Postnuptial Agreement Enforceable, Did Not Violate Public Policy

In this divorce action, the trial court properly held that a postnuptial agreement the parties had entered into did not violate public policy and was enforceable, the Michigan Court of Appeals has ruled.

For more than a year leading up to their marriage, the parties in Skaates v Kayser (Docket No. 346487) negotiated what was considered at the time to be a prenuptial agreement. But because the agreement was not executed until more than a month after the parties were married, it became a postnuptial agreement. Notably, the agreement included a “cooling off” provision which indicated that, if one party was contemplating a divorce, both parties 1) would wait four months before filing for divorce and 2) would attend marriage counseling.

The plaintiff, after about four years of marriage, filed for divorce in Marquette County Circuit Court. She did not abide by the agreement’s “cooling off” provision.

The plaintiff also filed a motion to enforce the postnuptial agreement. The trial court granted the motion, noting that postnuptial agreements are allowed if they “intended to promote harmonious marital relations and keep the marriage together.” After examining the agreement in this case, the trial court held it was acceptable under Michigan law, especially because the parties had negotiated the terms for more than a year before getting married and had legal representation during the entire process.

The defendant appealed, arguing the agreement should not be enforced for several reasons, including that 1) it was against public policy; 2) he had signed the agreement under duress; and 3) the plaintiff had materially breached the agreement.

The Court of Appeals affirmed the trial court’s decision in a published opinion written by Chief Judge Christopher Murray.

“Based on the trial court’s findings, though living together, the parties’ agreement was not in contemplation of them separating or divorcing,” the Court of Appeals said. “As the trial court concluded, because the postnuptial agreement addressed the disposition of property at death or in case of divorce, and otherwise allowed the parties to pursue their marriage in a manner most likely to allow it to flourish, and was not otherwise inequitable in its terms, it was not contrary to public policy.”

Judges Patrick M. Meter and Kirsten Frank Kelly were also on the appellate panel that issued the decision.

Background

The plaintiff, Carla Skaates, and the defendant, Nathan Kayser, began discussing marriage after living together for several years. The plaintiff was a dentist who had purchased a dental practice with her own money. The defendant owned his own company and also worked as the business manager at the plaintiff’s dental office.

In the years leading up to their marriage, the plaintiff and the defendant discussed and negotiated what was considered to be a prenuptial agreement. The final agreement was executed after they were married in 2012, making it a postnuptial agreement. Basically, the agreement provided that in the event of a divorce: 1) the plaintiff’s dental practice was solely hers; 2) the business owned by the defendant was solely his; and 3) a business the couple jointly owned would be divided equally, with the plaintiff having the option to buy the defendant’s interest. The agreement further provided that certain other assets would remain separate property, not subject to division.

The agreement also included a “cooling off” provision in the event one party was contemplating divorce. In a nutshell, this provision said that both parties would wait four months before actually filing for divorce and would participate in at least three marriage counseling sessions.

In 2016, the plaintiff filed for divorce and sought to enforce the postnuptial agreement. She did not wait four months before filing and the parties did not attend marriage counseling. The defendant filed a motion to set aside the postnuptial agreement, arguing that 1) it was against public policy because it was financially better for the plaintiff; 2) he had signed it under duress; and 3) the plaintiff had materially breached the agreement.

The trial court granted the plaintiff’s motion to enforce the postnuptial agreement. In a written opinion, Marquette Circuit Court Judge Karl A. Weber explained that, for more than a year, the parties negotiated the terms of the agreement and that both were represented by legal counsel during the process, including at the time the agreement was executed.

In particular, the trial court noted the agreement was not an incentive for divorce. And according to the trial court, although the plaintiff had “technically” violated the agreement’s “cooling off” provision, she cured any breach by ultimately participating in several counseling sessions and by putting the divorce proceedings on hold.

Postnuptial Agreement Enforceable

On appeal, the defendant argued the postnuptial agreement was void because it was against public policy.

“According to defendant, there are essentially three types of postnuptial agreements that have been upheld by Michigan courts: where the parties are separated or a divorce action is pending and the parties either seek to (1) reconcile their marriage or (2) agree to settlement terms to be entered into a divorce judgment in the near future, or (3) where the married couple is not separated, but they enter into an agreement to determine property rights upon the death of one of the spouses,” the Court of Appeals explained.

“What are not typically upheld in Michigan courts, according to defendant, is a postnuptial agreement entered into by a married couple that is not separated and which establishes each respective spouse’s rights in the event of divorce,” the Court of Appeals continued. “This latter prohibition, according to defendant, exists because of the longstanding Michigan public policy against enforcing postnuptial agreements that promote divorce.”

While the Court of Appeals said it did not disagree with the “general legal proposition” asserted by the defendant, the panel said it did disagree with the assertion that all postnuptial agreements made by married couples living together – i.e., not separated or otherwise contemplating divorce – that address property rights in the event of divorce are invalid as a matter of law.

“Indeed,” the Court of Appeals wrote, “in Ransford v Yens, 374 Mich 110 … (1965), an equally divided [Michigan] Supreme Court upheld a provision similar to that entered into by the parties here. … We agree with the opinion written by Justice Kelly in Ransford, and find that it is the most applicable case to resolving the validity of the parties’ agreement. And, it is an example of a postnuptial agreement upheld by the Supreme Court when it was entered into by a married couple living together while setting forth their respective rights and obligations as to existing property and future obligations should a divorce or separation occur.”

The Court of Appeals then turned to the agreement in this case, noting the parties had acknowledged their mutual desire “to define and clarify their respective rights in each other’s property and in any jointly owned property they now own or might accumulate after today and to avoid interests that, except as provided by this agreement, they might otherwise acquire in each other’s property as a consequence of their marriage relationship.”

According to the Court of Appeals, this language was important in understanding the agreement’s purpose and the parties’ intent. “[T]he plain language [of the agreement] demonstrates that its purpose was merely to define and clarify the parties’ rights during the course of the marriage and at the end of the marriage, whether it ends by divorce or death. Nothing in the agreement suggests that it was created in contemplation of a future separation or divorce. In fact, the agreement contained terms to help support the marriage. … To this same point, the agreement also contained a ‘cooling off’ provision, which required the parties to wait four months and attend joint marital counseling before filing for divorce. This provision likewise reflects the parties desire to refrain from making hasty decisions and to take affirmative steps to preserve the marriage if possible.”

Therefore, “[w]e … reject defendant’s contention that the agreement was created to encourage, or was made in contemplation of, divorce, rather than for the harmonious continuation of the marriage,” the Court of Appeals said.

The Court of Appeals further rejected the defendant’s argument that the agreement’s division of property made it more attractive for the plaintiff to divorce him. “In fact, as the trial court recognized, the evidence is the opposite. Under the agreement, plaintiff transferred a portion of several significant premarital interests to defendant, including a 25% ownership interest in her dental practice building; a 50% interest in the marital home (which plaintiff had purchased prior to the marriage with her own funds); and an immediate 50% interest in the camp property, which plaintiff had, again, purchased entirely with her own funds. Moreover, defendant’s various bank, investment, and retirement accounts, as well as his financial items, remained separate property and under his complete control. The trial court found that the division was equitable, especially in light of the marriage’s short duration, and, in light of the evidence presented, this determination was not clearly erroneous.”

The Court of Appeals also pointed out that the parties discussed and negotiated the agreement for more than a year before they got married. “It was undisputed before the trial court that the agreement was supposed to be a prenuptial agreement, and that it became a postnuptial one only because time constraints prevented earlier finalization. Accordingly, we agree with the trial court that this was not an agreement that contemplated a future divorce; nor was it an agreement that encouraged divorce. Instead, the agreement reveals that the parties clearly wished to be married and remain married, and the agreement was meant to help facilitate this. … As the trial court concluded, because the postnuptial agreement addressed the disposition of property at death or in case of divorce, and otherwise allowed the parties to pursue their marriage in a manner most likely to allow it to flourish, and was not otherwise inequitable in its terms, it was not contrary to public policy.”

In addition, the Court of Appeals refuted the defendant’s argument that he had signed the agreement under duress. “The trial court … found that defendant admitted that he was not forced to sign the agreement, which is supported by the record.”

The Court of Appeals also rejected the defendant’s claim that the plaintiff materially breached the agreement. “Th[e] evidence supported the trial court’s determination that, although plaintiff did not strictly follow the agreement’s terms, the breach was not substantial because her actions largely cured the breach.”

After the Court of Appeals issued its decision, the defendant filed a motion for reconsideration, which was denied.

You can learn more about marital agreements in Episode 6 of “In The Name Of The Law.”