Contesting A Pre-Nuptial Agreement - A Difficult Task
by Elliot D. Samuelson, Editor
Prior to the Court of Appeals' decision in Matter of Greiff [i], the person seeking to set aside a pre-nuptial agreement had the initial burden of proof. However, all that changed with the Court of Appeals pronouncement in Greiff that created a two-prong "burden of proof" standard that could shift the burden of proof from one to the other party. The high court explained that a spouse seeking to contest a pre-nuptial agreement has the threshold burden of proving, by a fair preponderance of the evidence, a fact-based inequality between the parties to the agreement "that demonstrates probable undue influence and unfair advantage." These words are pregnant with meaning and will undoubtedly be subject to different interpretations by the lower courts. Certainly, the remaining admonition made by the court that if the contesting spouse meets this initial burden, then the burden of going forward shifts to the spouse who seeks to uphold the validity of the agreement to prove that the agreement was free from fraud, deception or undue influence, will be heeded differently from judge to judge.
One of the first courts to grapple with this standard was a recent case in the Surrogate's Court of Nassau County,In the Matter of the Estate of Rappaport[ii]. These abstract principles of law were discussed and applied, resulting in a finding that the surviving spouse could not upset the pre-nuptial agreement nor make an election against the decedent's will. Each case will be fact sensitive.
The facts of Rappaport, supra are most interesting and should be reviewed at this juncture. The decedent, Fred Rappaport, met the surviving spouse who sought to contest the pre-nuptial agreement, Marguerite Downs, in 1983. She was 23 and he 49. In April of 1983, Marguerite moved in with Fred in his home in Mill Neck, New York , and they lived together almost continuously until Fred's death on December 31, 1998. (There was a 5 month separation that occurred between September, 1988 and February, 1989). The couple married on June 23, 1990 (after living together for 7 years), so at the time of Fred's death their marriage was 8 years in duration. Marguerite had gone to college but never graduated. Prior to beginning her relationship with Fred, she held several jobs including being employed as a leasing agent in a commercial real estate concern. During the time that she lived with Fred both before and during the marriage, she did not work since Fred's income was more than sufficient to establish a meaningful standard and lifestyle.
The Surrogate noted parenthetically, perhaps because Fred 's estate placed importance on this fact, that at the time of their prior separation, Marguerite had given an ultimatum to Fred to marry her and he refused.
The Court then noted that only three (3) witnesses were called at trial: the attorney who reviewed the pre-nuptial agreement with Marguerite, the attorney who drew the agreement for Fred, and Marguerite herself. Surrogate Radigan then correctly went on to analyze the relevant factors that had to be considered by the Court to determine any inequality between the parties and whether there was probable undue influence and unfair advantage. (The test apparently is in the conjunctive not the disjunctive, requiring a finding of both undue influence and unfair advantage). The Surrogate set forth the test seriatim: (1) detrimental reliance on the part of the poorer spouse; (2) the relative financial positions of the parties; (3) the formality of the execution ceremony itself; (4) whether there was full disclosure of assets as a prerequisite to a knowing waiver; (5) the psychological or mental condition of the objecting spouse at the time of execution; (6) a determination of whether one party had superior knowledge or ability and an over-mastering influence on the part of the proponent of the agreement; (7) the presence of separate independent counsel for each party; (8) the circumstances in which the agreement was proposed and whether it is fair and reasonable on its face; and (9) the provisions for the poorer spouse in the will.
Unfortunately, the court did not expand further on how each factor should be determined, or what weight should be given to them. The decision does not give guidance of whether, for example, the lack of independent counsel standing alone, would be a sufficient basis to move to the second prong, and shift the burden to the decedents' estate to establish the agreement was free of fraud and deception.
In most respects, Surrogate Radigan made a thoroughly expansive decision. But, for example, on the issue of detrimental reliance of the poorer spouse, he simply recited that Marguerite did not give up friends, family, assets or career objectives to marry Fred. Even if she had done so, he further remarked, it would have been insufficient because her motive was merely to cohabit with Fred prior to marriage. It appears that the judge thereby penalized her for living together without the benefit of marriage.
The fact that there was a major disparity in the financial positions of the parties apparently did not impress the Surrogate since Fred had millions and Marguerite a mere pittance by comparison. The judge held that there was no testimony that Marguerite had any physical or mental condition that prevented her from entering into the agreement voluntarily, although Marguerite complained she was pressured into signing the agreement. With respect to the "who had superior knowledge factor," he held that even though Fred was a far more sophisticated business person than Marguerite, there was no evidence that he wielded an "over mastering influence on her" and he noted that her earlier ultimatum and decision to leave evinced an ability to think and act independently of Fred. One cannot help to speculate that another judge might have reached an entirely different interpretation.
With respect to independent counsel, the Court noted that Fred's attorney drafted the agreement which originally contained a total waiver of all property in the event of either divorce or death as well as support. Marguerite admitted to speaking with a lawyer who was a friend of Fred's, or at least was known to him through his business attorney, but he denied he represented her. A second draft of the agreement contained a provision for Marguerite to receive $100,000, but there were still no provisions for the payment of any support, regardless of the term of the marriage. There was testimony that after the original and second drafts were made, Marguerite tore up the document in anger because it contained such meager terms. She also testified that Fred told her that the document was only a temporary measure. Finally, she claimed because of the pressures exerted upon her, she relented and executed the final agreement.
The Surrogate did not find Marguerite's testimony credible that she was badgered for three hours to execute the document. He further observed that if Marguerite truly believed that the document was temporary, why had she done nothing to seek to set it aside or modify it for 8 ½ years. The Court then turned to the question of whether the agreement was fair and reasonable on its face, but in doing so, failed to discuss the relative financial positions of the parties. Rather, the court stated out of context that the pre-nuptial agreement was brought up weeks prior to the date that it was executed, seemingly making any other deficiencies fall to the wayside. This was perhaps the most difficult part of the court's decision to follow because it totally ignored the fact that Marguerite had no income and meager assets while Fred was a multimillionaire.
Based upon his discussion and review of the facts, the Surrogate concluded that Marguerite had failed to sustain her threshold burden of proof to show any inequality of circumstances between she and Fred to demonstrate "probable undue influence and unfair advantage." He concluded that the burden never shifted to Fred's estate to prove the agreement was absent of fraud, deception or undue influence.
When considering the Surrogate's conclusion, one cannot help but speculate that there will be few circumstances sufficient for a disadvantaged financial spouse to sustain her burden of proof. Here, Marguerite did not have counsel of her own choosing, the lawyer who did give her advice apparently did not act in her best interest nor was he capable of negotiating a fair agreement, and Marguerite only received $100,000 and no support, when Fred apparently died with assets of several million dollars, although the decision is not clear on this point.
What would be more unfair than for a spouse to live with her millionaire husband in a happy marriage of eight years duration that did not terminate in divorce, and then at the time of the husband's death, walk out with a bequest of but $100,000, when without the agreement she could have elected against his will and received several millions of dollars? It seems to me that the Court did not give sufficient weight to this factor which should have been sufficient to shift the burden to the estate. A finding by the Court to shift the burden to the estate would not necessarily mean that Marguerite would be successful but would at least permit a full exploration of the issue of whether the agreement was free from fraud, deception, or undue influence.
The Rappaport case is one of the first to interpret the holding made by the Court of Appeals in Greiff. It should be required reading for any attorney who will engage in a contest of a pre-nuptial agreement. Any witness you call should certainly review with you the factors contained in this decision before testifying in court in order to ensure that the record will be sufficient for judicial review. There is little doubt that each case will rest upon the scope of the testimony and the credibility of the witnesses. As more and more decisions are rendered, the Court of Appeals may choose to give further guidance to the bar as to the weight that should be given to the enumerated factors, and make it easier to determine the ultimate outcome of such litigation.
[i].92 N.Y.2d 341
[ii].184 Misc.2d 660, 709 N.Y.S.2d 921 (Nassau County Surrogate's Court 2000)