Court Opinion

ID: 2782346
Source: CourtListenerOpinion
Date Created: 2015-02-26 16:04:11.293069+00
Date Added: 2024-06-11T11:01:58.838619
License: Public Domain

Feb 26 2015, 9:00 am

ATTORNEY FOR APPELLANT                                     ATTORNEY FOR APPELLEE
Chris M. Teagle                                            Dale W. Arnett
Muncie, Indiana                                            Winchester, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Julie M. Fetters,                                         February 26, 2015

Appellant-Petitioner,                                     Court of Appeals Cause No.
                                                          68A01-1404-DR-167
        v.                                                Appeal from the Randolph Superior
                                                          Court
                                                          Cause No. 68D01-1111-DR-1230
Jay M. Fetters,
Appellee-Respondent.                                      The Honorable Peter D. Haviza,
                                                          Judge

Barnes, Judge.

Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015                Page 1 of 12
                                              Case Summary
[1]   Julie Fetters appeals the trial court’s division of property in her divorce from

      Jay Fetters, following its decision to enforce a premarital agreement into which

      the parties entered. We reverse and remand.

                                                       Issue
[2]   The restated issue before us is whether the premarital agreement is

      unconscionable.

                                                      Facts
[3]   Julie and Jay began having a sexual relationship in 1994, when Julie was

      fourteen years old and Jay was twenty-nine. Jay was a school janitor at the

      time, but Julie did not go to his school. In the summer of 1995, when Julie was

      fifteen, she became pregnant by Jay, who was then thirty. Police began

      investigating Jay for sexual misconduct with a minor. Jay believed he could

      avoid prosecution if he married Julie, and Julie agreed to do so.

[4]   Before getting married, Jay asked Julie, who had just turned sixteen, to sign a

      premarital agreement prepared by his attorney. Among other things, the

      agreement provided that each party would retain their own separate property in

      the event of divorce. Julie went to Jay’s attorney’s office with her mother,

      where Jay’s attorney went over the document with her. Despite not being able

      to read very well and not understanding the agreement, Julie agreed to sign it;

      Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 2 of 12
      her mother also signed it. Julie did not have an attorney of her own review the

      document. Jay was never prosecuted for his relationship with Julie.

[5]   Julie dropped out of school when she got married, and she had the couple’s first

      child in the spring of 1996. The couple had a second child in 2003. Julie never

      obtained her GED and worked in various low-wage jobs during about half the

      marriage and exclusively cared for the children during the other half. In 2011,

      Julie filed a petition for dissolution of the marriage. She sought to disavow the

      premarital agreement and have it declared void by the trial court.

[6]   Jay has continued working as janitor, earning approximately $590 per week and

      accumulating a PERF pension worth approximately $38,000. Julie works as a

      nurses’ aide, earning approximately $9.85 per hour and working fifteen to

      thirty-five hours per week, and has no retirement plan. During the marriage,

      the couple lived in a home Jay had acquired before marriage and which had a

      value at the time of separation of $62,000. Julie, who owned no property at the

      time of the marriage, had acquired two vehicles in her name during it worth a

      total of $13,900; Jay owned two vehicles and one motorcycle in his own name,

      worth a total of $8,500.

[7]   The trial court denied Julie’s request to invalidate the premarital agreement.

      Thus, in accordance with the agreement, it entered a final dissolution decree

      awarding the full value of the marital residence and Jay’s PERF pension to

      him, along with his vehicles, while awarding Julie her own vehicles. Julie now

      appeals.

      Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 3 of 12
                                                    Analysis
[8]   The trial court here entered findings and conclusions to accompany its

      dissolution decree. However, it does not appear that either party requested

      such findings in accordance with Indiana Trial Rule 52(A). “In such a

      situation, the specific factual findings control only the issues that they cover,

      while a general judgment standard applies to issues upon which there are no

      findings.” Stone v. Stone, 991 N.E.2d 992, 998 (Ind. Ct. App. 2013), aff’d on r’hg.

      Not every finding needs to be correct, and even if one or more findings are

      clearly erroneous, we may affirm the judgment if it is supported by other

      findings or is otherwise supported by the record. Id. “We may affirm a general

      judgment with sua sponte findings upon any legal theory supported by the

      evidence introduced at trial.” Id. Sua sponte findings control as to the issues

      upon which the court has found, but do not otherwise affect our general

      judgment standard of review, and we may look both to other findings and

      beyond the findings to the evidence of record to determine if the result is against

      the facts and circumstances before the court. Id.

[9]   When reviewing the accuracy of findings entered sua sponte, we first consider

      whether the evidence supports them. Id. Next, we consider whether the

      findings support the judgment. Id. We will disregard a finding only if it is

      clearly erroneous, meaning the record contains no facts to support it either

      directly or by inference. Id. We will not reweigh the evidence or judge witness

      credibility. Id. at 999. “A judgment also is clearly erroneous if it relies on an

      Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 4 of 12
       incorrect legal standard, and we do not defer to a trial court’s legal

       conclusions.” Id. at 998-99.

[10]   Premarital agreements have long been recognized as valid contracts in Indiana,

       “as long as they are entered into freely and without fraud, duress, or

       misrepresentation, and are not unconscionable.” Rider v. Rider, 669 N.E.2d
160, 162 (Ind. 1996). Our legislature codified this caselaw approval of

       premarital agreements with its adoption in 1995 of a version of the Uniform

       Premarital Agreement Act (“the Act”), now found at Indiana Code Chapter 31-

       11-3.1 The Act went into effect in Indiana on July 1, 1995, and so it applies to

       this case. See id. at 164. In part, the Act states:

                  (a) A premarital agreement is not enforceable if a party against whom
                  enforcement is sought proves that:
                            (1) the party did not execute the agreement voluntarily; or
                            (2) the agreement was unconscionable when the agreement was
                            executed.
                                                            *****
                  (c) A court shall decide an issue of unconscionability of a premarital
                  agreement as a matter of law.
       Ind. Code § 31-11-3-8.2 No reported Indiana decision has interpreted the Act

       since its adoption. It would appear, however, that we may look to existing

       1
         For over a century, Indiana courts have referred to premarital agreements as “antenuptial” agreements. See
       McNutt v. McNutt, 116 Ind. 545, 19 N.E. 115 (1888); Rider, 669 N.E.2d 160. They have continued to do so
       even after the Act’s codification. See Schmidt v. Schmidt, 812 N.E.2d 1074 (Ind. Ct. App. 2004). However, in
       the Act, the term “premarital agreement” is used throughout. See Ind. Code § 31-11-3-2. Because the Act is
       applicable to this case, will use the term premarital agreement throughout this opinion.
       2
           Subsection (b) of this statute relates to spousal maintenance, which is not at issue in this case.

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015                              Page 5 of 12
       Indiana caselaw on premarital agreements so long as it does not conflict with

       the Act. Additionally, we may look for guidance from the official comments to

       the Uniform Act, as well as decisions from other jurisdictions that have adopted

       it. See Zemco Mfg., Inc. v. Navistar Int’l Transp. Corp., 759 N.E.2d 239, 246 (Ind.

       Ct. App. 2001) (looking for guidance from other jurisdictions that adopted

       Uniform Trade Secrets Act), trans. denied.

[11]   Standard principles regarding contract formation and interpretation apply to

       premarital agreements. Schmidt v. Schmidt, 812 N.E.2d 1074, 1080 (Ind. Ct.

       App. 2004). Generally, “‘a contract is unconscionable if there was a gross

       disparity in bargaining power which led the party with the lesser bargaining

       power to sign a contract unwillingly or unaware of its terms and the contract is

       one that no sensible person, not under delusion, duress or distress would

       accept.’” Rider, 669 N.E.2d at 162 (quoting Justus v. Justus, 581 N.E.2d 1265,

       1272 (Ind. Ct. App. 1991), trans. denied). This standard is consistent with the

       intent of the drafters of the Uniform Act, which believed unconscionability

       “includes protection against one-sidedness, oppression, or unfair surprise . . . .”

       Uniform Premarital Agreement Act § 6, cmt. (2001). Also relevant are “the

       economic circumstances of the parties resulting from the agreement, and any

       other relevant evidence such as the conditions under which the agreement was

       made, including the knowledge of the other party.” Id. The lack of assistance

       from independent legal counsel may be another factor to consider in deciding

       unconscionability. Id.

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 6 of 12
[12]   We also observe that the Act makes the issue of unconscionability a question of

       law. This means that our review of the trial court’s ultimate ruling on

       unconscionability is de novo. See Rivera v. Rivera, 243 P.3d 1148, 1154 (N.M.

       App. 2010) (applying New Mexico version of the Act). Underlying that legal

       determination may be factual determinations regarding the circumstances

       surrounding execution of the agreement, which we review for clear error as we

       would any other factual determination. See id. (applying New Mexico standard

       of “substantial evidence” for factual findings).

[13]   Here, the facts are largely undisputed. Indeed, in his brief Jay expressly agrees

       with Julie’s statement of the facts in her brief, with one exception. Namely, it is

       undisputed here that Jay commenced an illicit sexual relationship with Julie

       when she was fourteen years old and he was twice her age. When Julie became

       pregnant when she was fifteen, Jay found himself under police investigation for

       his conduct. In a successful attempt to evade prosecution, Jay proposed

       marriage to Julie, and she accepted. However, he also asked Julie to sign a

       premarital agreement disavowing any claim to any of his property, no matter

       how long they stayed married. Julie, being just sixteen years old, had no

       property of her own at the time and would accumulate very little during the

       marriage. She also dropped out of school upon marrying Jay and having their

       first child and has not since obtained her GED. Julie did not obtain

       independent legal advice regarding the premarital agreement, and she had

       difficulty understanding it in part because of her own poor reading skills. The

       only matter of dispute between the parties is whether Jay’s attorney read the

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 7 of 12
       document to Julie as opposed to a legal secretary. We will assume the facts in a

       light most favorable to the judgment, specifically that Jay’s attorney personally

       went over the document with Julie before she and her mother signed it. That

       slight difference in the facts, however, has little impact on our analysis.

[14]   We have not discovered any case remotely similar to this one, either in Indiana

       or elsewhere. We readily conclude that this premarital agreement is

       unconscionable as a matter of law. Although it does not appear Jay is highly

       educated, there still was a gross disparity in life experience between him and

       Julie. Indeed, Jay apparently violated criminal laws intended to protect minors

       by carrying out his illicit sexual relationship with Julie. See I.C. § 35-42-4-9

       (1995) (defining crime of sexual misconduct with a minor but providing as

       defense that child is married). And, he personally benefitted greatly by

       marrying Julie and avoiding prosecution, with no comparable benefit to Julie.

       Rather, Julie dropped out of school and did not further her education, while

       either caring for the couple’s children or working at low-wage jobs. Also, the

       property division portion of the agreement was entirely one-sided in Jay’s favor,

       as he was the only party bringing any assets into the marriage.

[15]   Furthermore, Indiana law has long held that contracts entered into by a minor

       are voidable at the option of the minor while he or she remains a minor, or

       within a reasonable time after reaching majority. See Wiley v. Wilson, 77 Ind.
596, 598 (1881); Bowling v. Sperry, 133 Ind. App. 692, 694, 184 N.E.2d 901, 902

       (1962). This reflects the law’s view that minors are not always entirely

       competent to enter into contracts with adults and are deserving of special

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 8 of 12
       protection in that regard. Although Julie was permitted to marry Jay at age

       sixteen,3 she still was a minor for purposes of contract formation. The current

       age of majority in Indiana is eighteen. See I.C. § 1-1-4-5(1). Even if we were to

       assume that Julie did not act promptly enough after reaching majority to

       disavow the premarital agreement in accordance with the Wiley case,4 we still

       believe it is highly relevant to consider that she was a minor when she entered

       into the agreement.

[16]   Finally, we note Julie’s lack of education, her difficulty reading, her stated lack

       of understanding of the premarital agreement, and the fact that she did not

       receive independent legal advice. It is true that Jay likewise appears not to be

       highly educated and it is possible he also did not understand all of the

       agreement’s intricacies. But, it was his attorney who prepared the agreement,

       and it is entirely in his favor. We also do not believe that Julie’s mother’s

       advice and consent regarding the premarital agreement was an adequate

       substitute for professional legal advice.

[17]   In sum, after considering all of the circumstances surrounding the premarital

       agreement’s execution and its one-sided nature in favor of the dominant party,

       3
         Julie was permitted to marry at age sixteen in contravention of the general minimum marital age of
       eighteen, or sometimes seventeen, because she was pregnant by Jay, was at least fifteen years old, and
       received parental consent to marry. See I.C. § 31-7-1-7 (1995).
       4
        As a practical matter, it is unclear how Julie could have unilaterally disavowed the premarital agreement
       while still remaining married to Jay. The agreement could have been withdrawn if both parties agreed to it in
       writing, however. See I.C. § 31-11-3-7.

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015                      Page 9 of 12
       Jay, we conclude that the agreement was unconscionable at the time of its

       execution. Premarital agreements traditionally have been looked upon

       favorably in Indiana. See Boetsma v. Boestma, 768 N.E.2d 1016, 1024 (Ind. Ct.

       App. 2002). However, we refuse to accept that this agreement is conscionable. 5

[18]   Having found the premarital agreement unconscionable, we must also address

       the trial court’s alternate conclusion that Julie is “barred by laches and

       estoppel” from challenging the agreement because she failed to disavow the

       agreement for nearly fourteen years after she turned eighteen. App. p. 50. For

       this proposition the trial court cited Estate of Palamora v. Palamora, 513 N.E.2d
1223 (Ind. Ct. App. 1987), and stated that Julie could not “accept[] the benefits

       of the marriage” and later attempt to disavow the premarital agreement. Id.

       The trial court misapplied the holding of Palamora. In that case, a man dying of

       cancer agreed to marry, but only on the condition that his wife-to-be execute a

       premarital agreement that would provide her with an income of $1,000 per

       month for the rest of her life from a trust to be established by the agreement, but

       5
         It is unclear under the Act whether we may consider the agreement’s unconscionability at the time of
       dissolution, as opposed to the time of execution. There may be a conflict between the Act and caselaw on
       this point. Cases have held, “an otherwise valid antenuptial agreement may become voidable as
       unconscionable due to circumstances existing at the time of the dissolution.” Pond v. Pond, 700 N.E.2d 1130,
       1132 n.3 (Ind. 1998) (citing Rider, 669 N.E.2d at 162–64 (Ind. 1996)). The Act, however, states that courts
       should consider whether “the agreement was unconscionable when the agreement was executed.” I.C. § 31-
       11-3-8(a)(2). Because we have concluded that the agreement here was unconscionable at the time of
       execution, we need not resolve this possible conflict. Regardless, we do note that, although the marital estate
       here is not especially large, the agreement has resulted in Jay receiving an overwhelming percentage of what
       would have been divisible marital property in the absence of the agreement. After fifteen years of marriage,
       Jay has received assets worth approximately $108,500 while Julie has received assets worth approximately
       $13,900. Jay also has a steady full-time job with reliable income that he has held for many years and which
       includes retirement benefits; Julie’s job is variable in hours, pays considerably less per hour, and does not
       provide retirement benefits.

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015                      Page 10 of 12
       she would otherwise receive nothing upon the husband’s death. After the

       husband died, the wife received and spent several payments from the trust and

       then attempted to disavow the premarital agreement. Under these

       circumstances, we held the wife could not accept the benefits of the premarital

       agreement and later seek to repudiate the agreement. Palamora, 513 N.E.2d at

       1228. Thus, in Palamora, it was not the fact that the wife accepted the benefits

       of marriage that prevented her from repudiating the premarital agreement; it was

       her acceptance of payments from the trust established by that agreement that

       prevented her from doing so. Here, Julie did not accept any material benefits

       from the premarital agreement; the fact that she did marry and remained

       married to Jay did not preclude her from attempting to disavow it.

[19]   We also note the following language in the Act: “Any statute of limitations

       applicable to an action asserting a claim for relief under a premarital agreement

       is tolled during the marriage of the parties to the agreement. However,

       equitable defenses limiting the time for enforcement, including laches and

       estoppel, are available to either party.” I.C. § 31-11-3-10. In order to establish

       laches, a party must prove: “(1) inexcusable delay in asserting a known right;

       (2) an implied waiver arising from knowing acquiescence in existing conditions;

       and (3) a change in circumstances resulting in prejudice to the adverse party.”

       Indiana Real Estate Comm’n v. Ackman, 766 N.E.2d 1269, 1274 (Ind. Ct. App.

       2002). The mere passage of time by itself is insufficient to prove laches. Id.

       Similarly, estoppel is an equitable doctrine “by which one’s own acts or

       conduct prevents the claiming of a right to the detriment of another party who

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 11 of 12
       was entitled to and did rely on the conduct.” Brown v. Branch, 758 N.E.2d 48,

       51-52 (Ind. 2001). We believe it is clear from the statutory language, along with

       the caselaw definitions of laches and estoppel, that the mere fact that Julie

       stayed married to Jay from approximately fifteen years and did not attempt to

       disavow the premarital agreement before she filed for divorce is not a bar to her

       disavowal. Rather, there must at least be some evidence or proof of Jay’s

       detrimental reliance on Julie’s failure to disavow the agreement, and there is

       none in this case. The trial court erred in concluding that Julie’s claim was

       barred by laches and/or estoppel.

                                                  Conclusion
[20]   The trial court erred in concluding that the parties’ premarital agreement is not

       unconscionable and that Julie is time-barred from challenging it. We conclude

       that the agreement is unconscionable, Julie is not barred from challenging it,

       and it therefore is void. We reverse the trial court’s division of property in the

       parties’ dissolution and remand for the trial court to divide the marital property

       in a manner consistent with the general laws governing such division.

[21]   Reversed and remanded.

       May, J., and Pyle, J., concur.

       Court of Appeals of Indiana | Opinion 68A01-1404-DR-167 | February 26, 2015   Page 12 of 12