Lewis v. Lewis

• Decision Date: 22 January 1988
• Docket Number: Nos. 10820,10740,s. 10820
• Citation: 69 Haw. 497,748 P.2d 1362
• Parties: , 56 USLW 2482 Patricia Ann LEWIS, Respondent-Appellee, v. Daniel Harbert LEWIS, Petitioner-Appellant. Thomas Vyn REESE, Sr., Petitioner-Appellee, v. Beverly Jean REESE, Respondent-Appellant.
• Court: Hawaii Supreme Court

Page 1362

748 P.2d 1362

69 Haw. 497, 56 USLW 2482

Patricia Ann LEWIS, Respondent-Appellee, v. Daniel Harbert LEWIS, Petitioner-Appellant.

Thomas Vyn REESE, Sr., Petitioner-Appellee, v. Beverly Jean REESE, Respondent-Appellant.

Nos. 10820, 10740.

Supreme Court of Hawai'i.

Jan. 22, 1988.

Syllabus by the Court

1. The enforceability of a premarital agreement is governed by the law of the state with the most significant relationship to the parties and subject matter. Primary emphasis is placed on deciding which state has the strongest interest in seeing its laws applied to the particular case.

2. Because the parties are residing in Hawaii and have been for many years and the most valuable real property owned by the parties is located in Hawaii, Hawaii has a stronger interest in seeing its law applied than does New York, the state where the parties were married and the premarital agreement was executed.

3. Under Hawaii law, a premarital agreement entered into prior to the enactment of the Uniform Premarital Agreement Act is valid and enforceable if it is valid under principles of contract law.

4. Under the facts of these two cases, the only plausible grounds under contract law for not enforcing the agreements are 1) the possibility that a party did not freely and voluntarily enter into the agreement; and 2) unconscionability.

5. Two basic principles are encompassed within the concept of unconscionability, one-sidedness and unfair surprise. As applied to premarital agreements, one-sidedness would mean that the agreement leaves a post-divorce economic situation that is unjustly disproportionate. Unfair surprise would mean that one party did not have full and adequate knowledge of the other's financial condition when the premarital agreement was executed.

6. The unconscionability of spousal support provisions in a premarital agreement must be evaluated at the time of divorce by considering all relevant factors and circumstances, including those occurring after the execution of the agreement. Although a spousal support provision may be reasonable at the time of execution, changed circumstances by the time of divorce could make enforcement of the provision unconscionable.

7. Family courts have the discretion to award a portion of one spouse's premarital property to the other spouse.

8. The unconscionability of provisions in a premarital agreement governing division of property must be evaluated at the time the agreement was executed.

Gary V. Dubin (R. Steven Geshell, with him on the brief), Honolulu, for petitioner-appellant Daniel Harbert Lewis.

Maurice Sapienza, Honolulu, for respondent-appellee Patricia Ann Lewis.

Steven R. Scott, Scott and Ohigashi, Wailuku, for petitioner-appellee Thomas Vyn Reese, Sr.

Edward F. Mason (Eugene S. Evans, Jr., with him on the brief), Wailuku, for respondent-appellant Beverly Jean Reese.

WAKATSUKI, Justice.

The following opinion covers two unconsolidated cases with related legal issues.

Lewis v. Lewis, No. 10820

Certiorari was granted to Daniel Harbert Lewis, petitioner-appellant ("husband"), for a review of the Intermediate Court of Appeals ("ICA") decision affirming the family court's divorce decree awarding spousal support and division of property.

On May 22, 1970, the day before husband and Patricia Ann Lewis, respondent-appellee ("wife"), were married in New York, they executed a premarital agreement which provided that in the event of divorce after they have had a child, wife would accept $1000 per month until death or remarriage in full satisfaction of husband's spousal support obligation. The agreement made no provision for division of property upon divorce.

In the divorce decree dated July 3, 1985, the family court refused to enforce the premarital agreement and instead awarded wife $2500 per month for 72 months or until death or remarriage. The decree awarded husband the residence subject to his paying to wife the sum of $150,000. Husband appealed.

The ICA affirmed and held: 1) that Hawaii law governed the issue of the enforceability of the premarital agreement; 2) that the family court did not err or abuse its discretion in refusing to enforce the premarital agreement and by awarding $2500 per month in spousal support; and 3) that the family court did not abuse its discretion in awarding wife the sum of $150,000. We agree on points 1) and 3), but vacate the ICA's holding on point 2).

I.

Husband contends that the enforceability of the premarital agreement should be governed by New York law, the place where the parties were married and the agreement was executed. We disagree.

We have moved away from the traditional and rigid conflict-of-laws rules in favor of the modern trend towards a more flexible approach looking to the state with the most significant relationship to the parties and subject matter. See Peters v. Peters, 63 Haw. 653, 634 P.2d 586 (1981). Primary emphasis is placed on deciding which state would have the strongest interest in seeing its laws applied to the particular case. Cf. id.

The most valuable real property owned at the time of divorce is located in Hawaii. Wife has been continuously living in Hawaii since no later than July 1982, and husband has been a resident of Hawaii since February 1983. New York's interest, if any, regarding the spousal support wife receives from husband is secondary to Hawaii's interest. Hawaii has the stronger and primary interest in seeing its laws applied to this case because it is most directly affected by the respective financial positions of husband and wife. Cf. Peters, 63 Haw. at 664, 634 P.2d at 593.

Finally, the family court's task of deciding the enforceability of premarital agreements would become more difficult with less certainty if the law of the place where the parties were married or the premarital agreement was executed is applied. Cf. Peters, 63 Haw. at 666, 634 P.2d at 594. We hold that Hawaii law governs this case.

II.

In June, 1987, the Governor signed into law the Uniform Premarital Agreement Act ("Hawaii Act"), which is virtually identical to the Uniform Premarital Agreement Act approved by the National Conference of Commissioners on Uniform State Laws in 1983.

Other than Section 10, the Hawaii Act has no application to this case. Section 10 states:

All written agreements entered into prior to the enactment of this Act between prospective spouses for the purpose of affecting any of the provisions of this Act shall be valid and enforceable if otherwise valid as contracts.

The premarital agreement between husband and wife was entered into in 1970, and therefore, the issue is whether the agreement was valid and enforceable under principles of contract law.

The ICA held that under Hawaii Revised Statutes ("HRS") § 580-47, the family court's obligation to issue "just and equitable" support and property awards empowers the court to refuse, under equitable principles, to fully enforce an otherwise valid premarital agreement. We disagree.

Section 10 of the Hawaii Act specifically states that such premarital agreements are valid and enforceable if otherwise valid as contracts. Unless the agreement rises to the level of unconscionability, a merely "inequitable" contract is not unenforceable under contract law. ¹ Furthermore, when a premarital agreement setting forth support and property division in the event of divorce is not unconscionable and has been voluntarily entered into by the parties with knowledge of the financial situation of the prospective spouse, enforcement of the agreement does not violate the principle of a "just and equitable" award under HRS § 580-47.

Under the facts of this case, the only plausible grounds for not enforcing the agreement under contract law are: 1) the absence of true assent to the agreement due to duress, coercion, undue influence, or any other circumstance indicating that wife did not freely and voluntarily enter into the agreement; and 2) unconscionability.

There is no specific finding by the family court on whether wife freely and voluntarily entered into the premarital agreement. The court found that the agreement was prepared one day prior to the marriage and wife was not represented by counsel. These findings, although relevant, are insufficient for this court to conclude that wife voluntarily executed the agreement.

III.

The Hawaii Supreme Court discussed the issue of "unconscionability" in two cases, one involving a non-UCC real estate lease agreement and the other being a sale-of-goods UCC case. In both cases, the court adopted the "UCC definition" by looking to the comment to UCC § 2-302(2) or HRS § 490:2-302 (the Hawaii equivalent of the former). See City and County of Honolulu v. Midkiff, 62 Haw. 411, 418, 616 P.2d 213, 218 (1980); Earl M. Jorgensen Co. v. Mark Construction, 56 Haw. 466, 474, 540 P.2d 978, 984 (1975). The comment states:

The basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.... The principle is one of the prevention of oppression and unfair surprise ( Cf. Campbell Soup Co. v. Wentz, 172 F.2d 80 (3rd Cir.1948)) and not of disturbance of allocation of risks because of superior bargaining power.

HRS § 490:2-302 comment.

It is apparent that two basic principles are encompassed within the concept of unconscionability, one-sidedness and unfair surprise. As applied to premarital agreements, one-sidedness would mean that the agreement leaves a post-divorce economic situation that is unjustly disproportionate. Unfair surprise would mean that one party did not have full and adequate knowledge of the other party's financial condition when the premarital agreement was executed.

The family court summarily concluded that $1000 per month in spousal support was unconscionable when viewed at the time of...