Court Opinion

ID: 4542471
Source: CourtListenerOpinion
Date Created: 2020-06-18 17:11:44.351704+00
Date Added: 2024-06-11T12:47:41.471175
License: Public Domain

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    DEBORAH GALLAGHER N/K/A                    :   IN THE SUPERIOR COURT OF
    DEBORAH A. GATTONE                         :        PENNSYLVANIA
                                               :
                                               :
                v.                             :
                                               :
                                               :
    DOUGLAS GALLAGHER                          :
                                               :   No. 3087 EDA 2018
                       Appellant               :

               Appeal from the Order Entered September 26, 2018
      In the Court of Common Pleas of Montgomery County Civil Division at
                              No(s): 2015-25149

BEFORE:      OLSON, J., STABILE, J., and STRASSBURGER, J.*

DISSENTING MEMORANDUM BY STRASSBURGER, J.: Filed: June 18, 2020

        Because I find the trial court erred in enforcing the parties’ property

settlement agreement, I respectfully dissent.

        As set forth in greater detail by the Majority, in 2016, Husband and Wife

entered into a property settlement agreement.             In pertinent part, the

agreement provided that Wife would receive 50% of the value of Husband’s

Johnson and Johnson stock, equal to $75,866. “The total value of Husband’s

stock was based upon a Johnson and Johnson account statement from

December 2015, which at the time the parties entered into the settlement

agreement was accessible to both parties.”              Majority at 2 (emphasis

added). Specifically, the parties relied “upon an account statement provided

____________________________________________

*   Retired Senior Judge assigned to the Superior Court.
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by Husband and titled, ‘Summary of J&J Stock as of December 31, 2015.’”

Trial Court Opinion, 1/3/2019, at 4. Husband and Wife testified that based on

this document, they both “believed that the marital value of the Johnson and

Johnson stock was $151,722[] and Wife’s 50% share was $75,866.[]”                  Id.

In 2018, the parties discovered that the actual total value of Husband’s

Johnson and Johnson stock at the time the parties entered the settlement

agreement was $27,701.95, which when split 50/50 in accordance with the

agreement, would entitle Wife to $13,850.98.

       Based upon the foregoing, Wife filed a motion to enforce the property

settlement agreement, arguing “that she materially relied upon the agreed

valuation    of   Husband’s     stock    in    executing   the   property   settlement

agreement.”       Id. In response, Husband conceded that the valuation was

wrong, but averred the parties were mutually mistaken.1 After a hearing, the

trial court granted Wife’s motion and Husband appealed.

       [A] property settlement agreement between husband and wife will
       be enforced by the courts in accordance with the same rules of
       law applicable to ascertaining the validity of contracts generally.
       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. [I]n Vrabel v.
       Scholler, 85 A.2d 858, 860 (Pa. 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]
____________________________________________

1 “A mutual mistake is ‘1. A mistake in which each party misunderstands the
other’s intent.... 2. A mistake that is shared and relied on by both parties to
a contract.’” Regions Mort. Inc. v. Muthler, 889 A.2d 39, 41 (Pa. 2005),
quoting Black’s Law Dictionary 1023 (8th ed. 2004).

                                           -2-
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        placed in their former position with reference to the subject-
        matter.’” [] 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.

Gocek v. Gocek, 612 A.2d 1004, 1006 (Pa. Super. 1992) (some citations and

quotation marks omitted).

        Where a mistake of both parties at the time a contract was made
        as to a basic assumption on which the contract was made has a
        material effect on the agreed exchange of performances, the
        contract is voidable by the adversely affected party unless he
        bears the risk of the mistake under the rule stated in § 154.[2]

Restatement (Second) of Contracts § 152 (1981).

        In this case, there is no dispute that the first two elements have been

met. It is clear that both parties were mistaken “as to a basic assumption on

which the contract was made[,]” and that had a “material effect on the agreed

exchange of performances[.]”          Id. Nonetheless, the trial court found that,

because Husband bore the risk of this mistake, he could not rely on the

____________________________________________

2   The Restatement (Second) of Contracts § 154 provides:

        A party bears the risk of a mistake when

        (a) the risk is allocated to him by agreement of the parties, or

        (b) he is aware, at the time the contract is made, that he has only
        limited knowledge with respect to the facts to which the mistake
        relates but treats his limited knowledge as sufficient, or

        (c) the risk is allocated to him by the court on the ground that it
        is reasonable in the circumstances to do so.

                                           -3-
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doctrine of mutual mistake as a means to void the settlement agreement. It

was largely on this basis that the Majority affirmed the trial court’s order. For

the following reasons, I respectfully disagree.

      Here, it is abundantly clear that both parties were in possession of the

account statement provided by Husband and both parties agreed to the

valuation based upon this statement.      In fact, the inclusion of the specific

amount of money to which Wife was entitled, $75,866, serves as evidence

that both Husband and Wife interpreted incorrectly the account statement.

There is no indication that Wife asked for any additional information to

supplement what was provided to her by Husband, and based upon the fact

that Wife subsequently signed the agreement, it appears she was satisfied

with utilizing the account statement as the sole means to determining the

value of the stock.

      Furthermore, while the trial court inferred that Husband, based upon his

longtime employment at Johnson and Johnson, was or should have been

aware of “the precise total value of his Johnson and Johnson stock, including

the number of shares owned by Husband and the proper way to read his

account statement[,]” simply being an employee does not make Husband an

expert on the value of Johnson and Johnson stock.          Further, there is no

indication, nor does the trial court cite to any evidence, that Husband held

himself out as someone with special knowledge of the stock’s valuation or as

having a greater ability to interpret the account statement provided to both

                                      -4-
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parties. There is also no indication that Husband had special and exclusive

access to inside company information about the stock that Wife did not. In

fact, the mistake was not about the valuation; instead, both parties simply

interpreted the account statement incorrectly. Thus, I find the doctrine of

mutual mistake applies and the trial court erred in enforcing the settlement

agreement.

      Lastly, I am cognizant of Wife’s averments that she materially relied

upon the agreed valuation of Husband’s stock when entering into the property

settlement agreement, and thus argues that she would be prejudiced by such

a determination. However, our law provides for contract reformation to rectify

any purported prejudice suffered. See Zurich Am. Ins. Co. v. O'Hanlon,

968 A.2d 765, 770 (Pa. Super. 2009) (“Mutual mistake will afford a basis for

reforming a contract.”) (citation omitted).

      For the aforementioned reasons, I respectfully dissent.

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