August 30, 2005
Case Law Development: Reformation Unavailable as Remedy for Unambiguous but Inequitable Property Division Agreements in Family Court
Gorman v. Gorman, 2005 R.I. LEXIS 166 (August 26, 2005)
In what the Supreme Court of Rhode Island terms a "close and troubling case," the court reversed a trial court order reforming the terms of a settlement agreement in a dissolution action. Husband and wife negotiated an agreement regarding property distribution, which they requested the family court in their dissolution action approve. The agreement contained a provision that divided all of Husband's specified stock option plan from his employment through a QDRO. However, Wife was unaware that Husband's employment also included a separate stock bonus plan that could not be subject to a QDRO. Two months after the divorce was finalized and the court had approved that agreement, Wife moved for "clarification" of the agreement and to reopen the judgment under Rhode Island's relief from judgment rule.
The trial court found the agreement ambiguous, given the negotiations and understandings of the parties, and ordered that the agreement be reformed to divide all of Husband's stock according to the agreement.
The Supreme Court held that the trial court erred in finding the agreement ambiguous as the provision clearly identified the stock option plan that would be subject to division. The fact that Husband had an interested in a different stock bonus plan did not make the agreement ambiguous. The court noted that, were this an ordinary contract, that finding would end the analysis. In this case, it meant that reformation was not a remedy available to the family court.
However, the trial court was not outside its authority to refuse to enforce the agreement. "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." The appropriate approach, according to the court, would be for the family court either to have "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." It remanded for the trial court to proceed accordingly, in the "fervant hope" the parties would be able to reach a negotiated resolution. While noting that "we perceive no evidence of unethically sharp dealing on the part of defendant or his attorney," the court did caution to attorneys in general that, "it is incumbent upon parties seeking court approval of a proposed property settlement agreement to bring the salient features of the agreement to the attention of the Family Court justice."