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Introduction: Settlement Agreements Are Like Other Contracts
As we have pointed out numerous times before, settlement agreements are treated much like other contractual agreements in Maryland courts. While marital settlement agreements have consistent content, basically the same principles which govern standard contracts also govern these agreements as well. This means, among other things, that ambiguities in the language of settlement agreements can pose serious problems, just as would be the case with ambiguities in other contracts. In point of fact, when Maryland courts confront ambiguities in settlement agreements, they often need to have additional separate litigation in order bring clarity to the situation. This is precisely what occurred in the very recent case of Dixon v. Dixon (2024).
In this new case from Baltimore, uncertainty was present when a particular phrase within a former couple’s settlement agreement gave rise to multiple conflicting interpretations. Let’s go over the details of this case so we can better see how ambiguities are handled in Maryland law.
Facts of the Case
The spouses in this case worked out a marital settlement agreement in 2022. The agreement resolved all property related issues, except for the division of the marital house. Within the agreement’s section on asset division, the spouses agreed that the wife would receive 50% of the marital portion of the husband’s police retirement pension “if, as and when” pension payments begin being distributed to him.
Importantly, the husband had already retired in 2019, well before any mention of divorce and before the settlement agreement. Because of this fact, the language of the agreement opened up a dispute, as the wife’s share was not clearly delineated by the terms. The wife could argue, as she did, that payments to her had a “start date” in 2019 when the husband actually retired, not in 2022 when the divorce occurred. If the wife succeeded on this argument, she would be entitled to “back payments” amounting to 50% of the marital portion of the husband’s pension which had already been distributed (since 2019).
Outcome & Discussion
Maryland courts recognize contractual language as “ambiguous” whenever a reasonably prudent person could draw two logical interpretations regarding its meaning. This ambiguity may be present because of an “intrinsic lack of clarity,” or because there is general uncertainty in how the language might apply to a particular situation. When a settlement agreement is unambiguous and clear, the court will only use the document itself to carry out its terms; when an agreement is ambiguous, however, the court will often use additional evidence provided by the parties to resolve the ambiguities. This can mean, as it did in this case, that the parties need to return to court to “relitigate” the dispute using extrinsic proof. In this case, the wife brought the case back to the trial court, and ultimately the appellate division, to resolve the ambiguity regarding the timing of her pension payments.
This case provides a perfect example of the utility of a skilled attorney. If a skilled attorney had assisted in the agreement formation process, then the spouses likely would’ve never needed to return to court to resolve ambiguities. A qualified attorney can “spot the issue” in the settlement agreement during the development stage, and this is immensely beneficial as it saves time, energy and resources.
Contact the Murphy Law Firm for Additional Information
If readers want to learn more about handling ambiguities in settlement agreements, other aspects of settlement agreements in Maryland, or another family law topic, connect with one of the family law attorneys at the Murphy Law Firm today by calling 240-219-5243.
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