Stewart v. Stewart
2013 WL 5477485, 214 Md.App. 458, 76 A.3d 1221 (2013)
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Rule of Law:
A prenuptial agreement is valid and enforceable, despite a failure to disclose the specific monetary value of assets, if there is no overreaching or unconscionability. Overreaching is absent if the agreement is substantively fair and was entered into freely and understandingly by the challenging party, even if that party chose not to retain counsel.
Facts:
- In 1986, Barbara Ann Stewart, who earned minimum wage and had negligible assets, began a relationship with James Edward Stewart, a successful business owner with approximately $2 million in assets.
- The couple began living together and planned to marry after James Stewart obtained a divorce from his first wife.
- James Stewart informed Barbara Stewart that he would not marry her unless she signed a prenuptial agreement waiving any interest in his premarital assets.
- James Stewart's attorney drafted an agreement listing his major assets, such as his company and real estate, but did not state their monetary value and omitted an IRA worth approximately $60,000 (3% of his total assets).
- Four days before their wedding in October 1988, Barbara Stewart signed the prenuptial agreement without being represented by legal counsel.
- The agreement included clauses stating that both parties had the opportunity to consult with independent counsel and had fully disclosed their assets.
- The couple married, had three children, and remained married for 21 years before separating.
Procedural Posture:
- James Edward Stewart filed a complaint for divorce in the Circuit Court for Charles County (trial court) and sought to enforce the prenuptial agreement.
- Barbara Ann Stewart filed a counter-complaint for divorce, challenging the validity of the agreement.
- The circuit court held a hearing on the validity of the prenuptial agreement and ruled that it was valid and enforceable.
- The parties then entered into a property settlement agreement that incorporated the prenuptial agreement but expressly reserved Ms. Stewart's right to appeal the court's ruling on its validity.
- The circuit court granted a judgment of absolute divorce.
- Barbara Ann Stewart, as appellant, appealed the circuit court's ruling on the prenuptial agreement to the Court of Special Appeals of Maryland (intermediate appellate court).
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Issue:
Does a prenuptial agreement become invalid due to overreaching or unconscionability when one party fails to disclose the specific monetary value of their assets and omits a minor asset, and presents the agreement to the other, unrepresented party four days before the wedding?
Opinions:
Majority - Krauser, C.J.
No. The prenuptial agreement is not invalid because there was no overreaching by Mr. Stewart, nor was the agreement unconscionable. A prenuptial agreement's validity is assessed using the 'overreaching' test, which examines both substantive and procedural fairness. Substantively, the agreement was fair because Ms. Stewart did not waive her rights to alimony or a monetary award from marital property, and the marriage itself served as valuable consideration. Procedurally, Ms. Stewart entered the agreement 'freely and understandingly.' Although she was presented with the agreement four days before the wedding, she had the opportunity to seek counsel but 'elected not to.' The court found her primary motivation was her love for Mr. Stewart and her desire to marry him 'regardless,' which negated her claim that the timing prejudiced her. Furthermore, she read the agreement, understood its purpose, and was aware of his major assets, constituting adequate knowledge even without specific valuations. The agreement was not unconscionable because unconscionability requires both procedural and substantive unfairness, neither of which was present.
Analysis:
This decision reinforces the high bar for invalidating a prenuptial agreement in Maryland under the 'overreaching' standard from Hartz v. Hartz. The court's analysis demonstrates that imperfect financial disclosure, such as omitting specific asset values or a minor asset, is not fatal if the challenging party possessed adequate knowledge of the other's overall wealth. The ruling significantly diminishes the power of a 'last-minute presentation' argument, especially when the challenging party's own testimony suggests they would have signed the agreement regardless. This precedent makes it more difficult to set aside prenuptial agreements, placing a heavy burden on the challenging party to prove that they did not act freely and understandingly, and that the agreement's terms were substantively inequitable at the time of signing.
