| Anonymous v Anonymous |
| 2014 NY Slip Op 08766 [123 AD3d 581] |
| December 16, 2014 |
| Appellate Division, First Department |
[*1]
| Anonymous,Appellant-Respondent, v Anonymous,Respondent-Appellant. |
Cohen Rabin Stine Schumann LLP, New York (Harriet Newman Cohen and BonnieE. Rabin of counsel), for appellant-respondent.
Boies, Schiller & Flexner LLP, New York (Charles F. Miller of counsel), forrespondent-appellant.
Order, Supreme Court, New York County (Ellen Gesmer, J.), entered on or aboutMay 10, 2013, which, to the extent appealed from as limited by the briefs, deniedplaintiff's request for an extension of time to challenge the parties' prenuptial agreement,limited plaintiff's award of counsel fees in accordance with the prenuptial agreement,limited defendant's obligation regarding payment of the costs of a car and driver used byplaintiff and the parties' children, and denied plaintiff's request for an order directingdefendant to pay the expenses on the parties' Michigan house, modified, on the law andthe facts, to the extent of vacating the limitation on plaintiff's award of counsel fees, anddirecting the court to determine at trial whether the counsel fee provision in theprenuptial agreement is unenforceable, and otherwise affirmed, without costs. Order,same court and Justice, entered on or about November 21, 2013, which, to the extentappealed from as limited by the briefs, denied plaintiff's motion to renew her request thatdefendant make all payments necessary for the use and upkeep of the car and driver, andgranted plaintiff's motion for interim counsel fees to the extent of awarding her $300,000in interim fees for the preparation of the custody trial subject to recoupment,unanimously affirmed, without costs. Order, same court and Justice, entered December18, 2013, which, to the extent appealable, denied plaintiff's motion for a pendente liteorder directing defendant to pay for the car and driver, unanimously affirmed, withoutcosts.
In this matrimonial action plaintiff wife seeks, among other things, to set aside theparties' prenuptial agreement. The parties entered into a so-ordered stipulation on July 12,2012, agreeing that any challenge to the prenuptial agreement would be made by August31, 2012. Plaintiff seeks an extension of time to challenge the agreement. She alleges thatthe agreement as a whole should be invalidated because she was pressured into signing itjust hours before the rehearsal dinner on the night before the wedding. She also claimsthat defendant husband told her that he would rip up the agreement after they weremarried for 10 years. Plaintiff further alleges that her attorneys need to conduct discoveryregarding the agreement in order for her to prove the allegations that provisions of theagreement are unconscionable, and that defendant should be directed to pay expert andattorneys fees necessary to conduct such discovery.
While a court has the authority to extend the time limits set forth in a so-orderedstipulation, here the motion court providently exercised its discretion in denyingplaintiff's request for an extension of time to challenge the prenuptial agreement,especially since she failed to demonstrate good cause for a further extension (seeCPLR 2004). Additionally, as discussed below, plaintiff's arguments regarding thevalidity of the agreement lack merit.
New York has a long-standing "strong public policy favoring individuals orderingand deciding their own interests through contractual arrangements" (Matter ofGreiff, 92 NY2d 341, [*2]344 [1998]). It isaxiomatic that a duly executed prenuptial agreement is presumed to be valid andcontrolling unless and until the party challenging it meets his or her very high burden toset it aside (see Bloomfield v Bloomfield, 97 NY2d 188, 193 [2001]). However,in many instances, "agreements addressing matrimonial issues have been subjected tolimitations and scrutiny beyond that afforded contracts in general" (Kessler v Kessler, 33 AD3d42, 46 [2d Dept 2006], lv dismissed 8 NY3d 968 [2007]). Although "there isa heavy presumption that a deliberately prepared and executed written instrumentmanifests the true intention of the parties" (Brassey v Brassey, 154 AD2d 293,295 [1st Dept 1989]), an agreement between prospective spouses may be invalidated ifthe party challenging the agreement demonstrates that it was the product of fraud, duress,or other inequitable conduct (see Christian v Christian, 42 NY2d 63, 72 [1977]).Nevertheless, such results remain the exception rather than the rule. The burden ofproducing evidence of such fraud, duress or overreaching is on the party asserting theinvalidity of the agreement (Matter of Greiff, 92 NY2d at 344; Cohen v Cohen, 93 AD3d506 [1st Dept 2012]).
Here, the court correctly determined that plaintiff did not meet her burden ofestablishing grounds to set aside the agreement as a whole. Contrary to her claim that shewas pressured into signing the agreement, the record is clear that this agreement wasnegotiated over approximately four weeks. Plaintiff was represented throughout that timeby highly competent and experienced matrimonial counsel. The agreement went throughsix drafts before a final copy was signed and changes in the terms of the agreementrequested by plaintiff's counsel were incorporated into the final document. Theagreement expressly disclaims any reliance on representations other than those set forthin the agreement, and extrinsic evidence regarding the parties' intent may not beconsidered unless a court first finds that the agreement is ambiguous, which in this case itis not (see Van Kipnis v VanKipnis, 11 NY3d 573, 577 [2008]).
Plaintiff argues that defendant's admitted failure to transfer to her one of theproperties he owns in Michigan pursuant to the terms of the agreement is evidence offraud. However, the record establishes shows that in the 12 years of the marriage, nodemand was made for the transfer of this particular property. In fact, plaintiff apparentlyraised no objection when this property was sold during the course of the marriage.Defendant contends that the failure to effect a formal transfer of this property was anoversight and has agreed to give plaintiff the proceeds of the sale, plus interest, as part ofan equitable distribution settlement. Thus, plaintiff, who never raised this issue prior tothe commencement of this action, failed to demonstrate that she was fraudulently inducedinto signing the agreement by defendant's promise to transfer that property to her. Atbest, she may have a cause of action for breach of contract and is entitled to receive thevalue of the property in equitable distribution, as indicated by the court (see Ungar v Savett, 84 AD3d1460, 1461 [3d Dept 2011]).
Defendant's failure to disclose the entirety of his financial interests is also not areason to vitiate the contract (see Strong v Dubin, 48 AD3d 232, 233 [1st Dept 2008]; see also Smith v Walsh-Smith,66 AD3d 534, 535 [1st Dept 2009], lv denied 14 NY3d 704 [2010]).Plaintiff was well acquainted with defendant's assets, and she specifically acknowledgedin the agreement that the amounts she would receive "are so significantly less than either[defendant's] assets or annual income that the precise amount of [his] assets and incomeis irrelevant to her decision to enter into this Agreement and the enforceability of thisAgreement." Indeed, the parties anticipated at the time of the agreement that defendant'sassets would continue to rise significantly. In the face of such an acknowledgment, shecannot claim that the agreement is invalid based on a failure to disclose assets.
With respect to plaintiff's claim that the maintenance provisions are unconscionable,we note that "an agreement concerning the amount and duration of spousal maintenancemust be fair and reasonable at the time it is made, and not unconscionable at the time ofentry of final judgment in the divorce action" (Kessler, 33 AD3d at 46).Moreover, courts have the authority to review maintenance agreements to ensure suchagreements are not unconscionable at the time of the entry of the judgment of divorce(Domestic Relations Law § 236 [B] [3] [3]; see Colello v Colello, 9 AD3d855, 860 [4th Dept 2004]). Since the motion court has permitted plaintiff tochallenge at trial whether the maintenance provision in the agreement is presentlyunconscionable in terms of plaintiff's current needs, expenses, and income, this issue mayserve [*3]as a basis to set aside that provision of theagreement.[FN1]
The motion court providently exercised its discretion in declining to order defendantto pay, pendente lite, the expenses of the Michigan vacation property, which, defendantcontends, he has been paying. The court further properly declined to direct defendant topay, pendente lite, the expenses of a car and driver since plaintiff has regained the abilityto drive. A speedy trial is plaintiff's remedy for these perceived inequities in the pendentelite award (see Sumner v Sumner, 289 AD2d 129, 130 [1st Dept 2001]). Further,the court properly denied plaintiff's motion to renew her request regarding the car anddriver, as the purported new facts regarding the parties' daughter would not change theprior determination (see CPLR 2221 [e] [2]). To the extent plaintiff sought leaveto reargue her request, the denial of that motion is not appealable (see Windham v New York City Tr.Auth., 115 AD3d 597, 599 [1st Dept 2014]).
The court also providently exercised its discretion in awarding plaintiff $300,000 ininterim counsel fees for trial preparation on child-related issues on condition that shepresent documentation of legal work within 30 days after trial (see DomesticRelations Law § 237). However, given the unique procedural posture ofthis case and the great disparity between the parties' finances both at the time of theexecution of the prenuptial agreement and at the time of the commencement of thisaction, plaintiff's request for counsel fees beyond those incurred for child-related issues isan issue appropriate to leave for trial (see Kessler, 33 AD3d at 47-48). AsSupreme Court has ruled that plaintiff is entitled to a hearing on her challenge to themaintenance provisions of the prenuptial agreement, and, as noted, that ruling is notchallenged on appeal, an award of counsel fees may be necessary despite the feewaiver, "as justice requires" (Domestic Relations Law § 237 [a]) in order toensure a level playing field to litigate her claim.[FN2] Accordingly, we direct that thequestion of the validity of the counsel fee provision for non-child-related issues in theparties' agreement should be considered at trial. Concur—Sweeny, J.P., Renwickand Kapnick, JJ.
Andrias and Saxe, JJ., concur in a separate memorandum by Saxe, J., as follows: Weare confronted on this matrimonial appeal with a conflict between the supremacy of twoimportant but divergent facets of public policy: "the strong public policy favoringindividuals ordering and deciding their own interests through contractual arrangements"with prenuptial agreements (Bloomfield v Bloomfield, 97 NY2d 188 [2001]),and the competing policy—enunciated in Domestic Relations Law§ 237 (a)—in favor of ensuring that nonmonied spouses have theability to litigate legitimate issues (see Silverman v Silverman, 304 AD2d 41, 48[1st Dept 2003]).
The parties entered into a prenuptial agreement that included a waiver of counselfees. The wife sought to challenge the validity of the prenuptial agreement, and movedfor various relief. I agree with the majority's affirmance of the denial of plaintiff'srequests (1) for an extension of time to challenge the parties' prenuptial agreement, (2)for an order directing defendant to pay, pendente lite, the expenses for the Michiganhouse or for a car and driver once plaintiff regained the ability to drive, and (3) to renewher earlier request regarding the car and driver, based on purported new facts regardingthe parties' daughter. I also agree with the [*4]majoritythat it was a provident exercise of discretion for the motion court to award plaintiff$300,000 in interim counsel fees for trial preparation on issues of child support andcustody, on condition that she present documentation of the legal work within 30 daysafter trial.
However, one aspect of the majority's opinion seems to me to require a moreelaborate explanation that what is provided, although I agree with the result. That aspectof the ruling modifies the order on appeal insofar as Supreme Court denied counsel feesfor any issues other than child-related matters, in view of plaintiff's waiver of counselfees contained in the prenuptial agreement. Our order, despite that fee waiver, directsSupreme Court to determine at trial whether the fee waiver may be set aside, with thefollowing explanation:
"[P]laintiff's request for counsel fees beyond those incurred for child-related issues isan issue appropriate to leave for trial (see Kessler, 33 AD3d at 47-48). AsSupreme Court has ruled that plaintiff is entitled to a hearing on her challenge to themaintenance provisions of the prenuptial agreement, and, as noted, that ruling is notchallenged on appeal, an award of counsel fees may be necessary despite the feewaiver, 'as justice requires' (Domestic Relations Law § 237 [a]) in order toensure a level playing field to litigate her claim."
I agree with the majority that under the unique procedural posture of this matter, it isappropriate to leave for trial the question of whether plaintiff may be entitled to an awardof counsel fees for the litigation of the non-child-related issue of maintenance. However,I believe that given the strong possibility that this ruling may be misunderstood ormisapplied, substantially more examination and discussion of our holding is required. Itherefore write separately to discuss the limited circumstances where it is appropriate toconsider awarding counsel fees despite such a fee waiver.
Initially, it is important to strongly emphasize that under most circumstances, courtsshould enforce counsel fee waivers contained in prenuptial agreements. The law sets thebar very high for a party seeking to void provisions of a prenuptial agreement (see Van Kipnis v Van Kipnis,11 NY3d 573, 577 [2008]; Barocas v Barocas, 94 AD3d 551, 551-552 [2012]). As ageneral rule, "[d]uly executed prenuptial agreements are accorded the same presumptionof legality as any other contract" (Bloomfield v Bloomfield, 97 NY2d 188, 193[2001]). And, most importantly for the present purposes, prenuptial agreements mostoften involve substantial disparities of wealth between the parties; nevertheless, suchdisparities by themselves do not create grounds to set aside marital agreements (see Smith v Walsh-Smith, 66AD3d 534, 535 [1st Dept 2009]; Strong v Dubin, 48 AD3d 232, 233 [1st Dept 2008]).
Of course, prenuptial agreements may be set aside in their entirety on grounds of"fraud, duress, or other inequitable conduct" (Cioffi-Petrakis v Petrakis, 103 AD3d 766, 767 [2d Dept2013]). Nevertheless, such results remain the exception rather than the rule. As oneNassau County Supreme Court Justice has aptly observed, a prenuptial agreement islikely to be upheld as long as "each spouse retains a lawyer [of] his or her own choosing,is provided with a proposed agreement with sufficient time to give due consideration tothe serious consequences of the proposed terms, is given fair and adequate disclosure,and is presented with an agreement that does not scream inequity or will leave one partypractically destitute" (C.S. v L.S., NYLJ 1202610051412, *8 [Sup Ct, Nassau CoJune 6, 2013]; see Alton L. Abramowitz, 'Live by the Prenup, Die by thePrenup!,' NYLJ, Aug. 29, 2013 at 3, col 1).
When a prenuptial agreement is not set aside in its entirety based on fraud orunconscionability, specific provisions of it may still be stricken. This is becauseDomestic Relations Law § 236 (B) (3) dictates that extra scrutiny be givento maintenance and child support provisions of marital agreements, defined asagreements "made before or during the marriage" (Domestic Relations Law§ 236 [B] [3]). While the statute directs that property distribution provisionsare "valid and enforceable" as long as they are "in writing, subscribed by the parties, andacknowledged or proven in the manner required to entitle a deed to be recorded"(id.), it specifies that maintenance provisions are valid and enforceable "providedthat such terms were [*5]fair and reasonable at the timeof the making of the agreement and are not unconscionable at the time of entry of finaljudgment." In addition, such provisions are subject to General Obligations Law§ 5-311, which prohibits marital agreements that relieve either spouse of thesupport obligation to the extent that the other is likely to become a public charge(id.). With regard to child support provisions, the statute directs that they shallremain subject to the protections of Domestic Relations Law § 236(id.).[FN*]So, only in those respects does the law dictate that prenuptial agreements waiving orlimiting claims by one spouse against the other must receive a greater degree of scrutinythan ordinary contracts when considering whether they must be enforced.
It is important to note that the heightened standard that the Domestic Relations Lawcreates for review of maintenance and child support provisions of marital agreements hasno counterpart for counsel fee waivers contained in such agreements. There is simply nostatutory basis for setting aside a presumptively valid counsel fee waiver on any groundsother than the usual grounds for setting aside a contract provision, such asunconscionability based on overreaching or inequitable conduct in the execution of theagreement (see Barocas v Barocas, 94 AD3d at 552). Accordingly, when a validprenuptial agreement includes a waiver of counsel fees, ordinarily there is no viable basisfor an award of such fees under section 237.
Nevertheless, there may be circumstances when a triable issue emerges despite theexistence of a prenuptial agreement, and the possible need for litigation of that triableissue creates with it a possibility—not a certainty—that theagreement's fee waiver may be found unenforceable to that extent.
The case of Kessler vKessler (33 AD3d 42 [2d Dept 2006], lv dismissed 8 NY3d 968 [2007])helps illustrate this concept. There, although the remainder of the prenuptial agreementwas upheld, the Second Department affirmed an order holding a prenuptial agreement'sfee waiver to be "unconscionable and unenforceable in light of the strong public policyembodied in Domestic Relations 237 (a)." The Court acknowledged the inherent conflictbetween the "strong public policy favoring individuals ordering and deciding their owninterests through contractual arrangements," and the policy embodied in DomesticRelations Law § 237, "in favor of assuring that matrimonial matters aredetermined by parties operating on a level playing field" (Kessler, 33 AD3d at45). Being careful to recognize that "not every agreement waiving the right to seek anaward of an attorney's fee should be set aside" (id. at 47), the Second Departmentconcluded that "[i]f . . . enforcement of the [fee waiver] would preclude thenonmonied spouse from carrying on or defending a matrimonial action as justicerequires, the provision may be held unenforceable" (id. at 48). In setting aside thefee waiver, the Court of Appeals pointed to the wife's suggestion that even if theprenuptial agreement was upheld, there were triable issues concerning what property wascovered by the agreement and what was acquired after the agreement. Therefore, alegitimate need for some litigation was presented, creating a valid basis for an award ofcounsel fees despite the valid prenuptial agreement.
Here, the issue that needs to be tried, which may make an award of counselfees necessary despite the fee waiver, in order to ensure a level playing field, is not anissue that the prenuptial agreement failed to cover, as was the case in Kessler.Rather, the motion court ruled that the wife [*6]is entitledto a hearing on her challenge to the maintenance provisions of the prenuptial agreement,and that ruling is not challenged on appeal. Consequently, although nothing inthe record before this Court justifies the need for such a hearing, we must accept, basedon the unchallenged ruling, that plaintiff has made the requisite showing establishing theexistence of a potentially meritorious challenge to the maintenance provision of theprenuptial agreement, which could, in turn, give her a legitimate basis to challenge herfee waiver.
It bears emphasis that awarding counsel fees despite a fee waiver, or even finding atriable issue regarding whether counsel fees should be awarded despite a fee waiver, isnot normally warranted where the parties entered into a valid prenuptialagreement—and a disparity between the parties' finances does not, in itself, changethat fact. Rather, the presented circumstances must be such as would actually precludethe nonmonied spouse from carrying on or defending a viable claim requiring litigation,so that justice could require an award of counsel fees to the non-monied spouse ascontemplated by Domestic Relations Law § 237 (a), notwithstanding thatspouse's fee waiver. The need to conduct a fact-finding inquiry into whether justicerequires an award of counsel fees despite a fee waiver will only emerge where the partychallenging the waiver has made a prima facie showing that there is a meritorious, or atleast potentially meritorious, challenge to terms of the prenuptial agreement, promptingthe need for litigation.
The majority's decision referring for trial the issue of the fee waiver's validity,without sufficient discussion, could encourage future baseless applications for awards ofcounsel fees despite fairly-negotiated, valid prenuptial agreements containing feewaivers. I am concerned about more than just the possibility of baseless awards ofcounsel fees in such situations; I also anticipate that fee applications which ought to berejected outright may unnecessarily be referred for trial regarding the issue of theenforceability of the fee waiver. This would in turn result in the accrual of unnecessaryfees, which additional costs will then be included in settlement demands, any time a courtperceives an issue of fact regarding the enforceability of provisions of a facially validprenuptial agreement.
To be clear, awarding counsel fees or trying the issue of whether such fees should beawarded despite a fee waiver, should be considered only in the narrowest ofcircumstances, when (1) litigation of an issue is required although it is covered by theparties' prenuptial agreement, and (2) justice requires an award of fees to allow thenonmonied spouse to litigate that issue (Domestic Relations Law 237 [a]).
Footnote 1:Defendant has notappealed that portion of Supreme Court's order setting the maintenance issue down fortrial.
Footnote 2:We do not share theconcern of our concurring colleague that our decision will encourage baseless feeapplications which may unnecessarily be referred to trial. Our decision does nothing toalter or expand well settled precedent regarding enforcement of valid prenuptialagreements. Our trial court has the expertise and experience to reject such feeapplications.
Footnote *: Notably, I am notaddressing here the potential need for awards of counsel fees, despite fee waivers,needed to litigate child-related disputes. Indeed, in the present case, the parties'prenuptial agreement properly allows for court awards of fees for child-related issues,albeit providing for their award at the conclusion of the litigation, without considerationof whether the non-monied spouse will have the ability to assume that cost. The presentdiscussion is limited to awards of counsel fees for non-child-related legal work where theclient waived such counsel fees in a prenuptial agreement.