Robert Schneider v. Lynn Schneider (2013)

MEMORANDUM OF DECISION

The plaintiff ex-husband and the defendant ex-wife have filed two postjudgment motions.   The factual and procedural history of the action is as follows.   The court entered a judgment of dissolution of the parties' marriage on January 3, 2007.   There was one child who was the issue of the parties' marriage, to wit:  Paul Schneider, born May 1, 1991.   The parties' separation agreement dated January 3, 2007 was incorporated into the judgment of dissolution.   For purposes of the two motions, the relevant provisions of the separation agreement required the plaintiff to make one-half of the mortgage, real property taxes and homeowner's insurance payments on the former jointly owned marital property located at 160 Olmstead Hill Road, Wilton, Connecticut (“property”) in lieu of child support until, the sale of the property or when the plaintiff begins to make college tuition payments whichever first occurs.¹  The separation agreement further required that the property be sold and expressly provided for the calculation and distribution of what was defined therein as the “net equity” based on the sales price less the mortgage and certain closing costs as well as the payment to the parties of profits remaining after subtracting the plaintiff's and then the defendant's equity lines of credit.²  The separation agreement acknowledged that the plaintiff obtained a $300,000 equity line of credit ³ against the property and permitted the defendant to obtain an equity line of credit up to $700,000 on the property after the dissolution.⁴  The separation agreement also required that the property to be sold after the dissolution of the marriage.   The property was sold on February 8, 2012 for the sales price of $1,130,000,⁵ which resulted in net proceeds in the amount of $494,943.83 ⁶ that has been held in escrow since the date of closing.   Both parties claim they are entitled to said proceeds.   In order to obtain a release of the proceeds from escrow, the defendant filed a motion for order re closing proceeds (# 116.01).   In dispute are two provisions of the separation agreement with the plaintiff alleging that the two provisions are ambiguous and inconsistent and the defendant alleging that they are clear and unambiguous:

Paragraph 5.A of the separation agreement, which states:  “Upon sale the parties shall retain, in accordance with the provisions of paragraph G hereof, the ‘net equity’ in the property, defined as sales price less balance due on the current mortgage on the premises, real estate conveyance taxes, broker's fee, attorneys fees, and agreed to and necessary ‘fix-up costs' necessary for sale, all of which shall be shared equally by the parties.”

Paragraph 5.G of the separation agreement, which states:  “Upon the sale of the premises, the net equity shall be distributed as follows:

i. the first three hundred thousand shall go to pay off the Husband's equity line of credit, with any balance remaining of that three hundred thousand after payment of the equity line going to the Husband up to a total of $300,000;

ii. the next seven hundred thousand dollars shall go to pay off the Wife's equity credit, with any remaining balance of that seven hundred thousand dollars after payment of the equity line going to the Wife;

iii. the balance of any remaining net equity shall be distributed equally to the parties.”

On March 25, 2013 and May 9, 2013, the court heard testimony from the parties and their witnesses, consisting of attorney Douglas Bayer, who handled the real estate closing, and attorney Paul Tusch, who was the plaintiff's lawyer in the divorce proceeding, and admitted exhibits into evidence.   The issue presented by the defendant's motion turns on the law of contract construction relative to the interpretation of the two pertinent provisions of the parties' separation agreement.

“Our Supreme Court has instructed that interpretation of a separation agreement incorporated into a dissolution decree is guided by the general principles governing the construction of contracts.”  (Internal quotation marks omitted.)  Nassra v. Nassra, 139 Conn.App. 661, 667, 56 A.3d 970 (2012).  “A contract must be constructed to effectuate the intent of the parties ․ [T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and ․ the language used must be accorded its common, natural, and ordinary meaning and usage.”  (Internal quotation marks omitted.)  Hammond v. Hammond, 145 Conn.App. 607, 612 (2013).  “When the language of a contract is ambiguous, the determination of the parties' intent is a question of fact ․” Id. “[T]he intent of the parties is to be ascertained by a fair and reasonable construction of the written words and ․ the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract ․ Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms.   A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity ․ Similarly, any ambiguity in a contract must emanate from the language used in the contract rather than from one party's subjective perception of the terms.”  (Internal quotation marks omitted.)  Nassra v. Nassra, supra;  accord Eckert v. Eckert, 285 Conn. 687, 692, 941 A.2d 301 (2008);  Isham v. Isham, 292 Conn. 170, 180– 81, 972 A.2d 228 (2009).

Applying these legal principles to the present facts, it is clear that the separation agreement is a contract between the parties as the separation agreement was incorporated into the judgment of dissolution.   Therefore, the law of contract construction is controlling over the interpretation of the parties' separation agreement.   The court begins by reviewing the applicable provisions of the separation agreement, specifically paragraphs 5.A and 5.G, in particular as well as the separation agreement as an integrated whole.   The court finds that there is no ambiguity in reading paragraph 5.A or 5.G separately or that paragraph 5.A's reference to paragraph 5.G is incompatible or cannot be reconciled with paragraph 5.A as it relates to paragraph 5.A's definition of the term “net equity” in connection with the net profits from the sale of the property.   Although the separation agreement omits any reference to the treatment of usual and customary closing costs like, as in this instance, an adjustment for fuel oil or real estate taxes through the date of closing, recording and release fees and express document delivery fees, the separation agreement clearly and unambiguously requires that the mortgage and certain closing costs be deducted from the sales price to arrive at the “net equity.”   In addition, the separation agreement lists the order of priority that each equity line is assigned with the plaintiff being listed as the first and the defendant being listed as the second.

The source of the confusion in the present case was caused by the occurrence of two separate events.   The first arose when the closing statement ⁷ was presented in a way that depicted an allocation of the $1,130,000 sales price for the property in the amount of $765,000 for the plaintiff and $365,000 for the defendant, with a notation in parenthesis of an assumed equal split of the real estate tax adjustment between the parties, an even split of the first mortgage and an even split of all the other closing costs as well.   But this method of distribution of the parties' share of the proceeds from the sale of the property could not be substantiated from the language contained in the applicable provisions of the separation agreement.   Simply put, there are no terms and conditions contained therein that either explicitly state in clear and unequivocal terms or suggest implicitly that $765,000 of the sales price should be allocated to the defendant and $365,000 of the sales price should be allocated to the plaintiff.   And attorney Bayer acknowledged this during his testimony.   It is reasonable for the court to assume that attorney Bayer attempted to apportion each party's share as reflected in paragraph 5.A relative to their equity lines of credit on the property, as advanced in the amount of $300,000 for the plaintiff, and following the divorce as anticipated in an amount up to $700,000 for the defendant, and then tried to reconcile that their respective interests as stated in paragraph 5.G, which mentioned the plaintiff's $300,000 equity line and the defendant's $700,000 equity line.

However, a careful reading of paragraphs 5.A and 5.G of the separation agreement reveals that the parties conveyed their intentions clearly and unambiguously through the choice of words they used to communicate that they wanted only certain expenses to be deducted from the sales price precisely as outlined.   Whether they were aware that standard practices involving real estate closings included usual and customary closing costs and adjustments beyond the items stated in their separation agreement cannot be ascertained from the separation agreement or the evidence in the record.   Nonetheless, there was no mistaking their intent to have the mortgage and select closing cost expenses subtracted from the sales price and that they meant for the difference to be treated as the “net equity” from which the plaintiff's and then the defendant's equity lines should be deducted.

If the instructions detailed in paragraphs 5.A and 5.G were followed to the letter as expressly provided for in the parties' separation agreement, then a more accurate visual representation of the parties' intentions as expressed in their own words would be depicted in the following format:

Paragraph 5.A of the Separation Agreement

Sales Price (Total Paid to Sellers at Closing) $1,130,000.00

less balance due for the:

Mortgage $ 302,364.68

Real Estate Conveyance Taxes $ 12,950.00

Broker's Fee $ 25,010.00

Attorneys Fees $ 1,500.00

Fix-up Costs $ 0.00

$ 788,175.32

Paragraph 5.G of the Separation Agreement

Net Equity Distributions

First $300,000

Plaintiff's (“P”) Home Equity Line (HELOC) 298,790.02 ⁸

P's HELOC up to $300,000 1,209.98

The next $700,000

Defendant's HELOC up to $700,000 488,175.32 ⁹

The balance of any remaining net equity shall

be distributed evenly $ 0.00

The second source of confusion emanated from the failure of the parties to address the situation presented by the instant circumstance in which the defendant opted not to obtain an equity line of credit after the dissolution of the marriage as contemplated in paragraph 5.C of the separation agreement.   A review of paragraph 5.B of the separation agreement indicates that the parties recognized that the plaintiff obtained a $300,000 equity line of credit on the property in his name and anticipated in paragraph 5.C that the defendant would take out an equity line of credit of up to $700,000 in her name after the divorce.   Yet for reasons that were not disclosed at the hearing or that cannot be ascertained from the evidence, the defendant failed to obtain an equity line in any amount on the property after their divorce was finalized.   It is apparent from paragraph 5.G of the separation agreement that the parties were desirous of paying off both equity lines upon the sale of the property with the balance after pay off of such line going to each party in an amount up to $300,000 for the plaintiff and in an amount up to $700,000 for the defendant.   But the ambiguity resulting from this omission can be resolved by exploring the circumstances connected with the parties' intentions in drafting the salient terms of the separation agreement.   The court finds that the testimony of both of the parties and attorney Tusch, the plaintiff's attorney in the parties' divorce action, to be credible and highly instructive in this regard.   All three testified in near unison that it was their individual understanding that the first $300,000 in net equity would be used to pay off the plaintiff's equity line of credit first and that the defendant would be entitled to the next $700,000.   In fact, attorney Tusch's testimony was the plaintiff's $300,000 was essentially an advance of his portion of the equitable distribution of the proceeds from the sale of the property.   This court finds from the collective testimony of those three witnesses that the parties planned to use the equity line of credit as merely a financing conduit by which they would be able to receive their cash share of the equitable distribution from that particular portion of the marital estate either prior to the judgment of dissolution or in advance of the real estate closing, which was supposed to have occurred “no later than the summer of 2009” according to paragraph 5.A of the separation agreement but did not occur until February 8, 2012 for some unexplained reason.   This is also bolstered by the wording in 5.G which allows the parties to retain the difference between the equity line pay off figure and up to the maximum of $300,000 in the case of the plaintiff and $700,000 in the case of the defendant.

Based upon the foregoing, the court finds that the plaintiff received substantially all of his $300,000 net equity share of the distribution from the sale of the property in accordance with the applicable terms and conditions of the separation agreement by virtue of the mortgage payoff of his equity line of credit on the property in the amount of $298,790.02 and is owed the difference between said figure and the $300,000 payoff amount to which he is entitled pursuant to said agreement or, in other words, the sum of $1,209.98 is due and owing to the plaintiff from the escrow funds.   The court further finds that the defendant has sustained her burden of proving that she is entitled to the remaining balance of $486,965.34 less the following:  $487.60 for the fuel oil adjustment, $5,236.93 for the real estate tax adjustment up to the date of closing, $106 for recording and lien release fees and $60 for FederalEx fees (collectively referred to as “undescribed expenses”) as none of undescribed expenses are mentioned in either paragraph 5.A or paragraph 5.G of the separation agreement.   Consequently, the court grants the defendant's motion for order re:  closing proceeds (# 116.01) only as follows.   The court orders the release of the funds in the escrow account to pay off the plaintiff's equity line of credit in the amount of $1,209.98 or, if it has been paid by the plaintiff as of this writing, it shall be made payable directly to the plaintiff.   The court orders the release of funds in the escrow account to the defendant in the amount of $481,074.81 and further orders that the balance of $7,100.54 be held in escrow until the escrow agent receives further written instructions executed by both parties expressing their joint decision concerning the final distribution of the remaining escrow balance.   If the parties are unable to decide how the remaining funds in escrow should be distributed, then, upon motion, the court may reopen the evidence for the limited purpose of hearing and receiving evidence in connection with the parties' intention for the apportionment of said undescribed expenses during the drafting and execution of the separation agreement.

The court next turns to the plaintiff's motion for order re:  mortgage payments (# 119.00).   The plaintiff testified that his obligation to pay half of the mortgage, real estate taxes and homeowner's insurance payments under paragraph 3.C of the separation agreement terminated on July 1, 2009 when he began to make college tuition payments pursuant to a certain article of the separation agreement.   But, despite having no legal obligation to do so after that date, the plaintiff continued to make said payments on the property from July 2009 through January 2012.   The plaintiff testified that he continued to make said payments because the defendant claimed a financial hardship and told him the house would go into foreclosure.   The plaintiff further testified that he and the defendant reached an understanding whereby she agreed to repay him when the property was sold.   The defendant testified that she continued to send him the monthly mortgage statement with one-half of the payment during that period and was aware that the plaintiff's obligation to continue to pay one-half of the mortgage, real estate taxes and homeowner's insurance terminated on July 1, 2009, but was never asked during direct or cross examination about whether she in fact reached any such informal agreement with the plaintiff to that effect.   The court finds the testimony of the plaintiff is not credible and that he failed to sustain his burden of proof.   Consequently, the court denies the plaintiff's motion for order re:  mortgage payments (# 119.00).

BY THE COURT,

SYBIL V. RICHARDS, JUDGE

FOOTNOTES

FN1. Paragraph 3.C of the separation agreement..  FN1. Paragraph 3.C of the separation agreement.

FN2. Paragraphs 5.A and 5.G of the separation agreement..  FN2. Paragraphs 5.A and 5.G of the separation agreement.

FN3. The pertinent provision of paragraph 5.B of the separation agreement expressly provides that “[t]he husband has obtained a $300,000 equity line on the property.”.  FN3. The pertinent provision of paragraph 5.B of the separation agreement expressly provides that “[t]he husband has obtained a $300,000 equity line on the property.”

FN4. Paragraph 5.C states:  “Subsequent to the date Judgment for dissolution of the marriage is entered, the Wife shall be entitled to obtain an equity line solely in her name on the property up to a maximum amount of $700,000 which equity line shall be subordinate to the Husband's $300,000 equity line provided for herein.”.  FN4. Paragraph 5.C states:  “Subsequent to the date Judgment for dissolution of the marriage is entered, the Wife shall be entitled to obtain an equity line solely in her name on the property up to a maximum amount of $700,000 which equity line shall be subordinate to the Husband's $300,000 equity line provided for herein.”

FN5. The final closing statement, which is identified as plaintiff's exhibit 3, increased the sales price by an additional $487.60 for a fuel oil adjustment and $5,236.93 for the real estate tax adjustment to the date of closing, which brought the actual adjusted sales price up to $1,135,724.50.   The court notes that neither of these adjustments are mentioned as allowable closing cost that may be added to the “net equity.”.  FN5. The final closing statement, which is identified as plaintiff's exhibit 3, increased the sales price by an additional $487.60 for a fuel oil adjustment and $5,236.93 for the real estate tax adjustment to the date of closing, which brought the actual adjusted sales price up to $1,135,724.50.   The court notes that neither of these adjustments are mentioned as allowable closing cost that may be added to the “net equity.”

FN6. This figure includes $487.60 and $5,236.93 for the fuel oil and real estate tax adjustments, respectively..  FN6. This figure includes $487.60 and $5,236.93 for the fuel oil and real estate tax adjustments, respectively.

FN7. Identified as defendant's exhibit C..  FN7. Identified as defendant's exhibit C.

FN8. This amount was paid off from the net proceeds of sale according to the evidence in the record..  FN8. This amount was paid off from the net proceeds of sale according to the evidence in the record.

FN9. The balance reflected in attorney Bayer's closing statement, which is identified as plaintiff's exhibit 3, and that is being held in escrow, is $494,943.83.   Thus, there is a discrepancy between the court's calculation and attorney Bayer's.   This is due to the court's adherence to the literal wording in the parties' separation agreement, which fails to account for usual and customary closing costs such as in this case the closing credit for the fuel oil and real estate tax adjustments in the amount of $487.60 and $5,236.93, respectively, for a total of $5,724.53 in favor of the parties or the negative adjustments for the FedEx or record and release fees in the amount of $60 and $106.00, respectively, that are reflected on the final closing statement as closing expenses to be subtracted against the net proceeds from the sale of the property..  FN9. The balance reflected in attorney Bayer's closing statement, which is identified as plaintiff's exhibit 3, and that is being held in escrow, is $494,943.83.   Thus, there is a discrepancy between the court's calculation and attorney Bayer's.   This is due to the court's adherence to the literal wording in the parties' separation agreement, which fails to account for usual and customary closing costs such as in this case the closing credit for the fuel oil and real estate tax adjustments in the amount of $487.60 and $5,236.93, respectively, for a total of $5,724.53 in favor of the parties or the negative adjustments for the FedEx or record and release fees in the amount of $60 and $106.00, respectively, that are reflected on the final closing statement as closing expenses to be subtracted against the net proceeds from the sale of the property.

Richards, Sybil V., J.