Opinion
8350/02.
Decided March 25, 2005.
Harry Issler, Esq., New York, New York. Emanuel A. Towns, Esq., Brooklyn, New York.
This case is a cautionary tale to matrimonial law practitioners, and their clients, who believe that their cases have been resolved with a "framework-settlement", that is, one in which they place on the record in court the general terms of the parties' agreement, leaving for another day the completion of the unresolved details and the execution of a written agreement setting forth all the terms of settlement. Unless the parties explicitly agree to be bound by the terms of a "framework-settlement" placed upon the record subject to their execution of a full written agreement resolving their action containing terms not inconsistent with anything stated to be in agreement in court, that settlement is merely an unenforceable illusion.
I. FACTUAL AND PROCEDURAL BACKGROUND
In October 2002, shortly after the commencement of this matrimonial action, Acting Supreme Court Justice Fred L. Shapiro issued a pendente lite order which imposed certain financial obligations on plaintiff (the Pendente Lite Order). Thereafter, some pretrial discovery was exchanged, and on January 23, 2004 the parties appeared before Justice Mark C. Dillon and engaged in lengthy negotiations which concluded with their resolution of some of the issues in dispute. They then placed their agreement (the January Agreement) on the record in court.
Speaking for both parties, plaintiff's counsel made the following statement:
"It is hereby stipulated and agreed by and between the attorneys for the respective parties, with the consent of their respective clients, the plaintiff James M. White, Junior, and the defendant Theresa Mazzella-White, that the within action being the same, is hereby settled under the following terms and conditions: First: That this settlement is subject to the execution of a formal stipulation of settlement to be executed by the parties in a form suitable for filing of a deed[.]" (Pl. Affid., Exh.A, Tr., p. 2 [emphasis added]).
Plaintiff's counsel continued his recitation of the January Agreement, setting forth the parties' respective rights and obligations related to certain financial matters and some aspects of their disputes over custody and visitation.
Several times during counsel's recitation, he referred to provisions which would be included in the written stipulation.
Among the terms of the January Agreement were those which bound defendant to pay her share of the mortgage, real estate taxes, homeowner's insurance and utilities for the marital home, the camp expenses for one of their sons and the health insurance expenses for their other son. In addition, defendant was obligated to maintain a life insurance policy in the face amount of $500,000 for the benefit of the parties' children.
After plaintiff's counsel finished placing the terms of the January Agreement on the record, Justice Dillon conducted a voir dire of the parties concerning their understanding and acceptance of those terms. To the extent relevant, defendant provided the following responses to Justice Dillon's questions:
Both parties were questioned at the same time by Justice Dillon.
"THE COURT: You both have been in court with the attorneys and law guardian the last 45 minutes or so, and you heard the stipulation of settlement placed upon the record? MRS. WHITE: Yes. THE COURT: And you understand each of the terms and conditions that have just been placed upon the record? MRS. WHITE: Yes. THE COURT: You've had a chance to consult with your attorneys? MRS. WHITE: Yes. * * * THE COURT: Are you agreeing to the terms and settlements — and conditions of the settlement because you have each decided this is what you would like to do to resolve the case? MRS WHITE: Yes." (Pl. Affid., Exh.A, Tr., p. 22-23).
Despite this questioning, defendant was never expressly asked whether she consented to be bound by the terms of the January Agreement in the event that the parties did not resolve their other outstanding differences and execute a written settlement agreement.
After that voir dire, Justice Dillon conducted an inquest as to the grounds for the divorce. Just prior to concluding the proceedings, he stated for the record that "[t]he terms of the stipulation are incorporated but not merged into the judgment of divorce", and that "[t]he judgment of divorce is now granted" (Pl. Affid., Exh.A, Tr., p. 28). He then directed that "the proposed findings of fact, the written agreement and judgment be submitted to the Court by February 27th" ( id., p. 29).
Subsequently, the parties' efforts to enter into a written agreement as contemplated by the January Agreement were unsuccessful. During that time, defendant learned that in an application to refinance the mortgage on the marital home, plaintiff represented that he had an annual income of approximately $84,000, almost four times that which he had represented in his net worth statement. Claiming that plaintiff's fraudulent misstatement of his income during the negotiations had caused her to enter into the January Agreement, defendant sought to vacate that agreement.
On May 24, 2004, the parties appeared before Justice Dillon, at which time the alleged misrepresentation was discussed. During that appearance, Justice Dillon set a schedule for submissions by the parties as to the misrepresentation issue. Then he asked the parties: "What are we doing in the meantime as far as financial issues" (Def. Affid., Exh.A, Tr., p. 23). Plaintiff's counsel responded: "Here is what we are doing, judge. We are still bound to the constraints of Judge Shapiro's order of October 2002" ( ibid. [emphasis added]). After further colloquy, Justice Dillon stated: "I would like to impose upon the plaintiff the same obligations that Judge Shapiro had directed, and my reasoning is that to some degree . . . you created these problems by putting information on that form which are inconsistent with what was given in court" ( id., p. 25).
The parties later submitted their positions in writing in accordance with the schedule set by Justice Dillon. On June 29, 2004 Justice Dillon issued an order (the June Order) granting defendant certain discovery with respect to the fraud issue. To the extent relevant to the issues before this Court, Justice Dillon directed that: " Financial terms of the parties' settlement shall control monthly obligations in the interim, subject to adjustment in the event the Stipulation is vacated" (Pl. Affid., Exh.B, p. 3 [emphasis added]).
Subsequently, defendant failed to make various payments that she had consented to make under the January Agreement, and permitted her life insurance policy to lapse. Thereafter, on December 9, 2004, plaintiff presented an order to show cause to Justice Dillon, seeking to bring on a motion for a contempt adjudication against defendant and for related relief. Specifically, plaintiff alleged that in violation of the January Agreement defendant failed to make more than $24,000 in various payments and did not maintain her life insurance policy. After being served with plaintiff's order to show cause, defendant cross-moved for sanctions and for an order directing plaintiff to resume the payments that he was required to make under the Pendente Lite Order.
A contempt hearing was directed by Justice W. Denis Donovan, the Presiding Judge of the Matrimonial Assignment Part, and that proceeding was then assigned to this Court. At the commencement of the hearing, defendant argued that no contempt finding could be entered because there was no binding agreement under which she was obligated to pay any of the monies or maintain her life insurance policy, as plaintiff asserted that she is required to do. Because this Court concluded that it would be a waste of judicial resources to conduct a full contempt hearing until a determination of whether there was a valid settlement in effect which would support a contempt finding, it ordered the parties to submit in writing their positions on that limited issue. With those submissions and the parties' respective motion papers before this Court, the central issue involved in this contempt proceeding may now be decided.
The following papers numbered 1 to 27 were read on these cross-motions. PAPERS NUMBERED Order to Show Cause/Affirmation/Affidavit (Plaintiff) 1-3 Notice of Cross-motion/Affirmation/Affidavit (Defendant) 7-9 Reply Affidavit (Plaintiff) 22 Memorandum of Law (Plaintiff) 23 Memorandum of Law (Defendant) 24 Exhibits 4-6, 10-21, 25-27
II. CIVIL CONTEMPT
In order to prevail on his contempt motion, plaintiff must establish that a lawful order of the Court, clearly expressing an unequivocal mandate, was in effect, that the order has been disobeyed by defendant, and that he has been prejudiced by the offending conduct ( Matter of McCormick v. Axelrod, 59 NY2d 574, 583). Because plaintiff bears the burden of proving each of the elements of civil contempt ( Beverina v. West, 257 AD2d 957, 957 [3rd Dept. 1999]), unless he establishes that there was a lawful order in effect which required defendant to make the payments and maintain life insurance, which obligations are the bases for this motion, his contempt application fails as a matter of law ( see Guerriere v. Guerriere, 188 AD2d 583, 584 [2nd Dept. 1992] [Failure to make lease payments did not support contempt adjudication where the judgment of divorce "did not contain any provision requiring [husband] to continue payments for a specified period even if the lease were terminated"]).
Since this motion seeks relief pursuant to DRL § 245, plaintiff is also required to establish that resort to alternative remedies to a contempt adjudication would be ineffectual ( see Rosenblitt v. Rosenblitt, 121 AD2d 375 [2nd Dept. 1986]).
Certainly, a stipulation settling the issues in a matrimonial action is enforceable ( see DeJose v. DeJose, 104 AD2d 629, 630 [2nd Dept. 1984], affd. 66 NY2d 804 ["[O]n-the-record oral stipulations are binding and strictly enforceable"]). The question presented in this case is whether the January Agreement constitutes an enforceable stipulation or, as argued by defendant, was nothing more than "an agreement to agree" (Def. Mem., p. 6). The answer to that question involves the interrelationship of the law of civil contempt and the principles governing the binding effect of conditional settlements.
III. ORAL SETTLEMENTS
"It is well settled that open-court stipulations of settlement are judicially favored, and will not lightly be set aside" ( DeGregorio v. Bender, 4 AD3d 385, 386 [2nd Dept. 2004]). Although there is a difference in view as to the binding effect of open-court stipulations which settle financial issues in a matrimonial action, with the Third and Fourth Departments of the Appellate Division treating them as not complying with the requirements of DRL § 236(B)(3) ( Harbour v. Harbour, 243 AD2d 947, 949 [3rd Dept. 1997], lv. dismissed 92 NY2d 845; Hanford v. Hanford, 91 AD2d 829, 829 [4th Dept. 1982]), the First and Second Departments consider them to be wholly enforceable (Rubenfeld v. Rubenfeld, 279 AD2d 153, 159 [1st Dept. 2001]; Nordgren v. Nordgren, 264 AD2d 828, 829 [2nd Dept. 1999]). Because this Court sits in the Second Department, it must follow the rule that an in-court stipulation settling the financial issues in a matrimonial action is binding upon the parties ( Mountain View Coach Lines, Inc. v. Storms, 102 AD2d 663, 664 [2nd Dept. 1984] ["[T]he doctrine of stare decisis requires trial courts in this department to follow precedents set by the Appellate Division of another department until the Court of Appeals or this court pronounces a contrary rule"]).
Under DRL § 236(B)(3), "opting out" agreements must be "in writing, subscribed by the parties and acknowledged or proven in the manner required to entitle a deed to be recorded."
Relying upon this rule, plaintiff maintains that the January Agreement is a binding order because it was entered on the record in open court, thereby satisfying CPLR 2104 ( Kalomiris v. County of Nassau, 121 AD2d 367, 368 [2nd Dept. 1986] ["Under [CPLR 2104], an oral settlement between the parties or their counsel will be enforceable if made in open court"]). Building upon that contention, he asserts that defendant can only avoid the binding effect of the January Agreement if she can establish that it "was procured through fraud and misrepresentation" (Pl. Mem., p. 4). In his view, because defendant has failed to meet that burden, the January Agreement remains in effect as a valid order which will support a civil contempt adjudication.
CPLR 2104 provides, in relevant part, that: "An agreement between parties or their attorneys relating to any matter in an action, other than one made between counsel in open court, is not binding upon a party unless it is in a writing subscribed by him or his attorney or reduced to the form of an order and entered" (emphasis added).
Of course it is true "that an oral stipulation of settlement with respect to property issues in a matrimonial action, if spread upon the record and found to be fair and reasonable by the court, is not to be disturbed absent a showing of one of the 'traditional' grounds for vacatur, e.g., fraud, duress, mistake or overreaching" ( Harrington v. Harrington, 103 AD2d 356, 359 [2nd Dept. 1984]). It is also undisputed at bar that, to date, defendant has not established that her consent to the terms of the January Agreement was obtained through any misrepresentation made by plaintiff as to his income. In defense of the contempt motion, however, defendant does not rely upon a challenge to the validity of the agreement. Rather, her position is that no binding agreement was ever entered into by the parties. Consequently, plaintiff's arguments are irrelevant to the issue to be determined by this Court.
Notably, plaintiff's written submission to this Court avoids discussion of this core issue, i.e., the existence of a binding agreement.
IV. VIOLATION OF JANUARY AGREEMENT
Notwithstanding that the January Agreement complied fully with CPLR 2104, the fundamental question that remains is whether that oral stipulation was, in fact, an unconditional agreement entered into by the parties that may be enforced in a contempt proceeding. Two Appellate Court decisions support the conclusion that the January Agreement is unenforceable.
The first of these is Luisi v. Luisi ( 244 AD2d 464 [2nd Dept. 1997]), in which there was no in-court stipulation, but rather a written stipulation settling the action was executed by counsel for the parties. However, that stipulation "expressly provided that it was 'subject to' the agreement of the parties" ( id., at 465). As viewed by the Second Department, "by its very terms, the stipulation was not enforceable unless and until the parties executed a further stipulation" ( ibid.). Because the parties were unable to reach a formal agreement, that Court determined that "there was clearly no settlement" of the action, and that the defendant-husband was entitled to have his counterclaim restored to the trial calendar ( ibid.).
Even more on point is Giambattista v. Giambattista ( 89 AD2d 1057 [4th Dept. 1982]). In that case, the parties placed their divorce settlement on the record in open court, but they also "agreed that the judgment of divorce was to be signed after the[y] executed [a] property settlement" and, in fact, it was stated by the defendant-wife's counsel and the trial Court that "the settlement was not binding until reduced to writing and signed by the parties before a notary public" ( id., at 1057). When the defendant later refused to execute a transcript of the settlement as it had been placed on the record, the trial Court entered a judgment of divorce incorporating but not merging the settlement.
On appeal, the plaintiff-husband argued that the settlement was binding because it was made in open court. The Fourth Department rejected that contention, holding that while "[t]he court record may obviate Statute of Frauds objections and establish the terms of the settlement, the presence of a record cannot complete a settlement and make it binding upon the parties when they did not intend the terms to be final and binding" ( ibid. [emphasis added]). As explained by the Appellate Division, " [t]he record of these proceedings establishes that the stipulation was conditional and that the parties and the court did not intend it to be binding until formally executed by both parties" ( ibid. [emphasis added]). Thus, the in-court agreement was held to be unenforceable.
That Court also held that the agreement was unenforceable because an oral stipulation as to the property issues in a matrimonial action fails to comply with the "opting out" requirements of DRL § 236(B)(3).
In this case, as noted, when the January Agreement was placed on the record before Justice Dillon, plaintiff's counsel began his recitation of the parties' agreement with the statement that "this settlement is subject to the execution of a formal stipulation of settlement to be executed by the parties in a form suitable for filing of a deed" (Pl. Affid., Exh.A, Tr., p. 2 [emphasis added]). Just as in Giambattista, although the placing of the parties' stipulation on the record may obviate any Statute of Frauds challenge and may establish the specific terms of the settlement, it cannot create a binding agreement where none was intended.
As is apparent from the interpretation of the same limiting language as was used by the parties in Luisi, by agreeing that their in-court settlement was "subject to the execution of a formal stipulation of settlement", the parties at bar created a condition that was required to be satisfied before the in-court stipulation was binding upon them. Because defendant refused to sign the written agreement proposed by plaintiff, and no "formal stipulation" was ever executed, that condition was not satisfied, and consequently, "there [is] clearly no settlement" in this case ( see Luisi v. Luisi, supra, 244 AD2d, at 465; see also Novak Co., Inc. v. New York Convention Center Development Corp., 202 AD2d 205, 206 [1st Dept. 1994] [Reversing the judgment enforcing a stipulation entered into by the parties in open court, which was expressly conditioned on its approval by both the Attorney-General's Office and the New York Convention Center Development Corporation's Board of Directors, where the approvals upon which the stipulation was expressly conditioned were not obtained]). Based upon the determination that the January Agreement does not constitute a binding stipulation, even if it had been made part of a court order, there is no valid order in this case that will sustain a contempt adjudication against defendant ( see Giambattista v. Giambattista, supra, 89 AD2d, at 1057). Therefore, plaintiff's contempt motion is denied to the extent that it is based upon defendant's failure to comply with the January Agreement ( see Guerriere v. Guerriere, supra, 188 AD2d, at 584).
The Court notes that defendant has not raised, as a separate ground for concluding that the January Agreement is not enforceable, at least prior to the issuance of the June Order, the fact that there has been no showing that the agreement was ever "implemented by any order of the court", either in the form of a written order or a "so-ordering" of the agreement on the record ( see Gingold v. Gingold, 48 AD2d 623 [1st Dept. 1975] ["The provisions of the [parties'] agreement [which] were never implemented by any order of the [Family] [C]ourt . . . cannot . . . provide the basis for adjudication of contempt"]; see also Fuerst v. Fuerst, 131 AD2d 426, 427 [2nd Dept. 1987] ["The court's 'so order[ing]' the stipulation without objection, pursuant to the request of the father's attorney, dispensed with the necessity for a written order to be served with notice of entry"]). Because defendant has not raised this defect in proof, the Court does not address it.
V. VIOLATION OF THE JUNE ORDER
Perhaps recognizing that his position is problematic, as an alternate ground for a contempt adjudication, plaintiff asserts that defendant violated the June Order. In his view, because Justice Dillon directed that the "[f]inancial terms of the parties' settlement shall control monthly obligations in the interim", by failing to make the payments and maintain the life insurance as set forth in the January Agreement, defendant violated the June Order and must be held in contempt.
There can be no question that the June Order is a valid directive which may support a contempt adjudication. Nevertheless, Justice Dillon's directive that the parties comply with the obligations imposed upon them by the January Agreement merely brought them full-circle to the question faced by this Court, namely, what are their respective obligations under their agreement. Because this Court concludes that the January Agreement is a conditional settlement whose limiting condition was not satisfied, defendant has no obligations under that agreement, thereby rendering the June Order without effect as a foundation for a civil contempt adjudication ( cf. Coan v. Coan, 86 AD2d 640, 640-641 [2nd Dept. 1982], appeal dismissed 57 NY2d 608 [Where parties entered into stipulation settling action, order directing parties to comply with stipulation was enforceable in contempt proceeding]). Accordingly, the Court also denies plaintiff's motion for a contempt adjudication to the extent that it is based upon defendant's violation of the June Order ( see Guerriere v. Guerriere, supra, 188 AD2d, at 584).
VI. CROSS-MOTION
Having determined that the January Agreement does not support a contempt adjudication, the Court turns to defendant's cross-motion. On her motion, she asks for the imposition of sanctions against plaintiff and an order directing plaintiff to resume making the payments that he was obligated to make pursuant to the Pendente Lite Order.
As an initial matter, the Court does not agree with defendant that plaintiff's contempt motion was frivolous. Merely because an application is unsuccessful, does not mean that it is necessarily frivolous within the meaning of 22 NYCRR § 130-1.1(a) ( see Nassau County v. Incorporated Village of Roslyn, 218 AD2d 688, 689 [2nd Dept. 1995]). Here, there was certainly a meritorious issue with respect to the binding effect of the January Agreement. For that reason, this branch of the cross-motion is denied.
Under 22 NYCRR § 130-1.1(c), "conduct is frivolous if: (1) it is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law; (2) it is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or (3) it asserts material factual statements that are false."
Finally, defendant's application for an order directing plaintiff to comply with the Pendente Lite Order is academic. In view of this Court's determination that the January Agreement is not enforceable, the only valid order in existence which controls the parties' interim obligations is the Pendente Lite Order.
VII. CONCLUSION
It is a common occurrence in matrimonial litigation that the parties are able to resolve certain of the disputed issues while they are present for a conference or other appearance, but that given the fragility of their emotional states, that resolution may be lost if their agreement is not placed on the record before they leave court for the day. Indeed, it is an unfortunate reality in many matrimonial actions that settlements considered acceptable in a courtroom, even those reached after lengthy negotiations, are soon viewed in a different light after the litigants return to their homes and places of employment, only to have the terms scrutinized by others whose views call into question whether a party has been denied his or her equitable share of the marital assets. Thus, it is hardly surprising that counsel will often request that a Trial Court permit the parties to place a framework-settlement on the record which sets forth the agreement reached by them as to whatever issues have been resolved at that time.
In most of those instances the framework-settlement will be conditioned upon the execution of a written agreement. The problem, as typified by what occurred in this case, is that the parties leave court with nothing more than an illusion of a settlement. Unless they are true to their words and complete the settlement process by signing the contemplated written agreement, they are left with an agreement which cannot be enforced. The net effect is that they are no closer to a resolution of their divorce action than they were the minute that they arrived at court on the day their framework-settlement was read into the record.
At a time when judicial resources are severely strained, Judges can hardly afford to have their in-court time used for the purpose of creating the illusion of a settlement. Therefore, in the future this Court shall not accept a framework-settlement in a matrimonial action unless the parties agree that, whatever may occur after their settlement is placed on the record, they shall be bound to the terms of their in-court agreement, and nothing inconsistent with the terms of the in-court settlement shall be part of the written agreement. Only in that manner can this Court ensure that the parties have not wasted their time and money, and the Court's time and resources, by recording a settlement which is unenforceable, and thus, does nothing to advance the parties' goal of resolving their differences and moving on with their lives.
When they appeared before the Court on May 24, 2004, Justice Dillon stated to the parties and counsel: "Let me start by saying on the record how absolutely angry and annoyed I am that I'm seeing anybody on this case. You will all remember the enormous effort that was made to settle this case when you were last in court. You all also will remember that we put a stipulation of settlement on the record that must have taken close to an hour to get through, if not longer" (Towns Affirm., Exh.A., Tr., p. 2-3). In view of the limited time available to dedicate to the settlement of matrimonial actions during the court day, Justice Dillon's reaction to being informed that the parties' settlement had not been completed is understandable.
The foregoing shall constitute the decision and order of the Court.