Marriage of Spiegel, In re

• Citation: 553 N.W.2d 309
• Decision Date: 18 September 1996
• Docket Number: No. 95-422,95-422
• Parties: In re the MARRIAGE OF Sara Jane SPIEGEL and A.J. Spiegel. Upon the Petition of Sara Jane Spiegel, Appellee, And Concerning A.J. Spiegel, Appellant.
• Court: United States State Supreme Court of Iowa

Page 309

553 N.W.2d 309

In re the MARRIAGE OF Sara Jane SPIEGEL and A.J. Spiegel Upon the Petition of Sara Jane Spiegel, Appellee And Concerning

A.J. Spiegel, Appellant.

No. 95-422.

Supreme Court of Iowa.

Sept. 18, 1996.

Steven H. Lytle and Randall G. Horstmann of Nyemaster, Goode, McLaughlin, Voigts, West, Hansell & O'Brien, P.C., Des Moines, for appellant.

Timothy S. White, Allison M. Heffern, and Sherry L. Schulte of White & Johnson, P.C., Cedar Rapids, for appellee.

Considered En Banc.

TERNUS, Justice.

This appeal challenges the economic provisions of a dissolution of marriage decree. Unlike the district court, we find the parties' prenuptial agreement to be enforceable, and hence reverse and remand.

I. Background Facts and Proceedings.

A.J. Spiegel met Sara Jane Williams in 1978; they began dating the next year. Both parties had been previously married and divorced and both had children from these prior marriages. At the time of trial A.J. was fifty years of age and Sara was forty-seven. Their respective children were adults.

Sara graduated from high school in 1965 and earned a bachelor of arts degree in merchandising and design in 1969. She then worked as a salaried interior decorator. In 1983 Sara started her own interior decorating business and while doing so completed a masters degree program in textile design. Her business has shown relatively little profit, generating no more than $4000 of net income in its best year.

In contrast A.J., through Herculean efforts beginning long before the parties' marriage, started and developed an extremely successful business. When the parties married, this business, the Mi-T-M Company (Mi-T-M), reported total assets in excess of $13 million, with A.J. having a net worth of more than $2.8 million.

The parties became engaged in 1983, but delayed setting a wedding date. Sara broke the engagement sometime in 1986 when she heard rumors A.J. was seeing other women. The parties soon reconciled and again became engaged within several months. Again no wedding date was set.

In February 1988, A.J. first brought up the idea of a prenuptial agreement. Although it was untrue, he told Sara his bankers, lawyers, and accountants felt he needed such an agreement to protect financing for a Mi-T-M construction project. Sara flatly rejected the suggestion, stating under no circumstances would she be married with a prenuptial agreement. A.J. dropped the matter for the time being.

In May 1988, the couple set a wedding date for July 30, 1988. A.J. did not bring up the subject of a prenuptial agreement again until approximately ten days before the scheduled wedding. Sara became upset and stated she had not changed her mind. A.J again dropped the subject but, without telling Sara, he continued prior discussions with his advisors, and directed his legal counsel to draft a prenuptial agreement and mail it to Sara.

When Sara received the document only five days prior to the wedding, she was decimated. She immediately phoned A.J. and asked why he was doing this to her. A.J. falsely repeated that a prenuptial agreement was not his idea but that of his business advisors. He tried to comfort Sara, explaining the agreement was just a piece of paper, that it would never come between them, and it was just to get the bankers "off his back."

The prenuptial agreement sent to Sara covered the parties' financial relationship and rights both during the marriage and in the event the marriage terminated due to death or dissolution. It basically waived any rights to which Sara would be entitled under Iowa law. The separate property of each would remain separate and any property acquired after the marriage would remain the separate property of the person who acquired it, except for any property specifically purchased in joint tenancy. The agreement also provided each party's salary would be considered separate property and the parties would maintain separate bank accounts for purposes of segregating their finances. Finally, the agreement eliminated the right to support or alimony in the event of dissolution.

A.J. told Sara to consult an attorney, and offered to pay the fee. In accordance with A.J.'s prompting, Sara employed legal counsel immediately and met with her attorney the next day. Sara's counsel explained each provision of the agreement to her, pointing out his concerns. He told her, "This agreement basically says that you get nothing."

In the short time available before the wedding, Sara's attorney was able to negotiate three changes: (1) Sara's right to a spousal statutory share of A.J.'s estate in the event of his death would not be waived in the agreement; (2) title to the couple's new home would be in joint tenancy and Sara would be entitled to one-half of the furnishings of the home; and (3) Sara would have title to the automobile she drove. Although Sara's attorney also sought concessions in the provisions dealing with Sara's rights in the event of dissolution, A.J. would not agree to any changes in that area. Sara's counsel told her before she signed the agreement that he had asked for a provision allowing alimony if the parties' marriage was dissolved and A.J. had refused to allow such a provision.

During the days of negotiation, Sara informed her attorney of A.J.'s representations that his financial advisors wanted the prenuptial agreement and the agreement was just a piece of paper and would not come between them. Her attorney warned her the agreement contained a provision stating the prenuptial agreement constituted "the entire agreement of the parties and no representations, terms, provisions, conditions or exceptions exist except those expressly set forth herein." He told her that because A.J.'s representations were not included in the document, they would not be considered legally binding and the agreement could be enforced against her in a dissolution proceeding.

On the afternoon of July 29, less than twenty-four hours prior to the wedding, Sara, A.J., and their respective counsel attended a tense and emotional meeting. A.J. represented to Sara that he had never actually read the terms of the agreement. For that reason Sara had her attorney read the agreement aloud line-by-line in A.J.'s presence, hoping that when he heard it and realized its import he would not ask her to sign the agreement. When reading the document failed to change A.J.'s mind, she turned to him and asked if this was what he really wanted (referring to her signing the agreement). When he replied "yes," Sara signed. Although Sara's attorney thought A.J. was unfair, her attorney did not think Sara signed the agreement under duress, fraud or undue influence.

A.J. and Sara were married the following day, July 30, 1988. Their marriage was rocky almost from the beginning. More fruitful, however, was A.J.'s business. During the parties' six-year marriage, A.J.'s net worth increased from $2.8 million to $9.6 million. A.J. earned over $800,000 in salary from Mi-T-M in 1993. That year the company had net sales of $9.4 million and net income of $494,546. Sara's net worth, valued at $39,250 at the time of the marriage, increased slightly due to her joint ownership of the marital home.

During the marriage, the parties abided by the prenuptial agreement. They maintained separate finances and did not commingle their assets or incomes. At one point, Sara attempted to obtain additional financial assistance from her first husband for their daughters' college expenses. During that proceeding, she relied on the prenuptial agreement to show the limited funds that were available to her from A.J.

Sara filed a petition for separate maintenance on April 14, 1994, after A.J. stopped paying Sara any money to meet the monthly household expenses. A.J. counterclaimed for dissolution of the marriage. Following trial, the district court refused to enforce the prenuptial agreement, finding it was gained through fraud, duress, and undue influence. The decree awarded Sara a lump sum property distribution of $2,000,000 with an initial payment of $250,000, the remainder payable in monthly installments over five years, with interest of ten percent per annum. A.J. was also ordered to pay Sara $7000 per month alimony until either party's death or Sara's remarriage. The alimony obligation would terminate if A.J. retired, provided he did not retire until he was sixty-five years of age. A supplemental decree awarded A.J. possession of the marital home. Sara was also awarded $15,000 for attorney fees. The case is before us on A.J.'s appeal. Our review is de novo. Iowa R.App. P. 4.

II. Property Distribution.

A.J. argues the trial court erred by failing to enforce the prenuptial agreement. Enforcement of the agreement would have the effect of depriving Sara of any interest in A.J.'s property. Iowa Code section 598.21(1) expressly permits the court to consider the provisions of a prenuptial agreement when deciding equitable property division issues. Iowa Code § 598.21(1) (1993). Thus, our first task is to determine the validity of the prenuptial agreement signed by A.J. and Sara.

A. Enforceability of prenuptial agreements. Iowa cases have long held prenuptial agreements are favored in the law. E.g., In re Marriage of Winegard, 278 N.W.2d 505, 512 (Iowa), cert. denied, 444 U.S. 951, 100 S.Ct. 425, 62 L.Ed.2d 321 (1979); Norris v. Norris, 174 N.W.2d 368, 369 (Iowa 1970); In re Estate of Parish, 236 Iowa 822, 830, 20 N.W.2d 32, 37 (1945); In re Estate of Mansfield, 185 Iowa 339, 342, 170 N.W. 415, 416 (1919). The purpose of such agreements is to "fix and determine the interest that the parties have respectively in the property of the other." In re Estate of Onstot, 224 Iowa 520, 526, 277 N.W. 563, 566-67 (1938). The motivation for a prenuptial agreement may vary from case to case, but often such agreements protect the interests of children by former marriages, Parish, 236 Iowa at 830, 20 N.W.2d at 37, and by doing so, settle...