Prenuptial Agreement Ruled Invalid in Cleveland, TN Divorce: Ellis v. Ellis

Facts: The parties met when Wife was 31 and husband was 47. Wife had a high school education and had worked in several relatively low-skilled jobs. Husband started his own construction company in the early 1980s and accumulated substantial wealth. They got engaged in the spring of 1996 and plan to marry the following spring in 1997.

In late October 1996, Wife discovered she was pregnant. The parties moved their wedding date up, planning to marry in Las Vegas on December 26, 1996.

On December 23, three days before the wedding, Husband presented wife with a wedding ring and, for the first time, a prenuptial agreement. Husband made it clear he would not marry Wife unless she signed the agreement.

Wife’s mother referred her to a local law firm. The next day, on Christmas Eve, Wife went to the law firm’s office without an appointment. She was told she would not be able to find or consult with an attorney before Christmas.

The parties met on Christmas Day at another law office and signed the prenuptial agreement.

The prenuptial agreement contained a list of each party’s separate property: two assets belonging to Wife and 16 assets belonging to Husband. Only one of Husband’s assets was listed with an estimated value.

The parties flew to Las Vegas on Christmas day, and were married there on December 26, 1996.

Husband filed for divorce on June 24, 2011. In her answer, Wife alleged the prenuptial agreement was invalid because she did not enter into it freely and knowledgeably.

The trial court ruled the prenuptial agreement was invalid and unenforceable, stating:

The facts presented in this case do not show that there was full disclosure. There is no proof that she got independent advice. She was not as sophisticated as [Husband] and the agreement appears to be unfair.

There was little opportunity to get independent advice because of the lateness, which I find was on December the 23rd, 1996, and that also the circumstances surrounding the lateness, the time in December when this was disclosed to her, her pregnancy, I find that those did create some duress in dealing with this agreement. The duty was on [Husband] to disclose and not upon her to ask.

Here the property was not accurately listed. The values were not shown. Whether this duress was unlawful as required by the law, I haven’t been provided any current definitions on that, but I find that the antenuptial agreement will be set aside. She had no real opportunity to review it.

Husband appealed.

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

Prenuptial agreements, sometimes called antenuptial or premarital agreements, are favored by Tennessee law. As a general rule, Tennessee courts enforce a prenuptial agreement if the party seeking enforcement demonstrates the agreement was entered into freely, and knowledgeably, and in good faith and without the exertion of duress or undue influence.

The requirement that a prenuptial agreement is enforceable only if entered into “knowledgeably” means the spouse seeking to enforce a prenuptial agreement must prove either that a full and fair disclosure of the nature, extent and value of his or her holdings was provided to the spouses 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.

A comprehensive and precise list of assets and liabilities, or detailed disclosures such as financial statements, appraisals, balance sheets, or the like, are not necessarily required to uphold a prenuptial agreement. Further, 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.

After reviewing the record, the Court of Appeals reasoned:

Wife had essentially no experience, education, or training in financial or business matters. She had lived with her parents up until the point she discovered she was pregnant. She was working a factory job on the night shift at that time. Husband, sixteen years Wife’s elder, conversely had a great deal of business acumen and experience, having started and built a multi-million dollar construction company. He demonstrated himself to be a shrewd and savvy businessman….

[The prenuptial agreement] informed Wife of the estimated value of a single item out of Husband’s list of 16 assets, which item accounted for only approximately 2.5% of Husband’s apparent net worth. The value of the remainder of the 97.5% was not disclosed. The evidence does not preponderate against the trial court’s judgment that Husband failed to meet his burden of proving that he made a full and fair disclosure of the nature, extent, and value of his holdings….

Husband surprised Wife with his presentation of the agreement three days before the scheduled wedding, and, significantly, two days before Christmas…. [W]e agree with the trial court’s determination that the factors regarding the time of the signing of the agreement in relation to the time of the wedding, and the parties’ representation by, or opportunity to consult with, independent counsel, weigh in favor of invalidating the agreement.

Accordingly, the trial court was affirmed and the prenuptial agreement invalidated.

K.O.’s Comment: Prenuptial agreements can be tricky. The drafting lawyer is tasked with creating a prenuptial agreement that will withstand the close scrutiny that is all but certain to come in a divorce. The standard of care for the drafting lawyer arguably requires delivery of a valid and enforceable agreement, something that may not be discovered until decades later when millions of dollars are at stake. Lawyers who don’t focus on practicing family law would be wise to consider referring such matters to those who do.

Ellis v. Ellis (Tennessee Court of Appeals, Eastern Section, November 25, 2014).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce, Matrimonial 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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