DALE F. LENTZ, Plaintiff/Counter-Defendant-Appellee v JUDITH ANN LENTZ, Defendant/Counter-Plaintiff-Appellant, by the State of Michigan Court of Appeals, for publication July 6, 2006.
Statement of Facts
The parties were married on July 21, 1979 and had two adult children at the time of the proceedings. Plaintiff, Dale F. Lentz, discovered his wife, Judith Ann Lentz, was involved in the latest of a series of affairs she had during the marriage. On January 1, 2003, the parties decided to separate and began to negotiate a separation agreement to divide the marital assets. No divorce action was filed at that time, but the separation agreement provided that “it is the intent of the parties that an action for separate maintenance will be filed in the future and that this agreement shall constitute all of the terms of any judgment entered in said action.” The parties used one attorney who had performed legal services on behalf of both of them over the years, and whose testimony during the trial was that he was not representing either one of them, but was hired only to prepare the agreement based upon the understanding of both of the parties. At trial, it was clear that Defendant was told she could review all business records of Plaintiff husband’s real estate business. Defendant wife chose not to do so. She also consulted with an attorney. The settlement provided she keep the Florida home, receive $1 million, a status quo arrangement and Plaintiff to pay her health insurance for 10 years. In return Plaintiff husband received his real estate business. The agreement also contained a bar to alimony or spousal support.
A bench trial began on February 17, 2004. The trial court ruled the separation agreement was valid, equitable, and enforceable and the Defendant wife failed to show she entered the agreement because of fraud, coercion or duress. On appeal, the Defendant claimed the contract should not be enforced because (1) the Plaintiff coerced her into making this agreement or (2), because the Plaintiff allegedly failed to provide Defendant with sufficient financial data to make an informed agreement.
Defendant asked the Court of Appeals to review separation agreements using the same legal principles that courts had traditionally applied to antenuptial agreements. The Court of Appeals felt that absent fraud, coercion or duress, adults in a marriage have the right and freedom to decide what is a fair and appropriate division of the marital assets, and the court should not rewrite such agreements.
The Court of Appeals took the opportunity to clarify the standard of review for post nuptial separation agreements, since recent cases set forth an imprecise and inaccurate statement of the law.
Keyser v Keyser, 182 Mich App 268 (1990), states, “It is a well-settled principle of law that courts are bound by property settlements reached through negotiations and agreement by parties to a divorce action, in the absence of fraud, duress, mutual mistake, or severe stress which prevent a party from understanding, in a reasonable manner, the nature and effect of the act in which she was engaged. Calo v Calo, 143 Mich App 749, 753-754; 373 NW2d 207 (1985). This rule applies whether the settlement is in writing and signed by the parties or their representatives or orally placed on the record and consented to by the parties, even though not formally entered as part of the divorce judgment by the lower court. Howard v Howard, 134 Mich App 391, 394-395; 352 NW2d 280 (1984). The finding of the trial court concerning the validity of the parties’ consent to a settlement agreement will not be overturned absent a finding of an abuse of discretion.
In addition, the Keyser court went on to rule that the key is not whether the property settlement is equitable, but whether the Defendant freely, voluntarily, and understandably entered into and signed the agreement.
In Lentz, the Court of Appeals affirmed the trial court’s findings that Defendant failed to establish fraud or mistake. The trial court found overwhelming evidence that Defendant did not enter the agreement under duress. Plaintiff was told by her husband and his controller that she could review all of the business records before she decided whether or not to claim any interest in his business. She neglected to do so, and Plaintiff was not required to compel her to review the records. The record further showed Defendant consulted an attorney with regard to her rights in the business. Defendant chose not to take any interest in the businesses, and declined to have her attorney review the separation agreement.
The Court of Appeals ruled, and this is the key language, “the standard of review traditionally applied to antenuptial agreements is not applicable to a postnuptial separation agreement wherein the parties divide their marital assets. Clearly, public policy favors upholding a property agreement negotiated by the parties when divorce or separate maintenance is clearly imminent. Such agreements undoubtedly promote judicial efficiency and best effectuate the intent and needs of the parties. Further, we will not rewrite or abrogate an unambiguous agreement negotiated and signed by consenting adults by imposing a “reasonable” or “equitable” inquiry on the enforceability of such agreements. An application of general contract principles to this agreement mandates only one conclusion: the parties freely entered an agreement to divide their property as they saw fit and we will not redraft the agreement or rule in a manner that allows either party to avoid his or her contractual obligations.”
This is now the state of the law regarding postnuptial separation agreements. In the past, there was much confusion about whether separation agreements should be reviewed in the same manner as antenuptial agreements. This case settles the issue. The result is a much stricter standard for antenuptial agreements than for post marital separation agreements. The clear distinction is that, prior to the marriage, the parties do not know one another; whereas, at the time of the divorce or separation, the parties know each other well, and have the ability to contract and do what is necessary to negotiate an agreement. Such agreements will be enforced as long they are unambiguous and agreed upon by two consenting adults.
Dated: October 27, 2008