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DIVORCE 51: Holding that the trial court erred by denying plaintiff-ex-wife’s requested calculation of interest payments, the court vacated the ruling and remanded the case.

The Plaintiff and defendant were married in October 1994. Plaintiff filed for divorce on February 4, 2004, and the trial court entered a consent judgment of divorce on January 5, 2005. The judgment referenced a property settlement agreement, under which defendant was to pay plaintiff a certain sum of money over the course of 12 years. The agreement contained a payment schedule. In relevant part, the agreement provided as follows: Plaintiff is to be paid monthly installments of $1,000 dollars per month starting February 02, 2005 as principle [sic] and interest on the $175,000 balance which shall be accruing interest as a traditional mortgage note in the amount of 3.75% effective January 03, 2005. The trial court held an evidentiary hearing to determine how interest accrued on a “traditional mortgage note.” Both parties presented expert witnesses. The trial court found that, based on the plain language of the agreement and the testimony of the experts, the parties “likely intended to enter into a private loan that was to be repaid in the same way as a bank mortgage loan” and that the parties intended for interest to accrue “in the same way as a bank mortgage loan.” The trial court further found that defendant’s proposed calculation was inconsistent with the agreement and the testimony of the experts. However, the trial court concluded that because both experts agreed that the interest rate could not be calculated without a note, it was “impossible” for the trial court to calculate interest in the manner advocated by plaintiff. The trial court further concluded that it was required “to apply simple interest to the property settlement” because it was not permitted to “insert terms into a contract.” The trial court also noted that “there [were] equitable reasons why th[e] Court should not enforce the Plaintiff’s interpretation of the calculation of interest.” Specifically, the trial court concluded that because plaintiff had not enforced the provision in the agreement that required defendant to execute a mortgage note, it would be inequitable to adopt plaintiff’s interest calculation. The trial court applied defendant’s calculation of interest.

ANALYSIS

Plaintiff first argues that the trial court erred by sua sponte applying the defense of laches. We agree. “Equitable issues are [generally] reviewed de novo, including equitable defenses such as laches.” However, because plaintiff failed to raise this issue any time before the trial court, the argument is unpreserved. We therefore review for plain error. The trial court plainly erred by sua sponte raising a defense on defendant’s behalf and by applying laches. Furthermore, the error affected the outcome of the proceedings because the trial court’s decision not to adopt plaintiff’s theory regarding the calculation of interest was based in part on its conclusion that laches applied.

Next, plaintiff argues that the trial court erred by holding that it was required to apply defendant’s formula for calculating simple interest. We agree. “The primary goal in the construction or interpretation of any contract is to honor the intent of the parties.” “The language in the Property Settlement read in context is clearly what we would call a conventional or traditional mortgage[.]” One of the experts created an amortization schedule based on the language of the agreement, and the schedule was admitted into evidence. In this case, the language of the agreement specifically provided that the interest would accrue “as a traditional mortgage note.”  The trial court clearly erred by finding that both experts concluded that it was “impossible” to calculate interest without a mortgage note and erred in utilizing a simple interest rate calculation.  Further, because the record establishes that the manner in which defendant calculated simple interest is not the proper way to calculate simple interest, the trial court’s finding was clearly erroneous and therefore vacated, and the case is remanded.

ADVICE TO CLIENTS HAVING PROPERTY DIVISION ISSUES IN DIVORCE SETTLEMENTS

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