How.jpgIn its November 20, 2012 decision in Kang v. Kim, the First Department affirmed what appears to be an unwarranted interpretation of a divorce settlement marital residence buyout provision. In doing so, the appellate court yielded to the construction of the provision used by the “trier of fact” to resolve the ex=wife’s post-divorce motion to enforce the parties’ property settlement agreement.

That agreement gave the ex-wife the right to purchase the husband’s interest in the marital residence, a cooperative apartment. The clause provided:

If the parties are unable to agree as to the terms for such purchase within 30 days of the day that the Wife gave notice to the Husband then the value of the Husband’s interest (the ‘buy-out price’) shall be one half of the value of the apartment as determined by a Real Estate Appraisers [sic ] agreed to by the parties less the outstanding amount owed upon the First Mortgage.

The wife claimed that the provision was unambiguous. The price (“P”) she was to receive was one half of the value of the apartment (“V”) less the entire outstanding mortgage (“M”). The entirety of the mortgage was to be subtracted from the ex-husband’s half-share of the gross value.

Recalling math class from, oh, so many years ago, the wife successfully argued:

P = (V/2) – M

The husband had argued that the buyout price was half the value of the apartment less the wife’s one-half share of the outstanding amount of the mortgage. Mathematically, the husband argued:

P = V/2 – M/2

Thus, the husband asserted that the buyout price was one half of the equity in the apartment. This might also be written:

P = (V-M)/2

The First Department noted that the lower court, New York County Supreme Court Justice Matthew F. Cooper, found the provision “unambiguous.”

However, the First Department disagreed on the issue of ambiguity, nevertheless deferring to the construction used by the lower court. The appellate court found that:

upon examination of the settlement agreement in its entirety, and considering the relation of the parties and the circumstances under which it was executed, the agreement is ambiguous because the provision is reasonably susceptible of more than one interpretation.

Indeed, the First Department noted, the settlement agreement also provided that all marital property was to be divided 50/50 and that if the premises were sold to a third party, the “net proceeds of sale” were to be divided equally.

Continue Reading Drafting Formulas in Divorce Stipulations of Settlement: Use Examples and Math Concepts