Edward R. Weinstein, Esq.Edward R. Weinstein, Esq.

What If My Property Settlement Agreement Is Not Clear?

As an attorney who has exclusively practiced divorce law throughout my entire career, I have sadly observed lawyers who do not practice divorce law exclusively write poorly written Property Settlement Agreements.  Ambiguous language could lead to a trial even after you haven been divorced, in order to determine the exactly what the parties agreed to.  It is essential, especially if you have children, assets and liabilities together, to hire a law firm in New Jersey that only handles divorce cases.  The following New Jersey Supreme Court case illustrates this reality.  

In Pacifico v. Pacifico, the Supreme Court of New Jersey reviewed a decision of New Jersey Appellate Division that affirmed an order of the Family Part that held that the property settlement agreement signed by Ginger and James Paul Pacifico was ambiguous as to the value of the marital house at the point in time Ginger, the ex-wife, chose to exercise her right to buy out her ex-husband’s interest in the property. The Supreme Court of New Jersey reversed the judgment and sent the issue back to the Family Part to evaluate the evidence under the standards set forth by the Supreme Court. Furthermore, the Family Part judge was directed not to apply the doctrine of contra proferentem, which states that any inferences should be drawn in the favor of non-drafting party in an or agreement.

James and Ginger Pacifico got married in 1978 and divorced in 1997. When the couple divorced they had two children together who lived in the marital home with Ginger. A property settlement was incorporated into the final judgment of divorce. According to the property settlement agreement, James was obligated to pay Ginger $ 435 a week in child support, and $ 100 a week in permanent alimony. Ginger was unemployed, and got to stay in the marital home with the kids. She was to be responsible for the mortgage, homeowner’s insurance, and property taxes. These costs were to be paid out of the support provided by James. The property settlement agreement also provided that the marital home would be held by both parties as joint tenants with rights of survivorship, until such time that the house was sold. The agreement further stated that Ginger had the first right to buy James’s interest in the home. If she chose not to exercise her right, James would have the same right to buy out her share. If neither of them wanted to exercise their option, then the house would be sold and the proceeds apportioned according to the property settlement agreement. 

When James filed a motion to compel putting the house on the market and selling it, Ginger responded with a cross-motion to buy out her ex-husband’s interest in the house for half of the $ 167,000 value that a broker’s market analysis had established back in 1996. James and Ginger both provided certifications relating to their understanding to the sale of the marital home provision in the property settlement agreement. The Family Part judge held that Ginger’s right to buy out James’ interest was subject to the current market value at the time she chose to exercise the right. Ginger appealed this decision and the New Jersey Appellate Division reversed the judgment of the Family Part and found that property settlement agreement was ambiguous as it did not explicitly specify the price at which the buy outs would be. Due to the conflicting proof relating to that provision, and because James’s attorney drafted the property settlement agreement, The New Jersey Appellate Division held that any ambiguity would be considered in Ginger’s favor. 

James contended that he and Ginger had not agreed to freeze the buy out price at the 1996 value. Ginger on the other hand contended that they had agreed that she would be able to buy out James’ interest in the house at the 1996 value. She claimed that in exchange for this special price, she gave tax and mortgage interest deductions to James. She also referenced a draft of the property settlement agreement that did reference the 1996 value. Many drafts were submitted into evidence. James’ attorney wrote the first and third drafts, and Ginger’s lawyer wrote the second one. 

After a plenary hearing, the judge found that the property settlement agreement was ambiguous, and that the ambiguity should be resolved in favor of Ginger because the property settlement agreement was drafted by James’ attorney. Furthermore, the judge ordered that Ginger would buy out James’ interest in the marital house for half of $ 167,000 minus the mortgage balance on May 27, 2003. No findings were made relating to the intention or credibility of the parties. While James appealed the decision, the New Jersey Appellate Division affirmed it, again stating that any ambiguity should be interpreted in Ginger’s favor, because James’ attorney drafted the property settlement agreement. 

Upon review, the Supreme Court of New Jersey held that legal doctrine of contra proferentem, or the doctrine that provides that when a term in a contract is ambiguous, the court must adopt a meaning that is favorable to the non-drafting party, was not appropriate in this case and should not have been applied. 

Courts have a duty to enforce contracts as the parties had intended. When it is necessary, the court must discern and implement the common intention of the parties. When a contractual party does not agree as to the intention or meaning of a term in a contract that is essential to a determination of their rights or duties, the court will supply a term that is reasonable under the circumstances. As James and Ginger disagreed over the understanding of the buy-out value, the Supreme Court of New Jersey stated that the New Jersey Appellate Division was right to order a plenary hearing to allow the Family Part to investigate the intent of the parties at the time they divorced and executed the property settlement agreement. That said, the Supreme Court of New Jersey still disagreed with the instructions the appellate panel gave to the Family Part for the remand. 

The Supreme Court of New Jersey held that the New Jersey Appellate Division committed error by directing the Family Part judge to apply the contra proferentem doctrine. The Supreme Court found that the appellate panel oversimplified the divorce settlement process by determining that James’ lawyer drafted the property settlement agreement. The final draft, the fourth one, was basically the third draft with Ginger’s handwritten changes. It is uncommon for one party’s version of a property settlement agreement to be accepted without some input and negotiation from the other party. Therefore, there is no real singular drafter, as required by the meaning of the contra proferentem doctrine. Moreover, the New Appellate Division failed to realize that even if the property settlement agreement was drafted by James’ attorney alone, the contra proferentem doctrine would not apply because there was no existence of unequal bargaining power, which is a prerequisite to apply the doctrine of contra proferentem. 

As such, because the doctrine of contra proferentum was not applicable, the Supreme Court of New Jersey reversed the judgment of the New Jersey Appellate Division. The Court ordered a remand and directed the Family Part judge to analyze the evidence previously gathered at the hearing under the standards expressed by the Court. Furthermore, not all the inferences had to be construed in Gingers favor, and the Family Part should keep the burden of persuasion in mind. The Supreme Court of New Jersey explained that as Ginger was the one seeking judicial approval to exercise her buy-out option of the marital house at the 1996 valuation, she had the burden to establish that it was the intention of both her and James’ to use that year’s valuation. Additionally, she was trying to exclude $ 137,000 worth of joint marital assets from equitable distribution, and as such should bear the burden of proof.