Opinion ID: 1966550
Heading Depth: 1
Heading Rank: 4

Heading: Antenuptial Agreements Specifically

Text: In Levy v. Sherman, 185 Md. 63, 73-74, 43 A.2d 25, 31-32 (1945), we extended our analysis of antenuptial agreements beyond traditional contract analysis when we held invalid an antenuptial agreement because the party seeking to enforce the agreement failed to meet the ultimate burden of proof fixed by the existence of a confidential relationship between the parties. We stated that, when evaluating such disputes, an antenuptial contract is entered into in contemplation of marriage, whether the parties are engaged to marry at the time or not, it is required of each to make a frank, full, and truthful disclosure of their respective worth in real as well as personal property. [8] Id. at 73, 43 A.2d at 29 (emphasis added). We acknowledged that a confidential relationship existed as a matter of law between a man and a woman in contemplation of an antenuptial agreement where marriage was its consideration. Without disclosure by each party and where the allowance provided in the agreement is unfairly disproportionate to the worth at the time [of execution of the contract], the concealment gives rise to the implication of fraud, and the burden of proof is cast on those claiming under it when the instrument is attacked, to show that it was entered freely, voluntarily, and knowingly and that each was given the opportunity to obtain independent legal advice. Id. at 73-74, 43 A.2d at 29. The consequence of the existence of a confidential relationship was twofold. First, the burden of proof was allocated to the party seeking to enforce the agreement, regardless of gender, as a means to prevent fraud. Second, a party seeking to enforce an antenuptial agreement in reliance on the objective contract interpretation theory came to court with its quiver of litigious arrows half-empty unless it was prepared to meet its assigned burden of proof. For example, after placing the burden of proof on the estate of Mr. Levy (which sought to enforce the agreement), the court held that there was nothing to show that a full disclosure of Levy's worth was made to appellant at the time, nor that she was advised of the rights she would acquire in Levy's properties upon marriage, and there is a total want of evidence to show that she had the benefit of independent legal advice. Id. at 78, 43 A.2d at 31-32. After Levy, we infrequently considered the issue of the validity of antenuptial agreements. Frey v. Frey, 298 Md. 552, 471 A.2d 705 (1984); Hartz v. Hartz, 248 Md. 47, 234 A.2d 865 (1967); Cohn v. Cohn, 209 Md. 470, 121 A.2d 704 (1956) (holding invalid a provision in an antenuptial agreement that waived a spouse's right to alimony void, as a matter of law, because it violated public policy in favor of preserving marriage), overruled by Frey v. Frey, 298 Md. 552, 563, 471 A.2d 705, 710 (1984); Ortel v. Gettig, 207 Md. 594, 116 A.2d 145 (1955). In Ortel, we evaluated the evidence to enforce an antenuptial agreement and determined it to be insufficient to support the validity of the agreement. We observed that all antenuptial agreements, even those entered into for convenience, were made between two parties involved in a confidential relationship and that each had the responsibility to the other to make a disclosure of their respective assets. Ortel, 207 Md. at 608-10, 116 A.2d at 152. Neither Mr. Gettig nor the eventual Mrs. Gettig made a full disclosure of his or her net worth as of the time the antenuptial agreement was executed, even though he held a minimum of $75,000 and she $10,000 in assets. Because the estate of Mr. Gettig sought to enforce the antenuptial agreement, the burden of proof was placed on the estate to show that a disclosure of Mr. Gettig's assets was made prior to Mrs. Gettig's waiver of property rights in Mr. Gettig's estate in the antenuptial agreement. After noting that Mr. Gettig provided less than a full disclosure of his assets at the time the antenuptial agreement was signed, we explained, [t]he appellant seeks to supply the lack of such proof by attempting to show that the appellee knew what his worth was. She did have, as she testified, knowledge of the fact that the husband had an electrical business and supposed that he owned the business properties and two lots improved by three houses in a waterfront neighborhood in Baltimore County, one of which houses, at least, was quite a substantial building. We find nothing to show that she knew the actual value of the electrical business or of any of the real estate, or what if anything he owned, or what intangible property he may have owned. Such indefinite knowledge or information falls far short of actual knowledge of his worth. Id. at 612, 116 A.2d at 153. Thus, Mrs. Gettig, who signed the antenuptial agreement the night it was presented to her and without the benefit of prior discussion or the reasonable opportunity to seek independent legal advice, received neither a full and fair disclosure of Mr. Gettig's assets nor possessed knowledge of their worth before entering the agreement. We revisited the subject of antenuptial agreements in Hartz v. Hartz , holding that overreaching was the correct yardstick for measuring their validity. Hartz, 248 Md. at 57, 234 A.2d at 871. Mrs. Hartz sought to invalidate an antenuptial agreement that barred her right to the property and estate of her deceased husband. Id. at 49, 234 A.2d at 866. The agreement recited that Mrs. Hartz had `full knowledge' of the `extent and probable value'... of Mr. Hartz's assets; yet, the trial court held that the disclosure was not full and frank without a disclosure of the value of Mr. Hartz's estate and subsequently invalidated the agreement. Id. at 54-55, 234 A.2d at 869. At the time of the agreement, both Mr. and Mrs. Hartz held real property in excess of $160,000, and, although neither side divulged the exact worth of their respective assets, both sides had estates of substance that each wished to protect for the benefit of their respective blood heirs as existed prior to the pending marriage. [9] Id. at 51-54, 234 A.2d at 867-69. We explained that the trial court's analysis, which relied solely upon the lack of full and frank disclosure of the nature and value of the assets of Mr. Hartz (the party seeking to enforce the agreement), was incomplete. Id. at 55, 234 A.2d at 869-70. The real test in a determination of the validity of an antenuptial agreement is whether there was overreaching, that is, whether in the atmosphere and environment of the confidential relationship there was unfairness or inequity in the result of the agreement or in its procurement. Id. at 57, 234 A.2d at 871 (emphasis added). While we did not require a trial court to incant these words in its analysis as magic words or recite a particular mantra in determining the validity of an antenuptial agreement, we made clear that a court must come to some conclusion about the unfairness or inequity of the agreement at the time it was entered and if an overreaching had occurred. We also provided guidance, as a roadmap for practitioners and the courts of our State, for how to evaluate the validity of antenuptial agreements under this overreaching standard. After recognizing the importance of the confidential relationship that existed between the parties, which compelled the party seeking to enforce the agreement to shoulder the ultimate burden of proof, we reiterated that this confidential relationship calls for frank, full and truthful disclosure of the worth of the property, real and personal, as to which there is a waiver of rights in whole or in part, so that he or she who waives can know what it is he or she is waiving. Id. at 56-57, 234 A.2d at 870-71 (footnote omitted). [A]dequate knowledge [by the spouse attacking the validity of the agreement] of that frank, full and truthful disclosure would reveal ... could serve as a substitute for a less-than-complete disclosure at the time the agreement was entered. Id. at 57, 234 A.2d at 871. In addition to the duties imposed by a confidential relationship to make a frank, full, and truthful disclosure (or prove knowledge) and to evince that the allowance made to the party waiving his or her rights was not unfairly disproportionate, the enforcing party was expected to prove that the antenuptial agreement was entered into voluntarily, freely and with full knowledge of its meaning and effect. [10] Id. If an inadequate disclosure and an unfairly disproportionate allocation existed, the validity of the agreement must be tested by other standards  that is, was the benefit to the wife [the party attacking the agreement] commensurate with that which she relinquished so that the agreement was fair and equitable under the circumstances  and did the subsequent would-be repudiator of the contract enter into the agreement freely and understandingly. Id. at 58, 234 A.2d at 871-72. We further explained that it was possible the party seeking to enforce the agreement could meet this burden even if he or she did not make a proper disclosure or that the opposing party lacked precise knowledge of the rights it was waiving. Id. at 58, 234 A.2d at 872 (citing Lindey, Separation Agreements & Ante-nuptial Contracts, § 90-44). In Hartz, we held that [t]he record demonstrates that there was no fraud, actual or implied, no overreaching, no unfairness and no pressure leading to the execution of the agreement. Id. at 60, 234 A.2d at 872. Mrs. Hartz had at least an approximately definite knowledge of the value of the property as to which of those rights were being released ..., and that level of knowledge was sufficient to support the validity of the antenuptial agreement. [11] Id. at 63, 234 A.2d at 874. She conceded that she signed the agreement freely and voluntarily; indeed, she would have been hard-pressed to state otherwise because the agreement was proposed by her and initially drafted by her attorney. We concluded by stating, [i]n summary, we think that the record shows that the agreement was entered into freely and voluntarily, with full understanding of the rights being waived and with at least an approximately definite knowledge of the value of the property as to which of those rights were being released and that the results of the agreements were fair and equitable under the circumstances. Mrs. Hartz is bound by the agreement. Id. at 63, 234 A.2d at 874 (citations omitted). In Frey v. Frey , we considered an argument that a bar against antenuptial agreements made in anticipation of divorce violated Maryland public policy protecting the institution of marriage. 298 Md. at 560, 471 A.2d at 709. We found no public policy existed as such in light of the evolution of statutory no-fault divorces and the 1978 Marital Property Act which allowed parties to agree what property is not to be considered marital property or family use personal property and thus control the distribution of property upon divorce. Id. at 562, 471 A.2d at 710 (citing Md.Code (1974, 1980 Repl. Vol.), Courts & Judicial Proceedings Article, § 3-6A-01(c), (e)). Until Frey, only those antenuptial agreements that disposed of rights and property upon death of the spouse were valid; any agreement, regardless of the parties' consent, that contemplated a waiver of rights or property upon divorce was void. See Cohn v. Cohn, 209 Md. 470, 121 A.2d 704 (1956). We further explained that [a]ll such antenuptial agreements, therefore, are to be evaluated upon the factors indicated in Hartz v. Hartz, 248 Md. 47, 234 A.2d 865 (1967). Frey, 298 Md. at 563, 471 A.2d at 711. Although the underlying agreement in Frey was not properly before us for substantive analysis because the trial court failed to evaluate the antenuptial agreement beyond ruling it to be void as a matter of public policy, we reiterated, for the benefit of the trial court on remand, the key elements of Hartz. After summarizing these elements, we stated again that the real test of an antenuptial agreement was whether overreaching in the atmosphere and environment of the confidential relationship had occurred. Id. at 564, 471 A.2d at 711 (quoting Hartz, 248 Md. at 57, 234 A.2d at 871). After our decision in Frey, analysis of the validity per se of antenuptial agreements has been undertaken only by the intermediate appellate court. This has drawn some scrutiny from legal commentators. [12] See John F. Fader, II & Richard J. Gilbert, Maryland Family Law 14-5 (3rd. ed. 1990) (stating Now what does all of this mean? There is not much help in answering this question from the appellate courts in Maryland. They have not had the opportunity to clarify issues because there has been little litigation in the area.). In Martin v. Farber, 68 Md.App. 137, 510 A.2d 608 (1986), the Court of Special Appeals held that an otherwise valid antenuptial agreement could be challenged nonetheless as unconscionable; unconscionability to be analyzed in the context as of the time the agreement was entered. In 1939, Mr. Farber entered an antenuptial agreement with his affianced bride three days before the wedding, waiving his right to all the property that she acquired prior to, or would acquire during, the marriage. [13] Id. at 139, 510 A.2d at 608-609. The trial court determined that the agreement was valid on its face; yet, it would not enforce the agreement because it would be unconscionable to do so. Id. at 143, 510 A.2d at 611. The trial court determined that the result of the antenuptial agreement forty-four years later would leave approximately $275,000 in assets, titled in Mrs. Farber's name and partly acquired from Mr. Farber's wages during the marriage, to Mrs. Farber's grandchildren from her first marriage. Id. at 139-40, 510 A.2d at 609. Mr. Farber would be left without a share of her intestate estate. Id. at 140, 510 A.2d at 609. The Court of Special Appeals examined the evidence as it existed at the time the agreement was executed. It reversed the trial court, explaining that, at the time the agreement was executed, [n]othing in the Farbers' antenuptial agreement or in the circumstances surrounding its execution renders it unconscionable or otherwise legally objectionable. Id. at 144, 510 A.2d at 611. The intermediate court held that the trial court misapplied the doctrine of unconscionability when it examined the consequences of the contract forty-four years after its execution. In Herget v. Herget , the Court of Special Appeals held valid an antenuptial agreement. 77 Md.App. 268, 550 A.2d 382 (1988), rev'd on other grounds, 319 Md. 466, 573 A.2d 798 (1990). [14] Mr. Herget, who sought to enforce the antenuptial agreement, and Mrs. Herget attached a purportedly full disclosure of their assets and worth to the antenuptial agreement. [15] The agreement, forwarded to the Herget's as a draft on 12 September 1973 and signed on 27 September 1973, included a waiver of alimony and a surrender of all marital claims by Mrs. Herget to Mr. Herget's property. Id. at 272-73, 550 A.2d at 384. While Mrs. Herget did not seek independent counsel before signing the agreement, which she claimed she did not read, Mr. Herget's attorney had suggested by letter that she seek independent legal advice before signing the agreement. Id. Mrs. Herget challenged the validity of the agreement, claiming that the trial court committed clear error in concluding otherwise. After reciting the Hartz overreaching in the atmosphere and environment of a confidential relationship test, the intermediate appellate court disagreed with Mrs. Herget and explained that the trial court had concluded correctly that the agreement was fair and equitable. It determined there was substantial evidence that Mrs. Herget had `entered [the agreement] voluntarily, freely and with full knowledge of its meaning and effect' as required by Hartz.  Id. at 277, 550 A.2d at 386. Mrs. Herget understood the full meaning and effect of a waiver of alimony because she had executed, and abided by, a similar waiver in a 1970 separation agreement from her first husband. She also evinced an understanding of other portions of the agreement at hand when she apportioned the proceeds of the sale of the marital home in accordance with their respective cash contributions as stated in the antenuptial agreement. Lastly, although she was only a high school graduate, Mrs. Herget was found by both courts to be an intelligent, sophisticated person on par with Mr. Herget, who held a bachelor's degree and was a successful businessman. Id. at 278, 550 A.2d at 386. The Court of Special Appeals did not mention in its analysis any confidential relationship that may have existed between the parties. In Harbom v. Harbom, Judge Arrie Davis of the Court of Special Appeals again affirmed a trial court's finding of the validity of an antenuptial agreement. 134 Md.App. 430, 438, 760 A.2d 272, 276 (2000). Mr. Harbom's father founded a plastics company, acquired investment accounts and real property, and was the holder of several loans. In 1962, the father gave these assets to Mr. Harbom, subject to the condition that they remain solely his separate property if he ever married. On 31 March 1986, Mr. Harbom and his soon-to-be wife entered into an antenuptial agreement negotiated by their respective parents. The agreement provided that both parties waived any right to the other's premarital property or any proceeds traceable to their respective premarital property. Id. Mrs. Harbom's father, a Harvard-trained tax attorney, negotiated the terms of the antenuptial agreement as early as 3 January 1986, as evidenced by a letter sent by Mr. Harbom's father that acknowledged that the proposed antenuptial agreement would not waive Mrs. Harbom's right to the marital home and retitle Mr. Harbom's premarital home in both of their names as tenants by the entirety. Id. at 447, 448, 760 A.2d at 280, 281. The agreement did not disclose expressly the value of the listed assets. Id. at 449, 760 A.2d at 282. Mrs. Harbom challenged the validity of the agreement, claiming that a full disclosure did not occur because Mr. Harbom had not disclosed the assets' values. The Court of Special Appeals explained that the disclosure need not be a drastically sweeping one and the wife need not know the husband's exact means so long as she has a general idea of his property and resources. [16] Id. at 449, 760 A.2d at 282 (citing Lindey, Separation Agreements and Antenuptial Contract, § 90-44). Even without a full, frank, and truthful disclosure, the enforcing party yet may satisfy his or her burden to show that the antenuptial agreement meets the overarching overreaching standard. The intermediate appellate court determined that the parents' discussions and negotiations about the assets referred to in the antenuptial agreement amply supported the trial court's conclusion that Mrs. Harbom had actual knowledge of every fact regarding [Mr. Harbom's] assets and income that she was interested in or sought to discover and that she was relinquishing any claim to these assets. Id. at 449, 760 A.2d at 282. Furthermore, even if Mr. Harbom's disclosure was not full and Mrs. Harbom's knowledge insufficient to be considered actual knowledge of the value of the assets, Mr. Harbom met his burden to prove that the agreement was not an overreaching one and that Mrs. Harbom entered the agreement voluntarily, freely and with full knowledge of its meaning and effect and that there was no overreaching. Id. at 450, 760 A.2d at 282. The Court of Special Appeals held correctly that she was given every opportunity to negotiate, or draft a different proposed antenuptial agreement if the agreement was not acceptable to her. Id. at 450, 760 A.2d at 282-83.