After surgically excising eight words, Saratoga County Supreme Court Justice Thomas D. Nolan, Jr., in his February 7, 2014 decision in Zinter v. Zinter, upheld the balance of a prenuptial agreement. Those words had given the husband the unconscionable power to control whether earnings and other after-marriage acquired property would be placed into joint or indiviual accounts, and thus marital or separate property.
In this divorce action, the parties were married on December 23, 2005. The wife was then 29 years old, a music teacher with a Master’s degree, and reported a net worth of $71,500.00. The husband was then 35 years old, a college graduate, and an officer and part owner of his family-owned and operated business, with a reported net worth of approximately $2.7 million.
The husband had retained an attorney to prepare a prenuptial agreement. In November 2005, both the prospective husband and prospective wife met with that attorney to review the proposed agreement. At the time, the wife was not represented by counsel. The husband’s attorney provided the wife with the names of three attorneys experienced in matrimonial law. Shortly thereafter, she retained one of them, with whom the wife met three times before the agreement was signed four days before the marriage.
Under the prenuptial agreement, the parties opted out of the equitable distribution and maintenance provisions of the Domestic Relations Law in the event of a divorce. It also established an expansive definition of separate and a limited definition of marital property, reciting the assets that would remain his or her separate property. It also contained a provision asserting and confirming that adequate asset disclosure both written and oral had occurred. A formula tied to the parties’ gross annual earnings during the marriage would be used to compute maintenance to the wife.
This divorce action was commenced by the wife in July 2013, seeking custody of the parties’ two children, child support, equitable distribution, maintenance, and other ancillary relief. The wife also sought to set aside the prennuptial agreement.
The husband moved to dismiss the attack on the prenuptial agreement. Justice Nolan treated the motion as one for summary judgment.
The husband argued that prior to execution of the agreement, he fully informed the wife about his financial affairs and that he fully and accurately disclosed to the wife that his assets had a value of approximately $2.7 million. Moreover, the husband claimed the wife was fully aware that a prenuptial agreement was a condition to his marriage. The husband’s attorney provided an affidavit that in accordance with his custom, he informed the wife that she ought to secure her own counsel, and since she did not then have an attorney, he provided her with the names of three attorneys, including the one she retained.
In opposition, the wife contended in general terms that before the agreement was signed the husband hid from her “details of his wealth and income,” that the husband’s attorney “steered” her to retain the attorney she hired, that the husband discouraged her from sharing the agreement with family and friends prior to execution, and that he misled her into signing it by telling her “that I was going to get so much from him that he could not afford to divorce me.” She further claimed that she did not “understand the agreement or its import in relation to what under New York’s Domestic Relations Law she might be entitled to be awarded if divorce took place.” The wife asserted that she was not provided with a copy of the agreement after it was signed, and not until recently, did she become informed of the full extent and probable value of the husband’s pre-marriage holdings and the value of the rights she agreed to waive. The wife’s attorney stated that the wife was referred to him by the husband’s attorney and that when she consulted him, he did not have the husband’s tax returns, pay stubs, or a business evaluation to review.
After discussing the general principles applicable to evaluating prenuptial agreements, the court first evaluated the wife’s position that triable issues regarding fraud, duress, or overreaching existed which precluded a summary determination. Although the parties had disparate financial resources at the time of their marriage, such had been disclosed. The wife pointed out that the husband had not disclosed his 2005 annual income of approximately $259,000.00 and gave her opinion that the $145,000.00 value then placed on his interest in the family business was unconscionably low. (A footnote in the husband’s list of separate property attached to the agreement stated that the $145,000.00 value represented the book value of his shares which, it went on to state, may have an actual value ranging from $580,000.00 to $725,000.00.) By 2012, that business was paying the husband $1 million.
Nevertheless, the Court noted that failure to include income in financial disclosure need not vitiate an agreement. Moreover, the wife did not challenge that the husband disclosed a significant net worth, nor allege that had the husband disclosed his 2005 income or a different valuation of his interest in the family business, she would not have signed the agreement.
What is clear from this record is that at the time of the agreement defendant had considerable means while plaintiff did not, and these disparities were indeed disclosed. . . . [The wife] offers no evidence sufficient to demonstrate an issue of fact regarding fraud. Likewise, there is no evidence that the [wife’s] free will and volition were overcome by [the husband’s] words or conduct before she executed the agreement.
The husband admitted his insistence on an antenuptial agreement was motivated by his desire to protect and preserve his separate assets, including his interest in a family owned business and to restrict plaintiff’s claims or rights upon divorce or death. The claim that the wife was unable to consult with family and friends because to do so would cause their jointly planned “surprise” wedding to no longer be “their” secret did not constitute, in the Court’s view, evidence of duress. The agreement was not foisted or sprung on the wife at the last minute prior to their wedding ceremony. She had a draft more than a month before the wedding, and once again she met with her attorney three times before she signed the final version. That her attorney was one of the three that the husband’s counsel suggested was of little moment and not determinative.
In short, the court cannot tease from this record sufficient proof that demonstrates the existence of triable issues regarding duress or undue influence by defendant.
However, that did not end the Court’s inquiry. Because of the fiduciary nature of the relationship between prospective spouses, under the court’s equity power, an agreement or certain provisions may also be set aside if “manifestly unfair” and thus unconscionable. Regardless of the absence of fraud or duress or undue influence, the court must nonetheless evaluate whether the terms were so unfair “as to shock the conscience and confound the judgment of any [person] of common sense.” Yet, an agreement will not be set aside simply because a party relinquished more than the law would have provided, or “merely because some terms may seem improvident.”
To be sure, the wife’s post-divorce rights were severely limited by the agreement. However, provision had been made for plaintiff to receive maintenance based on a formula tied to the duration of the marriage and to the parties’ not insignificant annual income, even if the amount of maintenance was perhaps lower than were the agreement to be set aside.
In addition, the agreement provided that any appreciation in the husband’s separate property, specifically his interest in the family business remains entirely the husband’s separate property, even if the wife’s indirect efforts may have contributed to such appreciation.
At great length, the agreement also excluded from the claims of the other contributions to retirement plans made after the marriage. While the waivers were reciprocal, their effect disproportionately benefitted the husband. At the time the agreement was made, the husband’s 401(k) was valued at $253,193.76 and wife’s teacher’s retirement plan was valued at $1,500.00. In their statements of current net worth, the husband’s 401(k) was now valued at $620,490.00 and the wife’s plan at $14,224.73.
While the agreement was strongly in the husband’s favor, in its totality, it was “not so one sided as to shock the court’s conscience with one exception, i.e., the definition of “Marital Property,” particularly viewed with the agreement’s expansive definition of “Separate Property”.
As defined in the agreement,
“Marital Property” means all that property that Scott and Jennifer purchase or otherwise acquire during the marriage that is owned or held by them jointly, including, without limitation, wedding gifts, automobiles, bank accounts, real property, household furnishings and investments.
While “Separate Property” is defined at page 2, 1. Definitions 1.1A as:
(i) all property, real, personal or other, whatever situated, that each party now holds or owns regardless of whether held directly or indirectly, in trust or otherwise,
(ii) property acquired by bequest, devise, or descent or gift from a third party,
(iii) compensation received for personal injuries,
(iv) all interests in Retirement plans acquired or contributed during the marriage,
(v) any and all income from, or proceeds of the property described in subparagraphs (i)-(iv) above or the reinvestment thereof, including any property acquired by the exchange or sale of the property described in subparagraphs (i)-(iv) above, whether by reorganization, merger or otherwise, even though the receipt of such income or proceeds may have occurred after the impending marriage, and
(vi) any and all increase in value of the property described in subparagraphs (i)-(iv) above, including, without limitation, any appreciation thereon, regardless of the active, inactive, direct or indirect contribution or counsel, advice, energy or other efforts of either party.
Thus, Justice Nolan noted that there were two prerequisites – timing and title – to make property marital. In application, despite approximately $2,755,488.00 in marital gross earnings from 2006 to 2011, their was only one jointly-titled checking account and one jointly-titled savings account with a combined balance of approximately $80,000.00.
Justice Nolan found the power to lead to this result unconscionable.
Since the defendant was essentially the sole breadwinner, he had the means and capacity to title accounts as he saw fit and thus to create marital or separate property at his whim. . . . This definition of marital property, giving the [husband] as it does the power to make separate and to take out of the reach of plaintiff on divorce any and all assets acquired during the marriage regardless of its duration is manifestly unfair and unconscionable as applied to the circumstances of this case.
As a result, the Court struck from the definition of Marital Property, page 2, paragraph 1. Definitions 1.1B the words “That is owned or held by them jointly” and none other. The agreement’s definition of “Separate Property” was left intact. Except as to the removal of those words, the prenuptial agreement was declared valid and enforceable.
Friedman and Molinsek, P.C., of Delmar represented the wife. Gordon, Tepper & Decoursey, LLP, of Glenville, represented the husband.