.webp)
.png)
Marital agreements, both prenuptial and postnuptial, have been a relatively frequent topic here on our blog, and this is for good reason. Prenuptial and postnuptial agreements have the potential to confer substantial value to spouses: when spouses create these agreements, they are essentially removing a certain level of uncertainty in the event that divorce occurs. Without any private agreement, the court will proceed with its default principles when it comes to the many issues of divorce, including distribution of assets, alimony, child custody and so forth. Having a private agreement, therefore, is primarily about taking these default principles of the equation, and this is something which is often highly beneficial for spouses.
In the past, we discussed the case of Lloyd v. Niceta, a case involving a postnuptial agreement which contained a “penalty clause” in the event of adultery. Recently, the Supreme Court of Maryland heard this case; let’s go over the case in a bit of detail.
Factual Posture of the Case
The parties in this case created a postnuptial agreement which stated that, in the event the husband committed adultery, the wife would be entitled to $7 million, or at least 50% of the marital assets. In the event that 50% of the marital assets added up to less than $7 million, then the wife would only be entitled to this lesser amount (in other words, she couldn’t attach a greater share to receive the full $7 million). Ultimately, the husband ended up committing adultery, and the wife petitioned for divorce.
When the case came before the trial court, the “$7 million clause” came under scrutiny: the trial court found that type of clause wasn’t unenforceable simply because it appeared to be a “liquidated damages” clause. In this situation, the court reasoned that such a clause couldn’t be undermined simply because it represented a form of “compensatory damages,” something which is ordinarily not granted in divorce proceedings. Likewise, the court stated that such a clause was supported by current public policy, and also current Maryland statutory law (Family Law Section 7-103(a)(1). After this ruling was upheld by the appellate court, the husband petitioned Maryland’s court of highest authority for review.
Ruling & Post-Ruling Discussion
The Supreme Court of Maryland affirmed the appellate court’s ruling, holding that the reasoning of the appellate division had been correct. In its opinion, the Supreme Court went over the multiple bases on which the trial court’s ruling might potentially be defeated: liquidated damages, public policy, and Maryland’s current statutory framework under Family Law Section 7-103(a)(1). Specifically, on the point regarding FL 7-103(a)(1), the Supreme Court highlighted the fact that this statute has previously been used to uphold the distribution of assets according to adulterous conduct. In other words, permitting the clause to stand as enforceable was very much consistent with past rulings. The husband tried to argue that such a clause was overly “restrictive” and prevented him from forming normal platonic relationships with other women, but the court rejected this argument.
Contact the Murphy Law Firm for Additional Information
Readers who want to know more about creating enforceable postnuptial agreements in Maryland, allocation of marital assets in a private agreement, grounds for divorce in Maryland, or any other related family law topic, contact one of the family law attorneys at the Murphy Law Firm today by calling 240-219-1187.
.png)
.png)
.png)
.png)
