204 A.3d 612
R.I.2019Background
- Kevin and Allie Hunt executed a marital settlement agreement (MSA) in January 2006 addressing disposition of their beachfront home at 25 Burnside Ave; the MSA set fair market value at $900,000 and an outstanding Citizens Bank mortgage amount at $360,000 (net equity $540,000).
- Under the MSA, Kevin was to pay property expenses for four years (through 12/31/2009) and then either (a) buy out Allie for 38% of net equity if he made all payments, or (b) if he failed, the property would be sold and net proceeds split 50/50.
- Kevin did not effectuate the 38% buyout payment by 12/31/2009; disputes and delays continued, additional mortgages and IRS liens arose, and the property entered receivership in 2016; Receiver sold the property for $577,500 (cash estate slightly higher after adding purported rent).
- Receiver recommended (and the Superior Court adopted) equal division of net proceeds, charged the Citizens Bank mortgage balances and IRS liens to Kevin alone (because only Kevin signed the notes), and added $38,250 in retroactive rent owed by Kevin to the receivership estate.
- Kevin appealed, arguing the Buyout Provision entitled him to 62% (i.e., 100% − 38% to Allie) of proceeds, that the 2004 mortgage payoff should not be charged solely to him, and that he should not owe retrospective rent.
Issues
| Issue | Plaintiff's Argument (Kevin) | Defendant's Argument (Allie/Receiver) | Held |
|---|---|---|---|
| Proper division under MSA: buyout vs sale | Kevin contends he satisfied the payment obligations and is entitled to keep 62% (i.e., be credited for paying expenses and thus receive the buyout result). | Allie/Receiver contend Kevin never tendered the 38% net-equity buyout payment by 12/31/2009, so the contingent sale provision controls and proceeds are split 50/50. | Court held MSA unambiguous: Kevin did not perfect buyout (no 38% payment), so Sale Provision applies; proceeds divided equally. |
| Allocation of mortgage payoff (2004 mortgage) | Kevin argues the outstanding mortgage should be deducted from sale proceeds ("net proceeds") before distributing 50/50—i.e., shared between both parties. | Allie/Receiver argued Allie is not liable because she did not sign the promissory note, and the Superior Court initially charged the mortgage to Kevin alone. | Supreme Court vacated the portion charging the entire 2004 mortgage to Kevin; held "net proceeds" include payoff of existing mortgages and remanded to deduct the 2004 mortgage principal equally, while permitting mortgage-related penalties/late fees caused by Kevin to be charged to him. |
| Retroactive rent charged to Kevin | Kevin argues no order or agreement required him to pay rent; thus he should not be charged $38,250. | Receiver asserted rent was required to remain in possession during receivership and that unpaid fair market rent should be credited to the estate. | Court upheld imposition of $38,250 as fair rent during pendency of receivership given Kevin occupied the property rent-free and in violation of Family Court possession order. |
Key Cases Cited
- Carney v. Carney, 89 A.3d 772 (R.I. 2014) (MSA retained contract characteristics when not merged into divorce judgment)
- Paul v. Paul, 986 A.2d 989 (R.I. 2010) (contract interpretation; if unambiguous, question of law reviewed de novo)
- McCulloch v. McCulloch, 69 A.3d 810 (R.I. 2013) (same; court reviews meaning of unambiguous contract de novo)
- McBurney v. Teixeira, 875 A.2d 439 (R.I. 2005) (agreement ambiguous only if reasonably susceptible to more than one interpretation)
- W.P. Associates v. Forcier, Inc., 637 A.2d 353 (R.I. 1994) (rules on contractual ambiguity and interpretation)
- Roadepot, LLC v. Home Depot, U.S.A., Inc., 163 A.3d 513 (R.I. 2017) (when only one reasonable interpretation exists, contract is unambiguous)