Lane v. Lane, 202 S.W.3d 577 (Ky. 2006)
Issue and Holding:
Whether an ante-nuptial agreement, entered into by the parties three days prior to their marriage, can be strictly enforced as written after a nine and a half year marriage and change of circumstances. The Court held no, portions of the agreement were unconscionable at the time of enforcement.
Three days prior to their marriage, the parties entered into an ante-nuptial agreement. At the time, the wife was 29 years old, a high school graduate, and working at a hotel for $19,000 a year. The husband was a 26 year old college graduate and stockbroker, earning $166,000 a year. Two children were born of the marriage, and the wife stayed at home to care for them and the house. By the time the marriage was dissolved, nine and a half years later, the husband was earning about one million dollars a year and was a partner in a regional brokerage firm.
The ante-nuptial agreement waived the parties rights to claim maintenance if the marriage was dissolved. It also stated that the separate property of each would be deemed nonmarital in the event of divorce. The agreement specifically identified two parcels of real estate, a partnership interest in Edward D. Jones, and the husband’s pension plan, profit sharing plan, and voluntary profit sharing plan through Edward Jones as the husband’s separate property. Further, the agreement stated that if either party defaulted in or breached any obligations within the agreement, the defaulting party would be responsible for attorney fees, court costs, costs of depositions, transportation, lodging, and other related expenses.
The trial court found the portions of the agreement involving waiver of maintenance and the imposition of attorney fees on the defaulting party to be unconscionable. It also found the husband’s 401(k) plan to be marital property and divisible. The trial court ordered that the husband pay $12,000 per month in maintenance for three years. It also ordered that the husband pay the wife $59,271.08 in attorneys fees. The trial court also determined the husband’s general partnership interest in Edward D. Jones to have been acquired during the marriage and divisible. The court valued the interest at $269,876.00.
The Court of Appeals strictly enforced the agreement, reversing the trial court’s award of maintenance and the 401(k) plan. It upheld the award of attorney fees, since it did not regard the wife as a defaulting or breaching party under the agreement. It also upheld the trial court’s valuation of the husband’s general partnership interest in Edward D. Jones.
The Supreme Court granted discretionary review.
Ante-nuptial agreements are not per se invalid as against public policy. Yet, courts may analyze such agreements for unconscionability at the time of enforcement. A trial court may modify or invalidate all or part of an ante-nuptial agreement if enforcement would be unconscionable. Each agreement should be reviewed on a case-by-case basis. However, the more one-sided the agreement is at the time it is made, the more likely it is that courts will invalidate the agreement at the time enforcement is sought.
The Court began by noting that the agreement in the instant case not only prevented the wife from receiving the bulk of the marital estate, but also prevented her from receiving rehabilitative maintenance. It also noted that the wife’s staying home to raise the children and maintain the household should be a substantial factor, along with the affluent standard of living during the marriage, towards rendering the waiver of maintenance under the agreement unconscionable.
The Court reinstated the trial court’s award of maintenance, since the court made appropriate findings of fact to support its ruling that the maintenance waiver was unconscionable. The Court also affirmed the trial court’s award of attorney’s fees, since the award of such fees is within the broad discretion of the trial court. Although, the Court remanded the case back to the trial court to determine whether additional fees should be awarded for costs incurred during the appellate process. The Court also affirmed the trial court’s and the Court of Appeals’ valuation of the husband’s general partnership interest in Edward D. Jones. Finally, the Court did not address the merits of whether the husband’s 401(k) should be marital property, since the wife did not preserve the issue for review.
Accordingly, the Court affirmed in part, reversed in part and remanded the case back to the trial court for further proceedings.
Justice Graves concurred in a separate opinion.
Justice Graves agreed with the majority opinion, but wrote separately to address social policy concerns involving ante-nuptial agreements. He argued that ante-nuptial agreements tend to promote marital instability. He also took issue with the fact that women are often treated unfairly by ante-nuptial agreements. As in the instant case, where under the agreement the wife was to receive the mere satisfaction of bearing two children and the privilege of being a wife, while the husband walked away with the family’s fortune. Justice Graves argued that more emphasis needs to be placed on the contributions made by homemakers to the marital property.
Justice McAnulty dissented.
Justice McAnulty argued that the agreement should be strictly enforced. He stated that the agreement was not unconscionable, just a bad bargain on the wife’s part. He believed there was a lack of evidence that the marriage forced the wife to forego the completion of her education. Since the parties signed the agreement with the advice of independent counsel, it should be fully enforced.