Marital Agreements: There Are No Do-Overs
Whenever playing a childhood game, the loser would inevitably call out as the game ended, “Do over.” In golf, there are mulligans. In the “game of divorce,” in most cases, there are no second chances to re-negotiate or litigate fairly negotiated and properly executed marital agreement.
The recently decided case of Kojovic v. Goldman, 2006 NY Slip Op 07595, makes this point abundantly clear. In Kojovic, the parties negotiated a post-nuptial agreement resolving all issues of equitable distribution and spousal maintenance. By the terms of the agreement, the wife was to receive a payment of $1.15 million dollars for her share of a closely held corporation in which the husband possessed a minority interest and was the chief executive officer.
The agreement negotiated by parties, who were both represented by counsel, contained boiler-plate language that:
Each party has made inquiry into the financial circumstances of the other and is sufficiently informed of the income, assets, and financial condition of the other. . . . The parties further acknowledge that the Husband has provided the Wife with additional information concerning his business interests, which information she has had independently reviewed by an accountant. The Wife acknowledges that she has the right of further inquiry including the taking of depositions and a forensic evaluation of the value of the Husband's shares of his business, Capital IQ, Inc., and knowingly waives the same.
Shortly after the parties executed the post-nuptial agreement, the business was sold for $225 million dollars and the husband received a payout of $18 million dollars. The wife sought to have the post-nuptial agreement set aside.
The Appellate Division denied the wife’s application and affirmed the validity of the agreement. In doing so, the court re-iterated the general proposition that a stipulation of settlement in a divorce action that is just, fair and competently entered into is entitled to the recognition accorded any other contract.
Judicial review is to be exercised circumspectly, sparingly and with a persisting view to the encouragement of parties settling their own differences in connection with the negotiation of property settlement provisions. There is a "heavy presumption that the deliberately prepared and executed post nuptial agreement manifest[s] the true intention of the parties" (Haynes v Haynes, 200 AD2d 457 , affd 83 NY2d 954 ), necessitating "a high order of evidence . . . to overcome that presumption" (Brassey v Brassey, 154 AD2d 293, 295 ). As noted in Christian (42 NY2d at 72), "courts should not intrude so as to redesign the bargain arrived at by the parties on the ground that judicial wisdom in retrospect would view one or more of the specific provisions as improvident or one-sided.
The wife in Kojovic, had every opportunity to avail herself of all methods of valuation to determine if she was making a “fair deal.” Indeed, the wife, who herself was a former security analyst, had retained an expert to review the books and records of the business that was ultimately sold and she was represented by counsel in the negotiation of the post-nuptial agreement. Moreover, in the agreement, she expressly waived her right to further discovery, acknowledged that she made her own investigation of the business and waived her right to further discovery. As a result, the agreement would not be set aside.
The validity of an agreement cannot be challenged based upon a claim that assets, which were disclosed, were under-valued. As the Court points out, this was not a case of concealment of the asset. The husband did not fraudulently hide the fact that he possessed the asset. The wife was aware of it and merely ascribed it a lower value.
She did not take account, for instance, the possibility of a future sale of the corporation. (Had she done so, perhaps she would have taken her distribution in stock instead of cash.)
If there is a lesson to be learned from this case it is that marital agreements will not disturbed merely because an aggrieved party incorrectly valued an asset. Moreover, before signing a marital agreement, it is imperative that a party must conduct his/her due diligence to ascertain the value of assets. Professional valuations of assets should be obtained and the parties should not causally assume the worth of assets.
After a marital agreement is executed, there will be no do overs.