Trial Court Must Address Whether Oral Postnuptial Agreement Existed

The trial court in this divorce action erroneously granted the plaintiff’s motion for summary disposition because there was a genuine issue whether oral postnuptial agreements existed, the Michigan Court of Appeals has ruled.

The plaintiff in Anderson v Lucci (Docket No. 369351) claimed that she and the defendant had entered into an oral postnuptial agreement, under which the plaintiff agreed to “purchase, maintain, and furnish the parties’ real properties and be responsible for all taxes, insurance, and utilities, so long as the properties would remain solely hers.” The plaintiff also asserted the parties had entered into a “full and final oral property settlement agreement” after divorce proceedings were initiated and had agreed that her $385,000 payment to the defendant “constituted the parties’ full and final divorce settlement.”

The defendant had originally filed for divorce in Barry County but, shortly after, the plaintiff filed for divorce in Antrim County. The Antrim County Circuit Court ultimately entered the judgment of divorce and, in doing so, awarded the parties their respective bank account, debts and vehicles. In addition, the plaintiff was awarded real property, proceeds from the sale of certain real property and the parties’ joint bank account.

The defendant appealed, arguing that the trial court should not have granted summary disposition for the plaintiff because there was a genuine issue as to whether any alleged oral agreements between the parties existed.

The Court of Appeals agreed with the defendant, vacating the order of summary disposition and remanding the case.

Regarding the alleged oral agreements, “reasonable minds could differ as to whether the parties entered into the alleged oral postnuptial agreement,” the Court of Appeals said. “Accordingly, a genuine issue of material fact existed, and the trial court erred by granting summary disposition on the matter.”

Judge Kristina Robinson Garrett, Judge Michelle M. Rick and Judge Kathleen A. Feeney were on the panel that issued the unpublished opinion.

Background

The parties were married in 2007. At the time of the divorce, the plaintiff was 68 years old and the defendant was 65 years old. The parties had no children together. During their marriage, the parties purchased a property in Battle Creek and on Torch Lake. The parties “generally maintained” their own bank accounts during the marriage, but did share one joint bank account for expenses associated with the properties they owned. After the defendant’s retirement in 2011, and before the plaintiff’s retirement in 2020, the plaintiff earned about $300,000 a year. “[T]herefore, plaintiff largely funded the party’s expenses during that time.”

The defendant filed a divorce complaint in Barry County Circuit Court and, on May 1, 2023, the trial court entered an ex parte mutual temporary restraining order that prohibited the parties from “concealing, assigning, selling, destroying, transferring, mortgaging, or encumbering either parties’ assets.” The order also prohibited the parties from “distributing proceeds from the sale of the Battle Creek property, which was under a purchase agreement at the time of the order, without a written agreement between the parties.” The defendant did not serve the plaintiff with the documents related to the Barry County filing, including the restraining order.

While the plaintiff was unaware of the Barry County restraining order, the defendant asked the plaintiff for part of the sale proceeds from the Battle Creek property so that he could buy a home in Florida. The plaintiff gave the defendant $385,000 from the proceeds and let him take personal property from the Battle Creek property. Further, the defendant withdrew “significant amounts of money from his retirement account and personal savings accounts, and he obtained a mortgage for his Florida property” without the plaintiff’s knowledge or approval.

The plaintiff filed a divorce complaint in the Antrim County Circuit Court on May 3, 2023. On July 25, 2023, the parties stipulated to dismiss the Barry County proceedings and move forward in Antrim County.

As the proceedings moved forward, the plaintiff claimed the parties had an oral postnuptial agreement under which she agreed to “purchase, maintain, and furnish the parties’ real properties and be responsible for all taxes, insurance, and utilities, so long as the properties would remain solely hers.” She further alleged the parties had entered into “a full and final oral property settlement agreement after the divorce proceedings were initiated, in which her $385,000 payment to defendant constituted the parties’ full and final divorce settlement.”

The plaintiff filed a motion for summary disposition, requesting that the trial court enter a judgment of divorce recognizing the alleged oral agreements between the parties and dismissing the case. The Antrim County trial court granted the plaintiff’s motion and entered a judgment of divorce awarding the parties their respective bank accounts, vehicles and debts. The judgment also awarded the Torch Lake property to the plaintiff, in addition to the remaining proceeds from the sale of the Battle Creek property and the parties’ joint bank account.

The defendant appealed.

‘Competing Evidence’

On appeal, the defendant argued the trial court erred by granting the plaintiff summary disposition because there was a genuine issue of material fact regarding the existence of any alleged oral agreements.

“We agree,” the Court of Appeals said.

To support the existence of an alleged agreement, the plaintiff presented “promissory notes, with only her signature, for the Battle Creek and the Torch Lake properties” and “records showing defendant’s minimal income during the parties’ marriage, which she argued reflected her financial support of him,” the Court of Appeals noted. In response, the defendant “presented deeds and mortgages for the Battle Creek and Torch Lake properties that contained both parties’ names” and “also argued that he completed maintenance and repairs for the parties’ various properties and made smaller financial contributions to the parties’ expenses.”

Further, the plaintiff “drew attention to the fact that defendant violated the Barry County restraining order by requesting sale proceeds, purchasing a home in Florida, withdrawing funds from his retirement account and personal accounts, and taking out a mortgage,” the Court of Appeals observed. “In response, defendant presented text messages from plaintiff that were exchanged after the transfer of the sale proceeds and indicated that the parties did not consider the $385,000 payment to be the parties’ final divorce settlement.”

According to the Court of Appeals, “Not only does this competing evidence create a genuine issue of material fact, … but also, plaintiff’s argument is misplaced. Defendant’s violation of the restraining order does not necessarily indicate that defendant agreed to accept no other property in the division of marital assets. To the extent that the trial court attempted to resolve the factual dispute of what defendant was entitled to after violating the restraining order, the trial court erred. … Even though defendant violated the restraining order, a genuine issue of material fact existed as to whether the parties entered into the alleged final settlement agreement; therefore, the trial court erred by granting summary disposition on the matter.”

When viewing the evidence in a light most favorable to the defendant, “reasonable minds could differ as to whether the parties entered into the alleged oral postnuptial agreement,” the Court of Appeals said. Therefore, “genuine issue of material fact existed, and the trial court erred by granting summary disposition on the matter.” 

Statute Of Frauds

The defendant further argued that, even assuming the alleged oral agreements existed, they would not be enforceable because they were against public policy and contrary to the statute of frauds.

“We agree,” the Court of Appeals said, noting that throughout the case, the plaintiff consistently asserted the parties had an oral agreement. “If true, this agreement would entitle plaintiff to the parties’ real properties and leave defendant with less than a quarter of the marital estate. Therefore, even if the parties did enter into this alleged oral postnuptial agreement, it would be invalidated on the basis that it encouraged divorce by making it financially attractive for plaintiff to divorce defendant.”

In addition, under the statute of frauds (MCL 566.106), the purported oral agreements could not be enforced without a writing because they concerned the parties’ interests in real property, the Court of Appeals pointed out. “Plaintiff agrees that the alleged oral agreements were not in writing, but plaintiff argues that the doctrine of partial performance vitiates the requirements of the statute of frauds to the parties’ alleged postnuptial agreement and alleged divorce settlement agreement.”

However, for the doctrine of partial performance to apply to an agreement, “the party seeking to enforce the agreement must first show that the oral contract exists by clear and convincing evidence,” the Court of Appeals explained. “Clear and convincing evidence is that which ‘produce[s] in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established, evidence so clear, direct and weighty and convincing as to enable [the factfinder] to come to a clear conviction, without hesitancy, of the truth of the precise facts in issue.’”

In light of the evidence presented, the plaintiff “failed to establish the existence of either alleged oral agreement by clear and convincing evidence,” the Court of Appeals wrote. “Regarding the alleged postnuptial agreement, defendant provided mortgage statements and deeds to the Battle Creek and Torch Lake properties that named both parties and showed defendant’s recorded interest in the properties. Regarding the alleged final settlement agreement, defendant provided text messages from plaintiff that were exchanged after the transfer of sale proceeds and indicated that the parties did not consider the $385,000 payment to be the parties’ final divorce settlement.”

Because the plaintiff failed to show that any oral agreement existed by clear and convincing evidence, “the trial court could not apply the doctrine of partial performance to the alleged agreements. … Accordingly, even if the alleged oral agreements existed, they would not be enforceable because they are against public policy and contrary to the statute of frauds.”

Collateral Estoppel

The defendant also asserted the trial court erred by applying the doctrine of collateral estoppel to the parties’ claims when granting plaintiff’s motion for summary disposition.

The Court of Appeals agreed.

“In this case, the trial court found that the doctrine of collateral estoppel applied because the Barry County Circuit Court entered an ex parte mutual temporary restraining order, which defendant violated, before the parties stipulated to dismiss the Barry County proceedings and continue their divorce proceedings in Antrim County,” the Court of Appeals wrote. “Even though this case was initiated in Barry County before proceeding in Antrim County, there is no evidence that: (1) the parties had an opportunity to litigate these issues in Barry County, or (2) the Barry County proceedings resulted in a valid and final judgement.”

Therefore, “the trial court erred to the extent that it applied the doctrine of collateral estoppel to the present case,” the Court of Appeals said.

“We vacate the trial court’s order of summary disposition and the trial court’s judgment of divorce, and we remand this matter for further proceedings consistent with this opinion,” the Court of Appeals concluded.