Is There a Statute of Limitations on Enforcing a Marital Settlement Agreement?
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Is there a time limit on enforcing the terms in a marital settlement agreement? In a recent appeal, Melchiorre v. Melchiorre J.A17003-20, the Superior Court decided whether Wife was barred under several legal doctrines from enforcing the terms of the marital settlement agreement because she had waited nearly 17 years after its entry to file her contempt petition. Husband argued that under the statute of limitations and/or the doctrine of laches. Husband also argued in his appeal that the “Releases” terms in the agreement barred wife from bringing a petition for contempt. Finally, he challenged contempt was a proper remedy. Husband withdrew his fifth issue on appeal.
In this case, Husband and wife entered into a post-nuptial agreement on June 8, 2001, which was incorporated but not merged into the divorce decree of July 18, 2001. Husband had non-vested stock options from his employer which totaled 1,269,317 shares, which were in his name only. Husband has non-vested stock options from his employer. The agreement provided that upon vesting, Wife “shall be entitled to request that Husband sell one-half (1/2) of the shares exercisable at each time and Wife will be paid the net proceeds thereof after deduction of commissions and any applicable capital gains taxes to Husband.” The agreement further provided that within 15 days after demand, each of the parties would execute any and all written instruments necessary to effectuate their Agreement.
Seventeen years later, Wife found her copy of the Agreement while going through her papers. She realized that she never received her one-half share of the stock and she asked Husband about it. He told her that it had been sold, but refused to give her any information about the proceeds. Wife hired a lawyer who asked for the same. Husband failed to comply and Wife filed petition for contempt and enforcement.
The trial court concluded that Wife’s claim was not barred by the statute of limitations, doctrine of laches, or waiver. Based on the evidence presented, the court held Husband in civil contempt, imposed sanctions, and determined how he could purge himself of contempt by executing the necessary authorizations, providing documents, and remitting attorney fees of $5202. 18 to Wife within 30 days. Husband filed reconsideration which was denied. He filed a timely appeal. He presented five issues. Whether the trial court erred in denying Husband’s motion for judgment on pleading based on 1) statute of limitations, 2) doctrine of latches, 3) doctrine of waiver. And Then 4) whether the court abused its discretion by finding Husband in civil contempt for failing to acknowledge debt to Wife, and whether the court committed an error of law or abuse its discretion by conducting an evidentiary hearing and taking testimony from the parties on Husband’s motion for judgment on the pleadings.
Statute of limitations and continuing contracts.
Generally the statute of limitations on a contract is four years. However, the trial court found this was a continuing contract. The test of whether a contract is continuing in nature as to take it outside of the statute of limitations is whether there was no definite time fixed for payment. Husband contends that it was not a continuing contract because there was a definitive time fixed for payments, as well as requirement that Wife make a demand. He argues that Wife had knowledge of the dates that the stock vested, which were on three separate dates: 1/1/2002; 1/1/2003, and 1/1/2004. Husband asserts she had 4 years from the date that each set of stock vesting to make a request to Husband to see one-half of the stock.
In support of his argument that Wife had the burden to make her demand, he cites K.A.R. v. T.G.L. , 107 A.3d 770 (Pa. Super. 2014). K.A.R. involved the sell of a business by Husband where Wife knew the date of the sale which occurred in 2004, but waited until 2011 to file a petition for enforcement. However, the trial court in this current case found that this contract was a continuing contract because Wife agreed that she would not request her share before the stock vested and the Agreement did not provide a time limit on the request, and as such there was not fixed time for payment. Additionally, Husband acknowledges that he owed his Wife a debt equal to one-half of the net proceeds from the sale of the stock, which tolled the statute of limitations on a continuing contract. Crispo v. Crispo, 909 A. 2d 308, 313 (Pa.Super. 2006) provided that acknowledgment of a debt consistent with a promise to pay a debt may toll the statute of limitations or remove its bar.
The trial court also concluded that Wife was under no obligation to request the sell of one-half of the stock when it was vested, but she was entitled to do so. Husband, however, was obligated to pay Wife one-half of the net proceeds from the sale of the stock, whenever Wife tendered such a request. Husband had the option to sell the stock for up to 10 years once the stock vested. Since Husband was the sole owner, Wife would have no way of independently knowing when the stock vested or when it was sold. Once Wife learned that he had sold the stock, she promptly requested her share of the proceeds, Husband failed to comply.
Here, although the vesting dates were known, and Wife was entitled to demand that Husband sell her share of the stock at those times, she was not required to do so. She was not compelled under the Agreement to demand her share at any particular time. Husband also acknowledges that Wife was owed one-half of the net proceeds from the sale of the stock. As such, Husband’s argument failed.
Doctrine of Laches
The doctrine of laches is one of equitable relief. In order to sustain a claim under the doctrine of laches, one has to establish: (a) a delay arising from petitioner’s failure to exercise due diligence; and (b) prejudice to the respondents resulting from delay. “Prejudice” requires that the respondent must have changed his position to his detriment. The burden was upon Husband to prove this. Husband did not notify Wife of sale nor did he pay to her her share of the proceeds when the sale was completed. Having failed to do what he was contractually obligated to do he is not entitled to relief under the doctrine of laches.
Other Arguments
Husband also argued that the settlement agreement’s “Releases” provision prevents Wife from suing him “for the purpose of encforincg any of the rights relinquished under this paragraph.” However, the Releases provision provides for an exception as provided in the Agreement. It provides for wife to enforce the terms of the agreement.
In his fourth argument, Husband also challenged the finding of contempt. 23 Pa.C.S. 3105(a) provides that a contempt proceedings is a remedy to enforce the agreement. 23 Pa. C.S. 3502(e)(9) “provid[es] that “If, at any time, a party has failed to comply with an order of equitable distribution, … with the terms of an agreement as entered into between the parties, after hearing, the court may, in addition to any other remedy available… in order to effect compliance … find the party in contempt.”
To make a finding of civil contempt, one must prove:
That the condemner had notice of the specific order or decree which he is alleged to have disobeyed.
That the act constituting the contempt’s violation was volitional,
That the contemnor acted with wrongful intent.
The trial court found that Husband had notice of the Agreement. He willfully did not pay to wife her one-half share of the net proceeds from the sale of the vested options. The court also found that he acted with willful intent. The court also found that the statute provides civil contempt as a remedy to enforce an agreement where a marital settlement agreement was incorporated but not merged into a divorce decree.
Husband withdrew his fifth issue.
Conclusion
This non-precedential opinion reminds us of one main thing: each party should know and keep track of their rights and obligations under their agreement, especially if there is a significant time-lapse between now and when a particular clause in your agreement can be enforced.