# FILED

September 9, 1996 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE SUPREME COURT OF TENNESSEE AT KNOXVILLE

FOR PUBLICA TION Filed: September 9, 1996 C.L. RANDOLPH, ) ) Plaintiff/Appellee, ) BRADLEY GENERAL SESSIONS ) ) Vs. ) HON. M. DREW ROBINSON, ) SPECIAL JUDGE ) VIRGINIA HENLEY RANDOLPH, ) ) Defendant/Appellant. ) No. 03-S-01-9510-CV-00119

For Appellant: For Appellee: Roger E. Jenne James F. Logan, Jr. JENNE, SCOTT & BRYANT LOGAN, THOMPSON, MILLER, Cleveland, Tennessee BILBO, THOMPSON & FISHER, P.C. Cleveland, Tennessee



## O P I N I O N

REVERSED AND REMANDED; TRIAL COURT JUDGMENT REINSTATED. ANDERSON, J.1 " Notwithst anding any o

ther provi sion of l aw to the cont rary,
. . . any antenupt ial or prenuptial agreement entered into by spous es concerning property owned by either spouse before the marriage whi ch is the subj ect of such agreement shal l be bindi ng upon any court having jurisdi ction over

such spouses and/or such ag reement if such agr eement is determined i n the disc retion of the cour t to ha ve be en en tered into by s uch spou ses free ly, kno wled gea bly and in good faith and without the exertion of duress or undue influence u pon either spouse. The term s of such agreement shall be enforceable

by all remedies avail able for enf orcement of contract terms. " Tenn. Cod e Ann. § 36-3-501 (1991 Repl.).
-2- We granted this appeal to clarify the s tatutory standard by w

hich the validity of antenuptial agreements should be judged. The trial court in this case held the antenup tial agree ment inva lid, find ing the wif e did not “knowledge ably” sign the agreement, as re quired by statute 1 . The Court of Appeals, in a split decision, reversed, findi ng the totality of the cir cumstances established that the wife possessed sufficient know ledge of the husband’s business affairs and financial status at the time she signed the agreement to m eet the statutory requirement of "knowledg eably" executing the agreement and that the agreement was therefore enforce able.

We interpret the statutory requirement tha t an antenuptial agreement is enforceable only if entered into "knowledgeably" to mean tha t the spouse seeking to enforce an antenuptial agreement must prove, by a preponderance of the evidence, either that a full and fair disclosure of the natu re, extent and value of his or her holdings w as provided to the spouse s eeking to avoid the agreement, or that disclos ure was unnecessary because the spouse seeking to avoid the agreement had independ ent knowledge of the full natur e, extent, and value of the proponent spouse’s h oldings.

Applying this standard, we have carefully reviewed the record in this case and conclude that the evidence does not preponde rate against the trial court’s finding that the wife did not "knowledgeably" si gn the antenuptial agreement.2 The agreement provides speci ficall y that “Perry f orever waiv

es, releases,and relinq uishes any and all cl aims to or ri ghts or in terest i n, statut ory, equi

table or otherwise, to the separate proper

ty of Randol ph owned by hi m prior to t he marriage and to any property

acquired after th e date of the

marriage which i s acquired wi th the proceed s or income from property owned prior t o the marriage or

is traceab le to pro perty acqui red prior to the marri age. This wai ver and release i ncludes but i s not li mited to any claims withrespect to do wer right

s, widow’ s allowance, homestead, year’ s support, mari tal share,right t o dissent f rom valid wi ll, any stat utory exempt property , or any other clai m which she might acquire with respect to said pr

operty as the wife, widow, heir at law, next of kin, or distributee of Randolph.”

3 This provi sion in i

ts enti rety r

equires tha

t “[i ]n the event

a divi sion must be made of the parties’ marital pr

operty, the marital

property

shall be d ivided b ased upon the amount inv ested by each of the parties. The part ies may prove t heir i nvestment based upon thei r records of i ncome, purcha ses, an d paym ents.” -3- Accordingly, the C

ourt of Appeals’ judgment is r eversed and the judgment of the trial court is reins

tated.

BACKGROUND In 1983, Virginia Perry

Randolph contacted C.L. Randol ph, a successful real estate businessman, about r enting a place to liv

e. They began dating, and in August of 1983, Virgini a and her 13-year-old so n moved into C.L.’s resi dence.

A little over one y

ear later, in September, 1984, they were married. C .L. Randolph, age 52, had been previously married five times and Virginia Perry Randolph, age 46, had been married once bef ore. On the day before their marriage, the parties entered into an antenuptial agreemen t prepared by C.L.’s lawyer. The agreement provided, in part, that

in the event of divorce or death, each party released all marital rights in the separate property of the other. 2 Also, in the event of divorce, the agreement provided that the division of marital property wa s to be bas ed upon t he amou nt each p arty invest ed in the property. 3 At the time the agreement was executed, Virginia owned virtually no assets, except personal belongi ngs, while C.L. had s ubstantial real estate holdi ngs that-4- were valued in 1986, at approximately $800,000. In 1983, when the parties were living together, C.L. had a net worth of betw een $500,000 and $600,000.

Almost from the beginning of their marriage, the parties ex perienced difficulties, including mental and physical abuse, and ad ultery on the part of C.L.. In addition, the parties had su bstantial health problems, both before and during the marriage, which e

xacerbated the stress. Divorce actions w ere filed on at least two prior occa

sions during the ten-y

ear marriage. The present ac tion began when, in November of 1993, the parties again separ ated and C.L. filed for divorce, asking that the antenuptial agreement be enforced . Virginia counterclaimed, asserting that the agreement was the resul t of fraud, duress, coercion, undue influence, and misrepresentati on.

At trial, Virginia

testified that she had never s een the antenuptial agreement until the day she signed it, which was one day before the parties were married. Virginia a

dmitted she reviewed the agreement on the drive t o the attorney’s office, but claimed that no one explained it to her. Because she was responsible for a minor chil d and suffering from breast cancer at the time the agreement was executed,Virginia said her onl y choices had been to sig n the agreement or be kicked out of the residence she and her son had sh ared with C.L. for the previous y

ear. As to her knowledge of property covered by the agreement, Virginia admitted that she knew about some of C. L.’s property holdings, but she insist ed that she was not awar e of, nor did anyone disclose to her, the full extent and value of his assets and holdings.-5- Virginia was not r

epresented by counsel w hen she signed the agreement. However, George McCoin, C.L.’s attorney who drafted the antenuptial agreement, was present w hen it was executed and t estified that it is his nor mal practice to explain suc

h agreements to both parties t o insure a mutual understanding of the terms. McCoin, however, could not specifically recall following that practi ce with Virginia . In addition, McCoin ack nowledged that he did not provide Virg inia with a copy of C. L.’s financial statement prior to execution of the agreement, nor discuss the specific dollar value of C.L’s holdings with her, but instead only discuss ed C.L.’s assets in gener al terms.

Likewise, C.L. admitted that he never advised Vi rginia of his net wor th, which in 1983 was betw een $500,000 and $600,000. He asserted, however, that she was aware of the natur e of his holdings since they had lived together for more than one year before the agr eement was signed, and she ha d accompanied him to many of his prope rties to collect rent. In addition, C.L. testified that Virginia ha d reviewed the agr

eement prior to signing it and had made suggestions for changes , including a provi sion relating to a w atch. Although Virginia con ceded she read that provis ion before signing the agreement, she denied that the pr ovision was incl uded on her suggestion.

Based on the foregoing proof, the t rial court found that both parti es had contributed to the breakup of the marr iage and awarded the div orce to each. Although rejecting the defendant’s claim that the agreement was procured by fraud, duress, coercion, undue influence, and misrepresentation, the trial court concluded that the antenuptial ag reement was invalid.In so holding, the trial court stated as follows:-6- The concern of the Court goes to the “knowledgeably” requirement in the statute. The failure to prove this requirement in the Court’s opinion would create an i nceptual impediment to the contract . The defendant has the burden of proof in this regard. The particular contract in question indi cates that “each party has sought and obtained independent counsel regarding this matter.” This is simply not the case according to all the proof. Mr. McCoin represented Mr. Randolph i n the transaction. He did not remember going over the agreement with each at the time of signature. He was not required under his duties to go over

the agreement with Mrs. Rando lph. Proo f of ind epende nt couns el would ha ve overcome the “knowledgeably” requirement. The Court is of the opinion that Mrs. Randolph p robably did not have the means nor perhaps the wherewithal to secure independent counsel to advise her of the consequences of the arrangement she was about to enter into. It was incumbent upon Mr. Randolph to assist in this regard due to the prior r elationship between the par ties and the obvious bargaining disparity. Mr. R andolph was a learned businessman very shr

ewd in his dealings.Mrs. Randolph did not possess similar tools no r abilities. The agreement states an untrue fact on the issue of independent counsel. This is a fatal flaw to the Court under the facts set out above. For this reason the Court finds that the antenuptial agreement is void and theref ore sets it aside.
Upon finding the agreement v oid and unenforceable, the trial c ourt awarded Virginia the followi ng: (a) $3,705, representing her one-half interest in the household property purchased after the marriage; (b) $41,500, representing her interest in the other marital property; (c) $125,000, as alimony in-sol ido; and (d) $3,000, in attorneys fees.

C.L. appealed, and in a split decision, the Court of Appeals c oncluded that the evidence preponderated against the trial court’s decision as to Virginia’s knowledge when she s igned the agreement. The Cour t of Appeals determined that neither independent counsel nor a fina ncial statement is absolutely-7- necessary to satisfy the “knowledgeably ” requirement of the statute. Accordingly, the C

ourt of Appeals reversed the judgment of the trial court w ith respect to the validity

of the antenuptial agreement, the di vision of marital property, and the a ward of al imony.

Thereafte r, we granted permis sion to appeal to consider the k nowledge required to sustain the v alidity of an antenuptial ag reement. We review the findings of fact by the trial court de novo upon the record of the trial c ourt, accompanied by a presumption of the c orrectness of the findings, unl ess the preponderance of the evidence is otherwise. Tenn. R. App. P. 13 (d). Because the trial judge is in

a better position to wei gh and evaluate the credi bility of the witnesses who testi

fy orally, we g ive great weig ht to the trial judge’s findings on issues involving

credibility of wi

tnesses. Gillock v. Board of Profess ional Responsibility , 656 S.W.2d 365, 36 7 (Tenn. 1983).

KNOWLEDGE It is now well s

ettled in Tennessee that public pol icy allows the enforcement of antenuptial agreements if c ertain prerequisites are satisfied. For example, Tenn. Code Ann. § 36-3-501(1991 Repl.) provides tha t "if such agreement is determined in the discretion of the court to hav e been entered into by such spouses freely,knowledgeably and i n good faith and without the exertion of duress or undue i nfluence upon either spouse," it i s enforceable.

Thus, under the statute, such agr eements are enforceable if entered into freely, knowledgeabl

y, and in good faith, wi

thout the exertion of duress or undue influence. Since both the trial court and the Court of Ap peals rejected the wife’s-8- claim that the agreement w as procured by fraud, duress , coercion, undue influence, and misrepresentation,the only issue in this appeal is whether the agreement was entered int o “knowledgeably. ”

The wife contends that the agree ment was not entered into knowledgeably si nce the husband did not make a full and fair disclosure of the nature, extent , and value of hi s assets, and sh e had no indep endent knowled ge of that information. On the other hand, th e husband argues that discl osure was not necessary in th is case, since the wife had gained kn owledge of his hol dings as a result of their relati onship prior to marriage.

These contentions arise from inter pretations of prior Tennessee deci sions rendered both before and after enactment of the abov e statute. Prior to the statute, at common law, the r ule governing the di sclosure required to validate antenuptial agreements was announced by the Court of Appeals in Baker v. Baker , 24 Tenn. App. 220, 142 S.W.2d 737 (1940). In that case, Mrs. Baker brought suit to set aside an antenuptial contract by which she had waiv ed her statutory right to s hare in the estate of her deceased husband. She claimed that when the agreement was signed, she did not know her husband was a wealthy man. She asserted that her husband ha d a duty to disclose that information since the parties wer

e engaged and therefore in a confide ntial relationship w hen the agreement was executed.

The Baker

court agreed and stated the rule as follows:
The rule supported by the weight of authority may be stated thus: An engagement to marry cr eates a confidential relation bet ween the contracting parties and an antenuptial contract enter ed into-9- after the engagement and during its pendency must be attended by the utmost good faith; if the provision for the prospe ctive wife is, in the light of surrounding circumstances, wholl y disproportionate to the mean s of her f uture hu sband an d to what sh e would rec eive under the law, the burden r ests on those claiming the validity of the contract to show that ther e was a full disclosur

e of the nature, extent and value of the intended husband’s property, or that she had full knowledge thereof w ithout such disclosure, and that she, with this knowledge, voluntarily enter ed into the antenuptial settlement. It should be noted that under this rule the contract is not invalidated merely because the portion fixed for the bride is small or disproportionate, for, if full y informed and advised, the i ntended wife may be entirely

satisfied with the prov

ision made for her, and, if she then voluntarily

enters into the contract sh e is bound by its terms.

Id . at 745-46 (citations omitted).

This Court first addressed the disclosure issue follow ing adoption of Tenn. Code Ann. § 36-3-501(1991 Repl. ) in Kahn v. Kahn , 756 S.W.2d 685 (Tenn. 1988). I n that ca

se, the p arties met at a r

estaura nt, whe re the pr ospecti ve wif e worked as a waitr

ess and the prospective husband was a patron. The husband was a relatively

wealthy businessman, w hile the wife owned v

irtually no assets. The prenuptial agreement was the suggestion of the husband and was prepared by the husband’s lawy

er. The agreement involv ed the release of all marital rights in the separate pr operty of each spouse, but req uired the husband to provide the wife, in th e event of divorce, a tw o-bedroom house or condominium for as long as she resided therein or until she remarr ied. Id ., at 686. As in the present case, the agreement i n Kahn was signed one day before the parties were married, and the w ife did not have the assistanc e of independent counsel. However, there, as here, the parties had liv ed together for more than one ye ar prior to their marriage.-10- Mrs. Kahn testified that she was not made fully aware of the extent of Mr. Kahn’s financial dealings before executing the agreement, but she conceded that she knew approximately a year and a half before signi ng the agreement that he was worth “millions of dollars” and “was making around $360,000 a year from all his investments.” Id . at 690. In addition, Mr. K ahn testified that he informed her prior to signing the prenuptial agreement that hi s net worth was betw een eight and nine million dollars. Id

.
In determining the validity of the agreement, this Court discussed the rule

announ ced by Baker , and compared it to the requi rements of the statute, stating as follows:
A comparison of the requirements of the statute and the Baker rule reveals that the statute makes no reference to the requireme nt in Baker that where the provi sion for wife in an antenuptial agreement is wholly disproportionate to the husband’s wealth, a full disclosure of the nature, extent and value of husband’s property is r equired to sustain the validity

of the agreement. Of course, numerous factual scenarios could occur in which the failure to make a full disclosure of assets, liabilities and values would breach the statutory requirem ent that the cont ract was en tered int o freely, knowledgeably and i n good faith. However, in this case it is not necessary that we resolve the apparent conflict between the Baker rule and the statute because we find that the an tenuptial agreement between these parties fully complies with the tests imposed in either of those rules.

Id . at 694 (emphasis added).

Applying the rules ann ounced in Baker , the Kahn court specifically held “the antenuptial agreement v alid because the wife had full k nowledge of the nature, extent and value of the intended husband’s property at the time she executed the agreement, making full disclosure at that time unn ecessary.” Id . at 696. The record in Kahn reflected that Mrs. Kahn was aware of every valuable-11- asset Mr. Kahn owned at the time she signed the agreement, and Mr. Kahn did not underestimate the value of any asset.

Initially, this cas

e requires that we r

esolve the issue left open i n Kahn -- whether the statute abrogated the rule announced in Baker requiring proof of full disclosure or independent knowledge to validate an antenuptial agreemen t. It is instructive to note that the rule announced in Baker remains the prevailing view throughout the country. See generallyJudith T. Younger, Perspectives on Antenuptial Agreements: An Upda te , 8 J. Am. Acad. Matrim. Law. 1 (1992) (hereafter “ Perspectives at ____.”). Moreover, unlike the court in Kahn , we do not perceive a conflict bet ween the rule announced in Baker and the statute providing for enforcement of antenuptial agreements entered into “knowledgeably.”

As we interpret the k

nowledge element of the statute, the spouse se eking to e nforce a n antenu ptial agre ement m ust prove, by a preponderance of the evidence, either that a full and fair discl osure of the nature, extent, and value of his or her holdings was pr

ovided to the spouse seeking to avoid the agreement, or that disclosure was unnecessary because the spouse seeking to avoid the ag reement had independent knowledg e of the full nature, extent, and value of the proponent spouse’s holdings. U nder the statute, disclosu re or full knowledge is required in all case s, not jus t those whi ch involve an agreement in which the provision for one spouse i s wholly dispropo rtionate to the means of the other spouse.

At least three principles support our interpretatio n of the rule. First, as was recognized i n both Baker and Kahn , an agreement to marry g ives rise to a4 See also Newman v. Newman , 653 P.2d 728, 732 (Colo. 19 82); Burtoff v. Burtoff , 418 A.2d 10 85, 1089 (D.C. Ap p. 1980) ; Del V ecc hio v. D el Ve cch io , 143 So. 2d 17, 21 (Fla. 1962); Frey v. Fr

ey , 471 A.2d 705, 711 (Md. 19 84); Fletcher v.Fletcher , 628 N.E. 2d 13 43, 1 346 (Oh io 1994); Kosik v. George , 452 P.2d 560, 563 (Or. 196 9); Button v. Button , 388 N.W.2d 546, 550 (Wis. 1986 ).

5 Burtoff , 418 A.2d at 1089; Del V ecc hio , 143 So . 2d at 21; Simeone v. Simeone , 581 A.2d 162, 167 (Pa. 199 0). -12- confidential relationship. 4 As a result, the parties to an antenuptial agreement do not deal at arms’ length and must exercise candor and good faith in all mat ters bearing upon the contract. 5

Secondly, parties to an ant enuptial agreement are ver y often ill-matched in terms of bargaining pow er. As one court put it, “ candor compels us to raise t o a conscious level the fact that, as in this case, prenuptial agreements will almost always be entered int

o between people with pr operty or an income potential to protect on one side and people who are impecunious on the other.” Gant v. Gant , 329 S.E.2d 106, 114 (W . Va. 1985). Thus, a rule requiring full disclosure or independent knowledge s erves to level the ba rgaining field for the par ty in the weaker position.

Finally, unlike other

private commercial cont racts, the State has an interest and is a party

to every marriag e. Gant , 329 S.E.2d at 114. In the absence of antenuptial agreements, s tate laws govern the division of marital property and the awardi ng of alimony in the event of divorce. Often, antenuptial agreements alter the rig hts parties otherwis e would have under those state laws. Consequently, it is

altogether appropriate tha t parties entering into antenuptial agreements do so with kn owledge of the holdings to which they are w aiving any claim under state law. Fletcher , 628 N.E.2d at 1347.-13- As we view the s

tatute, knowledge is s imply an element that must be proven to establish the ex istence of a valid contrac t. Ordinarily, the burden of proving the exist

ence of a valid contract is upon the person relying on the contract. In the context o f antenuptial agreements, the same i s true. The proponent has the burden of establishi ng the existence and terms of the agreement, as would be the s ituation in any other cont ractual setting. Lebeck v. Lebeck , 881 P.2d 727, 733 (N.M. App. 1994).

The extent of what constitutes “full and fair” disclosur e varies from case to case depending upon a number of factors, including the relativ e sophistication of the parties, the apparent fairnes s or unfairness of the substantiv e terms of the agreement, and any other circumstance unique to the litigants and their specif ic situation. Perspectives at 25. While disclosure need not reveal precisely every asset owned by an individual spouse, at a minimum, full and fair disclosure requires that each contr acting party be gi

ven a clear idea of the nature,extent, and value of the other party ’s property and resour

ces. Id . Though not required, a fairly simple and effectiv e method of proving disclos ure is to attach a net wor th schedule of assets, liabilities, and income to the agreement itself. See , e.g. , Pajak v. Pajak , 385 S.E.2d 384, 388 (W. Va. 1989); Hartz v. Hartz , 234 A.2d 865, 871, n. 3 (Md. 1967) (“The careful practitioner has often c aused to be prepared an itemization of the pr operty covered by the agreement with apprai sed values and caused it to be made part of the agreement .”).

In the absence of full and fair disclosure, an an tenuptial agreement will still be enforced if the spouse s eeking to avoid the ag reement had independent knowledge of the full nature, extent, and value of the other spouse’s property-14- and holdings. Of course, the particular facts and circumstance s of each case govern, to a great degree, the determination of knowledge. Some factors relevant t o the asse ssment in clude, bu t are not l imited to , the part ies’ respe ctive sophistication and experience in business affairs, the du ration of the relationship prior to the execution of the agreement, the time of the signi ng of the agreement in relation to the time of the w edding, and the parties’ r epresentation by, or opportunity to consult w ith, independent counsel. Perspectives at 18; see , e.g. , Norris v. Norris , 419 A.2d 982, 985 (D.C. App. 1980) ; Del Vecchio , 143 So. 2d at 21; Simeone , 581 A.2d at 167.

Though representation by independent counsel ma y be the best evidence that a party has entered int o an antenuptial agreement vol untarily and knowledgeably, no s

tate makes consultation wi th independent counsel an absolute requirement for v alidity. Perspectives

at 18. Some states, however, require that each party

have the opportunity

to consult with legal counsel of his or her own choice, but do not require actual consul tation for the agreement to be upheld. See , e.g. , Gant , 329 S.E.2d at 116. Finally, some states hold that the presence or absence of independent couns el is just another factor to be considered when determini ng if the agreement was ent ered into knowledgeably

. Perspectives

at 22; see , e.g. , Ex Parte Walters , 580 So. 2d 1352, 1354 (Ala. 1991); Matter of Benker‘s Estate , 331 N.W.2d 193, 198 (Mich. 1982). It is in this last category that Tenness ee is found. Kahn , 756 S.W.2d at 695.

Applying the foregoing

rules to the facts of this case,it is clear that the husband failed to prove the existence of a valid agreement. The re is no claim in this case that full and fair dis closure was provi ded to the wife. Instead, the-15- husband claimed that the wife had ful l knowledge of the nature, extent, and value of his holdings at the time she signed the agr eement. The record, however, does not suppor t that claim. Although the w ife resided with the husband for about a year before their marriage, he did not at any time reveal to her the extent or value of his holdings. She was aware only of the nature of his business -- that he conducted a real estate business. Although their relation ship was of a fair duration, she testified that she had on ly general knowledge of his holdings. Her testimony was corroborated by

her husband and his attorney

. From the record it appears the only business of which she had specific knowledge was a l osing concern. Though specific appraisal values a re not required to sustain the v alidity of an antenuptial ag reement, knowledge of the propone nt spous e’s overal l net worth is necess ary. In term s of the c omparat ive sophistication and business experience of the parties, the record clearly s upports the trial court’s conclusion that “Mr. Randolph was a learned businessman very shrewd in his dealings.” The wife, in contrast, possessed no prior business experience or knowl edge. Moreover, the ag reement at issue was ex ecuted one day before the parties wer e married. The wife was presented with the agreement on the way to the attorney’s office, at a time when she was in ill health. She had no opportunity to personally study the agreement or to seek advice from her own attorney or others close to her.

As we emphasized in Kahn , supra , consultation with in dependent counsel is not required and is merely one factor relev ant to the assessment of knowledge, and to the extent the trial court’s decision can be read to require such consultation, it is not approved. We have analyzed the r ecord applying the foregoing rules and conclude that the evidence does not prepon derate against-16- the trial court’s finding

that Virginia Randolph did not enter into the agreement knowledgeably. Ac

cordingly, the antenupti al agreement is unenforceable.

CONCLUSION Because we conclude that the evidence does not preponderat e against the trial court's finding

that Virginia Randolph did not knowledgeably enter into this antenuptial agreement, th e Court of Appeals’ judgment i s reversed. The judgment of the trial court i s reinstated and this cause is remanded for further proceedings consistent w ith this decision, incl uding assessment of attorney fees on appeal. Costs of this appeal ar e taxed to the plaintiff, C.L. R andolph, for which execution may

issue if necessary.

_______________________________ RILEY ANDERSON, JUSTICE

CONCUR: Birch, C.J. Drowota, Reid, and White, JJ.