ANOTHER OBJECT LESSON IN PSA DRAFTSMANSHIP
December 21, 2011 § 2 Comments
What does the following language in a divorce property settlement agreement (PSA) mean?
The parties both agree and understand that [Stephen] will retire from Martin Marietta Manned Space Systems effective April 24, 1992. . . . The parties have agreed to accept #D-Level Income as the monthly benefit option. This will provide [Stephen] a monthly income of approximately $3[,]189.26. [He] will remit to [Gloria] one-half of this income, being the approximate amount of $1,594.63, on the first day of each month . . . commencing on January 1, 1993. These monies will be considered alimony[,] and [Gloria will be responsible for the income taxes].
That was the question squarely presented to the chancellor in litigation between former spouses Stephen and Gloria Reffalt.
Stephen and Gloria were divorced in 1993. Stephen had retired from his job with Martin Marietta (MM). Approximately two years later Stephen’s retirement benefits paid by MM were reduced when his Social Security benefits kicked in, as the plan provided. As a result of the automatic reduction, the $1,594 payments to Gloria came to represent considerably more than 1/2 of the MM benefit. Nonetheless, Stephen continued paying the $1,594 until December 2008, when he apparently decided enough was enough, and he filed a petition to modify the payments proportionally to about $1,150 a month.
Stephen took the position that the above PSA language clearly intended that Gloria receive only 1/2 of his MM retirement benefits, whatever that amount might be.
Gloria argued that the language mandated that she be paid 1/2 of Stephen’s total retirement benefits from whatever source.
The chancellor found the language to be ambiguous and accepted parol evidence of the parties’ intentions in the drafting of the contract. Placing heavy emphasis on the parties’ course of conduct over fifteen years after the reduction in MM benefits, the trial court held that the language intended that Stephen pay the higher amount, and denied his request for a downward modification.
In Reffalt v. Reffalt, decided December 13, 2011, the COA affirmed. I recommend that you read the opinion, written by Judge Ishee, for its exposition on the principles of contract interpretation and what is and is not an ambiguous contract. The opinion also touches on the question of modification of property settlement.
This case is yet another example of draftsmanship that may appear at first blush to be clear, but on further inspection is susceptible to several different interpretations. Consider the language ” … This will provide …” and ” … one half of this income …” To what do the pronouns this refer? Are their objects the same thing or different? Better to have said “… one half of the #D-Level benefit each month …” Or “Stephen will pay to Gloria the sum of $1,594 each month.” Or “The amount payable by Stephen shall be adjusted automatically to be equal to 50% of his #D-Level benefit actually received, without any voluntary action on his part to reduce the amount received.”
A few suggestions:
- As I have said here before, it’s a good idea to draft and set aside that agreement for a day or two. Then pick it up and read it through different eyes. Cast yourself in the role of the judge looking at it years later, or the plan administrator considering how to apply it, or another lawyer to whom your former client has carried it.
- Go pronoun hunting. Eliminate as many as you possibly can, replacing them with the specific term that you intend to refer to.
- Does your language say exactly what you mean to say, or is it indirect and prolix? More words are not always better. The more verbosity you use, the more likelihood that confusion, unintended meanings and ambiguity will grow and fester in that thicket like a staph infection.
- Here are five suggestions for improving your PSA’s.
- And here are five more.
- Here is a post about a nightmare scenario in draftsmanship.
- Kicking the can down the road, and why it’s not a good idea in your PSA’s.
- And here is a post on some examples of the hidden costs of divorce that you need to take into account when drafting a PSA.
Give your PSA’s some thought. That’s what you’re being paid for. Strive for your PSA’s to be better than 99% of other attorneys’. Make it your goal that no judge will ever have to find one of your PSA provisions to be ambiguous.