Separation Agreements

Terms:

Collateral Attack:
An attempt to impeach or overturn a judgment rendered in a judicial proceeding, made in a proceeding other than within the original action or an appeal from it.

Res Judicata:
Rule that a final judgment rendered by a court of competent jurisdiction on the merits is conclusive as to the rights of the parties and their privies, and, as to them, constitutes an absolute bar to a subsequent action involving the same claim, demand or cause of action.

Estoppel:
Estoppel is a bar or impediment which precludes allegation or denial of a certain fact or set of facts after a final adjudication of the matter in a court of law. 

Unlike a prenuptial agreement, which is made in contemplation of marriage, a separation agreement focuses on discontinuation of the marital relationship.  In fact, a separation agreement is used to settle numerous issues that arise in termination of a marriage, such as separation of the parties, alimony, division of property, child support, custody and visitation. 

Separation agreements are fairly common today.  That was not always the case.  Traditionally, it was thought that these types of contracts were offensive to public policy, and thus unenforceable, on the grounds that they promoted divorce.  Fortunately, these objections have been abandoned.  Rather, courts encourage these types of agreements because they are a means to compromise marital disputes and avoid the expense, delay and stress of litigation.

Since a separation agreement is a contract, it too is governed by the principles of the law of contracts. Specifically, the agreement must be supported by consideration to the extent that it is executory. In a marital relationship, recognized consideration has taken various forms, such as:

(1) mutual promises (see, e.g., Chilwell v. Chilwell, 105 P.2d 122 (1940));

(2) a release by one spouse of property rights of the other spouse (see, e.g., Kirkland v. Kirkland, 181 So. 96 (1939)) and

(3) a spouse’s acceptance of the agreement in satisfaction of his claims for alimony or support (see, e.g., Bennett v. Bennett, 25 P.2d 426 (1933)).

Under the auspices of contract law, a separation agreement can also be challenged based on fraud, duress, or incapacity. In Johnston v. Johnston, 297 Md. 48, 465 A.2d 436 (1983), the court dealt with the issue of whether a separation agreement approved and incorporated but not merged into the divorce decree may be collaterally attacked. The court held that the separation agreement may not be collaterally attacked where its validity is conclusively established by the decree, which operated as res judicata.

Example: Joe and Nita are married. Nita, on highly sedative painkillers, signs the separation agreement, not knowing what she is signing. Two months later, however, she is miraculously cured. At that time, she sees the separation agreement but does not question it. As such, she cannot later collaterally attack the agreement because it was ratified by her action (or in this case, inaction).

Two common defenses to separation agreements are severability and estoppel. With severability, if a particular provision in the agreement is found to be fraudulent, the question arises whether the whole agreement should be invalidated. The answer depends on the intent of parties. There is often severability language in the contract, like one would ordinarily find in a typical contract.

Example: During the time Ted and his soon-to-be ex-wife, Nina, were preparing their separation agreement, he neglected to disclose all his assets, thereby underreporting the true value of his net worth. The other aspects of the agreement (i.e., issues of child support and custody) were not in dispute. A spouse who lies about his or her net worth can open the agreement for re-litigation by the other spouse. The court would have to decide whether to honor the uncontested parts of the agreement or throw out the entire arrangement.

If there is a delay on the part of one spouse with knowledge of any misrepresentation in challenging that section of the agreement, the party is estopped or prohibited from challenging the agreement. For example, if there were hidden assets, a party can re-litigate the property distribution only. Another remedy available to an injured party is she can collaterally attack the agreement, asserting that the agreement was not fair and reasonable when entered into, or the agreement was unconscionable from its inception.

Example: The wife claimed the separation agreement was inequitable and unconscionable because the parties were represented by the same attorney. The Court of Appeals held that the fact that the parties were represented by one attorney was insufficient grounds, by itself, to establish overreaching and unfairness requiring rescission of the agreement. See, e.g., Levine v. Levine, 56 N.Y.2d 42, 451 N.Y.S.2d 26, 436 N.E.2d 476 (1982).

On occasion, the parties may decide to reconcile.  The parties’ reconciliation generally terminates a separation agreement.  This change of heart gets complicated when there have been property transfers as part of the separation process.  These transfers will be unaffected by the termination of divorce proceedings.  Furthermore, when a divorced couple reconciles and remarries, property rights conferred under the divorce decree (which likely were included in a separation agreement) remain separate property in the new marriage.  See, e.g., In re marriage of Nordberg, 265 Mont. 352, 877 P.2d 987 (1994).

Example: Patricia and Guy are in the process of negotiating a separation agreement after five years of marriage.  Under the terms of the agreement, Patricia will receive rights to their summer home in the Catskills.  In addition, Patricia relinquishes her right of support.  Guy has given up the right to contest Patricia’s will and he will keep their apartment in Brooklyn Heights.  If they later reconcile and remarry, the property that was distributed would be considered their respective separate property.

Once all the obligations contained in the separation agreement are completed, a conversion divorce can occur, leading to a final divorce decree.  It is common practice to incorporate (or “merge”) separation agreements into divorce decrees, either by reference or by setting forth their terms expressly.  The latter, when given mandatory language, elevates the separation agreements to the status and enforceability of judgments.  As such, the separation agreement loses its status as a separate contract.  See, e.g., Pauling v. Pauling, 837 P.2d 1073 (Wyo. 1992).

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