In the vast majority of divorce cases, the parties are able to reach a financial settlement to resolve the case without a trial. To accomplish this, at some point before the prove up hearing,1 a marital settlement agreement (“MSA”) is successfully negotiated and signed by both parties. But what happens when something occurs between the time that the MSA is executed and the time that it is incorporated into the judgment for dissolution of marriage that threatens to destroy the agreement that had been reached? Can it be found unenforceable due to circumstances arising after its execution and before incorporation? What is an attorney’s duty related to supplementing discovery during this period?
This article will discuss issues that can arise during the time period between execution of the MSA and its incorporation into the judgment for dissolution of marriage. It will explore the validity of the executed MSA, potential challenges to enforceability of the MSA, and an attorney’s duty to supplement discovery during that period.
The MSA: Contract vs court order The MSA is the document disposing of all issues of assets and debts of a marriage. It can set maintenance and child support obligations, allocate personal and real property, allocate debt, and deal with tax liabilities and other finance-related issues that might arise in a case.
An MSA is a contract when executed,2 and it is then incorporated into the final judgment for dissolution of marriage that finalizes the divorce. Accordingly, an MSA is governed by common law as it is a contract, but it is also governed by statute.
Section 502 of the Illinois Marriage and Dissolution of Marriage Act (“IMDMA”) provides that “parties may enter into written agreements containing provisions for disposition of any property owned by either of them, maintenance of either of them and support, custody and visitation of their children.”3 Section 502 further states that aside from provisions related to issues pertaining to children, the terms of the agreement are binding unless the court finds the agreement is unconscionable.4 Section 502 provides that “[u]nless the agreement provides to the contrary, its terms shall be set forth in the judgment, and the parties shall be ordered to perform under such terms, or if the agreement provides that its terms shall not be set forth in the judgment, the judgment shall identify the agreement and state that the court has approved its terms.”5 Finally, Section 502 provides that the “[t]erms of the agreement set forth in the judgment are enforceable by all remedies available for enforcement of a judgment, including contempt, and are enforceable as contract terms.”6
As the MSA is governed by both contract law and the IMDMA, different issues related to invalidation and enforcement can arise depending on whether the MSA has or has not already been incorporated into the judgment. For example, before its incorporation into the judgment, the MSA can be attacked under any contract theory; including, among other theories, fraud,7 mistake of fact, unconscionability,8 or due to coercion or duress.9 Also during that time, the MSA can be enforced by a party’s filing of a motion to enforce the MSA as a binding contract or theoretically filing a breach of contract action. However, once the MSA is incorporated into the judgment for dissolution of marriage, a party that does not wish to be bound by the agreement would have to file a motion to vacate the judgment under some other procedural theory.10
Additionally, after incorporation into the judgment for dissolution, a party seeking to enforce the judgment can file a petition seeking indirect civil contempt against the noncomplying party. As such, procedurally speaking, timing matters when attempting to invalidate or enforce the MSA.
Courts have consistently found that the MSA is binding on the parties even if it has not yet been incorporated into a judgment. Even in circumstances in which the divorce proceedings are subsequently dismissed after the parties have signed the agreement, courts have found that the MSA may be binding as a valid allocation of marital and nonmarital property rights.11 In that situation, the court considered the MSA a post-nuptial contract because the agreement was a valid contract and was not made expressly dependent on incorporation into the divorce decree.12 However, the court also stated that had the parties not shown intent to be bound by the agreement, they may have rescinded it as they could any other contract.13
An attorney practicing in family law, then, should be careful to consider the way in which he or she drafts the MSA and what steps he or she takes to ensure that a valid and immediately enforceable agreement has been reached. He or she should consider the ramifications of including or excluding language in the agreement related to an effective date of the agreement or whether its terms only become binding upon incorporating into the judgment for dissolution of marriage. It seems that if express provisions contained in the MSA state that it is only binding or effective upon incorporation into the judgment, a court could potentially find that even if it were otherwise a binding contract, the express terms make it unenforceable.
Discovery Issues that May Arise Once the MSA is executed, what is an attorney’s duty to supplement discovery when all that is left is to conduct the brief prove up hearing? Pursuant to Illinois Supreme Court Rules 213 and 214, “a party has a duty to seasonably supplement or amend any prior answer or response whenever new or additional information subsequently becomes known to that party.” The current language of the rule has eliminated the need for either party to issue supplemental discovery requests throughout litigation. The drafting committee stated that “the definition of ‘seasonable’ varies by the facts of each case and by the type of case, but in no event should it allow a party or an attorney to fail to comply with the spirit of this rule by either negligent or willful noncompliance.”14 However, in the instance in which the MSA has been negotiated over the course of months, all assets and liabilities of each party have been disclosed through thorough and up-to-date discovery production, and the parties have executed the agreement that effectively resolves all pending issues in the case, it is unclear what duty still exists related to supplemental discovery.
In some cases, courts have found that parties attempting to invalidate an MSA or vacate a judgment could not successfully do so absent a showing that any nondisclosure was made with the intent to deceive or that the other party could not have reasonable discovered the information on their own.15 If a party deliberately conceals information that would impact the fairness of the MSA and is not otherwise discoverable to the other party, that party does have a duty to disclose that information to the other party. In one case, the court set aside an MSA because at the time the MSA was drafted the husband was unemployed, but he subsequently became employed before the parties executed the MSA.16 He failed to disclose this information at the prove up hearing or at any other time, and the MSA was incorporated into the judgment.17 The court found that the husband’s nondisclosure was fraudulent because based on the facts of the case, he had a duty to disclose all information related to his employment status prior to signing the MSA and entry of the judgment.18 What would have been the result had the husband disclosed this information, but after the MSA was signed and before the case could be proved up, he received a promotion or new title? It is unclear whether the same duty that exists before settlement is reached still exists after. If the MSA were signed and the morning of the prove up hearing one party won $5,000.00 in the lottery, would the winner’s nondisclosure have the potential to invalidate the entire agreement? It is important to be diligent in continuously updating discovery production in order avoid any such issues arising.
Conclusion While courts favor resolution of differences between husband and wife by property settlement agreements incorporated into the judgment for dissolution of marriage, and all presumptions are resolved in favor of their validity, even a well-negotiated and drafted MSA can be subject to challenge frustrating the resolution of the case. The law surrounding enforceability of an executed MSA prior to its incorporation into the judgment for dissolution of marriage and an attorney’s duty to supplement discovery is not crystal clear, but what it is clear is that an attorney in a divorce proceeding should carefully consider the terms he or she includes in the MSA and the potential issues that can arise. He or she should consider inserting a provision related to effective date of the MSA or providing that it is only effective upon incorporation into a judgment for dissolution of marriage if necessary. An attorney should consider his or her duty to supplement discovery at all times and be diligent to ensure that discovery noncompliance does not hinder the case progressing to resolution. A failure to take a serious look at the facts and circumstances surrounding the particular case may lead to significant additional litigation in the divorce proceedings.
1 In the divorce context, a prove up hearing is a hearing before a judge in which an uncontested case has been settled by agreement or resolved by default, and the divorce is finalized.
2 In re Marriage of Bohnsack, 2012 IL App. 2d 110250, 9 (2d Dist.2012); In re Marriage of Hexum, 394 Ill. App. 3d 307 (3d Dist.2013).
3 750 ILCS 5/502(a).
4 750 ILCS 5/502(b), (c) [emphasis added].
5 750 ILCS 5/502(d).
6 750 ILCS 5/502(e).
7 See In re Marriage of Palacios, 275 Ill. App. 3d 561 (1st Dist.1995); see also In re Marriage of Broday, 256 Ill. App. 3d 699 (1st Dist. 1993).
8 In re Marriage of Baecker, 367 Ill. Dec. 950, 983 N.E.2 d 104 3d Dist. 2012).
9 In re Marriage of Frey, 258 Ill. App. 3d 442 (5th Dist. 1994).
10 See e.g. 735 ILCS 5/2-1401.
11 In re Marriage of Vella, 237 Ill. App. 3d 194 (2d Dist. 1992); Stern v. Stern, 105 Ill. App. 3d 805 (2d Dist. 1982).
14 Illinois Supreme Court Rule 213.
15 In re Marriage of Broday, 256 Ill.App.3d 699 (1st Dist. 1993) (holding that settlement agreements will only be set aside for fraud if misrepresented assets could not reasonably have been discovered at time of or prior to entry of judgment).
16 In re Marriage of Gurin, 212 Ill.App.3d 806 (1st Dist. 1991).
Jane E. Nagle is an attorney with the law firm of Kollias & Giese, P.C. where she concentrates her practice in family law and consumer bankruptcy in DuPage, Cook, Will, Kane, and Kendall Counties. Jane is a member of the DuPage County Bar Association, DuPage Association of Women Lawyers, and Illinois State Bar Association. Jane serves on the editorial board for the Illinois Bar Journal and is a trained Guardian ad Litem in the Eighteenth Judicial Circuit. Jane received her Juris Doctor from DePaul University College of Law in May 2012 and received her Bachelor of Arts in International Studies and Spanish from Indiana University, Bloomington in 2006.