Monica (portrayed by Leslie Charleson) and Ned (portrayed by Kurt McKinney) first met out of town in 1988 while Ned (who had been using the fake name Ward) was working at Green Meadow Spa. Monica was a guest at the spa and, unaware that he was her nephew by marriage, the pair carried on an affair for the duration of her time at the spa.
Ned was fired from his job at the spa soon after and decided to make his way to Port Charles. When he arrived, Ned tried to pursue Monica again. That plan didn't work out as well as he had hoped, since Ned's attention strayed from Monica to Dawn upon his arrival in Port Charles. Ned and Dawn fell in love and got engaged; he was so in love with her that he even bought her an island and a house to go with it.
Happy as he was in his relationship with Dawn, Ned didn't reveal the fact that he had carried on an affair with her mother prior to living in Port Charles. But secrets are never actually kept secret for long in the world of soap operas.