DIVORCE JUDGMENT LANGUAGE
On April 7, 2011, the Michigan Court of Appeals decided a case that dealt with the interplay of the real estate market collapse and judgments of divorce. In the case of Neill /f/k/a Schmoke v Schomke, Docket No. 294878, unpublished, the husband agreed in the consent divorce judgment to a provision where he would pay his wife the amount of $1,074,000 for her share of the value of the marital home upon the sale of the home or after five years from the entry of the judgment. Further, the judgment stated that this sum would become a money judgment after five years.
COLLAPSE OF THE REAL ESATE MARKET
The house did not sell, not only that, the Defendant lost the home in foreclosure before the expiration of the five year period. His former wife then executed upon the money judgment and sought payment of the $1,074,000. The reality of the situation is that the real estate market in Michigan collapsed and most people, regardless of their intelligence, did not foresee the devastating extent of this collapse. The defendant in this case is a doctor and a well-educated and intelligent person whom like most here did not foresee this collapse.
The trial court took this problem into consideration and decided basically that due to the collapse of the real estate market that it would not be fair to force the Defendant to pay this full amount. The flip side of this argument whether it is fair to the ex-wife in this situation where she bargained for and contracted for an exact amount of money for her share of the home.
IMPORTANCE OF THE SPECIFIC LANGAUGE IN THE DIVORCE JUDGMENT
The Michigan Court of Appeals reversed this decision. The court paid a lot of attention to the exact wording of the judgment which stated that the amount due would become a money judgment. The appellate court found that due to this specific language particularly that after five years the amount would become a money judgment, the judgment was not subject to modification except in very limited circumstances.
The appellate court decided that it would be more unfair to the ex-wife to modify the amount of money due to her from the ex-husband as they both made a strategic decision to settle the matter and that he should not be relieved from his bad decision merely because his assessment of the consequences was incorrect. So it would appear that the court held the Defendant to his bad bargain and looked more to contract law in enforcing the judgment than it did to the traditional equitable or fairness arguments that would otherwise control in a divorce matter.
One last note of interest in the decision itself, was that the trial court believed the collapse of the real estate market in Michigan was an extraordinary circumstance that should allow revision of the judgment, the appellate court stated that while the “downturn was unfortunate” it could not be characterized as “entirely unforeseeable or extraordinary”. So despite the fact that it appears the extent of the collapse of the market is historically unique in this part of the country, the court still decided that people should have somehow been prepared for this potential when drafting the judgment of divorce.
COMPARE TO PRENUPTIAL AGREEMENTS
The court treated this judgment the way that the courts appear to be treating prenuptial agreements. The court favors enforcing the contractual provisions without attempting to balance the equities of the situation. Just as the courts have strongly trended toward enforcement of prenuptials as written without attempting to rebalance the equities between the parties, so here the court held the defendant to his bargain without attempting to rebalance the burden between these parties. Ten years ago, it is my belief that the outcome of this case would have been different and that this is an example of the ascendancy of contract law in the area of matrimonial law.
LESSONS LEARNED
There are a number of lessons one may learn from this case. First, every word and phrase in a judgment of divorce must be drafted and reviewed with care. If the use of the term “money judgment” was avoided, there may have been a different outcome in this case. Second, that the term foreseeable is very narrow when viewed in the eyes of the court and applied to divorce judgments. Finally, the court continues to rely more and more upon contractual principles in the area of matrimonial and appears to be moving away from equitability or fairness to both parties. From prenuptials to judgments of divorce, one must be very careful when drafting these agreements as the courts will enforce them as written.
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