Family Court Approval of a Marital Settlement Agreement Over One Party's Objection
| Publication year | 2015 |
| Pages | 44 |
| Citation | Vol. 26 No. 4 Pg. 44 |
Reid T. Sherard, J.
In a domestic relations case it can be very difficult for a lawyer to help a client negotiate and settle the myriad of issues. Most litigants, even in the most acrimonious disputes, want to manage the outcome and minimize risk. Trials are expensive and demanding of judicial resources. The Supreme Court requires mediation in about two-thirds of counties[1] before a trial can be scheduled, and it "encourage[s] litigants to reach an extra judicial agreement"[2] on marital issues. Most cases settle. The unique challenge in the family court, unlike many other civil courts, is any such agreement must be approved by the family court.[3] Many times parties commit to settlements and then attempt to back out of the deal prior to the approval hearing. In these circumstances the family court "must assume jurisdiction"[4] and begin a multi-step analysis to "satisfy itself the agreement is a fair contractual end to the parties' marital claims."[5] Thereafter the family court may approve the settlement agreement over the objection of a party who adopts such "buyer's remorse" if proper procedure is followed and appropriate evidence is presented.
Prelude: What is a marital settlement agreement and why does it matter?
The term "marital settlement agreement" is a term of art. It is used but not defined in the statutory code; however, such agreements "are viewed as contracts"[6] between the parties, and "it is clear that parties may enter into contracts resolving issues ... and that the family court has jurisdiction over those contracts."[7]
Executing a marital settlement agreement is an important act. For example, the alimony statute provides that "[n]o alimony may be awarded [to] a spouse who commits adultery before the earliest of ... (1) the formal signing of a written property or marital settlement agreement ..."[8] Similarly, another statute states that property acquired after the "formal signing of a written property or marital settlement agreement"[9] constitutes non-marital property which is not subject to apportionment by the family court. Without the family court conducting the analysis addressed in this article, a conniving party might immediately agree to sign a marital settlement agreement for an ulterior motive—for example, to foreclose the adultery bar to alimony—if that party could then easily repudiate the agreement but remain in compliance with the statute. Moreover, allowing marital settlement agreements to be repudiated without input from the family court would render meaningless the mandatory mediation process and the numerous appellate cases with opposite holdings. Other issues impacted by the approval issue are the length, cost and frustration of the pending litigation, as well as the effect on the minor children.
Overview of approval
The parties to a family court case generally "may agree to any terms they wish as long as the court deems the contract to have been entered fairly, voluntarily, and reasonably"[10] In its approval analysis, the family court must find and conclude:
(1) an agreement exists, including the specific terms;
(2) the parties freely and voluntarily entered into the agreement;[11]
(3) the agreement is fair and reasonable from both procedural and substantive perspectives;[12] and
(4) the agreement is not detrimental to the minor children whose rights are involved in the proceedings (as relevant).[13]
The court order addressing approval of an agreement "shall set forth the specific findings of fact and conclusions of law to support the court's decision."[14]
The vast majority of agreements are approved without incident. In the event one party repudiates, the family court should consider bifurcating the hearing regarding the approval of the agreement from the issues to be tried in the event the agreement is not approved.[15] The parties should be given the opportunity to have a "full hearing"[16] on the approval issue, at which they may testify, call third parties as witnesses and offer other evidence.[17]
It is possible that the family court will find the offered agreement to meet all required criteria as to one issue (e.g. equitable apportionment) and not as to another issue (e.g. alimony), and in that situation the family court should partially approve the agreement as to the former issue and set the matter for trial as to the latter issue.[18] Importantly, the family court is entitled to take the parties at their respective under oath testimony on any given issue.[19] In other words, if a party misrepresents the truth under oath, that can be considered "invited error" in the event that party appeals;[20] it will not void approval and may lead to an attorney's fees award against that party[21]
One frequent question is how mediation impacts the issue. Mediation is governed by special rules and is generally confidential.[22] Willingness to accept a settlement proposal is not an exception to the general rule.[23] However, "[u]pon the parties reaching an agreement, the mediator shall provide a Memorandum of Agreement ... It is the obligation of the parties to seek approval of the agreement by the family court."[24] Thus, the mediation rules plainly anticipate that an agreement reached in mediation is subject to the approval analysis in this article. Stated another way, the mediation rules do not change the analysis.
Even if one party repudiates the agreement, the family court can and should approve the agreement over such objection if the family court is satisfied that the required factors have been met.
First requirement: Is there an agreement?
Marital settlement agreements typically come in one of two forms, either an agreement that is reduced to writing and executed prior to the final hearing, or an agreement that is not reduced to writing prior to the final hearing but that is orally presented to the family court at such hearing. Importantly, like with any contract, the parties must have a meeting of the minds as to all essential and material terms of the agreement.[25] "[E]ven a plain, unambiguous agreement is nevertheless subject to the duty of the Family Court judge to rule upon its fairness"[26] before it is approved. As a practical matter, the exact terms of the agreement are also important as benchmarks for any future modification action and any future contempt action.
If the agreement is ambiguous the family court can take testimony and receive evidence so that it may "first ascertain the intention of the parties by examining the extrinsic circumstances surrounding the agreement and the parties . .. before ruling on its fairness."[27]
Rule 43(k), SCRCP warrants mention. Rule 43(k) "is intended to prevent disputes as to the existence and terms of agreements regarding pending litigation"[28] and it "plainly applies to all settlement agreements signed by counsel."[29] By its own terms, Rule 43(k) provides no agreement between counsel shall be binding unless signed by counsel and entered in the record, made in open court and noted upon the record, or signed by the parties and their counsel. Unless one of those three conditions is met, the agreement is not enforceable under Rule 43(k).[30] Most importantly, an agreement under Rule 43(k) "is still subject to review by the family court to determine its fairness."[31]
Second requirement:...
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