Gallagher, D. v. Gallagher, D. ( 2020 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37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