So-called “monogamy contract” not enforced by court

Charlotte Divorce Attorney Matthew R. Arnold of Arnold & Smith, PLLC answers the question “Does adultery affect my divorce case?”

Have you ever thought about paying a partner for their fidelity? A recent case tells the tale of a couple who tried to contract for just that. It ends with the scorned lover suing his ex-girlfriend to recover over $700,000 in gifts that he gave her throughout the relationship and reporting the gifts to the IRS as income payments.

Here’s the scenario: In November 2009, boy meets girl. Boy and girl get hit by Cupid’s arrow…to the point that over the course of the next year, the boyfriend gives the girlfriend the following (as found by the trial court):

A $70,000 Corvette because he did not want her to ride her Harley Davidson motorcycle
A diamond ring, not intended as an engagement ring
$200,000 wired to the woman’s account to entice her to quit her job and travel with him
$73,819 in various checks under similar circumstances

Fast-forward to November 2010, where the two lovers entered into a written agreement they intended to formalize their commitment to each other (neither was interested in marriage) and provide financial accommodations for the girlfriend.

Essentially, this was a monogamy contract. The agreement stipulated that

the couple would be faithful to each other and stay together, and
the boyfriend would pay the girlfriend $400,000, which he did when they signed the document together.

However, the relationship quickly deteriorated in the following months. In March 2011, the girlfriend moved out. According to the court, shortly after the woman moved out, the man started to accuse his ex of cheating, despite her assurances to the contrary.

By the end of March, the boyfriend had served the girlfriend with a civil suit demanding return of the cash, ring and car. He had also filed a Form 1099-MISC with the Internal Revenue Service reporting that he paid the woman over $700,000 in 2010, adding together the values of all the things he had given her.

The state trial court held that the woman had fraudulently induced the man to enter into the “commitment agreement” and entered a judgment of $400,000 against the woman. As to the other items, the trial court found that the Corvette, ring, and $273,819 from above were “clearly gifts,” which means the woman was entitled to keep them and did not have to report them as income.

The woman was on the hook for the $400,000 judgment from the state court, which she paid to her ex’s estate in 2013 (he died shortly after the trial).

Now, after trial and repayment, the woman still has to face the IRS’s retrying in Tax Court the issue of what parts, if any, of the $743,819 were gifts. On appeal, the court also reaffirmed that the woman had to pay back the $400,000.

The takeaway from all of this? If you were thinking of paying your partner to be monogamous, don’t count on it being a legally enforceable contract for either party. Of course, in states with at-fault divorce, infidelity could perhaps be used as an argument in the divorce petition, but North Carolina is a no-fault divorce state. And, if you give your significant other pricey gifts throughout a relationship, don’t bank on being able to get those items or their value returned to you upon the demise of the relationship.

If you find yourself facing a complicated family law matter, then you need the help of experienced family-law attorneys in Charlotte, North Carolina who can help guide you through the often confusing process of divorce. Please contact Arnold & Smith, PLLC today at (704) 370-2828 or find additional resources here.

About the Author

Matthew Arnold is a Managing Member of Arnold & Smith, PLLC, where he focuses on the areas of family law, divorce, child custody, child support, alimony and equitable distribution.

Mr. Arnold was raised in Charlotte, where he graduated from Providence Senior High School. He attended Belmont Abbey College, where he graduated cum laude, before attending law school at the University of North Carolina at Chapel Hill on a full academic scholarship.

A certified Family-Law Specialist, Mr. Arnold is admitted to practice in all state and administrative courts in North Carolina, before the United States District Court for the Western District of North Carolina, and before the Fourth Circuit Court of Appeals in Richmond, Virginia.

In his free time, Mr. Arnold enjoys golfing and spending time with his wife and three children.

Source:

http://www.lexisnexis.com/legalnewsroom/insurance/b/insurancelaw/archive/2015/04/21/the-equitable-remedy-of-rescission-a-tool-to-defeat-fraud.aspx

https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=10649

http://blog.ceb.com/2016/02/10/cupids-arrow-strikes-lover-in-the-wallet/

Image Credit:

http://www.freeimages.com/photo/red-corvette-1526243

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