scissors contract 2.jpgWhat happens when only one provision of an agreement is invalid because it violates some statute or public policy?  The answer may depend on who the court wants to benefit, instead of consistently-applied rules of contract law.

Take, for example the April 5, 2011 decision of the Second Department in Duggan v. Duggan.  In that case, the parties had resolved their divorce by a surviving February 26, 2009 stipulation of settlement. Under that stipulation, the father, who had gross income of $475,000.00, agreed to pay a base monthly child support obligation of $8,000.00.  That amount deviated from the presumptive amount under the Child Support Standards Act (C.S.S.A.) of $11,929.54. The mother had no income.

Apparently, the stipulation also had a provision which called for the reduction in the father’s monthly obligation in the event his income was reduced.

In 2010, the mother brought a Family Court enforcement proceeding when the father ceased making the payments to which he originally agreed. The father raised the stipulation’s modification provision, arguing that his $8,243.00 annual reduction in income to $466,757.00 entitled him to a $76,800.00 annual reduction in child support (to $1,600.00 per month)!

Finding that the father’s interpretation of the stipulation modification provision was “not plausible,” Nassau County Family Court Judge Julianne S. Eisman denied the father’s objections to the Order of Support Magistrate Tejindar S. Kahlon which granted the mother’s arrears petition. Finding that the language of the Stipulation, as interpreted by the father, would violate the C.S.S.A., and was against the best interests of the children, the modification provision was ignored.

On appeal, the Second Department affirmed, holding that the Family Court had the authority to find that a provision in a stipulation of settlement violated the C.S.S.A. The appellate court found that a provision which called for a reduction in child support to 13% of the presumptive C.S.S.A. amount, merely because the father’s income dropped by 1.7% was “against the best interests of the children.”

It is noteworthy that the appellate court did not quote the startling modification provision. Equally noteworthy is that there was no discussion of any interpretation of the modification provision other than the one the Family Court considered implausible.

In order to have obtained the Judgment of Divorce, it would have been necessary to have made the recitation in the stipulation of settlement that the parties had been made aware of the C.S.S.A. and its presumptive formula in their case. D.R.L. §240(1-b)(h).  The parties would have had to have stated the reasons they agreed to deviate from the C.S.S.A guidelines. Specific Findings of Fact would have been made by the Supreme Court upholding those reasons.

It is understandable that the presumed failure of the Supreme Court to review the specific modification provision might not estop the mother from later attacking that provision when it was sought to be applied. Thus, the form language of a divorce judgment that “the parties are directed to comply with every legally enforceable term and provision” of the agreement incorporated into the judgment, does not mean that every provision is, in fact, legally enforceable.

What then is, or should be the impact of rendering unenforceable only one provision of a settlement agreement?

For the purposes of this discussion, I will assume that the agreement had the rather routine “severability clause.” Such a clause provides that in case any provision of an agreement should be held to be contrary to or unenforceable or invalid under the law of any jurisdiction, such illegal, unenforceable, or invalid part of the agreement will be deemed separable from the other parts of the agreement. The other provisions will not be affected and shall continue in full force and effect.

New York’s highest court has stated that “whether a contract is entire or severable generally is a question of intention, to be determined from the language employed by the parties, viewed in the light of the circumstances surrounding them at the time they contracted.” Christian v. Christian, 42 N.Y.2d 63, 73, 396 N.Y.S.2d 817 (1977). Moreover, an explicit provision in a divorce agreement indicating that the doctrine of severability shall apply will be honored. Taft v. Taft, 156 A.D.2d 444, 548 N.Y.S.2d 726 (2nd Dept. 1989).

It would seem clear that the Duggans intended that it would not be necessary for Mr. Duggan to show substantial unforeseen circumstances before he would be entitled to a reduction in his base monthly child support obligation. Rather, the parties intended that such a result would flow from a reduction in his income.

While the particular modification formula may have unenforceable, are the Duggans to be left with an agreement which does allow for modification? Is it as if their agreement never had any modification provision at all?

In 2000, the Second Department in Toussaint v. Toussaint, 270 A.D.2d 338, 704 N.Y.S.2d 144, held that a college expenses provision of a settlement stipulation were so intertwined with the basic child support obligation, that the college provision would be invalidated when the entire child support provision was vacated for the failure to contain the C.S.S.A. recitation. The Court held:

The Supreme Court properly determined that since the stipulation failed to comply with Domestic Relations Law § 240(1-b)(h), those provisions of the stipulation relating to child support were invalid [citations omitted]. However, the remedy was to vacate only those provisions of the stipulation relating to child support, not to vacate the entire stipulation [citations omitted]. The provisions which must be vacated include those requiring the defendant to pay educational and health costs . . . .

However, in 2008 in Cimons v. Cimons, another case in which the Second Department invalidated the child support provisions of a divorce stipulation of settlement because the stipulation failed to recite the presumptive effect of the C.S.S.A., the Court let stand the parties’ provision on their contributions to the SUNY-capped college expenses (including tuition, room and board and other specified expenses) of the parties’ three children.  The provision included the obligation to make contributions beyond a child’s 21st birthday. Unlike in Toussaint, the Court in Cimons held that the contribution to college, although a potential C.S.S.A. add-on, was distinct from the parents’ basic child support obligations. In light of the father’s financial circumstances, the Court would not allow the father “to wield noncompliance with [the recitation requirements of] the CSSA as a sword to eviscerate his commitment to provide his children with support for their college education.” The Court held the college provision was “separate and discrete from the child support provision.” The two provisions were not closely intertwined. The college provision was enforceable.

More recently, in the 2010 decision of the Second Department in Levison v. Trinkle, the Court reached the opposite (?) conclusion. There, the pro se parties had entered a stipulation which did not contain the required C.S.S.A. recitation. The stipulation also obligated the father to pay 100% of the child’s college expenses. The Second Department, although citing Cimons, vacated the college provision, holding:

“Since the award of educational expenses is within the court’s discretion, it is frequently problematic to conclude that an agreement on college expenses deviates from, or opts out of, the CSSA. Nonetheless, a college expense provision might be found, under certain circumstances, to deviate from the CSSA, such as where an apportionment of costs, or the amount of support to be provided, is so unjust that the provision should be vacated for failure to satisfy the CSSA” (Cimons v. Cimons, 53 A.D.3d at 132, 861 N.Y.S.2d 88). Other issues to consider are whether the financial provisions are so intertwined that vacatur of one provision requires vacatur of another provision not directly connected with basic child support (id. at 129–131, 861 N.Y.S.2d 88). In the instant case, the parties did not distinguish between college tuition and other college expenses such as room and board, which are duplicative of basic child support [citation omitted], and there is nothing in the agreement separating the obligation to pay college expenses from the support provisions. It is thus apparent that the father’s obligations to support his daughter were so intertwined with each other that his obligation to pay college expenses should be vacated along with the basic child support award (cf. Cimons v. Cimons, 53 A.D.3d at 133, 861 N.Y.S.2d 88).

Whether provisions of an agreement are intertwined should not be a function of the numbering structure. A provision should not be allowed to remain because “he can afford it.” The courts do themselves a disservice when they make such arbitrary distinctions.

In Duggan, would the father have entered the base child support obligation without the modification provision? Should all the child support provisions have been vacated? The parties clearly contemplated modification of the base obligation on almost any change of circumstances. Accordingly, and despite the survival provisions of the agreement, should the child support provisions be deemed to have merged with the divorce judgment, allowing for modification more easily? Shouldn’t the court interpret and apply the agreement in the fashion which most closely approximates the intention of parties?