A breach by one ex-spouse of a divorce settlement stipulation may or may not excuse a breach by the other. The obligations of the parties may or may not be independent.
In its July, 2019 decision in Lainez v. Orellana, the Appellate Division, Second Department, held that the answer could be found the clear and unambiguous language of the stipulation. The parties could have made the obligations interdependent; they did not. The obligations, then, were not dependent.
In the parties 2011 divorce settlement agreement, the husband agreed to transfer his interest in the marital residence to the wife, and the wife agreed to hold the husband harmless with respect to all mortgage payments and do everything in her power to remove his name from the mortgage.
Following the divorce, the wife continued to live in the marital residence. However, neither party performed his or her obligations under the settlement and the husband had made the post-agreement monthly mortgage payments.
In April 2016, the parties entered into a stipulation resolving the problems arising from their failure to perform under the 2011 settlement agreement.Under the 2016 stipulation, the wife became obligated to reimburse the husband the $20,424.90 in mortgage payments he had made. The husband was obligated to transfer the residence to the wife within 30 days; and the wife was obligated to remove the husband’s name from the mortgage on the property within four months.
The 2016 stipulation further provided that if the wife, after receiving notice that she was in default, remained in default on any provision in the stipulation for more than 10 days, then she would transfer her interest in the property to the husband, who would become the sole owner of the property.
Several months later, the husband moved to compel the wife to transfer her interest in the marital residence to the husband on the ground that the wife had not fulfilled her obligations under the parties’ agreements. Supreme Court Suffolk County Justice Carol MacKenzie denied the motion, finding that the husband had failed to fulfill his obligation under the agreements to transfer his interest in the marital residence to the wife, and, without that transfer, the wife was in no position to refinance the mortgage.
The husband subsequently sent a deed, transfer documents, and contract of sale to the wife’s attorney to be held in escrow pending the reimbursement of mortgage payments to the husband, as agreed to in the 2016 stipulation.
In May 2017, the husband moved to compel the wife to transfer the residence to the husband pursuant to the 2016 stipulation. The wife had failed to pay him as required under the 2016 stipulation; he sent the wife notice of her default; and the wife had not cured her default. The wife opposed the motion, arguing that the husband had not complied with his obligations under the parties’ agreements inasmuch as the deed he executed transferring the property to the wife was not notarized and, therefore, could not be recorded, thus preventing the wife from fulfilling her obligation under the 2011 settlement agreement to refinance the property and remove the husband’s name from the mortgage.
Justice MacKenzie denied the husband’s motion, finding that the husband had failed to transfer his interest in the marital residence to the wife. Although the wife failed to reimburse the husband for the mortgage payments he had made prior to the 2016 stipulation, Justice MacKenzie would not penalize her as the husband had failed to fulfill his obligations under the same agreement.
The husband appealed from so much of the order as denied his motion to compel the wife to transfer her interest in the martial residence to him. The Second Department reversed.
The appellate court noted that the terms of the 2016 stipulation were clear and unambiguous. As a result, Justice Mackenzie should have given effect to the parties’ intent based upon the plain meaning of the words used by the parties.
The 2016 stipulation called for the wife to transfer her interest in the residence to the husband if she defaulted on any provision of that agreement and did not cure the default within 10 days of receiving notice of her default. Here, the wife failed to reimburse him for the mortgage payments he made prior to the 2016 stipulation as required by that stipulation; the husband gave notice of that default to the wife; more than 10 days had passed since the wife’s receipt of notice; and the wife had not cured the default. Thus, the husband established that under the plain terms of the 2016 stipulation, the wife was obligated to deed the marital residence to the husband.
Contrary to the wife’s contention, neither of the parties’ agreements made her performance contingent upon the husband’s performance under the agreements. The Second Department held that to the extent that the wife argued that she could not perform under the agreements until the husband transferred his interest in the marital residence to her, the husband’s failure to timely transfer title to the wife was a foreseeable event and a provision could have been made for its occurrence, but was not. Moreover, the husband’s purported deficiencies in performance under the agreements did not prevent the wife from performing her obligation to reimburse him for the mortgage payments he made prior to the 2016 stipulation. Accordingly, the husband’s motion to compel the wife to transfer her interest in the marital residence to him should have been granted.
Sondra Harris, counsel for the husband, reports that the wife was supposed to pay $3,404.06 on the signing of the 2016 stipulation and for the five months thereafter. The wife made the one payment at execution of the stipulation and defaulted thereafter.
The timing of the payments makes it clear that refinancing the mortgage was not linked to the payment obligation. Moreover, as the Second Department held, the stipulation did not link the husband’s obligation to deliver a deed to the wife’s obligation to make payments. Indeed, the first payment was made at signing, before the husband’s obligation to deliver the deed arose 30 days after the signing of the stipulation.
Thus, the Second Department recognized that these obligations were independent of each other. The husband’s breach did not excuse the wife’s performance. Had the parties intended to link these obligations, they could have. They did not.
The lesson: the divorce settlement should clearly state which obligations are independent; which obligations must only be satisfied if prior obligations are met.