Prenuptial agreement invalid under ‘second look’ test

January 30th, 2015

joel-rosen By: Pat Murphy January 28, 2015

A prenuptial agreement that would have limited a wife’s share of marital assets in the parties’ divorce to a dilapidated home purchased during the marriage could  not be enforced, the Appeals Court has found.

The husband argued that, under the plain terms of the couple’s agreement, the wife was entitled

only to the marital home, regardless of its condition, in the division of marital property.

But the court was persuaded that, under the “second look” test adopted in 2002 by the Supreme Judicial Court in DeMatteo v. DeMatteo, a change of  circumstances during the parties’ marriage had rendered the prenuptial agreement unconscionable and unenforceable.

“If the agreement is enforced, the wife, who makes $300 per week, would be left without sufficient property and appropriate employment to support herself,” Judge Frederick L. Brown wrote on behalf of the court. “The [trial] judge’s determination that enforcement of the agreement would be unconscionable was not in error.”

The decision affirmed a judgment by Probate & Family Court Judge Amy L. Blake awarding the wife $400,000 for what the Appeals Court characterized as a “principal residence substitute.” The seven-page decision is Kelcourse v. Kelcourse, Lawyers Weekly No. 11-007-15. The full text of the ruling can be found by clicking here.

Wake-up call?

Joel Rosen of Andover represented the wife, Rebecca Kelcourse. Rosen rejected the notion that

the decision in his client’s favor is an indication that Massachusetts courts are less inclined to

enforce prenuptial agreements.

“Prenuptial agreements are pretty strictly enforced in Massachusetts,” Rosen said.  “You have to

make a very strong showing before a court is going to invalidate one.”

He added that his client’s case is instructive because it illustrates just what it takes under theDeMatteo standard before courts will substitute their judgment for the contract the parties enter.

“It’s a pretty high bar,” Rosen said. “Either you have to prove that circumstances have changed so much that they are beyond what the parties contemplated when they signed the agreement, or you have to prove that the wife is essentially going to be impoverished.”

The husband, Lawrence Kelcourse, was represented by William M. Driscoll of Chelmsford. Driscoll did not respond to a request for comment prior to deadline.

 

But Wellesley family law attorney David B. Feldman called Kelcourse a “very significant”

decision on the enforceability of prenuptial agreements.

“Every few years the courts need to give lawyers a wake-up call to the fact that, if the agreement is unconscionable at the time one of the parties seeks to enforce it, the courts won’t enforce it,” Feldman said.

The case underscores the point that the Probate & Family Court first and foremost is a court of equity, he said.

What attorneys need to take from Kelcourse is the understanding that a prenuptial agreement is not automatically enforceable just because both sides had an attorney and both sides entered into the contract freely with full disclosure of assets, Feldman said.

“Even when on the face of it the agreement was properly done, it’s not going to be enforceable if it’s totally unfair,” he said.

Cambridge lawyer Rackham Karlsson said the Appeals Court ruling illustrates that, if the second look shows that a party is not going to be able to support him or herself post-divorce, agreement is going to fail.

“One of the things that [the SJC] was considering in determining in whether a prenuptial agreement was valid in DeMatteo was the public policy of not putting people on public assistance,” Karlsson said. “That public policy overrides strict adherence to the letter of the agreement.”

Lawyers may be fooling themselves if they think they can draft a prenuptial agreement that will necessarily hold up under each and every circumstance, he said.

“The best we can do is express the intent [of the parties]. A prenuptial agreement has concrete terms, but those concrete terms are grounded in an intent. If the circumstances at the time of divorce are too far out of alignment with that intent, then the courts will try to step in and fix it,” he said.

Money pit

The husband is a businessman who owns and operates a marina. For five years preceding the

parties’ marriage in July 1991, they lived together in a three-bedroom residence in the marina. At the time of the marriage, the husband was in his 40s, while the wife was in her mid-20s and pregnant with the second of the couple’s three children.

Several months before their wedding, the parties rented a home in Amesbury. The husband allegedly promised the wife at the time that the rental would be temporary.

Four days before the wedding, the parties executed a prenuptial agreement that waived the husband’s and the wife’s interest in all premarital property separately owned by the other spouse. Each party was represented by counsel.

The agreement further provided that any principal residence purchased during the marriage would be deemed the wife’s separate property. The agreement made no provisions for either the payment or waiver of spousal support.

The landlord of the Amesbury home eventually agreed to sell the property. A home inspector hired by the parties determined that the house needed an estimated $80,000 to $100,000 in repairs. The wife claimed that she agreed to buy the home based on the husband’s promise that he would secure funding to make the necessary repairs.

With the wife’s consent, the parties purchased the home in 2006 for the discounted price of

$320,000.

Repairs were never made to the home, and the couple separated in 2010, with the husband moving back to the marina residence.

 

Including the residence, the marina was valued at $1.7 million. While the marina was unencumbered by a mortgage, the marital home in Amesbury was subject to a $256,000 mortgage.

Moreover, the house had deteriorated further since the parties had purchased it in 2006. In addition to having boarded-up windows, chipped paint and hanging utility wires, the property was rodent-infested and had a black mold problem. It was later estimated that the home needed

$300,000 in repairs. An appraisal conducted after separation determined that the home was worth

$190,000, which was $66,000 less than the amount owed on the mortgage.

The wife filed for divorce in August 2010. The trial judge awarded the wife, who had employment income of $300 a week, $1,352 a week in alimony.

However, Rosen said because the wife’s alimony terminated upon the husband reaching full

retirement age, and the husband was 65 at the time of trial, his client was receiving no alimony.

‘Second look’ at prenup

The trial judge also awarded the wife $400,000 in the division of marital assets.

The husband contested that award on appeal, relying on the language of the parties’ prenuptial

agreement.

The Appeals Court concluded that the $400,000 award was justified under the “second look” test as a “substitute” for the principal residence the wife was entitled to under the terms of the

parties’ agreement.

Under DeMatteo, a prenuptial agreement valid at the time of execution will not be enforced at the time of divorce if, due to a change of circumstances, enforcement would leave the contesting spouse without sufficient means of support.

The trial judge found that the parties’ prenuptial agreement was valid at the time of execution, but found it unenforceable upon taking a second look in their divorce case. Specifically, the judge found that that the purchase of the principal residence and its subsequent neglect constituted a change in circumstance beyond what the parties contemplated in 1991, and that enforcement of the agreement would, therefore, be unconscionable.

The Appeals Court concluded that there was sufficient evidence to support the trial judge’s determination that the prenuptial agreement was unenforceable under the second look standard. “Crucial to this finding is that enforcement of the agreement would, as the [trial] judge noted, leave the wife ‘a house with negative equity, with documented structural issues, with documented code violations, and with needed repairs and/or renovations approximated to be upwards of $300,000,’” Brown wrote.

With the prenuptial agreement deemed unconscionable and unenforceable, Brown next examined

the trial judge’s consideration of the statutory factors for dividing the marital property.

Brown concluded that the trial judge properly applied the factors enumerated in G.L.c. 208, §34 in awarding the wife $400,000.

“The [trial] judge considered, inter alia, the wife’s occupation, opportunity for future income, age, and contribution as a homemaker, as well as the needs of the couple’s dependent children,” Brown wrote. “We find no abuse of discretion, or other error of law, in the division of assets.”

 

CASE: Kelcourse v. Kelcourse,Lawyers Weekly No. 11-007-15

COURT: Appeals Court

ISSUE: Was the “second look” test properly applied to declare unconscionable and unenforceable a prenuptial agreement that limited a wife’s share of marital assets to a dilapidated home purchased during the parties’ marriage?

 

DECISION: Yes

 

 

LAWYERS WEEKLY NO. 11-007-15

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