Unconcscionable

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The separation agreement was the product of mediation; the wife was afforded the opportunity to consult with counsel; and the wife elected to sign the agreement, notwithstanding the advice of counsel not to do so.  “These facts, standing alone, do not shield the separation agreement from judicial scrutiny. The validity of the agreement is dependent upon an examination of the totality of the circumstances, including an examination of the terms of the agreement, to see if there is an inference of overreaching.”

So held the Appellate Division, Second Department in its April 24, 2019 decision in Mizrahi v. Mizrahi. Reversing the decision of Queens County Supreme Court Justice Margaret Parisi-McGowan that upheld the agreement without a hearing, the appellate court also noted the record disclosed no information regarding who retained and paid for the services of the mediator, and how the mediator arrived at the substantive terms of the agreement.

The Second Department noted:

because of the fiduciary relationship existing between spouses, a marital agreement should be closely scrutinized and may be set aside upon a showing that it is unconscionable or the result of fraud or where it is shown to be manifestly unjust because of the other spouse’s overreaching. To rescind a separation agreement on the ground of overreaching, a wife must demonstrate both overreaching and unfairness.

Here, the court held that without a hearing to determine the totality of the circumstances, including the extent of the parties’ incomes and assets and the circumstances surrounding the execution of the separation agreement, it could not be determined on this record whether equity should intervene to invalidate the parties’ separation agreement.Continue Reading Inference of Mediated Separation Agreement Invalidity Sufficient to Warrant Hearing

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When your lawyer tells you that you are about to make a really bad deal, you disregard that advice at your peril.

That is one lesson to be learned from a split-decision of the Appellate Division First Department in its April 17, 2012 decision in Barocas v. Barocas. The court affirmed a decision of Supreme Court New York County Justice Ellen Gesmer which for the most part denied a wife’s attack on the prenuptial agreement she signed with her future husband in 1995.

Their marriage two weeks after the agreement was signed is now ending in divorce. Under the parties’ agreement, Deborah Barocas will not receive any maintenance (personal support). (The agreement contained no provision regarding the support for the parties’ two children.) Moreover, under the agreement, Deborah will also not share in any property accumulated by Victor during the marriage. Indeed, the agreement provided that Deborah would forfeit any gifts or jewelry she had been given by Victor before and during the marriage. Over their 15 years of marriage, Victor accumulated some $4,600,000 in assets, while Deborah had only $30,550 in an I.R.A.

Deborah was born in Guyana, the second of seven children. She arrived in the United States in 1981, at the age of twenty-one. She obtained a GED in 1982, and worked menial jobs. In 1989, she worked part-time as a receptionist for Victor’s family business. While working there, the parties began to date. In 1993, she moved into Victor’s Sutton Place apartment. Other than sporadic attempts at small business ventures, Deborah did not work outside the home for the duration of the marriage. She has no further education and no special skills.

Now attacking that agreement, Deborah noted that she has no other assets or sources of income. She alleged that she can no longer work, as she is now 50 years old and that her husband had thwarted her efforts to get a college education and pursue a career during the marriage.

The three-judge majority of this five-judge appellate court upheld Justice Gesmer’s decision to uphold the property division provisions of the prenuptial agreement. With regard to those provisions, Deborah Barocas failed to establish that her execution of the agreement was the result of inequitable conduct on her husband’s part. Rather, the parties fully disclosed their respective assets and net worth.

Moreover, the agreement was reviewed by independent counsel. Indeed, Deborah’s own lawyer admittedly had told her that the agreement was “completely unfair” and advised against signing it. The fact that the husband’s attorney recommended the wife’s attorney, and that the husband paid Deborah’s counsel’s fees, was insufficient to demonstrate duress or overreaching sufficient to base an attack upon the agreement.  Still further, the claim that Deborah believed that there would be no wedding if she did not sign the agreement, that the wedding was only two weeks away and that wedding plans had been made, was an insufficient basis to attack the agreement on the grounds of duress.

Although application of the provisions would result in plaintiff [husband] retaining essentially all the property, courts will not set aside an agreement on the ground of unconscionability where inequitable conduct was lacking and simply because, in retrospect, the agreement proves to be improvident or one-sided . . . . The circumstances surrounding the execution of the agreement disclose no issue of fact as to whether there was overreaching. We therefore adhere to the general rule that “‘[i]f the execution of the agreement . . . be fair, no further inquiry will be made’. . . .

Continue Reading Signing a Prenuptial Agreement Against the Advice of Counsel Bars Subsequent Attack