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.Continue Reading “Clear and Beyond Doubt” is Burden of Proof for Correction of Mutual Mistake in Divorce Settlement Agreement

show your work 3.jpgShow your work.

Mistakes happen, and probably a lot more often than any of us matrimonial lawyers would care to admit.

We all make mistakes. I am happy to say that most mistakes are alleviated by collegial adversaries working together to put things right.

However, sometimes the spouse benefiting from the mistake in marital settlement agreement will not acknowledge that a mistake was made.

When that happens, the burdened party must ask the court to reform the agreement to correct the mistake. That party has a heavy burden.

The burden, however, becomes a lot easier to meet if the parties have shown their work.

Consider, the February 21, 2012 decision of Kings County Supreme Court Justice Jeffrey S. Sunshine in Hackett v. Hackett. The parties had entered a marital settlement agreement in January, 2006. The parties’ marital estate was itemized in a schedule annexed to the agreement. The agreement expressly provided that the husband was to pay the wife $19,336.40, “in order to equalize the allocation of marital property so as to arrive in an equal division.”

Included among the parties’ property was their marital residence, a Brooklyn home valued at $465,000.00 against which there were two mortgages totaling $195,124.00. When listing the assets being received by the wife, the marital residence was included at a value equal to its net equity of $264,447.00. Including this amount for net equity, the wife was to receive $557,442.00 in assets. From this the wife was to be take on marital liabilities of $195,124.00. Thus, the wife was receiving assets net of liabilities of $382,318.00.

The problem was that these liabilities were the very same mortgages totaling $195,124.00 which were subtracted from the home’s appraised value to result in the equity value of $264,447.00 stated for the marital residence. The mortgages were double-counted. Moreover, there was another simple math error. Subtracting the $195,124.00 in mortgages from the $465,000.00 appraised value of the marital residence should have resulted in the wife being charged with receiving net equity of $269,876.00, not the $264,447.00 which was stated as the net equity value of the marital residence being received by the wife. Thus, the wife was under-charged $5,429.00, in addition to having benefited from the double-subtraction of the mortgages.

Instead, the wife should have been charged with receiving $562,871.00 in net assets (the originally stated $557,442.00, plus the $5,429.00 math error, without the second deduction for the mortgages already taken into account). The husband was properly charged under the agreement with receiving $400,990.00. Thus, the wife received $161,881.00 more than the husband. In order to equalize the division of assets, the wife would have to pay to the husband one half of this amount, or $80,940.50. Here, the agreement as originally drafted with its mistakes ended up with the husband paying the wife $19,336.00. To correct the error, the wife would have to repay this $19,336.00, and on top of that pay the husband $80,940.50, for a total of $100,276.50.

Justice Sunshine provided the husband relief, reforming the agreement to require the wife to make the requested payment of $100,276.50. To do so, the court rejected the recommendation of the Referee to home the matter was referred to “hear and report.”Continue Reading Correcting a Mistake in a Divorce Settlement Agreement