JengaOn June 12, 2018, the Court of Appeals in a 5-2 decision, affirmed the ruling discussed below.

It is common in agreements, and often the case in judicial decisions, for the parent paying periodic child support to receive a credit against those payments for college room and board expenses paid by that parent. May parties agree that the credit exceed the amount allocated by the parties to the support of the particular child attending college? No, (probably) said the Appellate Division, First Department, in its April 6, 2017 decision in Keller-Goldman v. Goldman.

The parties entered into a Stipulation of Settlement and Agreement that resolved all issues surrounding their separation. As may be relevant to the court’s determination, although the parties had four unemancipated children, the agreement only provided for support for the three children for whom the wife was deemed the custodial parent (the parties were to share equal time with these three). The husband retained custody of the fourth child, but agreed to receive no support for him from the mother. The opinion noted that had the parties not negotiated the issue of child support, the mother stood to collect $5,000 per month in child support payments, pursuant to the Child Support Standards Act, a fact acknowledged by the agreement. Instead, she agreed to monthly child support payments of $2,500.

Paragraph 10.3 of the parties’ agreement provided for a graduated reduction in the father’s child support payments upon the emancipation of each of the three children. Upon the first emancipation his monthly payment would be reduced by $350 to $2,150 per month; and upon the second emancipation the payment would be reduced to $1,462 per month.

The agreement provide for a room and board credit at paragraph 10.4, immediately following the support reduction schedule:

During the period in which a Child is attending a college and residing away from the residences of the parties and [the father] is contributing towards the room and board expenses of that Child, [the father] shall be entitled to a credit against his child support obligations in an amount equal to the amount [the father] is paying for that Child’s room and board. The credit shall be allocated in equal monthly installments against [the father’s] child support payments.

At the time the agreement was negotiated and executed, the eldest of the three children in the mother’s custody was attending a 10-month seminary program in Israel (deemed college). The father, who was responsible under the agreement for the entire tuition and for room and board, paid approximately $12,000 for the latter expense. Before the parties’ divorce judgment was entered, and relying on the language from paragraph 10.4 of the agreement, the father informed the mother that he was due a $1,200 per month credit towards his total monthly child support obligation of $2,500.

The mother then moved for a declaration that the pending judgment include language making clear that any credit due the father would be capped in accordance with the graduated emancipation reduction. In other words, she interpreted that formula as defining the amount of child support allocated for the particular child in question as $350 ($2,500 minus $2,150, the amount to be paid after emancipation of that child), and sought to limit the father’s credit to that amount. She noted that under the father’s construction of the agreement, he could, in theory, completely deprive one or two of her children of support if he paid enough in room and board for the other child or children to wipe out the entire periodic support obligation. The father opposed the motion, stressing that the court was required to enforce the plain language of the agreement.

In oral argument on the motions, Supreme Court New York County Justice Matthew F. Cooper opined that, as a matter of public policy, the agreement could not be enforced as written. It expressed deep concern with the possibility that one or two of the children could be deprived of any child support because the father was paying room and board for their sibling or siblings in an amount that exceeded the amount owed the mother. Justice Cooper stressed the fact that the father was already enjoying a reduction in the presumptive support amount provided by the Child Support Standards Act. Justice Cooper ultimately signed the judgment of divorce that clarified that the provision allowing the father a credit against his child support obligations is capped at the amount identical to the decrease in monthly child support when such child becomes emancipated.

The First Department affirmed. It first noted that, generally, a stipulation of settlement is a contract subject to the ordinary principles of contract construction and interpretation. These rules provide that “a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms. . . and courts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.” In the specific realm of settlement agreements defining a parent’s child support obligations, there is a presumption that the agreement reflects what the parties believed to be a fair and equitable division of the financial burden to be assumed in rearing the child. However, there is a very important caveat to that principle:

[T]he parties cannot contract away the duty of child support. Despite the fact that a separation agreement is entitled to the solemnity and obligation of a contract, when children’s rights are involved the contract yields to the welfare of the children. The duty of a parent to support his or her child shall not be eliminated or diminished by the terms of a separation agreement, nor can it be abrogated by contract.

The First Department held that here, the agreement violated this rule. The credit sought by the father took away that portion of child support intended for the welfare of the other two children.

The appellate court stated that it is appropriate for courts, in ensuring the fairness of child support provisions in divorce agreements, to look beyond the plain language chosen by the parties. An agreement may be interpreted in a manner that is consistent with public policy.

It was acknowledged that child support statutes permit parties to deviate by agreement from the basic child support obligation. However, those statutes also provide that the court shall retain discretion with respect to child support.

That discretion unquestionably extends to invalidating those provisions in agreements that violate public policy, as the court did here.

Moreover, “a contract should not be interpreted to produce a result that is absurd, commercially unreasonable or contrary to the reasonable expectations of the parties.” The reasonable expectation of the parties when they executed the agreement, based on its plain language, was that the father would support each child individually until that child was emancipated. This could be deduced from the fact that paragraph 10.3 of the agreement reduced the total support amount after the emancipation of the first, and then the second, child.

Insofar as the credit provision is the one that immediately follows, the First Departed stated that it was reasonable for the mother to interpret that provision as making clear that attendance at college or a gap year program is effectively a “temporary emancipation,” where no support payment is necessary for the child because the child is not a financial burden on the mother. At the same time, the credit provision prevents the mother from realizing a windfall by collecting child support for a child who, temporarily, is not a household expense. Reading the agreement this way, the two provisions can be understood as being in harmony with each other, which is a goal when construing any contract.

Justice Richard T. Andrias dissented, noting that the parties had negotiated a comprehensive settlement agreement under which they resolved all equitable distribution, custody, maintenance and support issues, with the husband, inter alia, assuming full responsibility for all tuition and education expenses and other statutory add-ons. Under these circumstances, enforcement of the room and board credit provision, pursuant to its unambiguous terms, does not run afoul of the public policy imperative with respect to child support. There was simply no basis for rewriting the parties’ comprehensive settlement agreement to the sole benefit of the wife.

Under the agreement, the husband was obligated to pay the wife $395,000 in equitable distribution and $1,500 per month in maintenance for five years, subject to specified contingencies. Section 8.5 of the agreement provided that the three older children would spend an equal amount of time with each parent. Nonetheless, the parties agreed in section 10.1 that the husband would pay basic child support to the wife in the sum of $2,500 per month for those three children (then 15, 17 and 18), for whom the wife was deemed the custodial parent. The parties also agreed in section 8.5 that the youngest child, then 9, would have primary custody with the husband. However, although the husband was deemed the custodial parent of that child, he waived any claims against the wife for child support. The husband was also obligated to pay 100% of the children’s health insurance, unreimbursed medical and dental expenses, school tuition, summer camp tuition, tutoring and therapy, and college tuition (subject to a cap based on the tuition at SUNY Binghamton).

Justice Andreas also noted that while the majority was concerned about the effect of the credit on the older children, the majority’s opinion disregarded the effect of its position on the youngest child, and on the husband’s ability to care for the older children. To Justice Andrias, this was not a traditional situation where the father saw the children only on weekends. Rather, here, the three oldest children were dividing their time equally between the parents, and the youngest lived primarily with the husband. Thus, the husband, like the wife, must also provide a home suitable for all of the children.

Questions: I have always thought the room and board credit was a someone deceptive concept. In essence, it simply means that the custodial parent is going to pay for the child’s room and board, at least up to the cap stated in the parties’ agreement.

Would the result here have been the same if the agreement had said just that: the wife shall pay the room and board expenses of the children at college? If expressed in that way, would this wife have agreed to pay all room and board expenses?

Should the cap on the credit be different for each child; $350.00 for the first; $688 for the second; $1,462 for the third; $0 for the fourth? Would the result have been any different if the parties had agreed to equal reductions upon the emancipation of each child, despite the 29%, 25%, 17% statutory formula?

Justice Andrias was his correct in his appreciation of the fact that we cannot know the minds of the parties. Exactly what was traded for what?

Stipulations of settlement thus present themselves like games of Jenga or Pick-Up-Sticks. Does a judge, or a party get to come along and remove one piece and disregard the impact on the entire tower of pieces or pile of sticks? If a court is going to void one provision of an agreement, should not a hearing be held on what the trade-offs were? Does a contract’s severability clause give the court the power to remove just one piece?

Should it matter that the wife was not receiving full formula support? Does the uncapped credit only violate policy when the parties have deviated from the formula?

Mark M. Holtzer, of Kanfer & Holtzer, of Manhattan, represented the husband.
Martin Friedlander, PC, of Manhattan, represented the wife.