Court Opinion

ID: 6216832
Source: CourtListenerOpinion
Date Created: 2022-02-09 17:12:36.523521+00
Date Added: 2024-06-11T08:57:11.258287
License: Public Domain

J-A02035-22

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    SAM E. COLTON                              :   IN THE SUPERIOR COURT OF
                                               :        PENNSYLVANIA
                       Appellant               :
                                               :
                                               :
                v.                             :
                                               :
                                               :
    KATHERINE COLTON                           :   No. 558 WDA 2021

                 Appeal from the Order Entered April 15, 2021
     In the Court of Common Pleas of Butler County Civil Division at No(s):
                                 18-90025-D

BEFORE: OLSON, J., MURRAY, J., and PELLEGRINI, J.*

MEMORANDUM BY PELLEGRINI, J.:                        FILED: FEBRUARY 9, 2022

        Sam E. Colton (Husband) and Katherine Colton (Wife) were involved in

contentious divorce litigation that proceeded to an equitable distribution trial

before a Master. The Master issued a Report and Recommendation (Report)

dividing the marital assets, including the marital home. When neither party

filed exceptions, the Court of Common Pleas of Butler County (trial court)

entered a divorce decree and incorporated the Report into an equitable

distribution order (Order).

        After the Order was ratified, Husband unilaterally drew $75,015.81 from

a Home Equity Line of Credit (HELOC) on the marital home, which he used to

purchase his new home. Wife discovered the HELOC only after the parties

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*   Retired Senior Judge assigned to the Superior Court.
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were proceeding to close on the sale of the marital home. As a result, Wife

filed a petition for relief seeking compensation for the reduction in value of

the marital home, an equitable interest in Husband’s new home and attorney’s

fees. As discussed in more detail infra, at a hearing on the motion, the parties

resolved the dispute when Husband agreed to pay Wife $67,000.

        Shortly after the hearing, Husband claimed that he entered the

settlement agreement based on a mutual mistake about the terms of the

Report relating to the equitable distribution of the marital home.        In the

alternative, he claimed the settlement was the result of a unilateral mistake

that Wife knew or should have known about at the time the contract was

formed.     Following briefing and argument, the trial court denied relief and

Husband now appeals that determination. We affirm.

                                               I.

                                               A.

        We glean the following facts from the certified record. The Report, which

was incorporated and adopted into the Order on March 31, 2020, divided the

proceeds from the sale of the marital home as follows: Husband would receive

“the first $9,341.00, then 25% of the next $178,069, and then 40% of any

net proceeds in excess of $187,500.00.” R.R. at 25a.1 Wife would receive

the remainder of the proceeds. Based on the distribution of the funds from

____________________________________________

1   For ease of reference, we cite to the reproduced record.

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the sale of the house, Wife’s earning potential and child support, the Report

recommended that Wife’s claim for alimony be denied.

      In September 2020, Wife filed an Emergency Petition for Special Relief

averring that in the closing process for the sale of the marital home, she

learned of the previously-undisclosed HELOC.         The marital home was

ultimately sold for $413,000 and the HELOC and outstanding mortgage were

paid from the proceeds. Wife requested that the trial court order Husband to

pay her the full value of the HELOC and $10,000 in attorney’s fees.

      Husband filed a response averring that after the divorce decree was

entered, he intended to use funds from his retirement account to purchase a

new home. Part of his retirement account was awarded to Wife in the Order

and was to be distributed via a Qualified Domestic Relations Order (QDRO)

drafted by Wife. When the QDRO was not processed in time for the purchase

of his new home, he drew the down payment from the HELOC on the marital

home.   He averred that he and Wife jointly opened the HELOC during the

marriage and that it had a $0 balance at the time of the equitable distribution

trial. He claimed that he intended to pay the HELOC with funds received from

the QDRO but was unable to do so because it had not been processed. He

requested that the trial court deny Wife’s petition and award him $750 in

attorney’s fees and $1,000 in sanctions.

      At a hearing on November 30, 2020, Husband stated that he was willing

to withdraw from the retirement account to cover the value of the HELOC.

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The proceeds from the sale of the house of approximately $71,000 were in

escrow. The trial court began by reviewing the sale price for the house, the

mortgage and the HELOC in conjunction with the Report. Counsel for Husband

then stated that the $71,000 in escrow and the $75,000 HELOC, less the first

$9,431 the Master had allocated him from the sale, would result in a remaining

balance of $136,569. Counsel then said: “And the way the Master’s report is

worded is [Wife] gets 75 percent of 178,069, of the proceeds, after the first

9431 are distributed to [Husband].      So, the way I interpret that is, the

remaining balance is going to go to Wife because we didn't hit that threshold.”

R.R. at 72a. Counsel for Wife agreed with that interpretation.

      The trial court then suggested that Wife would be entitled to all funds in

escrow and the value of the HELOC minus the approximately $9,431 awarded

to Husband. Counsel for both parties agreed that would result in Husband

paying Wife $65,584.81 in addition to all funds in escrow.         Counsel for

Husband then represented that he could make the payment by withdrawing

the funds from his retirement account, as it would be a quicker resolution than

seeking a new loan. The trial court agreed, saying ,“if he is no longer debating

that he shouldn’t have done it, it’s really just a practical matter of how do we

make [Wife] whole in the quickest way we can.” R.R. at 74a-75a.

      The trial court asked if that agreement would resolve the petitions and

Wife’s counsel responded:

      It would, Your Honor. I would rather get this settled. I think we
      were going to raise an issue that since he took it out and

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      purchased another piece of property, that my client has an
      equitable interest in that. So, I know it’s an “oops,” but it’s kind
      of a big “oops.” I think she could be reimbursed for some
      attorneys’ fees because it took him getting here for him to realize
      that.

R.R. at 75a-76a. The trial court suggested that it could continue the petitions

to allow Husband to make the payment and revisit the issue after that was

resolved.   Husband then agreed to withdraw his pending petitions and

requests for attorney’s fees, including a contempt petition related to the delay

in filing the QDRO.

      When Husband agreed to withdraw his petitions, the trial court said:

      So, it sounds to me like that the only thing really left to do would
      be how much, if any, counsel fees Wife would get for the 750—I
      mean $75,000 issue. So, I’m going to let you guys talk about that
      for a few minutes, keeping in mind that, you know, he may drop
      some of his. But I think she is entitled to some counsel fees. So,
      why don’t I let you guys talk. Talk to your clients, talk about the
      counsel fees, and see if you can come up with a number that you
      feel comfortable with. . . . And of course if you don’t have an
      agreement, if your clients don’t agree to this, then we will proceed
      with the hearing. But I’m guessing you are going to get an
      agreement because I wouldn’t—really, what you’ve offered is
      probably the only options for sanctions I would have anyway.

R.R. at 77a-78a.

      After counsels spoke with their clients, Husband’s attorney requested

that the proceeds from the sale of the house be offset by the amount each

party had paid toward the mortgage that year, based on a Consent Order

issued after the Order was entered. Counsel for Wife responded:

      I think I’ve already alluded to my position about the equitable
      interest that I believe my client has in [Husband’s] current
      residence, and we’ve agreed to waive that if we work out this

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      agreement. I know we haven’t gone into the details of it yet, but
      I think—considering what I discussed with her and what she was
      willing to do. They were sharing the payments on the mortgage.
      So, they both contributed to it. And I think that, you know, we
      just leave that issue be and just work out, you know, the
      settlement as far as this goes, because we’re really dwindling
      down the amount of money that’s available to my client.

R.R. 79a-80a.   After reviewing the Order, the trial court stated Husband’s

payment to Wife should be reduced by the amount he paid toward the

mortgage until May of 2020. It said:

      But that’s how I would read the Order that you put in there, that—
      so basically what they did, then, was they evened all of that off
      out of the sale by reimbursing each other what they paid. And
      then the distribution done by the Hearing Officer still stays the
      same. So, wife isn’t losing money.

R.R. at 83a. The parties then agreed to exchange proof of payments for the

mortgage and reduce Husband’s payment to Wife accordingly. The trial court

asked whether counsel wanted to colloquy their clients before placing the

agreement on the record and they declined.

      Counsel for Husband finally placed the following terms on the record:

Husband would pay Wife $67,000 within 120 days “in consideration of the

75,015 he took out, minus the 9,431 he is awarded for the Master’s Report

and Recommendation.” R.R. at 85a. That resulted in $65,584, which the

parties agreed to increase to $67,000 to include counsel fees for Wife. All the

proceeds in escrow from the sale would also be disbursed to Wife and

Husband’s payment would be reduced by his portion of the mortgage

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payments for February, March and April 2020. Wife’s mortgage payments in

those months would offset Husband’s payment.

      The parties agreed to exchange proof of their payments within 14 days

and Husband withdrew his petitions for contempt. The trial court ordered that

Wife’s petition for relief would remain open for 120 days or until full payment

was made, whichever occurred first.

                                      B.

      Shortly thereafter, Husband requested a status conference and argued

that there was a mutual mistake regarding the distribution of the proceeds

from the sale of the marital home in the Report and subsequent Order. He

claimed that based on the language in the Report, he was entitled to 25% of

the proceeds of the sale after his initial payment of $9,431 was taken out. At

the hearing on Wife’s petition, the parties had believed Wife was entitled to

100% of those proceeds.

      When asked to clarify his argument, Husband’s counsel said that he was

asserting there was a “misinterpretation” of the Report more so than a mutual

mistake as to the terms.    R.R. at 96a.    The trial court asked whether the

Report was ambiguous on its face or whether the Master made a mistake in

drafting the terms. Husband agreed that the Report was “correct” and the

language was unambiguous, but that he simply misread the agreement at the

prior hearing because it was “worded confusingly.”      R.R. at 97a-98a.     He

continued, “[i]t says 25 percent of the next $178,069. I think that’s clear that

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the Master intended my client to receive 25 percent of the proceeds after he

gets [$]9[,]431.” R.R. at 98a. Based on that formula, Husband argued his

payment to Wife should be reduced by $34,153. R.R. at 101a-02a.

     While Wife’s counsel agreed that they had examined the Report at the

previous hearing, she contended that the final settlement was based purely

on the sum agreed to by the parties, not the terms of the Report:

     And although we had looked at the Master’s report—I agree with
     that—what I took to my client was a number. Because it was,
     [y]ou’re going to get, you know, all of the amount that was
     escrowed at my firm, plus you’re going to get X amount of dollars
     from, you know, whether [Husband] refinances his current
     residence or takes it out of his retirement account. So, you know,
     my client just looked at—you know, her question was, All right,
     how much money am I getting. And that was the number that I
     gave her.

R.R. at 98a. Wife’s attorney asserted that when she discussed the settlement

with Wife, they did not base the decision on the Report. She agreed with

Husband’s interpretation of the Report but argued that the settlement was

reached without consideration of the terms of the Report.

     Finding that the issue did not implicate interpretation of the Report, the

trial court ordered the parties to write briefs addressing “[w]hat type of an

agreement was formed when we were in court the last time. . . . Was there

an agreement; was there a meeting of the minds; and what, if any, of the

[R]eport matters if those were the numbers that you came up with.” R.R. at

103a. The trial court expressed that if there was a mistake in entering the

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agreement, it was unilateral by Husband. The trial court’s subsequent order

directed the parties to provide briefs on the remedy for a unilateral mistake.

      In his brief, Husband argued again that both parties were under a

mutual and material mistake of fact related to the interpretation of the Report

and, as a result, the agreement was voidable. He claimed that they misread

the Report’s division of the proceeds from the sale of the marital home, and

that the misreading was the basis for the calculations of Husband’s payment

to Wife. In the alternative, he claimed that if his mistake was unilateral, Wife

knew or should have known about the mistake, rendering the agreement

voidable. At oral argument, Husband stated that he believed the parties had

calculated the settlement and agreed to distribute the funds in accordance

with the Report, with an upward adjustment for Wife’s attorney’s fees.

      In response, Wife argued that irrespective of the terms outlined in the

Report, Husband had agreed to pay Wife a total of approximately $136,569,

including the funds in escrow. She pointed out that the parties were only in

this bargaining position because Husband drew on the HELOC on the marital

home without giving notice to Wife. She argued that there was no unilateral

mistake and that Husband was now simply attempting to avoid his obligations.

Further, she argued that she had given up the equitable interest she would

have otherwise held in Husband’s new home, as it was purchased in part with

marital debt, in consideration of the settlement agreement. She contended

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that Husband was not entitled to relief, but if the agreement was voided, she

should be permitted to pursue that claim.

       Following oral argument, the trial court issued an order finding that

there was no factual error in reaching the agreement, but if there was an

error, it was Husband’s unilateral error. It ordered Husband to comply with

the agreement by paying Wife $67,000, less his portions of the mortgage

payments for February through April 2020.          It directed him to make the

payment within 120 days and stated that Wife’s petition would remain open

pending that final payment. Husband timely appealed2 and he and the trial

court have complied with Pa. R.A.P. 1925.

____________________________________________

2  Because the April 14, 2021 order held Wife’s petition open pending final
payment, this Court issued a Rule to Show Cause whether the order was final
and appealable pursuant to Pa. R.A.P. 341. See RTSC, 7/16/21. Husband
filed a response arguing that the order was final pursuant to Pa. R.A.P.
341(b)(1) because it “disposes of all claims and of all parties.” See Response
to RTSC, 7/26/21, at unnumbered 2. He argued that the final divorce decree
had been entered and the April 14 order disposed of the outstanding dispute
related to equitable distribution of the marital home. He contended that if he
waited 120 days, his notice of appeal from the order would have been untimely
pursuant to Pa. R.A.P. 903. He claimed with his arguments rejected in the
trial court that he had no alternative for relief other than the instant appeal.

To determine whether an order is final pursuant to Pa. R.A.P. 341(b)(1), we
“look beyond the technical effects of the adjudication to its practical
ramifications.” Lustig v. Lustig, 652 A.2d 393, 394 (Pa. Super. 1995). Our
review of the record reveals that the trial court left Wife’s petition for relief
open for enforcement purposes but fully disposed of the merits of the issues
therein. There were no further issues pending at the time of the trial court’s
order as the parties had fully litigated the issue of the HELOC and Husband’s
claims of mistake regarding the settlement. Because the order resolved all
issues between the parties, we conclude that it was final and appealable.

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                                               II.

       On appeal, Husband substantially restates the arguments he made in

the trial court, claiming that the settlement agreement was the result of a

mutual mistake of fact or, in the alternative, a unilateral mistake of fact of

which Wife knew or should have known.3 He seeks to have the settlement

agreement reformed to distribute the proceeds from the sale of the marital

home in accordance with the Report.

                                               A.

       A mutual mistake of fact “serves as a defense to the formation of a

contract and occurs when the parties to the contract have an erroneous belief

as to a basic assumption of the contract at the time of formation which will

have a material effect on the agreed exchange as to either party.” Murray

v. Willistown Township, 169 A.3d 84, 90 (Pa. Super. 2017) (quoting

____________________________________________

3

       The enforceability of settlement agreements is determined
       according to principles of contract law.          Because contract
       interpretation is a question of law, this Court is not bound by the
       trial court’s interpretation. Our standard of review over questions
       of law is de novo and to the extent necessary, the scope of our
       review is plenary as [the appellate] court may review the entire
       record in making its decision. . . . With respect to factual
       conclusions, we may reverse the trial court only if its findings of
       fact are predicated on an error of law or are unsupported by
       competent evidence in the record.

Step Plan Servs., Inc. v. Koresko, 12 A.3d 401, 408 (Pa. Super. 2010)
(cleaned up).

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Voracek v. Crown Castle USA, Inc., 907 A.2d 1105, 1107-08 (Pa. Super.

2006)). A contract may be reformed or rescinded based on a mutual mistake

if “(1) the mistake relates to an essential fact which formed the inducement

to [the contract], and (2) the parties [can be] placed in their former position

with reference to the subject-matter of [the contract].” Id. (citation omitted,

cleaned up). In addition, “the mistake must not be one as to which the party

seeking relief bears the risk.” Step Plan Servs., Inc. v. Koresko, 12 A.3d

401, 410 (Pa. Super. 2010) (emphasis & citation omitted). A party seeking

reformation or recission based on a mutual mistake must present clear and

convincing evidence of the mistake.     Smith v. Thomas Jefferson Univ.

Hosp., 621 A.2d 1030, 1032 (Pa. Super. 1993).

      Here, Husband argues that he and Wife were mutually mistaken about

the unambiguous language in the Report dividing the proceeds from the sale

of the marital home.   His claim is predicated on the assumption that both

parties calculated the settlement agreement in accordance with the terms of

the Report. However, after reviewing the record of the November 30 hearing,

the language the parties used to place the agreement on the record and Wife’s

explanation of her understanding of the agreement, the trial court rejected

Husband’s version of events.

      Instead, it concluded that rather than relying on the Report to calculate

Husband’s final payment to Wife, the parties reached a global settlement of

all claims, including those arising after the Master issued the Report and the

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trial court entered the Order. That settlement did not simply dispose of the

proceeds of the marital home, which were originally accounted for in the

Report, but also resolved Wife’s claims related to Husband increasing marital

debt unilaterally, her equitable interest in his new home and the attorney’s

fees she expended to pursue her remedy.           Upon learning that Husband

believed they had mistakenly calculated the settlement, Wife maintained that

her understanding of the hearing was that they had negotiated for a sum

certain and had not based the settlement on the Report.             Under these

circumstances, the record supports the trial court’s factual determination.

See Gocek v. Gocek, 612 A.2d 1004, 1008-09 (Pa. Super. 1992) (finding no

clear and convincing evidence of mutual mistake when defendant specifically

denied plaintiff’s factual allegations regarding the meaning of disputed

contract term in his pleadings).

      Additionally, Wife’s request for relief in her petition does not rely on the

terms of the Report, further supporting the trial court’s determination that she

did not agree to settle the dispute under the terms set forth by the Master.

She requested to be reimbursed for the full value of the HELOC in addition to

the funds in escrow, as well as attorney’s fees for litigating the matter. She

contended that because Husband used marital debt to purchase his new home,

she was entitled to pursue an equitable interest in that residence—an

equitable interest that did not exist at the time the Master issued the Report.

She agreed not to pursue that interest in consideration of the $67,000

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payment Husband agreed to at the hearing. Thus, while the parties began

negotiating the resolution of Wife’s petition based in part on the Report, the

trial court did not abuse its discretion by concluding that Wife was not agreeing

to a settlement that would be bound entirely by the Report.

      Husband acknowledges that Wife agreed to waive her claim regarding

her purported equitable interest in his new residence, but maintains that the

parties intended to base the settlement entirely on the calculations in the

Report. It is unclear why Wife would waive an interest she had claimed in her

petition only to reset the distribution of proceeds back to the status quo before

Husband drew on the HELOC without her knowledge. Essentially, Husband

argues that Wife forfeited her claim in exchange for nothing. To the contrary,

the record supports the trial court’s conclusion that while the parties referred

to the Report as a starting-off point for negotiations, Wife did not intend the

Report to control the distribution of proceeds but rather accepted a specific

sum in settlement of all her claims.

      Because Husband has not adduced clear and convincing evidence that

there was a mutual mistake as to an essential element of the settlement

agreement, his first claim merits no relief.

                                        B.

      Next, Husband argues in the alternative that he was unilaterally

mistaken about the terms of the Report when calculating the settlement, and

that he is entitled to reformation because Wife knew or should have known

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about his mistake. He refers to the hearing where he stated his mistaken

interpretation of the Report on the record: “And the way the Master’s report

is worded is [Wife] gets 75 percent of 178,069, of the proceeds, after the first

9431 are distributed to [Husband].      So, the way I interpret that is, the

remaining balance is going to go to Wife because we didn't hit that threshold.”

R.R. at 72a. Counsel for Wife stated that she agreed with the interpretation.

Based on this exchange, Husband argues that Wife knew or should have

known that he agreed to the settlement based on a mistaken interpretation of

the Report, but she did not correct his mistake.

      “Generally, if a mistake is not mutual, but unilateral, and is not due to

the fault of the party not mistaken, but to the negligence of the one who acted

under the mistake, it affords no basis for relief.” Kramer v. Schaeffer, 751

A.2d 241, 246 (Pa. Super. 2000) (citation omitted). However, if the party

who is not mistaken knows or should have known about the other party’s

mistake, relief is granted to the same extent as a mutual mistake.          Id.

(citation omitted).   “In such a situation, the mistaken party may void the

contract if the mistake is regarding a material term or the mistaken party may

enforce the contract so that the other party for whose benefit the contract was

performed will not be unjustly enriched.” Lapio v. Robbins, 729 A.2d 1229,

1234 (Pa. Super. 1999) (citation omitted).

      Again, Husband’s argument assumes that both parties understood the

settlement agreement to be based on the distribution terms in the Report. It

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appears that both parties misread the clause of the Master’s report at the

outset of the hearing. However, as discussed in Section II.A, supra, the trial

court’s factual finding that Wife did not rely solely on the Report in negotiating

the settlement is well-supported by the record. Throughout the negotiations,

Wife made clear that she waived a claim she had presented in her petition for

relief and reduced her demand for attorneys’ fees in consideration of the

settlement that the parties reached on the record. There is no indication in

the record that after reaching their specific agreement, Wife knew or should

have known that Husband believed the settlement agreement simply enforced

the terms of the Report.4 Rather, the record reflects a global resolution of all

of the parties’ pending petitions and claims and falls short of the clear and

convincing evidence necessary to reform the agreement based on Husband’s

unilateral mistake. No relief is due.

       Order affirmed.

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4 Lapio v. Robbins, 729 A.2d 1229 (Pa. Super. 1999), which Husband relies
on in support of his argument for unilateral mistake, does not compel a
different conclusion. The determination of whether a mistake existed is fact-
specific and turns on the circumstances surrounding the contract formation in
a particular case. Id. at 1232. In Lapio, the defendant testified at his
deposition that the plaintiff had accurately recounted their discussions leading
to the formation of the contract and admitted to much of the conduct that led
to the plaintiff’s mistaken impression about the terms of their agreement. Id.
at 1232-33. Put simply, the quantum of evidence in support of the unilateral
mistake in Lapio was much higher than is present in this case, meeting the
clear and convincing standard necessary for relief.

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 2/9/2022

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