The Unconscionable Pre-Nup

January 22, 2015 § 5 Comments

It has long been settled in Mississippi law that antenuptial agreements (or prenups) are enforceable in our courts. They are enforced and interpreted as are other contracts, with the added requirements that there be fair disclosure of finances and that they be voluntarily entered into. These heightened requirements are referred to as “procedural fairness.”

But what about the substance of the agreement itself? If the agreement is found to be procedurally fair, does that preclude further inquiry into the fairness of the instrument?

The case of Mabus v. Mabus, 890 So.2d 806 (Miss. 2003) did seem to hold that the trial court could not consider the substantive fairness of a prenuptial agreement, and a chancellor in a divorce action between Mr. and Mrs. Sanderson limited his analysis to the procedural fairness of the prenup, which he found to be fair. He enforced the agreement as written, despite the fact that it was one-sided in favor of Mr. Sanderson. Mrs. Sanderson appealed, charging that it was error for the chancellor not to consider the fairness of the contract.

In the case of Sanderson v. Sanderson, handed down December 11, 2014, the MSSC reversed and held that the substantive unconscionability of a prenup is a matter that should be considered by the trial court. Justice Coleman wrote for the majority:

¶17. Confusion has arisen in Mississippi as to whether courts should consider the substantive unconscionability of prenuptial agreements. The chancellor in the instant case stated in his Final Decree of Divorce that “some states look at both substantive and procedural unconscionability, Mississippi courts do not.” The lack of clarity in the law has arisen perhaps because of the Mabus Court’s use of the phrase “fundamental fairness” instead of “substantive unconscionability.” The Mabus Court wrote as follows:

The claim that the estates of the parties are so disparate that it questions fundamental fairness is of no consequence. An antenuptial agreement is as enforceable as any other contract in Mississippi. Of course, there must be fairness in the execution and full disclosure in an antenuptial agreement in Mississippi.

Id. at 821 (¶ 64) (internal citations omitted). The above-quoted language constitutes a holding that the Mabus prenuptial agreement was not fundamentally unfair but falls short of a blanket prohibition against considering substantive unconscionability in all prenuptial agreements. The Mabus Court’s language does not prohibit considering substantive unconscionability in prenuptial agreements as a rule of law. Mabus also makes two further assertions that have confused our law of prenuptial agreements.

¶18. First, Mabus states that a prenuptial agreement is a contract like any other contract that is subject to the same rules of construction and interpretation applicable to contracts. Mabus, 890 So. 2d at 819 (¶53) (citing Estate of Hensley, 524 So. 2d at 327). However, prenuptial agreements cannot be contracts like any other if courts cannot consider whether a prenuptial agreement can be substantively unconscionable. “The law of Mississippi imposes an obligation of good faith and fundamental fairness in the performance of every contract . . . this requirement is so pronounced that courts have the power to refuse to enforce any contract . . . in order to avoid an unconscionable result.” Sawyers v. Herrin-Gear Chevrolet Co., 26 So. 3d 1026, 1034-35 (¶ 21) (Miss. 2010) (emphasis added); see also Covenant Health & Rehab. of Picayune, LP v. Estate of Moulds ex rel. Braddock, 14 So.3d 695, 705 (¶13) (Miss. 2009).

¶19. Within contract law, there are many different types of contracts. The Legislature has carved out a remedy for unconscionable sales contracts. See Miss. Code Ann. § 75-2-302 (Rev. 2002). However, Section 75-2-302 has been applied to other types of contracts, such as arbitration contracts. Covenant Health & Rehab. of Picayune, 14 So. 3d at 706. Similarly, the Court has analyzed the unconscionablity of domestic relations contracts. See id. (“We also have found contracts to be unconscionable for clauses other than arbitration agreements.”); In the Matter of Johnson’s Will, 351 So. 2d 1339 (Miss. 1977) (considering unconscionability for a contract between a husband and wife preventing a wife from revoking her husband’s will); West v. West, 891 So. 2d 203, 213 (Miss. 2004) (“A contract may be either procedurally or substantively unconscionable.”). Accordingly, because prenuptial agreements are contracts like any other, substantive unconscionability must be considered.

¶20. The Court has even gone further and defined an unconscionable contract in domestic relations contracts. “[I]t is also the law that courts of equity will not enforce an unconscionable contract. In Terre Haute Cooperage, Inc. v. Branscome, 203 Miss. 493, 35 So. 2d 537 (1948), this Court defined an unconscionable contract as ‘one such as no man in his senses and not under a delusion would make on the one hand, and as no honest and fair man would accept on the other.’” In re Johnson, 351 So. 2d at 1341; see also West, 891 So.2d at 213 (¶ 27) (“Substantively, the terms of the property settlement agreement are less than desirable, but we cannot say that no spouse in his or her right mind would agree to what is, at worst, a begrudging but generous offer . . . to provide alimony . . . .”).

¶21. Second, the Mabus Court appears to have considered substantive unconscionability after stating fundamental fairness was of no consequence. In In re Johnson, the Court explained how to determine if a contract is unconscionable: “In determining whether this contract was unconscionable, it is necessary to analyze what the widow was to receive under the will in contrast to her rights absent the will under the laws of descent and distribution.” In re Johnson, 351 So. 2d at 1342. In other words, the Court considered what the wife would have received if the contract had not existed and if the wife was able to renounce her husband’s will. Similarly, even in light of the premarital agreement, the Mabus Court considered the White factors for lump sum alimony and the Ferguson factors for distribution of the marital property. Mabus, 890 So. 2d at 821-23 (¶¶65-71) (citing White v. White, 557 So. 2d 480, 483 (Miss. 1989); Ferguson v. Ferguson, 639 So. 2d 921 (Miss. 1994)). Also, in Estate of Hensley, in determining whether the prenuptial agreement between the husband and wife was enforceable, the Court noted that “a full reading of the record divulges that Mr. Hensley had actually been very benevolent.” Estate of Hensley, 524 So. 2d at 328. Thus, Mississippi has implicitly considered the substantive unconscionablity of premarital agreements. We hold that, given the contract law on unconscionability, substantive unconscionability for premarital agreements must be considered by trial courts.

¶22. Contract law has largely, with the exception of the sale of goods, remained common law. Therefore, inevitably, contradictions arise. Unconscionability looks at the terms of the contract. See West, 891 So. 2d at 213. Unconscionability also looks at the circumstances existing at the time the contract was made. Vicksburg Partners, L.P. v. Stephens, 911 So.2d 507, 517 (¶ 22) (Miss. 2005), overruled on other grounds by Covenant Heath & Rehab. of Picayune, LP v. Estate of Moulds ex rel. Braddock, 14 So. 3d 695 (Miss. 2009). We hold that substantive unconscionability feasibly could be measured at the time the prenuptial agreement is made; measuring it at the time the agreement is made would maintain consistency in the law. It also would ensure that the Court does not “relieve a party to a freely negotiated contract of the burdens of a provision which becomes more onerous than had originally been anticipated.” Mabus, 890 So. 2d at 819 (¶53) (quoting Estate of Hensley, 524 So. 2d at 328).

¶23. Because the chancellor in the case sub judice operated under the erroneous conclusion that the prenuptial agreement could not be analyzed for substantive unconscionability, we reverse and remand the case for him to do so. We decline the dissent’s invitation to conduct that analysis for the first time on appeal, because the error consisted of making no finding at all rather than the wrong finding. In other words, there is no decision on point for us to analyze for error.

There are some serious ramifications here for the drafting of antenuptial agreements. You will need to discuss the fairness of the agreement with your client, but that is a subject most clients do not care to address; after all, their primary concern is to maintain a status quo that is in all likelihood quite unfair. In Sanderson, for example, the husband’s pre-marital estate was in excess of $3 million, and the wife’s only around $120,000. He wanted to maintain that pre-marital wealth. Is that imbalance unconscionable?

Analyzing antenuptial agreements through the lens of contract law is problematical. The fact is that antenuptial agreements involve considerations that do not enter into negotiation of other types of contracts. As Justice Chandler’s dissent points out, “The decision to marry is not an arms-length commercial transaction, but rather is grounded in personal, moral, religious, and emotional considerations that are off-limits to strangers to the relationship.”

Justice Chandler goes on to add that the majority’s decision ” … leaves our chancellors to forage in the dark, with no guidance as to many issues[;] for instance, whether a prospective marriage partner with children from a previous marriage may protect and provide for those children in a prenuptial agreement, without fear that a court will void the agreement as unconscionable and leave the children at the mercy of the former spouse.” As a drafting or advising attorney, you likewise are in the dark as to whether a particular prenup will withstand scrutiny.

A Few Random Thoughts About Pre-Nups

August 6, 2014 § 3 Comments

If you’ve practiced law for any length of time, you have been confronted with this scenario:

Mr. X, a client for whom you likely have done some agreeable work before, enters your office accompanied by a pleasant woman, Miss Y, who is introduced as his fiancée.

After the initial pleasantries, Mr. X informs you that the happy couple is being married tomorrow, and they need you to prepare an antenuptial agreement. It should not be any big problem, because they have agreed, after much discussion, to the terms upon the piece of notebook paper that Mr. X pulls out of his wallet and lays on your desk. If you will have it typed up, they will sign it and go forth to embark on an ensuing lifetime of marital bliss, they tell you while gazing lovingly into each other’s eyes (eyelashes batting furiously).

Now, let’s stop right there before you hand it to your secretary to type up. Let’s consider a few points:

  • Antenuptial agreements are enforceable, if they are fair in their execution and a full disclosure of assets and liabilities has been made. Smith v. Smith, 656 So.2d 1143 1147 (Miss. 1995). If the parties agree to language that a full disclosure has been made, that creates a presumption that it was done. See, Kitchens v. Estate of Kitchens, 850 So.2d 215, 217 (Miss. App. 2003). The presumption may, however, be overcome by proof of fraud, misconduct, or overreaching. Id. In a case I had recently, both parties testified that neither had the benefit of any financial disclosures of the other, and neither had any clue as to the financial situation of the other, effectively negating the language in their own agreement.
  • Just as in an irreconcilable differences divorce, you can not ethically represent both parties. You need to make it clear that you can only represent one, and my suggestion is that it be the one with whom you had a previous attorney-client relationship. In a case where you represented neither or both before, they will have to choose.
  • You need to confer separately with your client about the content of the agreement, and you need to inform the other party that (s)he should seek and obtain independent legal advice. This is critical. Laypeople do not understand the intricacies and nuances of marital property, alimony, and divorce, and the seemingly innocuous provisions they jotted down on that paper may have far-reaching and even drastic repercussions for either or both later in the context of a divorce or estate.
  • Whom you represent, and the fact that you have not provided legal advice to the the other party, and that the other party is aware of the need to consult with independent counsel, all need to be spelled out in the agreement you draft
  • And while I am on that point, fastidiously avoid saying or doing anything that can be construed as legal advice to the unrepresented party. I can guarantee that that will come back and bite you in your nether regions.
  • Seriously consider whether you even want to touch this with the virtual ten-foot pole. Can all the bases be covered in the brief twenty-four hour period? Who will be held responsible if it all blows up in your client’s face? Do you have time to do the investigation and consultation with your client necessary to protect him?

It’s for another post to talk about the ingredients of an effective, successful pre-nup. My advice is, unless you have a tried-and-proven form in which you have complete confidence based on its being upheld in other cases, you should not even attempt to do one. I also suggest that you never do a pre-nup at the eleventh hour, as was the case here.

Rock, Paper, Scissors … Will, Pre-Nup, Quitclaim Deed

May 20, 2014 § 7 Comments

If I remember correctly, rock beats scissors, paper beats rock, and scissors beats paper.

But as among a will, a pre-nuptial agreement, and a quitclaim deed, which beats what? That was the question posed in Estate of Jones: Dixon v. Jones, decided  by the COA on April 29, 2014. 

Johnnie Lee Jones, the decedent, and his soon-to-be wife, Annie Ruth, entered into a prenuptial agreement on March 19, 1997. The agreement provided that, upon Johnnie Lee’s death, the home titled in his sole name was to go to Bonnie Jones Dixon, his daughter from a prior relationship. The home was located at 171 Vine Street in Jackson.  

After their marriage, Johnnie and Annie Ruth lived together in the Vine Street residence.

On September 16, 1998, Johnnie executed a will leaving the Vine Street home to Annie Ruth for her life, at which point the property was devised to his sister, Eliza Mae Webster. The will included the customary language that it revoked ” any and all previous testaments.”

Beginning in 2001, Johnnie and Annie Ruth claimed the property as their homestead.

On December 14, 2005, Johnnie executed a quitclaim deed conveying the Vine Street property to himself and his daughter Bonnie as joint tenants with right of survivorship. Annie did not sign the deed, although she and Johnnie were still married at the time.

Johnnie died on January 22, 2011, and Annie Ruth, who continued to live in the Vine Street home, filed pleadings on November 29, 2011, to admit Johnnie’s will to probate. Before an order was entered, however, Bonnie filed suit for declaratory judgment that she was the rightful owner of the property, and for damages. Bonnie relied on both the pre-nuptial agreement and the quitclaim deed. On January 17, 2012, the chancellor admitted the will to probate.

On November 29, 2012, the chancellor denied the declaratory relief. The judge ruled that the will revoked the pre-nuptial agreement, and that the deed was statutorily void because it conveyed homestead and did not bear Annie Ruth’s signature. Bonnie appealed.

The COA rejected Bonnie’s argument that the word “testaments” as used in the revocation language of the will referred solely to instruments disposing of personal property only, and not real property. The COA held that the use of the term “testaments” was interchangeable with “will,” and that MCA 91-5-3 expressly provides that a devise may be revoked by a testator’s subsequent will. The court concluded that the will revoked the pre-nuptial agreement. Interestingly, Bonnie’s attorney cited Wikipedia in support of her argument, and the COA cited www.yourdictionary in reaching its conclusion. Modern times.

As for the quitclaim deed, the court agreed with the chancellor that the quitclaim deed was void. The court cited MCA 89-1-29: “A conveyance, mortgage, deed of trust or other incumbrance upon a homestead exempted from execution shall not be valid or binding unless signed by the spouse of the owner if the owner is married and living with the spouse or by an attorney in fact for the spouse.”

The court also cited this language from Ward v. Ward, 517 So.2d 571, 573 (Miss. 1987):

Our legislature has chosen to place a restriction on the transfer or encumbrance of homesteads[,] and therefore, homesteads in Mississippi may not be alienated except in compliance with those restrictions. There can be no operative conveyance or effectual release of the exemption unless the method pointed out by the statute is pursued with strictness[,] and no requirement of the statute may be waived by the husband and wife or by either of them. Chancery will not interfere to give relief where by express law there is a limitation on the power of alienation of the homestead[,] and the final relief sought is merely to relieve that limitation. (emphasis added)

Our statutes and the case law applying them are quite protective of spouses’ homestead rights. This case is one in a long line of cases that lean in that protective direction.

The other lesson to be learned here is that a subsequently-executed will that includes appropriate revocation language will revoke any and all previous testamentary documents, including a pre-nuptial agreement.

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