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DIVORCE 44: A POST-NUPTIAL AGREEMENT WAS NOT CONTRARY TO PUBLIC POLICY WHEN IT WAS MOSTLY NEGOTIATED PRIOR TO THE MARRIAGE AND WAS NOT CREATED IN CONTEMPLATION OF A FUTURE DIVORCE

BACKGROUND

The parties met and began cohabitating in 2003.  In 2011, plaintiff and defendant began discussing marriage.  The parties had lived together for years, but each had their own separate businesses and assets.  Thus, leading up to their 2012 marriage, the parties negotiated the terms of what was to be a prenuptial agreement.  Plaintiff and defendant e-mailed back and forth, and discussed an agreement for approximately 16 months before its execution.   Although the agreement was supposed to be a prenuptial agreement, it turned into a postnuptial agreement because of time constraints.  In other words, despite working on it for 16 months and agreeing to the major provisions, the agreement was not signed prior to the marriage.  Plaintiff testified that, after they were married, defendant indicated that he was not going to sign the agreement, which greatly frustrated her.  Nonetheless, after reviewing the document and obtaining advice from separate legal counsel, the agreement was eventually executed on September 19, 2012, which was approximately one month after the marriage.

In October 2016, plaintiff filed for divorce .  Plaintiff subsequently filed a motion to enforce the agreement.  Defendant opposed the motion, and asked the court to void the agreement, arguing the agreement went against public policy because it was made in contemplation of a future divorce .  The trial court conducted an evidentiary hearing on the issue of enforceability, where the parties’ presented their own testimony and offered exhibits into evidence.   The trial court issued a written decision granting plaintiff’s motion.  In its opinion, the trial court noted that the parties had discussed the terms of the agreement for a period of 16 months, and that each party had been represented by counsel throughout this period, and up to the agreement’s execution.  The trial court stated that, although the parties “contemplated” that the agreement would be a prenuptial agreement, it “evolved into a postnuptial agreement” because the parties married six weeks before the agreement was executed.   Recognizing that postnuptial agreements were not unenforceable per se and were acceptable if they “intended to promote harmonious marital relations and keep the marriage together,” the trial court found that the agreement was the type of postnuptial agreement acceptable under Michigan law, reasoning in part that [n]othing in the agreement itself or the record suggests that the parties contemplated a separation in the near future when they signed the agreement.  On the contrary, the agreement was made in large part to fulfill the desire of the parties to define and clarify their respective rights in each other’s property and in any jointly held property that they owned prior to the execution of the Marital Agreement or thereafter acquired.

STANDARD OF REVIEW

Since postnuptial and other marital agreements are contracts, we are guided by contract principles in reviewing the agreement.  Accordingly, we review de novo the trial court’s interpretation of a contract as well as its ruling on legal questions that affect the contract’s validity.  However, we review for clear error any factual findings made by the trial court.

PUBLIC POLICY

Defendant argues that the agreement was unenforceable because it was contrary to public policy.  As defendant notes, the general rule is that “a couple that is maintaining a marital relationship may not enter into an enforceable contract that anticipates and encourages a future separation or divorce.”  To allow such agreements “would encourage separation or divorce, which is not an appropriate public policy.”  Despite this general prohibition against postnuptial agreements, we have recognized that they “ ‘are not invalid per se,’ because some postnuptial agreements may be intended to promote harmonious marital relations and keep the marriage together.” Accordingly, if the agreement in question “seeks to promote marriage by keeping a husband and wife together, Michigan courts may enforce the agreement if it is equitable to do so.”

The parties to the instant agreement expressly stated they were agreeing to ‘continue to live together as husband and wife,’ and there is nothing in the agreement that shows it was ‘calculated to favor a separation,’ or that it was drawn to ‘provide for a separation of the parties and a breaking up of the marriage.’  Instead of coming to such a conclusion, it is more logical to state that the parties now before this Court entered into said agreement with the hopes that the marital journey they had commenced as rather elderly people would continue on without discord if they eliminated the only dispute or problem they faced, namely: The eventual disposition of property owned severally at the time of marriage as well as that acquired jointly during the marriage.

Turning back to the parties’ agreement, the parties initially acknowledge their mutual desire “to define and clarify their respective rights in each other’s property and in any jointly owned property they now own or might accumulate after today and to avoid interests that, except as provided by this agreement, they might otherwise acquire in each other’s property as a consequence of their marriage relationship” (emphasis added).  This description is important in understanding its purpose and the parties’ intent, as the plain language demonstrates that its purpose was merely to define and clarify the parties’ rights during the course of the marriage and at the end of the marriage, whether it ends by divorce or death.  Nothing in the agreement suggests that it was created in contemplation of a future separation or divorce.  In fact, the agreement contained terms to help support the marriage.  For example, one provision speaks to the creation of a joint marital checking account, the purpose of which is to fund joint expenses during the marriage.  In this way, the parties could easily pay for joint expenses while still retaining their separate bank accounts, thereby eliminating a potential acrimonious issue and promoting a harmonious marriage.

To this same point, the agreement also contained a “cooling off” provision, which required the parties to wait four months and attend joint marital counseling before filing for divorce.  This provision likewise reflects the parties desire to refrain from making hasty decisions and to take affirmative steps to preserve the marriage if possible.  We therefore reject defendant’s contention that the agreement was created to encourage, or was made in contemplation of, divorce, rather than for the harmonious continuation of the marriage.  

We also think it important that the parties discussed and negotiated the agreement for 16 months, most of which was prior to the marriage.  It was undisputed before the trial court that the agreement was supposed to be a prenuptial agreement, and that it became a postnuptial one only because time constraints prevented earlier finalization.  Accordingly, we agree with the trial court that this was not an agreement that contemplated a future divorce; nor was it an agreement that encouraged divorce.  Instead, the agreement reveals that the parties clearly wished to be married and remain married, and the agreement was meant to help facilitate this.  

Based on the trial court’s findings, though living together, the parties’ agreement was not in contemplation of them separating or divorcing.  As the trial court concluded, because the postnuptial agreement addressed the disposition of property at death or in case of divorce, and otherwise allowed the parties to pursue their marriage in a manner most likely to allow it to flourish, and was not otherwise inequitable in its terms, it was not contrary to public policy.

ADVICE TO CLIENTS FACING POST-NUPTIAL ISSUES IN DIVORCE CASES

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