Facts: This is a legal malpractice case that should serve as a cautionary tale to Tennessee lawyers.
Husband hired Attorney to draft a prenuptial agreement in anticipation of Husband’s marriage to Wife.
Attorney was a solo practitioner who had never drafted a prenuptial agreement before. He used a standard form from 1993 as a guide in drafting this prenuptial agreement.
The prenuptial agreement contained the following boilerplate provision:
Each party declares and acknowledges that there has been a full and complete disclosure of the assets of each party, to the other party, as shown in Exhibit “A” attached. Each party acknowledges that he or she knows and understands the value of the property and the legal and moral consequences of this Agreement, and the legal and moral consequences of this release of the rights in the property. Dustin and Amy declare that they have been advised that they have the right to have this Agreement examined by an attorney, tax advisor, or other counselor of his/her choice. Each party does not desire or does not want any rights in the property, whether acquired before marriage, or during marriage, owned and titled in the name of the other party. The assets of each party are attached in Exhibit “A” hereto.
Exhibit A listed various assets. Notably, dollar values were not assigned to each asset, and the overall net worth of either party was not provided.
Husband and Wife went to attorney’s office and executed the prenuptial agreement. Wife claimed she was not advised to hire independent counsel and believed Attorney represented both her and Husband, which belief was shared by Husband. She did not negotiate the terms of the prenuptial agreement or suggest changes.
Husband and Wife subsequently married. Seven years later, they divorced.
Wife challenged the validity of the prenuptial agreement, arguing Husband failed to make a full and fair disclosure of his assets or overall net worth and that she did not possess independent knowledge of that information.
Following the hearing, the trial court ruled the prenuptial agreement was invalid because a reasonable disclosure of assets had not been made and because Wife did not possess independent knowledge of the same.
The trial court granted Wife’s request for temporary spousal support. Husband and Wife later entered into a marital dissolution agreement.
Husband filed a legal malpractice lawsuit against Attorney alleging that Attorney was negligent in drafting the prenuptial agreement. Husband alleged damages of $149,000.
The trial court granted summary judgment for Attorney based on the boilerplate language in the prenuptial agreement that says each party knows the value of the other party’s property.
On Appeal: The Court of Appeals reversed the trial court.
Husband argued the court erroneously relied upon the boilerplate language in the prenuptial agreement and failed to consider the countervailing testimony of the parties in the divorce action.
In order to prove damages in a legal malpractice action, a plaintiff must prove that he would have obtained relief in the underlying lawsuit, but for the attorney’s malpractice; consequently, the trial of a legal malpractice claim becomes, in effect, a “trial within a trial.”
Regarding prenuptial agreements, Tennessee Code Annotated § 36-3-501 provides as follows:
[A] 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 held that the proponent of a prenuptial agreement must prove the knowledgeably requirement by either (1) demonstrating that a full and fair disclosure of the full nature, extent, and value of the proponent spouse’s holdings was made or (2) establishing that disclosure was unnecessary because the spouse seeking to avoid the agreement had independent knowledge of the full nature, extent, and value of the holdings.
After reviewing the record, the Court concluded:
We agree with [Husband]. Parol evidence is inadmissible to add to, vary, or contradict contract language. Here, the evidence was not offered to add to, vary, or contradict a term in the contract. Rather, the evidence was offered to establish that Wife did not enter into the contract with the requisite knowledge, thereby invalidating the Agreement pursuant to section 36-3-501…. At issue in the divorce proceeding and now in this “trial within a trial” is whether a valid prenuptial agreement existed. [K]nowledge is simply an element that must be proven to establish the existence of a valid contract. Section 36-3-501 likewise provides that only agreements that have been entered into “freely, knowledgeably and in good faith and without exertion of duress or undue influence” are “enforceable by all remedies available for enforcement of contract terms.”
In determining whether the spouse seeking to avoid the agreement possessed independent knowledge, the Court suggested consideration of the following factors:
the parties’ respective sophistication and experience in business affairs, the duration of the relationship prior to the execution of the agreement, 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.
The record reflects that genuine issues of material fact remain as to whether Wife possessed independent knowledge of the full nature, extent, and value of the holdings as evidenced by the conflicting testimony presented by the parties. Likewise, genuine issues of material fact remain as to whether Defendant breached the applicable standard of care in drafting the Agreement. With these considerations in mind, we conclude that the trial court erred in granting summary judgment.
Accordingly, the trial court’s judgment was reversed and the legal malpractice case was remanded for trial.
K.O.’s Comment: I say it in my annual review seminars each year and I’ll say it again: lawyers who are not proficient in family law should refrain from drafting prenuptial agreements. They are fraught with danger. The drafting lawyer is all but guaranteed the prenuptial agreement will be scrutinized and likely challenged by a motivated lawyer if the parties divorce. (I should know — I represented Wife at the trial court level and succeeded in invalidating the prenuptial agreement in this case.) If the prenuptial agreement is invalidated, the drafting lawyer may be on the receiving end of a legal malpractice lawsuit, like Attorney was here. Lawyers who dabble in family law should consider referring clients seeking prenuptial agreements to lawyers who focus exclusively on family law. I’m sure the attorney in this case wishes he had done so.
Information provided by K.O. Herston: Knoxville, Tennessee Divorce and Family Law Attorney.