Court Will not Rewrite Settlement Agreement to Prevent Future Disputes

by Brian Vertz on March 25, 2013

In an unpublished decision, the Superior Court recently declined an invitation to rewrite a marital settlement agreement in order to avoid the possibility of future disputes over the use of funds committed to a children’s trust. In Hvidzak v. Hvidzak, No. 37 WDA 2012 (February 22, 2013), the Father and Mother entered into a marital settlement agreement in which they agreed to establish two trusts for the benefit of their children, from which their child support obligations would be satisfied. A dispute arose over the proper language of the trust instruments, which were eventually signed by the parties and ratified by a bankruptcy judge. Subsequently, Mother sued to vacate the agreement, claiming that there was no meeting of the minds as to Mother’s authority to use the trust funds for her own benefit. Mother refused to fund the trust from her distribution of marital property, as agreed, until the Court would issue an order clarifying that she had unfettered discretion as to how to spend the trust funds.

The Superior Court began with citations to the law providing that settlements will be honored, whether written or verbal, unless they have been procured by fraud, duress or mutual mistake. The interpretation of a settlement agreement requires a court to discern the objective intent of the parties. In this case, the language of the settlement agreements and trust instruments demonstrated to the satisfaction of the appellate court that the trust funds were intended for the benefit of the children, even if they might incidentally benefit Mother. Yet, the Superior Court refused to vacate the settlement or rewrite the instruments to provde Mother with absolute assurance that she might not be liable for a breach of fiduciary duty if she misspent the trust funds. The Court refused to consider the opinions of two trust experts who opined that the language of the trust instruments might leave Mother exposed to a future lawsuit if she should overstep her authority.

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