Silverman v. Silverman, 206 A.3d 825 (2019)

Feb. 28, 2019 · Delaware Court of Errors and Appeals · No. 188, 2018; File No. CS15-01396
206 A.3d 825

David SILVERMAN,1 Respondent Below, Appellant,
v.
Michelle SILVERMAN, Petitioner Below, Appellee.

No. 188, 2018
File No. CS15-01396

Supreme Court of Delaware.

Submitted: January 16, 2019
Decided: February 28, 2019

David C. Gagne, Esquire (argued), and Achille C. Scache, Esquire, GIORDANO, DELCOLLO, WERB & GAGNE, LLC, Wilmington, Delaware, for Appellant, David Silverman.

Shawn Dougherty, Esquire, WEIK, NITSCHE & DOUGHERTY, LLC, Wilmington, Delaware, for Appellee, Michelle Silverman.

Before STRINE, Chief Justice; VALIHURA, VAUGHN, SEITZ, and TRAYNOR, Justices, constituting the Court en Banc.

SEITZ, Justice:

On February 19, 1997, David Silverman ("Husband") and Michelle Silverman ("Wife") signed a premarital agreement covering their financial affairs if they divorced or died. They married in 1997 and divorced in 2015. In the post-divorce property settlement, Husband sought to enforce the premarital agreement. The Family Court applied the statute governing premarital agreements and found that, although *827Wife voluntarily entered into the agreement, the disparity in wealth made the agreement unconscionable. Also, according to the Family Court, Husband failed to provide a fair and reasonable disclosure of his property or financial obligations before Wife signed the agreement. The court refused to enforce the agreement. We accepted Husband's interlocutory appeal from the Family Court's order.

Under the premarital agreement statute, unconscionability alone does not invalidate a premarital agreement. Wife also had to prove that Husband did not provide a fair and reasonable disclosure of his property or financial obligations. Because the Family Court erred when it found Husband's financial disclosure insufficient, we reverse and remand to the Family Court to enforce the premarital agreement.

I.

Wife has a bachelor's degree in communications. Before Husband and Wife married in 1997, Wife was employed using her communications degree and lived with her parents. She planned to quit her job and move to Colorado. Husband has an associate's degree and worked in his family's business. A few months after they became romantically involved, in the spring of 1996 Wife moved in with Husband to live in Husband's apartment attached to his parents' home.

Husband and Wife planned a secret wedding in Las Vegas, Nevada. About a month before the wedding Husband gave Wife a premarital agreement with terms favorable to Husband, who had more assets and income potential in the family business than Wife. Under the agreement, each party waived alimony and agreed to retain separate "title, management, and control of the estates owned by them" and "all increases or additions thereto."2 They also agreed that upon death neither party would make a claim against the other or their estate "by inheritance, descent, dower, curtesy, or maintenance," including any claim to increases to the estates during their lifetimes.3 Further, any property that either party acquired after marriage would be "held by the respective party as though this respective party had acquired it before the solemnization of the said marriage."4

Husband suggested that Wife consult an attorney at his expense to review the agreement. Wife retained an attorney from a list of attorneys provided by Husband. Wife does not argue he was conflicted. Wife's attorney explained the downsides to Wife of entering into the agreement and asked Husband's attorney for substantive changes to benefit Wife,5 but Husband's attorney refused all changes except a provision *828relieving Wife of any debts incurred by Husband before or during the marriage.6

The day before the couple planned to leave for their Las Vegas wedding, Wife met with her attorney to review the agreement. The same day, before Wife met with her attorney, Husband gave Wife a summary of his assets and liabilities.7 The record is unclear when Wife's attorney received Husband's disclosure, but the attorney had a copy when he met with Wife to review the agreement.8 In the disclosure Husband and Wife summarized their assets and liabilities.9 Wife's attorney advised her the agreement was not in her best interests and she should not sign it. Anticipating this day might come, her attorney also requested she sign an acknowledgement which provided as follows:

I, [Wife], on this 19th day of February, 1997, hereby understand and acknowledge that I will be signing an Ante-Nuptial Agreement on this day, affecting statutory rights regarding alimony, property division, debt allocation, my elective share in my future husband's estate in the event of his death, as well as any other lawful right arising from my intended marriage to [Husband].
I have sought the assistance of [Wife's Attorney] in explaining these rights and my waiver pursuant to the aforementioned Ante-Nuptial Agreement. I have been advised by [Wife's Attorney], that I will be waiving most of my statutory rights to property acquired during the marriage, any right to alimony, the right to have my Husband be responsible for any debt incurred in my sole and individual name during the marriage, as well as my statutory rights to my husband's estate in the event of his death.
[Wife's Attorney] has advised me that this Ante-Nuptial Agreement is not in my best interests. After careful consideration of the Ante-Nuptial Agreement, I have no further questions, concerns, or revisions regarding said Agreement.10

Against her attorney's advice, Wife signed the premarital agreement and the acknowledgement on February 19, 1997.

The couple married on February 23, 1997 in Las Vegas without telling friends or family. According to Wife, the plan to keep the wedding a secret was Husband's, and Wife was "a little hesitant" to have a secret wedding.11 Wife testified that Husband forbade Wife from discussing the marriage or the premarital agreement with anyone other than her attorney before the marriage.12 Wife also testified that Husband had assured her the agreement was only a formality and that he would still take care of her either way.13 Wife did not pursue significant employment during the marriage, devoting her time to the important task of raising their children and taking care of a large home and property.

*829II.

In 2015, Wife petitioned for divorce. She asked the court to set aside the premarital agreement, and claimed she entered into the agreement involuntarily after being pressured by Husband. She also argued the agreement was so one-sided it was unconscionable, and her counsel did not competently represent her before signing the agreement. Finally, she claimed that Husband did not provide a fair and reasonable disclosure of his property or financial obligations before signing.

The Family Court found that Wife entered into the agreement voluntarily because she consulted with a lawyer before signing-who advised her not to sign-and she signed the acknowledgement confirming his advice.14 For the same reason the court dismissed Wife's claim that counsel should have given her better advice before she signed the agreement.15 But, the Family Court found the agreement so one-sided it was unconscionable based on the disparity in wealth between Husband and Wife.16 It also found that Husband failed to adequately disclose his property or financial obligations because of errors and omissions in his financial disclosure involving a car, a life insurance policy, and how Husband described his ownership interest in about 200 acres of land.17 Further, according to the Family Court, Wife did not have sufficient time to understand Husband's financial disclosure before signing the agreement.18 Thus, the Family Court found the agreement unenforceable. Husband has appealed from the Family Court's interlocutory order invalidating the premarital agreement.

III.

"When reviewing a Family Court order our standard and scope of review involves a review of the facts and law, as well as inferences and deductions made by the trial judge."19 Questions of law are reviewed de novo.20 Findings of fact are reviewed to assure that they are supported by the record and not clearly erroneous.21 The unconscionability of the agreement is a question of law reviewed de novo.22 What "fair and reasonable disclosure" of property and obligations requires is a question of statutory interpretation we review de novo.

A.

The parties have accepted the Family Court's ruling that Wife voluntarily entered into the premarital agreement. Thus, voluntariness is no longer at issue. Husband argues that the Family Court erred when it found the agreement unconscionable because the agreement's obligations were mutual, Wife had the advice of an independent attorney, and the Family Court failed to assess unconscionability at the time the parties signed the agreement. Husband also argues that the Family Court erred because any errors or omissions *830in Husband's financial disclosure were immaterial and did not mislead Wife in understanding the extent of Husband's wealth. Husband also argues in the alternative that Wife had sufficient knowledge of his property or financial obligations before marriage, and Wife waived the right to any disclosure according to the premarital agreement.

Wife responds that, although the statute requires the court to assess unconscionability at the time of execution, Husband already had substantially more assets at the time of execution and thus it was foreseeable that the imbalance would grow over time. Wife also argues that the Family Court correctly found that Husband's financial disclosure came too close in time to the execution of the agreement, had inaccuracies, and thus did not fairly and reasonably disclose Husband's property and financial obligations. Finally, according to Wife, she was not fully aware of Husband's finances, and the premarital agreement did not provide for a waiver of her right to a fair and reasonable financial disclosure.

For the reasons explained below, under the premarital agreement statute, we need only address one issue to decide this appeal-whether Husband met the statutory standard for "fair and reasonable" disclosure of his property or financial obligations before signing the premarital agreement. After our review of the record, we find that Husband's financial disclosure met the statutory standard, and thus the Family Court should have enforced the premarital agreement.

B.

Historically, the Court of Chancery resolved domestic relations disputes involving separate maintenance and premarital agreements.23 By statute adopted in 1935, early premarital agreements could address the disposition of a married couple's property during marriage and upon death, but not after divorce.24 Eventually, starting in the 1970's, courts recognized premarital agreements that addressed property division following divorce.25

*831In Delaware, jurisdiction over separate maintenance and premarital agreements eventually transitioned from the Court of Chancery to the Family Court.26 In 1990, the General Assembly enacted a statute conferring jurisdiction by the Family Court over the "construction, reformation, enforcement and rescission of agreements made between future spouses, spouses, and former spouses concerning the payment of support or alimony" and "the division and distribution of marital property and marital debts and any other matters incident to a marriage, separation or divorce."27 In 1996, the General Assembly enacted 13 Del. C. §§ 321 -28, modeled in substantial part after the Uniform Premarital Agreement Act ("UPAA"), drafted by the National Conference of Commissioners on Uniform State Law ("NCCUSL").28

Under the 1996 statute, a premarital agreement is "an agreement between prospective spouses made in contemplation of marriage, and which is effective upon marriage."29 The agreement "must be in writing and signed by both parties." Further, "[i]t is enforceable without consideration."30 The statute allows parties contemplating marriage to agree to a broad range of rights, including "the rights and obligations of each of the parties in any of the property of either or both of them,"31 "the disposition of property upon separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event,"32 "the modification or elimination of spousal support or alimony"33 and "[a]ny other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty."34

At the heart of the statute is § 326, which addresses enforcement of premarital agreements:

(a) A premarital agreement is not enforceable if the party against whom enforcement is sought proves that:
(1) Such party did not execute the agreement voluntarily; or
(2) The Agreement was unconscionable when it was executed and, before execution of the agreement, that party:
*832a. Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party;
b. Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
c. Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.

Wife argues that, under the statute, the unconscionability and disclosure requirements should be read disjunctively. In other words, Wife claims she can prevail in this appeal if she demonstrates either unconscionability or financial disclosure problems. The plain language of the statute, however, is otherwise,35 as is caselaw from other jurisdictions and scholarly commentary interpreting the UPAA.36 Indeed, in a case decided just one year before Delaware's enactment of the UPAA, the Family Court recognized that the UPAA "does not intend that a lack of disclosure alone" provides a basis to invalidate a premarital agreement, and that overall, the UPAA "seem[s] less protective" than the approach exemplified by pre-UPAA cases that would allow for challenges based on unfairness alone.37 Thus, to render the premarital agreement unenforceable under the statute, the spouse contesting enforcement must prove that the agreement is unconscionable and *833prove three other grounds-lack of fair and reasonable disclosure of the other spouse's property or financial obligations, non-waiver, and lack of adequate knowledge of Husband's property and financial obligations.

C.

Section 326(a)(2)(a) requires "fair and reasonable" disclosure of a spouse's property or financial obligations. What satisfies this standard will depend on the specific facts of each case. The financial disclosure must be "of a general and approximate nature, concerning the net worth of the other."38 Absent fraud or overreaching, "the inadvertent failure to disclose an asset or the unintentional undervaluation of an asset will not invalidate a prenuptial agreement as long as the disclosure that was made provides an essentially accurate understanding of the party's financial holdings."39

The Family Court focused on three allegedly deficient aspects of Husband's disclosure: (1) failing to disclose ownership of a car, purchased in 1996 for $ 21,500,40 which Wife drove but was titled in Husband's name; (2) omitting a $ 3000 life insurance policy; and (3) an inaccurate ownership description of a parcel of land-"50% interest in 200 acres - Milton $ 200,000.00."41 We agree with Husband that the Family Court erred when it found these discrepancies sufficient to invalidate the agreement.

For the car, it is obvious that Wife knew about the car-because it was her car to drive-even if she was unsure of the title at the time of signing.42 For Husband's life insurance policy, the $ 3000 represented an insignificant part of Husband's disclosure of $ 4,225,336 in net assets. Neither of these omissions was material to Wife's understanding of the extent of Husband's property and financial obligations. Finally, for the 200 acres of land, Husband admitted that he misdescribed his ownership interest as 50% instead of 100%. The error arose because he thought that his parents' life estates in the property impacted his ownership interest.43 The ownership error, *834however, had no impact on Wife's understanding of Husband's property or financial obligations. On appeal, Wife has not challenged Husband's $ 200,000 property value estimate in his summary of assets and liabilities.44 Whether Husband owned 50% or 100% of the property did not affect Husband's financial disclosure because 100% of the property value-$ 200,000-was included in the total value of Husband's assets. Because none of the errors were material to Wife's overall understanding of Husband's property or financial obligations, Husband met the statutory requirements.

Finally, Wife relies on the Family Court's finding that she was not given enough time to review Husband's financial disclosure. Although there may be circumstances when undue pressure to sign a premarital agreement might invalidate an agreement, that concern is not present here.45 Wife also had an attorney to advise her, mitigating any timing unfairness. Her attorney advised Wife not to sign. Unfortunately, her decision to sign the agreement has now caused her financial hardship after many years of marriage and raising children. But, the premarital agreement statute, as presently in force, does not permit Wife to avoid the agreement.

IV.

Under the premarital agreement statute, unconscionability alone does not invalidate an agreement. Wife also had to prove that Husband failed to provide a fair and reasonable disclosure of his property or financial obligations. The Family Court erred when it found Husband's financial disclosure deficient. Thus, the Family Court's April 4, 2018 decision is reversed, and the case is remanded for further proceedings consistent with this opinion. Jurisdiction is not retained.46