Prenuptial Agreement Held Invalid and Unenforceable in Tennessee: Stancil v. Stancil

Facts: Wife filed for divorce and sought temporary alimony. Husband responded that Wife had waived any claim to alimony in a prenuptial agreement. The trial court held on hearing on the validity and enforceability of the prenuptial agreement. The proof showed Wife had no formal education beyond the tenth grade. Husband owned an interest in an insurance company. Husband told Wife they needed to execute a contract so Wife would not “be on his property.” According to Wife, Husband told her this was due to Wife’s poor credit history and the possibility it could hinder Husband’s ability to obtain a loan. Husband told Wife the document was “like a prenup” but in reality its only purpose was related to the loan. Husband testified his purpose in securing the prenuptial agreement was to protect the interests of his children from an earlier relationship and to protect his business. According to Wife, Husband said he did not list one of his properties in the agreement, and this would have the effect of invalidating the agreement. After the hearing, the trial court ruled the prenuptial agreement was valid and enforceable. Wife appealed.

On Appeal: The Court of Appeals reversed the trial court.

Tennessee Code Annotated § 36-3-501 provides:

[A]ny prenuptial agreement entered into by spouses concerning property owned by either spouse before the marriage that is the subject of such agreement shall be binding upon any court having jurisdiction over such spouses and/or such agreement if such agreement is determined, in the discretion of such court, to have been entered into by such spouses freely, knowledgeably and in good faith and without exertion of duress or undue influence upon either spouse. The terms of such agreement shall be enforceable by all remedies available for enforcement of contract terms.

The Tennessee Supreme Court has interpreted this statute to require the spouse seeking to enforce a prenuptial agreement to prove, by a preponderance of the evidence, either that a full and fair disclosure of the nature, extent, and value of his or her holdings was provided to the spouse seeking to avoid the agreement, or that disclosure was unnecessary because the spouse seeking to avoid the agreement had independent knowledge of the full nature, extent, and value of the proponent spouse’s holdings. What constitutes “full and fair” disclosure must be determined from the circumstances of each case. Factors to be considered are (1) the relative sophistication of the parties, (2) the apparent fairness or unfairness of the substantive terms of the agreement, and (3) any other circumstance unique to the parties and their specific situation. Full and fair disclosure does not require that each and every asset be revealed with complete exactness, but it does require that each party be given a clear idea of the nature, extent, and value of the other party’s property and resources. Though not specifically required, a fairly simple and effective method of proving disclosure is to attach a net worth schedule of assets, liabilities, and income to the agreement itself.

Based on the foregoing principles, the Court ruled the prenuptial agreement in this case was invalid and unenforceable.

The Trial Court stated . . . “the Court does not believe that the [Wife] has maintained a showing of invalidity by clear and convincing evidence.” We believe that this statement reflects the wrong standard in a case such as this one. Rather, Husband, as proponent of the antenuptial agreement . . . had the burden of proving the agreement’s validity by a preponderance of the evidence.

Husband failed to carry his burden of proof. . . . We find that the evidence preponderates in favor of a finding that Wife was misled by Husband into believing that the antenuptial agreement would be purposefully invalidated by Husband.

The preponderance of the evidence in the record shows a lack of good faith by Husband in the preparation and execution of the antenuptial agreement. The evidence demonstrates that Wife simply did not know that she was signing away the possibility of alimony as part of a valid contract. . . . Wife believed she was signing an invalid agreement solely in order to assist Husband’s effort to obtain a loan. Husband’s bad faith underpins this antenuptial agreement. . . .

Wife clearly was disadvantaged with respect to sophistication. The record reflects that Wife, wishing to go ahead with getting married, was rushed into signing an antenuptial agreement which lacks values for Husband’s listed assets. In any event, Wife, lacking independent counsel, was misled by Husband to believe that the agreement would be invalid as an antenuptial agreement. The evidence in this case reflects a fundamentally unfair, hurried, and opaque process by which Wife was misled by Husband to enter into this antenuptial agreement.

Accordingly, the trial court was reversed and the prenuptial agreement was invalidated in its entirety.

Partial Dissent: Judge Susano filed a separate opinion concurring with the Court’s conclusion that the wrong legal standard was applied but dissenting from the Court’s reversal of the trial court’s judgment. Instead, Judge Susano argued the case should have been remanded to the trial court pursuant to Tennessee Code Annotated § 27-3-128.

Stancil v. Stancil (Tennessee Court of Appeals, Eastern Section, January 13, 2012).

Information provided by K.O. Herston: Knoxville, Tennessee Matrimonial, Divorce and Family Law Attorney.

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K.O. Herston is a family-law attorney in Knoxville, Tennessee whose practice is devoted exclusively to family law, including divorce, child custody, child support, alimony, prenuptial agreements, and other aspects of family law.

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