When you and/or your spouse own substantial assets, including investments, real estate, and so forth, the likelihood rises that you will need a relatively complex (and perhaps lengthy) settlement agreement. Part of ensuring that the agreement you sign is the agreement you need is ensuring that you have a skilled Maryland divorce lawyer by your side throughout the process, from negotiation to drafting to execution to enforcement.
Proper legal representation is essential, in part, to ensure that the contract you sign is well-written, avoiding unnecessary ambiguities or vagueness that can lead to unwelcome outcomes in the future.
A recent divorce case that originated in Montgomery County is a good example. The case involved a couple who reached a settlement agreement in January 2021 that covered the distribution of all of their assets.
The husband’s employer compensated him, in part, with stock units. The settlement agreement called for the husband to pay the wife “42% of the after-tax value of the marital portion of the [stock units] on an ‘if, as, and when’ basis.”
Four months after the spouses signed the agreement, another entity bought the husband’s employer, causing “an accelerated vesting” of all the stock units. In numerical terms, the stock units were cashed out and the husband received a cash payment of $1.44 million for the stocks. In mid-June, the husband wrote the wife a check for just under $250,000, which was her marital portion of the stock payout, according to his calculations.
The wife sought a contempt ruling against the husband, arguing that the $249,000 payment shortchanged her by more than $150,000, as the proper amount due was $403,000.
‘Parol Evidence’: When It Is (and Isn’t) Allowed
At the contempt hearing, the husband sought to present evidence other than just the contract itself. In contract law, this proof is called “parol evidence.” A party can only use this proof if the agreement in dispute is vague or ambiguous. The husband’s contention was that the correct vesting date – which was an essential element of the underlying calculation – was not clearly defined by the agreement, thereby making the contract ambiguous and opening the door to the use of parol evidence.
Maryland courts, when resolving marital settlement agreement disputes, utilize the same rules of law that exist in any other contract case. That means the trial court will not consider any evidence outside the agreement unless that contract is vague or ambiguous.
Ultimately, the trial court determined that the agreement was sufficiently clear and that the wife was entitled to the $403,000 sum she asserted. The husband appealed but was unsuccessful. The appeals court noted that, although the term “vesting” was not expressly defined in the contract, its meaning was still adequately clear. Merriam-Webster’s Dictionary, the court noted, defines “vesting” as “the conveying to an employee of inalienable rights to money contributed by an employer to a pension fund or retirement plan especially in the event of termination of employment prior to the normal retirement age.”
Applied to this couple’s agreement, that meant that the stock units plainly vested on the date that their full monetary value was conveyed to the husband. The husband’s Fidelity account statement showed he received the full $1.44 million on May 11, 2021. As a result, May 11, 2021 – which was the date that the wife’s accountant used to calculate her portion to be $403,000 – was clearly the correct one, meaning that the trial court was not permitted to consider parol evidence and the wife was entitled to the additional $154,000.
If you are considering resolving some or all of your divorce issues via a settlement agreement, it is well worth your while to talk to legal counsel before you sign anything. The experienced Maryland family law attorneys at Anthony A. Fatemi, LLC are here to provide you with reliable answers and effective advocacy throughout the process of considering or completing a marital settlement agreement. Contact us today at 301-519-2801 or via our online form to set up your consultation.