HomeMy WebLinkAbout96-6403 CivilKAREN A. McDERMOTT,
Plaintiff
EDWARD A. McDERMOTT,
Defendant
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION- LAW
BEFORE OLER, J.
OPINION and ORDER OF COURT
Oler, J., September 17_, 2000,
In this case, Plaintiff Karen A. McDermott filed a complaint in divorce on
November 21, 1996, against Defendant Edward A. McDermott. The ground asserted for
the divorce was irretrievable breakdown of the marriage. In addition to a divorce,
Plaintiff requested equitable distribution of marital property, alimony, alimony pendente
lite, and counsel fees and expenses.
Defendant filed an answer to the complaint on May 4, 1999, conceding that the
marriage was irretrievably broken. In addition, Defendant requested alimony pendente
lite and counsel fees, costs and expenses.
The parties' claims for alimony pendente lite were effectively disposed of by the
Honorable Edgar B. Bayley through an order, accompanied by an opinion, on January 25,
2000. Plaintiff's claim for alimony was withdrawn on November 24, 1999. Both parties
filed affidavits of consent. Issues remaining for resolution are equitable distribution of
marital property and the parties' claims for counsel fees, costs and expenses.
IN RE: ADJUDICATION
NO. 96-6403 CIVIL TERM
During the pendency of this litigation, the parties entered into a certain agreement
respecting marital property, the enforceability and effect of which became subjects of
dispute. A petition to enforce the agreement was filed by Plaintiff on May 17~ 1999.
The case was received by the undersigned judge following a request of the
Cumberland County Divorce Master that he be excused from involvement due to his
acquaintance with the parties.~ A trial/hearing was held on the complaint, answer and
petition on August 16, 1999, November 24, 1999, March 2, 2000, and March 20, 2000.
Based upon the evidence presented at the proceedings, a divorce decree and
supplemental decrees respecting equitable distribution and counsel fees, costs and
expenses will be entered, in accordance with this opinion.
STATEMENT OF FACTS; PROCEDURAL HISTORY
The primary issues presented in this case are: (1) whether the parties' agreement
dated March 21, 1998 was valid and enforceable, (2) if so, what the intended effect of the
agreement was in terms of the marital estate for purposes of equitable distribution, (3)
whether Defendant dissipated a certain company which he operated known as ABS, (4)
what percent of marital property should be distributed to each party to provide equitable
distribution, and (5) whether either party should be awarded counsel fees, costs, and
expenses.
Plaintiff, Karen A. McDermott, who was bom April 15, 1953, and Defendant,
Edward A. McDermott, born April 18, 1952, were married on September 30, 1973.2 This
~ A letter to this effect, which does not appear on the docket, was written by the Master to
the former President Judge of Cumberland County, Harold E. Sheely, dated October 29,
1997.
2 N.T. 59-61, Hearing, Aug. 16, 1999.
2
marriage was the first for both parties.3 Plaintiff and Defendant have two children, Stacy,
born November 26, 1979, and Sean, who was born on November 11, 1984.4 Plaintiff and
Defendant separated in January of 1996.5 __
Sean currently lives with Plaintiff at 10 Stone Spring Lane, Camp Hill,
Cumberland County, Pennsylvania, the marital residence.6 Stacy attends college part-
time at Harrisburg Area Community College, works, and has her own apartment.7
Defendant is currently living with his parents at 2 Longview Drive, Mechanicsburg,
Cumberland County, Pennsylvaniafi
In February of 1998, after expanded discovery was authorized, Plaintiff and
Defendant each filed a pre-trial statement, listing marital property and its estimated or
appraised value.9 On March 21, 1998, having discussed the division of marital
property,l° Plaintiff and Defendant entered into an agreement, which dealt with certain of
the marital assets.~ The untitled agreement read, in its entirety, as follows:
This Agreement is between Edward A. McDermott &
Karen McDermott and is the division of the marital real
estate assets.
3 N.T. 60, Hearing, Aug. 16, 1999.
4 N.T. 5, Hearing, November 24, 1999.
5 N.T. 59-61, Hearing, Aug. 16, 1999.
6 N.T. 62-3, Hearing, Aug. 16, 1999.
7 N.T. 5-6, Hearing, November 24, 1999.
8 N.T. 4, Hearing, March 20, 2000.
9 Plaintiff's Pre-trial Statement; Defendant's Pre-trial Statement; Plaintiff's Exhibits 17
and 19.
l0 N.T. 56-7, Hearing, March 20, 2000.
~l Plaintiff's Exhibit 11.
The following agreement has been mutually agreed upon:
The residence at 10 Stone Spring Lane, Camp Hill, Pa.
17011, will go to Karen A. McDermott. She will be
responsible for the remaining balance of that mortgage.
The 2-unit rental property located at 402 E. Main
Street, Shiremanstown, Pa. 17011 will go to Karen A.
McDermott. She will be responsible for the remaining
balance of that mortgage.
o
The business property located at 3912 & 3906 Market
Street, Camp Hill, Pa. 17011, which consists of 1 (one)
building and 1 (one) vacant lot, each deeded separately.
These properties will be held jointly by Edward A. &
Karen A. until sold. At that time the proceeds of those
properties will be split equally. Karen will remain in
the managerial position of collecting rents, etc. The
rents collected and bills paid will continue to be held in
a joint account.
The remaining assets which consist of IRA's, savings
accounts, vehicles, ABS, life insurance policies, personal
items, etc., will be negotiated between (also medical)
Edward & Karen. Child & spousal support will remain as
ordered by the court. Any and all pertinent information
will be passed onto counsel in an expeditious manner. 12
Both Plaintiff and Defendant signed and dated the agreement. 13 Plaintiff prepared
the agreement without the assistance of counsel, and no attorneys were present when the
agreement was signed. 14
Plaintiff thereafter, on May 17, 1999, filed a document entitled Petition for
Hearing and To Enforce Partial Property Settlement Agreement.is Defendant filed an
answer to the petition on July 20, 1999, challenging the validity of the agreement on the
~2 Plaintiff's Exhibit 11.
~3 Plaintiff's Exhibit 11.
~4 N.T. 57, Hearing, March 20, 2000; N.T. 24-6, 71-4, Hearing, November 26, 1999.
as Plaintiff's Petition to Enforce the Partial Property Settlement Agreement.
4
grounds that (1) there was a lack of consideration, (2) there was incomplete disclosure of
assets, (3) the legal implications of executing the agreement were not disclosed to him,
(4) Defendant was mentally impaired at the time the agreement was--sig.ned, (5).
Defendant did not fully comprehend the meaning and effect of the agreement, and (6)
Defendant was under duress at the time the agreement was signed.~6 In addition, the
meaning of the agreement in terms of its intended effect upon equitable distribution is
disputed by the parties.
At the trial/hearing conducted by the court, Plaintiff and Defendant testified, inter
alia, about the circumstances surrounding the signing of the agreement on March 21,
1998. In support of the validity of the agreement, Plaintiff testified that, prior to the
March 21, 1998, meeting between her and Defendant, they had met at least three times to
discuss the division of marital property.~7 During this period prior to March 21, 1998,
Plaintiff arranged for appraisals of the real estate included in the agreement.~8 Plaintiff
testified that Defendant was aware of the appraisals, received copies of them, and
arranged for a second appraisal of the residence at 10 Stone Spring Lane, because he did
not agree with Plaintiff's appraisal.~9 The evidence also revealed that the Defendant had
filed his pre-trial statement a few weeks before the March 21, 1998, meeting.2° Plaintiff
further testified that, while she and Defendant did not discuss the value of the assets on
March 21, 1998, she knew that Defendant was aware of their worth and that they had
16 Defendant's Answer to Petition to Enforce Partial Property Settlement Agreement.
~7 N.T. 25-6, Hearing, November 24, 1999.
t8 N.T. 29, Hearing, November 24, 1999.
19 N.T. 29-37, Hearing, November 24, 1999. Defendant's appraisal of the residential
property was approximately $20,000.00 higher than Plaintiff's appraisal.
20 N.T. 38-9, Hearing, November 24, 1999; Plaintiff's Exhibits 17.
discussed the values of the assets at prior meetings.21 As to the emotional state of
Defendant, Plaintiff testified that the March 21, 1998, meeting was very emotional for
both of them, but that she did not really see a significant change in Defendant's. attitude.
suggestive of clinical depression on his part.22
Defendant's testimony, on the other hand, was to the effect that shortly prior to
the March 21, 1998, meeting, he had had a breakdown in his doctor's office? In 1997,
Defendant began seeking treatment for depression and was placed on medication.24 He
ended his treatment sometime in 1997, but went back to the psychologist, again for
depression, shortly before March, 1998.25 Defendant testified that the meeting on March
21, 1998, was very emotional, that he was crying, and that he made only a cursory
reading of the agreement.26 Defendant stated that he and Plaintiff had previously made
verbal agreements as to the division of marital property, so that when he arrived at the
meeting on March 21, 1998, he assumed that the document she prepared would reflect his
understandings from prior discussions.27 One such understanding, which Defendant
testified to, is that the March, 1998 agreement was intended to physically divide certain
2~ N.T. 74-5. Hearing, November 24, 1999.
22 N.T. 81-2, Hearing, November 24, 1999.
23 N.T. 54-6, Hearing, March 20, 2000.
24 N.T. 38-9. 54-6, Hearing, March 20, 2000.
2s N.T. 38-9, 54-6, Hearing, March 20, 2000.
26 N.T. 56-7, Hearing, March 20, 2000.
27 N.T. 56-8, Hearing, March 20, 2000. For example, Defendant testified that he did not
think ABS would be included in the agreement and that the division of marital property
would be fifty-fifty.
martial property, but that it was not supposed to exclude such property from equitable
distribution of the marital assets?
Plaintiff has a high school diploma and was primarily the homemaker, thr.0ughom'
the marriage? During the marriage, Plaintiff would occasionally help her mother out in
a tax collection office and worked for ABS, a business operated by Defendant, until about
1993.3° Plaintiff received no taxable income for her work at ABS.3~ After the separation,
Plaintiff again helped her mother in the tax collection office and also worked for her
brother, an insurance agent.32 Plaintiff's work in the insurance agency consisted of
answering phones to take claims and general customer service.33 She also worked on the
office computer.34 In addition to a bi-weekly paycheck, providing Plaintiff
approximately $14,000.00 a year, her brother would help her pay bills and do fix-it jobs
around the house and rental properties.35 Plaintiff has managed the rental property in
Shiremanstown since the separation.36 Pursuant to a court order issued by Judge Bayley
on January 25, 2000, Plaintiff receives $269.00 a month for spousal support and $487.83
28 N.T. 61, Hearing, March 20, 2000. The court finds Defendant's testimony to be more
credible.
29 N.T.
30 N.T.
3~ N.T.
32 N.T.
33 N.T.
34 N.T.
35 N.T.
36 N.T.
64-6, Hearing, Aug. 16, 1999.
64-6, Hearing, Aug. 16, 1999; N.T. 49, Hearing, November 24, 1999.
64-6, Hearing, Aug. 16, 1999.
67-9, Hearing, Aug. 16, 1999.
67-9, Hearing, Aug. 16, 1999.
7-9, Hearing, November 24, 1999.
17-30, Hearing, November 24, 1999.
18, Hearing, November 24, 1999.
a month for child support for Sean from Defendant.37 Plaintiff has no health problems or
any other condition that could limit her working ability?
Defendant has a high school diploma and attended one year of_co.mmunity'
college.39 Defendant received technical training in 1984 on the equipment owned by the
company he was working for at the time.4° Defendant has received no other technical
training since.4~ In 1988, Defendant formed a company called ABS Mailing Systems.42
ABS (Alternative Business Services) was created to service equipment, such as labeling
machines, but shortly after its inception it also began to sell various product lines.43 In
1989, ABS picked up the "Buskro" product line, which consisted of high-speed labeling
equipment and ink jet equipment.44 Over the next four years, ABS added product lines
from Powis Parker and Xerox.45 In 1990, ABS hired Charles Kern as an accountant?
Kern was terminated in 1991 and ABS retained Stephen Gift to take his place.47
37 Plaintiff's Exhibit 20.
38 N.T. 7-8, Hearing, November 24, 1999.
39 N.T.
40 N.T.
41 N.T.
42 N.T.
43 N.T.
44 N.T.
45 N.T.
46 N.T.
47 N.T.
13-4, Hearing, March 20, 2000.
13-4, Hearing, March 20, 2000.
17-8, Hearing, March 20, 2000.
15, Heating, March 20, 2000.
15-6, Hearing, March 20, 2000.
16, Hearing, March 20, 2000.
16-7, Hearing, March 20, 2000.
18, Hearing, March 20, 2000.
19-20, Hearing, March 20, 2000.
In 1992, in addition to operating ABS, Defendant took steps to form Buskro
U.S.A.48 Defendant, Henry Kropman, the president of Buskro Limited in Canada, and
Arthur Ringuette, owner of a company known as A & R Mailing Machinery,49.intende.d'
to form Buskro U.S.A. as a partnership,so Both Defendant and Arthur Ringuette used
equipment manufactured by Buskro Limited? Buskro Limited was a Canadian
company, however, and the plan to set up Buskro U.S.A. was designed to create a Buskro
distributor in the United States.52 Many obstacles arose, however, which prevented the
formal organization of Buskro U.S.A.53 Ringuette testified that Buskro U.S.A. never
made a profit and had no assets? Ringuette testified that neither he nor Defendant
received any profit or income from Buskro U.S.A.55 Michael Signor, a certified public
accountant who testified at the Hearing, agreed that Buskro U.S.A. had no value as of
December 31, 1995.56 Plaintiff presented no testimony to contest the proposition that
Buskro U.S.A. had no value.
In 1993, ABS began experiencing financial and performance problems? Several
of the employees of ABS were leaving, Buskro Limited was pressuring ABS to sell, and
48 N.T. 20-3, Hearing, August 16, 1999.
49 N.T. 19-20, Hearing, August 16, 1999. A & R Mailing Machinery purchased and
repaired mailing equipment manufactured by Buskro.
5o N.T. 11, Hearing, August 16, 1999.
5~ N.T.
52 N.T.
53 N.T.
54 N.T.
55 N.T.
56 N.T.
57 N.T.
19-20, Hearing, August 16, 1999; N.T. 16, Hearing, March 20, 2000.
20, Hearing, August 16, 1999.
11-2, Hearing, August 16, 1999.
10-4, 27, Hearing, August 16, 1999.
25, 52, Hearing, August 16, 1999.
154-56, Hearing, March 2, 2000.
26, Hearing, March 20, 2000; Defendant's Exhibit 6.
9
suppliers began withdrawing? Powis Parker, a significant supplier for ABS, wrote a
letter to ABS in November of 1994, and another in April of 1996, expressing its concern
about ABS's production performance? In April of 1997, Powis Parker terminated its.
contract with ABS.6° Prior to the contract termination by Powis Parker, ABS had lost a
State contract with General Services, its largest customer.6~ This State contract was
canceled because of a State decentralization process, unconnected with ABS; the
cancellation caused ABS to lose significant profits and volume of supplies for Powis
Parker.62 The termination of the state and Powis Parker contracts led to a decision by
Defendant to cancel his contract with Xerox and to sell ABS before more money was
lost.63
In December of 1997, Defendant sold ABS for $50,000.00.64 Defendant testified
that he believed $50,000.00 to be a fair sale price based on a conversation with Henry
Kropman, the national sales manager of Buskro.65 Because Plaintiff and Defendant were
not legally divorced at this time, Plaintiff's consent was necessary to facilitate the sale of
58 N.T.
59 N.T.
60 N.T.
61 N.T.
62 N.T.
63 N.T.
64 N.T.
for the
26, Hearing, March 20, 2000.
27-32, Hearing, March 20, 2000; Defendant's Exhibit 6 and 7.
27-32, Hearing, March 20, 2000; Defendant's Exhibit 8.
32-3, Hearing, March 20, 2000.
33, Hearing, March 20, 2000.
35, Hearing, March 20, 2000.
24, Hearing, March 20, 2000. ABS sale price of $50,000.00 included $5,000.00
rights to sell Buskro, $5,000.00 for good will, $5,000.00 in inventory, $5,000.00
for the client list, $10,000.00 for a noncompetition clause effective for three years, and
$20,000.00 of compensation to Defendant for six months work in a consultant position.
65 N.T. 41-2, Hearing, March 20, 2000.
10
ABS.66 Defendant testified that he showed Plaintiff all the sales documents, that her
attorney reviewed them with her, and that she agreed to the sale.67
Plaintiff testified that she believed Defendant allowed ABS to "go down the
tubes.''68 Plaintiff also stated that she would not have agreed to the sale of ABS but for
the fact that Defendant told her it would go bankrupt if it were not sold? Charles Kern,
a certified public accountant and certified valuation analyst, called on behalf of Plaintiff,
testified that he believed ABS was worth $771,000.00 at the end of 1995.70
Defendant testified, however, as to certain errors that he perceived to exist in
Charles Kern's report.TM In this regard, Defendant clarified the relationship of ABS with
Fry Communications, stating that Fry was a sporadic customer? Defendant also testified
that Kern's assertion that ABS leased equipment was erroneous, and that Xerox was a
supplier for ABS, never a customer as Kern had believed.73 Defendant presented expert
testimony, through John Sheridan, a certified public accountant and lawyer,TM as to the
value of ABS in 1995.?5 Mr. Sheridan testified that ABS had a value of approximately
66 N.T. 78, Hearing, November 24, 1999. Plaintiff testified that she only signed the
consent form because she believed that ABS would go bankrupt.
67 N.T. 39-40, Hearing, March 20, 2000.
68 N.T. 78, Hearing, March 20, 2000; N.T. 40, Hearing, November 24, 1999.
69 N.T. 40, Hearing, November 24, 1999.
70 N.T. 27-37, Hearing, March 2, 2000.
?~ N.T. 49-51, Hearing, March 20, 2000.
72 N.T. 49-50, Hearing, March 20, 2000.
73 N.T. 49-50, Hearing, March 20, 2000.
74 N.T. 86, Hearing, March 2, 2000. John Sheridan is a CPA and CFE, has a MST and D,
and has been qualified in other courts as an expert in valuation matters.
75 N.T. 91-4, Hearing, March 2, 2000.
11
$50,000.00 in 1995, the same amount it sold for in 1997.76 Mr. Sheridan also suggested
the presence of many errors in Charles Kern's report and explained how he had arrived at
a much different value for the business? He emphasized Mr. Kem's reLian.c~ upon..
allegedly insufficient financial statements prepared by Mr. Gift, his failure to inquire into
ABS's gross profit percentage jump from 27 to 60 percent in just three years, and his
production of faulty calculations arising out of a method of valuation based on two
different systems of accounting?
Throughout the marriage, Plaintiff and Defendant maintained a modest standard
of living? Defendant testified that they rarely took vacations, went out to dinner, or
spent money on entertainment, and that they spent very little on clothing? Most of the
money they had was put into real estate.81 Plaintiff and Defendant acquired various
marital assets in the form of realty, such as their residence at 10 Stone Spring Lane,
Camp Hill, Pennsylvania, an apartment building at 402 E. Main Street and 3 Stoner
Avenue, Shiremanstown, Pennsylvania, and an office building and lot at 3906 and 3912
Market Street, Camp Hill, Pennsylvania.82 They opened accounts at Members First
Credit Union and Commerce Bank, established IRAs with Members First, and held stock
76 N.T. 92, Hearing, March 2, 2000.
77 N.T. 94-117, Hearing, March 2, 2000.
78 N.T. 94-110, Hearing, March 2, 2000.
79 N.T. 62, Hearing, March 20, 2000.
80 N.T. 62-3, Hearing, March 20, 2000.
8~ N.T. 62, Hearing, March 20, 2000.
82 Plaintiff's Exhibits 17 and 19; N.T. 79-82, Hearing, March 20, 2000, N.T.
Hearing, November 24, 1999.
18-20,
12
in Xerox and Fetrow's Hardware? They also acquired several cars, assorted gold coins,
household furnishings, and the business known as ABS Mailing Systems, Inc.84
Plaintiff and Defendant testified as to the value and ownership of much of the
aforementioned property and are in disagreement as to a few assets only. Plaintiff asserts
that the gold coins and stock in Fetrow's Hardware were a gift to her and therefore not a
marital asset? Plaintiff and Defendant also disagree about the value of certain marital
property, including ABS, Buskro U.S.A., the residence at 10 Stone Spring Lane, and
Defendant's IRA? The parties' disagreement as to the value of ABS and Buskro U.S.A.
has already been addressed in this opinion. The disagreement as to the value of the
residence at 10 Stone Spring Lane is such that the parties' appraisals of the residence are
different by approximately $20,000.00.87 Plaintiff's appraisal of the residence proposed a
value of $150,000.00, while Defendant's appraisal of the residence listed a value of
$174,000.00.88 As to Defendant's IRA, Plaintiff first listed the value of Defendant's IRA
as $13,000.00, but subsequently testified that the Defendant's IRA was worth
$15,113.12.89 Defendant, on the other hand, presented evidence that the value of his IRA
83 Plaintiff's Exhibits 17 and 19; N.T. 101-19, Hearing, November 24, 1999.
84 Plaintiff's Exhibits 17 and 19, N.T. 71-2, 77, 110-20, Hearing, November 24, 1999.
85 Plaintiff's Exhibits 17 and 19; N.T. 102- 155, Hearing, November 24, 1999. While
Plaintiff has suggested that the stock in Fetrow's Hardware is her personal asset, her
testimony at indicated that both Plaintiff and Defendant purchased the stock during the
marriage. N.T. 114, Hearing, November 24, 1999.
86 N.T. 31-8, Hearing, November 24, 1999.
87 N.T. 122, Hearing, November 24, ! 999.
88 Plaintiff's Exhibits 17 and 19.
89 Plaintiff's Exhibit 19; N.T. 31-8, Hearing, November 24, 1999.
13
was $14,177.00.9o Finally, Plaintiff testified that she and Defendant borrowed
$14,000.00 from her mother, representing a marital debt.9i
As a result of this divorce litigation, Plaintiff has incurred counsel foos a. nd costs..
of $14,704.76.92 Plaintiff argues that she is without sufficient funds to pay for this
litigation and that Defendant should bear the burden of her fees and costs.93 Defendant's
attorneys' fees and costs, on the other hand, amount to $30,721.50.94 Defendant testified
that he cannot currently afford health insurance and had to move in with his parents
because he could not pay the rent at his apartment? Defendant is trying to begin a new
business in carpentry and is not earning very much at this time.96 Defendant therefore
asserts that he- does not have adequate means to support himself and should be awarded
counsel fees, costs and expenses of litigation?
Upon consideration of all the evidence presented, and as will be discussed more
fully hereafter, the court did not find that the parties' agreement respecting certain marital
assets was the product of misrepresentation, intentional or otherwise, duress, inadequate
disclosure of assets or legal rights, or mental impairment. The court also concludes, as a
factual matter, that the intent of the parties in entering into the agreement was to divide
90 Plaintiff's Exhibit 17.
91 N.T. 166, Hearing, November 24, 1999; Plaintiff's Exhibit 19.
92 Plaintiff's Exhibit 28; N.T. 44-5, 119-20, Hearing, November 24, 1999.
93 Plaintiff's Complaint in Divorce; N.T. 44-5, Hearing, November 24, 1999.
94 Defendant's Exhibits 10 and 11; N.T. 66-9, Hearing, March 20, 2000.
95 N.T. 62-6, Hearing, March 20, 2000.
96 N.T. 64-6, Hearing, March 20, 2000.
97 Answer and Counterclaim to Complaint in Divorce; N.T. 66-9, 154, Hearing, March
20, 2000.
14
the assets in a physical sense without excluding the property from the marital estate for
purposes of a scheme of equitable distribution.
Finally, after reviewing the evidence presented at trial, the court ~nds the~'
following assets to constitute the marital estate at the values listed:
1. Residence at 10 Stone Spring Lane $139,000.00
2. Apartment at 402 E. Main Street $ 80,000.00
3. Plaintiff's IRA $ 9,000.00
4. Fetrow stock $ 525.00
5. 1992 Mercedes $ 23,650.00
6. ABS $ 50,000.00
7. Defendant's IRA $ 14,177.00
8. Xerox stock (27 shares) $ 1,971.00
9. 1990 Volvo wagon $ 8,550.00
10. 1990 Chevy van $ 3,745.00
11. Members First checking and savings accounts $ 1,591.00
12. Gold coins $ 3,500.00
13. Remaining household furnishings $ 6,000.00
14. Office building at 3912 Market Street $125,000.00
15. Lot at 3906 Market Street $105,000.00
16. Marital debt to Plaintiff's mother $ 14,000.00
17. Buskro $ 0.00
In making these findings, the court relied on the evidence presented by both
parties. In addition to crediting the testimony of Arthur Ringuette and Michael Signor
regarding the value of Buskro, the court found the expert testimony of John Sheridan to
be persuasive as to the value of ABS. In accepting this testimony, the court also found
that Defendant did not deplete the value of ABS or any other marital asset. The findings
of fact made by the court are discussed in greater detail in the following section. In
addition, it is believed that the marital assets received by each party will enable them to
pay their own attorneys' fees, costs, and expenses.
DISCUSSION
Statement of I,aw
15
A. PROPERTY AGREEMENT.
Standard of Review and Burden of Proof. Property settlement agreements
between a husband and a wife will be enforced by the courts in accordance with .the same.
rules of law applying to the validity of contracts generally. Lyons v. Lyons, 401 Pa.
Super. 271,277, 585 A.2d 42, 45 (1991), citing VanKirk v. VanKirk, 336 Pa. Super. 502,
505,485 A.2d 1194, 1196 (1984). When such agreements are entered into without fraud,
misrepresentation, or duress, and are based on full and fair disclosure of financial
positions, they are enforceable. Simeone v. Simeone, 525 Pa. 392, 400, 581 A.2d 162,
165 (1990).
Consideration. The reasonableness of a bargain is, in general, not a proper
subject for judicial review. Simeone v. Simeone, 525 Pa. 392, 401,581 A.2d 162, 166
(1990). The law will not normally inquire into the adequacy of consideration. Thomas v.
Thomas Flexible Coupling Co., 353 Pa. 591,598, 46 A.2d 212, 216 (1946). Contracting
parties are, as a general rule, bound by their agreements, without regard to whether the
agreements embodied reasonable or fair bargains. Adams v. Adams, 414 Pa. Super. 634,
638, 607 A.2d 1116, 1119 (1992), appeal denied, 533 Pa. 617, 619 A.2d 699 (1993);
$imeone v. $imeone, 525 Pa. 392, 399-400, 581 A.2d 162, 165 (1990).
A review of the parties' agreement in the present case does not lead to a
conclusion that it should be deemed unenforceable on the basis of the consideration
involved.
Disclosure of Assets. Whether adequate disclosure of the parties' financial worth
has been made will depend on the facts and circumstances of individual cases. Mormello
v. Mormello, 452 Pa. Super. 590, 599-600, 682 A.2d 824, 828 (1996). Disclosure need
16
not be exact, so long as it is full and fair. Simeone v. $imeone, 525 Pa. 392, 403, 581
A.2d 162, 167 (1990); Adams v. Adams, 414 Pa. Super. 634, 638, 607 A.2d 1116, 1118
(1992), appeal denied, 533 Pa. 617, 619 A.2d 699 (1993). Courts may cons. ider the..
parties' general knowledge of their financial resources and value of marital assets. See
generally id. at 637-38,607 A.2d at 1118.
Defendant's claim that there was no full disclosure of assets is not supported by
the evidence. In Adams v. Adams,98 the Superior Court took into consideration the fact
that a wife was involved in her husband's business in arriving at a conclusion that she had
been sufficiently apprised of the business's financial value. An agreement need not list
the value of every asset negotiated, so long as the parties are aware of the approximate
value of any assets. The law does not require disclosure to be exact.
In the present case, Defendant had recently filed his Pre-trial Statement, which
listed a value for each asset included in the March 21, 1998 agreement. Evidence was
also presented that the value of the assets had been discussed in the previous meetings
between Plaintiff and Defendant. While the agreement did not specifically list the value
of the assets in the agreement, Defendant was aware of their approximate worth and can
therefore not avoid the agreement on grounds of nondisclosure.
Disclosure of Legal Rights and Implications of the Contract. It has been said that
parties to a property settlement agreement must be aware of the statutory rights they are
relinquishing in order for there to be full and fair disclosure. Adams v. Adams, 414 Pa.
Super. 634, 638, 607 A.2d 1116, 1119 (1992), appeal denied, 533 Pa. 617, 619 A.2d 699
(1993). Nevertheless, a party's failure to consult with counsel regarding the legal
17
implications of a contract or any misunderstandings he or she might have conceming the
agreement is not determinative of its validity. Mormello v. Mormello, 452 Pa. Super. 590,
599, 682 A.2d 824, 828 (1996); $imeone v. Simeone, 525 Pa. 392, 400-01,581 A.:2d 162:
166 (1990). One is legally bound to know the terms of the contract entered into. Id. at
400, 581 A.2d at 166, citing Montgomery v. Levy, 406 Pa. 547, 550, 177 A.2d 448, 550
(1962).
Defendant's argument that the agreement is invalid because it did not disclose the
legal implications of his execution of it or otherwise express the legal rights at stake is
not persuasive.
Mental Impairment. Under Pennsylvania law, it is presumed that an adult is
competent to enter into a contract, and a signed document gives rise to a presumption that
it accurately expresses the state of mind of the signing party. Estate of McGovern v.
Commonwealth, 512 Pa. 377, 384, 517 A.2d 523, 526 (1986); Taylor v. Avi, 272 Pa.
Super. 291,296, 415 A.2d 894, 896 (1979). To rebut this presumption, the challenger
must present evidence of mental incompetency which is clear, precise, and convincing.
Estate ofMcGovern v. Commonwealth, 512 Pa. 377, 384, 517 A.2d 523, 526 (1986);
Elliott v. Clawson, 416 Pa. 34, 35,204 A.2d 272, 273 (1964).
Defendant's position that he was mentally impaired at the time of signing the
agreement is not supported by clear, precise, and convincing evidence. Defendant did not
present any expert medical testimony to support his allegation of mental impairment
resulting from depression, nor was his own testimony on the point persuasive to the court.
Although the March 21, 1998 meeting may have been emotional, Defendant was not so
98 414 Pa. Super. 634, 607 A.2d 1116 (1992), appeal denied, 533 Pa. 617, 619 A.2d 699
18
depressed, in the court's view, as to render him incapable of entering into a valid
contract. The property agreement will therefore not be set aside on grounds of mental
impairment on the part of a party. __
Comprehension. Parties are bound by their contracts without regard to whether
the terms were read and fully understood. Adams v. Adams, 414 Pa. Super. 634, 638, 607
A.2d 1116, 1119 (1992), appeal denied, 533 Pa. 617, 619 A.2d 699 (1993); $imeone v.
$imeone, 525 Pa. 392, 400, 581 A.2d 162, 165 (1990). Failure to read a contract does not
warrant avoidance or nullification of its provisions; in general, a person cannot escape his
contractual obligations by claiming that he did not understand what he was signing. Id.
at 400, 581 A.2d at 165-66. A contract cannot be avoided because a party failed to
consult with counsel. Id. at 400-01, 581 A.2d at 166. There is also no merit to the
argument that the contract is invalid because one of the parties was given a limited time
to read the contract or little time to take it to counsel. Mormello v. Mormello, 452 Pa.
Super. 590, 598-99, 682 A.2d 824, 828 (1996).
Based upon this authority, Defendant's position that the agreement between the
parties is unenforceable as to him due to a lack of understanding on his part can not be
sustained.
Duress. Duress in contract law has been defined as
[t]hat degree of restraint or danger, either actually inflicted
or threatened and impending, which is sufficient in severity
or apprehension to overcome the mind of a person of
ordinary firmness .... Moreover, in the absence of threats
of actual bodily harm there can be no duress where the
contracting party is free to consult with counsel.
(1993).
19
Adams v. Adams, 414 Pa. Super. 634, 639, 607 A.2d 1116, 1119 (1992), citing Hamilton
v. Hamilton, 404 Pa. Super. 533,536, 591 A.2d 720, 721 (1991). Using a party's sense
of guilt to one's advantage, or even threatening his job, without more, will_generally bq.
insufficient to void an agreement when the contracting party was free to consult with
counsel. Adams v. Adams, 414 Pa. Super. 634, 639, 607 A.2d 1116, 1119 (1992), appeal
denied, 533 Pa. 617, 619 A.2d 699 (1993).
Although Defendant asserts that he was under duress at the time the agreement
was signed, the evidence fell far short of establishing the degree of coercion which would
render the agreement void or voidable on that basis.
In summary, the circumstances surrounding the March 21, 1998, meeting,
including the information available to both parties, the absence of legal coercion, the
ability of Defendant to leave the meeting and consult with counsel, and the absence of
evidence of mental impairment, lead to a rejection of Defendant's argument that the
agreement of the parties executed on March 21, 1998, should be deemed of no effect.
B. EQUITABLE DISTRIBUTION.
Marital Property and Settlement Agreements. Marital property includes all
property acquired by either party during the marriage. 23 Pa.C.S.A. §3501(a). Marital
property does not include property excluded by valid agreement of the parties entered
into before, during, or after the marriage. Id. at §3501(a)(2); Laudig v. Laudig, 425 Pa.
Super. 228, 232-33, 624 A.2d 651,653 (1993). Property settlement agreements between
a husband and a wife will be enforced by the courts in accordance with the same rules of
law applying to contracts generally. See Lyons v. Lyons, 401 Pa. Super. 271,277, 585
A.2d 42, 45 (1991), citing VanKirkv. VanKirk, 336 Pa. Super. 502, 505, 485 A.2d 1194,
20
1196 (1984). To ascertain the intent of the parties, the court may take into consideration
the surrounding circumstances, the situation of the parties, and the subject matter of the
agreement. Laudig v. Laudig, 425 Pa. Super. 228,233,624 A.2d 651,653 {1.99.3), citing.
Wrenfield Homeowners Ass'n, Inc. v. DeYoung, 410 Pa. Super. 621,627, 600 A.2d 960,
963 (1991). Where ambiguity exists in a contract, courts are free to construe language
most strongly against the drafter. Raiken v. Mellon, 399 Pa. Super. 192, 198, 582 A.2d
11, 13 (1990).
Several factors have led the court to adopt the interpretation of the agreement
advanced by Defendant. First, the agreement does not reference the parties' rights to an
equitable division of the marital estate under the Divorce Code, it does not expressly
purport to affect such rights, in whole or in part, and it contains no waiver of those rights.
The contract does not, in other words, express an intent to withdraw from consideration
in an eventual equitable distribution order the value of the items divided between the
parties in the interim agreement.
Second, the highly disparate shares of the part of the marital estate provided to the
parties in the agreement does not suggest a scheme intended to substitute for equitable
distribution.
Third, Defendant testified that his understanding of the March 21, 1998,
agreement was that, while Plaintiff would take physical possession of certain marital
property, such property would not be taken out of the marital estate for purposes of
equitable distribution; the court found this testimony to be credible.
Finally, the ambiguity of the agreement in regard to its intended effect upon
equitable distribution under the Divorce Code is to be resolved against Plaintiff, as the
21
drafter of the document. For these reasons, the court has interpreted the agreement
between the parties as not withdrawing from consideration in a determination of equitable
distribution the value of those items which the parties divided in their_ ag.mement.'
executed on March 21, 1998.
Date of Valuation. While the trial court has discretion to choose the date of
valuation of marital property that best provides for economic justice between the parties,
Smith v. Smith, 439 Pa. Super. 283, 306, 653 A.2d 1259, 1270 (1995), appeal denied, 541
Pa. 641, 663 A.2d 693 (1995), valuation should be made as close as possible to the
property distribution date. Sutliffv. Sutliff, 518 Pa. 378, 380-81,543 A.2d 534, 535-36
(1988). The parties' present needs and circumstances are to be a major factor in
distributing marital assets. Id. at 383, 543 A.2d at 537. It would be impossible to
construct a distribution scheme that would be fully responsive to those needs and
circumstances if the court were not to consider the current value of the assets being
distributed. Id. at 383, 543 A.2d at 537. To allow a party to deplete a marital asset after
separation, however, would defeat the purpose and spirit of equitable distribution.
Naddeo v. Naddeo, 426 Pa. Super. 131,138, 626 A.2d 608, 611 (1993).
The values assigned to the marital assets listed herein were determined from the
evidence presented at trial and were modified to reflect changes to the estate. For
example, in determining the value of the marital home and other real estate, the court
considered not only the appraisals done on the property, but adjusted those figures to
reflect any payments made on the properties. The values listed in this opinion have,
therefore, been determined as close as possible to the distribution date of the marital
assets. In addition, by finding the expert opinion of John Sheridan to be persuasive
22
just after considering all relevant factors.
include:
(1) The length of the marriage
(2) Any prior marriage of either party.
(3)
regarding the value of ABS, it is not necessary to make further adjustments to the value
of ABS because Defendant did not deplete the marital asset.
Factors of Equitable Distribution. In an action for divorce, the courI_sha.!!, upon..
request of either party, equitably divide the marital property between the parties without
regard to marital misconduct in such proportions and in such a manner as the court deems
23 Pa.C.S.A. §3502(a). Relevant factors
(4)
The age, health, station, amount and sources of income,
vocational skills, employability, estate, liabilities and
needs of each of the parties.
The contribution by one party to the education, training
or increased earning power of the other party.
(5) The opportunity of each party for future acquisitions of
capital assets and income.
(6)
The sources of income of both parties, including, but
not limited to, medical, retirement, insurance or other
benefits.
(7)
The contribution or dissipation of each party in the
acquisition, preservation, depreciation or appreciation
of the marital property, including the contribution of a
party as a homemaker.
(8) The value of the property set apart to each party.
(9) The standard of living of the parties established during
the marriage.
(10) The economic circumstances of each party,
including Federal, State and local tax ramifications, at
the time the division of property is to become effective.
23
(11) Whether the party will be serving as the custodian of any dependent minor children.
23 Pa.C.S.A. §3502(a). Courts must not presume a 50/50 split to be the most equitable
distribution. Powell v. £owell, 395 Pa. Super. 345,352, 577 A.2d 576, 579 (1990). "'
Given the evidence presented and consideration of the factors listed in 23 Pa.
C.S.A. §3502, this court finds that Plaintiff should receive fifty-five percent of the marital
assets. Defendant will receive forty-five percent of the marital assets, including the
distribution made by the property agreement. In reaching this conclusion, the court
considered, among other things, Plaintiff's role as homemaker and her willingness to
accept part-time employment to help support her family. The court took into
consideration the extensive work and management experience of Defendant as it affects
his ability to acquire future employment. The fact that Sean, the parties' son, lives with
Plaintiff was also relevant in determining the needs and future earning capacity of the
parties. Considering all the factors listed in 23 Pa.C.S.A. §3502, this court finds that a
55/45 split is the most fair and equitable distribution.
The marital assets will be distributed as follows:
Plaintiff, Karen A. McDermott will receive:
1. Residence at 10 Stone Spring Lane $139,000.00
2. Apartment at 402 E. Main Street $ 80,000.00
3. Plaintiff's IRA $ 9,000.00
4. Fetrow stock $ 525.00
5. 1992 Mercedes $ 23,650.00
6. Half the value of the office building at 3912 Market Street $ 62,500.00
7. Half the value of the lot at 3906 Market Street $ 52,500.00
TOTAL $367,175.00
Defendant, Edward A. McDermott will receive:
1. ABS $ 50,000.00
2. Defendant's IRA $ 14,177.00
24
3. Xerox stock (27 shares) $ 1,971.00
4. 1990Volvo wagon $ 8,550.00
5. 1990 Chevy van $ 3,745.00
6. Members First checking and savings accounts $ 1,591.00
7. Gold coins $ 3,500~00
8. Remaining household furnishings $ 6,000.00
9. Half the value of the office building at 3912 Market Street $ 62,500.00
10. Half the value of the lot at 3906 Market Street $ 52,500.00
TOTAL $204, 534.00
mother
Each party will be responsible for paying half the marital debt to Plaintiff's
of $14,000.00; therefore:
1. Defendant must pay $7,000.00 to Plaintiff's mother.
2. Plaintiff must pay $7,000.00 to her mother.
Each party will be responsible for encumbrances on property which he or she
receives. After distribution of marital property, to effectuate the 55/45 division of value,
Plaintiff will pay Defendant $52,725.00.
C. ATTORNEY FEES AND COSTS.
Award Amount and Burden of Proof. The awarding of attorney's fees upon
divorce is not automatic, and is not intended to fully reimburse one party; rather, the
awarded amount should only be sufficient to advance just results and place the parties on
equal footing. Williamson v. Williamson, 402 Pa. Super. 276, 289, 586 A.2d 967, 973
(1991). Actual need must be shown to justify the award of attorney's fees. Hoover v.
Hoover, 288 Pa. Super. 159, 161-62, 431 A.2d 337, 338 (1981). The party requesting
attorney's fees has the burden to prove such need. Dimock v. Dimock, 21 D. & C.3d 499,
503 (Luzerne County 1982).
This court has discretion to award attorney's fees to any party to advance just
results by placing the parties on equal footing. The evidence presented in this case
establishes that, while Defendant has a greater earning capacity than Plaintiff does, he is
25
currently facing more financial problems. Both parties should be able to pay their own
attorney's fees, costs, and expenses from the marital property received.
CONCLUSION
For the foregoing reasons, the attached decree in divorce and supplemental
decrees respecting equitable distribution and counsel fees, costs, and expenses will be
entered.
Samuel L. Andes, Esq.
525 North 12th Street
Lemoyne, PA 17043
Attorney for Plaintiff
BY THE COURT,
J~2~siey Ole~,"J. '
LeRoy Smigel, Esq.
Ann V. Levin, Esq.
2917 North Front Street
Harrisburg, PA 17110
Attorneys for Defendant
26
KAREN A. McDERMOTT,
Plaintiff
Vo
EDWARD A. McDERMOTT,
Defendant
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION- LAW
NO. 96-6403 CIVIL TERM
SUPPLEMENTAL DECREE RESPECTING COUNSEL FEES.
COSTS, AND EXPENSES
AND NOW, this |Z~C~ay of September, 2000, upon consideration of Plaintiff's
Complaint in Divorce, Defendant's Answer with counterclaim for counsel fees, costs and
expenses, and Plaintiff's Petition for Hearing and To Enforce Partial Property Settlement
Agreement, following a trial/hearing, and for the reasons stated in the accompanying
opinion, the claims for counsel fees, costs and expenses are denied.
BY THE COURT,
Samuel L. Andes, Esq.
525 North 12th Street
Lemoyne, PA 17043
Attorney for Plaintiff
LeRoy Smigel, Esq.
Ann V. Levin, Esq.
2917 North Front Street
Harrisburg, PA 17110
Attorneys for Defendant
KAKEN A. McDERMOTT,
Plaintiff
Vo
EDWARD A. McDERMOTT,
Defendant
IN THE COURT OF COMMON PLEAS OF
CUMBERLAND COUNTY, PENNSYLVANIA
CIVIL ACTION- LAW
NO. 96-6403 CIVIL TERM
SUPPLEMENTAL DECREE RESPECTING EQUITABLE DISTRIBUTION
AND NOW, this IZt~day of September, 2000, upon consideration of Plaintiff's
Complaint in Divorce and Plaintiff's Petition for Hearing and To Enforce Partial Property
Settlement Agreement, following a trial/hearing, and for the reasons stated in the
accompanying opinion, it is ordered and decreed as follows:
1. The parties' marital property shall be divided as follows, subject to Plaintiff's
payment to Defendant of the sum of $52,725.00 within sixty days, with the properties at
3906 and 3912 Market Street to be sold pursuant to the parties' agreement executed
March 21, 1998:
Plaintiff, Karen A. McDermott shall receive:
1. Residence at 10 Stone Spring Lane $139,000.00
2. Apartment at 402 E. Main Street $ 80,000.00
3. Plaintiff's IRA $ 9,000.00
4. Fetrow stock $ 525.00
5. 1992 Mercedes $ 23,650.00
6. Half the value of the office building at 3912 Market Street $ 62,500.00
7. Half the value of the lot at 3906 Market Street
TOTAL $367,175.00
Defendant, Edward A. McDermott shall receive:
1. ABS $ 50,000.00
2. Defendant's IRA $ 14,177.00
3. Xerox stock (27 shares) $ 1,971.00
4. 1990 Volvo wagon $ 8,550.00
5. 1990 Chevy van $ 3,745.00
6. Members First checking and savings accounts $ 1,591.00
7. Gold coins $ 3,500.00
8. Remaining household furnishings $ 6,000.00
9. Half the value of the office building at 3912 Market Street $ 62,500.00
10. Half the value of the lot at 3906 Market Street $ 52.500.00
TOTAL $204, 534.00
2. Each party shall be responsible for one half the marital debt to Plaintiff's
mother of $14,000.00:
1. Defendant shall pay $7,000.00 to Plaintiff's mother.
2. Plaintiff shall pay $7,000.00 to her mother.
3. Each party shall be responsible for the encumbrances upon property he
or she receives.
BY THE COURT,
Samuel L. Andes, Esq.
525 North 12th Street
Lemoyne, PA 17043
Attorney for Plaintiff
LeRoy Smigel, Esq.
Ann V. Levin, Esq.
2917 North Front Street
Harrisburg, PA 17110
Attorneys for Defendant