Opinion
No. FA 02 0471185 S
February 26, 2004
MEMORANDUM OF DECISION RE PRENUPTIAL AGREEMENT
This is a contested divorce. However, at the outset of the hearing, the court indicated it would make a preliminary determination as to the enforceability of a prenuptial agreement entered into between the plaintiff and the defendant, dated October 7, 1988. Prenuptial agreements entered into after October 1, 1995, are governed by the Connecticut Premarital Agreement Act, General Statutes §§ 46b-36a et seq. As was said, this agreement was executed on October 7, 1988, and, therefore, its validity is to be determined by common law.
General Statutes § 46b-36j provides that "[n]othing in sections 46b-36a to 46b-36j, inclusive, shall be deemed to affect the validity of any premarital agreement made prior to October 1, 1995."
The leading case used to determine the validity of a prenuptial agreement, which is not governed by statute, is McHugh v. McHugh, 181 Conn. 482, 436 A.2d 8 (1980). In McHugh, the Supreme Court established three criteria to determine the enforceability of a prenuptial agreement. "The validity of an antenuptial contract depends upon the circumstances of the particular case . . . Antenuptial agreements relating to the property of the parties, and more specifically, to the rights of the parties to that property upon the dissolution of the marriage, are generally enforceable where three conditions are satisfied: (1) the contract was validly entered into; (2) its terms do not violate statute or public policy; and (3) the circumstances of the parties at the time the marriage is dissolved are not so beyond the contemplation of the parties at the time the contract was entered into as to cause its enforcement to work injustice." (Citation omitted.) Id., 485-86.
The plaintiff argues that the prenuptial agreement is invalid because it does not satisfy the requirements set forth in McHugh. Specifically, the plaintiff argues that the prenuptial agreement is not a valid contract because she was not made fully aware of the defendant's assets when she signed it. She claims that the defendant failed to disclose the true value of an inheritance that he was to receive from his mother's estate. The plaintiff also argues that enforcing the prenuptial agreement now would be unconscionable. She asserts that the present circumstances of the parties, i.e., the dramatic increase in the defendant's assets during the course of their marriage, is something that they could not have contemplated when they signed the prenuptial agreement.
The defendant counters that the prenuptial agreement is valid, and, therefore, the court may enforce its provisions in this dissolution action. He argues that although his financial statement was not complete in all of its terms, the plaintiff nonetheless was sufficiently apprised of information to give her full disclosure of his financial assets before she signed the prenuptial agreement. The defendant also takes issue with the plaintiff's argument that their circumstances now are beyond what was contemplated when the parties entered into the prenuptial agreement. He contends that the gradual increase in his assets over the course of their marriage is not so far beyond the contemplation of the parties whereby enforcing the terms of the prenuptial agreement would work injustice against the plaintiff.
1. Whether the Prenuptial Agreement was Validly Entered Into by the Parties
The first criterion of McHugh requires the court to determine whether the prenuptial agreement complies with principles of contract law. "To determine whether an antenuptial agreement relating to property was valid when made, courts will inquire whether any waiver of statutory or common-law rights, or the right to a judicial determination in any matter, was voluntary and knowing . . . A party must, of course, be aware of any right that he possesses prior to a proper waiver . . . The duty of each party to disclose the amount, character, and value of individually owned property, absent the other's independent knowledge of the same, is an essential prerequisite to a valid antenuptial agreement containing a waiver of property rights." (Citations omitted.) McHugh v. McHugh, supra, 181 Conn. 486.
In the present case, the plaintiff posits that the prenuptial agreement is invalid because neither party disclosed their income prior to entering into the agreement, and the defendant falsely disclosed the value of his inheritance. Thus, according to the plaintiff, she could not have knowingly waived her rights to any interest in the defendant's property without a proper disclosure of all of his assets. The court is not persuaded by the plaintiff's arguments and finds the following facts relevant to its determination that each party was properly disclosed of the other party's assets.
The parties were married on October 7, 1988. Several hours before the ceremony, the parties executed a prenuptial agreement. Both parties testified that the prenuptial agreement was first initiated by the defendant during the summer before their wedding. In the weeks leading to their wedding, the plaintiff insisted that the parties execute a prenuptial agreement because she wanted to provide security for her minor child. The plaintiff enlisted the assistance of her estate planning attorney to draft the terms of the prenuptial agreement. Both parties testified that the defendant was angry over the plaintiff's demands, but, the plaintiff was insistent on signing a prenuptial agreement. The week before the wedding, the parties engaged in extensive negotiations over the terms of the prenuptial agreement, drafting several versions, before signing the final agreement hours before the wedding.
The prenuptial agreement stated that "each party enters into this Agreement with full knowledge of the extent and approximate value of all the property and estate of the other, as presented in [the plaintiff's] financial information statement attached as Schedule A hereto and in [the defendant's] financial information statement attached as Schedule B hereto and each party has sought and received advice from their respective legal counsel as to the effect of this Agreement." (Plaintiff's Exhibit 1, Prenuptial Agreement, pp. 1-2.) Both Schedule A and B were attached to the prenuptial agreement. Neither of the parties listed their respective incomes on their financial statements. On the plaintiff's financial information sheet, she stated assets totaling $1,223,000, consisting of cash accounts, real property, personal property and an individual retirement account. The defendant disclosed assets totaling $576,000, comprised of cash, marketable securities, real property, personal property, retirement accounts and an interest in an inheritance. The defendant valued his inheritance as $150,000, but, in actuality, the value was $186,000. The defendant testified that most of his inheritance consisted of real property. The defendant explained, without contradictory evidence, that when the prenuptial agreement was drafted, his mother's estate was not yet complete, and it was not until several years later that the property was sold. The court finds the defendant's testimony to be credible.
During the negotiations surrounding the prenuptial agreement, the plaintiff never complained about the absence of the defendant's income from his financial statement or questioned the value of his inheritance. The parties' testimony reveals that the plaintiff, who has a bachelor's degree in Journalism, a master's degree in Corporate Communications and a Juris Doctorate degree, reviewed at least eight drafts of the prenuptial agreement, all of them prepared by her own attorney, before the parties signed the final version. Additionally, both parties testified that the plaintiff informed the defendant that she would not marry him unless the parties signed a prenuptial agreement before the wedding. The court finds, based on the testimony of the parties, that the prenuptial agreement was facilitated almost entirely by the plaintiff for her benefit. The defendant, throughout the entire process, objected to signing the prenuptial agreement. It was not until fifteen years later, at this dissolution action, did the plaintiff bring a claim to invalidate the prenuptial agreement, arguing that she was not fully disclosed of the defendant's assets, namely, his income and the value of his inheritance.
The plaintiff relies heavily on the language in McHugh v. McHugh, supra, 181 Conn. 486-87, that states, "The burden is not on either party to inquire, but on each to inform, for it is only by requiring full disclosure of the amount, character, and value of the parties' respective assets that courts can ensure intelligent waiver of the statutory rights involved . . . Other factors that bear upon the validity of such contracts include which party drafted the agreement, by counsel or otherwise, and whether the parties were represented by counsel." (Citations omitted; internal quotation marks omitted.) While it is undisputed that the first criterion in McHugh requires that there be disclosure between the parties in order for a prenuptial agreement to be valid, "[f]air disclosure is not synonymous with detailed disclosure such as financial statement of net worth and income . . . While disclosure should be full, fair and open, it has been said it need not be a drastically sweeping one, and [one party] need not know the [other party's] exact means, so long as [he or she] has a general idea of his property and resources." (Internal quotation marks omitted.) Levin v. Levin, Superior Court, judicial district of New London, Docket No. FA 0523556 (February 25, 1994, Austin, J.).
In Baumgartner v. Baumgartner, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. FA 96 0155390 (November 10, 1998, Tierney, J.), the defendant brought a claim to invalidate a prenuptial agreement on the ground that she was not provided adequate disclosure of the plaintiff's financial circumstances. The facts of Baumgartner, much like the present case, involved two parties, marrying for the second time who entered into a prenuptial agreement for the purpose of protecting their assets for their children. Id. Each party was well-educated had separate careers and homes before marrying one another. Id. No children were born out of the marriage. Id. The financial statements that were attached to the prenuptial agreement were not complete in all of its terms, specifically, the value of the husband's pension plan and his income. Id. The court determined, nonetheless, that the agreement was valid. Id. "Even though information was not disclosed in writing, the independent knowledge by a spouse will not void a prenuptial agreement." (Emphasis added; internal quotation marks omitted.) Id. Specifically, the court noted that "[t]he defendant carefully drafted the agreement, discussed issues with her own separate counsel and was fully aware of the amount, character and value of the plaintiff's assets . . . It was only in this lawsuit did the defendant first raise the claimed inadequacy of the financial disclosure . . ." Id.
Several superior court decisions follow the reasoning that a party's "independent knowledge" of the other's financial circumstance is sufficient to conclude that the party was adequately disclosed of financial information before signing a prenuptial agreement. In Colby v. Colby, Superior Court, judicial district of New Haven, Docket No. FA 95 0370560 (May 16, 1996, Munro, J.), the court held that the defendant's failure to list IRA accounts and the balance of a joint savings account with his father on the financial schedule did not invalidate the prenuptial agreement. The plaintiff in Colby was informed that the funds would be used as a down payment for the impending purchase of a house. Id. Likewise, in Levin v. Levin, supra, Superior Court, Docket No. FA 94 0523556, the court concluded that the prenuptial agreement was valid even though the plaintiff's financial statement did not list precise information as to his income. The court noted that based on the history of the parties' relationship, the defendant had independent knowledge of the plaintiff's financial circumstances before signing the prenuptial agreement. Id.
There are, however, superior court decisions that hold to the contrary, i.e., failure to disclose assets in the financial statement and inadequate knowledge of the same invalidates the prenuptial agreement. These cases can be factually distinguished from the present case. In Pite v. Pite, Superior Court, judicial district of New Haven, Docket No. FA 99 0429262 (February 20, 2001, Alander, J.), the court invalidated the parties' prenuptial agreement on the ground that the plaintiff lacked sufficient knowledge as to the defendant's assets and liabilities. Relying on the Supreme Court decision in McHugh, the Pite court noted, "The requisite financial information may be acquired either through full disclosure by the other party or one's own independent knowledge." (Emphasis added.) Id. In Pite, unlike in this case, the financial statements attached to the prenuptial agreement were blank. See id. Additionally, based on the evidence presented at trial, the court surmised that the plaintiff did not have independent knowledge of the amount, character and value of the defendant's income or assets. Id. Thus, the court held that the plaintiff lacked sufficient knowledge to knowingly waive her rights contained in the prenuptial agreement. Id.
Similarly, in DeFusco v. DeFusco, Superior Court, judicial district of Hartford-New Britain at Hartford, Docket No. FA 87 0338848 (January 14, 1991, Brennan, J.T.R.) ( 3 Conn. L. Rptr. 145), the court invalidated a prenuptial agreement because of the plaintiff's lack of knowledge as to the defendant's financial condition. The facts of DeFusco reveal that there was no disclosure of assets or discussion about the parties' financial conditions, the plaintiff was not represented by independent counsel, the defendant hired the attorney who drafted the prenuptial agreement, the defendant insisted that the parties sign a prenuptial agreement and the plaintiff saw the draft of the prenuptial agreement only minutes before signing it. Id. See also Cole v. Cole, Superior Court, judicial district of Waterbury, Docket No. FA 0104056 (November 12, 1992, Harrigan, J.) (invalidating a prenuptial agreement because there were no financial statements attached to the agreement and the wife had no understanding of the husband's antique business); Krawczynski v. Krawczynski, Superior Court, judicial district of Waterbury, Docket No. FA 92 0100143 (September 4, 1992, Harrigan, J.) ( 7 Conn. L. Rptr. 783, 7 C.S.C.R. 1117) (no intelligent waiver by the plaintiff because the husband failed to disclose his real estate and income values to the plaintiff).
The cases of Pite and DeFusco represent the extreme situation where there was little or no disclosure of one party's financial statement to the other party. The facts, in this case, are easily distinguished. In the present case, both parties testified that neither one specifically disclosed their incomes to the other in their financial statements. Testimony revealed, however, that the parties dated for several years before they were married. Neither party disputes that during their courtship the parties shared expenses and became knowledgeable of the other's standard of living and spending habits. As noted in McHugh, failure to disclose financial information in the prenuptial agreement is not fatal, so long as the other party has independent knowledge of the same. McHugh v. McHugh, supra, 181 Conn. 486-88. Additionally, it was the plaintiff's attorney who drafted the prenuptial agreement at the plaintiff's behest. Several drafts were prepared by the plaintiff's attorney before the parties finally agreed on the agreement. Moreover, the $30,000 discrepancy in the defendant's inheritance interest is not cause for alarm. The defendant testified that he estimated his inheritance because his mother's estate was pending in the probate court at the time the prenuptial agreement was signed. This court finds that the valuation of the defendant's inheritance interest at the time the prenuptial agreement was entered into was a reasonable estimation. The missing inheritance value, i.e., $30,000, is not significant when compared to the total value of the defendant's assets listed on his financial statement.
It is significant that at the time of the execution of the prenuptial agreement, the plaintiff was aware that defendant's financial statement listed $80,000 in marketable securities and $82,000 in retirement funds. The plaintiff listed $5,000 in an IRA.
As could be expected, it was those disclosed funds which eventually evolved into 86 percent of the total of the defendant's present assets.
Based on the evidence presented and the parties' testimony, the court finds that the plaintiff had "independent knowledge" of the defendant's financial circumstance to make an informed decision whether to enter into the prenuptial agreement. The disclosure requirement of McHugh has been satisfied.
2. Whether the Terms of the Prenuptial Agreement Violate Statute or Public Policy
Under the second criteria of McHugh, a prenuptial agreement will be unenforceable if it violates statute or public policy. The terms of this prenuptial agreement are summarized as follows: (1) each party shall retain real and personal property in their name regardless of when it was obtained; (2) each party shall retain earned and unearned income acquired during their marriage; (3) a release of rights to the other's property upon their respective death; (4) a release of alimony; and (5) a distribution plan for defendant's retirement benefits. Neither party has raised the issue that the prenuptial agreement violates any statute or public policy. A review of the terms of the prenuptial agreement by this court reveals that there are no provisions that violate statute or public policy. Thus, the second prong of McHugh is satisfied.
The retirement plan provision reads, "At such time as Robert retires, Renee will consent to any plan of distribution or other disposition of his pension benefits which he elects and will sign any document required to effect such election; provided, however, that at such time as any distribution to Robert exceeds 60% of the value of his pension plan assets, determined as of the date of such distribution, Robert agrees that Renee, at her option, is entitled to up to 25% of the proceeds from such distribution." (Plaintiff's Exhibit I, Prenuptial Agreement, ¶ 7.)
3. Whether the Present Circumstances of the Parties are Beyond the Contemplation of the Parties When They Entered into the Prenuptial Agreement
Even when a prenuptial agreement is found to be valid, the third criteria of McHugh requires a court to take a second look at the prenuptial agreement at the time it is to be enforced to determine whether the agreement is unfair. "[A]n antenuptial agreement will not be enforced where the circumstances of the parties at the time of dissolution are so far beyond the contemplation of the parties at the time the agreement was made as to make enforcement of the agreement work an injustice . . . [W]here the economic status of the parties has changed dramatically between the date of agreement and the dissolution, literal enforcement of the agreement may work injustice. Absent such unusual circumstances, however, antenuptial agreements freely and fairly entered into will be honored and enforced by the courts as written." (Citations omitted.) McHugh v. McHugh, supra, 181 Conn. 389.
The plaintiff argues that the prenuptial agreement should be invalidated because it would be unconscionable to enforce its provisions. The plaintiff claims that the parties' current circumstances are so far beyond what was contemplated when they entered into the prenuptial agreement. Specifically, the plaintiff argues that the defendant's assets have increased dramatically during the course of the marriage, while the plaintiff's assets have remained the same. Additionally, the plaintiff argues that the manner in which the defendant acquired his wealth should be scrutinized by the court. The plaintiff contends that the increase in the defendant's assets can be directly attributed to the plaintiff's efforts and contributions during the course of the marriage.
The defendant counters that enforcing the terms of the prenuptial agreement would not be unconscionable or unjust to the plaintiff. The defendant argues that the parties' present economic status is not so dramatically different than when they signed the prenuptial agreement. The defendant illustrated to the court that his financial assets are only 25 percent more than the plaintiff's current assets. Additionally, the defendant argues that the gradual increase in his assets, over the course of their marriage, is not beyond what the parties contemplated when they signed the prenuptial agreement.
There are no cases directly on point with the instant case regarding the substantial increase in one party's assets who was the party with fewer assets when the prenuptial agreement was signed. A review of recent superior court decisions reveals that the court will generally find that a significant increase in one party's financial assets is sufficient to invalidate a prenuptial agreement on the ground that the parties' circumstances are beyond what they contemplated when they entered into the agreement. In these cases, however, there is a common theme that differs from the present case. At the time of the marriage, one party has more assets, while the other party has few or no assets: At the dissolution, the same party's assets increased significantly, while the other party's assets remained the same.
For example, in Rosenberg v. Rosenberg, Superior Court, judicial district of Fairfield at Bridgeport, Docket No. FA 98 0356648 (September 2, 1999, Bassick, J.), the court refused to enforce a prenuptial agreement when the defendant's assets increased from $11.8 million to $23 million, while the plaintiff's assets increased from $140,000 to $270,000. The court noted, "The defendant's wealth has doubled in the interim period. To enforce the requirements of the contract that there be no alimony and property of but [$200,000] does work an injustice upon the plaintiff." Id.
Similarly, in Siegel v. Siegel, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. FA 94 0141170 (April 3, 1996, Novack, J.) ( 16 Conn. L. Rptr. 450, 452), both parties owned substantial assets that were nearly equal at the time the prenuptial agreement was signed. No children were born to the marriage. Id., 451. At the dissolution action, however, the defendant's assets increased by 40 percent or $600,000, while the plaintiff's assets remained the same. Id., 452. See also Brooks v. Brooks, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. FA 95 0143086 (May 20, 1997, Novack, J.) (unfair to enforce terms of a prenuptial agreement when the parties have two minor children and the husband's assets increased by six times); Christoni v. Christoni, Superior Court, judicial district of New Haven at Meriden, Docket No. FA 91 0237478 (March 14, 1994, Stengel, J.) (substantial change of monetary circumstances that was not contemplated by the parties); Ashton v. Ashton, Superior Court, judicial district of Stamford-Norwalk at Stamford, Docket No. FA 900110414 (October 15, 1991, Karazin, J.) ( 5 Conn. L. Rptr. 590), aff'd, 36 Conn. App. 918, 649 A.2d 264, cert. denied, 231 Conn. 948, 653 A.2d 826 (1994) (enforcement of prenuptial agreement would work injustice when the husband's assets increased five times).
In these circumstances, the court has refused to enforce the prenuptial agreement because the "economic status of parties has changed dramatically between the date of the agreement and the dissolution" and "literal enforcement of the agreement may work injustice . . ." (Emphasis added.) McHugh v. McHugh, supra, 181 Conn. 489. It is obvious, based on the facts of these cases, why the court concluded that enforcement of the prenuptial agreement would work an injustice to one party. This case, however, is easily distinguished from these cases. When the parties signed their prenuptial agreement, the plaintiff had significantly more assets than the defendant. During the course of their marriage, the parties' assets increased, albeit, the defendant's assets more than the plaintiff's. Although the defendant's assets increased significantly, enforcement of the prenuptial agreement at this time would not work an injustice to the plaintiff. The plaintiff still has significant assets of her own, totaling $1,561,225. The plaintiff's assets are only 25 percent less than the defendant's assets, which total $2,239,391. This is not like the case in Rosenburg v. Rosenburg, supra, Superior Court, Docket No. FA 980356648, where there is an enormous disparity in wealth between the parties. Furthermore, none of the factual circumstances in the previously cited cases pertain to this parties' situation. In Siegel v. Siegel, supra, Superior Court, Docket No. FA 94 0141170, the court concluded that it would be unconscionable to enforce the prenuptial agreement because the plaintiff expended substantial funds of her own to improve the defendant's home, which was completed shortly before the dissolution action. In Brooks v. Brooks, supra, Superior Court, Docket No. FA 950143086, the court emphasized not only the six-fold increase in the husband's assets, but more important, that the parties had two minor children.
The financial statements attached to the prenuptial agreement reveal that the plaintiff's assets totaled $1,223,000, while the defendant's assets amounted to $576,000.
In Rosenberg, the prenuptial agreement provided a formula for assigning the amount of support and alimony in the event of the parties' legal separation or dissolution. According to this provision, the greatest sum that the wife could receive was $200,000. The husband's assets at dissolution totaled approximately $23 million.
It should be noted again that at the time of the execution of this prenuptial agreement, the plaintiff's assets totaled 1.2 million dollars and the defendant's assets totaled $576,000.
The financial affidavits also indicated at the time of the execution of the agreement the defendant had $80,000 in marketable securities and $82,000 in retirement plans.
In this particular case, as opposed to the majority of cases reversing prenuptial agreements, it was the plaintiff who crafted the terms and conditions of the prenuptial agreement as opposed to the defendant and it was the plaintiff who insisted on its execution over the admitted objections of the defendant. It could not be unanticipated that the defendant would continue working, which would increase his retirement benefits nor that he would continue his investments which would increase his portfolio, the combination of both primarily represents the defendant's present financial assets.
Moreover, in this case, the plaintiff ignores an important provision in the prenuptial agreement — her rights to the defendant's pension. Paragraph seven of the prenuptial agreement entitles the plaintiff to 25 percent of the proceeds from the defendant's pension distribution at such time as the stated event occurs. Under the terms of the prenuptial agreement, therefore, the plaintiff stood to protect her own assets, as well as, receiving a share of the defendant's assets through his pension plan. To argue now, as the plaintiff does, that the current circumstances of the parties are beyond what they contemplated at the time of the prenuptial agreement and that to enforce its terms would work an injustice against her, is an attempt to exalt form over substance.
The plaintiff is entitled to 25 percent of the proceeds from the defendant's pension distribution at anytime that the distribution exceeds 60 percent of the value of his pension plan assets.
Based on the foregoing reasons, the court finds that there would be no injustice against the plaintiff in enforcing the terms of the prenuptial agreement. The third requirement of CT Page 2967 McHugh has been satisfied.
CONCLUSION
Accordingly, the prenuptial agreement is valid and its terms may be properly enforced.
Gilardi, J.