Kornegay v. Robinson

625 S.E.2d 805, 176 N.C. App. 19, 2006 N.C. App. LEXIS 413

• Court: Court of Appeals of North Carolina
• Decided: February 21, 2006
• Docket: COA05-131
• Status: Published

Opinions

HUNTER, Judge.

Jo Ann Outlaw Kornegay (“plaintiff’) appeals from an order of summary judgment entered 25 October 2004. For the reasons stated herein, we reverse the trial court’s order of summary judgment.

Plaintiff presented evidence tending to show that after a four-year relationship, Byard Komegay (“decedent”) asked plaintiff to marry him in early October 1990. Plaintiff, who had a high school education, was a yarn inspector in a textile mill. At the time of the marriage, plaintiff had a net worth of approximately $50,000.00. Decedent was a farmer and businessman with extensive real estate holdings and a net worth in excess of $500,000.00 at the time of the marriage. Both plaintiff and decedent had children from previous marriages.

Plaintiff moved into decedent’s home in early October 1990. On 11 October 1990, plaintiff and decedent traveled to South Carolina to obtain a marriage license. After moving into decedent’s home, and before obtaining the marriage license, plaintiff learned that decedent wished for her to sign a prenuptial agreement. On 12 October 1990, plaintiff and decedent went to the offices of decedent’s attorney, Robert T. Rice (“Rice”). Rice presented plaintiff with the prenuptial agreement. Plaintiff, in her affidavit, stated that the contents of the agreement were not reviewed or explained to her, and that she was not given the opportunity to review the agreement with her own attorney. Plaintiff did not read or request substantive changes to the document, and relied upon her understanding that the prenuptial agreement would only apply in the event of a divorce. Plaintiff signed the prenuptial agreement after approximately ten minutes, and plaintiff and decedent left Rice’s office and were married in South Carolina that same day.

On 16 May 2004, decedent passed away. Plaintiff believed that decedent had executed a will with substantial provisions in her favor in 1991; however a will executed 1 March 1991 made no provisions for plaintiff. The prenuptial agreement signed by plaintiff 12 October 1990 included a provision waiving all plaintiff’s rights as a spouse, including the right to claim a spousal share of decedent’s estate.

Plaintiff brought an action for a declaratory judgment against decedent’s estate to invalidate the prenuptial agreement on 9 July 2004. The trial court entered an order of summary judgment dismissing plaintiff’s action. Plaintiff appeals.

Plaintiff contends that the trial court erred in granting summary judgment enforcing the prenuptial agreement, as there were material issues of fact as to whether the agreement was executed voluntarily, and as to whether the agreement was unconscionable. Although we do not find the agreement to be unconscionable, we find, when taken in the light most favorable to plaintiff, that material issues of fact exist as to the voluntariness of the agreement.

We first note the appropriate standard of review. Summary judgment is properly granted when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law.” N.C. Gen. Stat. § 1A-1, Rule 56(c) (2003). “All such evidence must be considered in the light most favorable to the non-moving party.” In re Will of Priddy, 171 N.C. App. 395, 396-97, 614 S.E.2d 454, 456 (2005). “If findings of fact are necessary to resolve an issue of material fact, summary judgment is improper.” Prior v. Pruett, 143 N.C. App. 612, 617, 550 S.E.2d 166, 170 (2001).

I

The Uniform Premarital Agreement Act, N.C. Gen. Stat. § 52B-7 (2005), specifically governs the enforcement of premarital agreements in North Carolina. The statute provides that a premarital agreement is unenforceable if the party against whom enforcement is sought proves one of two circumstances. The statute states:

(a) A premarital agreement is not enforceable if the party against whom enforcement is sought proves that:

(1) That party did not execute the agreement voluntarily; or

(2) The agreement was unconscionable when it was executed and, before execution of the agreement, that party:

a. Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party;

b. Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and

c. Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.

Id.

Plaintiff first contends that the agreement was void under section 52B-7(a)(2), as the agreement was unconscionable. We disagree.

In King v. King, 114 N.C. App. 454, 442 S.E.2d 154 (1994), this Court stated, “[a] conclusion that the contract is unconscionable requires a determination that the agreement is both substantively and procedurally unconscionable.” Id. at 458, 442 S.E.2d at 157. “ ‘Substantive unconscionability . . . involves the harsh, oppressive, and “one-sided terms of a contract,” ’ i.e., inequality of the bargain.” Id. (citation omitted). “The inequality of the bargain, however, must be ‘so manifest as to shock the judgment of a person of common sense, and . . . the terms ... so oppressive that no reasonable person would make them on the one hand, and no honest and fair person would accept them on the other.’ ” Id. (citation omitted).

Here, the terms of the agreement do not reveal so inequitable a bargain as to “ ‘shock the judgment of a person of common sense[.]’ ” Id. (citation omitted). The agreement, the terms of which applied equally to both parties, recognized that both parties had children from previous marriages and possessed separate property obtained through inheritance and other means. The agreement then waived all marital rights, including intestacy rights, but permitted each party to make specific devises, bequests, and legacies to the other, as specifically permitted by N.C. Gen. Stat. § 52B-4(a)(3) (2005). Such an agreement between individuals with prior marriages and offspring from those unions is not “ ‘so oppressive that no reasonable person would make them on the one hand, and no honest and fair person would accept them on the other.’ ” King at 458, 442 S.E.2d at 157 (citation omitted). As a matter of law, the terms of the agreement are not substantively unconscionable. As we find no substantive unconscionability as a matter of law, we need not address plaintiff’s contentions that material issues of fact exist as to procedural unconscionability.

II

Plaintiff next contends that the agreement was void under section 52B-7(a)(l), as the agreement was not voluntary. We agree.

As discussed supra, the statute states that a “marital agreement is not enforceable if the party against whom enforcement is sought proves that [the] party did not execute the agreement voluntarilyf.]” N.C. Gen. Stat. § 52B-7(l)(a). The statute does not define the term voluntary, and a review of our existing case law reveals that few cases have applied the statute since its enactment in 1987.¹ However, in Howell v. Landry, 96 N.C. App. 516, 386 S.E.2d 610 (1989), a case concerning the voluntary nature of a premarital agreement entered into before the effective date of the statute, this Court found that such agreements are unenforceable if procured by undue influence, duress, coercion, or fraud, and further found that due to the confidential nature of the relationship, “there must be full disclosure between the parties as to their respective financial status.” Id. at 525, 386 S.E.2d at 615.

The issue of financial disclosure was more specifically addressed in the case of Tiryakian v. Tiryakian, 91 N.C. App. 128, 370 S.E.2d 852 (1988), which also concerned a premarital agreement signed before the effective date of the statute. In Tiryakian, the bride was asked to meet the groom on the day before the wedding at his attorney’s office to execute a legal document. Id. at 131, 370 S.E.2d at 853. The bride was given several copies of the premarital agreement iri the parking lot of the attorney’s office, and conflicting evidence was offered as to what was disclosed at that time. Id. The groom stated that the terms of the agreement were discussed and the bride was aware of its contents, while the bride contended that no specifics were discussed and that she was told, and believed, that the documents were to protect the groom’s interest in his grandmother’s estate. Id. The bride did not read the agreement or consult with an attorney, but instead rushed to her bank, had her signature notarized, and promptly returned the documents. The couple were married the next day. Id.

The Court in Tiryakian recognized the confidential relationship of persons about to marry, and the corresponding “affirmative duty on the part of each perspective spouse to fully disclose his or her financial status.” Id. at 132, 370 S.E.2d at 854. Although the agreement was entered into prior to the effective date of section 52B-7, Tiryakian noted that the Uniform Premarital Agreement Act echoed these requirements for full disclosure of financial status. Id. at 133, 370 S.E.2d at 854. Tiryakian also noted that the fact that a prenuptial agreement was drawn up by one party’s attorney and not throughly explained to the other party, who was unrepresented by counsel, might influence a court’s disapproval of such an agreement. Id. The Court concluded that the lack of full disclosure, coupled with the fact that the agreement was drafted by the groom’s attorney, and was signed by the bride without knowledge of its contents and without consultation of independent legal advice, voided the premarital agreement. Id. at 133, 370 S.E.2d at 854-55.

Here, plaintiff, who possesses only a high school education, was presented at decedent’s attorney’s office with a premarital agreement which waived all spousal rights, including all rights to decedent’s estate, while en route to the wedding. Plaintiff avers that she understood the document to apply in the event of divorce, that the agreement was not explained to her, and that she signed the document within ten minutes of its presentation without reading it. Plaintiff further avers that decedent did not disclose his full assets and that she was unaware of the extent of his holdings at the time she signed the agreement. Finally, plaintiff avers that she was not represented by independent legal counsel. In light of Tiryakian, when taken in the light most favorable to plaintiff, material issues of fact exist as to whether the execution of the agreement was voluntary. Summary judgment was therefore improperly granted by the trial court.

Defendants, however, contend that the case of Howell v. Landry should control. We find Howell distinguishable. Howell, as discussed supra, also concerned an agreement entered into prior to the effective date of the Uniform Premarital Agreement Act, but raised claims of undue influence and duress in the execution of a premarital agreement, rather than the issue of financial disclosure. Howell, 96 N.C. App. at 526, 386 S.E.2d at 616. The bride, who held an active role in the groom’s business prior to the wedding, had discussed the possibility of a premarital agreement with the groom, and had agreed to review such an agreement. Id. at 519, 386 S.E.2d at 612. The bride and groom planned to fly to Las Vegas to be married. The night before leaving, the groom presented the bride with an agreement which had been prepared by his attorney. Id. at 520, 386 S.E.2d at 612. The bride expressed interest in having her own attorney review the document, but agreed to sign it after making some adjustments to the terms, both as she wished to marry and due to her own financial involvement in the groom’s business. Id. at 520, 386 S.E.2d at 612-13. The Court in Howell held that the brevity of time before the marriage alone was insufficient to establish duress, and noted the bride’s awareness of the need for independent legal counsel and decision to nevertheless sign the agreement, as well as the bride’s adjustments to the agreement, in determining that there was no undue influence or duress. Id. at 528-29, 386 S.E.2d at 618.

Howell’s facts are distinguishable from the instant case, however, where issues of fact exist as to plaintiffs knowledge of the need for an attorney, the contents of the writing, and the extent of decedent’s disclosure of his assets, rather than claims of undue influence and duress.

The trial court, therefore, improperly granted summary judgment as material issues of fact exist as to whether full disclosure was made to plaintiff prior to entering the agreement between confidential parties.

Ill

We briefly address each of the concerns raised by the dissent. The dissent contends that as plaintiff admitted she “voluntarily” signed the agreement, that is signed without duress or undue influence, no material issue of fact exists. However, as discussed supra, full disclosure of assets is a necessary consideration in determining the voluntary nature of a prenuptial agreement. Tiryakian at 132-33, 370 S.E.2d at 854. Although the principles of construction applicable to contracts also apply to premarital agreements, see Turner v. Turner, 242 N.C. 533, 539, 89 S.E.2d 245, 249 (1955), our prior case law has made clear that this refers to the substance of separation agreements, and that further inquiry as to procedural fairness in the execution of the agreement is required for agreements formed in a confidential relationship. See Howell at 525, 386 S.E.2d at 615 (stating “when the parties to the agreement stand in a confidential relationship to one another, there must be full disclosure between the parties as to their respective financial status.”)

The dissent further contends that Tiryakian is distinguishable because it addressed a prenuptial agreement in the context of equitable distribution, and was not raised from a grant of summary judgment. Although Tiryakian arrived before this Court in a different procedural posture than the instant case, the statements of law as the nature of the confidential relationship of persons about to marry, and the corresponding duties of disclosure which are determinative in this case nonetheless are binding. See In the Matter of Appeal from Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989) (stating “a subsequent panel of the same court is bound by that precedent”).

The dissent also appears to suggest that summary judgment was properly granted because plaintiff failed to challenge the prenuptial agreement during the course of the marriage. Our statute governing premarital agreements states, however, that “[any] statute of limitations applicable to an action asserting a claim for relief under a premarital agreement is tolled during the marriage of the parties to the agreement.” N.C. Gen. Stat. § 52B-8 (2005). Here, plaintiff filed her action for declaratory judgment within two months of decedent’s death.

The dissent contends that plaintiff bears the burden to prove that the trial court erred and has failed in this case to show error in the trial court’s judgment. However, as discussed supra, our standard of review as to summary judgment makes clear that, “[i]f findings of fact are necessary to resolve an issue of material fact, summary judgment is improper.” Prior, 143 N.C. App. at 617, 550 S.E.2d at 170. Plaintiff’s affidavit as to her lack of knowledge of the extent of both decedent’s land holdings and business enterprises, when considered in the light most favorable to plaintiff as the non-movant, is sufficient to create a material issue of fact as to whether full disclosure was made prior to the signing of the agreement. Plaintiff has therefore shown error in the trial court’s grant of summary judgment.

As material issues of fact exist as to whether plaintiff entered the agreement voluntarily, summary judgment was improperly granted.

Reversed.

Judge TYSON concurring in part and dissenting in part in a separate opinion. Judge STEELMAN concurs.

1 . We note that this Court reversed an award of summary judgment as to enforcement of a premarital agreement under the statute in the case of Atassi v. Atassi, 117 , 451 S.E.2d 371, 376 (1995), on the-grounds that material issues of fact existed as to whether the agreement was signed under duress after the marriage date, the plaintiff had adequate knowledge of the defendant’s property or financial obligations, and the agreement was unconscionable. However the case did not specifically define the term voluntary in the context of the statute.