Marital Agreements: Can You Really Contract Out of Family Court Jurisdiction?, 13 SCBJ, SC Lawyer, July 2013, #4

• Author: Jonathan W. Lounsberry

Marital Agreements: Can You Really Contract Out of Family Court Jurisdiction?

Vol. 25 No. 1 Pg. 20

South Carolina Bar Journal

July, 2013

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0 Jonathan W. Lounsberry

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The determination of jurisdiction over a marital agreement can affect valuation and equitable division of property and assets. In the early 1980s, the S.C. Supreme Court (herein “Supreme Court”) held in Moseley v. Mosier that parties could contract out of family court jurisdiction when entering into marital agreements; however, parties cannot contract out of family court jurisdiction regarding any issues concerning children (e.g., child support, child custody, etc.).¹ Within the past year, the S.C. Court of Appeals (herein “Court of Appeals”) revisited this issue in Hammer v. Hammer.² Although Hammer dealt with a marital settlement agreement, the holding illustrates the family court's subject matter jurisdiction over marital agreements, including pre- or post-nuptial agreements.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Hammer v. Hammer

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In June 2012, the Court of Appeals published its opinion in Hammer, in which Appellant argued the circuit court incorrectly dismissed his complaint for lack of subject matter jurisdiction since the parties’ "contract clearly demonstrated the parties' intent that the family court not have exclusive jurisdiction over the contract...and sections 20-3-690 and 63-3-530 of the South Carolina Code do not provide for exclusive family court jurisdiction ..."³ The Court of Appeals affirmed "the circuit court's dismissal of Appellant's complaint for lack of subject matter jurisdiction."⁴

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In affirming the circuit court’s ruling, the Court of Appeals reiterated the holding in Moseley, stating: “… we find the May 2008 contract does not evidence intent by the parties that the family court not have jurisdiction over the contract … under Moseley, the family court has continuing subject matter jurisdiction over the claims raised in Appellant's amended complaint."⁵ Without an explicit, clear statement of the parties’ intent to remove jurisdiction from the family court, the family court under Moseley retains jurisdiction over the parties and their marital agreement.⁶ As stated above, the facts in Hammer indicate the parties intended for the family court to retain jurisdiction.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Additionally, Appellant argued the circuit court had the power to interpret and enforce the parties’ marital settlement agreement under S.C. Code Ann. §§ 15-53-20, 15-53-30 and 15-53-90.⁷ Nonetheless, the Court of Appeals held “[t]he May 2008 contract was part of the parties' divorce proceeding. Pursuant to section 20-3-690, the family court has exclusive jurisdiction over contracts relating to property in a divorce proceeding;" and, without jurisdiction over the marital agreement, the circuit court could not “declare the rights and status” of the parties under the marital agreement.⁸ Since the family court had the statutory authority to enforce and interpret the marital agreement under S.C. Code Ann. § 20-3-690, the correct court to “declare the rights and status” of the parties under the marital agreement was the family court. Falling in line with the holding of Moseley, Hammer demonstrates when the family court retains jurisdiction over the parties and their marital agreement.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Moseley v. Mosier

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Before 1983, the family court’s subject matter jurisdiction over marital agreements depended on the interpretation of "words of art.” The Supreme Court's ruling in Moseley v. Mosier abandoned this tradition, holding:

"Today, we overrule those cases which hold that words of art make a major distinction in the operation of divorce law. Furthermore, jurisdiction for all domestic matters, whether by decree or by agreement, will vest in the family court. In all decrees entered after this decision, the parties may contract concerning their property settlement and alimony, but the submitted agreement must be approved by the family court. The parties may specifically agree that the amount of alimony may not ever be modified by the court; they may contract out of any continuing judicial supervision of their relationship by the court; they may agree that the periodic payments or alimony stated in the agreement shall be judicially awarded, enforceable by contempt, but not modifiable by the court; they may agree to any terms they wish as long as the court deems the contract to have been entered fairly, voluntarily and reasonably. With the court's approval, the terms become a part of the decree and are binding on the parties and the court."⁹

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Moseley is the guidepost for interpretation and enforcement of marital agreements. As illustrated in Hammer, the family courts of this state return to Moseley when faced with issues surrounding marital agreements. In addition to Moseley, the family court is given statutory authority to review and enforce marital agreements.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The family court’s statutory authority over marital agreements

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0A year following the Moseley decision, the legislature enacted Article 5, Chapter 3, Title 20 of the South Carolina Code of Laws, which included §§ 20-3-690 and 20-3-630 (discussed below). Both S.C. Code Ann. §§ 20-3-690 and 63-3-530(B), coupled with Moseley and its progeny, grant the family court subject matter jurisdiction to interpret and enforce marital agreements (pre-nuptial, post-nuptial and settlement agreements).¹⁰ While the family court is granted this power, both through common and statutory law, does this power extend to the interpretations and enforcement of marital agreements dealing with non-marital property?

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The family court cannot apportion non-marital property. S.C. Code Ann. § 20-3-630, states, in pertinent part:

“The term "marital property" as used in this article means all real and personal property which has been acquired by the parties during the marriage and which is owned as of the date of filing or commencement of marital litigation as provided in Section 20-3-620 regardless of how legal title is held, except the following, which constitute non-marital property: … (4) property excluded by written contract of the parties..."¹¹

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Under Moseley, the family court must approve an agreement’s terms before it becomes enforceable. Accordingly, the family court retains subject matter jurisdiction over the parties' property until it enforces their marital agreement, triggering any “non-marital” designation of property addressed in the marital agreement. Yet, under S.C. Code Ann. § 20-3-630, the designation of “non-marital” only relieves the family court of the ability to apportion such property; it does not relieve the family court of jurisdiction over the marital agreement.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Exceptions to family court jurisdiction: Can marital agreements remove jurisdiction from the family court?

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0As a wise professor of mine oft-expressed for every rule of law, be it statutory or common, there is always an exception (and there is always an exception to the exception). In this vein, there are instances when the family court will lose subject matter jurisdiction over interpretation and enforcement of marital agreements. The following cases demonstrate instances where the family court can lose jurisdiction: (1) where terms of a marital agreement have not been submitted to the family court for approval and the parties are divorced; (2) where terms of a marital agreement are enforced by the family court and the property is deemed non-marital; and (3) where an action of enforcement and interpretation is first brought in circuit court and the marital agreement prevents either party from seeking equitable apportionment or spousal support.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Bailey v. Bailey: Where terms of a marital agreement have not been submitted to the family court for approval and the parties’ divorce has been finalized

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In Bailey v. Bailey, the Court of Appeals held that a "purely contractual claim falls squarely within the jurisdiction of the circuit court."¹² The Baileys entered into a post-nuptial agreement where the property owned by each party prior to the marriage would remain that party's separate property in the event of a divorce. But, when Mr. Bailey filed for divorce, he omitted a request for equitable apportionment or sought to have the post-nuptial agreement enforced. To further complicate matters, Ms. Bailey did not appear at the final hearing or file any responsive pleadings. One year after the divorce, Ms. Bailey brought an action in the circuit court seeking enforcement of the post-nuptial agreement.¹³ A special referee granted Mr. Bailey's motion for directed verdict, holding "Ms. Bailey should have brought a counterclaim during the original divorce proceedings asking the family court to enforce the agreement."¹⁴ Ms. Bailey appealed the decision, arguing "the circuit court had subject matter jurisdiction over the action and that the she was not required to raise the Agreement in a counterclaim to Mr. Bailey's divorce petition."¹⁵ The Court of Appeals held "the trial court erred when it ruled that Ms. Bailey’s action to enforce her rights under the Agreement, an action completely independent of and unrelated to the divorce action, fell within the exclusive jurisdiction of the family court."¹⁶ The Court of Appeals further held "only the circuit court has jurisdiction over purely contractual actions, " and "a family court lacks subject matter jurisdiction to settle a dispute between spouses involving their respective interests in property, unless the determination is incident to an action requesting an alteration of their marital status.”¹⁷

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0This exception lies in the timing of the action. If a party brings an action to enforce a marital agreement not presented to the family court during the marital dissolution, then subject matter jurisdiction over enforcement of the agreement vests in circuit court. The Bailey exception will not apply if a party seeks to have a marital agreement enforced during the dissolution of the marriage. As stated above, S.C. Code Ann. § 20-3-690 grants "the family courts of this State have subject matter jurisdiction over all contracts relating to property which is involved in a proceeding under this article and over the construction and enforcement of those contracts."¹⁸

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Bowen v. Bowen: Where terms of a marital agreement have been enforced by the family court and the property has been deemed non-marital

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In Bowen v. Bowen, the wife filed for divorce, enforcement of the parties’ antenuptial agreement and for one-half interest in real estate the parties owned not expressly addressed in the antenuptial agreement.¹⁹ The “family court determined the agreement was enforceable and, applying the plain language of the agreement, found the four parcels of property in dispute were nonmarital in nature. Nevertheless, the family court determined Wife owned a one-half interest in the properties.”²⁰

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The husband appealed the family court decision. The Court of Appeals, in turn, held:

“Once the family court determined the properties were nonmarital, it had no jurisdiction to address their ownership or deal with them in any way. See S.C. Code Ann. § 20-7-473 (Supp. 1996) ("The [family] court does not have jurisdiction or authority to apportion nonmarital property."). The parties' respective interests in the real estate in question must be handled as if the parties were not married. Therefore, that determination must be left for another day.”²¹

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The wife filed for a declaratory judgment in the circuit court after the Court of Appeals vacated the family court ruling. Her motion resulted in the circuit court awarding her the same interest in the property as the family court.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Here, the exception lies in the fact that the family court enforced the post-nuptial agreement, determining the property in question to be non-marital. After the family court approved the marital agreement, the family court lost the ability to apportion the parties' non-marital property. As stated in S.C. Code § 20-3-630(A)(4), the family court cannot apportion non-marital property, leaving the valuation and division of non-marital property either in the terms of the marital agreement or with the circuit court.²² It must be noted, when a marital agreement contemplates property as being treated non-marital, there is nothing to prevent the family court from counting the value against the equitable apportionment of the receiving party.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Gilley v. Gilley: Where an action for enforcement and interpretation is first brought in circuit court and the marital agreement prevents either party from seeking equitable apportionment or separate maintenance from the other

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0In Gilley v. Gilley, prior to a family court action being filed, the wife brought an action in the circuit court seeking to partition property the parties acquired as tenants-in-common.²³ The “[h]usband moved for dismissal on the grounds that the family court had exclusive jurisdiction over such matters.”²⁴ The circuit court denied husband’s motion ruling; since wife sought partition separate from an action for divorce or separate maintenance, the circuit court had jurisdiction.²⁵

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0After denial of his motion, the husband filed an action for separate maintenance and equitable division in family court. The family court dismissed his action because the pre-nuptial agreement prevented either party from seeking equitable apportionment or separate maintenance, preventing the family court from having jurisdiction over the agreement.²⁶ The husband appealed both the decision of the circuit court and the family court. The Supreme Court upheld both decisions.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The Gilley exception provides when an action is first brought in circuit court (separate from an action for divorce or separate maintenance) and the parties' marital agreement precludes either party from seeking equitable apportionment or separate spousal support, the circuit court will have proper subject matter jurisdiction over the parties' agreement.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Holler v. Holler: The exception to the exception

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0As stated above in Gilley, the family court loses subject matter jurisdiction over a parties' marital agreement when (1) an action is filed first in circuit court and (2) the parties' marital agreement precludes either party from receiving spousal support. Yet, the Court of Appeals held in Holler v. Holler when an action is filed in family court by one of the parties seeking spousal support (among other relief) and a marital agreement is used as a defense, the family court is required to retain subject matter jurisdiction over the agreement.²⁷ The family court retains jurisdiction over the agreement to review its terms for fairness and its enforceability.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Conclusion

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0The issue of jurisdiction over marital agreements seems to be a settled matter, with some exceptions. The holding in Hammer demonstrates the family court maintains exclusive jurisdiction over marital agreements. The guidepost of Moseley gives the family court direction over how to interpret and enforce marital agreements. Nonetheless, the exceptions mentioned above establish instances where the circuit court retains jurisdiction over interpretation and enforcement of marital agreements.

\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0\xA0Jonathan W. Lounsberry practices law in Ladson.

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Notes:

[1] Moseley v. Mosier, 279 S.C. 348, 306 S.E.2d 624 (1983).

[2] Hammer v. Hammer, 399 S.C. 100, 730 S.E.2d 874 (Ct. App. 2012).

[3] Id. at 103, 730 S.E.2d at 875.

[4] Id. at 109, 730 S.E.2d at 879.

[5] Id. at 106-107, 730 S.E.2d at 877.

[6] Moseley, 279 S.C. at 353, 306 S.E.2d at 627 (“However, unless the agreement unambiguously denies the court jurisdiction, the terms will be modifiable by the court and enforceable by contempt.”).

[7] S.C. Code Ann. § 15-53-20 (2005), states, in pertinent part: "[c]ourts of record within their respective jurisdictions shall have power to declare rights, status and other legal relations...." S.C. Code Ann. § 15-53-30 (2005), states, in pertinent part: “Any person interested under a deed, will, written contract or other writings constituting a contract or whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, status or other legal relations thereunder.” S.C. Code § 15-53-90 (2005), states, in pertinent part: “When a proceeding under this chapter involves the determination of an issue of fact such issue may be tried and determined in the same manner as issues of fact are tried and determined in other civil actions in the court in which the proceeding is pending. All existing rights to jury trials are hereby preserved.”

[8] Hammer, 399 S.C. at 108-109, 730 S.E.2d at 878.

[9] Moseley, 279 S.C. at 353, 306 S.E.2d at 627.

[10] S.C. Code Ann. § 20-3-690 (Supp. 2013) states: "The family courts of this State have subject matter jurisdiction over all contracts relating to property which is involved in a proceeding under this article and over the construction and enforcement of those contracts." S.C. Code Ann. § 63-3-530(B) (2010) states: "Notwithstanding another provision of law, the family court and the probate court have concurrent jurisdiction to hear and determine matters relating to paternity, common-law marriage, and interpretation of marital agreements; except that the concurrent jurisdiction of the probate court extends only to matters dealing with the estate, trust, and guardianship and conservatorship actions before the probate court."

[11] S.C. Code Ann. § 20-3-630(A)(4) (Supp. 2013).

[12] Bailey v. Bailey, 330 S.C. 326, 330, 498 S.E.2d 891, 893 (Ct. App. 1998).

[13] Id. at 328-29, 498 S.E.2d at 892.

[14] Id. at 329, 498 S.E.2d at 892.

[15] Id.

[16] Id. at 330, 498 S.E.2d at 893 (See Gilley v. Gilley, 327 S.C. 8, 488 S.E.2d 310 (1997)).

[17] Id. (citing Lighty v. South Carolina Dep't of Soc. Servs., 285 S.C. 508, 330 S.E.2d 529 (1985) (Gregory, J. concurring) and Brown v. Brown, 295 S.C. 354, 358, 368 S.E.2d 475, 477 (Ct. App. 1988)).

[18] S.C. Code Ann. § 20-3-690 (Supp. 2013).

[19] Bowen v. Bowen, 345 S.C. 243, 547 S.E.2d 877 (Ct. App. 2001).

[20] Id. at 247, 547 S.E.2d at 879.

[21] Bowen v. Bowen, 327 S.C. 561, 566, 490 S.E.2d 271, 273 (Ct. App. 1997).

[22] Supra note 11.

[23] Gilley v. Gilley, 327 S.C. 8, 488 S.E.2d 310 (1997).

[24] Id. at 11, 488 S.E.2d at 311.

[25] Id. at 10-11, 488 S.E.2d at 312 (citing Terry v. Lee, 308 S.C. 459, 419 S.E.2d 213 (1992) (family court lacks subject matter jurisdiction to settle a dispute between spouses involving respective interests in property, unless determination is incident to an action requesting an alteration of the marital status)); see also Gardner v. Gardner, 253 S.C. 296, 302, 170 S.E.2d 372, 375 (1969) ("The general rule is that jurisdiction of a court depends upon the state of affairs existing at the time it is invoked. If jurisdiction once attaches to the person an subject matter of the litigation the subsequent happening of events will not ordinarily operate to oust the jurisdiction already attached.").

[26] Id. at 11, 488 S.E.2d at 312.

[27] Holler v. Holler, 364 S.C. 256, 612 S.E.2d 469 (Ct. App. 2005).

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