Search This Blog

Friday, May 30, 2008

Clear and Unambiguous French PreNuptual Agreement Upheld to Deny Wife Equitable Distribution

Clear and Unambiguous French PreNuptual Agreement Upheld to Deny Wife Equitable Distribution

In Van Kipnis v Van Kipnis, --- N.Y.S.2d ----, 2007 WL 2003419 (N.Y.A.D. 1 Dept.), the Plaintiff wife and defendant husband were married in Paris, France, in 1965. Prior to the ceremony, and at the request of the wife, the parties agreed to execute a "Contrat de Mariage" (Contract), which is a form of prenuptial agreement under the French Civil Code. The expressly stated purpose of the Contract was to opt out of the "community property regime," which is the custom in France, in favor of a "separation of estates" property regime. The first article of the Contract, which is titled "MARITAL PROPERTY SYSTEM," provided: "The future spouses declare that they are adopting the marital property system of separation of estates, as established by the French Civil Code. Consequently, each spouse shall retain ownership and possession of the chattels and real property that he/she may own at this time or may come to own subsequently by any means whatsoever. They shall not be liable for each other's debts established before or during the marriage or encumbering the inheritances and gifts that they receive. The wife shall have all the rights and powers over her assets accorded by law to women married under the separate-estates system without any restriction." Shortly after the marriage the parties moved to New York, where they resided throughout their 38-year marriage. The husband acquired liquid assets of approximately $7 million and the wife of approximately $700,000-$800,000 The parties kept their assets completely separate throughout the course of their marriage. However, the parties jointly owned a country home in Lenox, Massachusetts, valued at $625,000, and a cooperative apartment at 860 Fifth Avenue, in Manhattan valued at $1.8 million. At the hearing, the wife testified that the Contract was executed for the sole purpose of opting out of the community property system of France, and instead adopting a complete separation of estates, whereby each party could not be held liable for the other's debts. She also admitted, however, that the husband executed the Contract at her insistence, that he had no money at the time of the marriage and that she had never moved to set the Contract aside during the marriage. The husband offered a similar understanding of the Contract. Expert testimony established that article 1536 of the French Civil Code provides different choices of matrimonial regimes; that by signing the Contract the parties opted out of France's community property regime and chose a regime of separate property; that the legal effect of this selection was that each
spouse retained the unfettered right to administer, enjoy and freely dispose of his or her separate property throughout the marriage and continuing through its dissolution; and that divorce is never mentioned in a marriage contract. The Referee upheld the Contract., finding that "it is clear that these parties entered into a prenuptial agreement ... which governed the economics of their 38 year marriage, and is likewise applicable in the circumstances of their divorce." Thus, the Referee determined that the parties were to retain ownership of the assets held in their respective names. With respect to the jointly held properties, the Referee recommended that wife be awarded the co-op apartment and reimbursed $75,000 for repairs and furnishings therein, and that the husband be awarded the Massachusetts country home. The Referee also ruled that the Contract did not constitute a waiver by the wife of the right to receive maintenance. In determining the amount and duration of maintenance, the Referee considered, inter alia, the marital standard of living, which it described as "relatively modest," in arriving at a sum of $7,500 per month, payable until either the husband or wife dies or the wife remarries. In
addition, after subtracting the amount of fees allegedly attributable to the wife's challenge to the Contract, which it found were not compensable, the Referee awarded the wife an additional $92,779 in attorneys' fees. On appeal, the wife argued that the enforceability of the Contract was irrelevant since, even if enforceable, it was not applicable to this divorce proceeding, since the intent was to shield each spouse's assets from the other's creditors during the marriage, and not to govern the distribution of property upon divorce. She noted that although the Contract specifically provides that each spouse "shall not be liable for each other's debts established before or during the marriage," it makes no mention of the disposition or distribution of property in the event of divorce, and contains no express waiver of property rights if the parties decided to divorce. She also noted that both parties testified that neither of them understood the Contract as having any relevance to divorce. The First Department held that because the Contract unambiguously provides for separate ownership of property and extrinsic evidence should not have been considered to create an ambiguity or vary its terms, it would affirm that portion of the order which found the contract to be enforceable and applicable. It rejected the wife's argument that the Contract should not be enforced
because it is not "an agreement for the disposition of ... property" within the meaning of Domestic Relations Law [DRL] 236(B)(5). Although the wife was correct that the Contract was not an agreement for the disposition of property, DRL
236(B)(3) authorizes enforcement of agreements that include "(2) provision for the ownership, division or distribution of separate and marital property" (emphasis added). Moreover, DRL 236(B)(1)(d)(4) defines "separate property" as including
"property described as separate property by written agreement of the parties." Thus, the DRL specifically authorizes agreements to treat what might otherwise be marital property as separate property for purposes of equitable distribution. This
is precisely what occurred in this case, where the Contract described each spouse's property held at the time of marriage or acquired thereafter as separate property. The court's award of $7,500 per month in maintenance, which would result in an approximate annual pre-tax incomes of $126,000 for the wife and $335,000 for the husband, was a proper exercise of discretion as was the $92,779.57 in attorneys' fees to the wife. Although the wife requested an additional $177,000 in fees (the husband had already paid $160,000), the Referee correctly ruled that under DRL 237 the wife was not entitled to fees incurred in challenging the enforceability of a prenuptial agreement. Moreover, because the legal bills submitted by the wife's attorney failed to clearly delineate those legal services that were unrelated to the wife's challenge to the agreement, and thus compensable under DRL 237, the court properly exercised its discretion in awarding the amount that it did.

No comments:

Post a Comment