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HomeMy WebLinkAbout99-1259 CIVILTIMOTHY R. PERCARPIO, PETITIONER V. DONNA J. KELLY, RESPONDENT IN RE: IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA 99-1259 CIVIL TERM PETITION TO RESCIND OR REFORM A MARITAL SETTLEMENT AGREEMENT OPINION AND ORDER OF COURT Bayley, J., September 21, 2001:-- Petitioner, Timothy R. Percarpio, age 60, and respondent, Donna J. Kelly, age 58, were married on June 2, 1962. They were divorced on September 6, 1974. They remarried on June 19, 1976. They were divorced on February 3, 1993. They had five children. By the time of their second divorce all of their children were adults. The parties married again on September 17, 1994, and were divorced a third time on June 23, 1999. They are now each married to another person. The parties lived in North Dakota during their first marriage. Upon the first divorce, wife received the marital home, but there were no other significant assets. Petitioner moved to Pennsylvania in 1977, and started a dental practice. During their second marriage, the parties acquired significant assets. Upon their second divorce, they entered into a comprehensive written property settlement agreement dated November 20, 1992. Upon their third divorce, they entered into a comprehensive written property settlement agreement dated March 26, 1999. On May 21, 2001, 99-1259 CIVIL TERM Timothy R. Percarpio filed a petition seeking to have the property settlement agreement dated March 26, 1999, either "rescinded or reformed on the basis of mutual mistake by the parties." The hearing was conducted on August 1, 2001. At the time of their second divorce, the parties each had their own attorney when they entered into the property settlement agreement dated November 20, 1992. In that agreement, husband received a vacation home in Virginia, an office building in which he conducted his dental business, his dental practice, his IRA and CEO accounts, all life insurance policies in which he was named as an owner, and some personal property. Wife received a marital residence in Dillsburg, which was subject to a mortgage with a balance of $101,250, a condominium in Virginia, her IRA and Keogh accounts, $50,000 which was transferred into her Keogh account by husband, three building lots in Virginia, and some personal property. Husband agreed, for a period of fifteen years, to pay wife an amount equal to the mortgage payment on the marital residence, and to pay her non-modifiable alimony of $2,000 per month for ten years subject to termination upon the death of either party, her co-habitation with an unrelated adult male, or her remarriage. During the parties' third marriage the Virginia condominium was sold. Wife received $80,000 and husband received $20,000. In December, 1998, when they separated for the last time, they agreed to privately negotiate a marital settlement agreement. One of the reasons husband wanted to do it that way is because he hates attorneys. He negotiated with wife and reached a tentative agreement. She contacted -2- 99-1259 CIVIL TERM an attorney, Samuel Andes, Esquire, and asked him to prepare a martial settlement contract. Andes explained the law of marital property generally to her, although she had some knowledge of the subject having been represented at the time of her second divorce. Wife and husband then met with Andes together. Andes told them both that he was representing wife, although he would prepare their negotiated agreement. He advised husband that he should have his own attorney. Husband did not follow the advice. After making some suggestions which resulted in a few changes to meet the parties' goals, Andes prepared their property settlement agreement which was executed on March 26, 1999. That agreement provides that wife would retain the Dillsburg property, where she and husband had lived, which was titled in her name alone, and subject to a mortgage that had a present value of $140,000, which she would be responsible to pay. In the agreement, the parties acknowledged that husband's pension was worth approximately $461,000 as of December 31, 1998. Husband agreed to make annual contributions to the pension of $54,000 a year commencing in 1999, and continuing through 2008. The agreement set forth that husband planned to retire as of January 31, 2009, at which time wife would receive one-half of the value of the pension with him receiving the other half. It was anticipated that in January of 2009, the account would have a value of $1,500,000 or more. The agreement provided that "Husband may retire prior to January of 2009 and prior to the balance of his account within the Plan obtaining the value of $1,500,000.00 -3- 99-1259 CIVIL TERM with the prior written consent of Wife and upon the mutual agreement of the parties as to the amount to be transferred into Wife's sole name .... "In the agreement, the parties acknowledged that the value of husband's professional corporation, which he owned with another dentist, was $1,000,000, of which his one-half interest was $500,000. The agreement provided "Husband further represents that Wife is currently the beneficiary under the terms of [a] buy-sell agreement and Husband promises to continue Wife to be the sole and exclusive primary beneficiary of all payments or sums due for his interest in the professional corporation under said buy-sell agreement, that he will designate the parties' issue, per stirpes, to be the secondary beneficiaries of the funds or payments, and that he will maintain Wife and the children in those sole beneficiary designations through 31 January 2009." In consideration, wife relinquished any claim or interest to husband's business. Husband received his business real estate in Mechanicsburg which had been appraised at $325,000, and was not encumbered. The parties' split a $6,000 investment account and each retained other retirement accounts that had been distributed at the time of their second divorce. The agreement provides that husband pay alimony to wife of $5,000 per month "[u]ntil the sooner of the death of Husband, the death of Wife, or the 31st of January 2009." Wife would report as taxable income that portion of the alimony husband pays equal to the amount of her federal income tax deduction for interest paid on the mortgage against the marital residence, and husband is entitled to an income tax deduction equal to that amount. Husband is not entitled to deduct the rest of the alimony payments and wife is -4- 99-1259 CIVIL TERM not required to include them in her taxable income. The parties divided some personal property. The agreement further provided: 2. VIRGINIA REAL ESTATE. The parties acknowledge that they acquired, during their marriage, a house at 402 Minton Circle on Smith Mountain Lake near Roanoke, Bedford County, Virginia, and that said property is currently titled in Husband's name alone and is subject to a mortgage owed to Wachovia Bank which has a present balance of approximately $80,000.00. With regard to such property, the parties hereby agree as follows: A. Prior to the entry of a final decree in divorce between the parties, they shall transfer the title to this property into their joint names, as joint tenants with the right of survivorship and not as tenants in common. B. Husband shall pay, in accordance with its terms, the mortgage and all other expenses associated with or incurred in the use or operation of the said property from the date of this agreement through 31 January 2009. Husband agrees that he shall pay all such obligations and that he shall indemnify and save Wife harmless from any cost, loss or expense caused to her by his failure to make such payments as due. C. From the date of this agreement through 31 January 2009, the parties shall share the use and occupancy of the property, with both of them having access to the exclusive use and occupancy of the property for substantially equal times each year (so that each of them will have the exclusive possession of the property available to them for an equal amount of time each calendar year). The parties agree that they will cooperate with each other in scheduling the use of the property and any maintenance, repairs or improvements to the property. Neither party shall incur any debt for the property, including repairs, without the prior knowledge or consent of the other party, with the exception of emergency repairs which each of the parties are authorized to make if necessary to prevent damage or loss to the property at a time when the other party is not reasonably available to be consulted. D. Neither party shall encumber, transfer, or assign the property or their interest in it without the prior consent of the other. Neither party shall file an action to partition the property, or force its sale, without the prior written consent of the other party. -5- 99-1259 CIVIL TERM E. On 31 January 2009, or on a date prior thereto upon the mutual agreement of the parties, Wife shall, by proper deed, convey, grant, and transfer to Husband all of her right, title, and interest in and to the property and will waive all further claim to or interest in the property thereafter, the property then to be the sole and separate property of Husband free of any interest or claim by Wife, including any continued claim of use or occupancy in accordance with sub-paragraph C hereof. The parties entered into a separate written option agreement regarding the Virginia property dated March 26, 1999. It provides: 1. Husband does hereby grant to Wife an unconditional option or right to purchase and acquire all of his interest in and ownership of the Property, which said option shall become effective upon the first of the following events to occur (hereinafter the "Option Events"): A. Husband's decision to sell or transfer the property, or any effort by Husband or anyone on his behalf to sell or transfer the Property to any other person or entity; and B. An action by any third party or entity which threatens to divest Husband of his interest and ownership of the Property involuntarily, including but not limited to, any creditor of Husband who attempts to expose the Property for judicial sale; or C. Husband's death. Upon the first of any of the above events to occur, Wife shall have the unconditional option and right to purchase the Property from Husband, for the price calculated in accordance with this agreement, said option to be exercised in accordance with the terms and provisions of this agreement. 2. Wife shall exercise the option extended to her by this agreement by giving written notice to Husband or the personal representative of his estate in the event of his death, within thirty (30) days of the date Wife first becomes aware of the occurrence of the Option Event which triggers her option right, as described in Paragraph 1 hereof. Written notice of such exercise by Wife shall be delivered to Husband's then-current address but, if Wife is not aware of Husband's address at that time, shall be valid if mailed to Husband at the address of the Property. 3. The price or consideration which Wife shall pay for the Property under this agreement shall be determined as follows: A. The parties shall attempt, in good faith, to reach -6- 99-1259 CIVIL TERM agreement upon the value and, if they can, the agreed price shall be the option price. B. If the parties cannot reach mutual agreement as to the option price, the price will be determined by averaging the results of three separate appraisals, one of which shall be conducted by an appraiser selected by Husband, the second of which shall be conducted by an appraiser selected by Wife, and the third of which shall be conducted by an appraiser selected by the two appraisers selected by Husband and Wife. All three appraisers will conduct a good faith appraisal of the Property and the average of their three appraised values will determine the price to be paid pursuant to this agreement. 4. If Wife fails to exercise her option rights under this agreement by giving Husband or his personal representative the written notice provided in Paragraph 2 within thirty (30) days of the date that Wife receives actual notice of the occurrence of one of the Option Events, the option granted by his agreement, and Wife's option rights with regard to the Property shall expire and Husband shall be free to sell, convey, or otherwise dispose of the Property as he sees fit. If wife exercises her option rights in accordance with Paragraph 2 hereof, the parties will cooperate to determine the option price for the property and Wife shall tender payment of the option price to Husband, and Husband shall tender a deed to the Property to Wife, within ninety (90) days of the date the option price is set, whether by the mutual agreement of the parties or the appraisal procedure set forth in Paragraph 3 hereof. 5. Wife shall have the right, during her lifetime or by her will, to assign her rights under this Option Agreement to any of the parties' children and, in the event of such assignment, the person or persons to whom the option rights are assigned shall have all of the Wife's rights and obligations as set forth herein. Attorney Andes testified that he understood that the parties were distributing among themselves a large amount of non-marital property that they owned separately when they married for the third time on September 17, 1994. He testified that he told husband that the law did not require such a distribution, and that he did not have to enter into such an agreement. Andes further testified that husband responded that he -7- 99-1259 CIVIL TERM negotiated the agreement with his wife because of their long-term relationship, which produced five children. Husband testified that attorney Andes never told him that much of the parties' property was subject to equitable distribution only to the extent of any increase in value during the third marriage until the final separation.1 Husband testified that he "absolutely" did not understand that legal status of such property. He further testified that he is sure that his wife was not aware of the legal status of such property. He testified that it was "as if we both thought that everything we owned was in one pile of marital assets to be distributed." Wife testified that as a result of her second divorce, she was aware of what marital property is in Pennsylvania. She testified that when she first met with Andes he discussed the concept of marital property with her, although they did not talk about it very much because she and husband had already reached the parameters of an agreement. In his brief in support of his position that there was a mutual mistake that requires a rescission or reformation of the marital settlement agreement of March 26, 1999, petitioner cites (~ocel~ v. (~ocel~, 417 Pa. Super. 406 (1992). In (~ocel~, the Superior Court of Pennsylvania stated that the precepts regarding property settlement agreements and their modification are governed as follows: First, a property settlement agreement between husband and wife will be enforced by the courts in accordance with the same rules of 1 The Divorce Code at 23 Pa.C.S. Section 3501(a) defines "marital property," that is subject to equitable distribution, to mean, with certain exceptions, "all property acquired by either party during the marriage including the increase of value, prior to the date of final separation." -8- 99-1259 CIVIL TERM law applicable to ascertaining the validity of contracts generally. Kleintop v. Kleintop, 291 Pa. Super. 491,436 A.2d 223, 225 (1981). Second, "the misconception which avoids a contract is necessarily a mutual one, and a fact which entered into the contemplation of both parties as a condition of their assent". Ehrenzellerv. Chubb, 171 Pa. Super. 460, 90 A.2d 286, 287 (1952). And, in Vrabel v. Scholler, 369 Pa. 235, 85 A.2d 858, 860 (1952), the general rule was again stated thusly: "'A contract [made under] a mutual mistake as to an essential fact which formed the inducement to it, may be rescinded on discovery of the mistake, if the parties [can be] placed in their form position with reference to the subject-matter.'" (Citation omitted). Lastly, to obtain reformation of a contract because of mutual mistake, the moving party is required to show the existence of the mutual mistake by evidence that is clear, precise and convincing. Bugen v. New York Life Insurance Co., 408 Pa. 472, 184 A.2d 499, 500 (1962). (Emphasis added.) There is no evidence in the present case to support a conclusion that the parties were mutually mistaken as to any facts when they entered into their marital settlement agreement on March 26, 1999. They (1) knew what property they owned, (2) what the value was of those assets, and (3) how they wanted the assets distributed. The comprehensive agreement they signed distributed those assets as they intended. Petitioner cites Singer Adoption Case, 457 Pa. 518 (1974), as authority for granting relief based on a mistake of law. The seminal case on the concept of a mistake of law is First National Bank of Sunbury v. Rockefeller, 333 Pa. 553 (1939), in which the Pennsylvania Supreme Court stated: The time honored rule that ignorance or mistake of law with a full knowledge of the facts, is not per se a ground for equitable relief, has been approved and followed in numerous decisions of this Court. Among them may be cited Good v. Herr, 7 Watts. & S. 253; Clapp v. Hoffman, 159 Pa. 531; Norris v. Crowe, 206 Pa. 438; Mu/holland's Estate, 224 Pa. -9- 99-1259 CIVIL TERM 536; Pa. Stave Co. 's Appeal, 225 Pa. 178; Clark v. Lehigh & W.-B. Coal Co., 250 Pa. 304; Shields v. Hitchman, 251 Pa. 455. These cases for the most part deal with mistakes of law, pure and simple, where there are no circumstances giving rise to equitable considerations, which would move a chancellor to grant relief from a misapprehension or ignorance of a person's interests, rights and liabilities. This rule often has been criticized (see Minors & Merchants Bank of Nanty-GIo Case, 313 Pa. 118), and, as Mr. Justice DEAN points out in Norris v. Crowe, supra, the trend of the decisions in our state has been to multiply the exceptions thereto, citing as examples the following cases: Heacock v. Fly, 14 Pa. 540; Gross v. Leber, 47 Pa. 520; Whelen's Appeal, 70 Pa. 410; Goettel v. Sage, 117 Pa. 298, and Wilson v. Ott, 173 Pa. 253. In the last mentioned case, we said, speaking by Mr. Justice MCCOLLUM (p. 261): "As they [the authorities cited] are based on a review of the cases involving a consideration of the effect of a mistake of law, they are worthy of notice as showing the trend of judicial thought on the subject, and the reluctance of the courts to sanction gross injustice under the claim that equity will not relieve against such a mistake." It is plainly to be seen from the foregoing cases that however the general rule may have been criticized in the past, the courts of this State are not inclined to depart from its enforcement for the reason, as often stated, that if ignorance or mistake of law were generally allowed to be pleaded, "there could be no security in legal rights, no certainty in judicial investigations, no finality in litigations": Clark v. Lehigh & W.-B. Coal Co., supra (p. 313). In consequence, relief has been refused in the following instances as a reference to the cases cited above will show: (a) Where money has been paid under a mistake of law; (b) where a contract has been fairly made with full knowledge of the facts, even though a party thereto may have been under a misapprehension concerning its legal effect; (c) where the parties cannot be restored to their original position; (d) where an innocent third party will be injured if correction of the mistake be decreed; (e) where there has been unreasonable delay in seeking relief; (f) where there is a mistake of law, pure and simple, without any circumstances or equitable considerations which would move a chancellor to grant relief. (Emphasis Added.) In the case sub judice, the marital contract was fairly made with full knowledge -10- 99-1259 CIVIL TERM of the facts. Accordingly, even if there was a mutual mistake of law, petitioner is not entitled to relief. Notwithstanding, we find that there was no mutual mistake of law between the parties. We find credible the testimony of attorney Andes that he told husband that the law did not require him to make the distribution he was willing to make, and that husband told him that he negotiated the agreement with his wife because of their long-term relationship, which produced five children. While husband may not have fully understood the finer aspects of Section 3501 (a) of the Divorce Code, that was his own fault for not seeking legal advice from a hated lawyer. Furthermore, we find that wife generally understood the concept of marital property at the time she entered into the marital settlement agreement. The parties chose to enter into an agreement that they both felt was fair and reasonable given their longstanding relationship, the interests of their large family, and their ages and circumstances. Lastly, even if there had been a mutual mistake of law, there are no equitable considerations which would move us to grant petitioner relief. The agreement was not oppressive to petitioner when it was entered into. Having over two years later come to a better understanding of the law, and a fuller realization that he did some things that he would not have had to do, but which he thought was the right thing to do at the time, is not such an equitable consideration that would warrant relief which could only be the rescission of the marital agreement and full litigation of the marital estate. For the foregoing reasons, petitioner is not entitled to have the marital settlement agreement of March 26, 1999, rescinded or reformed based on a mutual -11- 99-1259 CIVIL TERM mistake of law. AND NOW, this ORDER OF COURT day of September, 2001, the petition of Timothy R. Percarpio to rescind or reform a martial settlement agreement dated March 26, 1999, IS DISMISSED. By the Court, John J. Connelly, Jr., Esquire For Petitioner Keith O. Brenneman, Esquire For Respondent :saa Edgar B. Bayley, J. -12-