College Expenses - Making Sure Your provision is Unambiguous, Enforceable and Non-Modifiable

"Making Sure Your Provision Is Unambiguous, Enforceable and Non-Modifiable"

By: Michael A. Robbins

COLLEGE EXPENSES

College expenses are more frequently being negotiated and included in Judgments of Divorce. However, the law is unclear whether a college expense provision is in the nature of child support and, therefore, modifiable; or whether child support is more in the nature of a negotiated property settlement and non-modifiable. The answer to this question may depend on your drafting.

Legal Authority

Historically, college expenses required by Consent or Judicial Decree, in divorce cases, have always been deemed Child Support. In fact, college expenses, like all other "educational expenses", were expressly sanctioned under the Child Custody Act, (until the Age of Majority Act became effective in 1972, MCLA 722.51. 1 ) as child support. Following the enactment of the Age of Majority Act, which reduced the age of majority from 21 years to 18 years, all expenses of education, ordered in connection with divorce decrees were considered Child Support.

In Smith v Smith, 433 Mich 606, 447 NW2d 715 (1989), the Michigan Supreme Court interpreted the Age of Majority Act and the relevant child support and custody statutes and held that there was a legislative intent to authorize support payments for the benefit of minor children only and that support payments may not be awarded beyond the age of majority. The Supreme Court reasoned, that lap of the

1 See Smith v Smith, 437 Mich 606 (1989), for a relevant general discussion of the issue.

amendments evidence legislative intent to retain the longstanding rule that support payments are to be limited by the age of majority." The court concluded that the exceptional circumstances clause of MCL 552.17a was legally void. Smith, supra at 618.

Currently, the words "exceptional circumstances" do not appear in MCL 552.17a. Rather the statute currently reads :[s]ubject to . . . MCL 552.605b, the court may also order support as authorized in this chapter for a child of the parties to provide support for the child after the child reaches 18 years of age." MCL 552.605b allows a court to "order child support for the time a child is regularly attending high school on a full-time basis with a reasonable expectation of completing sufficient credits to graduate from high school while residing on a full-time basis with the recipient of support or at an institution, but in no case after the child reaches 19 years and 6 months of age." Further, subsection (4) of MCL 552.605b allows the parties to enter into a valid and enforceable agreement that provides for the support of a child after the child reaches 18 years.

Consequently, Michigan's divorce law is clear that a provision in a Judgment of Divorce for the support of a child after reaching 18 years of age is valid and enforceable if "the provision is contained in the judgment . . . by agreement of the parties as stated in the judgment" MCL 552.605b(4)(a).

Enforcement of College Expense Provisions

Michigan courts have held that "when agreed to by the parties, the provision for a determination by the court of an amount to be paid for educational expenses, even

though this would extend support beyond the child's minority, is a valid exercise of the court's discretion." Gibson v Gibson, 110 Mich App 666, 671; 313 NW2d 179 (1981). See also: Ovaitt v Ovaitt, 43 Mich App 628; 204 NW2d 753 (1972).

The Court in Ovaitt, supra, recognized the consequences of not enforcing agreements to pay post-majority expenses;

Where the parties entered into an agreement that was incorporated by the court in its judgment... it would be an invitation to chaos to hold that such provision was not enforceable. It would permit parties to divorce actions to play fast and loose with the court and with the other parties to the action by entering into agreements which they had no intention of performing...[as a matter of public policy, this should not be permitted and the parties should be required to live up to the terms of their voluntary agreement. Id. at 638-639; 204 NW2d at 759.]

That analysis was found to be "quite persuasive" in Wagner v Wagner, 105 Mich App 388; 306 NW2d 523 (1981) and was further cited in Gibson, supra.

In Aussie v Aussie, 182 Mich App 454, 452 NW2d 859 (1990); the Court of Appeals, while noting the ruling in Smith, supra, stated that:

"We do not read Smith to preclude plaintiff from enforcing a clear contract of the parties, which may be of record or in the judgment of the case .. . While the option of increasing child support for Andrew is no longer valid, defendant did agree to pay the college expenses in consideration to plaintiff's agreement not to seek additional support at the time. Plaintiff kept her part of bargain. As the Ovaitt panel concluded, failure to enforce such contracts would be an invitation to chaos [because it] would permit parties to divorce actions to play fast and loose with the Court and the other parties . . . by entering into agreements which they had no intention of performing. (emphasis added).

Modification

However, just because the agreement is enforceable does not mean it cannot be modified if the agreement is not specific. The Michigan Court of Appeals recently

modified a party's obligation to cover college tuition expenses in Top v Silver, unpublished opinion per curium of the Court of Appeals, decided January 25, 2005 (Docket No. 250275). In Top, supra, the mother petitioned for enforcement of a provision in the Judgment of Divorce that required the father to provide for four (4) years of college tuition. The father responded requesting a modification because his business had closed. The language used in the Judgment of Divorce was broad and did not expressly state whether the college tuition was child support or part of the property settlement. The court found the tuition obligation was child support and stated that "the complete failure to enforce that obligation now, after appellant had twelve years to plan or petition the court based on changed circumstance, would be unjust and inappropriate," but it modified the agreement to limit the future obligation to tuition prices in Michigan. At the time the child was attending Indiana University. In Top, supra, it is important to note that the Trial Court's characterization of tuition as child support was not appealed or addressed by the Court of Appeals. Additionally, the mother stipulated to the limitation on father's obligation to pay college expenses and to basing future obligations on his ability to pay. Based on this stipulation, the Trial Court ordered a modification and the Court of Appeals affirmed. What is unclear, is whether the Trial Court would have ordered a modification if the mother had not agreed. This issue was not presented to the Court of Appeals and the question remains unanswered.

However, Oakland County Circuit Judge Cheryl Matthews did provide an answer to this question in the case of Ross v Ross, 2000-634472-DM. In that case, the father agreed under the heading of "Child Support" to the following provision:

"21.b. College costs. Defendant promises and agrees that he will pay directly to the institution of higher education involved or to the Child, as and when due, the tuition and related costs and expenses (including room and board) of the Child while enrolled as a full-time student in any college or university degree program designed to provide an undergraduate degree (the "College Costs"). These payments are to be used exclusively for the payment of the College Costs. Defendant's obligation for the payment of the College Costs, however, will not extend beyond four years of college for Edmund W. Ross, II, and beyond five years of college for William J. Ross, IV, or will Defendant's obligation for the payment of the college costs extend beyond the Child's 25 th birthday."

In Ross, the parties' eldest child was attending the University of North Carolina Asheville when the younger child got accepted to the University of San Diego. The eldest child's expenses were approximately $20,000 per year and the father was advised that the younger child's expenses would be approximately $25,000 per year. Father refused to pay the youngest child's expenses forcing mother to file a motion to enforce the college expense provision. In response, father argued that his obligation to pay college expenses was "child support" and requested a modification based upon a change in circumstances. He also argued that the college costs provision was ambiguous because the term "reasonable" was omitted. Mother argued that the provision was an unambiguous contractual provision separate from child support. She also argued that she gave up claims to substantial sums of money in negotiating this provision. In her ruling, Judge Matthews indicated the following:

"Clearly these parties have entered into an agreement whereby the Defendant will pay tuition including room and board (i.e., support) for his post-majority aged children and the agreement is valid and enforceable pursuant to MCL 552.605b. The question presented to the court is - Is the agreement modifiable like child support or enforceable in contract?"

"The court finds that the parties' agreement as to college costs is not "child support" but is enforceable as a contractual agreement. Further the court finds the college costs agreement language is unambiguous and denies Defendant's request for an evidentiary hearing as it relates to the intent of the parties at the time of the agreement."

The Ross case is currently in the Michigan Court of Appeals.

Hot Tip

1. Specify that any agreement for the payment of post-majority educational expenses shall be considered as a negotiated property settlement, not child support, and is therefore, non-modifiable, despite any change in circumstances and is not dischargeable in bankruptcy in accordance with 11 U.S.C. §523(a)(15).

2. Make the college expense provision as specific and unambiguous as possible and make sure the following issues are addressed:

A. Private University or Public University.

B. Undergraduate and/or Graduate School.

C. In state or out-of-state.

D. An explanation of college expenses (i.e., tuition, room, board, books, lab fees, fraternity dues, transportation expenses, spending money, etc.)

E. The use of MET, 529 Plan or other college fund prior to payments
beginning.

F The child's obligation to obtain scholarships, tuition grants or tuition
credits prior to payments beginning.

G. A limitation on expenses such as those that would have been incurred had the child attended the University of Michigan in Ann Arbor.

H. A date or event when payment shall conclude (i.e., child's marriage, child's G.P.A. falling below 2.0, child not attending school full time, child's remarriage, child obtaining a certain age).

I. A provision indicating that once the obligations have been
terminated, they will not be reinstated.

ATTACHMENTS

1. Top v Silver, unpublished opinion per curium of the Court of Appeals, decided
January 25, 2005 (Docket No. 250275)

2. Ross v Ross, Oakland County Circuit Court, decided September 8, 2006 (Docket
No. 2000-634472-DM)

3. Sample Judgment Language