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COHABITATION, DOMESTIC PARTNERSHIP, PREMARITAL & POST-MARITAL PROPERTY AGREEMENTS Presented by: KATHERINE A. KINSER Kinser & Bates, L.L.P. 17300 Preston Road, Suite 220 Dallas, Texas 75252 (214) 438-1100 (214) 438-1150 facsimile Written by: KATHERINE A. KINSER JONATHAN J. BATES State Bar of Texas 36 TH ANNUAL ADVANCED FAMILY LAW COURSE August 9-12, 2010 San Antonio CHAPTER 33

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Page 1: COHABITATION, DOMESTIC PARTNERSHIP, PREMARITAL & … · Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 1 COHABITATION, DOMESTIC PARTERSHIP,

COHABITATION, DOMESTIC PARTNERSHIP, PREMARITAL & POST-MARITAL PROPERTY AGREEMENTS

Presented by:

KATHERINE A. KINSER Kinser & Bates, L.L.P.

17300 Preston Road, Suite 220 Dallas, Texas 75252

(214) 438-1100 (214) 438-1150 facsimile

Written by:

KATHERINE A. KINSER JONATHAN J. BATES

State Bar of Texas 36TH ANNUAL ADVANCED FAMILY LAW COURSE

August 9-12, 2010 San Antonio

CHAPTER 33

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KINSER VITAE

KATHERINE A. KINSER KINSER & BATES, LLP 17300 Preston Road

Suite 220 Dallas, Texas 75252 (214) 438-1100 EDUCATION University of Arkansas at Little Rock, Bachelor of Arts, January, 1980 Southern Methodist University School of Law, May 1984 PROFESSIONAL AFFILIATIONS Board Certified-- Family Law, Texas Board of Legal Specialization Fellow -- American Academy of Matrimonial Lawyers Lifetime Member --American Academy of Matrimonial Lawyers Foundation Texas Academy of Family Law Specialists (President 2002-2003) Sustaining Life Member -- Texas Family Law Foundation (Legislative Bill Review Committee) Life Fellow -- Texas Bar Foundation Master -- Annette Stewart American Inn of Court State Bar of Texas, Family Law Section Texas State Bar Legislative Committee Family Law Council of the State Bar of Texas 1992-1998 Member, Legislative Committee, Family Law Council, 1995-1997, Co-Chair, 1997-1998, 2002 - present Co-Chair, Administrative Practice Committee, Family Law Council, 1996-1997 Member, Pattern Jury Charges - Vol. V Committee, State Bar of Texas, 1994, 1995 Family Practice Manual Revision Committee, 1990-1994, (Chairman -- 1992 - 1994) American Bar Association, Family Law Section Dallas County Bar Association, Family Law Section (Chairman 1991) Collin County Bar Association, Family Law Section State Bar of Texas, Sports Law Sections Dallas County Bar Association, Sports Law Section Sports Lawyers Association

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KINSER VITAE

Sports Financial Advisors Association Admitted to Practice before the United States Supreme Court, 1985 Life Member -- National Who’s Who PROFESSIONAL ACTIVITIES AND AWARDS Course Director, Sports Financial Advisors Association 5th Annual Conference, November 2009 Faculty, American Bar Association, 2008, 2009 Family Law Advocacy Institute, Denver, Colorado Course Director, State Bar of Texas - 33rd Annual Advanced Family Law Course, August, 2007 Course Director, Marriage Dissolution Course, State Bar of Texas, 1997 Course Director, Texas Academy of Family Law Specialists - 11th Annual Trial Institute, 1997 Adjunct Professor, Southern Methodist University School of Law, 2004 - 2006 Texas Monthly “Super Lawyer” 2003 - 2009 Texas Monthly “Top Fifty Female Lawyers in Texas,” November 2003 RECENT PUBLICATIONS AND SPEECHES “Mechanics of Effective Cross Examination”, 35th Annual Advanced Family Law Course, State Bar of Texas, Dallas, Texas, August 3-6, 2009 (with panelists J. Steven King, Kristy D. Piazza and Hon. Frank Sullivan) “Preparing Your Client for Social Studies and Psychological Evaluations”, 2009 State Bar of Texas Annual Meeting: Family Law Section CLE, June 25, 2009 “Guaranteed Pay, What a Deal, or is It?” Characterization of Unusual Employment Contracts, Family Law on the Front Lines, The University of Texas School of Law, San Antonio, Texas, June 18-19, 2009 LexisNexis Texas Annotated Family Code, Annotations for Chapter Four – “Premarital and Marital Property Agreements,” 2006 – 2009 (co-authored with Jonathan J. Bates) American Journal of Family Law, Valuing Professional Practices & Licenses: A Guide for the Matrimonial Practitioner, 2005 - 2009 Supplement, “Celebrity Divorce – Representing Big Hitters” (co-authored with Jonathan J. Bates)

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KINSER VITAE

“Exploring Employment Plans and Benefits,” New Frontiers in Marital Property Law, Napa Valley, California, October 2008 “As God is My Witness, I’ll Never be Hungry Again:” Premarital & Marital Property Agreements, State Bar of Texas, Advanced Family Law Course, August 2008 “Evidence Without Witnesses,” Collin County Bench Bar Conference, League City, Texas, May 2008 “Predicates, Making and Meeting Objections,” State Bar of Texas - The Trial of a Family Law Jury Case, January 2008 “Words From the Wise” - 7th Annual Family Law on the Front Lines, June 2007 “Guaranteed Pay: What a Deal, or Is It?” - Characterization of Unusual Employment Contracts”, LEI Conference, Snowmass, Colorado, January 2007 “Persuasive Skills”, 2006 Fall CLE Conference, Santa Fe, New Mexico, October 2006 “Family Law and The Entertainment Arena - Print, Television, Film and Beyond”, 16th Annual Entertainment Law Institute, October 2006 “Guaranteed Pay: What a Deal, or Is It?” - Characterization of Unusual Employment Contracts”, New Frontiers in Marital Property Law, San Francisco, October 2006 “Guaranteed Pay: What a Deal, or Is It?” - Characterization of Unusual Employment Contracts,” Advanced Family Law Course, August 2006 “Litigating the Case - The Trial”, Texas Academy of Family Law Specialists 20th Annual Trial Institute, January 2006 “Sports and Entertainment - Representing Big Hitters”, ABA Family Law Section, Fall CLE Conference, September 2005 “Representing Big Hitters - They Have The Glory, But What About the Guts?”, Collin County Bench Bar, April 2005 “Representing Big Hitters” – Legal Education Institute, Colorado Bar Association, January 2005 “Show Me the $$” - State Bar of Texas, Advanced Family Law Course, August 2004

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KINSER VITAE

“Sports: Players, Success and The Law” - State Bar of Texas, Entertainment and Sports Law Sections, March 2004 “Drafting Pretrial Motions in High-Stakes Family Law Cases” – Advanced Family Law Drafting and Advocacy: Art and Form, December 2003 “Keeping Private Stuff Private” – Advanced Family Law Course, August 2003 “Marital Agreements and Pre-Divorce Planning,” State Bar of Texas - Advanced Family Law Drafting Course, December 2002 “Sports & Entertainment B Representing Big Hitters,” State Bar of Texas - Advanced Family Law Course, August 2002 “Valuation of Law Practice in Divorce,” American Academy of Matrimonial Lawyers, Spring Meeting 2002 “Common Law Marriage and Rights of Putative Spouses,” State Bar of Texas - Advanced Family Law Course, August 2001 “Jury Trials: What You Can And Can’t Do,” State Bar of Texas - Ultimate Trial Notebook: Family Law Course, December 2000 “Evidence for Judges,” State Bar of Texas - Advanced Family Law Course, August 2000 “Representing the Professional Athlete,” State Bar of Texas - Advanced Family Law Course, August 2000 “Common Law Marriage,” State Bar of Texas Advanced Family Law Course, 1999 “The Athletes - Dating Games How Wheel of Fortune Becomes Jeopardy@, Dallas Chapter, Texas Society of Certified Public Accountants, September 1998 “Use of Trial Aids in Opening and Closing Arguments,” State Bar of Texas Advanced Family Law Course 1998 “Peculiar Marital Property Characterization Issues Involving Athletes and Entertainers,” Texas Entertainment and Sports Law Journal, Spring 1998 “Challenging Characterization Issues (including Sports and Entertainment Law),” State Bar of Texas--Advanced Family Law Course 1997

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KINSER VITAE

“Family Law Issues Impacting the Professional Athlete,” Sports Lawyers Association 23rd Annual Conference, May 1997 “Evidence without Witnesses” -- Advanced College of Judicial Studies 1997 “Domicile Restrictions,” State Bar of Texas--Advanced Family Law Course 1996 “Relocation Litigation - A Live Demonstration,” State Bar of Texas--Advanced Family Law Course 1996 “The Battered Wife Syndrome - The Lawyer’s Role as Attorney and Counselor,” State Bar of Texas--Marriage Dissolution Course 1996 “Identification and Allocation of Stock Options,” American Academy of Matrimonial Lawyers--Spring Meeting 1996 “Characterization,” State Bar of Texas--Texas Family Law Practice for Paralegals, 1996 "Significant Family Law Cases," Texas Center for the Judiciary, State Judicial Conference 1995 "Where Do We Go From Here? No More Gender-Based Preemptory Challenges in Custody Trials," State Bar of Texas--Marriage Dissolution Course 1995 "Organizing the Huge Property Case," Clearwater Information Systems, Inc.--Texas Family Law Practice for Paralegals 1995 "Evidence without Witnesses," University of Houston Law Center, 1995 - 1997 "Pretrial and Trial Tactics - Characterization," State Bar of Texas --Advanced Family Law Course 1994 "The Use of Expert and Lay Witnesses," State Bar of Texas--Marriage Dissolution Course 1994 "Pre- and Post-Nuptial Agreements", State Bar of Texas--Advanced Family Law Course 1993 "Enforcement", State Bar of Texas--Marriage Dissolution Course 1993

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TABLE OF CONTENTS

I.   INTRODUCTION ............................................................................................................................................. 1 

II.  DIFFERENT TYPES OF AGREEMENTS ....................................................................................................... 1 A.  Background ........................................................................................................................................... 1 B.  Cohabitation and Domestic Partnership Agreements ............................................................................ 1 C.   Premarital Agreements .......................................................................................................................... 2 D.   Post-Marital Agreements ...................................................................................................................... 3 E.  Premarital vs. Post-Marital Agreements ............................................................................................... 3 F.  The Nature of the Beast ........................................................................................................................ 4 

III.  CREATIVE DRAFTING ................................................................................................................................... 4 A.   Don’t Be Afraid to Put the Form Book Down ...................................................................................... 4 B.   Setting the Tone .................................................................................................................................... 5 C.   Keep Earnings as Community in Premarital Agreements ..................................................................... 5

D. The “Signing Bonus” ............................................................................................................................ 5 E.  Recurrent Transfers in Premarital or Post- Marital Agreements ........................................................... 5 F.   Guaranteed Lifestyle During Marriage ................................................................................................. 5 G.   The “Exit Bonus” .................................................................................................................................. 5 H.   The “Poison Pill” .................................................................................................................................. 5 I.   Expiration Clause in Premarital Agreement ......................................................................................... 6 J.   Deny at Your Own Risk ........................................................................................................................ 6 K.   Recurrent Performance Obligations by the Monied Partner or Spouse ................................................ 6 L.  House, Car and “Nest Egg” ................................................................................................................... 6 M.   Interaction With Homestead Rights ...................................................................................................... 6 N.   Anticipating “Eviction” from Separate Property Residence ................................................................. 6 O.   Permit Gifts and Bequests ..................................................................................................................... 7 P.   Right of Survivorship ............................................................................................................................ 7 Q.   Life Insurance ....................................................................................................................................... 7 R.  Post-divorce Alimony in Lieu of Property ............................................................................................ 7 S.   Choice of Law - Where Did They Go? ................................................................................................. 7 T.   2010 - an Enforcement Oddity .............................................................................................................. 7 U.  Creative Provisions in a Changing World – Civil Unions and Same Sex Marriages ........................... 7 V.  Setting the Fee ....................................................................................................................................... 7 W.  Paper as You Go ................................................................................................................................... 8 X.   Disqualification from Divorce .............................................................................................................. 8 Y.  Loss of Confidentiality ......................................................................................................................... 8 

IV.   CASE LAW AND STATUTORY AUTHORITY ............................................................................................. 8 A.   Interspousal Fiduciary Obligations ....................................................................................................... 8 

V.   THE EFFECT OF A PRE OR POST-MARITAL AGREEMENT DURING MARRIAGE ............................. 9 A.   Partition of Community into Separate .................................................................................................. 9 B.   Agreement That Income from Separate Will Be Separate .................................................................... 9 C.  Community Property Survivorship ....................................................................................................... 9 

VI.   THE EFFECT OF THE AGREEMENT AT DIVORCE ................................................................................... 9 A.   Temporary Support ............................................................................................................................... 9 B.   Child Support ........................................................................................................................................ 9 C.   Interim Attorney’s Fees and Litigation Expenses ................................................................................. 9 D.   Separate Property Is Indivisible ............................................................................................................ 9 E.   Division of Community Assets and Debts ............................................................................................ 9 F.   Waiver of Reimbursement and Economic Contribution Claims ......................................................... 10 

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G.   Bifurcation and Discovery .................................................................................................................. 10 H.   Fees upon Final Hearing ..................................................................................................................... 10 

VII.  THE EFFECT OF THE AGREEMENT AT DEATH ..................................................................................... 10 A.   Agreement to Make Will ..................................................................................................................... 10 B.   Family Allowance ............................................................................................................................... 10 C.   Surviving Spouse Homestead Rights .................................................................................................. 10 D.   Allow for Gifts or Bequests ................................................................................................................ 11 

VIII.   OTHER CLAUSES TO PONDER .................................................................................................................. 11 A.  Merger Clause ..................................................................................................................................... 11 B.   Disclaimer of Reliance ........................................................................................................................ 11 C.   Attorneys’ Representations ................................................................................................................. 11 

IX.   CONTESTING ENFORCEMENT OF PRE AND POST-MARITAL AGREEMENTS ................................ 11 A.   Voluntariness ...................................................................................................................................... 11 B.   Unconscionability ............................................................................................................................... 12 C.   Common Law Defenses ...................................................................................................................... 12 D.  The Effect of Pregnancy on Enforcement ........................................................................................... 12 

1.  Texas ...................................................................................................................................... 12 2.  Other Jurisdictions ................................................................................................................. 13 

a.  Agreement Invalidated .............................................................................................. 13 b.  Agreement Valid ....................................................................................................... 13 

E.  Ratification .......................................................................................................................................... 14 F.  The Effect of Prior Declaratory Relief ................................................................................................ 15 G.  Effect of Remarriage ........................................................................................................................... 16 H.   Contingent Fee .................................................................................................................................... 17 I.   Summary Judgment for Pre and Post-Marital Agreements ................................................................. 17 J.   Trial for Pre and Post-Marital Agreements ......................................................................................... 17 K.   Appeal ................................................................................................................................................. 18 L.   Shifting of Attorney’s Fees ................................................................................................................. 19 

X.  ANTICIPATORY BREACH ........................................................................................................................... 19 

XI.  DAMAGES ...................................................................................................................................................... 20 A.  Prejudgment Interest ........................................................................................................................... 20 

1.  In General............................................................................................................................... 20 2.  Prejudgment Interest in Marsh ............................................................................................... 20 3.  Marsh Overruled? .................................................................................................................. 21 4.  Prejudgment Interest in Pearce .............................................................................................. 21 

XII.  POST-TRIAL MATTERS ............................................................................................................................... 21 

XIII.  CONCLUSION ................................................................................................................................................ 21 

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COHABITATION, DOMESTIC PARTERSHIP, PREMARITAL & POST-MARITAL PROPERTY AGREEMENTS I. INTRODUCTION This article is designed to provide the family law practitioner with creative ideas that should be considered when preparing cohabitation, domestic partnership, pre- and post-marital agreements. For ease of use and reference, the paper is divided into three main parts:

1) An overview of the agreements addressed in the paper and their history;

2) The substantive law that underlies all the agreements; and

3) Creative drafting and issues to consider, including, helpful hints, practice tips and reminders for drafting the agreement.

II. DIFFERENT TYPES OF AGREEMENTS A. Background Cohabitation and domestic partnership agreements have been utilized over time to address many different types of issues that arise when couples, both opposite sex and same sex, agree to share a residence or domicile when they are not married. For some couples, the living arrangement is a precursor to marriage; for others, there is no intent to ever marry, or the marriage is prevented by law, as it is in Texas for same sex couples. While the predominant thought is that cohabitation agreements and domestic partnership agreements usually involve gay or lesbian couples, that is simply not the case. Under the current rules of Social Security, military benefits and some insurance disability programs, benefits may be lost if the beneficiary, or in the case of the parent of a child receiving benefits, if the parent, remarries. Therefore, many couples choose to live together without the benefit of marriage to keep their benefits, or those of their children, from being lost. In another typical scenario, couples who have previously been divorced, and who may have children, simply do not want to have their assets at risk by a subsequent marriage and divorce. In situations involving inherited funds and/or trust funds, trustors and/or beneficiaries do not want to place family money at risk. When the circumstance includes young children, adult children, grandchildren, extended families and elderly parents, some couples choose to shelter their own resources from the real or perceived obligations of their partner. Premarital and post-marital agreements in Texas

have a long, complex history steeped in the community property presumption, the state constitution, statutes, and case law. Originally, such agreements were disfavored by the Texas courts and traditionally found to be unenforceable. However, as a result of amendments to the Texas Constitution, evolving statutes, recent case law, and improved draftsmanship, the agreements are generally held to be a valid and enforceable.

B. Cohabitation and Domestic Partnership

Agreements The agreements made by non-married couples regarding their obligations during a cohabitation period are contracts that are enforceable under contract law if they are drafted correctly. The main difference between these agreements and those drafted under the statutes found in the Texas Family Code is the requirement of consideration. Without consideration being recited and paid, the contract will be unenforceable. There are other practical and statutory reasons for persons living at the same residence to enter into a cohabitation agreement. For example, if the couple wants to purchase a home, the agreement may set out terms of payment, percentage ownership, terms and conditions for one to buy out the other and/or the rights of the survivor in the event of death of one of the parties. This situation is especially true if one or both parties has heirs that might attempt to force the sale of the property during the lifetime of the surviving party. Terms and conditions of payment of all living expenses of the parties may also be included in a cohabitation or domestic partnership agreement. As in any contract, the clearer and more specific the terms are, the easier they will be to enforce. In the circumstance where one party is moving into the home of the other, the owner of the home is most benefitted by an agreement which not only sets out terms and conditions of payment of living expenses but also the conditions under which the home owner can force the other party to move. The two statutory schemes that are sometimes utilized by parties in this situation are the homestead and landlord/ tenant statutes found in the Property Code. Tex. Prop. Code Section 41.002 sets out the definition of a homestead in Texas. Property claimed as a family homestead must “be used for the purposes of a home, or as both an urban home and a place to exercise a calling or business, of the homestead claimant.” TEX. CONST. art XVI, Section 51. Therefore, understanding that the property is the home of both the owner and the domestic partner, if the owner then wants the partner to move, the partner may attempt to claim a homestead right in the property, regardless of the fact that there is no ownership

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interest. Simply put, the owner has permitted the domestic partner to share the property, use it as their domicile and residence, and may face obstacles to getting their partner to leave. “Family” is defined as a relationship by blood or marriage in which the head of the family has a legal or moral obligation to support other family members and those family members are dependent on the head of the family for support. NCNB Texas Nat’l Bank v. Carpenter, 849 S.W.2d 875 (Tex. App.—Fort Worth 1993, no writ). Even though the blood or marriage relationship is not present, a domestic partner may claim that same dependency in an attempt to remain in the unowned property. Additionally, in the case of heterosexual partners, absent a cohabitation agreement, the non-owner partner may look no further that the common law marriage statutes to keep from having to move from their home. Common law marriages are recognized as a family for the purposes of the homestead exemption and, theoretically, to establish rights to reside in the homestead. Baker v. Mays & Mays, 199 S.W.2d 279 (Tex. Civ. App.—Fort Worth 1946, writ dism’d). Another legal issue that may be raised by a non-owner domestic partner who is requested to vacate their home is a claim that they are a tenant and have rights arising under Tex. Prop. Code Title 8, Chapter 92. This circumstance is particularly true if the non-owner partner has paid for any portion of the mortgage, utilities, insurance and/or maintenance of the property. If that is the case, the owner partner may have to go through an eviction suit to regain sole possession of their property. See Tex. Prop. Code Title 4, Chapter 24, regarding forcible entry and detainer when tenant claims an oral rental agreement. C. Premarital Agreements Subchapter A of Chapter 4 of the Texas Family Code adopted the Uniform Premarital Agreement Act in Texas, slightly modified. Section 4.001 defines a “premarital agreement” as one made between prospective spouses, in contemplation of marriage, which shall become effective on marriage. While not clear from the statutory text and unanswered in Texas case law, the Official Comments to the Act indicate that a ceremonial marriage is required. Uniform Premarital Agreement Act § 2 cmt. Property which may be subject to a premarital agreement is broadly defined to include any “interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.” TEX. FAM. CODE ANN. §4.001(2). Texas law defines “property” very broadly to include every species of valuable right and interest. Winger v. Pianka, 831 S.W.2d 853, 857 (Tex.App.–

Austin 1992, writ denied). A premarital agreement must be in writing and signed by both parties. TEX. FAM. CODE ANN.§ 4.002. No actual consideration is required; however, it may be wise in some cases to provide for benefits the non-monied party, to avoid a later finding of unconscionability, particularly if the financial condition of the non-monied party under the agreement will be poor. If the benefits are good enough, it may defuse any impetus to challenge enforceability. Section 4.003 provides a comprehensive listing of matters which might be dealt with in a premarital agreement. These include:

(1) the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located;

(2) the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property;

(3) the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event;

(4) the modification or elimination of spousal support;

(5) the making of a will, trust, or other arrangement to carry out the provisions of the agreement;

(6) the ownership rights in and disposition of the death benefit from a life insurance policy;

(7) the choice of law governing the construction of the agreement; and

(8) any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty.

Subsection (b) makes clear that child support may not be “adversely affected” by a premarital agreement. TEX. FAM. CODE ANN. § 4.003(b). Therefore, a provision providing for the elimination of or reduction of a parties’ child support obligation in the event of divorce would be unenforceable. Other issues regarding the children of the contemplated marriage, however, might be properly included in a premarital agreement, including provisions for private education, college expenses, and choice of residence. All limitations on support obligations owed to minor children, and some restrictions on parental rights, are probably subject to review by the court as “a violation of public policy” if found to unduly limit a parent’s obligations, violate a child’s best interest, or impinge upon a parental right. See, e.g., Zummo v. Zummo, 574

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A.2d 1130, 1148 (Pa. Super. Ct. 1990) (premarital promise to raise child in certain religion not enforceable; “while we agree that a parent’s religious freedom may yield to other compelling interests, we conclude that it may not be bargained away”); In re Weiss, 49 Cal. Rptr. 2d 339 (Calif. Ct. App. 1996) (mother’s premarital written agreement to raise her children in Jewish faith is not legally enforceable). After marriage, a premarital agreement may be amended or revoked only by a written agreement signed by the parties. TEX.FAM.CODE. §4.005. The amended agreement or the revocation is also enforceable without consideration. Id. D. Post-Marital Agreements Subchapter B of Chapter 4 sets out the statutory requirements of a property agreement executed as between spouses. Again, “property” is broadly defined in the post-marital agreement context. TEX. FAM. CODE ANN. § 4.101. Through post-marital agreements, spouses can partition or exchange their community property interests between each other:

At any time, the spouses may exchange between themselves any part of their community property, then existing or to be acquired, as the spouses may desire. Property or a property interest transferred by a partition or exchange agreement becomes the spouse’s separate property.

TEX. FAM. CODE § 4.102. Spouses may also agree, at any time, that income or property arising from the separate property that is owned by them at the time of the agreement, or thereafter acquired, shall be the separate property of the owner. TEX. FAM. CODE ANN. § 4.103. Like premarital agreements, agreements between spouses must be in writing and signed by the parties. TEX. FAM. CODE § 4.104; see also, Miller v. Miller, 700 S.W.2d 941, 951 (Tex.App.–Dallas 1985, writ ref’d n.r.e.)(partition agreement must be in writing); Recio v. Recio, 666 S.W.2d 645, 649 (Tex.App.–Corpus Christi 1984, no writ)(partition or exchange agreements must be in writing to be enforceable). The intent of the parties to effectuate a present partition and exchange of property, on hand or to be acquired, should be included. See Collins v. Collins, 752 S.W.2d 636 (Tex. App.--Fort Worth 1988, writ ref’d) (finding that a mere listing of assets as separate property of one spouse on the parties’ joint tax return, although a writing signed by the parties, does not amount to a post-marital agreement). In 2003, the Legislature amended section 4.102 to provide that partitioned property automatically included future earnings and income from the

partitioned property unless the spouses agreed in a record that the future earnings and income would be community property after the partition or exchange. TEX. FAM. CODE ANN. § 4.102 (repealed). This change applied to a partition and exchange agreement made on or after September 1, 2003. In 2005, the Legislature amended section 4.102 to delete the automatic partition of future earnings and income from partitioned property and made it discretionary. This change applied to a partition and exchange agreement made on or after September 1, 2005, and a partition and exchange agreement made before September 1, 2005 is governed by the law in effect on the date the agreement was made and the former law is continued in effect for that purpose. As a result, partition and exchange agreements executed between September 1, 2003 and August 31, 2005 will automatically include future earnings and income from the partitioned property unless the spouses agree in a record that the future earnings and income would be community property after the partition or exchange. E. Premarital vs. Post-Marital Agreements Most reported Texas cases discussing enforcement of post-marital agreements deal with those entered during marriage, rather than before. Marsh v. Marsh, 949 S.W.2d 734, 745 (Tex.App.–Houston [14th Dist.] 1997, writ denied). The statutory defenses for premarital and post-marital agreements are, however, identical. It has been stated that, in post-marital agreements, a fiduciary duty exists that is not present in premarital agreements between prospective spouses. Id.; see also, Daniel v. Daniel, 779 S.W.2d 110, 115 (Tex.App.-Houston [1st Dist.] 1989, no writ) (recognizing the confidential relationship between a husband and wife imposes the same duties of good faith and fair dealing on spouses as required of partners and other fiduciaries). However, adverse parties who have retained independent counsel may not owe fiduciary duties to one another. See Miller v. Ludeman, 150 S.W.3d 592, 597 (Tex. App.—Austin 2004, pet. denied); see also Toles v. Toles, 113 S.W.3d 899, 916 (Tex. App.—Dallas 2003, no pet.). In Sheshunoff v. Sheshunoff, 172 S.W.3d 686, 700-701 (Tex. App. – Austin 2005, pet. denied), the Austin Court of Appeals addressed the applicability of a fiduciary duty in a post-marital agreement: Our conclusion is not altered by Mr. Sheshunoff's assertions that Ms. Sheshunoff, as his spouse, owed him a fiduciary duty to be truthful during their negotiations. Assuming without deciding that such a duty would apply under the circumstances of this case, the Texas Legislature enacted section 4.105 with the understanding that married spouses owing fiduciary duties to one another would negotiate and execute post-marital agreements. Notwithstanding these duties,

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the legislature manifested the strong policy preference that voluntarily made post-marital agreements be enforced. We have concluded that Mr. Sheshunoff has not raised a fact issue regarding the sort of involuntary execution the legislature could have intended to bar enforcement of post-marital agreements. That conclusion would control even in the face of the fiduciary duties Mr. Sheshunoff claims. Id. at 700-701 (citations and footnote omitted).

In addition, under Texas law, breach of fiduciary duty is arguably a defensive issue which is subsumed into the issue of whether each spouse was provided a fair and reasonable disclosure of the property or financial obligations of the other spouse (i.e., the unconscionability prong of section 4.105). See, Blonstein v. Blonstein, 831 S.W.2d 468, 471 (Tex.App.–Houston [14th Dist]), writ denied per curiam, 848 S.W.2d 82 (Tex. 1992). In other words, an alleged breach of fiduciary duty relates exclusively to the “unconscionability” prong of section 4.105. It may also be possible for spouses to waive (or discharge) any possible fiduciary duty with respect to entering into a post- marital property agreement.

Nonetheless, it should also be noted that a fiduciary duty may arise before marriage. See, Andrews v. Andrews, 677 S.W.2d 171, 174 (Tex.App.-Austin 1984, no writ) (fiduciary duty existed between a couple who had been seeing each other for approximately seven years, were living together and engaged to be married, and who had agreed to purchase a house jointly for use as their marital residence). F. The Nature of the Beast

Is a marital agreement a contract? Certainly, language in the Texas Family Code would so imply. See, TEX.FAM.CODE §4.003 (“[t]he parties to a premarital agreement may contract...”) (emphasis added). Texas appellate courts treat marital agreements like contracts. See, e.g., Marsh, 949 S.W.2d at 743-744 (wife’s payment of gift taxes was not a “condition precedent” to husband's performance of his obligations under the parties’ premarital agreement requiring him to fund trust). Legal commentators often also suggest that marital agreements constitute contracts. See, Harry L. Tindall & Angela G. Pence, Premarital and Marital Property Agreements at 18, ADVANCED FAMILY LAW COURSE (San Antonio 2001)(“[a] premarital or marital agreement is subject to the same general rules of construction and interpretation as any contract”). Finally, the “Official Comment to Uniform Premarital Agreement Act,” Section 2, states “...a premarital agreement is a contract.” Yet, as stated above, Texas Family Code §4.002 and §4.401 specifically provide that consideration is not required for a

premarital agreement. A “contract,” however, must be based upon a valid consideration. Federal Sign v. Texas Southern University, 951 S.W.2d 401, 408 (Tex. 1997); see also, American Nat'l Ins. Co. v. Warnock, 114 S.W.2d 1161, 1164 (Tex. 1938) (consideration is a fundamental element of every valid contract). Can it be argued that a marital agreement is not a “contract”? Does it matter? It might. As discussed hereinbelow, courts frequently resort to a discussion of “commercial contract” issues when examining a premarital agreement. Is it appropriate to consider commercial or contract law in the context of a premarital agreement? Although Texas courts, and Texas lawyers, assume so, the issue is not definitively resolved, and some difficulties exist with the “accepted” approach. III. CREATIVE DRAFTING A. Don’t Be Afraid to Put the Form Book Down While the forms that have been promulgated for use by family law practitioners are often helpful, it is a disservice to any client to rely solely on form book language.

Cohabitation agreements, domestic partnership agreements, premarital and post-marital agreements are contracts. However, cohabitation agreements and domestic partnership agreements both require consideration to be recited in the contract and the consideration must be paid. There are no statutory exemptions with regard to consideration for these two types of agreements.

When preparing cohabitation, domestic partnership, premarital or post-marital agreements, some attorneys simply put in their client’s information and leave all of the form book language in their client’s agreement. Instead of using general language that may have no benefit to either your client or the other party, it is wise to be willing to put the form down and use some common sense.

In preparing this paper, the authors asked several prominent family law attorneys across the state to fill out a short survey about the most creative provisions they have seen in marital agreements, as well as what advice they had to lawyers regarding the drafting of premarital agreements. One lawyer put it best when they said, “Don’t be wedded to form book proposals.” Because of the unique nature of these agreements, some creativity is not just suggested, it is required.

Cohabitation, domestic partnership, premarital agreements and post-marital agreements can be as creative as the attorneys or parties want them to be. Clearly, cohabitation and domestic partnership agreements do not pose the same types of problems dealing with the client and their partner as premarital agreements as no marriage is imminent. The balance between preparing documents that protect spouses’ rights in the event of divorce, while the parties are

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eagerly preparing for their wedding, should remind the family law practitioner to be creative and careful in their drafting of the proposals. B. Setting the Tone Whether you represent the monied or the non-monied partner or spouse, the tone that you take in negotiating and drafting the these agreements can shape the course of a case. When meeting with the client for the first time in the initial consultation it is a good idea to discuss not only the client’s goals, but the tenor and tone they want to take in the case. Sometimes these will conflict with each other and the client is unaware of the conflict. For example, the client may want to engage in negotiations from a very aggressive standpoint with a “take it or leave it” attitude. However, the client’s overall goal may be to simply protect their property. In such a case, the tone in which they want to proceed may be counterproductive to achieving their goals.

As every family law practitioner knows, there are many ways to skillfully obtain their clients’ goals without alienating the affections of the parties. In the case of the preparation and negotiation of cohabitation, domestic partnership and premarital agreements, it is wise to consider the overall effect of the drafting and negotiating of the agreement. Sometimes taking a hardline stance only ensures that the parties are setting themselves up for several difficult months and possibly not having a partnership or wedding at all. -Practice Tip- There is a fundamental dilemma in negotiating hard for your client. The more successful you are in wrestling concessions from the other party, the weaker your client’s arguments will be to set aside the agreement in the future. It is prudent to explain this dilemma to your client and allow him or her to make the decision on how they would like to proceed.

C. Keep Earnings as Community in Premarital

Agreements The usual purpose of a premarital agreement is to eliminate or at least restrict the community estate. The party without the major income obviously wants narrower restrictions. Often the effect of a premarital agreement can be limited to passive income, on the basis that the marital partners should share in the earnings from labor during the marriage.

D. The “Signing Bonus”

Another way to address this is the non-monied party could receive a transfer of property in exchange for giving up rights through an agreement. This could involve a cash payment, or a transfer of an undivided one-half interest in the home, etc. The problem with a

payment or transfer at the outset of the partnership or marriage is that it might over-reward a short relationship and under-reward a long one.

Negotiate for the transfer of as much property or money as you can up front, since there will be less chance of performance failures when the agreementis new and on everybody’s minds. Such transfers could include not only money, but also an interest in the family home, furniture, jewelry, an automobile, retirement benefits, etc.

E. Recurrent Transfers in Premarital or Post-

Marital Agreements Bargain for monthly or annual transfers that go beyond paying for the current living expenses. An attraction to recurrent transfers is the fact that they can be structured so that they will not come due unless the marriage continues.

F. Guaranteed Lifestyle During Marriage If there is to be no community property income, or insufficient community property income during marriage, try to include a contractual duty of support during the marriage from the monied spouse’s separate estate.

G. The “Exit Bonus”

One creative drafting technique to consider is the idea of a “exit bonus” for the non-monied partner or spouse if the relationship ends. There are many ways this can be handled. One way is to pay one lump sum amount if the relationship ends. Another way is to pay the non-monied partner or spouse a certain amount of money for each year the parties are together or married. This “exit bonus” provides two key advantages. First, it makes a clean break and clearly sets out what both parties are negotiating for in the agreement. Second, it provides security and a sense of fairness to the non-monied partner or spouse so that they do not feel like they are signing away everything.

There may be some resistance from the monied partner or spouse to enter into such an agreement. If so, a creative way to overcome such resistance is to provide incentive for not contesting the agreement. This creative clause has been referred to by one family law practitioner as “the poison pill.”

H. The “Poison Pill” In order to provide incentive to the monied partner or spouse to provide an “exit bonus”, and to minimize the risk of the agreement being attacked, a creative technique is to insert a clause that says if the non-monied partner or spouse attacks the validity of the agreement, they forfeit the “exit bonus”. Of course, language should be included in this clause that clearly states that the non-monied partner or spouse has every

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right to attempt to attack the agreement, however, if they do so, they do not receive the “exit bonus” and essentially receive nothing at all. The combination of these two creative provisions makes it more likely that the agreement will not be attacked and will be enforced as the parties intend.

I. Expiration Clause in Premarital Agreement A premarital agreement can contain a clause that the agreement expires after ten years, or after a child is born, etc. One wonders whether this type of expiration could retroactively alter ownership rights that have already vested, but the expiration certainly can apply on a prospective basis.

J. Deny at Your Own Risk A creative clause that can be added to premarital agreements governs responses to requests for admissions. Request for admissions are an underused, valuable discovery tool. The family law practitioner could include a clause in the premarital or post-marital agreement that provides if the non-monied spouse answers a request for admission about the agreement being fully enforceable in any way other than “admit”, the forfeiture of the “exit bonus” becomes automatic. This provision is easy to add to a premarital agreement and goes to the core of what the agreement means. If the parties are unwilling to admit that the agreement is enforceable when they are preparing it, there is an obvious problem already brewing. On the back end, if a party is unwilling to admit that the agreement is enforceable, the forfeiture of the “exit bonus” provides some incentive for them to reassess their desire to attack the validity of the agreement. Caution should be used when being creative. The issues in this paper are designed to encourage attorneys to draft creatively, however, there are professional and ethical obligations that limit the “creativity” of overzealous attorneys. For example, while it is permissible to include a clause that a party forfeit the “exit bonus” if they fail to answer a request for admission that asks if the agreement is fully enforceable, it is not wise to include clauses that attempt to penalize or eliminate a party for wanting to go to mediation or to take away their right to a jury trial.

K. Recurrent Performance Obligations by the

Monied Partner or Spouse Recurrent obligations of the monied party may be breached, and could possibly serve as a basis to avoid the agreement. No case has ruled on whether material breach of an agreement is grounds to avoid the agreement, for contracts signed on or after September 1, 1993.

L. House, Car and “Nest Egg” If you can obtain a guarantee upon dissolution of marriage of a nice place to live, a nice car to drive, and a chunk of money to save for a rainy day, this can make up somewhat for giving up a community property claim to community income.

M. Interaction With Homestead Rights

Article XVI, §52 of the Texas Constitution provides that the homestead shall not be partitioned among the heirs of the deceased during the lifetime of the surviving husband or wife, or so long as the survivor may elect to use or occupy the same as a homestead; such provision is sometimes referred to as the “probate homestead.” Williams, 569 S.W.2d 867, 869 (Tex. 1978).

Such rights, provided by law for the protection of the family and to secure a home for the surviving spouse, may be waived, however, particularly where, in the absence of any suggestion of fraud, overreaching or lack of understanding, (1) the parties to a premarital agreement are mature individuals, (2) full disclosure is made of the nature and extent of the property interest involved, (3) both parties have substantial separate property which they desire to preserve for themselves, and (4) there are no interests of any minor children to protect. Id. at 869-870.

N. Anticipating “Eviction” from Separate

Property Residence In instances where one party will be moving into a

separate property house belonging to the other party, the agreement should include specific terms regarding the terms and conditions of payment of expenses associated with the property, including the mortgage, tax, utility and maintenance expenses. The agreement should also contain provisions which anticipate the necessity of the later “eviction” of the party. Those provisions should include the conditions under which the homeowner can force the other party to move, as well as a specific timetable for notice of the demand to vacate the residence and the time period upon which vacancy must occur. Although provisions remain subject to challenge, the agreement should specifically recite that the parties agree that the party moving into the residence is not a “tenant” and accordingly does not have tenant rights arising under the Texas Property Code, even in instances where the non-owner party has paid for a portion of the mortgage, utilities, insurance and/or maintenance of the property. The agreement should also recite that the eviction formalities set forth in the Texas Property Code do not apply and that the parties specifically agree to be contractually bound by the specific provisions set forth in the agreement.

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O. Permit Gifts and Bequests An agreement may define certain property to be separate property of a partner or spouse, or as belonging to the owning or acquiring partner or spouse. Gifts or bequests would contravene these descriptions, so a paragraph should be included that overrides the original characterization if there is a gift or bequest.

P. Right of Survivorship A survivorship right in community property (if any) is a death-related term to be considered. However, a survivorship right cuts both ways, and can remove wealth from the non-monied party’s probate estate, working to the disadvantage of any heirs. Required bequests from the monied spouse’s estate, or claims against the monied spouse’s estate, would operate one-way only, and might be preferable.

Q. Life Insurance Since the spouses will not be building a community estate (or at least not as much of one) because of the agreement, the non-monied spouse may want an insurance policy on the life of the monied spouse. The obligation might be extended to include children born or adopted as beneficiaries of life insurance on the life of the monied spouse.

R. Post-divorce Alimony in Lieu of Property A popular term is one year of post-divorce alimony for every year of marriage.

S. Choice of Law - Where Did They Go? In thinking creatively, attorneys should incorporate choice of law provisions into cohabitation, domestic partnership, premarital and post-marital agreements that they prepare. Attorneys may want to include an arbitration clause that states that the agreement will be arbitrated by a neutral third party if any question regarding the validity of the agreement comes up. Problems arise when, fifteen or twenty years down the road, the parties have left the great state of Texas and have moved to Delaware. In order to avoid a choice of law problem, the arbitration clause can contractually bind the parties to apply Texas law thus eliminating a future question of what law applies to an agreement drafted in Texas for parties who later move out of the state.

T. 2010 - an Enforcement Oddity Another provision that family law attorneys should use in preparing cohabitation, domestic partnership, premarital and post-marital agreements is a provision that the controlling law is the law on the day the agreement is signed. Though they only meet every two years, the Texas Legislature has proven that

they are capable of drastically changing the status of the law in a legislative session. In order to protect against future changes that could have a negative impact on your client’s rights that they are contractually bound to in the agreement, the agreement itself should state that if any question as to the validity or enforcement of the agreement is raised, the laws of the State of Texas on the date of the signing of the agreement will control the interpretation of said agreement.

U. Creative Provisions in a Changing World –

Civil Unions and Same Sex Marriages There are already several states that have

recognized, in varying degrees, either civil unions or same sex marriage. What is the effect of a Massachusetts same sex couple who lived in Boston for five years as a married couple, have a premarital agreement, then one or both of the spouses are transferred to Texas, and one party seeks enforcement of the agreement. What is the effect of the premarital agreement in a state that does not recognize same sex marriage?

In order to avoid such a problem for clients in Texas, the clients can contract and enter cohabitation and domestic partnership agreements between them that may be different from what is permissible under the Family Code. For example, if a same sex couple in Texas wished to enter into an agreement regarding the division of their property, debts, and provisions for their children, they can do so. Such provisions would probably need to begin with language that states, “Whether the state recognizes the marriage of Mr. Greenacre and Mr. Blackacre, the agreement is intended to be a contract between the parties.” Such provisions can provide some assurance and stability in an atmosphere where sister states are addressing the issue of same sex marriage differently than the State of Texas. Any such agreement needs a recitation of the consideration and the consideration actually needs to be paid.

V. Setting the Fee Some lawyers will not draft cohabitation, domestic partnership, premarital or post-marital agreements because of the risk of a contest at a later time. In setting your fee, consider that you may later be required to testify to who drafted what, the circumstances surrounding execution, discussions with your client, etc. Worse yet, you may be the vehicle for an attack on the agreement, based on failing to advise your client properly, or worse, for conspiring with the monied party to take advantage of your client. Consider these possibilities when setting your fee. A straight hourly rate only compensates you for your time spent in negotiations and drafting, not the

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potential for later involvement.

W. Paper as You Go If your client decides to try to challenge

enforcement of the agreement, the client may allege that he or she did not understand the agreement because you did not explain it to him or her adequately. The more one-sided the agreement is, the more important it is that your advice to the client be documented, preferably in the form of an extensive explanation, signed by the client.

If there are unusual or complicated terms, make a record of your discussions with the opposing lawyer as well as your client. Redline each set of changes and keep all drafts in case a dispute develops later over the meaning of a clause.

X. Disqualification from Divorce It is possible, if the relationship ends or a divorce occurs, that your client may wish to hire you to represent him or her. Many forms contain a waiver of disqualification provision. If the agreement is contested, the opposing party may wish to disqualify you on the grounds that you will be a witness. In such a case, your ethical obligations may supercede the waiver provision. If you do accept employment when the relationship ends, be sure to disclose to the client at the time you accept employment, of the possibility of a motion to disqualify.

Y. Loss of Confidentiality Advise your client that, if he or she contests enforceability of the agreement, the “offensive use” doctrine of Ginsberg v. Fifth Court of Appeals, 686 S.W. 2d 105, 107 (Tex. 1985), may apply. In Ginsberg, the Supreme Court of Texas held that a party seeking affirmative relief cannot invoke a privilege to preclude the defendant from obtaining information necessary to defend against the claim. That is "using the privilege as a sword, not a shield," and in that situation the trial court can force the party invoking the privilege to either waive the privilege or suffer dismissal of his affirmative claims. In Ginsberg, a woman was contesting the validity of a deed to land, on the ground that she was fraudulently induced to sign the deed. The point at which she became aware of the transfer affected the statute of limitations, and the Supreme Court held that her psychiatrist’s records on that issue were discoverable. In Republic Ins. Co. v. Davis, 856 S.W.2d 158, 163 (Tex. 1993), the Supreme Court articulated a three-pronged test to apply in such situations:

First, before a waiver may be found the party asserting the privilege must seek affirmative relief. [FN9] Second, the privileged information sought must be such that, if believed by the fact finder, in all

probability it would be outcome determinative of the cause of action asserted. Mere relevance is insufficient. A contradiction in position without more is insufficient. The confidential communication must go to the very heart of the affirmative relief sought. Third, disclosure of the confidential communication must be the only means by which the aggrieved party may obtain the evidence. [FN10] If any one of these requirements is lacking, the trial court must uphold the privilege. [FN11] [Content of footnotes omitted]

In Republic Ins. Co. v. Davis, the “offensive use” principle was applied to the attorney-client privilege. In Owens-Corning Fiberglas v. Caldwell, 818 S.W.2d 749 (Tex. 1991), it was applied to the attorney work product privilege. In Parten v. Brigham, 785 S.W.2d 165, 168 (Tex. App.--Fort Worth 1989, no writ), the offensive use doctrine was applied to a bill of review brought to set aside a property division upon divorce. The plaintiff alleged that community assets were hidden from her at the time of divorce. The appellate court held that her divorce lawyer’s files were open to discovery to the extent they reflected the plaintiff’s knowledge of community property assets.

If the party seeking enforcement of the agreement can show affirmative relief, outcome determinative, and exclusive means to the information, they may be able to see your file and take your deposition and call you to testify at trial.

IV. CASE LAW AND STATUTORY

AUTHORITY A. Interspousal Fiduciary Obligations One court has said that post-marital agreements are evaluated in the context of the fiduciary relationship that exists between spouses. Daniel v. Daniel, 779 S.W.2d 110, 115 (Tex. App.-- Houston [1st Dist.] 1989, no writ); compare to Pearce v Pearce, 824 S.W.2d 195, 197 (Tex. App.--El Paso 1991, writ denied) (“Texas courts have closely scrutinized property agreements made by spouses during the marriage”). In ordinary fiduciary litigation, the burden of proof is on the fiduciary to prove that his transaction with the beneficiary was fair. See Archer v. Griffith, 390 S.W.2d 735, 739 (Tex. 1964) (“The burden of establishing its perfect fairness, adequacy, and equity, is thrown upon the attorney, upon the general rule, that he who bargains in a matter of advantage with a person, placing a confidence in him, is bound to show that a reasonable use has been made of that confidence; a rule applying equally to all persons standing in confidential relations with each other”); Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 27-28 (Tex. App.--Tyler 2000, pet. denied) (”where ‘self-dealing’ by the fiduciary is alleged, a ‘presumption of unfairness’ automatically arises and the burden is placed on the fiduciary to prove (a) that the questioned

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transaction was made in good faith, (b) for a fair consideration, and (c) after full and complete disclosure of all material information to the principal”). If this rule were to be applied to a post-marital agreement, it would reverse the burden of proof in TEX. FAM. CODE §§ 4.006, 4.105, which provide that a premarital or marital agreement is not enforceable if the party against whom enforcement is sought proves the two statutory defenses.

V. THE EFFECT OF A PRE OR POST-

MARITAL AGREEMENT DURING MARRIAGE

A. Partition of Community into Separate Since 1980, both premarital and post-marital agreements can partition and exchange community property on hand and yet to be acquired. TEX. CONST. art. XVI, § 15, provides in part:

. . . . provided that persons about to marry and spouses, without the intention to defraud pre-existing creditors, may by written instrument from time to time partition between themselves all of part of their property, then existing or to be acquired, or exchange between themselves the community interest of the other spouse in other community property then existing or to be acquired, whereupon the portion or interest set aside to each spouse shall be and constitute a part of the separate property and estate of such spouse or future spouse . . . .

B. Agreement That Income from Separate Will Be

Separate TEX.CONST. art. XVI, § 15, provides in part:

spouses also may from time to time, by written instrument, agree between themselves that the income or property from all or part of the separate property then owned or which thereafter might be acquired by only one of them, shall be the separate property of that spouse. . .

Note that the constitutional power to agree is limited to spouses, and thus does not include persons about to marry. In one case the Court held that a clause in a premarital agreement that income from separate would be separate was not enforceable. Fanning v. Fanning, 828 S.W.2d 135 (Tex. App.--Waco 1992), aff'd in part and rev'd in part, 847 S.W.2d 225 (Tex. 1993). However, the language in that agreement was peculiar, and a subsequent case held that persons about to marry could achieve such a recharacterization through partition and exchange of future income. Winger, 831 S.W.2d at 858; (“We hold that the 1980 amendment to Article XVI, section 15, of the Texas Constitution

permits persons about to marry to partition or exchange between themselves salaries and earnings to be acquired by the parties during their future marriage”).

C. Community Property Survivorship By constitutional amendment in 1987, Texas spouses can create a right of survivorship in community property. Such agreements are governed by Tex. Probate Code §§ 451-457. An agreement must be in writing and signed by both spouses (§ 452).

VI. THE EFFECT OF THE AGREEMENT AT

DIVORCE A. Temporary Support Texas Family Code § 4.003 specifically provides that a premarital agreement can cover the modification or elimination of spousal support. There is no statutory authority for spouses to modify or eliminate spousal support in a post-marital agreement.

B. Child Support As already stated, Texas Family Code section 4.003(b) specifically provides that the right of a child to support may not be adversely affected by a premarital agreement. Clearly, parties to a premarital agreement may not agree to eliminate the obligation to pay child support. However, other issues related to child support, such as private education, college expenses, or choice of residence, might be included in a marital agreement, subject, of course, to court review. See Ex parte Hall, 854 S.W.2d 656, 658 (Tex. 1993) (orig. proceeding).

C. Interim Attorney’s Fees and Litigation

Expenses Texas Family Code § 4.003 does not specifically provide for the waiver in a premarital agreement of the right to recover attorneys’ fees in connection to a divorce. An argument is sometimes made that Texas Family Code § 6.502, permitting the award of interim fees, provides a basis for the award of interim fees even in the face of a premarital agreement to the contrary.

D. Separate Property Is Indivisible The case of Eggemeyer v. Eggemeyer, 554 S.W.2d 137 (Tex. 1977), established that the Texas Constitution prohibits a court, in a divorce, from taking the separate property of one spouse and awarding it to the other spouse. Partitioning community property into separate property is the most effective way to protect ownership of that property in a divorce.

E. Division of Community Assets and Debts Texas Family Code § 4.003(3) specifically provides that a premarital agreement can address “the

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disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event . . .”. In Fanning v. Fanning, 828 S.W.2d 135 (Tex. App.--Waco 1992), aff'd in part and rev'd in part, 847 S.W.2d 225 (Tex. 1993), the appellate court noted that a clause requiring a 50-50 division of community property upon divorce “appears to encroach upon the trial court's statutory duty to’ order a division of the estate of the parties in a manner that the court deems just and right, having due regard for the rights of each party’ . . . ." In light of the Family Code language, however, the court ruled that the trial court erred in deviating from a 50-50 division of community property. Id. at 143.

F. Waiver of Reimbursement and Economic

Contribution Claims Although Texas Family Code § 4.003 does not specifically list the waiver of reimbursement and economic contribution claims as terms for a premarital agreement, TEX. FAM. CODE § 3.410 provides that a waiver clause in a premarital or post-marital agreement is “effective to waive, release, assign, or partition a claim for economic contribution under this subchapter to the same extent the agreement would have been effective to waive, release, assign, or partition a claim for reimbursement under the law as it existed immediately before September 1, 1999, unless the agreement provides otherwise.”

G. Bifurcation and Discovery PJC 207.1 recommends that the court consider a separate trial to determine the validity of a premarital or post-marital agreement, when contested. Separate trials raise the related issue of bifurcating discovery, to permit the contesting party to have discovery in advance of the first trial of only evidence relating to the enforceability of the agreement. See TEX.R.CIV.P. 174(b).

H. Fees upon Final Hearing Chiles v. Chiles, 779 S.W.2d 127, 129 (Tex. App.–Houston [14th Dist.] 1989, writ denied), holds that where the premarital agreement precludes a community estate, attorneys’ fees cannot be awarded in the final judgment.

VII. THE EFFECT OF THE AGREEMENT AT

DEATH A. Agreement to Make Will When couples include in a cohabitation, domestic partnership, premarital or post-marital agreement provisions relating to the making of a will, special consideration should be given to Section 59A of the Texas Probate Code:

Section 59A. Contracts Concerning Succession (a) A contract to make a will or devise, or

not to revoke a will or devise, if executed or entered into on or after September 1, 1979, can be established only by:

(1) provisions of a written agreement

that is binding and enforceable; or (2) provisions of a will stating that a

contract does exist and stating the material provisions of the contract.

(b) The execution of a joint will or

reciprocal wills does not by itself suffice as evidence of the existence of a contract.

TEX. PROBATE CODE § 59A.

B. Family Allowance The Texas Probate Code provides for a family allowance, in appropriate cases, for the support of the surviving spouse and minor children of the deceased during the first year after the deceased's death. The section specifically allows any person who is authorized to act on behalf of the minor children of the deceased to apply for the family allowance. TEX. PROB. CODE § 286. The amount of the allowance is addressed to the trial court's discretion. San Angelo Nat. Bank v. Wright, 66 S.W.2d 804, 805 (Tex. Civ. App.--Austin 1933, writ ref'd). “The allowance shall be fixed with regard to the facts or circumstances then existing and those anticipated to exist during the first year after such death.” TEX. PROB. CODE § 287. “No such allowance shall be made for the surviving spouse when the survivor has separate property adequate to the survivor's maintenance; nor shall such allowance be made for the minor children when they have property in their own right adequate to their maintenance.” TEX. PROB. CODE §288. If the non-monied spouse doesn’t have enough estate to be disqualified for a family allowance, he or she will need the allowance. With regard to the non-married partners, this provision should be specifically addressed in the cohabitation or domestic partnership agreement if one or both partners have children. This statutory authority, coupled with a written contract, will permit one partner to obtain a family allowance for the deceased partner’s children.

C. Surviving Spouse Homestead Rights In Texas, a surviving spouse may occupy the homestead during the spouse's lifetime without it being

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partitioned to the heirs of the deceased spouse until the survivor's death. TEX. CONST. art. XVI § 52; Tex. Prob. Code § 272& 284. In Williams v. Williams, 569 S.W.2d 867 (Tex. 1978), the Texas Supreme Court ruled that persons about to marry can by premarital agreement waive the probate homestead right of a surviving spouse provided by Art. XVI, § 52, of the Texas Constitution. Unlike the family allowance, the homestead right is not based on need, and the surviving spouse’s life estate can tie up the inheritance of the home for some time. The surviving spouse’s homestead rights are a prime candidate for waiver, or limitation to a fixed term of years.

D. Allow for Gifts or Bequests If the agreement describes certain assets, or types of assets, as belonging solely to one partner or spouse, include a clause the recognizes that inter vivos gifts and bequests by will override the characterization of the property in the agreement.

VIII. OTHER CLAUSES TO PONDER A. Merger Clause

A clause saying “This document contains the entire agreement between the parties with regard to the subject matter,” is commonly called a merger clause. A merger clause establishes the parties' intent that the written agreement be their complete agreement. Weinacht v. Phillips Coal Co., 673 S.W.2d 677, 679 (Tex. App.--Dallas 1984, no writ). The reason for placing a merger clause in a written contract is to invoke the parol evidence rule which excludes proof of extrinsic agreements. Burleson State Bank v. Plunkett, 27 S.W.3d 605, 615 (Tex. App.-Waco 2000, pet. denied). Since TEX. FAM. CODE §§ 4.002 & 4.104 require premarital and post-marital agreements to be in writing, an oral side agreement would not be admissible, even without a merger clause. However, the merger clause would eliminate the possibility of any pre-existing or contemporaneous written agreement (perhaps an earlier hand-written agreement between the parties) that would survive the formal agreement. In Dallas Farm Machinery Co. v. Reaves, 307 S.W.2d 233, 239 (1957), the Supreme Court held that a merger clause can be avoided based on fraud in the inducement and that the parol evidence rule does not bar proof of such fraud. However, Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997) (discussed below), said that a merger clause can sometimes bar a fraudulent inducement claim, depending on circumstances.

B. Disclaimer of Reliance In Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997), the Supreme Court held that

an express disclaimer of reliance on representations by the other party may in some instances preclude a fraud claim. “The contract and the circumstances surrounding its formation determine whether the disclaimer of reliance is binding.” Id. at 179.

C. Attorneys’ Representations Some forms call for the attorneys to sign written representations of their client’s competency, that the lawyers have explained the terms of the agreement to the client, and that the client understands, is acting voluntarily, etc. The lawyer would normally want to delete such a clause, since it turns the lawyer into a witness supporting enforcement of the agreement. However, the written recital does not bind the lawyer’s later testimony–rather it is a matter to be explained if the later testimony is to the contrary.

IX. CONTESTING ENFORCEMENT OF PRE

AND POST-MARITAL AGREEMENTS The Texas Family Code expressly provides that an attack on a written premarital, or partition and exchange (and by extension) income agreement, is limited to two defenses. The party attempting to attack the agreement must show that:

(1) the party did not sign the agreement voluntarily; or

(2) the agreement was unconscionable when it was signed and, before signing the agreement, that party:

(A) was not provided a fair and reasonable

disclosure of the property or financial obligations of the other party;

(B) did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and

(C) did not have, or reasonably could not have had, adequate knowledge of the property or financial obligations of the other party.

TEX. FAM. CODE ANN. §§ 4.006(a); 4.105(a). A. Voluntariness

Voluntary has been defined as being “done by design or intentionally or purposely or by choice or of one’s own accord or by the exercise of will. A voluntary act proceeds from one’s own free will or is done by choice on or of one’s own accord, unconstrained by external interference, force, or influence.” Prigmore v. Hardware Mutual Ins. Co., 225 S.W.2d 897 (Tex. Civ. App.—Amarillo 1949, no

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writ). One court of appeals has considered voluntariness in terms of duress. See e.g., Osorno v. Osorno, 76 S.W.3d 509, 511 (Tex. App.--Houston [14th Dist] 2002, no pet.).

In representing a client in the preparation and signing of such an agreement, you would not want the client to act involuntarily. You will naturally take steps to see that the client understands what he/she is doing, and is not acting under compulsion. If the signing is in your opinion not voluntary, document that point well in your file. You will no doubt be a witness when the agreement is challenged at a later time. B. Unconscionability

Whether or not an agreement is unconscionable is a matter of law to be decided by the Court. TEX. FAM. CODE ANN. §§ 4.006(b); 4.105(b). Unconscionability in premarital and marital agreements has been evaluated in the context of unconscionability as it applies in general contract law:

In determining whether a contract is unconscionable or not, the court must look to the entire atmosphere in which the agreement was made, the alternatives, if any, which were available to the parties at the time of making the contract; the non-bargaining ability of one-party; whether the contract is illegal or against public policy, and whether the contract is oppressive or unreasonable.

Wade v. Austin, 524 S.W.2d 79 (Tex. Civ. App.—Texarkana 1975, no writ). Because unconscionability is so ill-defined, document the circumstances surrounding the negotiation and signing, so you will make a better witness at the enforcement trial.

C. Common Law Defenses

Section 4.006(c) and 4.105(c) limit the attack of premarital and post-marital agreements to the statutory defenses of voluntariness and unconscionability. However, the amendment applies only to agreements “executed on or after” September 1, 1993. Daniel v. Daniel, 779 S.W.2d 110, 114 (Tex. App.--Houston [1st Dist.] 1989, no writ). Because “an agreement executed before that date is governed by the law in effect at the time the agreement was executed,” common law defenses regarding the enforcement of contracts may still be available to attack pre-Sept. 1, 1993 agreements. Exactly what common law defenses apply, and how they apply, has not been conclusively established in Texas case law.

One appellate court has held that such common law defenses as duress, overreaching, undue influence, fraud, estoppel, and breach of fiduciary duty are necessarily incorporated into the 1993 statutory defenses. In Blonstein v. Blonstein, 831 S.W.2d 468, the court of appeals affirmed the trial court’s denial of jury instructions on common law defenses, finding that

they were already included in the court’s instructions regarding voluntariness, unconscionability, and disclosure:

. . . [Duress, overreaching, and undue influence] inquired as to whether David Blonstein’s free will was overcome by threats or other acts of Esther Blonstein. The first question actually submitted to the jury asked “Did David Blonstein voluntarily execute the marital property agreement?” This broad-form question encompassed those three defensive issues. . . .Asking whether David Blonstein acted voluntarily is the same as asking whether he acted by free will. . . . [Fraud, estoppel, and breach of fiduciary duty] concerned whether Esther Blonstein had misrepresented or failed to disclose information about the property schedule attached to the marital agreement. The question actually submitted to the jury asked: “Was David Blonstein provided a fair and reasonable disclosure of the property or financial obligations of Esther Blonstein or did David Blonstein have or reasonably could have had an adequate knowledge of the property or financial obligations of Esther Blonstein?” This question contained, because of his broad form, those defensive issues requested by the appellant.

Blonstein, 831 S.W.2d at 471. In a per curium opinion, the Texas Supreme Court denied the application for writ of error, but expressly stated that in doing so, it neither approved nor disapproved of the analysis of the court of appeals. Blonstein v. Blonstein, 848 S.W.2d 82 (Tex. 1992). D. The Effect of Pregnancy on Enforcement 1. Texas In Texas, the effect of the woman being pregnant at the time a marital agreement is negotiated and executed has recently been decided. In Osorno v. Osorno, 76 S.W.3d 509 (Tex. App. – Houston [14th Dist.] 2002, no pet.), after Gloria became pregnant, Henry agreed to marry her if she would sign a premarital agreement. Gloria signed a premarital agreement and they were married the next day. When Henry filed for divorce six years later, Gloria unsuccessfully contested the enforceability of the premarital agreement. On appeal, Gloria argued that she signed the premarital agreement involuntarily because she was forty, unmarried and pregnant. Id. at 510-11. The Fourteenth Court of Appeals stated the “for duress to be a contract defense, it must consist of a

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threat to do something the threatening party has no legal right to do.” Id. at 511. The appellate court concluded that Henry had no legal duty to marry Gloria and that his threat to do something he had the legal right to do is insufficient to invalidate the premarital agreement. Id. 2. Other Jurisdictions Courts of other states have also considered the “pregnancy” problem. a. Agreement Invalidated In Munson v. Munson, No. FA 950325174S, 1997 WL 585754, *4-*5 (Conn. Super. 1997), the Superior Court of Connecticut held that a premarital agreement was invalid because the wife signed the agreement under duress. The Superior Court specifically found that, since the wife was four months pregnant at the time the agreement was signed, and the husband insisted on her signing the agreement “some weeks before the marriage,” duress was established. Id. It should be noted, however, that the wife also testified that she saw the agreement only once, that the husband made the agreement a condition of marriage, that the husband prepared the agreement, and that the wife had not received full disclosure of the parties’ assets. Id. at *4. In finding duress, the Superior Court focused nevertheless on the wife’s pregnancy and the immediacy of the marriage. In Persichilli v. Persichilli, No. FA920293938S, 1993 WL 574304, *2-*3 (Conn.Super. 1993), the Superior Court of Connecticut determined that a premarital agreement was invalid because the wife had not voluntarily signed the agreement. Factors the Superior Court considered were that the wife had no previous experience with legal matters or with lawyers (immediately before signing the agreement, the wife had been advised not to sign the agreement), the wife was under extreme emotional distress after the husband told her the marriage, scheduled for the next day, would be canceled unless she signed the agreement, and the wife was four months pregnant at the time. Id. at *2. Under the circumstances, stated the Connecticut Superior Court, “...the wife would have signed anything the husband wanted in order to have the marriage take place the next day.” Id. at *3. In Rowland v. Rowland, 599 N.E.2d 315, 319 (Ohio Ct. App. 1991), motion to certify overruled, 62 Ohio St.3d 1442, 579 N.E.2d 215 (Ohio 1991), an appeal of a judgment upholding a premarital agreement, the appellate court found “evidence of what might characterized as duress or coercive circumstances: appellant’s age [18], lack of experience, morning sickness, and indeed the pregnancy itself,” but since such circumstances were fact issues, the appellate court considered itself bound the trial court’s finding

that there had been no fraud, duress, or coercion. However, the appellate court nevertheless invalidated the agreement on the basis of overreaching, since the agreement had been prepared entirely by the husband’s attorney, without any input from the wife, the husband’s attorney was unaware that the wife was pregnant at the time the agreement was signed and had failed to advise the wife of the rights she was giving up and her right to independent counsel, and the wife signed only after being advised in the office of the husband’s attorney, procedures which the appellate court considered to be a violation of the Ohio Canons of Ethics. Id. at 319-321. In Williams v. Williams, 617 So.2d 1032, 1035 (Ala. 1992), the Alabama Supreme Court held that the evidence created a genuine issue of fact, precluding summary judgment against the wife, as to whether the father’s conditioning of the marriage on the pregnant mother’s signing the premarital agreement, joined with the mother’s moral objection to abortion and the importance of legitimacy in a small town, engendered a coercive atmosphere in which the mother had no viable alternative to accepting the father’s condition for marriage, i.e., signing the agreement. In West Virginia, the only statutory grounds for voiding a premarital agreement are that either of the parties is a minor at the time the agreement is signed or that the female party to the agreement is pregnant at the time the agreement is signed. See, Gant v. Gant, 329 S.E.2d 106, 112 (W.Va. 1985). In Bassler v. Bassler, 593 A.2d 82 (Vt. 1991), the trial court refused to enforce a premarital agreement. On appeal, the husband argued that the agreement was valid, and that the trial court erred in admitting the testimony of the wife that the husband insisted that she sign the agreement before the marriage, and that the wife was induced to sign by the pending wedding and her advanced pregnancy. 593 A.2d. at 88. The husband argued that the wife’s testimony sought to contradict or negate the terms of the agreement because it was inconsistent with the agreement’s acknowledgment clause and was therefore barred as parol evidence. Id. The Supreme Court of Vermont, however, held that evidence of unconscionability did not offend the parol evidence rule because such evidence may be offered to disaffirm or avoid the binding force of the contract. Id. Thus, the trial court did not err by admitting the testimony of the wife, since her testimony did not vary or add to the terms of the agreement, but rather challenged the validity of the contract. Id. b. Agreement Valid In Margulies v. Margulies, 491 So.2d 581 (Fla. Dist. Ct. App. 1986, rev. denied), the wife alleged at trial that, after the parties’ child had been born, she had

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been coerced into signing a premarital agreement. The trial court upheld the agreement. On appeal, the appellate court noted that whether the wife believed that the signing of the agreement was a mandatory condition precedent to marriage and whether the husband would have refused to marry the wife, were questions that were not openly discussed at or before the time the wife signed the agreement. Id. at 583. Even if the wife was motivated by a strong desire to legitimize the child, the appellate court found substantial evidence that she entered into the agreement with “her eyes wide open,” after complete disclosure of the husband’s financial condition and negotiations through counsel resulting in modifications to the agreement. Id. Thus, the trial court’s conclusion that the agreement was not coerced, the result of undue influence, or otherwise unlawfully procured, was amply supported by the evidence. Id. In Hamilton v. Hamilton, 591 A.2d 720 (Pa.Super.Ct. 1991), the wife, who was 18, pregnant, unemployed, and “probably frightened,” was told by her husband that without a premarital agreement, there would be no wedding. 591 A.2d at 722. At the time of divorce, the trial court refused to enforce the waiver of spousal support contained in the premarital agreement and the husband appealed. The appellate court held that the trial court erred by refusing to enforce the premarital agreement, because it was clear that there was neither force nor threat of force used to induce the wife to execute the agreement. Id. She had been represented by counsel, who advised her not to sign the agreement, but she signed anyway. The appellate court state that where a party has been free to consult counsel before signing an agreement, the courts have uniformly rejected duress as a defense to the agreement. Id. In Kilborn v. Kilborn, 628 S.W.2d 884 (Ala.Civ.App. 1993), the trial court enforced a premarital agreement which had been signed by the 20 year old wife at time when she was three months pregnant. The husband had informed her that she would have to sign the agreement before he would marry her. She contacted an attorney, who advised her to sign the agreement, but qualifying her signature with the words, “due to duress and being pregnant.” The husband promptly refused to go through with the wedding. Some months later, the husband again proposed marriage and the premarital agreement. The wife contacted another attorney who also advised her not to sign the agreement. Nonetheless, the wife signed the agreement, to which was attached a list of the husband’s assets and expected inheritance. On appeal, the appellate court rejected the wife’s arguments that she did not sign the agreement voluntarily, but rather under coercive circumstances, stating that there was sufficient evidence of

voluntariness, with competent, independent advice and full disclosure. Id. at 885. In Marriage of Dawley, 551 P.2d 323 (Cal. 1976), the Supreme Court of California held that an premarital agreement, signed after the parties entered into a contemplated short-term marriage of convenience, which altered community status of property acquired during marriage, could not be said to be “oppressive or unfair,” and thus was not procured by undue influence, where, even though the wife was compelled to enter into the agreement by her unplanned pregnancy and by her fear that she would lose her job, the husband, who was threatened with a paternity suit and also the likely loss of his job, was in no position to take advantage of the wife’s distress; further, the wife did not rely on the husband’s advice but consulted her own attorney before executing the agreement. 131 Cal.Rprt. at 11-12. In Baumgartner v. Baumgartner, No. L-88-032, 1989 WL 80947, *10 (Ohio Ct.App. 1989) (unreported), the trial court refused to enforce the parties’ premarital agreement, stating, “....the only reason [the wife] signed the agreement was because she was pregnant, and that she wanted her baby to have the [the husband’s] last name, and the [the husband] made it clear that if [the wife] did not sign the agreement, [the husband] would not marry her.” The appellate court found that the trial court’s statements were indeed supported by evidence, but that such statements were totally irrelevant to whether the premarital agreement was valid, because a party’s statement that he will not marry, and thereby not give his child his name, unless the other party signs a premarital agreement, is not fraud, duress, coercion or overreaching. Id. The appellate court also noted that if all premarital agreements failed because one party refused to marry the other if the agreement wasn’t signed, then virtually all premarital agreements would be unenforceable. Id. at *11. E. Ratification Ratification of a premarital agreement, alleged to be unenforceable, is a potential issue in any premarital agreement case. See, e.g., Marsh, 949 S.W.2d at 741, n. 7 (the appellate court, because it held the agreement valid, did not reach the wife’s claim that the husband, by making payments to a trust pursuant to the agreement, ratified the agreement); see also Nesmith v. Berger, 64 S.W.3d 110, 115 (Tex. App. – Austin 2001, no pet.). Ratification is the adoption or confirmation by a person with knowledge of all material facts of a prior act which did not then legally bind him and which he had the right to repudiate. Spellman v. American Universal Inv. Co., 687 S.W.2d 27, 29 (Tex.App.-Corpus Christi 1984, writ ref’d n.r.e.). Ratification

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occurs when one, induced by fraud to enter into a contract, continues to accept benefits under the contract after he becomes aware of the fraud or if he conducts himself in such a manner as to recognize the contract as binding. See, e.g., Daniel v. Goesl, 341 S.W.2d 892, 895 (Tex. 1960). Once a contract has been ratified by the defrauded party, the defrauded party waives any right of rescission or damages. Old Republic Ins. Co., Inc. v. Fuller, 919 S.W.2d 726, 728 (Tex.App.-Texarkana 1996, writ denied). An express ratification is not necessary; any act based upon a recognition of the contract as subsisting or any conduct inconsistent with an intention of avoiding it has the effect of waiving the right of rescission. Id. In other words, ratification may be inferred from conduct Spellman, 687 S.W.2d at 29. One who asserts ratification must prove that the ratifying party acted upon full knowledge of all material facts. See, e.g., K.B. v. N.B., 811 S.W.2d 634, 638 (Tex.App.-San Antonio 1991, writ denied) (the husband, who did not consent in writing to the artificial insemination procedure performed on his wife, ratified the parent-child relationship with the child born as the result of the procedure, where the husband knew about the artificial insemination process and participated in it willingly from the beginning, acknowledged the child, and publicly held him out as his son for several years). Ratification is an issue that is normally a question of fact, but it may become one of law if the facts and circumstances are admitted or clearly established. Williams, 932 S.W.2d at 685. In addition, mental intent or reservation does not affect determination of the question of ratification. See, e.g., Oram v. General American Oil Company of Texas, 513 S.W.2d 533, 534 (Tex. 1974); see also, Spellman, 687 S.W.2d at 30 (even if the appellants stated that they did not intend to ratify the lease by accepting rental payments, the acceptance of the payments was inconsistent with the intention to avoid the lease and recognized the lease as subsisting and binding; therefore, the appellants waived or abandoned any right of rescission or of attack upon the initial invalidity, if any, of the lease). F. The Effect of Prior Declaratory Relief The Declaratory Judgments Act is a procedural device for deciding cases that are within the court’s jurisdiction. State v. Morales, 869 S.W.2d 941, 947 (Tex.1994); Chambers County v. TSP Development, Ltd., 63 S.W.3d 835, 840 (Tex. App. – Houston [14th Dist.] 2001, pet. filed). The purpose of the Declaratory Judgments Act is to settle and afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations. Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex.1995); Rush v. Barrios, 56 S.W.3d 88, 105 (Tex. App. – Houston [14th

Dist.] 2001, pet. denied) (The purpose of a declaratory judgment is to establish existing rights, status, or other legal relations). The Declaratory Judgments Act is remedial only. Bonham State Bank v. Beadle, 907 S.W.2d at 467. The Declaratory Judgments Act does not confer jurisdiction on the trial court, but, rather makes available the remedy of a declaratory judgment for a cause of action already within the court's jurisdiction. State v. Morales, 869 S.W.2d at 947; Rush v. Barrios, 56 S.W.3d at 105. A declaratory judgment is appropriate only if a justiciable controversy exists as to the rights and status of the parties and the controversy will be resolved by the declaration sought. Bonham State Bank v. Beadle, 907 S.W.2d at 467; City of Longview v. Head, 33 S.W.3d 47, 51 (Tex. App. – Tyler 2000, no pet.); Rush v. Barrios, 56 S.W.3d at 105. A justiciable controversy must be distinguished from an advisory opinion. Longview v. Head, 33 S.W.3d at 51. Texas courts do not have the authority to render judgments that merely constitute advisory opinions. Patterson v. Planned Parenthood of Houston & S.E. Tex., Inc., 971 S.W.2d 439, 443 (Tex.1998);Waite v. Waite, 64 S.W.3d 217, 223 (Tex. App. – Houston [14th Dist.] 2001, pet. denied); Texas Dept. of Public Safety v. Moore, 985 S.W.2d 149, 153 (Tex. App. – Austin 1998, no pet.). An opinion is advisory when the judgment sought would not constitute specific relief to a litigant or affect legal relations. Continental Cas. Co. v. Texas Bd. of Chiropractic Examiners, 2001 WL 359632 at *2 (Tex. App. – Austin April 12, 2001, no pet.); Brinkley v. Texas Lottery Comm'n, 986 S.W.2d 764, 767 (Tex.App.-Austin 1999, no pet.). The distinctive feature of an advisory opinion is that it decides an abstract question of law without binding the parties. Continental Cas. Co. v. Texas Bd. of Chiropractic Examiners, 2001 WL 359632 at *2; Brinkley v. Texas Lottery Comm'n, 986 S.W.2d at 767. Unless there is a justiciable issue, the trial court does not have subject matter jurisdiction under the Texas Declaratory Judgment Act. J.E.M. v. Fidelity & Cas. Co. of New York, 928 S.W.2d 668, 671 (Tex.App.-Houston [1st Dist.] 1996, no writ). Subject matter jurisdiction refers to the court’s power to hear a particular type of suit, a power that exists by operation of law only, and cannot be conferred upon any court by consent or waiver. Federal Underwriters Exch. v. Pugh, 541, 174 S.W.2d 598, 600 (Tex. 1943). Lack of subject matter jurisdiction renders a judgment void, rather than merely voidable, so that it may be challenged either directly or collaterally. See, Browning v. Placke, 698 S.W.2d 362, 363 (Tex. 1985) (on collateral attack judgment was not shown to have been rendered by a court without jurisdiction); see also, Mapco, Inc. v. Forrest, 795 S.W.2d 700, 703

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(Tex. 1990) (an order is void only if the court rendering it had no jurisdiction over the parties, no jurisdiction of the subject matter, no jurisdiction to enter the judgment, or no capacity to act as a court). Errors other than lack of jurisdiction render the judgment merely voidable and must be attacked within prescribed time limits. Browning, 698 S.W.2d at 363 (Tex. 1985). The distinction between a void and voidable judicial act is: while a void act is entirely null within itself, not binding on either party, and not susceptible of ratification or confirmation, so that its nullity cannot be waived, a voidable act is not absolutely void within itself, but rather is binding until disaffirmed, and may be made finally valid by failure within the proper time to have it annulled, or by subsequent ratification or confirmation. Brazzel v. Murray, 481 S.W.2d 801, 803 (Tex. 1972), quoting, Murchison v. White, 54 Tex. 78, 81 (1880). Accordingly, a collateral attack on declaratory judgment affirming the enforceability of a premarital agreement might successfully allege that no justiciable issue existed at the time the court entered the judgment, i.e., there was no existing controversy concerning the enforcement of the agreement and thus the issue was not ripe. Further, because no justiciable issue existed, the court rendering the judgment lacked subject matter jurisdiction, and the parties’ attempt to bestow such jurisdiction was ineffective. Thus, the declaratory judgment represents, at best, an impermissible advisory opinion. No reported Texas case discusses the validity of a declaratory judgment affirming the enforceability of a premarital agreement. In their article, Tindall and Pence cite nine opinions from courts of other states. See, Tindall and Pence at 12; see also, Bavido v. Weixel, 459 So.2d 701 (La. Ct. App. 1984); Eaton v. Eaton, 366 A.2d 121 (Md. Ct. App. 1976); Richardson v. Richardson, 606 N.E.2d 56 (Ill. App. Ct. 1992); Wolfe v. Wolfe, 491 A.2d 281 (Pa. Super. Ct. 1985); Stenson v. Stenson, 359 N.E.2d 787 (Ill. App. Ct. 1977); Kosik v. George, 452 P.2d 560 (Or. 1969); Miller v. Miller, 151 So.2d 869 (Fla.Dist.Ct.App. 1963); Trossman v. Trossman, 165 N.E.2d 368 (Ill.App.Ct. 1960). It must be stated again that a collateral attack on a declaratory judgment affirming the enforceability of a premarital agreement is untested in Texas law. Counter-arguments to such an attack may well exist. For example, the Texas Supreme Court has stated that, if a court having potential jurisdiction renders a judgment when the potential jurisdiction has not been activated, and the defect is apparent from the face of the judgment, then the judgment is void and subject to either direct or collateral attack. Fulton v. Finch, 346 S.W.2d 823, 827 (Tex. 1961) (emphasis added). If, however, the court having potential jurisdiction renders

a judgment regular on its face that contains recitations stating that potential jurisdiction has been activated, then the judgment is voidable, not void, and may be set aside only by a direct attack. Akers v. Simpson, 445 S.W.2d 957, 959 (Tex. 1969). The unassailability of the judgment arises because a court of potential jurisdiction has the power to determine whether its jurisdiction has been activated, and the recitations making that determination are immune from attack in a collateral proceeding. McEwen v. Harrison, 345 S.W.2d 706, 710 (Tex. 1961). Consequently, depending on how the declaratory judgment is drafted, a collateral attack may not be possible. The issue, if and when finally visited by a Texas appellate court, will make for interesting reading. (Even if a collateral attack on the declaratory judgment is possible, the existing declaratory judgment may well constitute evidence--perhaps dispositive--as to issues of “voluntariness” or intent). If a collateral attack is not possible, the Texas lawyer also may not have many viable options for direct attack upon a declaratory judgment affirming the enforceability of a premarital agreement. It is unlikely that a direct appeal will still be available, since an appeal must be perfected within 30 days after the judgment was signed. TEX.R.APP.P. 26.1. If the declaratory judgment was signed within the preceding six months, a restricted appeal (formerly an appeal by writ of error) may be available. See, TEX.R.APP.P. 30. To bring a restricted appeal, a litigant must demonstrate that (1) he or she is a party to the suit, (2) he or she filed the restricted appeal within six months of judgment; (3) he or she did not participate at trial; and (4) error is apparent on the face of the record. It is very unlikely that a declaratory judgment, entered by consent of the parties, will show error on the face of the record. Finally, the equitable bill of review may be available. To be successful in a bill of review, the plaintiff must allege and prove: (1) a meritorious defense to the cause of action alleged to support the judgment, (2) which fraud, accident, or the opposing party’s wrongful act prevented him from presenting, (3) without any fault or negligence of his own. Baker v. Goldsmith, 582 S.W.2d 404, 406-407 (Tex. 1979). It is doubtful that a bill of review will correct a declaratory judgment affirming the validity of a marital agreement entered by consent of the parties. G. Effect of Remarriage In Marshall v. Marshall, 735 S.W.2d 587, 592 (Tex.App.-Dallas 1987, writ ref’d n.r.e.), the parties were first married on April 26, 1982. On June 14, 1982, they executed a separate property agreement, which provided: “All income and/or property arising from the separate property now owned by [said spouse]

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or hereafter acquired by [said spouse], shall be the sole and separate property of [said spouse].” Id. The parties then divorced, and the October 15, 1982 judgment of divorce recited that the agreement was valid. Id. Approximately five months later the parties remarried, only later to file for divorce again. Id. On appeal after the trial of the second divorce, the husband argued that the parties’ 1982 agreement was still in effect at the time of the second divorce. Id. The Dallas Court of Appeals rejected the husband’s argument, noting that the parties’ agreement contained no express provision providing for the termination or continuation of the agreement. Id. When the duration of a contract is not expressly dictated by the agreement, stated the Dallas appellate court, Texas courts frequently presume that the parties intended that the agreement should continue for a reasonable time. Id. However, when it appears, from the intrinsic nature of the agreement, that an agreement is necessarily limited as to duration by the happening of any one of several contingencies, this ascertainable contingency determines the duration. Id. The Dallas Court of Appeals then examined the agreement, which had been executed less than two months after the first marriage, and specifically focused on the following provisions:

WHEREAS, JOSEPH WOODROW MARSHALL and ARLENE O'BRIEN MARSHALL were married on April 26, 1982, and are now husband and wife; WHEREAS, at the time of said marriage each owned separate property and each expects that each might hereafter acquire separate property; and WHEREAS, both desire the income and/or property arising from all of the respective separate property now owned or which hereinafter might be acquired by each shall be the respective separate property of each, it is therefore agreed between them as follows....Id.

From such provisions, the Dallas appellate court concluded that the parties were contracting in relation to the existing [first] marriage only, and that it was unreasonable to assume that they anticipated a series of remarriages and divorces. Id. According to the Fifth Court of Appeals, the first divorce was the ascertainable contingency that determined the duration of the agreement; consequently, the agreement had no bearing on either the second marriage or the second divorce. Id.

H. Contingent Fee Contingent fees are frowned upon in many family law matters. Tex R. Disciplinary Conduct 1.04, Comment 9, provides:

Contingent and percentage fees in family law matters may tend to promote divorce and may be inconsistent with a lawyer's obligation to encourage reconciliation. Such fee arrangements also may tend to create a conflict of interest between lawyer and client regarding the appraisal of assets obtained for the client.... Because of the human relationships involved and the unique character of the proceedings, contingent fee arrangements in domestic relations cases are rarely justified.

See TEX. DISCIPLINARY R. PROF'L CONDUCT 1.04(a), reprinted in TEX. GOV'T CODE ANN., tit. 2, subtit. G app. A (Vernon 1998) (TEX. STATE BAR R. art. X, § 9). However, the only outright prohibition of a contingent fee in the Texas Rules of Disciplinary Conduct is in criminal cases. Tex R. Disciplinary Conduct 1.04(e). Especially where the agreement puts the non-monied spouse in a situation where he or she cannot afford to pay a reasonable fee for legal representation and professional assistance, then the right to be represented by counsel of choice may only be available through a contingent fee arrangement. I. Summary Judgment for Pre and Post-Marital

Agreements Summary judgment procedure is available with regard to premarital and post-marital agreements, and many appellate opinions review and some affirm summary judgments upholding premarital and post-marital agreements. See e.g., Grossman v. Grossman, 799 S.W.2d 511 (Tex. App.--Corpus Christi 1990, no writ) (court of appeals upheld husband's summary judgment seeking enforcement of a premarital agreement). Whether a summary judgment can be supported in a particular case is fact intensive, and can’t be predicted in advance. J. Trial for Pre and Post-Marital Agreements If you are challenging an agreement and you survive summary judgment, you get a trial on your voluntariness and unconscionability defenses. There is enough potential overlap in the two defenses that ordinarily both defenses will be alleged. Unconscionability is an issue to be tried to the Court. Voluntariness can be tried to a jury. But since unconscionability, under the case law, involves an assessment of “the entire atmosphere in which the agreement was made,” Marsh v. Marsh, 949, S.W.2d

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734, 740 (Tex. App.– Houston [14th Dist.] 1997, writ denied), the trial judge will often listen to exactly the same evidence as the jury, before making a decision. Courts sometimes even wait until after the return of the jury verdict to render a decision or unconscionability. In many instances, the parties will agree to-- or the Court will order--separate trials, with the first phase involving enforceability of the agreement to be concluded before discovery occurs on the remaining issues in the divorce. If there are not separate trials, then tracing can become very complicated since the enforceability of the agreement often will determine the character of property that is presumptively community, and two tracings will be required, one assuming that the agreement is valid and one assuming it is not. K. Appeal It is unclear whether the enforceability of an agreement is subject to an interlocutory appeal. (The Marsh case, 949 S.W.2d at 738, suggests that the issue can be brought separately, that’s the test for severability.) If not, the validity of the first phase of the case cannot be tested on appeal until the remaining issues have been resolved and the judgment on the entire case is appealed. In most Texas appellate cases involving the enforcement of premarital and post marital agreements, the appellate court has upheld the trial court’s judgment upholding the agreement. Here is a partial list:

I. Beck v. Beck, 814 S.W.2d 745 (Tex.

1991), cert. denied, 112 S.Ct. 1266 (1992) affirming trial court which upheld premarital agreement

II. Blonstein v. Blonstein, 831 S.W.2d 468 (Tex.App.--Houston [14th Dist.] 1992, writ denied) affirming trial court which upheld premarital agreement

III. Chiles v. Chiles, 779 S.W.2d 127 (Tex.App.--Houston [14th Dist.] 1989, writ denied) -- reversing the trial court which set aside a premarital agreement

IV. Daniel v. Daniel, 779 S.W.2d 110 (Tex.App.--Houston p1st Dist.] 1989, no writ)--affirming trial court which upheld premarital agreement

V. Dokmanovic v. Schwarz, 880 S.W.2d 272 (Tex.App.--Houston [14th Dist] 1994, no writ)--affirming the trial court which upheld premarital agreement

VI. Fanning v. Fanning, 828 S.W.2d 135 (Tex.App.--Houston [14th Dist.] 1994, no writ)--Wqaco 1992), aff’d in part and rev’d in part, 847 S.W.2d 225 (Tex.

1993)--reversing trial court for failing to enforce premarital agreement

VII. Fazakerly v. Fazakerly, 996 S.W.2d 260, 265 (Tex. App.--Eastland 1999, pet. denied)–affirming trial court which upheld premarital agreement

VIII. Fellows v. Fellows, 2000 WL 1073609 (Tex. App--Dallas 2000, no pet.)–affirming trial court which upheld premarital agreement

IX. Grossman v. Grossman, 799 S.W.2d 511 (Tex. App.--Corpus Christi 1990, no writ)–affirming trial court which upheld premarital agreement

X. Larson v. Prigoff, 2001 WL 13352 (Tex. App.--Dallas 2001, no pet.) (not for publication)–affirming trial court’s which upheld premarital agreement.

XI. Marsh v. Marsh, 949 S.W.2d 734 (Tex. App.- -Houston [14th Dist.] 1997, no writ)–affirming trial court which upheld premarital agreement

XII. Pearce v Pearce, 824 S.W.2d 195, 197 (Tex.App.--El Paso 1991, writ denied) reversing trial court for failing to uphold premarital agreement

XIII. Pletcher v. Goetz, 9 S.W.3d 442, 446 (Tex. App.--Fort Worth 1999, pet. denied)--affirming trial court which upheld partition and exchange agreement

XIV. Rathjen v. Rathjen, 1995 WL 379322 (Tex. App.--Dallas 1995, writ denied)–reversing trial court for failing to uphold premarital agreement

XV. Sheshunoff v. Sheshunoff, 172 S.W.3d 686, 693 (Tex. App.--Austin 2005, pet. denied)-husband who executed agreement with knowledge and understanding of its terms, but did not believe that wife would avail herself of her rights under the agreement did not execute agreement “involuntarily” so as to prevent enforcement of agreement

XVI. Winger v. Pianka, 831 S.W.2d 853 (Tex. App.--Austin 1992, writ denied)–affirming trial court which upheld premarital agreement

XVII. Young v. Young, 854 S.W.2d 698 (Tex. App.--Dallas 1993, writ denied)–reversing trial court which upheld premarital agreement, on procedural ground that wife was entitled to trial de novo on appeal of master’s ruling.

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L. Shifting of Attorney’s Fees Whether the agreement in question shifts the payment of attorneys’ fees can be a big factor in deciding whether to challenge the enforceability of a cohabitation, domestic partnership, premarital or post-marital agreement. X. ANTICIPATORY BREACH Under Texas law, when one party repudiates a contract, the nonrepudiating party has the right to accept the repudiation and bring a cause of action for damages immediately, or to keep the contract alive and sue for damages as they accrue. Thomas v. Thomas, 902 S.W.2d 621, 624 (Tex.App.-Austin 1995, writ denied); see also, Hardin Assocs., Inc. v. Brummett, 613 S.W.2d 4, 6 (Tex.Civ.App.-Texarkana 1980, no writ) (noting that upon repudiation, nonrepudiating party has right to maintain action at once for entire breach and thus receive in damages the present value of future payments due under contract) (emphasis added). The two distinct options available to the non-breaching party are inconsistent, substantive rights. Thomas, 902 S.W.2d at 624. Thus, when the nonrepudiating party decides to file a suit for unaccrued future damages immediately upon repudiation of the contract, that party resolves the right to recover such future contract payments “into a mere cause of action for damages,” giving up the right to later sue on the contract. Id.; quoting, Greenwall Theatrical Circuit Co. v. Markowitz, 79 S.W. 1069, 1071 (Tex. 1904). According to the Texas Supreme Court, “a contract cannot be thus treated, for one purpose, as subsisting, and, for another purpose, as at an end...[upon such a repudiation ... the other may make his choice between the two courses open to him, but can neither confuse them together nor take both.” Greenwall Theatrical Circuit Co., 79 S.W. at 1071-72. If the nonrepudiating party accepts the renunciation as terminating the agreement, that party may not later sue on the contract. Thomas, 902 S.W.2d at 625. In other words, the decision to pursue a claim for anticipatory breach involves an “election of rights,” and such election may have far-reaching implications, often misunderstood or misperceived by the practitioner. See, Id. at 624. Thomas, for example, illustrates a potential trap in anticipatory breach claims. In Thomas, the parties were divorced in 1989. Id. at 622. As part of the divorce settlement, the husband agreed to pay contractual alimony to the wife. Id. at 622-623. In December, 1991, the former wife sued the former husband, alleging breach of the alimony contract as well as anticipatory repudiation of the contract and seeking judgment for all payments due, both past and future, under the alimony contract. Id. at 623. The

jury found that the husband both breached and repudiated the contract, awarded the wife $100,000 in damages for breach of contract, but found zero damages for repudiation. Id. After the trial court reduced the damages for breach of contract to $68,000 for the past due and unpaid alimony payments from August 1991 through November 1992, the judgment became final. Id. In April 1993, the former wife demanded alimony payments due under the same alimony contract that was the subject of the prior litigation. Id. In response, the former husband filed a suit for declaratory relief to the effect that the rights and obligations of the parties under the alimony contract had been fully and finally adjudicated in the previous lawsuit. Id. The trial court ruled in the former husband’s favor. Id. On appeal, the Austin Court of Appeals upheld the trial court’s ruling, stating that the former wife “elected” to terminate the contract when she chose, in the original suit, to sue for anticipatory repudiation, instead of waiting to enforce the contract and sue to collect the alimony installments as they became due and unpaid. Id. at 625. Thus, according to the Austin appellate court, the trial court in the second action correctly determined that all contractual obligations between the parties had been terminated and that the former husband had no obligation to make alimony payments after November 1992 (the month that the first case was tried). Id. Another potential trap lurking in anticipatory breach claims involves proof of damages. As stated, under an anticipatory breach claim, the nonbreaching party may sue for the present value of the payments payable under the agreement. See, e.g., Taylor Pub. Co. v. Systems Marketing Inc., 686 S.W.2d 213, 217 (Tex.App.-Dallas 1984, writ ref’d n.r.e.). An anticipatory breach does not change the usual rule for measuring damages, (i.e., damages for breach of contract are to compensate the innocent party for loss or damage actually sustained), but rather merely requires that an accurate estimate of the probability of future performance be substituted for the certainty of performance. Kiewit Texas Min. Co. v. Inglish, 865 S.W.2d 240, 245 (Tex.App.-Waco 1993, writ denied). The face value of a contract is ordinarily different than the value of its expected performance, with the uncertainty of future performance usually accounting for the difference. Id. Thus, plaintiffs are only entitled to recover the value to them of the “expected performance” of the contract, which is the loss they actually sustained from the anticipatory breach; they are not automatically entitled to recover the present value of the remaining face value of the contract. Id. Consequently, plaintiffs have the burden of establishing with reasonable certainty the value of the expected performance. Id.

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Moreover, it must be emphasized that, once the right to sue for anticipatory breach is elected, the right to sue for installments due under the contract is likely lost. Therefore, if the party electing to sue for anticipatory breach fails, for whatever reason, to prove its damages, such party will not later be able to sue on the contract, even if, at that later date, damages have become more ascertainable. XI. DAMAGES Although a complete discussion of available contract damages is beyond the scope of this article, certain generalized comments are appropriate. The universal rule for measuring damages for the breach of a contract is just compensation for the loss or damage actually sustained. Phillips v. Phillips, 820 S.W.2d 785, 788 (Tex. 1991). Thus, a party usually should be awarded neither less nor more than his actual damages. Id.; see also, Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (Tex. 1952) (measure of damages for breach of contract is just compensation for damages actually sustained by plaintiff as a result of defendant’s default). To restore an injured party to the position he or she would have been in had the contract been performed, it must be determined what additions to the injured party’s wealth have been prevented by the breach and what subtractions from that party’s wealth have been caused by it. Lafarge Corp. v. Wolff, Inc., 977 S.W.2d 181, 187 (Tex.App.-Austin 1998, writ denied), citing, 5 Corbin on Contracts §992 (1964). In other words, damages for breach of contract protect three interests: a restitution interest, a reliance interest, and an expectation interest. O'Farrill Avila v. Gonzalez, 974 S.W.2d 237, 247 (Tex.App.-San Antonio 1998, writ denied). Marsh, again, illustrates relevant considerations. In Marsh, without filing for divorce, the wife sued the husband for a “simple” breach of contract. 949 S.W.2d at 738. The wife simply sought to enforce the parties’ agreement, which required the husband to transfer certain of his assets into a trust. Id. As the successful party, the wife was awarded a judgment in the amount that the husband was obligated to transfer, attorney’s fees, prejudgment interest, and postjudgment interest. Id. at 737. In this manner, the trial court adhered to the “universal rule” of contract damages, and placed the wife in the position she would have occupied but for the husband’s breach.

A. Prejudgment Interest 1. In General Prejudgment interest is “compensation allowed by law as additional damages for lost use of the money due as damages during the lapse of time between the accrual of the claim and the date of judgment.” Johnson & Higgins of Texas, Inc. v. Kenneco Energy,

Inc., 962 S.W.2d 507, 528 (Tex. 1998). There are two legal sources for an award of prejudgment interest: (1) general principles of equity and (2) an enabling statute. Id. Section 302.002 of the Texas Finance Code, effective September 1, 1997, provided:When no specified rate of interest is agreed on by the parties, interest at the rate of six percent per year is allowed on all accounts and contracts ascertaining the amount payable, beginning on the 30th day after the date on which the amount is due and payable. TEXAS FINANCE

CODE §302.002 derives from former TEX.REV.CIV. STAT. art. 5069-1.03, which was repealed in 1997 and recodified §302.002. Former art. 5069-1.03 read: “When no specified rate of interest is agreed upon by the parties, interest at the rate of six percent per annum shall be allowed on all written contracts ascertaining the sum payable, from and after the time when the sum is due and payable; and on all open accounts, from the first day of January after the same are made.” However, in 1999, section 302.002 of the Texas Finance Code was amended and now provides:If a creditor has not agreed with an obligor to charge the obligor any interest, the creditor may charge and receive from the obligor legal interest at the rate of six percent a year on the principal amount of the credit extended beginning on the 30th day after the date on which the amount is due. For the purposes of prejudgment interest calculated under former article 5069-103, a contract is one “ascertaining the sum payable” when it (1) “provides the conditions upon which liability depends,” and (2) “fixes a measure by which the sum payable can be ascertained with reasonable certainty, in the light of the attending circumstances.” Great American Ins. Co. v. North Austin Mun. Utility Dist. No. 1, 950 S.W.2d 371, 372-373 (Tex. 1997) (construing former art. 5069-103).

2. Prejudgment Interest in Marsh In Marsh, 949 S.W.2d at 744, the husband complained on appeal that the trial court erred in awarding his wife pre-judgment interest at 10% per annum, which exceeded the 6% rate authorized at the time by former art. 5069-1.03. The parties’ agreement did not contain a provision for prejudgment interest. The Houston appellate court first noted that former art. 5069-1.03 did not apply when the damages cannot be calculated from the face of the contract itself. Id., citing, Rio Grande Land & Cattle Co. v. Light, 758 S.W.2d 747, 748 (Tex. 1988). The Fourteenth Court of Appeals therefore stated that when damages are not ascertainable from the face of the contract, a trial court may award 10% pre-judgment interest. Id., citing, Perry Roofing Co. v. Olcott, 744 S.W.2d 929, 930-31 (Tex. 1988). In other words, according to the appellate court, when extrinsic evidence is needed to determine the amount of contract damages, former art. 5069-1.03

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did not apply. The appellate court then examined the parties’ agreement. The amount of the husband’s interest in the accounts, of which he was to transfer one-half to his wife under the agreement, was not determined at the time of the execution of the contract. Id. at 745. One of the accounts contained assets that formerly belonged to the husband’s late wife, in which the husband’s interest had not yet been determined. Id. Under the agreement, the husband was to transfer one-half of the value of his interest “as it may be determined.” Id. Consequently, the Houston Court of Appeals held that, the parties’ premarital agreement was not a contract “ascertaining the sum payable” as required by former art. 5069-1.03, and therefore the trial court did not abuse its discretion in permitting prejudgment interest to accrue at 10% per annum. Id.

3. Marsh Overruled? In Great American Ins. Co., 950 S.W.2d at 373 (decided on July 31, 1997, exactly three weeks after the motion for rehearing was overruled in Marsh), the Texas Supreme Court held that former art. 5069-1.03 applied when calculating prejudgment interest, even if extrinsic evidence is needed to quantify contract damages, so long as the contract fixes a measure by which the sum payable can be ascertained with reasonable certainty in light of the attending circumstances. (Emphasis added.) The Texas Supreme Court specifically disapproved of those court of appeals opinions holding that former art. 5069-1.03 cannot be applied when resort to extrinsic evidence to determine damages is necessary. Id. The opinion in Great American Ins. Co. did not mention Marsh. Nonetheless, the holding concerning prejudgment interest in Marsh no longer appears viable, having survived a mere three weeks after inception. Furthermore, the amendment of section 302.002 of the Texas Finance Code in 1999 also indicates that the holding concerning prejudgment interest in Marsh is no longer viable.

4. Prejudgment Interest in Pearce The El Paso Court of Appeals in Pearce also addressed a prejudgment interest issue. Pearce, 824 S.W.2d at 201. In Pearce, the trial judge refused to allow the wife’s post-trial amendment, requesting prejudgment interest, and on appeal, the wife claimed that this refusal constituted reversible error. Id. The El Paso appellate court agreed, holding that the trial court erred in refusing to allow such an amendment, since no evidentiary proof was required and the wife’s request could not have or should not have operated as a surprise to the husband, relying on the Texas Supreme Court’s decision in Benavidez v. Isles Construction Company, 726 S.W.2d 23, 26 (Tex. 1987); Id. In Benavidez, the Texas Supreme Court stated: Where

prejudgment interest is sought at common law as an element of damages, the plaintiff must plead for it. Such is not the case where prejudgment interest is sought on the basis of a written contract fitting the description of article 5069-1.03. An award of this statutory interest, or interest eo nomine as it is known, may be supported by a prayer for general relief.726 S.W.2d at 25. Consequently, the Texas Supreme Court held in Benavidez that the trial court’s refusal of a requested trial amendment for prejudgment interest was arbitrary and unreasonable, and therefore an abuse of discretion, since the recovery of prejudgment interest upon stipulated damages did not require any evidentiary proof at trial, but rather only a mechanical application of an established formula by the trial court after the verdict has been returned, and since the trial amendment could not have caused any surprise or prejudice to the opposing party. Id. at 26.

XII. POST-TRIAL MATTERS A party asserting an affirmative defense (like release or waiver) in a trial before the court must request findings in support thereof in order to avoid waiver. Augusta Dev. Co. v. Fish Oil Well Serv. Co., 761 S.W.2d 538, 542 (Tex.App.--Corpus Christi 1988, no writ); Pinnacle Homes, Inc. v. R.C.L. Offshore Eng. Co., 640 S.W.2d 629, 630 (Tex.App.-Houston [14th Dist.] 1982, writ ref'd n.r.e.). Furthermore, if the findings issued by the court do not encompass any element of the defense asserted, then the failure to request additional findings relevant thereto effects a waiver. Id. Don’t make this mistake.

XIII. CONCLUSION

There are many creative steps a family law practitioner can take in preparing cohabitation, domestic partnership, pre- and post-marital agreements. Lawyers should always remember that they are not bound by the language in the form book and should use creativity in drafting these agreements. Whether it is the inclusion of an “exit bonus” or a “signing bonus”, an expiration clause or a poison pill clause, or contractual language that addresses the forum or controlling laws that control the agreement, the attorney has a vast canvas to creatively fill while preparing these agreements. The best service an attorney can provide for their client is to tailor the creative techniques discussed in this paper to the individual needs of their client on a case by case basis. Such a strategy will most appropriately address the client’s needs, goals, and will most likely cut down on any future attack of the agreement, which benefits both the client and the attorney.

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