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Issue  246  Article  398
Published:  6/1/2018

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In re: Sharpe (17-1151) 4/3/2018
COA Reads Pre-Nuptial Agreement Broadly

Chris Burti, Vice President and Senior Legal Counsel

The parties whose respective interests gave rise to this action were married in 2009 and remained married until the husband's death in 2016. At the time that they were married, he was 86 years old, she was 75 years old, they had both been married previously and they had adult children from their prior marriages. A will for the deceased husband ("testator") was entered into probate by his son along with a pre-marital agreement and an irrevocable trust agreement.

The testator's will designates his two adult children from a previous marriage as co-executors and devises all of the testator's estate to the "... Irrevocable Trust Agreement." The two beneficiaries of the trust are the same two named children and the will leaves nothing to his wife at his death. The pre-marital agreement has two schedules attached listing the respective separate property belonging to the couple. The pre-marital agreement stated that "each party agrees that the separate property shall include, but not be limited to, the property described hereafter, and that the separate property of the party shall remain the separate property of the other party."

Following the testator's death, his widow filed a petition to claim an elective share of her husband's estate. The executor, filed an answer and reply denying her right to claim an elective share. After hearing the matter, the Clerk of Superior Court entered an order granting the petition. The Executor appealed to the Superior Court after which the widow died and her personal representative was substituted. The matter was heard in the superior court which entered a judgment denying Petitioner's petition which, in turn, gave rise to this appeal contending that the superior court erred in concluding the pre-marital agreement waived the widow's right to claim an elective share in his estate. The petitioner also contended the superior court improperly took judicial notice of the widow's will to interpret the premarital agreement.

The fact that the pre-marital agreement at issue was executed both voluntarily and after full disclosure was not contested by the parties. The order of the clerk reviewed by the superior court included a finding of fact numbered 10 stating: "The Prenuptial agreement ... contains no clause waiving her right to claim an elective share of his estate. On appeal, the superior court determined all of the clerk's findings of fact were supported by the evidence, except for finding of fact 10, concluding that "Finding of fact 10 is partially correct in that there is not one specific clause waiving the spouse['s] right to claim an elective share of the estate, but the findings supported by the evidence, contradict this statement and conclusively establish the intent of the parties." Therefore, the only finding of fact at issue before the Court of Appeals was finding of fact 10.

The Court observed that although it was labelled as a finding of fact by the clerk, "it is actually a conclusion of law, because it involves a matter of contract interpretation. Shelton v. Duke Univ. Health Sys., 179 N.C. App. 120, 123, 633 S.E.2d 113, 115 (2006) ("Contract interpretation is a matter of law, and the standard of review for this Court is de novo") (citation omitted)." This allowed the Court of Appeals to review the clerk's "finding of fact" 10 de novo which, in turn required a review of the terms of the pre-marital agreement by the Court. The operative language of the pre-marital agreement set out in the opinion states:

WHEREAS, both parties are individually possessed of certain separate property and both acknowledge that they played no role in the accumulation of the other's separate property; and, WHEREAS, the parties desire to contract with each other concerning matters of the disposition of their separate property;
. . . .
1. Division of Property. Except as provide[d] below, each party agrees that the separate property of the other party shall include, but not be limited to, the property described hereafter, and that the separate property of the party shall remain the separate property of the other party.
. . . .
2. Exclusive Right to Manage Separate Property. Each party has the sole and exclusive right at all times to manage and control their respective separate property to the same extent as if each were unmarried. This right to manage and control includes the right to dispose of any or all of that party's separate property by deed, will, or otherwise on that party's sole signature without any involvement or control by the other party[.] (Emphasis supplied).
. . . .
3. Obligation to Join in Execution of Documents and Free Trader Agreement. . . . Each party specifically waives, relinquishes, renounces, and gives up any claim that he or she may have or otherwise had or may have made to the other's separate property under the laws of this state. Each party agrees to execute a separate "Free Trader Agreement" to be recorded in the Alamance County Register of Deeds setting forth the intent of the parties.
. . . .
8. Agreements with Respect to Home. The parties will be residing at a home owned by Husband.     1. In the event of the death of Husband, the property shall be the sole and separate property of Husband subject to a right to possession by Wife so long as she maintains the house as her principal residence.
    2. If Wife should die and Husband survive, the property shall be the sole and separate property of Husband.
. . . .
12. Miscellaneous Provisions. To clarify certain aspects of this document's execution and effectiveness, the parties agree as follows: . . .
b. This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, personal representatives, successors, and assigns.
. . . .
13. Entire Agreement. This represents the entire Agreement of the parties with regard to the subject matter hereof. . . . All prior and contemporaneous conversations, negotiations, possible and alleged agreements and representations, covenants, and warranties with respect to the subject matter hereof are waived, merged herein, and superseded hereby.

Pre-marital agreements are contracts and the Court acknowledged that it must employ well-established principles of contract construction in interpreting these provisions "If 'the language of a contract is clear and unambiguous, construction of the contract is a matter of law for the court.' Hagler v. Hagler, 319 N.C. 287, 294, 354 S.E.2d 228, 234 (1987). The opinion discusses the North Carolina Supreme Court opinion in Lane v. Scarborough, 284 N.C. 407, 200 S.E.2d 622 (1973), broadly interpreting the waiver provisions of a separation agreement which had no specific express release of the wife's right to intestate succession. The opinion asserts that in Lane:

"...the Supreme Court recognized express terms therein, such as "[t]hey agreed . . . they would live wholly separate and apart from each other as though they had never been married" and that "each agreed that the other would thereafter hold, acquire, and dispose of all classes and kinds of property, both real and personal, as though free and unmarried." Id. at 411, 200 S.E.2d at 625. The Court also noted the separation agreement stated that each party "released the right to administer upon the estate of the other." Id. The Court determined that "the specific terms of the contract are totally inconsistent with an intention that the parties would each retain the right to share in the estate of the other . . . if he or she were to become the surviving spouse." Id. The Court ultimately concluded: "The provisions that each would thereafter acquire, hold, and dispose of property as though unmarried and that each renounced the right to administer upon the estate of the other refute the contention that [the wife] intended to retain any rights in her husband's estate." Id."

Here, the Court of Appeals in applying Lane concludes that the "only logical reading of "each party specifically waives . . . any claim . . . to the other's separate property under the laws of this state," would extend, in light of the entire agreement, to include a spouse's right to claim an elective share under N.C. Gen. Stat. § 30-3.1. The pre-marital agreement also expressly states: "This Agreement shall be binding upon and inures to the benefit of the parties and their respective heirs, executors, personal representatives, successors, and assigns." The implications of these express and unambiguous terms "refute the contention that [the wife] intended to retain any rights in her husband's estate."

Petitioner contended that the language in the pre-marital agreement was not sufficiently express or specific to include a waiver or release of the widow's right to claim an elective share in her deceased husband's estate citing; Napier v. Napier, 135 N.C. App. 364, (1999), disc. review denied, 351 N.C. 358, 543 S.E.2d 132 (2000), in support of this contention. The opinion distinguishes Napier which addressed whether a release term under a separation agreement constituted a waiver of alimony. The court concluded that that the issues in Napier were sufficiently narrow that the opinion 3was not inconsistent with this Courts determination.

"Although the pre-marital agreement does not expressly refer to the parties' rights to claim upon each other's estate, the plain and unambiguous language does not permit us to read the agreement to mean the parties intended to waive rights to each other's separate property while they were alive, but not after one of them had pre-deceased the other."

The petitioner additionally argued the superior court "erred, or abused its discretion", by taking judicial notice of the widow's will which had not been submitted into evidence. Since the judge's order stated that the will was "not necessary to resolve this matter, but as corroboration for the decision", the Court notes that "the superior court's order is abundantly clear and shows the court did not rely upon [the] will in making its ruling, but only noticed it for corroboration of that decision."

Lane as analyzed by this decision is extremely helpful in giving full effect to broad and general language commonly used to effect comprehensive waivers in property settlements and especially for those frequently employed in pro se agreements drafted from documents downloaded from the internet. However, as always, there is a major caveat. In McIntyre v. McIntyre, 188 N.C. App. 26, (2008), the Court of Appeals determined, and the Supreme Court affirmed, that a marital property agreement that "hereby releases, renounces and forever quitclaims...all right, title, interest, claim and demand whatsoever including all marital rights in the real estate and personal property...and agrees that [spouse] may at all times hereafter purchase, acquire, own, hold, possess, encumber, dispose of and convey any and all kinds and classes of property, both real and personal, as though still unmarried and without the consent, joinder or interference...", is not a waiver of equitable distribution rights. Opinions such as Napier and McIntyre carve out exceptions to the more traditional rule enunciated here in In re: Sharpe requiring title examiners to scrutinize these agreements carefully to ascertain whether they mean what they purport to mean, or, if a case law exception creates an unexpected problem.


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