Background
Mr. Brvenik and Ms. Kavanagh divorced pursuant to a marital settlement agreement (MSA) executed July 12, 2023. The MSA included a provision (Section 3.b.iii.B) setting forth how to calculate Ms. Kavanagh’s equity in their jointly owned lake house. During final redlining, Ms. Kavanagh’s attorney inadvertently deleted the phrase “reduced by” when removing a clause regarding deductions. The error meant the executed agreement read that equity equals “the fair market value of the Lake House shall be the existing mortgage balance…multiplied by 50%,” instead of the intended “reduced by the existing mortgage balance.”
When the parties met to close the transaction in November 2023, Mr. Brvenik offered Ms. Kavanagh $2,552.63 (50% of the remaining $5,092.75 mortgage balance), rather than the approximately $291,000 she expected based on the property’s $823,000 appraised value. Ms. Kavanagh refused to sign the deed. She later moved to reopen the case and reform the MSA, alleging both attorneys had confirmed the deletion was unintentional and that Mr. Brvenik, who received the redlines before signing, knew of the error but did not disclose it.
The circuit court reformed the agreement and awarded attorney’s fees to Ms. Kavanagh. Mr. Brvenik appealed, arguing the court improperly admitted settlement discussions and erred in finding he knew of the mistake.
The Court’s Holding
The appellate court affirmed reformation, holding that when one party knows a written agreement does not express the other party’s actual intent and fails to disclose that knowledge, the non-disclosure constitutes inequitable conduct sufficient to justify reformation. The court rejected Mr. Brvenik’s arguments on three grounds. First, evidence regarding the deleted phrase was admissible despite occurring during negotiations, because Maryland Rule 5-408 (settlement evidence exclusion) applies only when evidence is offered to prove the validity or invalidity of a claim—here, the evidence was offered to prove the existence of a mistake, a different purpose. Second, entries in Mr. Brvenik’s post-divorce fee invoices showing his counsel immediately researched “mutual mistake” doctrine corroborated that he knew the deletion was a mistake, undermining his claim of innocent surprise. Third, the deletion was obvious: without “reduced by,” requiring an appraisal of the property became senseless, and principles of marital property division establish that equity is calculated on net value, not mortgage balance.
The court articulated the controlling standard: when one party knows at execution that a written agreement does not accurately express the other party’s intention and knows what that intention actually is, reformation is warranted. Non-disclosure of such knowledge is equivalent to misrepresentation and estops the knowing party from enforcing the agreement as written. The court reformed Section 3.b.iii.B to include “reduced by,” restoring the parties’ negotiated intent.
Key Takeaways
- Reformation is available when one party knowingly conceals that a written instrument fails to reflect the other party’s actual intent.
- Post-execution conduct, including immediate legal research on contract reformation doctrine, can evidence pre-execution knowledge of a mistake.
- Settlement negotiation evidence is admissible when offered for a purpose other than proving claim validity—including to establish the existence of a mistake in contract terms.
- In marital property division, equity is calculated on net value (fair market value minus encumbrances), not mortgage balance alone, and courts will not enforce language that contradicts this principle without clear evidence of intent.
Why It Matters
This decision protects parties to marital settlement agreements from exploitation based on clerical errors. It establishes that sophistication and active participation in negotiations do not permit a party to remain silent about known errors and later claim the agreement’s terms. For divorce counsel, the case signals that courts will scrutinize whether an obviously problematic provision was actually negotiated and intended, and will look to surrounding circumstances—here, the necessity of an appraisal, standard property valuation principles, and the parties’ actual discussions—to determine true intent. The ruling also clarifies that settlement-protected discussions remain admissible for non-settlement purposes, allowing courts to understand the factual predicate of claimed mistakes without chilling settlement discussions.
The decision reinforces core equitable principles: non-disclosure of a known mistake operates as fraud, and courts will not permit a party to take advantage of another’s mistake when the first party’s own knowledge and silence contributed to the error going undiscovered. This has implications beyond divorce for any contract reformation claim where one party has actual knowledge of a drafter’s mistake.