Herget v. Herget

573 A.2d 798, 319 Md. 466, 1990 Md. LEXIS 81

• Court: Court of Appeals of Maryland
• Decided: May 25, 1990
• Docket: 138, September Term, 1988
• Status: Published

Opinions

McAULIFFE, Judge.

The major area of controversy in this divorce action concerns an antenuptial agreement that was executed in 1973. In an action filed in the Circuit Court for Baltimore County, the wife claimed that the agreement was invalid, reasoning that the husband did not make a full disclosure of his income and assets at the time the agreement was signed; that the agreement was not the wife’s voluntary act; and, that the wife did not enter into the agreement with a full understanding of its meaning. Alternatively, she argued that if the agreement were valid, it did not have the effect of barring her claim to a monetary award — a right that arose by virtue of legislation enacted after the antenuptial agreement had been signed.

Judge J. William Hinkel carefully considered each of the wife’s contentions concerning the alleged invalidity of the agreement, following the guidelines established by this Court in Frey v. Frey, 298 Md. 552, 563-64, 471 A.2d 705 (1984) and Hartz v. Hartz, 248 Md. 47, 234 A.2d 865 (1967). Judge Hinkel concluded that the agreement was valid. He also concluded that the plain language of the agreement evidenced the intent of both parties to exclude and protect the property of each from any and all claims of the other that might arise out of their relationship as husband and wife, and that their mutual release was sufficiently broad to protect either party from a claim for a monetary award.

The Court of Special Appeals upheld the trial judge’s holding that the antenuptial agreement was valid, but held that the wife’s claim for a monetary award was not barred by the terms of the agreement. Herget v. Herget, 77 Md.App. 268, 550 A.2d 382 (1988). We granted the husband’s petition for certiorari to consider the effect of the antenuptial agreement on the wife’s claim for a monetary award. We denied the wife’s cross-petition, by which she sought further review of the determination that the agreement was valid.

At the time of execution of the antenuptial agreement, petitioner was a bachelor. Respondent, on the other hand, had been previously married, and had custody of her two daughters, who were seven and five years of age. Petitioner’s assets at that time were valued at $1,604,000. Respondent’s assets, consisting mainly of an investment portfolio, were valued at $690,000. Petitioner enjoyed an income of $50,039 and respondent received $28,650 in annual unearned income. Petitioner is a college graduate, who owned his own business. Respondent has a high school education and no particular training for employment, but the trial judge described her as “intelligent,” and said that he was impressed with her “sophistication, comprehension, and ability to communicate.” The agreement, executed two days before the marriage, was prepared by petitioner’s attorney.

The agreement, recites the intent of the parties to: waive, relinquish and bar ... all ... rights and interests which she and he, respectively, as wife [or] husband ... may become entitled to, except as in this Agreement provided, with respect to any property, real or personal, now owned or hereafter acquired by the other party.

Further, it provided, in paragraph two, that:

Mary Elizabeth Schaefer releases and surrenders any and all claims she may have, now, or at the time of any termination of the proposed marriage between the parties, by divorce, death or otherwise, in any estate or property of Charles Edward Herget, Jr., now owned or hereafter acquired by him, including all rights to support, dower, thirds and halves, and all other rights and interests of every kind therein that shall arise out of the relation of the parties as husband and wife, and whether such rights and interests shall accrue during the lifetime of either of the parties, or at the time of or after her or his death, other than as specifically provided for herein or by will, trust agreement or other instrument.

Paragraph three contained a reciprocal agreement on the part of the husband. Paragraph four then provided:

Except as above provided, each of the parties hereby waives and releases unto the other party, her or his heirs, next of kin, personal representatives and assigns, all of her and his respective rights, interests and claims in and to said property of the other, to the end that neither of the parties shall obtain any right or interest to or in any property of the other by virtue of their marriage, but each, during her or his lifetime shall own or dispose of her or his property in the same manner as if the parties had never been married; and upon the death of either of the parties, the property of the deceased party shall be distributed and title thereto shall devolve in the same manner as if the parties had never been married.

As we have noted, the trial judge found this agreement to be valid, and that issue is not before us. The sole issue with which we are concerned is whether the agreement bars the wife’s claim for a monetary award.

An antenuptial agreement is a contract, subject to the general rules of contract interpretation. In Re Marriage of Garrity/Bishton, 181 Cal.App.3d 675, 226 Cal. Rptr. 485, 488 (1986); 3 Lindey on Separation Agreements and Antenuptial Contracts, § 90.14 (1989); S. Green and J. Long, Marriage and Family Law Agreements, § 2.07 at 118 (1984). It is well settled that Maryland follows the objective law of contracts. General Motors Acceptance v. Daniels, 303 Md. 254, 261, 492 A.2d 1306 (1985). We explained, in Aetna Cas. & Sur. v. Ins. Comm’r, 293 Md. 409, 420, 445 A.2d 14 (1982), the procedure to be followed in interpreting a contract:

In Maryland, under the objective law of contracts, a court, in construing an agreement, must first determine from the language of the agreement itself, what a reasonable person in the position of the parties would have meant at the time it was effectuated. Where the language of the contract is unambiguous, its plain meaning will be given effect. There is no need for further construction. (Citations omitted).

In the particular context of the case before us, our task is perhaps most aptly stated by the language of Judge Boyd in Joffe v. Niagara Fire Ins. Co., 116 Md. 155, 160, 81 A. 281 (1911):

Courts have no right to make new contracts for the parties, or ignore those already made by them simply to avoid seeming hardships.

The monetary award that the wife seeks is authorized by Maryland Code (1984,1989 Cum.Supp.) Family Law Article, § 8-201 et seq. The concept of a monetary award is relatively new in Maryland, having been first adopted in 1978. Chapter 794, Laws of Maryland 1978. Its function is to provide a means for the adjustment of inequities that may result from distribution of certain property in accordance with the dictates of title. With one exception,¹ a divorce court in Maryland is not empowered to alter title to real or personal property held by the parties, or to directly divide or distribute that property in a way that is inconsistent with title. The court may, however, after giving consideration to factors enumerated by the legislature, enter a monetary award against one party and in favor of the other when that action is appropriate to adjust an inequity that would otherwise result from distribution, strictly in accordance with title, of property qualifying as “marital property.” To the extent a monetary award is immediately due and owing, the court may enter a judgment reflecting it, thereby subjecting the property of the indebted party to lien and execution. Family Law Article, § 8-205(b).

In rejecting the husband’s contention that the antenuptial agreement in this case was sufficiently broad to encompass a release of the future right to a monetary award, the Court of Special Appeals held that “the right to a monetary award ... is not an interest in the estate or property of one’s spouse,” and therefore is not covered by the language of the agreement. Herget, supra, 77 Md.App. at 279, 550 A.2d 382. In so holding, the court followed its earlier decision in Falise v. Falise, 63 Md.App. 574, 493 A.2d 385 (1985). In Falise, the intermediate appellate court held that a separation agreement entered into before 1978 (and before a reconciliation of the parties and the acquisition of additional marital property), by which each party agreed to relinquish all right, title, and interest in and to the property of the other then owned or thereafter acquired, did not effect a release of the right to a monetary award, for two reasons. First, the court said, “[w]e doubt that the subject agreement could affect the status of something which is neither an interest in real or personal property, i.e., marital property.” Id. at 580, 493 A.2d 385. Second, the court reasoned that the wife could not be regarded as having released a right that she did not have and could not have fairly anticipated at the time the agreement was signed. Id. at 580-81, 493 A.2d 385.

This second line of reasoning, that one cannot release a right that is unknown to that person at the time of the execution of the agreement, was at least mentioned, and may have been relied upon, by the Court of Special Appeals in this case.

This lack of contemplation of such a concept, however, is the very reason why appellant did not surrender her right to seek a monetary award which did not exist at the time she entered the antenuptial agreement. Falise v. Falise, supra, 63 Md.App. at 581, 493 A.2d 385, citing Smith v. Smith, 72 N.J. 350, 371 A.2d 1, 5-6 (1977).

Herget, supra, 77 Md.App. at 280, 550 A.2d 382. In the case of Smith v. Smith, 72 N.J. 350, 371 A.2d 1, 6 (1977), cited by the Court of Special Appeals, the New Jersey Supreme Court held that:

[I]n general, claims arising after the date of delivery of the instrument are not covered by it unless explicitly mentioned, since they would not appear to have been within the contemplation of the parties. Bilotti v. Accurate Forming Corp., 39 N.J. 184, 203-05, 188 A.2d 24 (1963).

The holding in Smith was not, however, grounded on this reasoning. Rather, the New Jersey Supreme Court, following the established law of that state that a contract between husband and wife is unenforceable at law and may be enforced in equity only if found to be fair and equitable,² decided that only a property settlement agreement that was the substantial equivalent of an equitable distribution of marital assets, and was itself fair and equitable, would operate as a bar to a claim for equitable distribution. Id. 371 A.2d at 7. Finding that the agreement in Smith dealt only with support, and had none of the characteristics of a property settlement agreement, the Court held that it was no bar to the wife’s claim. Additionally, we note that the case cited in Smith in support of this contract principle, Bilotti v. Accurate Forming Corp., 39 N.J. 184, 188 A.2d 24 (1963), espouses a somewhat different principle. In Bilotti, the Court said that “[c]laims or demands arising contemporaneously with delivery [of the release] are not discharged unless expressly embraced therein or falling within the fair import of the terms employed.” (Emphasis added). Id. 188 A.2d at 35.

In any event, the language of Smith relied upon by the Court of Special Appeals is contrary to established Maryland law. In Bernstein v. Kapneck, 290 Md. 452, 430 A.2d 602 (1981), this Court held that a broad general release of claims for injuries “known and unknown, and which have resulted or may in the future develop” sufficiently reflected the intent of the parties to release the defendant from any responsibility for a serious brain injury about which the parties neither knew or could reasonably have known at the time the release was executed. This Court said:

While it is true that a growing number of courts (despite a clear and unambiguous release for consideration of all known and unknown, as well as foreseen and unforeseen, claims for personal injuries) permit repudiation by a releasor when unanticipated injuries surface subsequent to the contract’s execution, we do not believe these decisions can withstand critical analysis and decline to follow them.

Id. 290 Md. at 456, 430 A.2d 602.

We reject the notion that the parties in the case before us were incapable of releasing a right that did not then exist. We also reject the argument that general language cannot effect a full release of a specific right, even a right that is unknown at the time the agreement is drawn.

We return then, to the first and more difficult question presented by this case — was the general language employed by the parties in this case sufficient to effect a mutual release of the then unknown right to a monetary award? We hold that it was.

The language of the release and waiver portions of the agreement was very broad. As the trial judge noted rhetorically, “what other anticipatory language could be used when the parties to an agreement wish to relinquish all future rights and interests known and unknown?”

In a preliminary paragraph of the agreement, the parties stated their intention to relinquish all rights and interests that each might subsequently acquire or become entitled to “with respect to any property, real or personal, now owned or hereafter acquired by the other party.”

In paragraph two of the agreement, the wife released “any and all claims” she might then or thereafter have in any estate or property then owned or thereafter acquired by her husband, including “all ... rights and interests of every kind therein that shall arise out of the relation of the parties as husband and wife” except as otherwise provided in the agreement.

In paragraph three, the parties noted their intention to purchase a home, and agreed that their ownership rights in the equity value of the property would be in proportion to the funds each invested in the property, notwithstanding that they would hold it as tenants by the entirety.

In paragraph four, each party again released “all of her and his respective rights, interests and claims in and to [the] property of the other, to the end that neither of the parties shall obtain any right or interest to or in any property of the other by virtue of their marriage____”

In reversing the trial judge, the Court of Special Appeals reasoned that the agreement effected a release only of “an interest in the estate or property of one’s spouse,” and that the right to a monetary award is not such an interest. Herget, supra, 77 Md.App. at 279, 550 A.2d 382. As earlier noted, this conclusion was grounded in part on that court’s previous determination in Falise, supra, 63 Md.App. at 574, 493 A.2d 385, that the legislature had not granted one party a “legal interest” in the marital property of the other by the creation of the right to a monetary award. That analysis, we conclude, fails to give effect to the obvious intent of the parties, manifested by the language of the agreement viewed as a whole.

In one sense, the Court of Special Appeals was correct in finding that the right to a monetary award does not carry with it a “legal interest” in the other party’s property. Nor does the right to a monetary award confer a specific “property right” in the sense of title. See Head v. Head, 759 F.2d 1172, 1174 (4th Cir.1985) (Maryland marital property act did not give wife a property interest in stock of her husband sufficient to constitute her a “seller” under the federal Securities Exchange Act of 1934 when she released, in a separation agreement, all claims against the stock).

In another sense, however, the approach taken by the Court of Special Appeals may be viewed as overly narrow. Certainly, under a Fourteenth Amendment due process analysis, the right to a monetary award properly would be characterized as a “property interest.” See generally, L. Tribe, American Constitutional Law § 10-9 (2d ed. 1988). Within the specific context of the Maryland marital property act, this Court has approved a broad definition of the term “property”:

The term property, “when considered in a broad sense, is a term of wide and rather comprehensive signification---- It has been stated that the term embraces everything which has exchangeable value or goes to make up a man’s wealth — every interest or estate which the law regards of sufficient value for judicial recognition.”

Deering v. Deering, 292 Md. 115, 125, 437 A.2d 883 (1981), quoting Diffendall v. Diffendall, 239 Md. 32, 36, 209 A.2d 914 (1965). See Niroo v. Niroo, 313 Md. 226, 232-33, 545 A.2d 35 (1988). We think it clear that in referring to mutual releases of all claims of rights or interests that each party might have or might thereafter acquire in and to any property of the other, these parties were using the term “property” in its broad sense. They manifested an unequivocal mutual intent to free all of their estate and property from any claims by the other that might arise by virtue of their marriage. If a monetary award is now allowed, that intent will be frustrated, because the award will have to be paid from the property, whether cash, personalty, or realty, of the party against whom the award is made.

In practical terms, a claim for a monetary award is a claim against the property of the person from whom the award is sought. The very purpose of a monetary award is to equitably distribute the property of the parties — a point that is made clear by the following passage from the report of the commission recommending the adoption of the marital property act:

The Commission’s approach, in summary, has been to establish the concept of “marital property” as being all that property which was acquired by the parties during their marriage and giving the Court the power to consider its total value in disposition of the property of the parties, to recognize that special consideration from a family point of view needs to be given to the real property which constitutes the family home and the personal property which is devoted primarily to family use, to recognize non-monetary as well as monetary contributions of the parties to the marriage, and by these measures to accomplish a truly equitable disposition of property upon divorce or annulment without the turbulent upheaval that would come with a total disregard of title. (Emphasis added).

Report of The Governor’s Commission on Domestic Relations Laws, at 5 (January, 1978).

Had the General Assembly decided to follow a different course, to permit equitable distribution of property by the actual division of that property, it is doubtful that anyone would suggest that the agreement in this case did not afford full protection from such a claim. The decision by the legislature to accomplish an equitable disposition of property through the use of a monetary award should not produce a different result.

We conclude that the intent of the parties manifested by their antenuptial agreement was to prevent the very type of claim that is now being made. The trial judge properly found that the wife’s claim for a monetary award was barred.

JUDGMENT OF THE COURT OF SPECIAL APPEALS REVERSED; CASE REMANDED TO THAT COURT WITH INSTRUCTIONS TO AFFIRM THE JUDGMENT OF THE CIRCUIT COURT FOR BALTIMORE COUNTY; COSTS IN THIS COURT AND IN THE COURT OF SPECIAL APPEALS TO BE PAID BY RESPONDENT.

1 . In 1986, trial courts were given authority to transfer ownership of an interest in certain pension, retirement, profit sharing, and deferred compensation plans from one party to another. Chapter 765, Laws of Maryland 1986, codified at Family Law Article, § 8-205(a).

2 . Carlsen v. Cartsen, 72 N.J. 363, 371 A.2d 8 (1977); Edgerton v. Edgerton, 203 N.J.Super. 160, 496 A.2d 366 (1985).