Applying contract law to a property settlement agreement.

In Smith v Smith, __ Mich App __ (#295243, 5/26/2011) the Court of Appeals applied contract law to a property settlement agreement dividing IRAs thereby holding the parties to the written language in the agreement, notwithstanding any subsequent possible unfairness.   

When a court interprets a contract, the entire contract must be read together and construed as a whole. Duval v Aetna Casualty & Surety Co, 304 Mich 397, 401 (1943). All the parts must be harmonized as much as possible, and each word of the contract must be given effect, if possible. Id. Also, courts may not change or rewrite plain and unambiguous language in a contract under the guise of interpretation because “the parties must live by the words of their agreement.” Harbor Park Market, Inc v Gronda, 277 Mich App 126 (2007).  Property-settlement agreements, as a general rule, are final and cannot be modified. Zeer v Zeer, 179 Mich App 622, 624 (1989). It is well settled that property settlement agreements are enforceable and that a court is bound by the terms of the agreement in the absence of fraud, duress, mutual mistake, or severe stress. Keyser v Keyser, 182 Mich App 268, 269-270 (1990). Parol evidence is generally not admissible to vary or contradict the terms of a clear and unambiguous contract. Hamade v Sunoco, Inc, 271 Mich App 145, 166-167 (2006).

The terms in the retirement-accounts section of the PSA are clear. The parties used fixed values for all the retirement accounts. Defendant was to retain his IRA, and plaintiff was to retain all other retirement accounts. To equalize the value each was receiving, defendant was required to transfer approximately $1.4 million to plaintiff. Because the terms were unambiguous, the trial court was bound by them, Keyser, 182 Mich App at 269-270, and the parties were required to live up to the terms of their agreement, Harbor Park Market, Inc, 277 Mich App at 130-131.  Also, when looking at the PSA as a whole, there is no indication that the parties intended to take into account market fluctuations in dividing the retirement accounts. In the investment property section, the PSA indicates that the investment accounts would be “divided evenly in kind,” which arguably takes into account market fluctuations. There is no such language in the retirement-accounts section.