Should the Parties' Property Settlement Agreement be Merged in the Judgment?

A question often asked and answered on the Family Law ListServ is whether or not a lawyer should merge a property settlement agreement in a Judgment of Divorce. It is important to note the distinction between settlements that are “incorporated but not merged” and those that are both incorporated and merged in the judgment. It is the legal effect of each circumstance that is important.

The legal effect if the agreement is incorporated but not merged is that the contractual aspect of the agreement is preserved, binding both parties, and the court may not alter the parties' agreement even though there may be some statutory basis to do so.

To the extent that a divorce judgment adopts a property settlement agreement (i.e., the agreement is incorporated and merged), it is a consent judgment and is as valid and binding on the parties as though made by the court without any stipulation or agreement of the parties. Then, the court retains the right to modify the judgment on any legal grounds.

In Michigan, the court of appeals has held that when the parties' agreement is not merged in the divorce judgment, the property settlement agreement may only be enforced by resort to the usual contract remedies and not as part of the divorce judgment.  See Williams v Williams (Unpublished) 1996 LEXIS 888, Docket No. 175091 Michigan Court of Appeals Decided October 8, 1996)

A more important aspect of non-merger is this: a party may be bound by the Agreement where he or she would otherwise have had a statutory right to change the agreement in the future.

To understand the legal effect of non-merger which operates to deprive a party of statutory remedies based upon a change in circumstances or other grounds, see Mastrogiacomo v Mastrogiacomo, 133 A.D.2d 671; 519 N.Y.S.2d 841 (1987) There, the parties' separation agreement was incorporated but not merged into the divorce judgment. Husband filed a motion to terminate his obligation to pay alimony and medical expenses of Wife who was cohabiting with another man. A New York statute would have permitted the court to modify or terminate the alimony. Because the Agreement provided that alimony would terminate only upon Wife's remarriage or the death of either party, the court held that it would enforce the terms of the agreement since there was no overriding public policy reason not to do so.
But see Taverna v Pizza, 430 Mass. 882; 724 N.E.2d 704  (2000). There the court upheld the parties' settlement agreement that had been incorporated but not merged and, on contract grounds, refused to modify that agreement as it related to certain property issues. However, less than a week after the divorce was final, Wife gave birth to a child and subsequently filed a paternity case seeking an order of filiation and support. The Court dismissed her complaint on public policy grounds, not wanting to stigmatize the child. The Court reopened the divorce to make child support and custody provisions for the child notwithstanding the parties' settlement agreement.

Other courts have refused to be bound by the parties' agreement, incorporated but not merged in a Judgment of Divorce, limiting modification of child support. See Gravlin v Rupert, 2002 NY Int. 58, Decided May 7, 2002

In Gravlin, the terms of a separation agreement incorporated but not merged into a judgment of divorce were held to operate as contractual obligations binding on the parties. Citing Merl v Merl, 67 NY2d 359 [1986]), the court said:

"Thus, where the parties have provided for child support within a separation agreement, it is to be assumed that they have anticipated and adequately provided for the child's future needs and the terms of the agreement "should not be freely disregarded" (Boden v Boden, 42 NY2d 210, 212-213 [1977]). However, the needs of a child must take precedence over the terms of the agreement when it appears that the best interests of the child are not being met (See Brescia, 56 NY2d 132; see also Family Court Act, § 413). Recognizing this, the Court in Brescia established a means for modification of support obligations, based purely on the needs of the child. Separately, in Boden, we recognized the need for modification based on maintaining the fairness of the original agreement as between the parties in light of a subsequent unanticipated change in circumstances, or undoing an agreement that was unfair ab initio."

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Comments

[Jeanne M Hannah]

A court rule, MCR 2.612 allows amendment of judgment in certain situations. That rule says:

(C) Grounds for Relief From Judgment.
(1) On motion and on just terms, the court may relieve a party or the legal representative of a party from a final judgment, order, or proceeding on the following grounds:
(a) Mistake, inadvertence, surprise, or excusable neglect.
(b) Newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under MCR 2.611(B).
(c) Fraud (intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party.
(d) The judgment is void.
(e) The judgment has been satisfied, released, or discharged; a prior judgment on which it is based has been reversed or otherwise vacated; or it is no longer equitable that the judgment should have prospective application.
(f) Any other reason justifying relief from the operation of the judgment.

(b) and (c) might apply to your case, but the court rule and law require you to file your motion within one year after entry of judgment in those instances. Therefore, the only portion of this rule that applies is sub-paragraph (f).

It seems to me that this is a case in which the court would grant equitable relief and make your husband responsible for any loans against the 401k that he created. This is especially true where, as here, he obviously did it right before entry of judgment depriving you of the opportunity to know and readily discover his devious conduct.

Talk to your divorce lawyer. He or she can help you file a post-judgment motion to remedy this situation. While there is no guarantee, this sure looks like a case that warrants the court's relief. Best of luck to you! Jeanne

[Karen]

In my Judgment of divorce, it stated that I was to receive 50% of the ex's 401k from the date of marriage to the date of divorce. Almost 2 years after the divorce, i discovered that i did not receive the 50% because the day before the divorce was filed, my ex took out a loan against the 401k and never told anyone. When the 401k was divided since there was no mention of the loan, it was considered "silent" Can I now go after him for this loan amount.