The Second Department seems to have taken another bite out of prenuptial agreements. My March 25, 2013 post asked, Is it Open Season on Prenuptial Agreements? That post discussed the Second Department’s February, 2013 decision in Cioffi-Petrakis v. Petrakis and its December, 2012 decision in Petracca v. Petracca. Both cases affirmed Supreme Court Nassau County decisions setting aside the prenuptial agreements in issue,
Now, in an October 15, 2014 decision in McKenna v. McKenna, the Second Department modified an order of Nassau County Supreme Court Justice Margaret C. Reilly that had granted a husband summary judgment motion declaring the parties’ prenuptial agreement to be valid and enforceable. Justice Reilly had also denied the wife’s motion for an award of pendente lite maintenance and counsel fees.
Holding that summary judgment was not warranted, the appellate court may have increased or changed the burden needed to uphold a prenuptial agreement; changing the role of a contract’s “merger clause.” That clause declares that no factual representations not specifically referenced in the contract may later be used to claim the contract was fraudulently induced. Typically, it is a shield used to protect the agreement from attack.
In McKenna, the Second Department suggests a merger clause may be used as a sword: preventing a court from learning the wife’s actual knowledge of the husband’s finances at the time the prenuptial agreement was entered. As that knowledge could only have come from representations of the husband, the merger clause would bar proof of such representations not referenced by the agreement.
The McKennas were married in February, 1997. Shortly before their marriage, they entered into a prenuptial agreement. The agreement provided that in the event of separation or divorce, each party waived the right to the other’s separate property, including property acquired from the proceeds of separate property acquired during marriage; the wife waived any interest in the marital home, which had been owned by the husband before the marriage, as well as any interest in the husband’s annual bonus and retirement account. The prenuptial agreement also limited the husband’s maintenance obligation to a lump sum payment of between $5,000 and $25,000, depending on the length of the marriage. The agreement further provided that the husband would pay the wife’s reasonable counsel fees in any matrimonial action, unless the wife challenged the agreement.
In December 2011, the husband commenced this action for a divorce and ancillary relief. The wife moved to vacate the prenuptial agreement on the ground, among others, that the husband never disclosed the value of his assets. The wife also sought pendente lite maintenance and counsel fees. The husband cross-moved for summary judgment declaring that the prenuptial agreement was valid and enforceable. Justice Reilly denied the wife’s motion, and granted the husband’s cross motion.
The Second Department acknowledged that the husband had demonstrated his prima facie entitlement to judgment as a matter of law. He submitted the agreement, which appeared fair on its face and set forth express representations that it was not a product of fraud or duress, that each party had made full disclosure to the other, that each party had been represented by independent counsel, and that they had fully discussed and understood its terms.
However, contrary to the opinion of the lower court, the Second Department found that triable issues of fact existed notwithstanding that the agreement recited that there had been “full disclosure” and that it was “a fair Agreement” which “is not the result of any fraud, duress or undue influence.”
Under the agreement, the wife had waived substantial rights to equitable distribution and spousal support. However, it was not possible to evaluate the fairness of the prenuptial agreement on its face, inasmuch as the husband provided no financial disclosure as part of the agreement. Neither the husband’s disclosure made in support of his motion, nor the support he provided to the wife and her son from a prior marriage during the course of this marriage was sufficient to enable the Court to determine the fairness of the agreement at the time of its execution. Moreover, the agreement’s merger clause precluded certain proof on the issue:
In addition, the plaintiff’s purported financial disclosure to the defendant during the five years the parties lived together prior to the execution of the prenuptial agreement is precluded from consideration pursuant to the merger clause in the agreement, since the representations are not included in and are extrinsic to the agreement.
Further, the wife’s attorney at that time was selected by the husband and paid by him. According to the wife, she met with her attorney only a short time before the execution of the agreement and that attorney failed to advise her of the legal consequences of the terms of agreement. Given the parties’ conflicting claims as to the negotiation and execution of the prenuptial agreement, at this juncture, summary judgment in favor of either party on the issue of the validity of the prenuptial agreement was unwarranted.
Moreover, and notwithstanding that the prenuptial agreement contained a waiver of maintenance and equitable distribution, there was no provision for the waiver of pendente lite maintenance during the pendency of this litigation. While the parties’ premarital agreement limited the wife’s rights to obtain spousal support and waived her rights to counsel fees, it did not bar temporary relief, including pendente lite maintenance and counsel fees.
Thus, the Second Department held, in granting the husband’s motion for summary judgment, the Supreme Court, without explanation, improvidently denied those branches of the wife’s motion which were for pendente lite maintenance and counsel fees. Accordingly, the Second Department remitted the matter for a new lower court determination of those branches of the wife’s motion.
Comment: The actual knowledge of the wife (acquired from statements of the husband) of the husband’s finances may not suffice to uphold the agreement. Proof of such knowledge would be inconsistent with the agreement’s standard merger clause. To be safe, nothing less than an exchanged full Net Worth Statement should be made available when entering such an agreement,
Moreover, any attempt by the monied spouse to select the attorney for the non-monied spouse is made suspect. Moreover, the non-monied spouse would need to (verifiably?) represent that there has been fully counseled (is the opportunity, alone, sufficient?) on all issues.