Wilson v. Moore

Citation929 S.W.2d 367
PartiesHayden D. WILSON, Jr., Plaintiff/Appellee, v. Kathryn Ann MOORE, Defendant/Appellant.
Decision Date03 May 1996
CourtCourt of Appeals of Tennessee

Jacqueline E. Schulten, Chattanooga, for defendant/appellant.

Stephen T. Greer, Dunlap, for plaintiff/appellee.

KOCH, Judge.

This appeal involves a marriage that failed in less than three years. The husband filed suit in the Circuit Court for Sequatchie County seeking a divorce and the enforcement of the parties' prenuptial agreement. The wife also requested a divorce and challenged the validity of the prenuptial agreement. Following a bench trial, the trial court declared the parties divorced pursuant to Tenn.Code Ann. § 36-4-129(b) (1991) and upheld the prenuptial agreement. Accordingly, the trial court awarded the parties their personal property and directed the husband to assume certain credit card indebtedness and to provide the wife medical insurance for up to thirty-six months. Both parties take issue with various portions of the final divorce decree on this appeal. We have determined that the trial court erred by failing to consider the husband's income earned during the marriage as marital property. Accordingly, we modify the division of marital property and the award of spousal support.

I.

Hayden Wilson, Jr. and Kathryn M. Wilson (now Kathryn Ann Moore) first met when they were both employed by the Sequatchie County Board of Education. Mr. Wilson, who was in his mid-forties at the time, had a doctorate degree in educational psychology and guidance and was a special education instructor. Ms. Moore worked at the same school as an aide. She was eight years younger than Mr. Wilson and was a recent divorcee with custody of two minor children. They began dating shortly after Mr. Wilson's divorce in February 1990.

Mr. Wilson proposed to Ms. Moore in March 1991. Two months later, Ms. Moore received her undergraduate degree and was employed at a local pharmacy. Mr. Wilson requested Ms. Moore to sign a prenuptial agreement because he desired to preserve his separate assets for his children. Ms. Moore was generally ambivalent about signing the agreement. On the only occasion she questioned the need for the agreement, Mr. Wilson informed her that he would not pay her to marry him. Thereafter, Mr. Wilson requested the lawyer who had represented Ms. Moore in her divorce from her first husband to prepare the agreement. They signed the agreement on July 18, 1991 and were married ten days later on July 28, 1991. Ms. Moore and her two children moved in with Mr. Wilson and his two minor children. 1

Ms. Moore suffered a work-related injury and stopped working at the pharmacy shortly after the wedding. The parties' relationship developed serious problems later in the year, and by December 1991, Ms. Moore declared that she wanted a divorce. Mr. Wilson also consulted a lawyer about a divorce. An uneasy stalemate developed, and the parties began living essentially separate lives in June 1992 when Ms. Moore enrolled at Chattanooga State Technical Community College to study radiological technology. She spent most of the time during the week at school, and she studied most of the time when she was at home.

The parties separated in November 1993, and Mr. Wilson filed suit for divorce on November 8, 1993. Ms. Moore counterclaimed for divorce. Following a trial in May 1994, the trial court entered a final decree declaring the parties divorced and finding that their prenuptial agreement was valid. The trial court also found that Mr. Wilson's contributions to his retirement accounts during the marriage were marital property and awarded Ms. Moore one-half of these funds. The court also directed Mr. Wilson to be responsible for $1,500 in credit card debt and to provide Ms. Moore with health insurance coverage for up to thirty-six months or until she found employment.

Mr. Wilson filed a post-trial motion taking issue with the portion of the decision awarding Ms. Moore one-half of the contributions to his retirement accounts made during the marriage. The trial court altered its original decision after determining that the prenuptial agreement prevented Ms. Moore from receiving a share of Mr. Wilson's retirement contributions. This appeal followed.

II. THE VALIDITY OF THE PRENUPTIAL AGREEMENT

Ms. Moore disputes the validity of the prenuptial agreement on the ground that Mr. Wilson did not disclose his financial holdings with sufficient precision before she executed the agreement. We disagree. Mr. Wilson's explanation of his financial holdings was sufficient to enable Ms. Moore to make a knowledgeable decision with regard to executing the agreement.

A.

Prenuptial agreements are favored by public policy in Tennessee. Perkinson v. Perkinson, 802 S.W.2d 600, 601 (Tenn.1990); Hoyt v. Hoyt, 213 Tenn. 117, 125, 372 S.W.2d 300, 303 (1963); Key v. Collins, 145 Tenn. 106, 109, 236 S.W. 3, 4 (1921). They benefit the parties by defining their marital rights in property which tend to be among the most frequent causes of family discord. Sanders v. Sanders, 40 Tenn.App. 20, 30, 288 S.W.2d 473, 477 (1955). They also enhance the opportunities for middle-aged persons to re-marry by protecting their separate assets for the children of previous marriages. Pajak v. Pajak, 182 W.Va. 28, 385 S.E.2d 384, 388 (1989). 2

Tenn.Code Ann. § 36-3-501 (1991) requires the courts to give effect to prenuptial agreements as long as they satisfy certain requirements. To be enforceable, the agreement must "have been entered into by such spouses freely, knowledgeably and in good faith without exertion of duress or undue influence on either spouse." This record contains no evidence of duress, undue influence, or bad faith on Mr. Wilson's part. Thus, the principal focus of this aspect of the appeal is on the requirement that the spouse enter into the prenuptial agreement knowledgeably.

An engagement to marry establishes a confidential relationship between the parties. Baker v. Baker, 24 Tenn.App. 220, 223, 142 S.W.2d 737, 745 (1940); see also 1 Homer H. Clark, Jr., The Law of Domestic Relations in the United States § 1.9, at 44 (2d ed. 1987); 3 Alexander Lindey & Louis I. Parley, Lindey on Separation Agreements and Antenuptial Contracts § 90.03 (1995). Accordingly, engaged persons who plan to execute a prenuptial agreement must make "a full disclosure of the nature, extent and value" of their property in order to enable their prospective spouse to make a knowledgeable decision about entering into the agreement. Williams v. Williams, 868 S.W.2d 616, 619 (Tenn.Ct.App.1992). The required disclosure may be accomplished through a formal, explicit process, such as exchanging lists of holdings, or it can be made more informally over the course of the relationship. Kahn v. Kahn, 756 S.W.2d 685, 695 (Tenn.1988).

The adequacy of a particular disclosure depends upon the context in which it was made. Therefore, the lengths to which a person must go in revealing his or her financial interests can only be determined by the circumstances of each particular case. Rather than formulating precise tests, many courts have required that the disclosure be "full and fair" 3 or "fair and reasonable" 4 or some other similar formulation. All these standards, in essence, require that the disclosure be essentially fair under all the circumstances.

While some state courts have resolved the issue differently, most courts have not construed the full and fair disclosure requirement to mandate detailed disclosures such as financial statements, appraisals, balance sheets, or the like. In re Estate of Lopata, 641 P.2d 952, 955 (Colo.1982); In re Thies (Thies v. Lowe), 273 Mont. 272, 903 P.2d 186, 189 (1995); In re Estate of Geyer, 516 Pa. 492, 533 A.2d 423, 427 (1987); Hartz v. Hartz, 248 Md. 47, 234 A.2d 865, 871 n. 4 (1967); In re Estate of Hill, 214 Neb. 702, 335 N.W.2d 750, 753 (1983); see also 2 John Tingley & Nicholas B. Svalina, Marital Property Law § 28.05 (rev. 2d ed. 1995). Thus, in the absence of fraud or overreaching, the inadvertent failure to disclose an asset 5 or the unintentional undervaluation of an asset 6 will not invalidate a prenuptial agreement as long as the disclosure that was made provides an essentially accurate understanding of the party's financial holdings. The disclosure will be deemed adequate if it imparts an accurate understanding of the nature and extent of a person's property interests. Nanini v. Nanini, 166 Ariz. 287, 802 P.2d 438, 441 (1990).

B.

Mr. Wilson's financial holdings immediately prior to his marriage to Ms. Moore consisted of (1) a 360-acre farm partially owned with his parents, (2) a furnished farm house, (3) farm equipment and vehicles, (4) approximately seventy head of livestock, (5) a boat, and (6) twelve other accounts or assets worth between $130,000 and $160,000. While he did not provide Ms. Moore with a detailed list of these assets and their value prior to the execution of the prenuptial agreement, he attempted as best he could to familiarize her with his holdings.

Ms. Moore was familiar with Mr. Wilson's farm and was even privy to his negotiations in 1991 to sell a portion of the farm to Charles Green. She was also familiar with the farm house and its contents because she had visited there often while the parties were dating. Sometime after the engagement, Mr. Wilson removed each of his financial files from a filing cabinet in his bedroom, described each one of his accounts to Ms. Moore, and even gave her an estimate of the current value of the assets. Mr. Wilson unintentionally overlooked a $5,000 certificate of deposit and 250 shares of stock in First Pikeville Bank because he did not have folders for these assets. He also overvalued his Sherson Lehman account by approximately $13,000 because he mistook the maturity value of the bonds in the account for their current...

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