NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-5172-18
MICHAEL C. STEELE,
Plaintiff-Respondent, APPROVED FOR PUBLICATION v. April 30, 2021
JANE D. MCDONNELL APPELLATE DIVISION
STEELE,
Defendant-Appellant. _______________________
Argued January 27, 2021 – Decided April 30, 2021
Before Judges Ostrer, Accurso, and Enright.
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Somerset County, Docket No. FM-18-0584-16.
James P. Yudes argued the cause for appellant (James P. Yudes, PC, attorneys; James P. Yudes, of counsel; Kevin Mazza and Elsie Gonzalez, on the briefs).
Thomas D. Baldwin argued the cause for respondent (Chiesa Shahinian & Giantomasi, PC, attorneys; Thomas D. Baldwin, on the brief).
The opinion of the court was delivered by
ENRIGHT, J.A.D. Defendant Jane D. McDonnell Steele appeals from a declaratory judgment
finding the marital agreement (MA) she and plaintiff Michael C. Steele signed
after the parties' marriage was a valid, enforceable agreement. Additionally,
defendant appeals from the final judgment of divorce (JOD) which
incorporated the MA. We conclude the trial court erred by deeming the MA to
be in the nature of an enforceable pre-marital agreement. Further, we are
convinced the inherently coercive circumstances accompanying the negotiation
and execution of the MA here warrant heightened judicial scrutiny to assure it
was fair and equitable. We reverse the declaratory judgment and that portion
of the JOD which enforced the MA, vacate the denial of defendant's counsel
fee request, and remand for further proceedings. Moreover, we identify
several factors the trial court should consider on remand when assessing
whether to enforce the agreement.
I.
Each party was previously married and divorced before the parties began
dating in 1989. Plaintiff had no children from his first marriage; defe ndant
had a son from her prior marriage. Defendant received no financial settlement,
aside from child support payments, when she divorced her first husband.
Once the parties' relationship intensified, defendant relocated with her
son from California to New Jersey, and the parties began living together in the
A-5172-18 2 summer of 1990. During their courtship, plaintiff told defendant, a
schoolteacher, that he operated several businesses. Years later, when
defendant was asked in her deposition whether plaintiff "came from reasonable
wealth" "along the lines of [her] upbringing," defendant answered
affirmatively. However, the term, "reasonable wealth," was not defined.
Defendant also testified that from the inception of the parties' relationship,
plaintiff "never told [her]" "how much money he ma[de]," even though she
asked him.
In January 1990, almost two years before the parties' marriage, plaintiff
retained a New York law firm to draft a premarital agreement (PMA) for his
review. That same month, he received an initial draft of a PMA, which
provided that in the event of a divorce, his future ex-spouse would receive
$3000 per month in taxable alimony, for the number of months equal to the
number of months the parties were married. Approximately one week later,
plaintiff's attorney forwarded a revised PMA to plaintiff "with the dollar
amounts deleted," which would "enable [plaintiff] . . . to give this to a possible
future fiancé[e] without getting into financial details, which vary, of course,
with each individual situation." Plaintiff testified that before he proposed to
defendant, he did not discuss any terms of a PMA with her.
A-5172-18 3 In January 1991, unbeknownst to defendant, plaintiff's counsel obtained
the name of an attorney in New Jersey who could represent defendant in the
event a PMA were to be negotiated between the parties. When this referral
was provided, the parties were not yet engaged, and there is no evidence
plaintiff or his counsel informed defendant of the referral at that time.
Nonetheless, plaintiff's attorney wrote to the attorney who provided the
referral, stating, "[w]e have recommended the name to a Jane D. McDonnell of
Gladstone who we hope will be calling, although it is possible she will retain
some other attorney."
Plaintiff's counsel commenced working with plaintiff's accounting
employee to draft a financial disclosure statement to accompany a proposed
PMA. On January 8, 1991, plaintiff's counsel sent plaintiff a draft financial
disclosure statement for his review. The disclosure described plaintiff's six
primary assets as follows: (1) more than 96% common stock interest in R.
Markey & Sons, Inc., valued at $8,000,000 to $10,000,000 "based on a
multiple of 1990 earnings"; (2) an approximate 30% interest in a revocable
trust dated February 20, 1978, created by the children of Edward C. Steele,
with Edward C. Steele as Trustee, valued at approximately $369,394; (3) an
interest in an irrevocable trust dated February 19, 1972, as amended December
20, 1976, holding "extremely valuable" shares of E.C. Steele, Inc.; (4) a 70%
A-5172-18 4 interest in a cooperative apartment in New York City, conservatively valued at
$225,000; (5) a trust created by Suzanne C. Steele with a fair market value of
$60,000; and (6) "other property," including furniture and personal effects not
exceeding $50,000. The disclosure statement concluded with the following
language:
In summary, Mr. Steele's personal net worth could be as high (or higher) as $12,000,000 plus a very substantial beneficial interest in the Irrevocable Trust containing stock of E.C. Steele Co., Inc., and containing reinvested dividends from E.C. Steele Co., Inc. These values could go up very substantially over the years. In addition, Mr. Steele has an expectancy of inheriting ultimately very substantial assets from his father and mother.
II.
Defendant accepted plaintiff's marriage proposal in the spring of 1991.
A few weeks after he proposed, plaintiff informed defendant for the first time
that he wanted her to sign a PMA. According to plaintiff's deposition
testimony, defendant's reaction was "initially negative. She resisted the idea."
Plaintiff also testified he had a few more conversations with defendant about
signing a PMA but she continued to be unwilling. However, contrary to
defendant's testimony, he asserted that sometime between July and September
1991, defendant relented and was willing to sign a PMA. Despite the fact
plaintiff had drafts of a PMA and financial disclosure statements, there is
A-5172-18 5 nothing in the record to demonstrate he presented defendant with these
documents prior to the wedding. In fact, during his deposition, plaintiff
specifically was asked if he showed a draft PMA or his prepared financial
disclosure statements to defendant prior to the marriage. He answered,
"Probably not." He provided the same response when asked if prior to the
marriage, he told defendant he had an accountant prepare his financial
disclosure statements, or whether he discussed terms he would offer defendant
under the PMA.
Defendant testified that when plaintiff first asked her to sign a PMA, he
mentioned people "would" or "might" "lose their jobs" if she did not sign the
PMA. Plaintiff denied making any such statement. Defendant also testified
that after the parties' engagement, plaintiff asked her a number of times to sign
a PMA. Defendant declined these requests and recalled that each discussion
on this topic lasted for approximately one minute. She viewed the PMA as
"this thing that was very distrustful that he wanted to insert into our marriage,
and I wanted nothing to do with it." Still, she acknowledged the issue of a
PMA "was always there between us" "[w]hether we talked about it or not."
She explained that during their brief conversations about the PMA, plaintiff
was "at times frustrated, at times angry, and he just got really quiet and
wouldn't talk to me, and was clearly upset. And that continued throughout the
A-5172-18 6 entire time period while I was being asked to sign this agreement." Neither
party asserts plaintiff threatened not to marry defendant if she refused to sign a
PMA.
Defendant acknowledged that even though plaintiff did not share
information with her about his financial circumstances prior to the marriage, it
did not matter to her whether he was "worth a billion [dollars] or worth zero."
Defendant testified she did not care "what his economic circumstance was" and
she would have married plaintiff "anyway" because the parties "were madly in
love."
III.
Defendant became pregnant in October 1991. The parties arranged to be
married in Paris on November 30, 1991. Shortly after the wedding ceremony,
plaintiff again requested that defendant sign a PMA. On December 30, 1991,
defendant retained the attorney recommended to plaintiff's counsel in January
1991, so the parties could commence negotiating an agreement. Plaintiff
received and paid the invoices from defendant's attorney.
Shortly after defendant retained counsel to negotiate the MA, she
provided her attorney with an informal accounting of her property and inc ome.
On January 23, 1992, defendant's attorney wrote to plaintiff's attorney,
requesting changes to what she referred to as the parties' "premarital
A-5172-18 7 agreement," even though the parties were married by this time. One of the
changes involved increasing the proposed taxable alimony figure from $3000
to $5000 per month for each month the marriage endured, in the event the
parties divorced. This requested change was accepted by plaintiff. Also,
defendant's attorney asked for the equitable distribution section of the
agreement to be modified to reflect that if the parties remained married for
over five years, defendant would receive $50,000 versus $35,000 in equitable
distribution payments for each year the marriage lasted. Plaintiff rejected this
change. Significantly, even though defendant was pregnant when the parties
negotiated the terms of the MA, her attorney made no request to modify the
proposed MA to include a provision for child support or life insurance for the
child's benefit after her birth.
On February 12, 1992, plaintiff's attorney disclosed to defendant's
counsel that he "circulated" a "draft premarital agreement" prior to the parties'
marriage, but he did not identify who received the draft. The letter also
addressed changes to the agreement proposed by defendant's counsel and
referred to the parties' draft agreement as the "Steele/McDonnell Marital
Agreement." Defendant's attorney then forwarded the letter to defendant for
her review. Several weeks later, defendant's attorney wrote to plaintiff's
counsel and requested that the MA include a clause confirming, "the parties
A-5172-18 8 have fully intended at all times to enter into this agreement but were married
prior to its execution, and nonetheless desire that the Agreement be executed
by them and deemed enforceable in a court of law, consistent with their
intentions and wishes." Plaintiff accepted this change.
A revised draft of the MA was submitted to defendant's attorney on
April 22, 1992. Although the parties appeared at the office of defendant's
attorney in April 1992 to sign the updated MA, the meeting was adjourned
after defendant stated she thought she "should ask for something" and her
attorney reportedly "threw the question back at" her, responding, "well, what
do you want?" Defendant recalled that in this moment, she did not know what
she should be "asking for" and that her attorney "was absolutely no help to
[her] at all." Defendant later testified she "never felt like [her attorney] was
[her] advocate."
Additionally, in April 1992, the parties selected, and plaintiff purchased
the parties' first marital home. Plaintiff paid $406,000 for the home, subject to
a $170,000 mortgage, and placed title to the marital residence in his name
alone.
In early June 1992, plaintiff's attorney revised the financial disclosure
statement to accompany the MA and submitted it for review by plaintiff's
accounting employee. The updated financial disclosure statement referenced
A-5172-18 9 plaintiff's income and seven primary assets, namely: (1) 95.6% interest in the
common stock of R. Markey & Sons, Inc., with a "total estimated value of
$3.7-4.2 million" based on a "downturn in 1991," together with 21% of the
common stock of Keymar, Inc., worth approximately $551,800; (2) 37.4%
interest in the Revocable Trust dated February 20, 1978, created by Edward C.
Steele, with Edward C. Steele as Trustee, worth approximately $505,000; (3)
an interest in the Irrevocable Trust dated February 19, 1972, as amended
December 20, 1976, holding the "extremely valuable shares of stock in E.C.
Steele Co., Inc."; (4) plaintiff's New York cooperative apartment, which was
noted as sold, with the proceeds returned to the Revocable Trust; (5) the trust
under the Will of Suzanne C. Steele worth approximately $96,000; (6) whole
ownership of Steele Associates, Inc., worth approximately $82,000; and (7)
other property including IRAs worth $26,000, securities worth $40,000,
personal property not exceeding $125,000 in value, and a home in Far Hills
worth $406,000 with a $170,000 mortgage. The updated financial disclosure
statement reflected a marked decrease from the first statement as to the value
of R. Markey & Sons, Inc. Also, the statement indicated different accounting
methods were used to calculate the values of plaintiff's companies and did not
reflect plaintiff's companies made certain distributions to him in 1991 totaling
over $300,000.
A-5172-18 10 In June 1992, plaintiff's attorney forwarded a revised MA to defendant's
attorney for her review. On July 10, 1992, plaintiff's attorney forwarded a
"final" copy of the MA to plaintiff, asking him to review and sign it. Further,
plaintiff's attorney requested that plaintiff deliver his signed copy to defendant
for consideration and review with her attorney.
The parties' first child was born in July 1992. When defendant's former
counsel was deposed in 2018 about her role in negotiating the terms of the
MA, she testified she had no recollection of defendant being pregnant or
having any special health problems at that time. Asked if she would have had
"concerns about a pregnant woman who's married and about to give birth
entering into a post-marital agreement," defendant's former counsel stated, "I
think so." Additionally, during the deposition of defendant's former counsel,
the following exchange occurred between her and defendant's current counsel:
Defendant's Current Counsel: Do you have any recollection of this case at all in terms of the parties or what happened in this case?
Defendant's Former Counsel: No.
Defendant's Current Counsel: So when [plaintiff's counsel] asked you what you did or what you didn't do, that's not based upon any recollection of [the] time whatsoever, correct?
Defendant's Former Counsel: Correct.
A-5172-18 11 Defendant's Current Counsel: It's simply conjecture on your part of what you would have or might have done, correct?
IV.
The parties signed their MA on August 4, 1992. Defendant testified that
when she signed the MA in her attorney's office, she "didn't read the whole
thing." She remembered "looking at . . . Schedule B," which reflected her
husband's financial information. But she testified the MA was "difficult for
[her] to understand, and so [she] skipped to the part where it said the $35,000
and the $5,000 a month . . . to make sure it was in there." Further, she
affirmed that when she signed the MA, she was "breastfeeding on demand
every two hours, and was completely sleep deprived." She "decided to sign
the agreement to make [her] husband happy."
The MA was executed in four counterparts, and contained Exhibits A
and B. Exhibit A was a single page in length. It described defendant's
financial circumstances, including that she held a one-sixth income interest in
a trust, generating $6000 in annual income. Additionally, the exhibit listed
defendant's personal possessions of nominal value, her $10,000 student loan
debt, earned income of $1100 per month, and child support of $350 per month
for her son from her first marriage.
A-5172-18 12 In contrast, Exhibit B was seven pages long and outlined plaintiff's
assets, liabilities, and income. The exhibit identified his assets as including:
(1) 95.6% interest in the common stock of R. Markey & Sons, Inc., with a "total estimated value of $3.7-4.2 million" in light of a "downturn in 1991," together with 21% of the common stock of Keymar, Inc., worth approximately $551,800; (2) 37.4% interest in the Revocable Trust dated February 20, 1978, created by Edward C. Steele, with Edward C. Steele as Trustee, worth approximately $505,000; (3) an interest in the Irrevocable Trust dated February 19, 1972, as amended December 20, 1976, holding the "extremely valuable shares of stock in E.C. Steele Co., Inc."; (4) the New York cooperative apartment was noted as sold, with the proceeds returned to the Revocable Trust; (5) the trust under the Will of Suzanne C. Steele worth approximately $96,000; (6) whole ownership of Steele Associates, Inc., worth approximately $82,000; and (7) other property including IRAs worth $26,000, securities worth $40,000, personal property not exceeding $125,000 in value, and a home in Far Hills worth $406,000 with a $170,000 mortgage.
Exhibit B also described plaintiff's personal net worth "as high as
$9,000,000 (or higher), plus a very substantial beneficial interest in the
Irrevocable Trust." It further stated: "[t]hese values could go up very
substantially over the years. In addition, [plaintiff] has an expectancy of
inheriting ultimately very substantial assets from his father and mother." Also,
Exhibit B reflected plaintiff's estimated income from various sources,
including his 1991 salary and bonus, which totaled $184,804. According to
defendant, Exhibit B did not reflect all of plaintiff's assets or income, such as
A-5172-18 13 "additional distributions" he received from his companies in 1991, and a
pension plan from R. Markey & Sons, in which plaintiff held an interest.
Nonetheless, the MA confirmed the parties were represented by counsel, were
"fully aware of each other's holdings" and "the parties . . . fully intended at all
times to enter into this agreement, but were married prior to its execution, and
nonetheless desire that the Agreement be executed by them and deemed
enforceable." Another clause in the MA stated defendant "declares and
acknowledges that [plaintiff] has informed her that his current net worth and
other assets and liability, and income are the approximate amount shown on
Exhibit B."
Paragraph 7.5 of the MA stated any party who attempted through legal
action "to vary the terms of" the MA became liable to pay "liquidated
damages" to satisfy the other party's "costs and expenses incurred" to defend
against the action. Also, the MA contained a waiver of estate rights, including
a waiver of each party's elective share, and stated that "no representations or
promises of any kind have been made to [either party] with respect to any
bequest, other testamentary benefit or appointment, or beneficial interest of
any nature." On the other hand, the MA specified plaintiff would establish an
estate plan to effectuate the MA's alimony and equitable distribution
A-5172-18 14 provisions "as if the parties' fifth wedding anniversary had already occurred
and the marriage had been dissolved thereafter."
The MA further confirmed each party would retain ownership of any
separate property, as set forth in Exhibits A and B of the MA. Additionally,
paragraph 1.3 of the MA described marital property as property the parties
acquired or purchased during the marriage that was owned or jointly held by
them. But this paragraph also specified that the term, "marital property,"
excluded "all real property jointly owned or held that is used . . . for residential
or vacation purposes." Therefore, although plaintiff purchased more than one
marital home in his name alone, including the home bought before the MA was
executed, defendant acquired no interest in same. Moreover, except for a joint
bank account used by plaintiff to deposit defendant's monthly allowance,
defendant contends no property was purchased or acquired in joint names
throughout the parties' twenty-four-year marriage.
The MA also stated if the parties divorced and any child born of or
adopted during the marriage had not reached majority, the marital residence
would not be sold until the earliest of the following events: all children were
emancipated or attained the age of twenty-three, or until the spouse living in
the home remarried or cohabited for over thirty days. Importantly, the MA
called for the custodial parent who remained in the marital residence to be
A-5172-18 15 responsible for all carrying charges on the home. Plaintiff's 2016 Case
Information Statement represented the parties' monthly shelter expenses,
exclusive of his New York apartment, totaled over $9000.
Under the terms of the MA, if either party filed for divorce after five
years of marriage, defendant was entitled to receive equitable distribution
payments in the sum of $35,000 for each year of marriage, to be adjusted
based on the Consumer Price Index. Defendant was to receive no such
equitable distribution payment if either party commenced an action to dissolve
the marriage less than five years after the parties wed.
Regarding spousal support, the MA provided that in the event of a
divorce, plaintiff would pay defendant taxable alimony of $5000 per month for
each month the parties were married, to be adjusted based on the Consumer
Price Index. Such payments terminated upon defendant's death, remarriage, or
cohabitation. Significantly, defendant was earning $11,000 a year as of June
1992, but stopped working at that time, anticipating the birth of the parties'
first child. Therefore, she had no earned income when she signed the MA.
She remained at home until 2013 to raise the parties' children.
The MA made no provision for child support or custody, even though the
parties' first-born daughter was nearly a month old when the MA was
executed. In fact, at Paragraph 5.1, the MA stated:
A-5172-18 16 Each party acknowledges that no provision has been made herein for the support or custody of children who may be born or adopted into the marriage, and they agree to defer consideration of such support or custody for determination under the circumstances that may exist at such future time as those issues may arise.
According to the deposition testimony of defendant's former counsel, if she
knew defendant had just given birth a few weeks before the MA was signed,
she would have advised defendant not to sign the MA.
We also observe that paragraph 6.3 of the MA states:
This Agreement was first presented to [plaintiff] on or about April 24, 1992, and to [defendant] on or about April 30, 1992. Negotiations directly between them and between their respective counsel began before the marriage and continued after their wedding to account for their marital status. Each party acknowledges that he or she has had ample time to consider all of the provisions and consequences of this Agreement and to consult with his or her separate legal counsel.
[Emphasis added.]
However, negotiations between the parties and their respective counsel did not
begin prior to the parties' marriage, and the parties acknowledged as much
during their respective depositions. Defendant's former counsel also testified
she did not negotiate the terms of the MA before December 1991 and could not
have, because she was not retained until that month.
A-5172-18 17 V.
Plaintiff filed a complaint for divorce in December 2015. The parties
attempted to mediate their differences but were unsuccessful. In February
2018, plaintiff sought a declaratory judgment to enforce the MA or
alternatively, to limit the scope of discovery to issues relating to the formation
of, and entry into, the MA, rather than the adequacy of financial disclosure
leading to its execution. Defendant filed a cross-motion, opposing
enforcement of the MA and asking that it be declared void ab initio;
alternatively, defendant sought to compel plaintiff to provide discovery
regarding the sufficiency of his financial disclosure when the parties
negotiated their MA. By order dated April 19, 2018, the trial court denied
plaintiff's motion for a declaratory judgment; determined a plenary hearing
was necessary to address the enforceability of the MA; denied plaintiff's
request that discovery be limited to "issues relating to the formation and entry
into the agreement, but not to the adequacy of financial disclosure"; granted
defendant's request that plaintiff comply with discovery, "including with
respect to the adequacy of the financial disclosure at the time the parties
entered into the agreement"; and ordered broad discovery, so the court could
determine "whether defendant voluntarily and knowingly entered into the
agreement . . . and [determine] the financial disclosures provided by plaintiff
A-5172-18 18 throughout preparation of the agreement and thereafter." (Emphasis added).
The order called for the parties to propound interrogatories and notices to
produce, as well as depose each other and fact witnesses.
Both parties moved for reconsideration of this order; their motions were
denied on June 15, 2018. By way of a separate order entered the same day, the
trial court also denied plaintiff's request for a stay of the denial of his
reconsideration request. The judge reasoned, in part, "the relative balance of
hardships favors a full and fair hearing with liberal discovery as to the parties'
finances, both at the time the parties executed the putative agreement, and
presently." (Emphasis added). Both parties moved for leave to appeal.
On August 10, 2018, we granted plaintiff's motion for leave to appeal
and denied defendant's cross-motion for leave to appeal. We summarily
reversed the June 15, 2018 discovery order "to the extent it provided for broad
and liberal pre-plenary hearing discovery." Additionally, we ordered
the Family Part to enter a modified order limiting pre- plenary hearing discovery to issues relating to the formation and signing of the August 4, 1992 Marital Agreement. Thus, the pre-plenary hearing discovery will address the events, communications, representations, and circumstances - including plaintiff's financial circumstances - at or about the time of the August 4, 1992 Marital Agreement, and relevant matters that preceded the Marital Agreement.
A-5172-18 19 Thereafter, the parties engaged in limited discovery, which included their
depositions, and the deposition of defendant's former attorney, given her role
in negotiating the MA on defendant's behalf.
On April 30, 2019, defendant filed a motion for partial summary
judgment, seeking to have the MA deemed a post-nuptial agreement, and
adjudicated as void ab initio. Alternatively, she asked that the court render the
MA unenforceable, arguing it was inequitable when it was executed since
plaintiff "failed to fully disclose his assets at the time of negotiating and
entering" the MA. She also contended it was unfair to enforce the MA under
her existing circumstances. Parenthetically, the record reflects that when
plaintiff initiated divorce proceedings in 2015, defendant had only recently re-
entered the job market, her annual earnings were less than $2000, and her
earnings were supplemented with dividend income of approximately $16,000
per year.
Plaintiff cross-moved for a declaratory judgment to enforce the MA.
The trial court conducted oral argument on the cross applications on May 31,
2019, during which plaintiff's counsel argued, "[t]here can be no reasonable
question that this is, as I've characterized it, a premarital agreement disguised
as a marital agreement, only by virtue of the timing." At the conclusion of the
hearing, the judge reserved his decision.
A-5172-18 20 On June 28, 2019, the judge denied defendant's motion, and granted
plaintiff's cross-motion. In his lengthy written opinion, the judge found the
MA was akin to a PMA and enforceable. He acknowledged plaintiff's position
that the MA "constitutes a premarital agreement," "[d]espite the signing of the
agreement subsequent to the date of marriage." Further, the judge identified
201 paragraphs of undisputed facts taken "verbatim" from the parties'
submissions and found these facts were "not in dispute between the parties and
are sufficient to decide the case." Considering these facts, the judge 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
(Act), N.J.S.A. 37:2-31 to -41.1 He observed N.J.S.A. 37:2-32 defined a
premarital or pre-civil union agreement as "an agreement between prospective
spouses or partners in a civil union couple made in contemplation of marriage
or a civil union and to be effective upon marriage or upon the parties
establishing a civil union." (Emphasis added).
The judge then distinguished the parties' MA from the mid-marriage
agreement referenced in Pacelli v. Pacelli, 319 N.J. Super. 185 (App. Div.
1999). He concluded that unlike the wife in Pacelli who was presented with a
1 Reference to pre-civil union agreements was added to the short title in 2006. See L. 2006, c. 103, § 26.
A-5172-18 21 mid-marriage agreement on a "take it or leave it" basis, 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. He also compared defendant's 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 the
unpublished case, we found the agreement to be an enforceable PMA due to
the "relatively brief time which ha[d] elapsed since the parties['] nuptials."
Accordingly, the judge "adopt[ed] the same view," and found the MA in the
instant matter was similar to a PMA and enforceable. He stated,
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.
The judge also rejected defendant's claim that plaintiff fraudulently
withheld financial information from her or that she was under duress when she
signed the MA. On the other hand, the judge found plaintiff "used before -tax
figures for some of his businesses and after-tax figures with regard to other
businesses. This affected his disclosure of income and valuations in his
businesses, resulting in differences of millions of dollars that he avoided
A-5172-18 22 disclosing." (Emphasis added). Additionally, the judge found the MA did
"not disclose . . . the value of plaintiff's share of the irrevocable trust dated
February 18, 1972, as amended December 20, 1976." Still, the judge
determined plaintiff did not knowingly undervalue his assets to avoid fully
disclosing material information to defendant. Further, the judge determine d
defendant failed 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
Schedule B. Also, the judge found defendant signed the MA "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 MA.
VI.
On appeal, defendant offers the following arguments for our
consideration:
POINT I
THE TRIAL COURT ERRED AS A MATTER OF LAW IN DETERMINING THAT THE AUGUST 4, 1992 AGREEMENT WAS A PREMARITAL AGREEMENT, AND AS SUCH ITS GRANTING OF
A-5172-18 23 DECLARATORY JUDGMENT TO THE PLAINTIFF AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT ON THE ISSUE MUST BE REVERSED.
A. THE TRIAL COURT ERRED BY IGNORING THE LIMITS OF [ITS] AUTHORITY AS DETERMINED BY THE LEGISLATURE IN ESTABLISHING THAT A PRENUPTIAL AGREEMENT MUST BE ENTERED INTO PRIOR TO A PARTIES['] MARRIAGE, AND VOIDED LEGISLATIVE INTENT.
B. THE TRIAL COURT ERRED IN RELYING UPON AN UNREPORTED DECISION WHICH WAS NOT CONTROLLING AND CLEARLY DISTINGUISHABLE AS PRECEDENT IN MAKING [ITS] DETERMINATION THAT THE AUGUST 4, 1992 AGREEMENT WAS PREMARITAL.
POINT II
BESIDES ITS ERROR IN RELYING UPON THE UNPUBLISHED . . . CASE IN FINDING THE AGREEMENT TO BE PREMARITAL, THE TRIAL COURT FAILED TO APPLY THE CORRECT STATUTE IN ENFORCING SAME.
POINT III
THE TRIAL COURT ALSO COMMITTED REVERSIBLE ERROR BY FAILING TO MAKE FINDINGS OF FACT REGARDING THE ENFORCEABILITY OF A PRENUPTIAL AGREEMENT UNDER THE ACT.
A-5172-18 24 POINT IV
THE TRIAL COURT ERRED AS A MATTER OF LAW IN REFUSING TO RECOGNIZE THE PARTIES' AUGUST 4, 1992 AGREEMENT AS A POSTNUPTIAL OR MID-MARRIAGE AGREEMENT, AND IN SO DOING THE DIFFERING STANDARD GOVERNING THEIR ENFORCEABILITY.
POINT V
THE TRIAL COURT ERRED IN FAILING TO GRANT DEFENDANT'S REQUEST FOR FINDING AS A MATTER OF LAW THAT THE AUGUST 4, 1992 MARITAL AGREEMENT WAS VOID AB INITIO AND/OR NOT FAIR AND EQUITABLE AT THE TIME [] ENFORCEMENT WAS SOUGHT.
POINT VI
THE TRIAL COURT ERRED IN ESSENTIALLY GRANTING SUMMARY JUDGMENT IN FAVOR OF THE PLAINTIFF WHEN THERE WERE MATERIAL FACTS IN CONTROVERSY.
POINT VII
THE TRIAL COURT ERRED IN FAILING TO AWARD COUNSEL FEES TO THE DEFENDANT.
As a threshold matter, we agree with the contentions raised by defendant
in Points I, II and IV. Accordingly, we remand this case for further
proceedings and discovery consistent with this opinion, and are satisfied we
need not reach the arguments raised in Points III and VI. To the extent
defendant contends in Point V that the trial court erred in failing to recognize
A-5172-18 25 the parties' MA was void ab initio, we find this argument unpersuasive for the
reasons set forth herein.
We review summary judgment using the same standard that governs the
trial court. Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of
Pittsburgh, 224 N.J. 189, 199 (2016). As the parties agreed on the material
facts for purposes of the motion, our task is limited to determining whether the
trial court's ruling on the law was correct. Manalapan Realty, LP v. Twp.
Comm. of Manalapan, 140 N.J. 366, 378 (1995).
Relevant New Jersey caselaw typically references three types of marital
agreements, namely PMAs, mid-marriage agreements, and property settlement
agreements. We acknowledge the circumstances surrounding the execution of
the MA make it somewhat difficult to conclude it belongs in any of these three
categories. But ultimately, we are persuaded under the totality of
circumstances, the parties' MA deserves the heightened scrutiny we have
applied to mid-marriage agreements, as in Pacelli. Much like other agreements
between partners or spouses, the MA need not bear a specific label for us to
address its enforceability.
Ordinarily, "[p]re-nuptial agreements establishing post-divorce
obligations and rights should be held valid and enforceable." Hawxhurst v.
Hawxhurst, 318 N.J. Super. 72, 80 (App. Div. 1998) (citing Marschall v.
A-5172-18 26 Marschall, 195 N.J. Super. 16, 27 (Ch. Div. 1984)). Such agreements made in
contemplation of marriage are enforceable if they are fair and just. Pacelli,
319 N.J. Super. at 189; DeLorean v. DeLorean, 211 N.J. Super. 432, 435 (Ch.
Div. 1986); Marschall, 195 N.J. Super. at 28, 31. The public policy supporting
enforcement of a pre-nuptial, as opposed to a post-nuptial, agreement is that
one party remains free to walk away before the marriage takes place. Pacelli,
319 N.J. Super. at 189-90, 195. Still, unconscionable PMAs are not
enforceable. Rogers v. Gordon, 404 N.J. Super. 213, 219 (App. Div. 2008)
(quoting Marschall, 195 N.J. Super. at 29-31).
Conversely, mid-marriage agreements are generally unenforceable as
they are "inherently coercive." Pacelli, 319 N.J. Super. at 191. A mid-
marriage agreement is "entered into before the marriage [has] lost all of its
vitality and when at least one of the parties, without reservation, want[s] the
marriage to survive." Id. at 190-91. Such agreements are carefully reviewed
because they are "pregnant with the opportunity for one party to use the threat
of dissolution 'to bargain themselves into positions of advantage.'" Id. at 195
(citation omitted).
Property settlement agreements generally are enforceable, so long as
they are "fair and equitable," as they assume the parties stand in adversarial
positions and negotiate in their own self-interest. Lepis v. Lepis, 83 N.J. 139,
A-5172-18 27 148-49 (1980). Property settlement agreements are prepared in contemplation
of divorce, "when relations have already deteriorated. Discovery is available,
parties usually deal at arms length and the proceeding - almost by definition is
adversarial." Marschall, 195 N.J. Super. at 29.
Given these legal precepts, we are persuaded the trial court mistakenly
found the MA was in the nature of a PMA and enforceable under the 2013
version of the Act to enforce it. In reaching this conclusion, we note when we
conducted oral argument, plaintiff's counsel promptly conceded the MA was
not a premarital agreement. Additionally, the MA simply is not a PMA, given
that the Act defines a premarital agreement as "an agreement between
prospective spouses … made in contemplation of marriage … and to be
effective upon marriage." N.J.S.A. 37:2-32 (emphasis added). Further, the
MA was not "in the nature of a PMA" as argued by plaintiff, because it was
not negotiated and executed under the circumstances common to actual PMAs.
Indeed, the parties could have, but did not negotiate or execute the MA upon
their engagement, or when defendant became pregnant. This is significant
because prior to the parties' engagement, plaintiff already had worked with
counsel to prepare more than one draft of a PMA and, with the assistance of an
accounting employee, had prepared financial disclosure statements. Also,
almost a year before the parties married, plaintiff obtained a referral for an
A-5172-18 28 attorney he thought could assist defendant in negotiating an agreement. Yet,
plaintiff did not submit a draft PMA or draft financial disclosure statement to
defendant for her review, nor reveal the name of the attorney referred to him
until after the parties married. Further, defendant did not retain counsel to
assist her in negotiating the terms of the MA until about a month after the
wedding. Also, the first time defendant saw a draft of the MA, she was well
into her pregnancy, and it was not until several months after the parties
married and purchased a home that they signed the MA. Because the MA was
neither a PMA nor in the nature of one, it is not entitled to any presumption in
favor of enforceability. Even if the MA qualified as a PMA, which it does not,
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
PMA 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.
We also are convinced the parties' MA does not qualify as a property
settlement agreement. Plainly, it was not executed in contemplation of a
A-5172-18 29 divorce, whereby each party's economic rights would be fixed upon the entry
of a divorce judgment.
The parties' MA also differs somewhat from the mid-marriage agreement
referenced in Pacelli. In Pacelli, the parties had been married for ten years and
had two children when the husband informed his wife "he would divorce her
unless she agreed to certain terms regarding their economic relationship. To
punctuate his demand, [the husband] moved out of the marital bedroom and
into an apartment above their garage." Pacelli, 319 N.J. Super. at 187. The
wife wanted to "preserve the marriage and did not want her children to grow
up in a broken family," so she signed the mid-marriage agreement contrary to
her attorney's advice. Id. at 188.
Unlike the scenario in Pacelli, here, neither party was threatened with
divorce or separation to prompt the execution of a marital agreement. Instead,
both parties were happily married when they negotiated and signed their
agreement. Even defendant's counsel admitted during oral argument on May
31, 2019, as he argued in favor of summary judgment, this case was "not [like]
Pacelli because they were both happily married and testified to that."
Nevertheless, defendant, like the wife in Pacelli, already had entered the
legal relationship of marriage when she signed the MA. She also had left her
teaching job and given birth to the parties' daughter a mere few weeks prior to
A-5172-18 30 signing the MA. Defendant's former counsel had no recollection of defendant
being pregnant or having any special health problems at the time the
agreement was executed, but in her deposition, she testified she thought she
would have had "concerns about a pregnant woman who's married and about to
give birth entering into a post-marital agreement."
Additionally, when defendant recalled her circumstances at the time the
MA was executed, she testified, "[a]sking me to sign the agreement three
weeks after our child was born felt a little confrontational and opportunistic."
Further, as already mentioned, she stated that after she gave birth, but before
she signed the MA, plaintiff was "at times frustrated, at times angry, and he
just got really quiet and wouldn't talk to me and was clearly upset. And that
continued throughout the entire time period while I was being asked to sign
this agreement." Believing there were consequences to not signing the MA,
defendant explained there was the "possibility that I could become incredibly
vulnerable without support, being a mother of two children. Additionally, she
testified:
I felt tremendous pressure by him. I felt like he was never ever going to let it go. That it was just going to go on and on and on, and it would always be there, and he would always be coming to me and pressuring me to sign the agreement.
A-5172-18 31 Under these circumstances, we have little difficulty concluding the
parties' MA 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 MA 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.
Despite the contextual differences between the various types of
agreements, our jurisprudence makes clear the parties' MA, much like other
mid-marriage agreements, as well as prenuptial or property settlement
agreements, is not enforceable if it is not fair and equitable. However, unlike
PMAs or property settlement agreements, we do not approach the question of
whether a mid-marriage agreement is enforceable with a predisposition in
favor of its enforceability, given the "inherently coercive" nature of mid -
marriage agreements.
Marital agreements "involve far more than economic factors and must
serve the strong public and statutory purposes of ensuring fairness and equity
in dissolution of marriages." Conforti v. Guliadis, 128 N.J. 318, 323 (1992)
A-5172-18 32 (internal quotation marks and citations omitted). But any marital agreement
that is unconscionable or the product of fraud or overreaching, particularly
where it exploits the confidential relationship between spouses, may be set
aside. Massar v. Massar, 279 N.J. Super. 89, 93 (App. Div. 1995); Guglielmo
v. Guglielmo, 253 N.J. Super. 531, 541 (App. Div. 1992).
Further, a settlement agreement "will be reformed . . . where a party
demonstrates that the agreement is plagued by 'unconscionability, fraud, or
overreaching in the negotiations of the settlement.'" Weishaus v. Weishaus,
180 N.J. 131, 143-44 (2004) (quoting Miller v. Miller, 160 N.J. 408, 419
(1999)). Accordingly, a trial court has a "duty to scrutinize marital agreements
for fairness." Dworkin v. Dworkin, 217 N.J. Super. 518, 523 (App. Div.
1987). In doing so, a court must
must consider issues such as the adequacy of the agreement at [its] inception, the presumed understanding of the parties at that time, the reasonable expectation of the parties during the life of the agreement, [and] the manner in which the parties acted and relied on the agreement.
[Glass v. Glass, 366 N.J. Super. 357, 372 (App. Div. 2004) (citing Konzelman v. Konzelman, 158 N.J. 185, 193 (1999)).]
This court has recognized that "[i]nterpretation and construction of a
contract is a matter of law for the court subject to de novo review." Fastenberg
v. Prudential Ins. Co. of Am., 309 N.J. Super. 415, 420 (App. Div.
A-5172-18 33 1998) (citing Bradford v. Kupper Assocs., 283 N.J. Super. 556, 583 (App. Div.
1995)). That said, "[t]he law grants particular leniency to agreements made in
the domestic arena," thus allowing "judges greater discretion when interpreting
such agreements." Guglielmo, 253 N.J. Super. at 542 (citing N.J.S.A. 2A:34-
23).
We have long recognized that a family court is a court of equity, where
judges employ a "full range" of equitable doctrines to deal with matrimonial
controversies. See Kazin v Kazin, 81 N.J. 85, 94 (1979). Divorce agreements
are necessarily infused with equitable considerations and are construed in light
of salient legal and policy concerns. Konzelman, 158 N.J. at 194 (citing
Petersen, 85 N.J. at 642). The interpretation, application, and enforceability of
divorce agreements are not governed solely by contract law. Ibid. "[C]ontract
principles have little place in the law of domestic relations . . . . Thus,
settlement agreements, if found to be fair and just, are specifically enforceable
in equity. Ibid. (citations omitted).
Although we are not persuaded defendant was under duress when she
signed the MA, our review of the MA and the circumstances surrounding its
execution suggest the MA may have been unfair, if not unconscionable, when
it was executed, and when plaintiff moved to enforce it. Our concerns pertain
to three areas: the adequacy of plaintiff's financial disclosures before the
A-5172-18 34 parties signed the MA; the circumstances surrounding the MA's negotiation
and execution; and the adequacy of the settlement itself.
Regarding the sufficiency of plaintiff's disclosures before the MA was
executed, we note first, as the judge observed, the MA did not disclose the
value of plaintiff's share of the irrevocable trust dated February 18, 1972.
Second, different methods were used to value plaintiff's businesses, which, as
the trial court found, resulted in "millions of dollars that he avoided
disclosing." Third, defendant contends plaintiff had an interest in a pension
plan that was not disclosed in the MA at Exhibit B. We are mindful plaintiff
does not deny this claim. Moreover, his 2016 Case Information Statement
plainly lists an "R. Markey & Son Defined Benefit pension" with the
explanation that he "began participating in the pension on January 1, 1983"
and it is "exempt as per marital agreement." Defendant also suggests plaintiff
enjoyed additional income from his business interests which was not disclosed
in Exhibit B. Given these facts, if the remand court concludes plaintiff
significantly underreported his income or net worth prior to the execution of
the MA, agreement, the mere fact he disclosed other assets and income on
Exhibit B would not militate in favor of enforcement of the MA. A
right in question "can properly be considered 'known' only if there is full awareness of the other party's income and assets, since those facts are critical elements in determining the potential awards of
A-5172-18 35 alimony and equitable distribution which the signer of the agreement is being asked to waive.'"
[Orgler v. Orgler, 237 N.J. Super. 342, 349 (App. Div. 1989) (quoting Marschall, 195 N.J. Super. at 32).]
As to the circumstances resulting in the execution of the agreement, we
already have addressed defendant's resistance to signing a PMA before the
parties' marriage, her belief plaintiff was "never ever going to let [his request
for an agreement] go," and her feelings of vulnerability when plaintiff
persisted in his request to have defendant sign the MA after the parties were
married, bought a home, had a child, and defendant was unemployed. We also
do not ignore defendant's testimony that she signed the MA to "make
[plaintiff] happy," at a time when she was "breastfeeding on demand every two
hours, and was completely sleep deprived."
On the other hand, we recognize defendant testified she "[d]idn't care
one way or the other what Mr. Steele's economic disclosure was in schedule B"
as "it wasn't important to her." Defendant testified it did not matter to her
whether plaintiff had a "billion dollars a year in income or zero dollars a year
in income." Further, she confirmed she "didn't care one way or the other what
[plaintiff's] economic circumstance was" and "would have married him
anyway" because the parties "were madly in love." These facts also must be
considered when assessing the enforceability of the MA.
A-5172-18 36 Ultimately, to the extent defendant had a limited understanding of the
terms of the MA 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." Pacelli, 319 N.J. Super. at 198.
Regarding the adequacy of the settlement itself, we observe the MA did
not acknowledge the existence of, or provide for the support of, the parties'
infant child, let alone health or life insurance coverage or other support -related
obligations for her benefit. Further, the MA required a waiver of defendant's
apparently extremely valuable elective share. Additionally, although
defendant stopped working two months before the MA was executed, in
anticipation of raising the parties' newborn daughter, the MA made no
provision for defendant to receive equitable distribution unless the parties
remained married for more than five years. Also, defendant is sixty-two years
old and has reported minimal earnings after being absent from the job market
from 1992 to 2013. 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 MA.
A-5172-18 37 Therefore, we reverse the declaratory judgment and that portion of the
JOD which enforced the MA. On remand, we direct the trial court to employ
heightened scrutiny and review the MA for fundamental fairness, with
particular consideration to be paid to the concerns we have raised.
Specifically, the court shall consider the adequacy of plaintiff's pre -execution
financial disclosure; the circumstances surrounding the MA's negotiation and
execution; and the adequacy of the settlement itself. In anticipation of this
remand hearing, we lift our prior order limiting the scope of discovery so that
the parties can pursue discovery regarding their financial circumstances both at
the time they executed the agreement, and when plaintiff sought to enforce the
MA.
We turn next to defendant's contention that the trial court erred in
denying her request for counsel fees in conjunction with its entry of the JOD
on June 28, 2019. An award of counsel fees in matrimonial matters is
discretionary. R. 5:3-5(c); Williams v. Williams, 59 N.J. 229, 233 (1971). We
will not disturb a counsel fee decision absent a showing of "an abuse of
discretion involving a clear error in judgment." Tannen v. Tannen, 416 N.J.
Super. 248, 285 (App. Div. 2010). An abuse of discretion occurs when a trial
court makes "findings inconsistent with or unsupported by competent
evidence," utilizes "irrelevant or inappropriate factors," or "fail[s] to consider
A-5172-18 38 controlling legal principles." Elrom v. Elrom, 439 N.J. Super. 424, 434 (App.
Div. 2015) (citations omitted). An abuse of discretion is also demonstrated if
the court fails to consider "all relevant factors." Masone v. Levine, 382 N.J.
Super. 181, 193 (App. Div. 2005) (citing Flagg v. Essex Cnty. Prosecutor, 171
N.J. 561, 571 (2002)).
Rule 4:42-9(a)(1) permits the trial court to award counsel fees in a
family action pursuant to Rule 5:3-5(c). Rule 5:3-5(c) lists various factors the
trial court should consider in deciding whether to award a party counsel fees.
It is well established that
in awarding counsel fees, the court must consider whether the party requesting the fees is in financial need; whether the party against whom the fees are sought has the ability to pay; the good or bad faith of either party in pursuing or defending the action; the nature and extent of the services rendered; and the reasonableness of the fees.
[Mani v. Mani, 183 N.J. 70, 94-95 (2005) (emphasis omitted) (citations omitted).]
Here, we cannot discern the extent to which these factors were
considered or if the factors were discounted based on the judge's decision to
enforce the MA under the Act. What is evident, however, is that the judge
referenced Rules 4:42-9(b), 5:3-5(c) and New Jersey Rules of Professional
Conduct (RPC) 1.5(a) in denying both parties' counsel fee requests, but he did
not fully explain how the factors set forth in these Rules impacted his decision.
A-5172-18 39 Instead, he succinctly stated in his June 28, 2019 opinion:
The court finds that the fees presented by counsel are reasonable and made in good faith. In addition, the court finds that the submissions made by both parties in this matter were made in good faith. As a result, there is no award of counsel fees in connection with this current motion. The parties are responsible for their own fees and costs.
We are persuaded these findings fall short of what is required under the Court
Rules.
Additionally, we note that although the judge decided to enforce the
MA, he did not enforce paragraph 7.5 of the MA, which called for the party
seeking to vary the terms of the MA to pay, as liquidated damages, "all costs
and expenses incurred by the other party in defense" of the MA. Although
such "costs and expenses" presumably would have included plaintiff's counsel
fees in this action, the judge did not compel defendant to absorb plaintiff's
counsel fees. Given what appears to be a significant discrepancy in the parties'
earnings and assets, we do not take issue with this result, nor does plaintiff
cross appeal from the denial of counsel fees. However, given our discussion
about the circumstances under which a marital agreement should be enforced,
we direct the trial court to scrutinize for fairness the contents of paragraph 7.5,
along with the balance of the MA's provisions.
A-5172-18 40 Accordingly, we vacate the June 28, 2019 denial of defendant's request
for counsel fees and remand for reconsideration of this issue, in tandem with
the remand court's consideration of the validity and fairness of the MA. Any
review of defendant's request for counsel fees should follow the Rules of Court
and RPC 1.5(a), so that her financial circumstances and ability to pay her own
fees are considered, along with plaintiff's ability to contribute to her fee s.
Finally, because the judge who heard this matter already conscientiously
expressed his opinion about the fairness of the MA, we are persuaded that to
preserve the appearance of a fair and unprejudiced hearing, it would be
prudent for another judge to preside over this matter on remand. See Pressler
& Verniero, Current N.J. Court Rules, cmt. 4 on R. 1:12-1(d).
The declaratory judgment is reversed, the portion of the JOD which
enforced the MA is vacated, the denial of defendant's counsel fee request is
vacated, and the matter is remanded for further proceedings consistent with our
opinion. We do not retain jurisdiction.
A-5172-18 41