Facts: Husband and Wife divorced after 28 years of marriage.

Before mediation, Husband sent a letter to Wife with a settlement proposal. At mediation, the mediator made notations on the letter to reflect the parties’ evolving agreements, to wit:

The parties signed the letter with the mediator’s notations as the “Mediated Agreement.”

Paragraph 4(A)(d) of the marital dissolution agreement (MDA) that followed was based on this section of the “Mediated Agreement” and stated:

As a division of marital property, Wife will also receive the sum of $298,588.64 representing one-half of a claim to dissipation by husband, one-half of the value of the gold and silver at National Security and Trust that existed at the time of the mediation, and further representing loans Husband made and a withdrawal he took out of his 401(k). Such sum shall be paid over a twenty-four (24) month period in equal installments commencing on the first day of the month following the entry of the Final Decree. Accordingly, Husband shall pay to Wife the sum of $14,441.19 each month for a period of 24 months….

The MDA was approved by counsel for both parties and incorporated into the Final Decree of Divorce.

Eight months later, Wife petitioned to reform Paragraph 4(A)(d) of the MDA to correct a “clerical mistake.”

The trial court found clear and convincing evidence that the parties agreed that Wife one half of the dissipation amount ($37,500), one half of the value of the gold and silver ($80,722.04), and the total of the loans or withdrawals from Husband’s 401(k) ($298,588.64). Thus, the trial court found that the parties intended for Wife to receive $416,810.68 in 24 monthly installments at the rate of $17,367.11 per month and reformed the MDA.

Husband appealed.

On Appeal: The Court of Appeals reversed the trial court.

In Tennessee, MDAs are treated as contracts and are subject to the rules governing the construction of contracts.

The words expressing the parties’ intentions should be given the usual, natural, and ordinary meaning. If the language of a written contract is unambiguous, courts must interpret it as written rather than according to the unexpressed intention of one party. Tennessee courts cannot make contracts for the parties but can only enforce the contract which the parties themselves have created.

Tennessee law allows courts to rewrite contracts to correct a mutual mistake when necessary to reflect the parties’ agreement accurately.

Mutual mistake is a mistake of all the parties laboring under the same misconception. A party seeking to reform a contract because of mutual mistake must show by clear and convincing evidence:

• the parties reached a previous agreement;
• they intended that the previous agreement be included in the written contract;
• the written contract materially differs from the previous agreement; and
• the variation between the previous agreement and the written contract is not the result of gross negligence by the party seeking reformation.

The Court found the trial court erred in reforming the MDA because there was no mutual mistake:

[I]t is clear that although the parties concede that a mistake was made in the drafting of the MDA, they do not agree on what the mistake was. In seeking affirmance of the trial court’s reformation of Paragraph 4(A)(d), we inferred that Wife is of the opinion that the parties agreed that she would receive the full amount of Husband’s withdrawal from the 401(k), i.e., $298,588.64. Husband, however, maintains that the parties agreed that Wife would receive only one-half of the withdrawn amounts, i.e., $149,294.32. In short, Wife ostensibly argues that there was no mistake in the MDA, and Husband contends that the MDA awarded Wife twice the agreed upon amount for his withdrawals from the 401(k). Stated another way, there is no mutual mistake in this case…. Here, the parties do not agree concerning whether Wife was to receive the full amount of Husband’s 401(k) withdrawal, or whether she was to receive one-half of that amount. In this regard, the parties were not “laboring under the same misconception.” In the absence of a mutual mistake, the remedy of reformation is not available, and the trial court erred in reforming Paragraph 4(A)(d) of the parties’ MDA.

*     *     *     *     *

[P]aragraph 4(A)(d) of the MDA contemplates that Wife will receive a sum certain of $298,588.64 payable in 24 monthly installments of $12,441.19…. There is no ambiguity as the MDA clearly states that the $298,588.64 represents the sum total of Wife’s interest in the dissipation, the gold and silver, and the withdrawals from the 401(k). Although the parties may have contemplated some other arrangement or amounts in their “Mediated Agreement,” the plain and unambiguous language used in the MDA governs the interpretation of their contract. If the contract is plain and unambiguous, the meaning thereof is a question of law, and it is the Court’s function to interpret the contract as written according to its plain terms. As such, under Paragraph 4(A)(d) Wife is entitled only to a total of $298,588.64 (not $416,810.68), and Husband is to pay the $298,588.64 in 24 monthly payments of $12,441.19.

The Court reversed the trial court’s reformation of the MDA.

Lawrence v. Lawrence (Tennessee Court of Appeals, Western Section, November 12, 2021).

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