| Barocas v Barocas |
| 2012 NY Slip Op 02789 [94 AD3d 551] |
| April 17, 2012 |
| Appellate Division, First Department |
| Victor Barocas, Respondent, v Deborah Barocas,Appellant. |
—[*1] Raoul Felder & Partners, PC, New York (Barry Abbott of counsel), for respondent.
Order, Supreme Court, New York County (Ellen Gesmer, J.), entered May 4, 2011, whichdenied defendant wife's motion for summary judgment declaring void the parties' November 1,1995 prenuptial agreement, affirmed, without costs.
We reject defendant's contention that the property division provisions of the prenuptialagreement are unconscionable. Defendant failed to establish that her execution of the agreementwas the result of inequitable conduct on plaintiff's part. Rather, the parties fully disclosed theirrespective assets and net worth, and the agreement was reviewed by independent counsel, whodefendant admits had told her that the agreement was "completely unfair" and advised againstsigning it (Strong v Dubin, 48AD3d 232 [2008]; Colyer vColyer, 26 AD3d 303, 304 [2006]; Cron v Cron, 8 AD3d 186 [2004], lv dismissed 7 NY3d864 [2006], lv denied 10 NY3d 703 [2008]). The fact that plaintiff's attorneyrecommended defendant's counsel, and that plaintiff paid her counsel's fees, is insufficient todemonstrate duress or overreaching (seeSmith v Walsh-Smith, 66 AD3d 534 [2009], lv denied 14 NY3d 704 [2010]).Defendant's claim that she believed that there would be no wedding if she did not sign theagreement, that the wedding was only two weeks away and that wedding plans had been made, isinsufficient to demonstrate duress (seeColello v Colello, 9 AD3d 855, 858 [2004]). Although application of the provisionswould result in plaintiff retaining essentially all the property, courts will not set aside anagreement on the ground of unconscionability where inequitable conduct was lacking and simplybecause, in retrospect, the agreement proves to be improvident or one-sided (see Christian vChristian, 42 NY2d 63, 72 [1977]; McCaughey v McCaughey, 205 AD2d 330, 331[1994]). The circumstances surrounding the execution of the agreement disclose no issue of factas to whether there was overreaching. We therefore adhere to the general rule that " '[i]f theexecution of the agreement . . . be fair, no further inquiry will be made' "(Levine v Levine, 56 NY2d 42, 47 [1982], quoting Christian, 42 NY2d at 73).
Moreover, "[d]uly executed prenuptial agreements are accorded the same presumption oflegality as any other contract" (Bloomfield v Bloomfield, 97 NY2d 188, 193 [2001]). Wedisagree with the dissent's conclusion that there is an issue of fact as to whether the propertydivision provisions of the instant agreement are unconscionable. An unconscionable contract isone "which is so grossly unreasonable as to be unenforcible because of an absence of meaningful[*2]choice on part of one of the parties together with contractterms which are unreasonably favorable to the other party" (King v Fox, 7 NY3d 181, 191 [2006]). Here, meaningful choice isnot an issue inasmuch as defendant knowingly entered into the agreement against the advice ofher counsel.
Although defendant's waiver of spousal support was not unfair or unreasonable at the timeshe signed the agreement, given her knowing and voluntary execution thereof with benefit ofcounsel, factual issues exist as to whether the waiver would be unconscionable as applied to thepresent circumstances (see Domestic Relations Law § 236 [B] [3] [3]). Childsupport award for the parties' two children has not been established, and it is unclear whetherdefendant would become a public charge without spousal support (see Cron, 8 AD3d at187; see also Domestic Relations Law § 236 [B] [3] [3]; General Obligations Law§ 5-311; Bloomfield, 97 NY2d at 194). Also, it is unclear whether waiver of allspousal support would result in inequality "so strong and manifest as to shock the conscience andconfound the judgment of any [person] of common sense" (Christian, 42 NY2d at 71[internal quotation marks omitted]). In particular, the evidence shows that, despite the 15-yearmarriage, under the agreement, plaintiff would be entitled to retain property valued at about$4,600,000, while defendant would be entitled to only an IRA account valued at approximately$30,550. She claims that she has no other assets or sources of income, and could no longer work,given that she is now 50 years old and that plaintiff had thwarted her efforts to get a collegeeducation and pursue a career during the marriage. Plaintiff, however, contends that defendantchose not to get a college degree or pursue a career, and that, while he supported her variousbusiness projects, the projects failed or she would quit after losing interest. Accordingly, we findthat issues of fact exist as to whether the maintenance waiver would be unconscionable asapplied to the current circumstances. Concur—Andrias, J.P., DeGrasse and Freedman, J.
Manzanet-Daniels, J., dissents in part as follows: I agree with the majority that the motioncourt properly held that an issue of fact exists as to whether maintenance waiver contained in theparties' prenuptial agreement is unconscionable under the standard set forth in section 236 (B) (3)of the Domestic Relations Law. I would also find that an issue of fact exists as to whether theproperty waiver contained in the agreement is unconscionable (see Christian v Christian,42 NY2d 63 [1977]; Bloomfield v Bloomfield, 281 AD2d 301 [2001], revd on othergrounds 97 NY2d 188 [2001]).
Defendant wife was born in Guyana, the second of seven children. She arrived in the UnitedStates in 1981, at the age of 21. She obtained a GED in 1982, and worked menial jobs. In 1989,she worked part-time as a receptionist for plaintiff husband's family business. While workingthere, she and plaintiff began to date, and in 1993, she moved in with plaintiff at his apartmentlocated on Sutton Place. Other than sporadic attempts at small business ventures, the wife did notwork outside the home for the duration of the marriage (indeed, to the present day). She has nofurther education and no special skills.
The parties were married on November 11, 1995. A prenuptial agreement was presented[*3]to the wife approximately two weeks prior to the wedding.Schedules attached to the agreement indicated that plaintiff husband had no liabilities and totalassets in the amount of approximately $580,000, including a cooperative apartment and aninterest in a family trust with an unspecified value. Defendant wife, on the other hand, had only$2,500 in a bank account, jewelry and a fur coat valued at less than $20,000, collectively. Underthe terms of the prenuptial agreement, the wife waived any claims to any property that thehusband owned or acquired not only prior to, but also subsequent to the marriage. She furtherwaived any right of election. The agreement contained a complete maintenance waiver,irrespective of the length of the marriage or whether the marriage produced children. Theagreement also provided that the wife would forfeit any gifts or jewelry she had been givenbefore and during the marriage.
The parties had been married 15 years when the husband initiated divorce proceedings in late2010. Their sons are presently 14 and 7 years of age.
In January 2011, the wife moved for summary judgment declaring the parties' prenuptialagreement void. The motion court sustained the property division provisions of the prenuptialagreement and determined that her waiver of maintenance was fair and reasonable at the time ofthe execution of the agreement, but set a hearing to determine whether the maintenance waiverwas unconscionable in light of present circumstances.
I agree with the majority that the motion court properly set down for a hearing the issue ofwhether the maintenance waiver is unconscionable. I would also find, however, that an issueexists as to whether the property division provisions of the prenuptial agreement areunconscionable under the common-law standard. The instant agreement is so one-sided and theinequality "so strong and manifest as to shock the conscience and confound the judgment of any[person] of common sense" (Christian v Christian, 42 NY2d at 63 [internal quotationmarks omitted]).
The husband's net worth as of the execution of the agreement was $580,000; the wife's was$19,200, only $2,500 of which represented liquid assets she was entitled to retain upondissolution of the marriage. The husband has a current net worth of approximately $4.6 million;the wife has a current net worth of $30,554. Thus, during the 15-year period the parties weremarried, the husband's net worth increased in excess of $4 million, whereas the wife's net worthonly marginally increased. Given the disparity of the property distribution division, it would bedifficult to conceive of an instance in which the unconscionability standard has any real purpose,if not applied to this agreement. The instant agreement does not, like others we have upheld,provide some measure of distribution to the nonmonied spouse varying in degree based on thelength of the marriage and whether the marriage has produced any children. Indeed, not only doesthe wife receive no property, under any circumstances (nor any maintenance), but she is requiredto forfeit jewelry and gifts given to her during the marriage.
In Bloomfield v Bloomfield (281 AD2d 301 [2001], revd on other grounds97 NY2d 188 [2001]), this Court affirmed Supreme Court's determination that theparties' prenuptial agreement was unenforceable as per the General Obligations Law in effect atthe time. We went on to state: "[I]t also appears that the agreement could be heldunconscionable. . . . This prenuptial agreement, which provides for no division ofproperty at the end of the marriage, without regard for when, how or why it ends, and absolutelyno right of election, is manifestly unfair. No rational person would agree to this arrangement andno [*4]fair and honest person would accept it. Equity mustintervene to prevent an injustice." (281 AD2d at 305 [internal citations omitted]). Although thestatutory standard set forth in section 236 (B) (3) of the Domestic Relations Law may beinapplicable to adjudge the property division provisions of the agreement, traditionalcommon-law standards apply to test the validity and enforceability of the agreement as a whole(see Christian v Christian, 42 NY2d 63 [1977] [holding property division provisions ofseparation agreement so unconscionable as to be unenforceable]). There are instances in whichan agreement is so one-sided that, in the words of the Court, "no [person] in his [or her] sensesand not under delusion would make on the one hand, and . . . no honest and fair[person] would accept on the other" (Christian, 42 NY2d at 71 [internal quotation marksomitted]). We have held that equitable principles must be taken into account in deciding whetherto vacate property settlement agreements between spouses on grounds that might otherwise beinsufficient to nullify an ordinary contract since "[a]greements between spouses, unlike ordinarybusiness contracts, involve a fiduciary relationship requiring the utmost of good faith. . . [I]t is appropriate to take into account these common-law equitable factors,notwithstanding the inapplicability here of the broader fair and reasonable [when made] and. . . not unconscionable at final judgment statutory standard" (Goldman vGoldman, 118 AD2d 498, 500 [1986] [internal quotation marks omitted]).
The parties' agreement provides for no division of property at the end of a lengthy marriageproducing two children, without any consideration to the contribution the wife may have madetowards its acquisition. Indeed, the agreement requires that the wife return any jewelry and giftsshe had been given before and during the marriage. I would accordingly find that an issue of factexists as to the unconscionability of the property division provision of the parties' prenuptialagreement, and remand for further consideration.
Freedman, J., dissents in part as follows: I respectfully dissent and would modify the decisionbelow as follows. I agree that the wife is not entitled to summary judgment declaring the parties'prenuptial agreement dated November 1, 1995 void as unconscionable with respect to either theproperty division or maintenance waiver, but would find that the conscionability of the propertydivision or equitable distribution waiver, as well as that of the maintenance waiver, should beexplored at a hearing.
The agreement, entered into 15 years earlier, less than two weeks before the marriage,provided that the parties waive any claim to maintenance in the event of divorce and that allproperty acquired by either party before or during the marriage shall remain the separate propertyof that party except for gifts or jewelry or family heirlooms given by one party to the other, whichmust be returned to the gifting party in the event of divorce. Prior to the signing of the prenuptialagreement, the husband retained counsel for the wife who advised the wife that the agreementwas completely unfair and that she should not sign it.
Defendant signed the prenuptial agreement despite the fact that she had not worked for twoyears prior to the marriage; that she had dropped out of high school in Guayana (but laterobtained a GED); that her future husband was a lawyer; that her only assets were $2,500 otherthan jewelry plaintiff had given her; that plaintiff husband's assets were in excess of $900,000;and that counsel advised against signing the agreement.
The parties now have two children ages 7 and 14. The husband owns the apartment that hepurchased during the marriage for $900,000 but may be worth $3,000,000 (with no mortgage).[*5]His net worth statement lists bank, investment and retirementaccounts in his name valued at approximately $1,745,000. The evidence shows that, despite their15-year marriage, under the agreement, plaintiff would be entitled to retain property valued atabout $4,600,000, while defendant would have no other assets than an IRA account valued atapproximately $30,550. She claims that given that she is now 50 years old and that plaintiff hadthwarted her efforts to get a college education and pursue a career during the marriage, thewaiver provisions are unconscionable. Plaintiff, however, contends that defendant chose not toget a college degree or pursue a career, and that, while he supported her various businessprojects, the projects failed or she would quit after losing interest.
The motion court held that Domestic Relations Law § 236 (B) (3) permits parties tomake agreements before, after or during marriage concerning property division and spousalmaintenance, but that maintenance provisions are subject to General Obligations Law §5-311, which prohibits waivers of maintenance where the spouse is in danger of becoming apublic charge. Additionally, Domestic Relations Law § 236 (B) (3) requires that the termsof maintenance provisions be "fair and reasonable at the time of the making of the agreement and. . . not unconscionable at the time of entry of final judgment." With respect toproperty division provisions of an agreement, the court noted that they are void asunconscionable if they are unconscionable on their face. The court then determined thatdefendant wife failed to show that there was any "inequitable conduct or other infirmity" on theplaintiff's part inducing her to sign the agreement, and she signed it willingly in spite of herlawyer's contrary advice. The court found that the property division aspects of the agreement,"while perhaps improvident for the [w]ife, are not unconscionable." With respect to spousalsupport, the court found that the wife's waiver of maintenance was fair and reasonable at the timeof execution, but that it was less clear whether it is unconscionable under the presentcircumstances, in part because the parties have two children and the child support award had notyet been determined. The court denied defendant's request for summary judgment voiding theagreement and deferred determination of unconscionability with reference to the maintenancewaiver to a hearing at which time the issue of the 50-year old wife's failure to work outside thehome or pursue an education would be relevant.
The court, in effect, granted summary judgment to plaintiff with respect to the propertyallocation which included return of all jewelry and heirlooms that he gave defendant before andduring the marriage. However, it did not decide the maintenance issue based on theunconscionability provision of Domestic Relations Law § 236 (B) (3) (3) and the danger ofbecoming a public charge provision of General Obligations Law § 5-311.
Although the parties fully disclosed their respective assets and net worth, and the agreementwas reviewed by independent counsel, who defendant admits had told her that the agreement was"completely unfair" and advised against signing it (Strong v Dubin, 48 AD3d 232 [2008]; Cron v Cron, 8 AD3d 186 [2004],lv dismissed 7 NY3d 864 [2006], lv denied 10 NY3d 703 [2008]), the courtshould still look at the impact of the agreement at the time of its implementation (Cron at186-187; see also Bloomfield v Bloomfield, 97 NY2d 188, 194 [2001]). Defendant'sclaim that she believed that there would be no wedding if she did not sign the agreement, that thewedding was only two weeks away and that wedding plans had been made, may have beeninsufficient to demonstrate duress (seeColello v Colello, 9 AD3d 855, 858 [2004]). However, where, as here, application ofthe provision would result in plaintiff retaining [*6]essentially allthe property acquired before and during the marriage and thus appears "manifestly unfair to aspouse because of the other's overreaching," the court should make sure it does not contain anunconscionable bargain that "no [person] in his [or her] senses and not under delusion wouldmake" (Christian v Christian, 42 NY2d 63, 72, 71 [1977] [internal quotation marksomitted]; see Bloomfield, 97 NY2d at 194; McCaughey v McCaughey, 205AD2d 330, 331 [1994]).