The Massachusetts Appeals Court recently decided Rabinowitz v. Schenkman, a case with shocking facts. The parties in Rabinowitz, former spouses, executed a separation agreement, which a probate and family court judge approved and incorporated into a 2014 amended divorce judgment. Per the separation agreement, the ex-husband made monthly payments to the ex-wife for purposes of property division. In 2015, however, the ex-wife attempted to murder the ex-husband with a hatchet. He then stopped paying her. In response, the ex-wife sued the ex-husband for breach of contract.
In Rabinowitz, the Appeals Court agrees with the lower court, which ruled that the ex-wife violated the covenant of good faith and fair dealing when she tried to kill her ex-husband. Accordingly, she is precluded from recovering on a breach of contract claim, and the ex-husband does not have to continue his payments to her.
Case Background
Mark and Julie enter into a separation agreement. Regarding property division, Mark must make monthly payments to Julie.
Julie and Mark married in 1997 and divorced in 2013. The couple’s 2013 divorce judgment granted Mark sole legal and physical custody of Mark and Julie’s four children. The 2013 divorce judgment did not, however, resolve the issues of alimony, child support, and the division of the couple’s assets.
In 2014, Mark and Julie resolved the outstanding issues in a separation agreement, which a probate and family court judge approved and incorporated into an amended divorce judgment. The child-related provisions of the separation agreement merged with the amended divorce judgment. The remaining provisions survived the judgment as an independent contract.
Among other provisions, the separation agreement required Mark to pay Julie $212,000 over five years (sixty equal payments of $3,533.33). These payments constituted Julie’s share of the marital estate stemming from Mark’s ownership of a dental practice. The separation agreement also required Mark to maintain a life insurance policy to ensure that Julie would receive this money even if Mark died. Mark made his payments to Julie for 17 months, through August 1, 2015.
Julie attacks Mark with a hatchet, so Mark stops paying Julie.
On August 11, 2015, Julie attacked Mark and their 9-year-old son with a hatchet outside of Mark’s dental practice. During the attack, Julie accused Mark of ruining her “reunification plans” that were “in the works” for their children. Following this attack, Mark stopped his payments to Julie.
Julie pleads guilty to armed assault with intent to murder.
On December 16, 2015, Julie pleaded guilty to multiple criminal charges, including armed assault with intent to murder. She received a two-and-one-half-year sentence in the house of corrections (partially suspended for probation).
Julie files a breach of contract complaint against Mark for his failure to pay her.
On October 16, 2019, Julie filed a complaint against Mark in the Superior Court for breach of contract. Julie based her complaint on the fact that Mark stopped making his monthly payments to her, as the separation agreement required, after she attacked him.
Superior Court judge: Julie’s attempt to murder Mark violated the covenant of good faith and fair dealing. Mark doesn’t have to pay her anymore.
After a jury-waived trial, the Superior Court judge found that Julie’s attempt to kill Mark was part of a “‘woefully misguided plan'” to get custody of their children and interfere with Mark’s ability to follow through on his obligation under the separation agreement. The judge further found that Julie’s murder attempt violated the covenant of good faith and fair dealing, which is implied in the separation agreement. So, said the Superior Court judge, Mark was excused from making further payments to Julie under the separation agreement.
Massachusetts Appeals Court Affirms
Julie appealed the Superior Court judge’s decision. The case then went to the Massachusetts Appeals Court. On appeal, Julie argued that the Superior Court judge erred in a number of ways. This blog will focus on one question in particular: Was it appropriate for the Superior Court judge to apply the covenant of good faith and fair dealing to excuse Mark of his financial obligation to Julie?
First, a word on the covenant of good faith and fair dealing.
On appeal, Julie argued that the Superior Court judge should not have used the covenant of good faith and fair dealing to excuse Mark from his obligation to make monthly payments to her as per the separation agreement and divorce judgment.
What is the covenant of good faith and fair dealing? This covenant is implied in contracts. The Appeals Court, citing case law, explains. In legal terms, the covenant “demands that ‘neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.'”
Think of the covenant of good faith and fair dealing as an unwritten term (rule) in every contract. It essentially provides that, when two (or more) people enter into an agreement, neither one can do anything that will prevent the other from being able to perform their obligations under the agreement or get what they’re supposed to get from it.
Does the covenant apply to separation agreements in divorce?
Yes. “Separation agreements are construed ‘according to established contract principle…'” the Appeals Court says in its opinion.
Generally, property division in a divorce case is unmodifiable. But the court can revisit the issue in rare situations.
In her appeal, Julie argued that, under Massachusetts divorce law, property division is not modifiable. Meaning, once the court equitably divides property in a divorce, that’s it, you can’t ever revisit (relitigate) it.
The Appeals Court disagrees with Julie here. Yes, the Appeals Court notes. In a Massachusetts divorce, the divorce judgment determines the parties’ marital property rights, and that determination generally cannot be changed. However, Massachusetts courts have sometimes revisited property division in cases where a party claims a violation of the covenant of good faith and fair dealing occurred.
Nothing in Massachusetts divorce law, the Appeals Court says, “prohibits a court from entertaining the contract defense raised here — particularly where the parties understood that their separation agreement would survive the divorce judgment as an independent contract.” Moreover, the Appeals Court adds that it’d be reasonable for a judge (the Superior Court judge here) to conclude that this case is “one of those rare situations that warrants revisiting the issue of property division” given the case’s “unique facts” and Julie’s “egregious” conduct.
There is “no such temporal limitation” on the covenant: A judge can consider pre-divorce and post-divorce conduct.
Julie argued on appeal that the covenant of good faith and fair dealing doesn’t apply here because the separation agreement was not conditioned on post-agreement conduct. When the probate and family court judge approved the separation agreement, Julie argued, the approval contemplated the parties’ conduct during the marriage (which is a consideration for property division under Massachusetts divorce law). The approval, according to Julie, did not contemplate conduct after the marriage.
The Appeals Court did not buy Julie’s argument. “The implied covenant of good faith and fair dealing has no such temporal limitation,” the court said. “Because separation agreements are construed ‘according to established contract principles,’ the implied covenant of good faith and fair dealing applies to the parties’ postagreement conduct.” Here, Julie and Mark understood that their separation agreement would survive the divorce judgment as an independent contract. And parties have certain obligations when they enter into such a contract. “‘Parties to a separation agreement stand as fiduciaries to each other, and will be held to the highest standards of good faith and fair dealing in the performance of their contractual obligations.'”
Appeals Court: The Superior Court judge’s determination that Julie breached the implied covenant of good faith and fair dealing is not “clearly erroneous.”
Whether Julie breached the good faith covenant was a question for the Superior Court judge as the factfinder in this case. The Appeals Court will not disturb the finding unless it’s clearly erroneous.
Considering the evidence…
The Appeals Court, in its opinion, lays out the evidence in this case as follows.
- Mark and Julie divorced.
- Mark got sole physical and legal custody of the children.
- Julie and Mark entered into a separation agreement. The agreement included a structured division of property. Mark was to make monthly payments to Julie over five years.
- Under the separation agreement, Mark was to maintain life insurance to secure his payments to Julie if he were to die during those five years.
- The separation agreement provided an “‘orderly process'” for marital property division.
- During the period of performance under the separation agreement, Julie attacked Mark and their nine-year-old son with a hatchet. Julie accused Mark of ruining her “‘reunification plans'” that were “‘in the works'” for the children.
A judge could conclude that Julie’s actions had the effect of destroying or injuring Mark’s rights under the separation agreement.
The Appeals Court notes the separation agreement provided a structured, orderly way for Mark to pay Julie over five years while also earning an income from his dental practice and caring for his children. Yet, at trial, Julie admitted she was “‘not really comfortable with'” the separation agreement.
Based on everything it’s presented with, the Appeals Court concludes that one could find that Julie tried to get around the separation agreement by killing Mark, and thereby collecting on the life insurance policy and getting custody of the kids. Or, that Julie tried to seriously hurt Mark, impairing his ability to pay her with income from his dental practice.
One could view Julie’s conduct as a breach of the implied covenant of good faith and fair dealing. “In the judgment of the fact finder, such precipitous and violent conduct could be viewed as a breach of the implied covenant of good faith and fair dealing because the wife took some action that will ‘have the effect of destroying or injuring the right of the other party to receive the fruits of the contract,'” said the Appeals Court.
Julie cannot recover on a breach of contract claim because she violated the implied covenant of good faith and fair dealing.
Lastly, Julie argued that Mark didn’t have a valid defense for breaching their contract and stopping payments to her. According to Julie, Mark had to prove that she “‘actually destroyed or injured'” a right or caused “‘demonstrable harm,'” like an economic loss. She basically argued that Mark had to prove damages in order to stop paying. But there was no real harm, said Julie, because Mark survived her murder attempt. So, he should pay up.
The Appeals Court disagreed with Julie. The court noted that “‘[a] breach [of the covenant] occurs when one party violates the reasonable expectations of the other’…A material breach by one party ‘excuses’ the other party from further performance and entitles the other party to ‘recover contract damages.'” In this case, the Appeals Court said, Mark only wants to end his payments to Julie. He’s not seeking damages. So he doesn’t have to prove damages when raising the implied covenant of good faith and fair dealing as a defense. “The focus of this defense is not on whether tangible harm has been done but on whether a party took some action that ‘will have the effect of destroying or injuring’ the rights of the other party to the contract.”
The Appeals Court’s Bottom Line
“Keeping in mind that ‘spouses who enter into agreements with each other are held to standards higher than those we tolerate in the arm’s-length transactions of the marketplace’…the trial judge could conclude that a spouse who tries to kill another spouse in order to evade the consequences of a separation agreement does not live up to this standard. We discern no error and limit our holding to the conclusion that the wife’s violation of the implied covenant of good faith and fair dealing precludes her recovery on her breach of contract claim.”
Simply put, you can’t get in the way of another party’s ability to perform or benefit from a contract that you’ve each agreed to. If you do, the other side may be excused from holding up their end of the bargain.
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