Herring v. Herring
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NO. COA13-544 NORTH CAROLINA COURT OF APPEALS Filed: 3 December 2013 JUDITH TEEL HERRING, Plaintiff v. Cabarrus County No. 12-CVD-576 JAMES DALLAS HERRING, Defendant Appeal by defendant from order entered on 29 November 2012 by Judge Donna H. Johnson in Cabarrus County District Court. Heard in the Court of Appeals 23 October 2013. Ferguson, Scarbrough, Hayes, Hawkins & James R. DeMay, for plaintiff-appellee. DeMay, P.A., by Christy E. Wilhelm for defendant-appellant. DAVIS, Judge. James Dallas Herring ( Defendant ) appeals from the trial court s a separation agreement entered into by him and his former wife. The issue before order us is denying his whether the motion to set separation aside agreement rescinded based on the ground of mutual mistake. review, we affirm the trial court s order. Factual Background should be After careful -2Judith Teel Herring ( Plaintiff ) and Defendant married on 27 April 1985 and separated on 21 June 1998. May 2007, the parties executed a separation were On 11 agreement ( Separation Agreement ) to confirm their separation and make arrangements in connection therewith; including settlement of their property rights, and other rights and obligations growing out of the marriage relationship. The Separation Agreement distributed the parties real and personal property, including the parties marital home, vehicles, bank accounts, and stated that retirement accounts. Specifically, the Separation Agreement Plaintiff would retain all bank checking, savings, mutual fund, money market, stocks, 401K, 456B retirement and governmental employees retirement accounts which are presently titled in her name only as her separate property. The Separation Agreement also provided that Defendant would likewise retain all bank checking, savings, mutual fund, money market, stocks and 401K retirement accounts which are presently titled in his name only as his separate property. The Separation Agreement contained a provision specifying that [t]his agreement contains the entire undertaking of the parties, and there are no representations, warranties, covenants or undertakings other than those expressed -3and set forth herein. Finally, the Agreement provided that Defendant would pay Plaintiff a distributional award of $31,500 and that Plaintiff would execute a quitclaim deed conveying her interest in the marital home to Defendant. On 21 February 2012, Plaintiff filed a complaint for absolute divorce and alleged that the parties had agreed upon and completed a division of all property subject to equitable distribution considerations as defined by the North Carolina General Statutes, and there remains no division of property to be further considered by the Court. On 5 April 2012, Defendant filed an answer and counterclaim seeking equitable distribution and to set aside the Separation Agreement on grounds of mistake, misrepresentation, or fraud. Specifically, Defendant contended that [t]he parties were mistaken as to the actual marital value of Plaintiff s Governmental Employees Retirement. The actual value was far greater than the $27,499 value divided by the parties. The matter was heard on 10 October and 20 November 2012, and on 29 November 2012, the trial court entered an order denying Defendant s motion to set aside the Separation Agreement and likewise denying his claim Defendant appealed to this Court. for equitable distribution. -4Analysis On appeal, Defendant argues that the trial court erred by failing to rescind or reform the parties Separation Agreement based on a mutual mistake of fact.1 A marital separation We disagree. agreement is subject to rules pertaining to enforcement as any other contract. the same Gilmore v. Garner, 157 N.C. App. 664, 669, 580 S.E.2d 15, 19 (2003). Thus, like any other contract, a separation agreement may be set aside or reformed based on grounds such as fraud, mutual mistake of fact, or unilateral mistake of fact procured by fraud. See Searcy v. Searcy, ___ N.C. App. ___, ___, 715 S.E.2d 853, 857 (2011) ( Separation and property settlement agreements are contracts and as such are subject to rescission on the grounds of (1) lack of mental capacity, (2) mistake, (3) fraud, (4) duress, or (5) undue influence. ) (citation, quotation marks, and alteration omitted). A parties mutual and intended. 1 by mistake reason of of fact it is a each mistake has common done what to both neither Lancaster v. Lancaster, 138 N.C. App. 459, 465, 530 Defendant makes no argument in his brief regarding the trial court s rejection of his fraud and misrepresentation theories. These issues are thereby deemed abandoned. See N.C. R. App. P. 28(b)(6) ( Issues not presented in a party s brief, or in support of which no reason or argument is stated, will be taken as abandoned. ). -5S.E.2d 82, 86 (2000) (citation and quotation marks omitted). To support the rescission or reformation of an otherwise valid and binding contract, the mutual mistake must be of an existing or past fact which is material; it must be as to a fact which enters into and forms the basis of the contract, or in other words it must be of the essence of the agreement, . . . the efficient cause of the agreement, and must be such that it animates and controls the conduct of the parties. MacKay v. McIntosh, 270 N.C. 69, 73, 153 S.E.2d 800, 804 (1967). Thus, neither unilateral mistakes of fact nor mutual mistakes of law are, standing alone, sufficient to set aside or reform a contract. See Stevenson v. Stevenson, 100 N.C. App. 750, 752, 398 S.E.2d 334, 336 (1990) ( A unilateral mistake, unaccompanied by fraud, imposition, or like circumstances, is not sufficient to avoid a contract. ); Durham v. Creech, 32 N.C. App. 55, 60, 231 S.Ed.2d 163, 167 (1977) ( A bare mistake of law generally affords no grounds for reformation. ). The party seeking to reform or rescind the contract bears the burden of proving the existence of clear, cogent, and convincing evidence. Servs., review 158 N.C. denied, Defendant App. 357 contends 244, N.C. that 249, 461, 586 the 580 a mutual mistake by Smith v. First Choice S.E.2d S.E.2d parties 99 743, 748, (2003). shared a disc. Here, mutual -6misunderstanding as to the proper value of Plaintiff s Teachers and State benefits. Employees Retirement Specifically, System Defendant ( TSERS ) argues that retirement the parties mutual mistake was basing their calculation of the TSERS pension solely upon Plaintiff s contributions to the account rather than upon the expected future value continued working for the State. of the pension if Plaintiff We conclude that Defendant failed to adequately establish that the TSERS pension value used by the parties in calculating the distributional award to Plaintiff set forth in the Separation Agreement constituted a mistake of fact common to both parties sufficient to compel the setting aside of the Agreement. Defendant argues that Plaintiff s testimony at the hearing on his motion to set aside the Separation Agreement was an acknowledgement of the mutual mistake because she testified that [a]s far as I knew, 27,000 was what was in there at that point cause that s all I would have gotten. looked at it at the time we did this. That s how we However, this statement does not establish that Plaintiff misunderstood the nature of her pension or was unaware of the potential future benefits she would receive if she continued her service with the State for the prescribed period of time. Indeed, Plaintiff s earlier -7testimony that if she had retired on that date, that would have been the amount of money that [she] would have gotten indicates that her intent had been to value the pension as if she had terminated her service and withdrawn the pension funds on the date of separation. We are not persuaded that these statements demonstrate by clear, cogent, and convincing evidence that Plaintiff was wholly ignorant of the fact that, as a defined benefit plan,2 her TSERS pension would contributions eventually and the be worth accumulated more than interest. just her Defendant s unilateral assertions that (1) the parties intended to use the actual value of the TSERS account in calculating a distributional award; and (2) they were unaware that the pension was worth more than Plaintiff s contributions are insufficient to establish the existence of a mutual mistake of material fact. See Lancaster, 138 N.C. App. at 465-66, 530 S.E.2d at 86 ( Although [the defendant] argues that the separation agreement 2 In a defined benefit plan the employee s pension is determined without reference to contributions [by the employee] and is based on factors such as years of service and compensation received. Cochran v. Cochran, 198 N.C. App. 224, 227, 679 S.E.2d 469, 472 (2009) (citation and quotation marks omitted), disc. review denied, 363 N.C. 801, 690 S.E.2d 533 (2010). In equitable distribution actions, defined benefit plans are valued by our courts using the five-step method outlined in Bishop v. Bishop, 113 N.C. App. 725, 731, 440 S.E.2d 591, 595-96 (1994). -8contains mutual argument, mistakes, thereby negating [the the plaintiff] contention offers that no the such alleged mistakes were mutual. ). Moreover, we believe that the mistake alleged by Defendant would more accurately be characterized as a mistake of law, which does not afford a basis for rescinding or reforming a separation agreement. Defendant is essentially asserting that the parties misunderstood the value of the TSERS pension because they did not treat the pension as a defined benefit plan and calculate its worth accordingly. mutually mistaken about concerned how TSERS the Thus, if the parties were anything, pension the would mistake have would been have valued and distributed under North Carolina s equitable distribution law. In Dalton v. Dalton, 164 N.C. App. 584, 586, 596 S.E.2d 331, 333 should (2004), have set the aside defendant the argued parties that the separation trial court agreement on several grounds, including the parties mutual mistake as to how retirement accounts were distributed equitable distribution system. under North Carolina s The defendant asserted that the parties belief that the law in North Carolina required each of them to retain their respective retirement savings account as their separate property was a mutual mistake requiring -9rescission. that the Id. at 586, 596 S.E.2d at 332. alleged mistake did not Our Court concluded support rescission of the contract, stating that in the instant case, the separation agreement succeeded in accomplishing the intention of the parties. Specifically, the parties intended to distribute their retirement benefits pursuant to an erroneous understanding of North Carolina law. That the parties distribution scheme, in actuality, differed from that established by North Carolina law constitutes merely a bare mistake of law. Id. at 588, 596 S.E.2d at 334. mutual mistake here, if any, Likewise, we believe that the is a bare mistake of law regarding the valuation of defined benefit plans for purposes of equitable distribution. As such, it fails as a basis for rescission. Finally, in a related argument, Defendant asserts that the trial court s defined refusal benefit plan to value valuation the TSERS method account outlined in using the Bishop v. Bishop, 113 N.C. App. 725, 731, 440 S.E.2d 591, 595-96 (1994), led to its erroneous conclusion that there was no mutual mistake of fact. This argument is without merit. While Defendant is correct that a trial court is required to utilize the Bishop method when distributing a defined benefit plan in an equitable distribution action, it is well established -10that parties may agree in a separation agreement to distribute their property in any fashion they desire without resorting to litigation for equitable distribution. App. 584, 586, 378 S.E.2d 554, 555 Lee v. Lee, 93 N.C. (1989). Indeed, [b]y executing a written separation agreement, married parties forego their statutory rights to equitable distribution and decide between themselves how to divide their marital estate following divorce. Brenenstuhl v. Brenenstuhl, 169 N.C. App. 433, 435, 610 S.E.2d 301, 303 (2005). Here, the Separation Agreement addresses and distributes the TSERS account in the provision stating [t]he Wife shall hereinafter retain . . . governmental employees retirement accounts which are presently titled in her name only as her separate property. As Defendant has failed to meet his burden of proving a mutual mistake requiring reformation or rescission of the Separation Agreement, the trial court was neither obligated nor permitted to disregard the parties contractual agreement and instead conduct its own valuation and distribution of the TSERS pension using the Bishop method. See Lee, 93 N.C. App. at 586, 378 S.E.2d at 555 ( A validly drawn separation agreement which distributes all of the parties property . . . bars an equitable distribution claim. ). -11Conclusion For the reasons stated above, we affirm the trial court s order denying Defendant s motion to (1) set aside the Separation Agreement; and (2) equitably distribute pension. AFFIRMED. Judges ELMORE and McCULLOUGH concur. Plaintiff s TSERS
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