D.R. v M.R.
Annotate this CaseDecided on September 25, 2013
Supreme Court, Westchester County
D.R., Plaintiff,
against
M.R., Defendant.
3246-08
Neil VanderWoude, Esq.
Attorney for Plaintiff
Gerosa & VanderWoude
770 Farmers Mills Road
Carmel, New York 10512
David J. Whelan, Esq
Attorney for Defendant
17 Stillman Avenue
Pleasantville, New York 10570
Colleen Duffy, J.
This Decision addresses a plenary action commenced on April 23, 2012, by D.R. [*2]("Plaintiff"), seeking, inter alia, to rescind the terms of the parties' settlement agreement in a matrimonial action, and a motion brought by Order to Show Cause in the post-judgment matrimonial part on February 13, 2013, by M.R. ("Defendant"), in which he seeks dismissal of the plenary action and a declaratory judgment directing Plaintiff to comply with the terms of the parties' Judgment of Divorce, filed July 15, 2011 ("Judgment of Divorce"), and Separation and Property Settlement Agreement, dated July 21, 2010 ("Separation Agreement"), which was incorporated but not merged into the Judgment of Divorce.
As the issues in the Plenary Action and Defendant's motion in the Post-Judgment part are inextricably intertwined, this Decision addresses all matters.
I.PROCEDURAL HISTORY
The parties in this matter were married in the State of New York on June 5, 1993 and have three children.
In or around January or February 2008, Plaintiff commenced an action for divorce.
On July 21, 2010, the parties entered into a written Settlement Agreement that was later incorporated but not merged into the parties' Judgment of Divorce.
On April 23, 2012, Plaintiff commenced a plenary action by Summons and Verified Complaint, Index No. 2876-12, seeking: (1) rescission or reformation of the Settlement Agreement based upon repeated material breaches of the Settlement Agreement by Defendant; (2) rescission of the Settlement Agreement on the grounds of fraud in the inducement, fraud and forgery; or (3) rescission on the grounds that the terms of the Settlement Agreement were unconscionable (the "Plenary Action").
On February 5, 2013, Defendant moved, by Order to Show Cause in the post-judgment matrimonial part, under Index No. 3246-2008 (the "Post-Judgment Action"), for an order: (1) dismissing Plaintiff's complaint in the Plenary Action and (2) a declaratory judgment directing Plaintiff to comply with that portion of the Judgment of Divorce and Settlement Agreement requiring Plaintiff to deliver a deed conveying Plaintiff's right, title and interest in the premises at [], New York (the "Marital Residence").
On March 20, 2013, Plaintiff filed an Affidavit in Opposition to Defendant's Order to Show Cause in the Post-Judgment Action.
On or about April 5, 2013, Defendant filed the Reply Affirmation of David Whelan, Esq., attorney for Defendant, and exhibits thereto, in Reply to Plaintiff's Affidavit in Opposition.
II.CONCLUSIONS OF LAW
As an initial matter, the Court notes that the appropriate procedural mechanism to seek to set aside a settlement agreement made during marriage is a plenary action. Brender v. Brender, 199 AD2d 665, 666, fn2 (3d Dept. 1993)(action to challenge settlement agreement should be commenced by plenary action, rather than motion); Teitelbaum Holdings, Ltd. v. Gold, 48 NY2d 51, 55-56 (1979)(where prior action has been terminated, challenge to stipulation of settlement should be brought by plenary action). Plaintiff properly initiated a Plenary Action. [*3]
Because the Plenary Action to determine the validity of the Settlement Agreement should be determined before Defendant's motion for a declaratory judgment regarding certain terms of the Settlement Agreement is addressed, the Court necessarily addresses both proceedings in this Decision and Order.
With respect to Defendant's motion to dismiss the Plenary Action and obtain a declaratory judgment, for the reasons set forth below, such application is denied in part and granted in part. As set forth in Section A below, the Court finds that as there are issues of fact as to the validity of the Settlement Agreement, a trial is required and therefore Defendant's application for a declaratory judgment is denied.
A.Defendant's Motion to Dismiss Plenary Action
is Granted in Part and Denied in Part
As set forth below, Defendant's motion to dismiss the Plenary Action is granted as to the claims of fraudulent inducement, fraud, forgery, and rescission based upon breach, but denied as to dismissal of Plaintiff's other claims.
1.Defendant's Motion to Dismiss Plaintiff's Causes
of Action for Fraud and Forgery is Granted
Defendant's motion to dismiss Plaintiff's claims of fraud in the inducement, fraud and forgery for failure to state a cause of action is granted.
In determining a motion pursuant to CPLR § 3211(a)(7), the Court must
accept each of the factual allegations of the Verified Complaint as true and sustain the cause of action if it may be discerned, even if inartfully crafted. Fishbach & Moor, Inc. v. E.W. Howell Co., 240 AD2d 157 (1st Dept. 1997). A pleading is to be construed to allege whatever can be fairly implied from the facts. Nastasi v. Nastasi, 26 AD3d 32, 37 (2d Dept. 2005).
A claim for a cause of action sounding in fraud must include the following elements: (1) a material misrepresentation of an existing fact, (2) made with knowledge of the falsity, (3) an intent to induce reliance thereon, (4) justifiable reliance upon the misrepresentation, and (5) damages. Orchid Construction Corp. v. Gonzalez, 89 AD3d 705, 707 (2d Dept. 2011).
Here, Plaintiff has failed to allege any justifiable reliance on alleged misrepresentations by Defendant. In short, Plaintiff contends that the basis of the fraud is that she relied, to her detriment, on Defendant's purported failure to disclose certain "marital property . . . at the time of the parties' Settlement Agreement consist[ing] of $28,000 in a business account and shared ownership of at least one and as many as three real estate holdings." Verified Complaint, ¶ 10. The argument is absurd. There can be no real dispute that Plaintiff was aware of such purported assets (the business account, the cash in the metal box, the business and at least one real estate holding) at the time she entered into the parties' Settlement Agreement. Plaintiff's Affidavit In Opposition to Defendant's Order to Show Cause ("Plaintiff's Aff."), ¶¶ 6-11, 36-39, 44-45. Her own knowledge and awareness of the existence of those very assets she now claims Defendant failed to disclose defeats any fraud claim. NM IQ, LLC v. OmniSky Corp., 31 AD3d 315, 316 (1st Dept. 2006)(where plaintiff received independent analyst [*4]report of defendant's need for capital, reliance upon defendant's representation that it had sufficient capital was unreasonable), app. denied, 2006 NY App. Div. Lexis 12559 (1st Dept. 2006), app. denied, 8 NY3d 804 (2007); AIX Partners I, LLC v. AIX Energy, Inc., 2013 NY Slip Op. 32003U, *8 (Sup. Ct., New York Co. 2013)(plaintiff's actual knowledge of facts defeated claim for fraud in the inducement as a matter of law). Accordingly, Plaintiff's claim that she relied to her detriment on Defendant's failure to disclose such assets, cannot lie. Kalivia Food Corp. v. Hunts Point Co-op Market, Inc., 244 AD2d 460, 460 (2d Dept. 1987)(failure to show justifiable reliance is fatal to claim for rescission based on fraud).
Plaintiff's fraud claims also fail to sufficiently detail the allegedly fraudulent conduct to permit a reasonable inference of the alleged conduct, as required by CPLR § 3016(b). Sargiss v. Magarolli, 12 NY3d 527, 530 (2009).
Plaintiff's bald assertions, without more, that certain real property that Defendant held jointly with his family was concealed or disposed of by Defendant a few months before the divorce action was filed, after Defendant had learned that Plaintiff had consulted an attorney about a divorce, also are insufficient for a fraud cause of action. Plaintiff also has failed to allege any facts or submit any documentary evidence to support her contentions that Defendant forged her signature on documents and authorized bank transactions that required her signature. Such causes of action for fraud and forgery cannot lie. Other than citing an address or the name of the business
in response to Defendant's Bill of Particulars, Plaintiff has wholly failed to allege any facts with any specificity that would support such causes of action pertaining to these claimed assets. Indeed, Plaintiff has not even alleged when such purported assets which Defendant owned jointly with his family became marital property, or how they were transferred. Plaintiff's conclusory allegations, without any factual basis, fail to meet the statutory requirement that a cause of action in fraud be pleaded with particularity. Greschler v. Greschler, 51 NY2d 368, 375 (1980); Rubin v. Rubin, 33 AD3d 983, 985-86 (2d Dept. 2006). See Verified Complaint, ¶¶ 33-45.
Plaintiff's own admitted knowledge of assets she claims were marital that Defendant failed to disclose, together with her failure to plead specific facts to allege the elements of fraud are fatal to her claim of rescission of the Settlement Agreement on these grounds. Accordingly, Defendant's motion to dismiss Plaintiff's causes of action on the basis of fraud in the inducement, fraud and forgery is granted.2.Defendant's Motion to Dismiss Plaintiff's Claim for
Rescission Based upon Unconscionability is Denied
With respect to Plaintiff's claim seeking rescission of the contract on the grounds that the terms of the Settlement Agreement are unconscionable, Defendant's motion to dismiss is denied.
New York State has a strong public interest in marriage and takes a supervisory role in matrimonial affairs. Cioffi-Petrakis v. Petrakis, 103 AD3d 766, 766 (2d Dept. 2013), citing Kessler v. Kessler, 33 AD3d 42, 45 (2006). Agreements between spouses "are closely scrutinized by the courts, and . . . are more readily set aside in equity under circumstances that would be insufficient to nullify an ordinary contract."
Petracca v. Petracca, 101 AD2d 695, 698 (2d Dept. 2012), quoting Levine v. Levine, 56 NY2d 42, 47 (1982); Cioffi-Petrakis at 466 (agreements affecting matrimonial issues [*5]have been subjected to limitations and scrutiny beyond that of other contracts).
Relief from an agreement between spouses will be granted if the agreement is manifestly unfair to one spouse because of the other's overreaching. Christian v. Christian, 42 NY2d 63, 72-73 (1977); Petracca, 101 AD3d at 698. A contract will not be enforced if the inequality of the bargain is so strong and manifest as to shock the conscience. Pennise v. Pennise, 120 Misc 2d 782, 788-89 (Sup. Ct., Nassau Co. 1983)(allegations that wife gave up her livelihood and her home and got nothing in return, and was not represented by counsel, raises strong inference of overreaching and unconscionability); Christian, 42 NY2d at 71-72.
Here, Plaintiff's claims that Defendant transferred or disposed of certain marital assets upon his learning of Plaintiff's desire for a divorce, to circumvent any claim Plaintiff may have had to such property, including real property and cash, if true, would constitute a basis for setting aside the parties' Separation Agreement on the grounds of unconscionability. The Court notes that the parties' Settlement Agreement, including the division of the marital property between the parties, is silent about any such assets. Thus, if such assets did exist as marital property, Plaintiff received no consideration whatsoever for relinquishing any claims to such property.
Moreover, irrespective of Plaintiff's claims of Defendant's purported transfer of and the disappearance of claimed marital property, the Settlement Agreement appears to be unfair on its face. The Settlement Agreement provides, in relevant part, as follows:
ARTICLE 4
REAL PROPERTY
B.It is stipulated and agreed that in consideration of the entire sum contained in the Teamsters Local 456 annuity fund, which was $76,268.34 as of March 31, 2010 and shall remained untouched by [Defendant] pending disbursement to [Plaintiff], [Plaintiff] shall deliver a deed conveying her right, title and interest in the aforesaid premises to [Defendant]. . . .
***
ARTICLE 5
AUTOMOBILES
B.[Defendant] shall have and keep as his own the 1973 Ford Mustang automobile currently in his possession, and [Plaintiff] hereby relinquishes any claim that she may have to same. . . .
***
ARTICLE 7
MAINTENANCE AND SUPPORT
B.[Defendant] shall pay to [Plaintiff], as and for [Defendant's] obligation toward support of the Children, the sum of $300.00 per month, allocated in accordance with the Child Support Standards Act, until the Children shall become [*6]emancipated.
(a)the Children of the marriage entitled to receive parental support are: [ ] . . . [ ] . . . ; and [], . . .
***
(e)[Defendant's] basic support obligation is $6261.01 per year;
***
(g)Taking in to account the social security disability payments received by the children, [Defendant] shall pay to [Plaintiff] $300.00 per month for statutory support of the three children of the marriage.
Settlement Agreement, Articles 4, 5 and 7.
The parties' Settlement Agreement contemplates that, with respect to equitable distribution, Plaintiff was to receive the entire value of a Teamsters Local 456 annuity fund ("Teamsters Fund"), which was $76,268.34 as of March 31, 2010,[FN1] in exchange for conveying to Defendant her right, title and interest in the Marital Residence which she contends had marital equity of approximately $220,000.00 (to which she was entitled to half). Plaintiff also relinquished any claim she may have had to a 1973 Ford Mustang which she claims has a value of $10,000.00-15,000.00. Moreover, Plaintiff agreed to accept child support for the parties' three minor children in the amount of $300.00 per month although, under the CSSA calculations set forth by the parties in the Settlement Agreement, Defendant's annual child support obligation, on an income of approximately $21,571.00 is $6261.01 per year.[FN2] Pursuant to the parties' Settlement Agreement, [*7]Defendant also is obligated to pay one third (1/3) of the Subject Children's unreimbursed medical costs.[FN3]
With respect to equitable distribution, according to the amounts asserted by Plaintiff, she relinquished her interest in the Marital Residence of approximately $105,000.00 plus her share of whatever the value was of the 1973 Ford Mustang. In exchange, the only consideration which Plaintiff received was the portion of the Teamsters Fund to which the Defendant would otherwise have been entitled. That consideration has not been valued by the parties or the Settlement Agreement. There can be no dispute that, to the extent that any or all of the funds in the Teamsters Fund is marital property, Plaintiff's interest in that marital property is not consideration. As neither party has indicated whether all or some portion of the Teamsters Fund constituted marital property and the parties' Settlement Agreement also is silent on this point, the Court cannot ascertain the value of the consideration received by Plaintiff. If most or all of the funds in the Teamsters Fund were marital property, then the actual consideration Plaintiff received was significantly less than that which Defendant received, to wit, Plaintiff's equity in the Marital Residence and the Ford Mustang.
In addition, Plaintiff's contentions that an ex parte communication to her by Rene Matola, Esq., Law Secretary to the Honorable Bruce Tolbert, Supreme Court Justice, advising Plaintiff to accept the terms of the Agreement constituted duress causing her to agree to the terms of the parties' Settlement Agreement, if true, also may be a basis for rescission of the Settlement Agreement on the grounds of unconscionability. See Yuda v. Yuda, 143 AD2d 657, 659 (2d Dept. 1988)(improper pressure from court to settle case contributed to appellate court's finding of unconscionability); Schunk v. Schunk, 84 AD2d 904, 904 (4th Dept. 1981)(court should not act as a lever to exert undue pressure on litigants to settle, particularly in divorce cases; stipulation rescinded). According to Plaintiff, during a settlement conference between the parties and counsel with Ms. Matola, Defendant became upset and, when he and his attorney stepped outside the room, Ms. Matola proposed that Plaintiff accept the full retirement fund in lieu of her share of the house. Plaintiff's Aff., ¶¶ 48-65.
Pursuant to the terms of the Settlement Agreement, Plaintiff agreed to give up her rights to what appears to be the single largest asset of the marriage, the Marital Residence, as well as her rights in a vintage car, and received, in exchange, [*8]Defendant's interest in the Teamsters Fund, which may be less than half the value of Plaintiff's interest in the Marital Residence. Petracca, 101 AD2d at 698 (wife demonstrated that terms of agreement were manifestly unfair given the nature and magnitude of rights she waived, giving rise to inference of overreaching); Pennise, 120 Misc 2d at 788-89; Christian, 42 NY2d at 71-72.
In short, Plaintiff has alleged concealment and transfer of marital assets by Defendant as well as an ex parte communication from the trial Judge's court attorney urging her to accept the terms, and, according to Plaintiff, the Agreement itself is unfairly lopsided in favor of Defendant. Any one of such allegations, if true, would permit this Court to find that it would be unconscionable to enforce the Settlement Agreement.Pennise, 120 Misc 2d at 788; Yuda, 143 AD2d at 659.
3.Defendant's Motion to Dismiss Plaintiff's Application for
Rescission on the Grounds of Repeated Breach is Granted
Although Plaintiff may seek to proceed on a breach of contract claim, the Court grants Defendant's motion to dismiss Plaintiff's claim for rescission on the grounds of breach of contract.
Rescission for a breach of contract is an extraordinary remedy that is only appropriate when the breach is material and willful or so substantial and fundamental that the breach goes to the root of the parties' agreement, frustrating the entire contract. Lenel Sys. Intl. v. Smith, 106 AD3d 1536, 1538 (4th Dept. 2013), citing Callanan v. Keeseville, Ausable Chasm & Lake Champlain R.R. Co., 199 NY 268, 284 (1927). When the failure to perform does not go to the root of the contract, rescission is not an appropriate remedy. Rosenwasser v. Blyn Shoes, Inc., 246, NY 340, 348 (1927);Berit Realty, LLC v. Vortex Group, Inc., 2009 NY Slip Op. 31677U, 2009 NY Misc. Lexis 5387, *24-25 (Sup. Ct., New York Co. 2009); Morgan Stanley v. Discover Fin. Serv., 26 Misc 3d 1215A, 2010 NY Misc. Lexis 119, ***11-12 (Sup. Ct., New York Co. 2010).
Here, even if Defendant has repeatedly breached the parties' Settlement Agreement by failing to consistently pay monthly child support and failing to reimburse Plaintiff one third(1/3) of the unreimbursed medical expenses for the Subject Children, rescission of the entire agreement is not warranted.
The Settlement Agreement between the parties encompasses far more than the child support and "add on" obligations of Defendant to Plaintiff. The Settlement Agreement delineates the parties' rights and obligations vis a vis the division of assets and debts, bank accounts, stocks and bonds, as well as custody and visitation of the Subject Children. Thus, any breach by Defendant of his payment obligations, even if persistent, could not be said to be so fundamental as to frustrate the heart of the Settlement Agreement. Berit Realty, LLC, 2009 NY Misc. Lexis 5387, *24-25; Morgan Stanley., 2010 NY Misc. Lexis 119, ***11-12 (where alleged breach relates to only one provision of extensive agreement, and no showing that it goes to the root of the agreement, no rescission).
The Court also notes that the Settlement Agreement expressly provides that "[e]ach of the respective rights and obligations of the parties hereunder shall be deemed independent and may be enforced independently, irrespective of any other right and obligations set forth herein." Settlement Agreement, Article 16. Accordingly, [*9]there can be no real dispute that the parties intended that each of the provisions of the Agreement could operate independent of the others such that no one clause or provision would constitute the root of the contract.
B.Plaintiff is Entitled to a Trial on the Issue of Whether the
Stipulation of Settlement Should be Rescinded or Reformed
For the reasons already articulated by this Court (see Section II.A.2, supra), Plaintiff is entitled to proceed on the issue of whether the Settlement Agreement should be rescinded or reformed. Haberman v. Wright, 121 AD2d 187, 189 (1st Dept. 1986)(where factual issues exist as to whether agreement should be rescinded, trial court must resolve the issue); Metzendorf v. 130 West 57 Co., 132 AD2d 262, 266 (1st Dept. 1987)(where papers submitted on cross motions raise factual issues regarding the actual agreement, such issues may only be resolved at trial). Accordingly, Defendant's application for a declaratory judgment requiring Plaintiff to comply with those portions of the Judgment of Divorce and Settlement Agreement that require her to deliver a deed conveying her right, title and interest in the Marital Residence to Defendant is denied, without prejudice to Defendant's right to renew the application at the conclusion of the trial.
A conference is scheduled before this Court on October 15, 2013, at 9:30 a.m., to address the issue of discovery, if any. Upon completion of discovery, a trial will be ordered.
The Court considered the following in deciding the motion: Summons and Verified Complaint, filed under Index No. 2876-12, on April 23, 20112; Order to Show Cause, and Affirmation of David J. Whelan, Esq., in Support of Motion, filed February 28, 2013; Affidavit of D.R. in Opposition to Order to Show Cause, filed March 20, 2013; Reply Affirmation of David J. Whelan, Esq., in Reply to Opposition to Order to Show Cause, filed April 5, 2013.
This constitutes the Decision and Order of the Court.
Dated: White Plains, New York
September 25, 2013 __________________________COLLEEN D. DUFFY
Justice of the Supreme Court
Footnotes
Footnote 1: Article 20 "Pension/Retirement Benefits" of the parties' Settlement Agreement also sets forth the parties' agreement as to the appropriate division of their respective retirement/pension accounts, carving out an exception for the Teamsters Local 456 Pension, which was to be distributed in its entirety, at least with respect to its value as of March 31, 2010, to Plaintiff. The Settlement Agreement mandates that each party is responsible for the cost and expense of a Qualified Domestic Relations Order for his/her respective share of the other party's qualified monies. Settlement Agreement, Article 20, ¶¶ B and C.
Footnote 2: With respect to child support, the Settlement Agreement provides, in relevant part, as follows:
C.(1) The parties hereto each warrant and represent that they are familiar with the provisions of the Domestic Relations Law Section 240 (1-b) statutory provision commonly known as the Child Support Standards Act of 1989 . . . and are aware that an award of child support in accordance with DRL Section 240(1-b) would be based on the following considerations:
****
(b) the income of [Plaintiff], who is the custodial parent, is approximately $31,0876.76 per year;
(c) the income of [Defendant], who is the non-custodial parent, is approximately $21,571.00 per year;
(d) the applicable child support percentage is 29%;
(e) Defendant's] basic support obligation is $6261.01 per year;
(f) The basic child support obligation as defined in DRL Section 240 (1-b) presumptively results in the correct amount of child support to be awarded; . . .
Footnote 3: With respect to medical coverage, the parties' Settlement Agreement provides, in relevant part, that:
[Plaintiff] will be responsible for two-thirds and [Defendant] will be responsible for one-third of any and all of the Children's health care expenses which are not covered by insurance, including but not limited to, hospital expenses, doctor expenses, pharmaceutical expenses, dental expenses, orthodontia expenses, psychiatric expenses, psychological expenses, mental health care expenses, optometric expenses and ophthalmologic expenses.
Settlement Agreement, Article 21.
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