The Second Department has imposed what may be an impossible burden of proof needed to correct a mathematical miscalculation (the alleged mutual mistake) in a divorce settlement agreement. That is the effect of the March 19, 2014 decision in Hackett v. Hackett.
After 22 years of marriage, the husband commenced an action for a divorce in 2005. A year later, the parties executed a written settlement agreement, which was incorporated, but not merged into their judgment of divorce.
Under the terms of the settlement agreement, the wife received the marital residence, which the parties estimated to be worth $465,000, and she assumed responsibility for repayment of a first mortgage and a home equity loan with combined outstanding balances of $195,124. The husband retained sole ownership of his restaurant business, which had an appraised value of between $360,000 to $385,000, but which the parties agreed to value, for purposes of their settlement, at only $325,000. The wife also agreed to waive valuation of the husband’s certification as a public accountant, which he acquired during the marriage. “Schedule A” to the divorce settlement agreement listed the dollar values of the assets being allocated to each party. The settlement “purportedly” [the Court’s word] equalized the division of assets by requiring the husband to pay the wife $19,336.
Approximately two years later, the ex-husband commenced this action, seeking to reform the settlement agreement on the ground that an alleged mutual mistake had resulted in the unequal division of the marital assets. He alleged that the settlement agreement contained a “computational error” on Schedule A. As a result the wife’s share of the marital assets was undervalued, resulting in a windfall to her in excess of $100,000. The husband maintained the expressed intent of the agreementcertain was to equally divide the parties’ assets.
The ex-wife denied that the calculation of marital assets set forth in the settlement agreement was a mistake in light of, inter alia, her assumption of all of the marital debt and the parties’ stipulation to undervalue the plaintiff’s business.
The Supreme Court referred the matter to a court attorney/referee to hear and report. After a hearing, the referee issued a report and recommended that the cause of action seeking reformation of the settlement agreement be denied.
The ex-husband then moved pursuant to CPLR 4403 to have the Supreme Court reject the referee’s report and recommendations. Kings County Supreme Court Justice Jeffrey S. Sunshine granted the ex-husband’s motion; the settlement agreement should be reformed. Justice Sunshine concluded that there had been a mutual mistake in calculating the value of the assets allocated to each party that undermined their intent to divide their assets equally. Based upon its determination, Justice Sunshine court required the ex-wife to pay the ex-husband $100,276.50.
The Second Department here reversed. The Court noted that marital settlement agreements are judicially favored and are not to be easily set aside. Although a mutual mistake by the parties may form the basis for reformation of a marital settlement agreement, “the mistake must be so material that . . . it goes to the foundation of the agreement.”
To overcome the heavy presumption that a deliberately prepared and executed written instrument manifested the true intention of the parties, evidence of a very high order is required. The party seeking reformation must show clearly and beyond doubt that there has been a mutual mistake, and must show with equal clarity and certainty the exact and precise form and import that the instrument ought to be made to assume, in order that it may express and effectuate what was really intended by the parties.
The Second Department held the ex-husband failed to meet this burden. He failed to prove that, as a result of a mutual mistake, the settlement agreement did not reflect the true intent of both parties with respect to the distribution of the marital estate. He also failed to prove that the precise form the agreement was intended to take would have required the wife to have paid her husband another $100,276.50. The burden on the husband was to prove that if the mathematical error not been made, the wife would have agreed to the exact same deal, except paying the husband another $100,276.50. This he failed to do.
According to the wife at the hearing, the settlement agreement met her expectation of being awarded title to the marital residence in exchange for her assumption of marital debt and relinquishment of her claims to the husband’ business, his certification as a public accountant, and spousal maintenance.
Further, the wife testified that she would not have entered into the agreement had she been aware that she would have been required to pay the plaintiff another $100,276.50 (in addition to the $19,336 she paid to equalize the agreement-stated values) to precisely equalize the assets allocated to each party.
Under these circumstances, the ex-husband did not meet his burden to show, “clearly and beyond doubt,” that the settlement agreement was the result of mutual rather than unilateral mistake. He failed to prove that the agreement must be reformed to require the ex-wife to pay him $100,276.50.
Comment: The burden of proof seems impossible to meet. To do so, it must be “clear and beyond doubt” that the beneficiary of an admitted mathematical miscalculation would have agreed to correct it. Here, that was negated by the wife simply saying, “I knew what I was getting and had the math been correct, I wouldn’t have agreed to the change needed to correct it. The husband could never prove the “precise form” the settlement would have taken had the mistake not been made.
Perhaps this result could have been avoided by a boilerplate provision that addressed errors of computation; or other language that isolated the distribution and then provided the method for any necessary correction. Triple-checking the math, or inserting into the settlement agreement a self-computing spreadsheet or table might also help. Once again, 50/50 hindsight . . . .