Say What You Mean and Mean What You Say
January 4, 2016 § 2 Comments
Lee and Leslie Voulters were divorced from each other in 2004 on the sole ground of irreconcilable differences. The divorce judgment incorporated their PSA, which provided that Lee would pay Leslie lump-sum alimony in the sum of $1.08 million at the rate of $10,000 a month until paid in full. He also agreed to maintain a policy of life insurance on his life with a benefit of $1.08 million, with Leslie as beneficiary.
When Leslie filed a contempt action in 2013 charging Lee with missing some lump-sum payments and with failing to provide proof of life insurance, Lee counterclaimed, asking the court to interpret the PSA that the purpose of the life insurance was to protect Lee’s payment of lump-sum alimony, and that the obligation would terminate when the lump-sum alimony was paid in full.
Spoiler alert: There is no provision in the PSA that links the life insurance requirement to the lump-sum-alimony requirement.
Here are the pertinent parts of the agreement:
LUMP SUM ALIMONY/SPOUSAL SUPPORT
Lee shall pay spousal support to Leslie, in the form of lump sum alimony, the total sum of $1,080,000.00, payable in monthly installments of $10,000.00 each for a period of nine years. Such payments for support shall be due and payable by automatic bank transfer from Lee’s checking or other account directly into Leslie’s checking account, commencing on the fifth day of April, 2004, and shall so continue for one hundred and seven consecutive months thereafter. Lee’s obligation to pay such support to Leslie shall be fully vested upon the entry of a Final Judgment of Divorce in this cause, and shall not be modifiable. Lee’s obligation to pay such support shall not terminate upon Leslie’s death or remarriage, nor shall it terminate upon Lee’s death. However, despite the conventional definition of lump sum alimony[,] . . . these payments by Lee to Leslie under this Agreement shall be taxable to Leslie, and deductible by Lee, for state and federal income tax purposes.
LIFE INSURANCE
Lee agrees to maintain life insurance on his own life in an amount not less than one million, eighty thousand dollars ($1,080,000.00), naming Leslie as primary beneficiary thereon. Proof of such insurance coverage shall be furnished to Leslie within fifteen (15) days following the date of execution of this Agreement. Furthermore, Lee shall direct his insurance carrier to provide coverage information to Leslie at least twice a year if requested by Leslie.
. . . .
EFFECT OF AGREEMENT
. . . .
The respective rights and obligations of the parties hereunder are deemed independent and may be enforced independently irrespective of any of the other rights and obligations set forth herein. This Agreement contains the entire understanding of the parties, who hereby acknowledge that there have been and are no representations, warranties, covenants, or understandings other than those expressly set forth herein.
RELEASE AND WAIVER
Subject to the provisions of this Agreement, each party has released and forever discharged . . . his or her heirs, legal representatives, Executors, Administrators, and assigns . . . from all causes of action, claims, right or demands . . . in law or in equity . . . except . . . causes of action for divorce or separation action now pending . . . . Each party releases, waives, and relinquishes any and all rights . . . to share in the estate of the other party upon the latter’s death . . . . (Emphasis added.)
Both parties offered testimony about their intent in negotiating the language into the agreement. Lee argued that the agreement was ambiguous because it had no termination date. Leslie argued that she negotiated it for support, which she needed because her estate was meager in comparison to Lee’s.
One question before I tell you how the chancellor ruled: do you see anywhere in that language quoted above any link between the life insurance obligation and the lump-sum alimony?
The chancellor ruled that the agreement was unambiguous, and that it did require Lee to maintain the life insurance regardless of the status of the lump-sum payments. Lee appealed.
On December 8, 2015, the COA affirmed in Voulters v. Voulters. The opinion by Judge Barnes includes a nice recitation of the law of contract interpretation, life insurance and insurable interests, and even attorneys fees in contempt actions and on appeal. I definitely commend it to your reading.
What I want to focus on here is this: If you want your agreement to mean a particular thing, then make sure there is language in it that says that particular thing. Remember that when the judge is called on to interpret a contract, she is bound by the language within the four corners of the document, and she may not accept parol evidence to vary or “explain what the parties meant” by those terms unless she first finds the agreement to be ambiguous. Just because Lee did not include a termination date for his life insurance obligation, that did not render the agreement ambiguous. It rendered instead the meaning that it had no termination date. In other words, it meant exactly what it did and did not say.
Be careful in your draftsmanship. Take time to make sure it says exactly what your client needs it to say. I think I was saved a hundred times or more by the simple practice of drafting the agreement and setting it aside for at least a day. I would then pick it up and read it afresh, often catching something that could be read two ways, or was simply not clear enough to do the job. Sometimes I would imagine myself to be another person altogether, looking at it as an outside observer. Anything to get an objective perspective.
Remember that some day someone entirely unconnected with the negotiations and the emotion of the divorce case is going to be reading your work with absolutely none of the knowledge that you had when you drafted it. It may be a judge, or it may be another lawyer having to represent your client, or — heaven forbid — a lawyer looking for a cause of action against you. That’s why it’s critical when you draft an agreement to give some thought and care to the words, phrases, and language construction that you use. That’s what your client is paying you for: to have absolutely no more trouble out of this matter after the final judgment is entered.
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A note that may seem obvious: “having a second pair of eyes” on the document does not mean “send it to opposing counsel.” Guess who’s not going to call your attention to some provision that tilts the playing field away from your client?
A catch-22 for the many new lawyers who, out of desperation, are engaged in solo practice – you also can’t send your draft to a mentor for review because it would violate confidentiality.
In other words, either learn the pitfalls quick; find you an experienced lawyer who will join together with you for mentorship; or, you know, read this blog religiously (with an archive trawl).