MAY v. MAY (2019)

Denise Marie May (Wife) appeals the family court's grant of Keith Alan May's (Husband's) motion to set aside judgment in the parties' divorce action based on mutual mistake pursuant to Rule 60, SCRCP. We affirm.

FACTS/PROCEDURAL BACKGROUND

Husband and Wife were married twice. This action involves the divorce ending their second marriage. As part of the divorce action, Husband and Wife were subject to mandatory mediation. Wife appeared pro se at the mediation, although she had previously been represented by counsel. Husband was represented at the mediation. The parties reached a consensus on all relevant issues at the conclusion of the mediation, and the mediator drafted a settlement agreement (the Agreement) intended to reflect the agreed-upon terms. The relevant part of the Agreement provided:

The Wife shall refinance or assume the debt on the home to remove the Husband's name from the indebtedness to Benchmark Mortgage. The Wife shall refinance or assume the debt on the home to remove the Husband's name from the indebtedness on or before June 7, 2016. The Husband hereby waives and relinquishes any and all interest in the property and the equity therein. The Wife shall be responsible for any and all debts and liabilities associated with this property and shall hold the Husband harmless therefrom.

Should the Wife not refinance or otherwise remove the Husband's name from the Benchmark Mortgage on or before June 7, 2016, the house shall be placed on the market for sale by June 13, 2016․ All net sales proceeds shall be split by the parties on a 50/50 basis.

Husband and Wife initialed each page of the Agreement and signed the final page. Husband and Wife then appeared before the family court, again with counsel and pro se respectively, and affirmed they had read and understood the Agreement and consented to it. Wife refinanced the mortgage on the marital home and removed Husband's name therefrom in the allotted time. However, according to Husband, Husband's attorney, and the mediator, the parties agreed that if Wife was able to refinance the marital home, she would pay Husband $60,000 as his part of the equity in the home. As exposed in the above-quoted portion of the Agreement, the document did not include this provision.

Husband filed a Rule 60(a) and (b), SCRCP motion, arguing the Agreement should be reformed to correct his and Wife's mutual mistake in signing something other than what they agreed to at mediation. Husband's attorney, Husband, and the mediator presented affidavits to that effect. Wife attested in her affidavit “there is no error, clerical or otherwise, in the agreement or the [family court]'s Order. This is the agreement that was drafted [and] signed [,] and it is precisely to what I agreed.” Wife also argued evidence regarding anything that occurred during mediation was protected by privilege under Rule 8, SCADR. The family court concluded the Agreement reflected a mistake and should be reformed. The family court indicated it did not rely on the mediator's affidavit in reaching its conclusion. Rather, the family court relied on the parties' affidavits and the internal inconsistency in the Agreement which under Wife's interpretation, would give Husband no equity in the marital home if Wife refinanced but would give him half the equity if the home was sold. Additionally, the court declared each party should pay his or her own attorney's fees. The family court denied Wife's motion for reconsideration, and this appeal followed.

STANDARD OF REVIEW

“Whether to grant or deny a motion under Rule 60(b)[, SCRCP,] lies within the sound discretion of the judge. Our standard of review, therefore, is limited to determining whether there was an abuse of discretion.” Raby Constr., L.L.P. v. Orr, 358 S.C. 10, 17-18, 594 S.E.2d 478, 482 (2004) (citation omitted). “An abuse of discretion occurs when the ruling is based on an error of law or a factual conclusion without evidentiary support.” Historic Charleston Holdings, LLC v. Mallon, 381 S.C. 417, 434, 673 S.E.2d 448, 457 (2009).

LAW/ANALYSIS

I. Mediation 1

Wife argues the family court could not consider any information related to the mediation other than that contained in the original Agreement presented to the family court because Rule 8, SCADR, prohibits such disclosure. She contends this would have the effect of negating the affidavits of Husband, Husband's attorney, and the mediator in consideration of whether a mutual mistake occurred. We disagree.

In 2018, Rule 8 was revised to specifically address the issue in this case. It now provides for a limited exception to confidentiality.

(c) Limited Exceptions to Confidentiality. There is no confidentiality attached to information that is disclosed during a mediation:

․

(4) offered for the limited purpose in judicial proceedings of establishing, refuting, approving, voiding, or reforming a settlement agreement reached during a mediation;

․[2]

Prior to the revision of Rule 8, this court considered the language of the prior version and what type of information it protected from disclosure in later proceedings.³ In Huck v. Oakland Wings, LLC, 422 S.C. 430, 435-36, 813 S.E.2d 288, 290-91 (Ct. App. 2018), cert. denied, S.C. Sup. Ct. Order dated Aug. 3, 2018, the court found:

Avtex argues the trial court erred in concluding the South Carolina rules governing alternative dispute resolution prevented it from compelling disclosure of the terms of [a settlement agreement with other parties]. The Hucks argue the settlement agreement is protected because it was a part of the mediation process.

We find the trial court erred in denying Avtex's motion to disclose settlement. The documents referred to in Rule 8 are designed to protect any documents prepared for use by the mediator and the parties to the mediation itself. Once the parties reach a settlement, documents prepared in conjunction with the settlement and release are not for the purpose of, or in the course of, mediation. Rather, they are documents prepared in connection with the litigation and to bring the litigation to a close. Rule 8 is designed to protect the communications made during the mediation itself and to protect the process. The parties' mediation agreement reinforces the rule and simply incorporates the same language. The request for production of the settlement documents does not disclose confidential information from the mediation (i.e., it does not disclose or discuss information the parties utilized to reach the settlement).

In the instant case, neither Husband's, nor Husband's attorney's, nor the mediator's affidavits disclosed the substance of the negotiations. Rather, they stated what the parties agreed to as a result of the mediation and that the Agreement as prepared did not contain the agreed-upon terms. The statement of what the parties agreed to at the conclusion of the mediation process, even if it was incorrectly memorialized in the written agreement, is not “information they utilized to reach the settlement,” nor does it reveal documents or material relied upon during or in the course of the mediation. Therefore, Rule 8 as it existed at the time of Husband's motion did not protect the relevant affidavits. Furthermore, the legislature's revision to Rule 8 last year makes clear it intended to permit the correction of mediated settlement agreements. Accordingly, the admission of the disputed affidavits was not erroneous.

II. Mutual Mistake

Wife contends the family court erred in reforming the settlement agreement on the basis of mutual mistake. Specifically, she maintains Husband did not establish a mistake at all and if he did, the mistake was a unilateral mistake on Husband's part in failing to read the Agreement. We disagree.

“A contract may be reformed on the ground of mistake when the mistake is mutual and consists in the omission or insertion of some material element affecting the subject matter or the terms and stipulations of the contract, inconsistent with those of the parol agreement which necessarily preceded it.” George v. Empire Fire & Marine Ins. Co., 344 S.C. 582, 590, 545 S.E.2d 500, 504 (2001). “A mistake is mutual whe[n] both parties intended a certain thing and by mistake in the drafting did not obtain what was intended. Before equity will reform a contract, the existence of a mutual mistake must be shown by clear and convincing evidence.” Id. (citation omitted).

Wife correctly argues Husband was required to establish a mistake by clear and convincing evidence. The family court indicated it based its finding of mistake on the internal inconsistency in the Agreement—the parties agreed to split the marital home's equity if sold, but Husband would receive no equity if Wife refinanced the mortgage. This incongruity suggests a mistake. However, in the absence of the affidavits regarding the $60,000 provision, that inconsistency may not rise to the level of clear and convincing evidence.⁴ Nevertheless, considering all the information presented to the family court, it is clear the parties agreed to the $60,000 equity payment and it was inadvertently omitted from the Agreement. Wife contends she did not admit to any mistake and therefore a finding of mutual mistake is in error. However, Wife's affidavit is equivocal and does not deny she consented to the $60,000 equity provision at the time of the drafting of the Agreement. Regardless, as noted by one court, “the issue of mutual mistake arises only when alleged by one party and denied by the other. Agreement on the matter would eliminate it as an issue to be tried.” Steffens v. Steffens, 422 So. 2d 963, 964 n.1 (Fla. Dist. Ct. App. 1982).

Having concluded Husband presented clear and convincing evidence of mutual mistake in the record, the remaining question is whether Husband's own negligence in failing to read the Agreement precludes a finding of mutual mistake permitting reformation of the Agreement.

South Carolina case law is replete with cases finding a party's failure to read a contract does not vitiate the contract or that party's obligations under it. See Sims v. Tyler, 276 S.C. 640, 643, 281 S.E.2d 229, 230 (1981) (“One who is capable of reading and understanding but fails to read a contract before signing is bound by the terms thereof.”); Regions Bank v. Schmauch, 354 S.C. 648, 663, 582 S.E.2d 432, 440 (Ct. App. 2003) (“A person signing a document is responsible for reading the document and making sure of its contents. Every contracting party owes a duty to the other party to the contract and to the public to learn the contents of a document before he signs it.”); id. at 664, 582 S.E.2d at 440 (“One who signs a written instrument has the duty to exercise reasonable care to protect himself.”). Concomitantly, our courts attempt to avoid outcomes in which a party receives a windfall. See Atkinson v. Orkin Exterminating Co., 361 S.C. 156, 172, 604 S.E.2d 385, 393 (2004) (“According to the collateral source rule, a wrongdoer should not receive a windfall simply because the injured party received compensation from an independent source.”); see also Proctor v. Whitlark & Whitlark, Inc., 414 S.C. 318, 332, 778 S.E.2d 888, 896 (2015) (“Granting a windfall to a gambler would neither punish excessive gaming nor protect a gambler and his family from the gambler's irresistible impulses.” (quoting McCurry v. Keith, 325 S.C. 441, 444, 481 S.E.2d 166, 168 (Ct. App. 1997))).

The tension between these legal tenets was addressed in Jumper v. Queen Mab Lumber Co., 115 S.C. 452, 106 S.E. 473 (1921), a case that is almost one hundred years old and yet appears to be directly on point.

[W]e assert that it would be a monstrous perversion of justice to deny the right of reformation upon the ground that the defendant was negligent in not reading the contract before signing it. It was as much the duty of the plaintiff to read the contract and see that it conformed to the agreement as it was the defendant's. If the plaintiff read it and discovered the discord and allowed the execution to proceed intending to take advantage of it, he does not assume a position that commends him to a [c]ourt of [e]quity.

Id. at 465, 106 S.E. at 478.

[I]f when presented for their signatures [the parties] thought or assumed that no discord existed, their signing would be the result of their co-operative fault; if one of them discovered the discord and remained silent, it would be a fraud upon the other not to call attention to it. In any conceivable event, therefore, reformation would be decreed.

Id. at 464, 106 S.E. at 477.

We find the analysis in Jumper persuasive and controlling. Although Husband should have read the Agreement more carefully, Wife either neglected to read the Agreement herself or recognized Husband's error and elected to remain silent. Consequently, we affirm the family court's decision to set aside the judgment and reform the Agreement to correct the mutual mistake of the parties.

III. Parol Evidence Rule

Wife also contends the parol evidence rule prohibited the introduction of the previously discussed evidence because the Agreement was unambiguous. We disagree.

While Wife's argument may be correct in many circumstances, our courts have made clear the parol evidence rule does not preclude extrinsic evidence in cases involving mistake and reformation. The Supreme Court of South Carolina has “confirm[ed] ․ the general principle that extrinsic evidence is admissible to prove mutual mistake in cases seeking reformation.” Progressive Max Ins. Co. v. Floating Caps, Inc., 405 S.C. 35, 50, 747 S.E.2d 178, 186 (2013). Therefore, Wife's contention is without merit.

IV. Attorney's Fees

Finally, Wife argues the family court erred in not requiring Husband to pay her attorney's fees. We disagree.

Wife maintains that if she wins on appeal, the family court erred in not awarding her attorney's fees. Our disposition of the case defeats this argument. Having neglected to set forth any other basis for entitlement to attorney's fees, we affirm the family court's decision.

CONCLUSION

Based on the foregoing, the family court's decision is

AFFIRMED.

FOOTNOTES

2.   This revision is consistent with a Florida case cited in Husband's brief, DR Lakes Inc. v. Brandsmart U.S.A. of W. Palm Beach, 819 So. 2d 971 (Fla. Dist. Ct. App. 2002). Florida, like South Carolina, has now revised its Alternative Dispute Resolution Rules to recognize an exception to the confidentiality of mediation as it relates to correcting a settlement agreement reached therein.

3.   The version of Rule 8 in place at the time of Husband's motion stated:(a) Confidentiality. Any mediation communication disclosed during a mediation, including, but not limited to, oral, documentary, or electronic information, shall be confidential, and shall not be divulged by anyone in attendance at the mediation or participating in the mediation, except as permitted under this rule or by statute. Additionally, the parties, their attorneys[,] and any other person present or participating in the mediation must execute an Agreement to Mediate that protects the confidentiality of the process. The parties and any other person present or participating shall maintain the confidentiality of the mediation and shall not rely on, or introduce as evidence in any arbitral, judicial [,] or other proceeding, any mediation communication disclosed in the course of a mediation ․

4.   Wife also points to a provision in the Agreement whereby Husband is excused from child support payments if Wife does not sell the house. However, Husband and Wife had only one child eligible for child support at the time they signed the Agreement and the child would turn eighteen years old approximately fifteen months after the deadline to refinance the house. Therefore, this provision does not indicate the parties intended to offset the lack of equity to Husband with the unpaid child support as the amounts would be significantly disparate.

KONDUROS, J.:

HUFF and THOMAS, JJ., concur.