Lane v. Lane

202 S.W.3d 577, 2006 Ky. LEXIS 232, 2006 WL 2706956

• Court: Kentucky Supreme Court
• Decided: September 21, 2006
• Docket: 2004-SC-000151-DG
• Status: Published

Opinions

OPINION

LAMBERT, Chief Justice.

Three days before their marriage on November 24, 1990, Appellant, Paula 0. Lane, and Appellee, David L. Lane, entered into an ante-nuptial agreement. Appropriate asset disclosures were made and the underlying validity of the agreement is not at issue herein. What is at issue is whether events subsequent to the nine and a half year marriage and the birth of two children render enforcement of the agreement unconscionable. The Court of Appeals’ opinion strictly enforced the agreement as written. The trial court had deviated from a strict application of the agreement on a determination of uncon-scionability. We granted discretionary review.

At the time of their marriage, Appellant was working as a night desk clerk in a hotel earning $19,000 a year. She was twenty-nine years of age. Despite his youthful age of twenty-six, Appellee was already a successful stockbroker at Edward D. Jones and Company, earning $166,000 per year. Appellee was a college graduate while Appellant had only a high school education. Two children were born of the marriage, after which Appellant did not work outside the home as she was the primary caregiver for the children. By the time the marriage was dissolved, Ap-pellee had achieved great financial success. He was earning approximately one million dollars per year and he was a partner in a regional brokerage firm.

According to the agreement, the parties waived their rights under the law to claim maintenance in the event the marriage was dissolved. The parties further agreed that the separate property of each would be deemed nonmarital in the event of divorce. The agreement explicitly identified certain items as Appellee’s separate property. These items were two parcels of real estate (not relevant here), a partnership interest in Edward D. Jones, and Appellee’s pension plan, profit sharing plan and voluntary profit sharing plan through Edward D. Jones. The agreement further provided that should either party default in or breach any obligations contained therein, the defaulting party would be responsible for attorney’s fees, court costs, costs of depositions, transportation, lodging, and other related expenses. As there was a dramatic difference in the parties’ economic circumstances when enforcement of the agreement was sought, we must determine whether the doctrine of uncon-scionability allows relief to Appellant.

The trial court found the provisions of the agreement regarding waiver of maintenance and the imposition of attorney’s fees on a defaulting party to be unconscionable. It further found Appellee’s 401(k) plan to be marital property despite language in the agreement excepting pension and profit sharing plans. On appeal, the Court of Appeals strictly enforced the agreement, reversing the trial court’s decision regarding maintenance and the 401 (k) plan. It upheld the trial court’s award of attorney’s fees, not because the provision was unconscionable, but because it did not regard Appellant as a defaulting or breaching party under the relevant provision of the agreement.

This Court has embraced the view that ante-nuptial agreements are not per se invalid as against public policy.¹ However, courts retain the right to analyze such agreements for unconscionability at the time of enforcement.² In this proceeding, Appellant has failed to persuade us to reverse both courts below on her contention that the entire agreement is unconscionable. Neither the trial court nor the Court of Appeals reached such a conclusion and neither do we. On the other hand, we are persuaded that the Court of Appeals failed to give due deference to the trial court’s determination that the provision of the agreement regarding waiver of maintenance was unconscionable.³

From the time this Court first recognized the validity and enforceability of ante-nuptial agreements, we have included the following qualification:

The ingenuity of persons contemplating marriage to fashion unusual agreements, particularly with the assistance of counsel, cannot be overestimated. We will observe the tradition whereby the law develops on a case by case basis. It should be recognized, however, that trial courts have been vested with broad discretion to modify or invalidate ante-nuptial agreements.⁴

Thus, it is beyond reasonable dispute that a trial court may modify or invalidate all or part of an ante-nuptial agreement where enforcement is unconscionable in its application. This includes cases where “the facts and circumstances changed since the agreement was executed so as to make its enforcement unfair and unreasonable.”⁵ On this basis, the trial court modified the agreement and ordered Appellee to pay maintenance of $12,000.00 per month for three years.

In reversing the trial court’s award of maintenance, the Court of Appeals relied on Blue v. Blue⁶ to vacate the award and strictly enforce the ante-nuptial agreement. However, in so doing, the Court of Appeals failed to accord the proper deference owed to the trial court⁷ and overlooked the dictates of Edwardson v. Ed-wardson providing that each agreement should be reviewed on a case-by-case basis. While this Court is not bound by the Court of Appeals decision in Blue, it is nevertheless distinguishable. As such, we need not re-examine Blue at this time. The parties’ circumstances in Blue were vastly different than those present here. In Blue, both parties had children by earlier marriages and they had married each other twice, but without children born of either of their marriages. Even more striking is the fact that the wife in Blue still had a right to remedy the vast income disparity between the spouses by seeking a maintenance award. In this case, the ante-nuptial agreement prevented Appellant not only from receiving the bulk of the marital estate, but also from any entitlement to rehabilitative maintenance. Likewise, Gentry v. Gentry and Edwardson follow in similar suit, with the parties having prior marriages with no children born of their marriages and none of the agreements containing a total maintenance waiver provision.

In the case at bar, this was the first marriage for both Appellant and Ap-pellee and both parties were in their twenties. Two children were born of the marriage and Appellant quit her job to care for the children while Appellee rapidly progressed in his career. While a significant disparity in the parties’ incomes existed at the time of the marriage, this disparity grew exponentially during the marriage in large part because the husband was able to concentrate on his career while the wife stayed home to care for the children and the home. Contrary to the dissent’s contention, Appellant’s discontinuance of employment to rear the children and maintain the household is not of nominal value and should in fairness be considered a substantial factor in this case,⁸ along with the affluent lifestyle maintained during their marriage,⁹ towards rendering the maintenance waiver provision unconscionable.¹⁰

Parties who contemplate entering into ante-nuptial agreements have a duty to appropriately consider their circumstances and whether such an agreement is right for them. The more one-sided an agreement appears at the time it is made, the more likely courts are to invalidate the agreement at the time enforcement is sought. Bare-knuckle bargaining is not an appropriate practice. As this was a first marriage between younger persons, it is curious that these parties even wanted an ante-nuptial agreement. Their situation differed vastly from the customary and proper ante-nuptial agreement circumstances where parties desire to preserve their assets for their children and grandchildren.¹¹ But they made their agreement and it will be enforced, subject to judicial scrutiny for unconseionability.

As the trial court made appropriate findings of fact to support its conclusion of unconseionability with respect to maintenance, the Court of Appeals erred in failing to accord the trial court its proper deference. However, we discern no error in the trial court’s failure to grant a longer duration of maintenance. Therefore, on the maintenance issue, we reinstate the judgment of the trial court.

Appellant also contends that the trial court’s award of attorney’s fees and expert witness fees was insufficient and constituted an abuse of discretion. However, the trial court awarded Appellant $59,271.08 in attorney’s fees. The allowance of such fees is within the broad discretion of trial courts in such matters and we see no abuse of that discretion. However, we will remand the case to the trial court for consideration of whether additional attorney’s fees and costs incurred during the appellate process should be granted and in what amount.

Appellant also argues that the trial court incorrectly valued Appellee’s general partnership interest in Edward D. Jones, an item of property acquired during the marriage and determined to be marital property subject to division. The trial court held an extensive evidentiary hearing and heard sharply conflicting expert testimony regarding the value of the partnership interest. Ultimately, it found the value of the partnership interest to be book value, which was $269,876.00. The trial court’s valuation should not be disturbed absent a determination that it is clearly erroneous.¹² The Court of Appeals affirmed the trial court on this issue and we, likewise, affirm.

Finally, we will touch upon an issue that was addressed by the Court of Appeals but not presented here: whether Appellee’s 401(k) plan valued at $238,000 was covered by the agreement. The trial court included this asset in the marital estate on the view that the agreement provision relating to Appellant’s pension and profit-sharing plans did not embrace the 401(k) plan. The Court of Appeals reached the opposite conclusion:

It is clear that the parties intended to refer to David’s 401(k) plan as a “pension plan” in the ante nuptial agreement. Therefore, the family court erred when it included David’s 401(k) account as part of the marital estate subject to division.

Appellant could have raised an issue in this Court as to the Court of Appeals’ reversal of the trial court on the 401(k) issue, but she did not. We have carefully reviewed her issue statements, the text of her brief, and her request for relief, and find nothing that could be fairly described as contesting the Court of Appeals’ resolution of the 401(k) issue. As such, we express no opinion as to the 401(k) plan.

For the reasons stated herein, we reverse in part, affirm in part, and remand to the trial court for entry of judgment consistent herewith. On remand, the trial court should also determine whether additional attorney’s fees and costs should be awarded to Appellant for the costs of legal services incurred during the appellate process.

GRAVES, ROACH, SCOTT, and WINTERSHEIMER, JJ., concur.

GRAVES, J., files a separate concurring opinion in which ROACH and WINTERSHEIMER, JJ., join.

McANULTY, J., dissents by separate opinion. MINTON, J., not sitting.

1 . Gentry v. Gentry, 798 S.W.2d 928 (Ky.1990) (overruling Stratton v. Wilson, 170 Ky. 61, 185 S.W. 522 (1916)).

2 . Edwardson v. Edwardson, 798 S.W.2d 941 (Ky.1990).

3 . Id. at 946 ("It should be recognized, however, that trial courts have been vested with broad discretion to modify or invalidate ante-nuptial agreements.”)

4 . Id.

5 . Gentry, 798 S.W.2d at 936.

6 . 60 S.W.3d 585 (Ky.App.2001).

7 . Id. at 590 ("We certainly agree that trial courts retain broad discretion to review prenuptial agreements ....”).

8 . See, e.g., KRS § 403.190 (contribution of a spouse as homemaker is relevant consideration towards the acquisition of marital property); Goderwis v. Goderwis, 780 S.W.2d 39, 40 (Ky.1989) (increased value of husband’s business during marriage was marital even though wife’s contributions towards the business were in the indirect role as homemaker). Cf. Shraberg v. Shraberg, 939 S.W.2d 330, 333 (Ky.1997) (in finding a separation agreement to be unconscionable, the court cited the long established principle that dealings between spouses whereby one spouse obtains the property of another without consideration must be looked upon with suspicion).

9 . See, e.g., Ware v. Ware, 131 Md.App. 207, 748 A.2d 1031, 1047 (2000)(in citing the substantial effect that large income disparities have on the children of a marriage, the court stated ''[tjhere is a child involved, who will undoubtedly go back and forth between the father, who can afford to live in luxury, and the mother, who cannot.")

10 . See Shraberg v. Shraberg, 939 S.W.2d 330, 333 (Ky.1997) (Unconseionability requires a showing of "fundamental unfairness as determined 'after considering the economic circumstances of the parties and any other relevant evidence....’”).

11 . See, e.g., Edwardson, 798 S.W.2d 941; Gentry, 798 S.W.2d 928; Blue, 60 S.W.3d 585.

12 . Duncan v. Duncan, 724 S.W.2d 231 (Ky.App.1987); CR 52.01.