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Validity of Prenuptial Agreements in New York

Jeremy D. Morley

Here is an overview of some of the recent and important New York cases concerning prenuptial agreements:

Colello v. Colello, 9 A.D.3d 855, 780 N.Y.S.2d 450 (N.Y. App. Div. 4th Dep't, 2004)

Threat to cancel wedding. A man’s alleged threat to cancel the wedding if his fiancée refused to sign a prenuptial agreement does not constitute duress that would invalidate the agreement. "As a matter of law, [the] exercise or threatened exercise of a legal right [does] not amount to duress."

Attorney chosen by other party. The allegation of plaintiff that her attorney was chosen and paid for by defendant does not by itself raise a triable issue of fact sufficient to sustain her claim of duress.

Breach of fiduciary duty. In order to establish a cause of action for breach of a fiduciary duty with respect to the execution of the agreement, plaintiff must establish the existence of a fiduciary relationship, misconduct by defendant, and that such misconduct "induced plaintiff to engage in the transaction in question," directly causing the loss about which plaintiff complains.

Unconscionability An unconscionable bargain is "one such as no [person] in his [or her] senses and not under delusion would make on the one hand, and as no honest and fair [person] would accept on the other.” Defendant established that the agreement was not achieved by overreaching or fraud and was not "facially unfair." Plaintiff alleges that subsequent events have rendered the agreement unconscionable in its application to the parties' financial situation. According to plaintiff, defendant implemented the agreement by taking his compensation from his business in part in the form of durable assets that were titled in the name of the business, compensation that otherwise would have been marital income and would have been used to purchase marital property. Plaintiff alleges that defendant thereby purportedly insulated such assets, including the marital residence, from plaintiff's claims for equitable distribution, at least according to a strict and literal reading of the parties' agreement. Although courts are authorized to review whether maintenance agreements are unconscionable at the time of entry of a final judgment of divorce, they have no such authority concerning distribution of property. The agreement here concerns only property and is silent with respect to maintenance. Defendant therefore is entitled to summary judgment dismissing that cause of action.

 

Cron v. Cron, 8 A.D.3d 186;780 N.Y.S.2d 121 (1st Dept. 2004).

Fraud, etc. Defendant, in seeking rescission of the parties' prenuptial agreement, failed to carry her burden to demonstrate that the agreement was the product of fraud, duress or other inequitable conduct. Indeed, the record demonstrates that defendant was aware of plaintiff's earnings and substantial financial assets but nonetheless chose to sign the agreement, notwithstanding the contrary advice of her attorney, who represented her interests in a highly competent manner.

Fairness of agreement Court has the power to vary a prenuptial agreement in the interests of fairness (equity). Since the wife’s waiver of maintenance did not place her in danger of becoming a public charge it was not unconscionable. But the agreement's housing provisions, when considered in light of defendant's current responsibilities as a custodial parent of two grade-school age children who have been raised in luxurious accommodations and attend school in an affluent community on Long Island's North Shore, were “plainly inequitable.” In view of the overwhelming need to maintain a sense of continuity in the children's lives, including defendant's need to live in close proximity to the children's school, and the sharp rise in real estate values in that area since the 13-year-old prenuptial agreement was executed, there was virtually no prospect that defendant could find suitable housing within the $200,000 cap imposed by the prenuptial agreement. Also defendant has been out of the work force, at plaintiff's insistence, since the birth of the parties' first child, over 10 years ago, while plaintiff earned approximately $4 million a year and had assets of over $30 million. Under the circumstances, equity's intervention was warranted. Accordingly, the First Department modified the agreement to increase the amount of defendant's reasonable housing needs to $2 million. In light of defendant's meager resources and in order to maintain the children in the community in which they have lived all their lives, the husband was directed to maintain the home (with title in his name) until the children are emancipated or have moved elsewhere.

Kessler v. Kessler, 818 N.Y.S.2d 571 (App. Div. 2d Dept. 2006).

Attorneys fees and prenuptial agreements

“The determination as to whether or not a provision waiving the right to seek an award of an attorney's fee is enforceable must be made on a case-by-case basis after weighing the competing public policy interests in light of all relevant facts and circumstances both at the time the agreement was entered and at the time it is to be enforced. If, upon such an inquiry, the court determines that enforcement of the provision would preclude the non-monied spouse from carrying on or defending a matrimonial action or proceeding as justice requires, the provision may be held unenforceable. Also relevant to such a determination is the conduct of the parties over the course of the matrimonial action. Such a determination is frequently best made at the conclusion of the action. However, because an attorney's fee is authorized when needed to carry on or defend an action, it may be necessary to make such a determination at an earlier point in the litigation.”

 

Werther v. Werther, 2005 NY Slip Op 51543(U) September 2, 2005 Supreme Court, Nassau County

Lack of Independent Counsel

Lack of independent counsel is not, without some extrinsic evidence of unconscionability, duress or fraud, sufficient in and of itself to overturn the agreement. This is especially true where one of the parties to the agreement makes a conscious decision not to retain an attorney despite being advised to do so.

Maintenance provisions

The maintenance provisions of the agreement were deemed unfair and unreasonable. General Obligations Law §5-311 provides that the parties to an agreement may relieve one another from the ability of support provided neither party is likely to become a public charge. While the Court acknowledges that defendant's waiver of maintenance would likely not result in her becoming a public charge, the waiver is not fair and reasonable in view of the current and prospective financial circumstances of the parties, same which are disparate. Accordingly, that portion of the agreement waiving maintenance is set-aside.

Child support

"Without question, a provision in an agreement eliminating a party's child support obligation is void as against public policy.”

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