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DIVORCE 42: LANGUAGE IN THE PARTIES’ JUDGMENT OF DIVORCE WAS NOT AMBIGUOUS AND MUST BE INTERPRETED AS WRITTEN

BACKGROUND

This case arises out of the divorce of the parties.  The parties mediated a settlement and the Court entered a Judgment of Divorce based on that agreement.  The provision of the judgment on appeal concerns plaintiff’s redemption proceeds from restricted stock shares of his former employer. 

Plaintiff calculated defendant’s marital share of the proceeds by applying a proportional fraction to the total proceeds received in relation to the total time plaintiff owned the stock during the marriage over the duration of plaintiff’s ownership of the stock before it was redeemed; plaintiff then divided the marital share in half, and provided this sum to defendant. 

Defendant filed a motion to enforce the JOD regarding the property settlement, arguing that plaintiff violated the terms of the relevant provision relating to the division of plaintiff’s restricted stock redemption proceeds (i.e., paragraph 19 of the JOD) by failing to pay her 50% of the total redemption proceeds.  After a hearing on the motion, the trial court found that paragraph 19 of the JOD was ambiguous, and, after reviewing both parties’ evidentiary briefs and a portion of the transcript of the settlement agreement recording, found that defendant was entitled to 50% of the total redemption proceeds.  The trial court entered an order granting defendant’s motion to enforce JOD relative to property settlement.  This appeal ensued.

STANDARD OF REVIEW  

A consent judgment is in the nature of a contract, and is to be construed and applied as such.  The interpretation of a contract is a question of law reviewed de novo on appeal, including whether the language of a contract is ambiguous and requires resolution by the trier of fact.

ANALYSIS

Property settlement provisions in a divorce judgment are typically final and cannot be modified by the court.  Absent fraud, duress, or mutual mistake, courts must uphold divorce property settlements reached through negotiation and agreement of the parties.  A fundamental tenet of jurisprudence is that unambiguous contracts are not open to judicial construction and must be enforced as written.  When a court abrogates unambiguous contractual provisions based on its own independent assessment of ‘reasonableness,’ the court undermines the parties’ freedom of contract.  If a contract, however inartfully worded or clumsily arranged, fairly admits of but one interpretation it may not be said to be ambiguous . . . .

Plaintiff argues the trial court erred in its determination that the provision of the JOD relating to the division of plaintiff’s restricted stock redemption proceeds was ambiguous.  Plaintiff contends that paragraph 19 of the JOD plainly indicates that defendant’s marital share was to be calculated by applying a proportional formula.  That formula calculated defendant’s distribution of the proceeds on the basis of the duration of plaintiff’s ownership of the stock shares before the JOD was entered in relation to the duration of plaintiff’s ownership of the stock shares before the stock shares were redeemed (the “marital proceeds”).  Defendant would then receive one-half of the marital proceeds. 

The relevant JOD provision, while perhaps inartfully worded, is nevertheless unambiguous.  Paragraph 19 of the JOD states: Plaintiff is awarded his restricted stock in his employers company [sic] free and clear of any claim of Defendant. However, if said restricted stock is redeemed by the company pursuant to a certain Purchase Agreement dated 04/20/2011, Plaintiff shall pay Defendant 50% of any redemption proceeds based on the number of shares owned at the time of Entry of this Consent Judgment of Divorce and proportional to the number of years Plaintiff owned said stock while the parties were married and the total number of years Plaintiff owned said stock prior to said date of redemption. For the purposes of calculating this proportion, Plaintiff received said restricted stock on or about 04/20/2011.  

The JOD clearly indicates that plaintiff does not pay defendant 50% of the total proceeds, but rather an amount proportional to the duration of plaintiff’s ownership of the stock shares during and after the parties’ marriage.  Specifically, the JOD declares that plaintiff will pay defendant 50% of any proceeds on the basis of 1) the number of shares owned at a fixed point in time (i.e., the “number of shares owned at the time” the JOD was entered), and 2) proportional to the relative timeframe of plaintiff’s ownership of the stock during the marriage to the time he owned the stock before it was redeemed (i.e., “proportional to the number of years Plaintiff owned said stock while the parties were married and the total number of years Plaintiff owned said stock prior to said date of redemption.”).  

Defendant nevertheless claims that the ambiguity of paragraph 19 of the JOD is apparent because the parties disagree on the correct interpretation regarding the remainder of the paragraph, and notes that the trial court declared at multiple instances during the proceeding that it was ambiguous.  Yet a contractual term is ambiguous on its face only if it is equally susceptible to more than a single meaning, or if two provisions of the same contract irreconcilably conflict with each other.  Despite defendant’s assertions to the contrary, the latter portion of paragraph 19 of the JOD is not prone to more than one reasonable interpretation.  No other portion of the JOD affects, or otherwise relates to, plaintiff’s obligations to pay defendant a portion of the stock redemption proceeds.  The relevant language of paragraph 19 delineates that defendant will receive “50% of any redemption proceeds based on” the total shares owned at the entry of the JOD and “proportional to the number of years Plaintiff owned said stock while the parties were married and the total number of years Plaintiff owned said stock prior to said date of redemption.”  Use of the phrase “50% of any redemption proceeds based on . . .” designates that defendant will not receive 50% of the total redemption proceeds, but rather, 50% of the proceeds resulting from a calculation on the basis of the two listed inputs (i.e., the shares at the time the JOD was entered and proportional to plaintiff’s ownership of the stock shares before the divorce). 

This Court would need to ignore the latter half of the paragraph that designates defendant’s payment to be “proportional” to interpret paragraph 19 as defendant contends.  Courts cannot simply ignore portions of a contract . . . in order to declare an ambiguity.  Furthermore, courts must also give effect to every word, phrase, and clause in a contract and avoid an interpretation that would render any part of the contract surplusage or nugatory.  Defendant’s interpretation of paragraph 19 would leave the final sentence of the paragraph, which sets the date plaintiff received the stock shares as April 20, 2011, as surplusage.  Were defendant to receive 50% of the redemption proceeds of the 102,857 shares, regardless of when the shares were redeemed, the date at which plaintiff received the shares would be irrelevant.     The trial court, therefore, erred in its determination that the language of paragraph 19 of the JOD was ambiguous.  Because defendant does not assert that the JOD was formed on the basis of fraud, duress, or mutual mistake, the trial court was required to uphold the JOD as it was written. 

Therefore, the trial court erred when it concluded that paragraph 19 of the JOD, examined in conjunction with the settlement agreement, required a distribution of 50% of the total redemption proceeds to defendant.  Paragraph 19 of the JOD is not ambiguous and must be enforced as written. 

CONCLUSION

The trial court erred in its determination that the JOD was ambiguous.  The plain language of paragraph 19 of the JOD indicates that the redemption proceeds are to be calculated on a proportional basis, in relation to the amount of time plaintiff owned the stock while the parties were married and the total number of years plaintiff owned the stock before redemption. 

ADVICE TO CLIENTS FACING PROPERTY DIVISION ISSUES IN DIVORCE CASES

Aldrich Legal Services understands what a stressful time this is for you when you have assets that need to be divided in a divorce.

Aldrich Legal Services represent parties throughout southeast Michigan with a wide range of divorce related matters.

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