OPINION
Introduction
Robinson, Justice.
The parties to this appeal are former spouses, and the issue before us involves the Property Settlement Agreement that was drafted in connection with their divorce. The dispute centers around two separate stock plans in which the defendant husband was at all relevant times a participant by virtue of his status as an employee of a company called “NY-PRO, Inc.” In addressing the contentions of the parties, it will be necessary for us to consider some fundamental principles of contract law as they relate to the responsibilities and powers of the justices of the Family Court; and, in the end, our disposition of this appeal reflects our awareness of the peculiar status of contractual property settlement agreements that are submitted for the review and approval of the Family Court.
Facts/Travel
The plaintiff, Kathleen M. Gorman, and the defendant, Daniel W. Gorman, were married on ■ July 17, 1965, and they remained married for more than thirty-five years. The parties separated on or about January 3, 2002; and on February 12, 2002 plaintiff filed for divorce, stating that irreconcilable differences had led to the irremediable breakdown of their marriage. The defendant filed a counterclaim. Both parties were at all pertinent times represented by counsel.
A hearing was held before the Family Court on January 24, 2003, at which time the court heard testimony relative to both the complaint and the counterclaim. At the close of that hearing, the attorneys for the parties advised the court of their desire to memorialize in written form their agreement about the division of property. The court reserved decision and instructed the parties to submit a written agreement to the court.
Two weeks later, on February 7, 2003, the Family Court granted plaintiffs complaint and defendant’s counterclaim, and it granted the parties an absolute divorce on the statutory grounds of irreconcilable differences. On the same date, the Family Court also approved the written Property Settlement Agreement that had been submitted to the court by counsel for the parties.
The most pertinent provision of that Property Settlement Agreement is the following:
“11.
RETIREMENT, PENSION AND PROFIT-SHARING PLANS:
11.1 The NYPRO ESOP Employee Stock Option Plan * * * shall * * * be divided equally between the parties via a Qualified Domestic Relations Order (QDRO).”
On April 15, 2003 (ie., more than two months after the divorce had been granted and the Property Settlement Agreement had been approved), plaintiff filed a motion seeking “clarification” of both the Property Settlement Agreement and the “intent” of the parties with respect to the Property Settlement Agreement. The defendant objected.
Subsequently, on May 2, 2008, plaintiff filed a motion for relief under Rule 60(b) of the Family Court Rules of Procedure for Domestic Relations and a motion to modify the Property Settlement Agreement. The defendant also objected to both of these motions.
In the above-referenced motions, plaintiff asserted that, in addition to being a participant in the NYPRO employee
stock option plan
(“NYPRO ESOP”) which was specifically mentioned in paragraph 11.1 of the Agreement, defendant was also a participant in a NYPRO
stock bonus plan
(“NYPRO SBP”).
The plaintiff then argued that the parties had intended that the NYPRO SBP would be divided equally between the parties even though it was not expressly mentioned in paragraph 11 of the Agreement. This contention was based on what plaintiff alleged was her understanding that the divorcing parties had agreed upon a “fifty-fifty” division of
all
of defendant’s corporate stock holdings.
The plaintiffs Rule 60(b) motion additionally asserted that the Property Settlement Agreement as executed by the parties “contains terms that were based on or mistake of fact(s), inadvertence, misrepresentation(s) and/or fraud, as it relates to the disclosure and nature of certain assets held by the Defendant through his employer, Nypro, Inc.”
In his objections to these motions, defendant argued that the Agreement should be read literally and that the specific mention of the NYPRO ESOP in paragraph 11 implicitly excludes all non-specified plans from being treated as part of the Agreement.
The Family Court conducted a hearing on July 15, 2003 to resolve the dispute relative to paragraph 11 of the Agreement.
On August 20, 2003, the Family Court issued a bench decision about this matter. It found that there was an ambiguity in the Agreement with respect to the term “NYPRO ESOP Employee Stock Option Plan.” In so ruling, the Family Court stated that “paragraph 11 of the agreement is subject to different constructions, and [the Family Court] must clarify the subject factual ambiguity regarding the intentions of the parties.”
In reaching that conclusion, the Family Court justice took into consideration all of the negotiations between the parties as
well as the testimony of the parties at the hearings on January 24 and July 15, 2003. He found that plaintiff and defendant had intended that
all
of defendant’s NYPRO stock (including the NYPRO SBP stock) would be divided equally between the parties; and he further found that the parties were actually referring to
all
of defendant’s NYPRO stock when they used the term “NYPRO ESOP” in paragraph 11 of the Agreement. Specifically, the court stated:
“[T]hroughout the discovery process, defendant represented that the total number of stock holdings were either held in the, quote, Employer Stock Option Plan, close quotes, or generally held as NY-PRO stock * * *. Never at any time did the defendant specifically alert plaintiff to the fact he held considerable stock in his employee stock bonus plan.
“Therefore, the plaintiff would have had no reason to believe that by simply drafting paragraph 11 to read, quote, Employee Stock Option Plan, close quote, she was foregoing a substantial portion of the NYPRO stock.”
The Family Court found that it was clear from the transcript of the January 24, 2003 hearing both that plaintiff did not know that defendant held the NYPRO SBP and that the divorcing parties “intended all NYPRO stock to be distributed under the title, quote, Employee Stock Option Plan, close quote.” The court further found that, at the July 15, 2003 hearing on the Motion for Clarification, plaintiff repeatedly testified that she believed that all of defendant’s NYPRO stocks were held within the NYPRO ESOP.
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OPINION
Introduction
Robinson, Justice.
The parties to this appeal are former spouses, and the issue before us involves the Property Settlement Agreement that was drafted in connection with their divorce. The dispute centers around two separate stock plans in which the defendant husband was at all relevant times a participant by virtue of his status as an employee of a company called “NY-PRO, Inc.” In addressing the contentions of the parties, it will be necessary for us to consider some fundamental principles of contract law as they relate to the responsibilities and powers of the justices of the Family Court; and, in the end, our disposition of this appeal reflects our awareness of the peculiar status of contractual property settlement agreements that are submitted for the review and approval of the Family Court.
Facts/Travel
The plaintiff, Kathleen M. Gorman, and the defendant, Daniel W. Gorman, were married on ■ July 17, 1965, and they remained married for more than thirty-five years. The parties separated on or about January 3, 2002; and on February 12, 2002 plaintiff filed for divorce, stating that irreconcilable differences had led to the irremediable breakdown of their marriage. The defendant filed a counterclaim. Both parties were at all pertinent times represented by counsel.
A hearing was held before the Family Court on January 24, 2003, at which time the court heard testimony relative to both the complaint and the counterclaim. At the close of that hearing, the attorneys for the parties advised the court of their desire to memorialize in written form their agreement about the division of property. The court reserved decision and instructed the parties to submit a written agreement to the court.
Two weeks later, on February 7, 2003, the Family Court granted plaintiffs complaint and defendant’s counterclaim, and it granted the parties an absolute divorce on the statutory grounds of irreconcilable differences. On the same date, the Family Court also approved the written Property Settlement Agreement that had been submitted to the court by counsel for the parties.
The most pertinent provision of that Property Settlement Agreement is the following:
“11.
RETIREMENT, PENSION AND PROFIT-SHARING PLANS:
11.1 The NYPRO ESOP Employee Stock Option Plan * * * shall * * * be divided equally between the parties via a Qualified Domestic Relations Order (QDRO).”
On April 15, 2003 (ie., more than two months after the divorce had been granted and the Property Settlement Agreement had been approved), plaintiff filed a motion seeking “clarification” of both the Property Settlement Agreement and the “intent” of the parties with respect to the Property Settlement Agreement. The defendant objected.
Subsequently, on May 2, 2008, plaintiff filed a motion for relief under Rule 60(b) of the Family Court Rules of Procedure for Domestic Relations and a motion to modify the Property Settlement Agreement. The defendant also objected to both of these motions.
In the above-referenced motions, plaintiff asserted that, in addition to being a participant in the NYPRO employee
stock option plan
(“NYPRO ESOP”) which was specifically mentioned in paragraph 11.1 of the Agreement, defendant was also a participant in a NYPRO
stock bonus plan
(“NYPRO SBP”).
The plaintiff then argued that the parties had intended that the NYPRO SBP would be divided equally between the parties even though it was not expressly mentioned in paragraph 11 of the Agreement. This contention was based on what plaintiff alleged was her understanding that the divorcing parties had agreed upon a “fifty-fifty” division of
all
of defendant’s corporate stock holdings.
The plaintiffs Rule 60(b) motion additionally asserted that the Property Settlement Agreement as executed by the parties “contains terms that were based on or mistake of fact(s), inadvertence, misrepresentation(s) and/or fraud, as it relates to the disclosure and nature of certain assets held by the Defendant through his employer, Nypro, Inc.”
In his objections to these motions, defendant argued that the Agreement should be read literally and that the specific mention of the NYPRO ESOP in paragraph 11 implicitly excludes all non-specified plans from being treated as part of the Agreement.
The Family Court conducted a hearing on July 15, 2003 to resolve the dispute relative to paragraph 11 of the Agreement.
On August 20, 2003, the Family Court issued a bench decision about this matter. It found that there was an ambiguity in the Agreement with respect to the term “NYPRO ESOP Employee Stock Option Plan.” In so ruling, the Family Court stated that “paragraph 11 of the agreement is subject to different constructions, and [the Family Court] must clarify the subject factual ambiguity regarding the intentions of the parties.”
In reaching that conclusion, the Family Court justice took into consideration all of the negotiations between the parties as
well as the testimony of the parties at the hearings on January 24 and July 15, 2003. He found that plaintiff and defendant had intended that
all
of defendant’s NYPRO stock (including the NYPRO SBP stock) would be divided equally between the parties; and he further found that the parties were actually referring to
all
of defendant’s NYPRO stock when they used the term “NYPRO ESOP” in paragraph 11 of the Agreement. Specifically, the court stated:
“[T]hroughout the discovery process, defendant represented that the total number of stock holdings were either held in the, quote, Employer Stock Option Plan, close quotes, or generally held as NY-PRO stock * * *. Never at any time did the defendant specifically alert plaintiff to the fact he held considerable stock in his employee stock bonus plan.
“Therefore, the plaintiff would have had no reason to believe that by simply drafting paragraph 11 to read, quote, Employee Stock Option Plan, close quote, she was foregoing a substantial portion of the NYPRO stock.”
The Family Court found that it was clear from the transcript of the January 24, 2003 hearing both that plaintiff did not know that defendant held the NYPRO SBP and that the divorcing parties “intended all NYPRO stock to be distributed under the title, quote, Employee Stock Option Plan, close quote.” The court further found that, at the July 15, 2003 hearing on the Motion for Clarification, plaintiff repeatedly testified that she believed that all of defendant’s NYPRO stocks were held within the NYPRO ESOP.
The court found it “noteworthy” that, even though defendant was in the best position to distinguish the two stock plans, he nonetheless had allowed “the subject ambiguity to go unnoticed despite numerous opportunities to rectify the situation.” The court stated that it would be improper to reward defendant where he should have been aware of the misunderstanding and should have taken steps to clarify the matter. For these reasons, the court held that paragraph 11 of the Property Settlement Agreement should be construed as dividing equally
all
of defendant’s NYPRO stock, including both the NYPRO ESOP and the NYPRO SBP.
In accordance with the foregoing findings, on September 26, 2003, the Family Court entered an order directing defendant to transfer to plaintiff one-half of
all
the stock that he held by virtue of his employment with NYPRO, Inc., as of the date of execution of the Property Settlement Agreement.
A decision pending entry of final judgment was issued on that same date. This appeal followed the entry of final judgment.
Analysis
1. The Family Court’s Finding of Ambiguity
On appeal, defendant argues that the Agreement is unambiguous because it specifically references “the NYPRO ESOP Employee Stock Option Plan” and makes absolutely no mention of the separate and distinct NYPRO Stock Bonus Plan.
The Family Court has broad power to review and to decide whether to approve proposed property settlement agreements, given the special status that the law accords to agreements between spouses.
See Lecours v. Lecours,
792 A.2d 730, 731 (R.I.2002);
Bowen v. Bowen,
675 A.2d 412, 414 (R.I.1996).
The highly respected justice of the Family Court who presided over this case, in reconsidering the subject Agreement after one of the parties had sought “clarification,” was in fact acting on the basis of his statutorily conferred right and duty to oversee divorce proceedings. That oversight responsibility includes the authority to review the division of the marital assets pursuant to a property settlement agreement.
In the case of
Christian v. Christian,
42 N.Y.2d 63, 396 N.Y.S.2d 817, 365 N.E.2d 849, 855 (N.Y.1977), New York’s highest court succinctly summarized the special status that the law accords to contracts between spouses: “Agreements between spouses, unlike ordinary business contracts, involve a fiduciary relationship requiring the utmost of good faith.” We endorse and adopt that cogent statement of a principle that should govern the dealings of spouses who invoke the Family Court’s powers for the purpose of obtaining a divorce. As a result of the fundamental difference between ordinary business contracts and spousal agreements, family courts should and do monitor such agreements with special attention and with a concern for the equities of the situation.
When the Family Court considered the above-referenced motions that plaintiff filed several weeks after the absolute divorce had been granted, it in effect treated them as Rule 60(b) motions for relief from judgment and proceeded to take a close second look at the Property Settlement Agreement.
It was at that point that the Family Court realized that the Property Settlement Agreement did not represent the “fifty-fifty” approach that the Family Court had considered to be fair in view of both the length of the marriage and the other equitable considerations present in the record. After having considered these factors and the additional testimony,
the
Family Court justice determined that the Property Settlement Agreement was ambiguous on its face and also was inequitable and did not merit his continuing approval.
Although we fully understand the equitable concerns that motivated the Family Court justice, we must disagree with that aspect of his ruling that held the Agreement to be ambiguous.
We consider the Property Settlement Agreement to be an unambiguous contractual document. In particular, we find no ambiguity about the term “NYPRO ESOP Employee Stock Option Plan,” which is expressly referred to in paragraph 11.1 of the Agreement. The document clearly calls for division of the NYPRO ESOP, and it makes absolutely no mention of the NYPRO SBP.
But our holding as to the unambiguous nature of the language in the Agreement is not the end of the matter; we must now turn to the Family Court’s responsibilities when contractual agreements of this type are concerned.
What differentiates the contractual agreement at issue in this case (ie., the Property Settlement Agreement) from most contracts is that it was not immediately self-executing, as contracts usually are. Although the opposing parties in a divorce proceeding (and their attorneys) customarily negotiate the terms of the property settlement agreement with each other, the fruit of those negotiations (even if reflected in a completed and integrated and signed document as was the case here) is subject to review and approval by the Family Court.
See
G.L.1956 § 8-10-3(a)
(specifying that the Family Court has jurisdiction over “antenuptial agreements, property settlement agreements and all other contracts between persons who at the time of execution of the contracts, were husband and wife or planned to enter into that relationship”);
see also Bowen v. Bowen,
675 A.2d 412, 414 (R.I.1996). It is because of the special oversight duties of the Family Court with respect to property settlement agreements that we do not leave these parties to the terms to which they agreed in a formal written document.
If this were an ordinary contractual dispute, we would simply hold the Agreement to be unambiguous and would allow its provisions to be carried out as expressed in the written document.
But this is not an ordinary contractual dispute. Because the Agreement was drafted in the
context of a divorce proceeding, the validity and enforceability of such a contractual agreement between divorcing spouses must be analyzed differently from the way in which those aspects of an ordinary bilateral contract would be analyzed. Therefore, despite our finding that no ambiguity exists in the Agreement, we conclude that the Family Court, which, upon considering the motions filed by plaintiffs attorney, saw an inequity in the terms of the Agreement, acted logically in concluding that the Agreement ought not be enforced to the extent that it was inequitable. We must next decide whether the Family Court properly modified (ie., reformed) the Agreement in its effort to remedy this perceived inequity.
2. The Family Court’s Modification of the Agreement
The defendant argues that the Family Court was without legal authority to reform the Agreement. The defendant contends that, since a property settlement agreement which is not merged into the final decree of divorce retains the characteristics of a contract,
it can be modified only if both parties consent to the modification.
We agree with these contentions, which are based on settled law.
For a contract to be subject to judicial reformation, the court must first find a mutual mistake.
See Yates v. Hill,
761 A.2d 677, 680 (R.I.2000) (“To permit reformation of a contract, it must appear by reason of mutual mistake that the parties’ agreement fails in some material respect to reflect correctly their prior understanding.”);
Hopkins v. The Equitable Life Assurance Society of the United States,
107 R.I. 679, 685, 270 A.2d 915, 918 (1970) (“To warrant reformation it must appear that by reason of mistake, common to both parties, their agreement fails in some material respect correctly to reflect their prior completed understanding.”).
The Family Court, which did
not
find mutual mistake in this case, is subject to that same limitation.
Absent the consent of the parties or one of the recognized bases for reformation, the Family Court does not have the authority to reform or modify a contractual property settlement agreement that is incorporated by reference in (but not merged into) the final divorce judgment.
See Riffenburg v. Riffenburg,
585 A.2d 627, 680 (R.I.1991) (holding that “the judiciary is without authority to modify alimony in a nonmerged separation agreement”).
We have found the Property Settlement Agreement at issue to be unambiguous, and we see no evidence of
mutual
mistake. Therefore, reformation was not a remedy that was properly available to the Family Court.
In summary, we believe that the Family Court in this case had the power to
review
the Property Settlement Agreement and to withdraw its approval of the Agreement when it determined that the Agreement was inequitable. It did not, however, have the power to reform the Agreement so as to resolve what it perceived to be the inequitable nature of some of its terms.
The Family Court should have either directed the parties to negotiate a new Property Settlement Agreement for review and approval by the court or simply ordered the parties to proceed to trial.
Conclusion
In view of the fact that the Family Court found that the written document before it did not in fact reflect the “fifty-fifty” division that the justice considered to be equitable, we remand this case to that court with instructions to direct the parties to renegotiate and submit a new Property Settlement Agreement to the Family Court for its consideration. As was the right of either party prior to the execution of the Property Settlement Agreement that the court initially approved, both the plaintiff and the defendant retain the right to seek a trial if their further negotiations are unsuccessful. Having said that, we wish also to express the fervent hope that those negotiations will be successful.