I have seen this more than one time in my career. One party (or his/her family members) really wants there to be a prenuptial agreement but, either due to lack of time, fear/cowardice, not having your act together, or any other reason, the prenup never gets done. Some I have seen signed just after the wedding, with a clause that says something like “we really meant this to be done before the wedding, but didn’t get around to it, but want this agreement to be treated as if it was signed before the wedding.” I have seen other signed weeks, months or years later with similar disclaimers and so-called “statements of intentions.” Given that post-nuptial agreements are disfavored in New Jersey (more on that later), these attempts to claw back prenup treatment for agreements signed after the wedding have always given me cause for pause, and I figured that one day there would be a case where this was disallowed. Today is that day.
Specifically, on April 30, 2021, the Appellate Division released a reported (precedential) opinion, authored by Judge Enright (a former matrimonial attorney) in the case of Steele v. Steele where the prenuptial agreement was signed more than 7 months after the wedding, while the wife was pregnant with the parties’ first child. While the trial court in this case, relying (improperly so it seems) on a similar unreported (non-precedential) decision enforced the prenuptial agreement as a marital agreement, the Appellate Division reversed in a 41 page opinion.
The factual background in the decision is quite long but I will try to boil it down to the essential facts. The parties were both previously married and divorced. The wife had a child from her prior marriage, but little else in terms of income and assets. The husband apparently was the beneficiary of family wealth, in the nature of business interests, interests in trusts, retirement, assets, etc. valued at millions of dollars (and the value was different in different disclosures over time.) The motion of the prenup can up, at least from the husband’s perspective, almost two years prior to the parties’ wedding – even pre-proposal. Specifically, the husband retained a law firm and started the process of the drafting and preparing his financial disclosures approximately 2 years before the wedding, but did not first tell the wife he wanted an agreement until after they were engaged, several months after. The evidence was pretty clear that the husband never shared the draft prenuptial agreement or financial disclosures with the wife prior to the wedding. The evidence was also pretty clear, as the wife testified, that she would have signed agreement anyway – pretty much no matter what it said or if the disclosures were accurate, because the parties were “madly in love.”
The wife got pregnant in October 1991 and the parties then decided to get married in Paris in November 1991. After the wedding, the issue of the prenup came up again and the wife retained the attorney recommended for her by the husband’s attorney. She never felt that that attorney was really looking out for her interests, though some of the provisions were re-negotiated to be somewhat more favorable to her than as originally drafted, but perhaps, unfavorable given all of the facts and circumstances, even at that time. The parties’ first child was born in July 1992, but the prenup was not signed until the following month, when the wife was sleep deprived, having been on a 2 hour, on-demand, breast feeding schedule. Curiously, when her lawyer was deposed in the divorce action, the lawyer was unaware that the was pregnant or had the child and said she wouldn’t have let her enter into the agreement if she knew that. The agreement did not address issues related to the child (e.g. support, custody, life insurance.) Despite the husband’s massive wealth and significant income at the time of the marriage, the agreement provided for nominal equitable distribution and only $5,000 per month in alimony for each month of the marriage if the parties stayed married for 5 years.
After substantial and interesting pre-judgment litigation which included motions for leave to appeal that limited discovery to the time of the agreement, ultimately, the trial judge entered declaratory judgment and enforced the agreement. Of note, the judge found the agreement was akin to a prenup and enforceable as a prenup, “[d]espite the signing of the agreement subsequent to the date of marriage.” The judge then analyzed the definition of a premarital or pre-civil union agreement, as defined by the 2013 version of the Uniform Premarital and Pre-Civil Union Agreement Act, despite the fact that that version of the act was not in effect as of the signing of the prenup. The judge then distinguished this from the Pacelli case which disfavors because it wasn’t presented on a “take it or leave it” basis and that here “some form of a marital agreement was contemplated” by defendant prior to the parties’ marriage, and she was able to negotiate an “upward adjustment in her entitlement” under the MA. The judge also compared the wife circumstances to those set forth in an unpublished appellate decision, which he found to be “extremely similar” to the instant matter. The judge noted that in that case, the Appellate Division found the agreement to be an enforceable prenup due to the “relatively brief time which ha[d] elapsed since the parties[‘] nuptials.” As such, he adopted the same view and found the agreement here similar to a prenup, finding:
in the present set of circumstances, the only thing that appears to have prevented these parties from entering into the agreement prior to marriage is that defendant became pregnant with their first child. Subsequent to the birth of the child, almost immediately thereafter, the parties signed and entered into the Marital Agreement.
Also, while finding that the husband’s financial disclosures were not accurate, they were not intentionally inaccurate and thus, it was not held against the husband. Rather, blame was shited to the wife, as the the judge determined that she ailed to “ask questions or retain a financial expert” so the impact of plaintiff’s disclosures was “significantly offset by her lackluster desire” to ascertain the true extent of plaintiff’s finances. Moreover, the judge concluded defendant did not demonstrate she relied on plaintiff’s disclosures, since she admitted in her deposition she read very little of the agreement, including the disclosures. The judge further found that the wife signed the agreement “endorsing her support that whatever disclosure was provided was sufficient to her,” and he concluded her previous counsel “obtained positive results” for her, including “more favorable alimony and equitable distribution” provisions in the agreement.
As noted above, the Appellate Division reversed the decision and remanded the matter for further discovery and a trial. First, they found that the agreement was not a prenup because the Act defines a premarital agreement as “an agreement between prospective spouses … made in contemplation of marriage … and to be effective upon marriage.” This clearly did not happen in this case and what followed in the opinion was a long discussion on how the circumstances were actually unlike a typical prenuptial agreement.
Judge Enright then noted that even if the agreement qualified as a prenup, which it did not and the court held:
the 2013 iteration of the Act would not have governed its enforceability, given its effective date; instead the 1988 version of the Act would have applied to a prenup (sic) executed in 1992. The language of the 1988 version allowed for a separate determination of whether a premarital agreement is unconscionable, apart from reasons established in its subsections. By comparison, the 2013 version of the statute only allowed for a determination of unconscionability for the reasons established in its subsections.
The Appellate Division then found that the agreement did not qualify as a property settlement agreement either, as it was not executed in contemplation of a divorce where each party’s economic rights would be fixed upon the entry of a divorce judgment. They also found that it was unlike a mid-marriage agreement referenced in the Pacelli case where the husband use the threat of a divorce to improperly obtain an agreement whereby the wife gave up her rights – an agreement that was found to be unenforceable. While factually unlike Pacelli, the wife in Steele did feel pressured to sign and that the husband would never let it go. In that way, the circumstances were similar to Pacelli and the court held:
Under these circumstances, we have little difficulty concluding the parties’ Agreement (sic) is in the nature of a mid-marriage agreement and deserves heightened scrutiny. Certainly, just as in the Pacelli case, there was a marriage and a family to preserve. Moreover, though the purported pressure placed on defendant differs from the tactics employed by the husband in Pacelli, plaintiff’s insistence on having defendant execute the agreement (sic) months after the marriage, so soon after the birth of the parties’ daughter and while she was unemployed, appears to be “inherently coercive.” At that point, defendant was not free to just walk away.
The Court then found that though they were not persuaded that the wife was under duress when she signed the agreement, they found that based upon their review of the agreement and the circumstances surrounding its signing, that it might have been unfair, if not unconscionable, when
it was executed, and when the husband moved to enforce it. The Appellate Division pointed to 3 areas of concern; (1) the adequacy of plaintiff’s financial disclosures before the parties signed the agreement; (2) the circumstances surrounding the agreement’s negotiation and execution; (3) and the adequacy of the settlement itself.
Interestingly, when discussing the whether or not the wife cared about the adequacy of the disclosures because she would have married him anyway, the court said that that may not matter. Rather:
Ultimately, to the extent defendant had a limited understanding of the terms of the agreement (sic) or its consequences once she was married, we are satisfied her mindset did not relieve plaintiff of his obligation to treat defendant fairly. To hold otherwise would effectively lead to ignoring defendant’s contributions as a spouse, parent, homemaker and helpmate” and inequitably “preclude her participation in post-agreement wealth.” (citation omitted)(emphasis added).
As to the adequacy of settlement, without passing on the issue, the Court noted: “The record is devoid of any indication she can enjoy any semblance of the marital lifestyle, notwithstanding the taxable and non-taxable distributions due her under the agreement (sic).”
The take away of this case is that is you want to be sure that your prenup holds up, get it done before the wedding and follow the statutory requirements without fail. If you try to get an agreement, post-wedding, good luck because it is an uphill fight in light of Pacelli and now Steele.
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