clear why the husband got a credit against 2014/2015 support for 2013/2014 college room and board payments; the agreement was not entered until after that 2013/2014 was over.
What is clear that particularly as the husband had already paid for a year of college by the time the agreement was entered, the parties would have been well-served by setting forth a detailed and specific example of the calculation and application of the credit. Such an example would have at least provided the court with a clear understanding of whether the parties agreed that tuition was to be included; whether the credit would apply against the support obligation for both children; and possibly whether an unused credit could be carried forward.