Opinion ID: 895787
Heading Depth: 1
Heading Rank: 4

Heading: Premarital Agreements

Text: [¶ 23] In her premarital agreements with Emanuel, Lavilla waived any share of his estate except as provided in his will, including waiver of all rights of ... homestead, inheritance, succession, surviving spouse or family allowance, [and] exempt property. NDCC 30.1-05-04 [1] authorized such waivers: The right of election of a surviving spouse and the rights of the surviving spouse to homestead allowance, exempt property and family allowance, or any of them, may be waived, wholly or partially, before or after marriage, by a written contract, agreement, or waiver signed by the party waiving after fair disclosure. Unless it provides to the contrary, a waiver of all rights or equivalent language in the property or estate of a ... prospective spouse... is a waiver of all rights to elective share, homestead allowance, exempt property, and family allowance by each spouse in the property of the other and a renunciation... of all benefits which would otherwise pass to him from the other by intestate succession or by virtue of the provisions of any will executed before the waiver .... (our emphasis). This statute begins the analysis, but other statutes affect it, too. [¶ 24] In the trial court, Emanuel's children argued for summary judgment because Lavilla had read a written disclosure of his $280,000 in assets before she signed the premarital agreements so she had received fair and reasonable disclosure as a matter of law. Lavilla relies on the overlapping provisions of the Uniform Premarital Agreement Act, NDCC ch. 14-03.1, to assert that her premarital agreements were unenforceable and unconscionable. [¶ 25] The Uniform Premarital Agreement Act, enacted in 1985, see 1985 N.D. Laws ch. 190, authorizes prospective spouses to contract the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located, the disposition of property upon ... death, or the occurrence or nonoccurrence of any other event, and the making of a will ... or other arrangement to carry out the provisions of the agreement. NDCC 14-03.1-03(a), (c), (e). A premarital agreement becomes effective upon marriage, NDCC 14-03.1-04, but several other parts of this Act affect the enforceability of a premarital agreement. [¶ 26] Emanuel's children emphasize parts of NDCC 14-03.1-06: Enforcement. 1. A premarital agreement is not enforceable if the party against whom enforcement is sought proves that: a. That party did not execute the agreement voluntarily; or b. The agreement was unconscionable when it was executed and, before execution of the agreement, that party: (1) Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party; (2) Did not voluntarily sign a document expressly waiving any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and (3) Did not have notice of the property or financial obligations of the other party. 2. If a provision of a premarital agreement modifies or eliminates spousal support and that modification or elimination causes one party to the agreement to be eligible for support under a program of public assistance at the time of separation or marital dissolution, a court, notwithstanding the terms of the agreement, may require the other party to provide support to the extent necessary to avoid that eligibility. 3. An issue of unconscionability of a premarital agreement is for decision by the court as a matter of law. Lavilla argues, [b]ecause of Lavilla's lack of independent representation ..., [her] signing of the premarital agreement[s] cannot be deemed voluntary and is also unconscionable as a matter of law under NDCC 14-03.1-06(3). Lavilla also stresses another section in the Act, one not derived from the Uniform Act, but unique to North Dakota's version: Enforcement of unconscionable provisions. Notwithstanding the other provisions of this chapter, if a court finds that the enforcement of a premarital agreement would be clearly unconscionable, the court may refuse to enforce the agreement, enforce the remainder of the agreement without the unconscionable provisions, or limit the application of an unconscionable provision to avoid an unconscionable result. NDCC 14-03.1-07. Lavilla contends [t]he latter section overrides the former section regarding the issue and application of unconscionability, and insists the trial court should not have summarily concluded these premarital agreements were enforceable. [¶ 27] Because enforceability of premarital agreements is a matter of first impression in North Dakota, Lavilla suggests we use the dual analysis often employed to evaluate commercial contracts for unconscionability: Procedural Unconscionability, focusing on unfair surprise, oppression, and inequality of bargaining power; and Substantive Unconscionability, focusing upon the harshness of the contract. See Construction Associates, Inc. v. Fargo Water Equip. Co., 446 N.W.2d 237, 241 (N.D.1989); In re Marriage of Spiegel, 553 N.W.2d 309, 316 (Iowa 1996). Lavilla urges that these premarital agreements are unenforceable under both the procedural and substantive standards of NDCC 14-03.1-07, because there was something wrong with the bargaining process and the agreement has terms that are unconscionable.
[¶ 28] Lavilla contends these agreements were procedurally defective because she lacked independent counsel and because Emanuel induced her to sign it by falsely promising to take care of her anyway. Lavilla argues she could not have signed voluntarily unless she understood her rights fully, and that depends on whether she had been adequately represented by an attorney. Emanuel's failure to keep his anyway promise in a relationship of mutual trust and confidence where he benefited disproportionately, Lavilla contends, was constructive fraud that should prevent enforcement of these agreements. [¶ 29] Emanuel's children contend Lavilla had plenty of time to consult independent counsel between May 1987 when attorney Tschider sent out the prepared documents and February 1988 when they signed them. The children point out that Lavilla testified in her deposition that, during this time, she did not seek independent counsel nor consult with another attorney about the documents. The children summarized Lavilla's deposition testimony: (1) she read the marriage agreement before signing; (2) she understood the effect of the documents; (3) she was asked if she understood the documents by Morris Tschider; (4) she was asked if she had any questions by Morris Tschider; (5) she didn't ask any questions; (6) she was asked if she wanted to sign the document; and (7) she signed the document. The children dispute Lavilla's deposition testimony that Tschider did not advise her to seek separate counsel with Tschider's deposition testimony that he advised Lavilla that he could not represent her on the premarital agreement and consent to will and that she should obtain separate counsel. The children concede, however, that for summary judgment, Lavilla's version of these facts [is] assumed to be true. [¶ 30] A premarital agreement is not enforceable if the disadvantaged spouse did not execute it voluntarily. NDCC 14-03.1-06(1) directs: A premarital agreement is not enforceable if the party against whom enforcement is sought proves that ... [t]hat party did not execute the agreement voluntarily. In holding this premarital agreement was voluntary and valid as a matter of law, the trial court reasoned: Other than the inferences which [Lavilla] contends resulted from statements made by [Emanuel] prior to his death regarding `taking care of her,' the record is devoid of any basis on which to conclude that the premarital agreements of the parties should be cast aside. We disagree. The trial court failed to recognize the factual dispute about whether Lavilla was adequately advised to obtain independent counsel. [¶ 31] Although we have never decided whether a premarital agreement can be avoided for lack of counsel, several other states have. No state makes independent counsel an absolute requirement for validity. Randolph v. Randolph, 937 S.W.2d 815, 822 (Tenn.1996). Some states require at least an opportunity to consult with independent counsel, but do not require actual consultation. McKee-Johnson v. Johnson, 444 N.W.2d 259, 266 (Minn.1989); Gant v. Gant, 174 W.Va. 740, 329 S.E.2d 106, 116 (1985). Many states, however, treat the absence or presence of independent legal counsel as a factual factor in assessing the voluntariness of a premarital agreement. Ex Parte Walters, 580 So.2d 1352, 1354 (Ala.1991); McHugh v. McHugh, 181 Conn. 482, 436 A.2d 8, 12 (1980); Matter of Estate of Benker, 416 Mich. 681, 331 N.W.2d 193, 199-200 (1982); Fletcher v. Fletcher, 68 Ohio St.3d 464, 628 N.E.2d 1343, 1348 (1994); Randolph, 937 S.W.2d at 822; Matter of Marriage of Matson, 107 Wash.2d 479, 730 P.2d 668, 671 (1986); Button v. Button, 131 Wis.2d 84, 388 N.W.2d 546, 550-51 (1986); see generally Robert Roy, Annotation, Enforceability of Premarital Agreements Governing Support or Property Rights Upon Divorce or Separation as Affected by Circumstances Surrounding ExecutionModern Status, 53 A.L.R.4th 85 (1987 & Supp.1996). Kahn v. Kahn, 756 S.W.2d 685, 695 (Tenn.1988), said it clearly: We hold that whether or not a wife should be explicitly advised about what she is giving up or should be urged and given full opportunity to seek independent counsel is a factual issue, in that it may be required in some circumstances and not in others. [¶ 32] Lack of opportunity to consult independent counsel may be a factor in a fiduciary relationship. A fiduciary relationship is something approximating business agency, professional relationship, or family tie impelling or inducing the trusting party to relax the care and vigilance ... ordinarily exercise[d]. Asleson v. West Branch Land Co., 311 N.W.2d 533, 539 (N.D.1981) (quoting 37 C.J.S. Fraud § 2, p. 213 (1943)). A fiduciary relationship develops when someone is under a duty to act for, or to give advice to, another person upon matters within the scope of the relationship. Restatement (Second) of Torts § 874, cmt. a (1979). A fiduciary relationship generally arises from an unequal relationship between the parties. Compare Land Office Co. v. Clapp-Thomssen Co., 442 N.W.2d 401, 406 (N.D.1989) (fiduciary relationship ordinarily does not exist when business persons deal at arm's length). For a fiduciary relationship, the superior party must have a duty to act in the dependent party's best interest. As Production Credit Ass'n v. Ista, 451 N.W.2d 118, 121 (N.D.1990), explained, whether a fiduciary relationship exists is generally a question of fact. [¶ 33] An agreement to marry can create a fiduciary relationship between individuals if they do not deal at arms length. Persons contracting about marriage are sometimes mismatched in bargaining power and sophistication. See Weber v. Weber, 548 N.W.2d 781, 783 (N.D.1996) (Property settlement agreements in divorce cases must be scrutinized for unconscionability. The review for unconscionability is not ended by finding a lack of a trust relationship between the parties.); Crawford v. Crawford, 524 N.W.2d 833, 836 (N.D.1994) (Marriage involves a confidential relationship, and the law should not permit one marital partner to take `unconscientious advantage' over the other through the trust which is part of that relationship.); Syllabus by the Court in Barker v. Barker, 75 N.D. 253, 27 N.W.2d 576, 577 (1947): Ordinarily, and presumptively, a confidential relation exists between husband and wife, and generally business transactions between them will be deemed to be within the rule of confidential relations. [¶ 34] Unlike many private contracts, the state has an interest in every marriage contract. We agree with the view that lack of adequate legal advice to a prospective spouse to obtain independent counsel is a significant factual factor in weighing the voluntariness of a premarital agreement. [¶ 35] Indeed, adequate legal representation will often be the best evidence that a spouse signed a premarital agreement knowledgeably and voluntarily. Here, the evidence conflicts on whether Tschider actually advised Lavilla to obtain independent counsel. [2] Tschider testified he did. Lavilla, however, disputes this and testified she believed Tschider was her attorney and relied on him as an advisor. [3] Her belief is understandable since Tschider also prepared her will. [4] Whether Tschider adequately advised Lavilla about his potential conflict of interest, her need to have independent counsel, and the effect of her consent to his dual representation are disputed material facts that preclude summary judgment. [¶ 36] Emanuel's children contest Lavilla's claim of his constructive fraud for failing to fulfill his oral promise to take care of her anyway. Any amendment to a premarital agreement must be in writing, they argue, citing NDCC 9-06-07 (a written agreement supersedes any oral negotiations), and NDCC 14-03.1-05 (a premarital agreement may only be amended or revoked by a signed written agreement). They argue, if an intent to deceive is absent, a promise to do something in the future cannot be considered fraud. Urging that Lavilla does not allege that Emanuel made any misrepresentations about past or existing facts, Emanuel's children contend he did not mislead Lavilla by promising to take care of Lavilla outside of the marital agreement and then failing to do so. [¶ 37] However, parol or extrinsic evidence can be used to show that a contract has no effect because of fraud, illegality, or mistake, or to show that the contract was only partially integrated because essential elements were not reduced to writing. Mau v. Schwan, 460 N.W.2d 131, 134 (N.D.1990). The factual circumstances of an unfulfilled oral promise would be additional evidence on the voluntariness of the premarital agreements, and leaves an additional factual dispute for trial. See NDCC 9-03-08(2)(fraud by a contracting party who makes a positive assertion, in a manner not warranted by the information of the person making it, of that which is not true though he believes it to be true to induce another to enter into the contract); Barker, 27 N.W.2d 576 (husband abused confidential relation with spouse by secretly acquiring title to home in his name alone); Bourgois v. Montana-Dakota Utilities Co., 466 N.W.2d 813, 818 (N.D.1991)(recognizing a statutory claim for relief based on negligent misrepresentation). [¶ 38] We reverse the summary judgment and remand for trial of the factual questions on the voluntariness and enforceability of these premarital agreements.
[¶ 39] Even if a premarital agreement has been validly and voluntarily obtained, its substantive effect may be unconscionable and thus unenforceable. Under NDCC 14-03.1-06(3), the substantive enforceability of these premarital agreements is a matter of law to be decided by the court. [¶ 40] Lavilla contends these premarital agreements were substantively unconscionable for their harshness and one-sidedness. Lavilla values the decreed distribution to her of the right of occupancy of residence-main floor unit[ ] of the duplex at $30,000, the household goods at $3,000, their joint bank account at $2,000, and the auto at $400, for a total of $35,400. Lavilla compares her estimated $35,400 distribution to the $280,000 in assets Emanuel disclosed to her in 1987. Lavilla contends this is less than 13% of Emanuel's estate and is certainly a low percentage based on the length of marriage and time that Lavilla committed to the marriage in caring for Emanuel and providing companionship. Lavilla thus argues the trial court should have declined to enforce the premarital agreements because they will violate public policy by allowing Emanuel's heirs to take an estate worth approximately $300,000 (or larger because of appreciated value) and leave Lavilla with only a life estate in the home, household belongings, a small bank account and a used car. [¶ 41] Emanuel's children question the $30,000 value Lavilla places on her lifetime occupancy of the residence-main floor unit[], but we observe it was not separately evaluated in the filed inventory and appraisement, nor was the value determined by the trial court. Anyway, the children insist, a court need not determine the appropriate values to determine whether this agreement is unconscionable as a matter of law. The children say that Lavilla and Emanuel were only married for six years at the time of his death and ... after Emanuel had acquired all the assets that are the subject of this estate, and that Lavilla knew that it was a condition of their marriage for his property to go to his children and grandchildren. [¶ 42] Lavilla mainly contends her outlined financial circumstances will force her onto public assistance. NDCC 14-03.1-06(2) authorizes, [i]f ... a premarital agreement modifies or eliminates spousal support and that modification ... causes one party ... to be eligible for support under a program of public assistance at the time of separation or marital dissolution, a court, notwithstanding... the agreement, may require the other party to provide support to the extent necessary to avoid that eligibility. [5] Without any conflicting evidence, Lavilla's affidavit would permit an inference of her need for public assistance in the near future. [¶ 43] Lavilla's affidavit said, based upon the reduced amount of my social security and lack of other substantial assets received from Emanuel[] Lutz's estate, I expect to soon have to seek some type of public assistance. The children did not submit any affidavit or other evidence to dispute Lavilla's, but simply argue here that NDCC 14-03.1-06(2) does not apply because [t]his subsection only applies if a party to a premarital agreement is eligible for public assistance `at the time of separation or marital dissolution,' and [t]here is no reference in this section to death. [¶ 44] However, the Prefatory Note to the Uniform Premarital Agreement Act, the identically worded source of NDCC 14-03.1-06(2) explains: [I]f a provision of a premarital agreement modifies or eliminates spousal support, and that modification or elimination would cause a [spouse] to be eligible for support under a program of public assistance at the time of separation, marital dissolution, or death, a court is authorized to order the other party to provide support to the extent necessary to avoid that eligibility. 9B U.L.A. 370 (1987)(our emphasis). In view of her undisputed affidavit, whether Lavilla's financial circumstances will actually make her eligible for public assistance is a factual inquiry that precludes summary judgment in this case. While unconscionability of a premarital agreement is a matter of law to be decided by the court, NDCC 14-03.1-06(3), a conclusion of unconscionability necessarily turns on factual findings about the relative property values, Lavilla's other financial circumstances, and her ongoing needs. [¶ 45] Also, [n]otwithstanding the other provisions of NDCC ch. 14-03.1, if the trial court finds that the enforcement of [these] premarital agreement[s] would be clearly unconscionable, the trial court may refuse to enforce the agreement[s], enforce the remainder of the agreement[s] without the unconscionable provisions, or limit the application of an unconscionable provision to avoid an unconscionable result. NDCC 14-03.1-07. This additional standard for when premarital agreements are clearly unconscionable, supplements the standards in NDCC 14-03.1-06 and, together, they require complete factual findings about the relative property values, Lavilla's other resources, and her foreseeable needs. [¶ 46] We remand for trial of whether Lavilla procedurally executed these premarital agreements voluntarily and whether they are unconscionable in their substantive application to her.