Prenuptial agreements: 'Like planting a bomb'

By Agenique Smiley
BridgeTower Media Newswires
 
DETROIT — Unfortunately, “until death do us part” is generally not how many marriages end. When there are substantial assets, or the potential thereof, many couples enter into prenuptial agreements to protect their interests.

However, the same rules apply to prenuptial agreements as they do to any contract. They must clearly outline the rights and obligations of the parties, and they must be equitable and fair.

But what happens when one party has more assets to protect than the other? Does that party have the right to exclude their potential spouse from their equitable share? How far is too far in a prenuptial agreement? Courts have grappled with that question since the very first prenuptial agreement was signed and continue to confront this issue today.

Allard v Allard

In Allard v. Allard, the Court of Appeals was tasked to answer two questions on remand: whether parties may waive the trial court’s discretion under MCL 552.23(1) and MCL 552.401 through an antenuptial agreement and, if so, whether the parties validly waived MCL 552.23(1) and MCL 552.401 through their agreement.

On Sept. 9, 1993, two days before their wedding, which took place on Sept. 11, 1993, Earl and Christine Allard entered into an antenuptial agreement. Per the agreement, each party retained sole ownership of all real, personal, intangible or mixed property owned prior to the marriage free and clear of any claim of the other party.

The agreement also stated that, in the event of divorce, the parties agreed that all property acquired after the marriage shall be divided on a 50/50 basis. The lynchpin of this provision, and the basis of the lawsuit, is the portion of this section whereby the parties agreed: “in full satisfaction, settlement and discharge of any and all rights or claims to alimony, support, property division or other rights or claims of any kind, nature, or description incident to the marriage and divorced ... under the present or future statutes and laws of common law of the state of Michigan or any other jurisdiction (all of which are hereby waived and released) ...”

Plaintiff Earl Allard filed for divorce on July 28, 2010. On July 13, 2011, plaintiff filed a second motion for summary disposition, arguing that the antenuptial agreement governed and was dispositive of all issues except child custody, parenting time and support.

Defendant Christine Allard responded to the motion, stating, among other arguments, that the agreement was void because the terms were unconscionable. Defendant also asserted that a change of circumstances supported setting aside the agreement.

The Wayne County Circuit Court Family Division granted plaintiff’s motion. The court held, among other things, that the agreement was not unconscionable, there was no change in circumstances that would make enforcement of the contract unfair and unreasonable, and that the equitable distribution factors contemplated by MCL 552.19 as set forth in Sparks v. Sparks were inapplicable because of the presence of the “unambiguous antenuptial agreement.”

The case was eventually appealed to the Michigan Supreme Court, which remanded it back to the Court of Appeals for disposition. The Court of Appeals concluded in a Jan. 31 published opinion that the parties could not waive the trial court’s equitable discretion under MCL 552.23(1) and MCL 552.401. It vacated the trial court’s orders and remanded the case back to the trial court for further proceedings.

The parties agree

Counsel for both the plaintiff/appellee and defendant/appellant agree that the decision in this case was determined by the court’s interpretation of MCL 552.23(1) and MCL 552.401, specifically, the impact of the Legislature’s use of the word “shall” versus its use of the work “must.” However, that is where the meeting of the minds ends.

Plaintiff’s point of view

“The court missed an opportunity to apply the must vs. shall analysis,” stated James N. McNally, attorney for the plaintiff/appellee.

“The most common statutory interpretation tasked to the court is determining the Legislature’s intent through the use of those two words,” McNally continued, “whether the Legislature intended something to be mandatory or optional.”

McNally is a former staff attorney at the Michigan Court of Appeals and Michigan Supreme Court. He specializes in appeals and research, and practices in both the Court of Appeals and the Michigan Supreme Court. His practice is located in Grosse Pointe Farms.

McNally believes that the court focused less on the question of what the parties could do via contract and more on what the court could do. “The court did not take into account the parties’ right to decide the scope of their contract and their ability to make a decision and not have it undone by the court,” he said.

“The parties went into the marriage with an idea that things would happen a certain way in the event of a divorce but the court disregarded that decision,” McNally asserts.

‘Lopsided’ agreement

“The court focused on the rights of the parties and the power of the court,” stated Kevin S. Gentry, attorney for defendant/appellant. “This was largely a decision based on statutory language and turned on the court’s inherent power.”

Gentry has been an appellate practitioner for over 18 years. His firm, Gentry Nalley PLLC, is located in Howell and he is also an adjunct professor of legal research and writing at Michigan State University College of Law.

“The agreement was lopsided to the point of being inequitable,” Gentry asserts. “It was written in a way to imply that no marital estate existed after 20 years of marriage. It divested the wife of any part of the marital estate.”

Gentry believes that the prenuptial agreement in this case was not only designed to outline the party’s agreement, but also to frustrate Michigan law.

Gentry added, “Prenuptial agreements are generally upheld by the court except in extreme circumstances.”

“The agreement in this case represented an extreme circumstance because, by its terms, it implied that there was no marital estate.”

A word of advice

“Drafting a prenuptial agreement is like planting a bomb that won’t explode for 10/15/20 years after signing,” McNally asserts.

“Don’t dabble in prenuptial agreements,” McNally warns, “only attorneys that specialize in this area should be drafting these types of agreements.”

McNally added that an attorney should always consult the appropriate experts before drafting an antenuptial agreement.

“When drafting a prenuptial agreement, carefully determine the marital property and anticipate that there will be a marital estate to be divided,” Gentry counsels. “Don’t make your agreement so lopsided that it offends the equitable requirements under law.

“Prenuptial agreements are difficult to write because they require an attorney to forecast the law,” Gentry added.

“Prenuptial agreements require a lot of detail and always remember that the laws may change,” McNally advised.
 

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