New York Divorce Law Prenuptial Basics, Part I

by / 0 Comments / 165 View / December 30, 2007

New York divorce law loves agreements. An agreement means no trial, and the issues are resolved. In fact, so strong does the New York divorce law support agreements, that they are pretty impossible to break.

There are three basic agreements in divorce and family law: (1) the prenuptial ( and it’s close relative the post-nuptial); (2) the separation agreement; and (3) the stipulation settling the divorce.

The prenuptial is a strange creature to be filed under the “hope for the best but plan for the worst” category. Generally, it is used by a person who either is coming into the marriage with assets, or has been burned in a prior divorce, or both.

As readers of these pages know (and by the way, in the space of the month the average visitor comes back 3.7 times) property division is not that straight forward. Sure, the statute (DRL 236 B) states that property acquired before the marriage, such as an inheritance or money from a personal injury settlement are separate property, but creative lawyers have found ways to get the New York courts to chip away at the statute and create a host of exceptions. The two main exceptions are co-mingling and increase in value of the separate property. It is beyond my purpose in this post to explain them. Just take my word for it.

The question is: How do you protect your separate property from becoming marital property? The answer is a well drafted pre or post nuptial agreement. For example, assume you own a house. You want to insure that if there is a divorce the house remains your property. So, you sign a prenuptial which states that the house is separate property. Problem solved? Nope. Remember, where there’s a will there’s a lawyer. Suppose during the marriage, you sold your house and bought a new house. A clever lawyer could (and will) argue that while, yes indeedy, the old house was separate property, this new house is marital. The solution is a clause in the prenuptial which states that all separate property remains separate even if it is sold and new property was bought.

That protects the spouse with the separate property. But, what about the spouse who belatedly realizes that s/he has signed a bad deal? Can the agreement be broken? Remember what I said at the top of the posting? Courts love agreements. Judges use great phrases such as “public policy” and the “smooth administration of justice” and the like. But, what it comes down to, is that New York courts really, really hate to break an agreement absent fraud, duress, and over-reaching. In a future post I’ll address these three grounds to break an agreement. However, in my experience, they are very high standards to meet.

The Appellate Division, First Department, in a recent decision, has demonstrated just how high the standard is. Basically, in 1974 just before marriage the groom presented the wife, in Germany with a prenuptial agreement in German. The court upheld the agreement. I am putting the link here for anyone who wishes to read the full decision. I’m going to quote Judge Saxe’s dissent, because he really sets out why the decision is not fair. Stawski v. Stawski

In December of 1974, an affianced young American woman in the bloom of love, traveling with her German fiancé to his parents’ home in Frankfurt, en route to a skiing vacation in Switzerland, experienced a sudden and unexpected detour to a lawyer’s office in Frankfurt, where she was presented with a prenuptial agreement. Her execution of that document, and its enforceability, form the basis for this appeal.

The Special Referee, who was requested to hear and determine the controversy, held that the agreement is enforceable, and the majority agrees. However, in my view, the confluence of various questionable practices and procedural irregularities surrounding the execution of the agreement makes this the exceptional case in which an antenuptial agreement should be set aside. The evidence establishes that plaintiff’s signature was obtained through a combination of deception and overreaching, causing an unknowing waiver of unexplained rights. Accordingly, I dissent.

Plaintiff wife and defendant husband are children of Holocaust survivors; the parents met in a displaced persons camp outside Frankfurt, Germany after World War II, and ultimately settled there. Plaintiff’s family moved to the United States 3½ years later, and settled in New York City, where plaintiff was born. Defendant’s family remained in Germany. He was educated in England beginning at age 10 and received a law degree from Birmingham University in England. After briefly meeting at a dance in Frankfurt in the 1960s when she was 12 and he was 14, plaintiff and defendant met again in 1971, when she was 19 and an undergraduate at New York University and he was 21 and studying for a Master’s degree in International Law at the same university. They became engaged in the summer of 1974 and married in 1975.

In December 1974, the affianced couple traveled together from New York to Frankfurt, where defendant’s parents lived, in anticipation of a winter ski vacation. Upon their arrival in Germany, defendant told plaintiff that before they left for Switzerland, it was necessary for both of them to attend a meeting with a lawyer. The parties dispute the exact explanation provided to plaintiff as to the need for this meeting; she testified that the reason defendant gave her was the necessity of “signing a piece of paper for bankruptcy.” Plaintiff also testified that she and defendant had no prior discussions regarding the signing of any agreement having to do with their marital or property rights. For his part, defendant testified that he brought up the subject of a premarital agreement with plaintiff in the autumn of 1974 and that she asked him to discuss the matter further with her father, which he testified he did, although both plaintiff and her father disputed this assertion.

The couple went to the office of a law firm in Frankfurt. It is undisputed that the law firm represented defendant’s family in various legal matters. The parties appeared before Dr. Nikolas Hensel, who, aside from being an attorney, was apprentice to a notar. In Germany, a notar is a public official before whom certain types of transactions, including marital agreements, must be executed in order for them to be valid. A notar serves as an independent consultant for the parties to the transaction, and is responsible for exploring and ensuring the parties’ understanding of the transaction and its legal consequences. At the time, Dr. Hensel was not yet officially a notar, but was apprenticed to an older notar, Dr. Rudolph Boergner, for whom he was properly [*5]substituting on the date of execution of the agreement.

After exchanging pleasantries with the parties, Dr. Hensel showed them the agreement, which was written in German. Apparently, neither of the parties had seen either the final document or even a draft of the document before the visit. Dr. Hensel initially read the agreement to the young couple in German. The agreement was not a long one. It stated that the signatories (plaintiff and defendant) planned to get married in 1975 and, as translated into English, that: “We hereby agree that for the time of our marriage we exclude the legal regime of joint ownership of any increase in property. Instead we will adopt the regime of legal separation of property. The notar’s representative informed us on the legal significance of such a decision.” Thirty years later, in a court in New York, it is this language that is relied upon to bar plaintiff from sharing at all in increases in the value of defendant’s separately-owned property during the course of the marriage.

Judge Saxe to goes, in a well reasoned dissent to explain why he would set aside the agreement. The rest of the court was unpersuaded. They cited the oft quoted legal maxims. I’ll provide an except below:

“[T]he decision of the fact-finding court should not be disturbed upon appeal unless it is obvious that the court’s conclusions could not be reached under any fair interpretation of the evidence, especially when the findings of fact rest in large measure on considerations relating to [*2]the credibility of witnesses” (Thoreson v Penthouse Intl., 80 NY2d 490, 495 [1992] [internal quotation marks omitted]). It cannot be said that the Special Referee’s conclusions were not based on a fair interpretation of the evidence, and there is thus no basis for reversal. The agreement is fair, neutral and valid on its face and the issue determined by the Special Referee was therefore solely one of credibility.

Furthermore, the public policy of this State favors ” ‘individuals ordering and deciding their own interests through contractual arrangements’ ” (Van Kipnis v Van Kipnis, 43 AD3d 71, 76-77 [2007], quoting Bloomfield v Bloomfield, 97 NY2d 188, 193 [2001]), and thus, duly executed prenuptial agreements, including agreements executed in a foreign country, are accorded the same presumption of legality as any other contract (see Greschler v Greschler, 51 NY2d 368 [1980]). A party attacking the validity of the agreement has the burden of coming forward with evidence showing fraud, which will not be presumed, and must have as its basis evidence of overreaching—the concealment of facts, misrepresentation or some other form of deception (see Matter of Sunshine, 51 AD2d 326 [1976], affd 40 NY2d 875 [1976]). Plaintiff completely failed to meet that burden.

The numerous circumstances cited by plaintiff as irregularities, including her alleged lack of fluency in the German language, defendant’s superior education, the fact that she was unrepresented by counsel and that the agreement was written by a law firm that had previously done business with defendant’s family, do not establish overreaching on defendant’s part, especially in view of the uncontradicted testimony that the agreement was explained to plaintiff in English. In reaching the opposite conclusion, the dissent adopts a highly skewed version of the facts in the course of portraying plaintiff as a naive individual who was the victim of elaborate “machinations” that were calculated to induce her to sign an agreement she did not understand. However, at the time the agreement was executed, plaintiff had received her B.A. from a prestigious university, New York University (where she took such courses as “International Law,” “Ideas & Action I: Law in Society,” “International Politics” and “U.S. Foreign Policy”) and was pursuing a Master’s degree in political science from that same university.

How far will the courts go to enforce an agreement? In Van Kipnis v. Van Kipnis, the court enforced an agreement, even though the written agreement was contrary to the parties understanding. In 1965 the parties signed a contract in France. “At the time, the wife, a Canadian citizen, was studying at the Sorbonne and the husband, a citizen of the United States, had just finished college. Prior to the marriage ceremony, and at the specific request of the wife, the parties agreed to execute a “Contrat de Mariage” (Contract), which is a form of prenuptial agreement under the French Civil Code. The wife made all the arrangements for the Contract, including securing the presence of a “Notaire,” the French official who presides over the execution of such contracts, and obtaining an American attorney and interpreter to protect the husband’s interests. The expressly stated purpose of the Contract was to opt out of the “community property regime,” which is the custom in France, in favor of a “separation of estates” property regime.”

After 38 years of marriage, the parties started a divorce action. After months of litigation, the husband found the agreement and moved to have it enforced. “At the hearing, the wife testified that the Contract was executed for the sole purpose of opting out of the community property system of France, and instead adopting a complete separation of estates, whereby each party could not be held liable for the other’s debts. She also admitted, however, that the husband executed the Contract at her insistence, that he had no money at the time of the marriage and that she had never moved to set the Contract aside during the marriage.

The husband offered a similar understanding of the Contract in his testimony. Defendant testified: “I didn’t realize it was a prenuptial agreement. I just thought I had a marriage contract, which meant that we decided to protect ourselves from creditors, and we decided to keep our assets in separate names, and I never drew the conclusion that this had relevance in a divorce proceeding.””

The court found that as the agreement was clear on it’s face, the parties understanding was irrelevant and inadmissible.

Two fundamental principles of contract interpretation are that “agreements are construed in accord with the parties’ intent,” and that “[t]he best evidence of what parties to a written agreement intend is what they say in their writing” (Greenfield v Philles Records, 98 NY2d 562, 569 [2002] [internal quotation marks omitted]). “Thus, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” (id.). “A contract is unambiguous if the language it uses has a definite and precise meaning, unattended by danger of misconception in the purport of the agreement itself, and concerning which there is no reasonable basis for a difference of opinion” (id. [internal quotation marks and brackets omitted]).

Extrinsic evidence of what the parties really intended is generally inadmissible, and will be considered only if the agreement is found to be ambiguous, which is an issue of law for the court (id., citing W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]). However, extrinsic evidence may not be utilized to create an ambiguity that would otherwise not exist, since “before looking to evidence of what was in the parties’ minds, a court must give due weight to what was in their contract” (W.W.W. Assoc. at 162). An omission or mistake in a contract, such as a failure to include a specific contingency, does not itself create an ambiguity (see Reiss v Financial Performance Corp., 97 NY2d 195, 199 [2001]).

But, recently, the Second Appellate Department agreed to set aside a post-nuptial on the grounds that the husband engaged in overreaching. In Barchella v Barchella the court stated that “because of the fiduciary relationship that exists between spouses, postnuptial agreements are closely scrutinized by the courts and are more readily set aside on grounds that would be insufficient to nullify an ordinary contract.”

The lesson is that if you want to protect your property get a prenuptial agreement. If you are on the other side of the table, get a lawyer. A well drafted and fair agreement can save a lot of grief and trouble in the future.

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