NATURE OF THE CASE: In this divorce law case, Ms. Simpson sought a divorce on grounds of cruel and inhuman treatment and Mr. Simpson asserted insanity as a defense.

FACTS: H and W married with the agreement that H would attend college first, and then W would attend after he graduated. H attended six different colleges but never obtained a degree. H made no real effort to find steady employment. The marriage was turbulent and W testified that H constantly belittled her and complained of her inability to make him happy. H was prone to uncontrolled rage and outbreaks and irrational behavior.

W eventually moved out of the home and filed for divorce based on irreconcilable differences. H kidnapped her with a handgun and told her that he was going to kill her. W testified that she was afraid to live with defendant.

At trial, H moved to dismiss W’s complaint on the basis of the defense of insanity. An expert witness physician testified that H was suffering from paranoid schizophrenia. The trial court dismissed the complaint on grounds that H was insane.

The Court of Appeals reversed on the grounds of cruel and inhuman treatment. The court reasoned that mentally ill persons may be held liable in tort if malice or evil intent is not a necessary element. The court held that it would be anomalous to hold that a spouse can obtain a recovery in a tort action against a mentally ill spouse but cannot obtain a divorce based upon the same facts. The court stated that defendant’s abduction of his wife and threats to kill her were tortious acts incompatible with the marital relationship.

ISSUE: Under what circumstances may a defendant assert insanity as a defense in a divorce action?

RULE OF LAW: A defendant in a divorce action may assert the defense of insanity to the commission of acts of cruelty only if there is proof that at the time of such conduct, as a result of mental disease or defect, the defendant lacked sufficient capacity either 1) to appreciate the wrongfulness of his or her conduct; or 2) the volition to control his or her acts.

HOLDING AND DECISION: Some courts hold that insanity is a valid defense to an action for divorce without giving consideration to the degree or character of insanity that is relied upon as a defense. The majority of the courts and the better reasoned cases consider the degree and the character of the insanity and what direct effect it has upon the plaintiff’s proof.

To successfully defend a divorce action based upon cruel and inhuman treatment, the defendant has the burden of proving that he or she was not in remission at the time of the commission of all or a sufficient number of the acts of cruelty relied upon by plaintiff and that plaintiff’s proof does not warrant dissolution of the marriage. The testimony of the expert witness fails to establish that defendant, as a result of mental illness, lacked capacity to appreciate the wrongfulness of his conduct or the volition to control his actions at the time he committed acts of cruel and inhuman treatment more than sufficient to warrant dissolution of this marriage.

DISPOSITION: Divorce granted.

NATURE OF THE CASE: This case involved a suit for divorce and an annulment based on fraud.

FACTS: Mr. and Ms. Wolfe discussed marriage and W informed H that she previously had been married and divorced. H was a Roman Catholic and was prohibited from marrying a divorced woman whose husband was still alive. W later lied to H and told him that her former husband was killed in a car accident and showed him a forged death certificate. If W’s former husband were dead then she would be a widow in the eyes of the Catholic Church, thereby making it possible for H to marry her.

Mr. and Ms. Wolfe became married and W converted to Catholicism. The Wolfes had one child together. The Wolfes separated several years later and W filed for divorce. H filed a counterclaim seeking an annulment for fraud, based on W’s false claim that her former husband was dead.

At trial W’s former husband testified and W admitted to fraud. She plead the Fifth Amendment when questioned about the forged death certificate. H testified that he would not have married W if he believed that her former husband was still alive. The trial court ruled for H and later vacated that judgment. The court of appeals reversed and this appeal resulted.

ISSUE: Under what circumstances can a marriage contract be voided for fraud?

RULE OF LAW: A marriage contract can be voided for fraud only if the fraud itself affects the essentials of the marriage.

HOLDING AND DECISION: The evidence shows that W perpetrated a fraud upon H. The trial court ruled against H on the basis that the fraud must go to the marriage relation such that it would make the performance of duties and obligations of that relation impossible, or render its assumption and continuance dangerous to health or life. H has established that he is a loyal practitioner of Catholicism and his religion prohibits marriage with a divorced person whose former spouse is still living. We are convinced this marriage would not have occurred but for the fraud of W. Since discovering the fraud, H has been unable to continue marital cohabitation with W. This conduct is not a mere subjective personal aversion but something that his religion has commanded H to do. Under these facts, this fraud goes to the essentials of this marriage.

DISPOSITION: Annulment granted.

NATURE OF THE CASE: This family law case involved the enforceability and validity of a contract entered into by a couple during marriage.

FACTS: Mr. Pacelli married Ms. Pacelli in June 1975 when he was 44 years old and she was 20. The Pacellis had two children. W was born in Italy and immigrated to the United States when she was fourteen. H was a builder and real estate developer who owned a restaurant at the time of the marriage.

H testified that he had a net worth of three million dollars at the time they were married but presented no evidence to support that statement. The family enjoyed a high standard of living with a gross income of $540,000 in 1984 and $476,000 in 1985. W contributed no income to the family.

In 1985 H informed W that he would divorce her unless she agreed to certain terms regarding their economic relationship and moved out of the marital bedroom into an apartment above the garage. H had consulted a divorce attorney and was aware of his economic exposure for equitable distribution and alimony. H admitted to a net worth of $ 4.7 million in 1985, $1.7 million more than he had when he married W. H was informed that any agreement between them had to be fair and made only after full disclosure of relevant information regarding the parties’ assets. H was also aware that W should be represented by counsel.

W did not want a divorce. She consulted with counsel and was aware of her rights. She informed her lawyer that H sought an agreement whereby he would pay her $500,000 in the event of a future divorce in full satisfaction of plaintiff’s equitable distribution and alimony obligations. W’s lawyer advised her not to agree to the deal. W signed the agreement against her attorney’s advice and told him that she would sign anything in an effort to preserve the marriage. The Pacellis remained married until 1994 when H filed a complaint for divorce. H had a net worth of $11,241,500 at the time.

The trial court found that the agreement was not the result of coercion or duress that it was fair as measured in 1985, and that defendant’s contention that the parties had nullified the agreement in 1989 was not credible. This appeal resulted.

ISSUE: Under what circumstances will a mid-marriage agreement for divorce be deemed valid? In determining fairness, should the agreement be measured for fairness as of the date it was executed or as of the date of enforcement?

RULE OF LAW: A mid-marriage agreement for divorce is valid if it is fair and equitable at the time of its enforcement.

HOLDING AND DECISION: A prenuptial agreement is reached when the parties are not adversaries, when the relationship is at its closest, and when the parties are least likely to be cautious in dealing with each other. W faced a more difficult choice than the bride who is presented with a demand for a pre-nuptial agreement. The cost to W would have been the destruction of a family and the stigma of a failed marriage. She testified on several occasions that she signed the agreement to preserve the family and to make sure that her sons were raised in an intact family.

A mid-marriage agreement in this case also differs from a property settlement agreement made when the marriage has died. W’s access to eminent counsel is of little relevance because her decision was dictated not by a consideration of her legal rights, but by her desire to preserve the family.

There is no case in point on this type of agreement but courts have addressed reconciliation agreements. We have ruled that in some circumstances a reconciliation agreement will be enforced if it is fair and equitable. A prerequisite to enforcement is a requirement that the marital relationship has deteriorated at least to the brink of an indefinite separation or a suit for divorce. Under such circumstances a promise that induces a reconciliation will be enforced if it is fair and equitable.

Before a reconciliation agreement will be enforced, the court must determine that the promise to resume marital relations was made when the marital rift was substantial. The terms of the agreement must have been conscionable when the agreement was made. The party seeking enforcement must have acted in good faith. Changed circumstances must not have rendered literal enforcement inequitable.

H and his lawyer establish that H’s primary interest was financial. The evidence supports an inference that the marital crisis was artificial, created by H to take advantage of his wife’s dedication to the marriage and her family. In most other jurisdictions a contract between a husband and wife, made when the spouses are separated for legal cause, and providing for the payment of a consideration for their reunion, is, by weight of authority, enforceable by either spouse. In most jurisdictions, an agreement of that character is held not only to be unobjectionable in this respect, but to promote the stability of the relation, as it purports to do. On the other hand, several courts have considered such an agreement as mischievous, because it offers an inducement for domestic discord to persons who are willing to occupy this vantage ground for the purpose of obtaining pecuniary or other concessions.

Placing a mid-marriage agreement in the same category as a pre-nuptial agreement is inappropriate. Mid-marriage agreements closely resemble so-called reconciliation agreements with an opportunity for one party to use the threat of dissolution to bargain themselves into positions of advantage. In the present case, we conclude that the terms were not fair and just.

We conclude that in 1985 the marital estate was $3,000,000, not $1,700,000. Thus, the $540,000 provided in the agreement was 18% of the marital estate. The $500,000 also purchased defendant’s waiver of alimony. An alimony award in 1985 would have been substantial, perhaps approaching six figures. H’s annual income in 1984 and 1985 averaged $500,000. The parties lived well. They lived in an expensive home, drove luxury automobiles and vacationed at some of the most desirable destinations. W spent $20,000 to $30,000 per year on clothing from stores such as Bergdorf Goodman. Their son, Tony, went to Deerfield Academy, and Franco went to Choate. Defendant argues that the agreement should be measured for fairness in 1994, when plaintiff sought to enforce it.

In evaluating a reconciliation agreement changed circumstances must not have rendered literal enforcement inequitable. The close scrutiny and careful evaluation of mid-marriage agreements also requires consideration of the agreement’s impact when enforced. A marriage may prosper or decline and for those reasons we adopt this rule. It is apparent that the agreement is also unfair when measured in 1994.

DISPOSITION: Reversed.

NATURE OF THE CASE: This Canadian family law case involved an appeal from the dismissal of a claim by a wife to a one-half interest in ranch property held solely in the name of her husband.

FACTS: Ms. Murdoch (W) performed chores on several ranches which were bought and sold prior to the purchase of the ranch in question. Mr. Murdoch (H) admitted that W had been involved in a number of activities related to the actual running of the ranches. W’s earnings were used to make the down payment on the initial ranch property whose proceeds were later reinvested in subsequent properties. Her earnings were used to buy all the household furniture and appliances except a stove. The land and other ranch assets were held in H’s name only and W sought one half of those assets. The trial court found in favor of H and W appealed.

ISSUE: Under what circumstances will a spouse be entitled to a beneficial interest in a matrimonial home when the legal estate is solely vested in the other spouse?

RULE OF LAW: A beneficial interest in a matrimonial home, when the legal estate is solely vested in the other spouse, will only arise when the court is satisfied by the words of conduct of the parties that it was their common intention that the beneficial interest was not to belong solely to the spouse with title.

HOLDING AND DECISION: The Pettitt decision disposed of the idea that a judge has discretionary jurisdiction to pass proprietary interests from one spouse to the other. For a party to have a claim to a beneficial interest in land, even a spouse, the party vested in the legal estate must hold it as a trustee on trust. Only then will the claimant have a beneficial interest in the estate as a cestui que trust.

Any gift of a beneficial interest in land must be in writing. If there is no writing such a trust can only take effect as a resulting, implied, or constructive trust. Whenever the trustee has so conducted himself that it would be inequitable to allow him to deny to the cestui que trust a beneficial interest in the land acquired, a trust implied by law will arise. In this case the words of conduct of the parties do not show that it was their common intention that the beneficial interest was not to belong solely to the spouse with title.

DISPOSITION: Affirmed.

DISSENT: W worked to improve the lot of her family for 15 years and there is no reason to treat her contributions to the family as less significant than a direct financial contribution. It would be valid to translate her contributions to the family into the assets acquired especially when the labor is not simply housekeeping. The appropriate mechanism to give relief to a spouse who cannot prove a common intention is a constructive trust, which does not depend on evidence of intention. Such a trust would arise in equity based on unjust enrichment and its formation is not based on intent.

NATURE OF THE CASE: This dispute over the doctrine of judgmental immunity and its application arose in the context of a family law case involving divorce.

FACTS: Wood sued McGrath, North, Mullin & Kratz for legal malpractice alleging that one the law firm’s divorce lawyers had negligently represented her in a dissolution decree action. Wood alleged that McGrath North allowed her to accept less than her share of the marital estate and was negligent in informing her that the distribution excluded all rights to unvested stock options; that state law indicated that a trial court was likely to include them in the marital estate; that the settlement excluded $210,489 from the marital estate to account for the capital gains on that stock; and that the court would likely value the stock without deducting for any potential capital gains tax.

At trial Wood testified that the lawyer from McGrath North told her that an award of 40% was a good award and that judges normally ordered between 35-50%. Wood testified that the attorney never discussed or mentioned alternatives to settlement and never discussed any reasons for rejecting the proposed out of court settlement. Two attorneys testified that the law firm breached the standard of care by failing to inform Wood of all the issues related to the stock options and that the effect of the deduction taken for the capital gains tax and what trial court’s would generally do with such issues. They determined that McGrath North breached the standard of care because the lawyer did not fully inform his client.

At the close of evidence McGrath North moved for a directed verdict and the trial court granted the motion. The court of appeals held that judgmental immunity was applicable as the law regarding the stock and the capital gains was unsettled and as such, McGrath North was not obligated to give additional advice regarding the unsettled nature of relevant legal principles.

ISSUE: In presenting a client with a settlement offer, does an attorney have a duty to inform the client of possible options when the law relating to a relevant issue is unsettled?

RULE OF LAW: Yes. In presenting a client with a settlement offer, an attorney has a duty to inform the client of possible options when the law relating to a relevant issue is unsettled.

HOLDING AND DECISION: Lawyers must advise clients with respect to settlements with the same knowledge and diligence with which they pursue all other legal tasks. A lawyer should exert his best efforts to ensure that decisions of a client are made only after the client has been informed of relevant considerations.

Where there are reasonable alternatives, the attorney should inform the client that the issue is uncertain, unsettled, or debatable and allow the client to make decisions. The fact that an attorney does not inform the client of such issues does not mean that the attorney can be held liable for a failure to predict the future course of unsettled law. It is for the failure to inform that he will be held liable and not for his judgment regarding an area of unsettled law. Under these facts, there was a failure to inform. This was not an issue of judgmental immunity. The court of appeals was in error not to conclude that the firm was negligent as a matter of law.

DISPOSITION: Reversed and remanded.

NATURE OF THE CASE: This family law case involved a dispute over whether certain income is subject to child support obligations.

FACTS: Mr. Perlenfein is a manager and minority shareholder of closely held corporation Albany Rental, Inc. H receives a salary of $2,000 per monthly and owns 27.5% of the shares. His mother owns 45.5% of the shares and his brothers own 25% and 2% respectively. Albany Rental is a subchapter S corporation and its profits are treated as income to the shareholders for federal income tax purposes. The shareholders also receive credit against the income for accelerated depreciation. To meet federal income tax liability standards, the shareholders receive annual dividends sufficient to pay the taxes owed. All other profits of the corporation are retained for reinvestment. Ms. Perlenfein is the sole proprietor of an incorporated accounting business and receives a salary of $2,000 per month. All other profits are retained by the corporation.

W and H divorced in 1988. W was granted custody of their two minor children and H was ordered to pay $250 per month in support. W moved for modification of that amount contending that Albany’s profits and accelerated depreciation credits in the amount of $4,792 per month should be used to calculate gross income for the purposes of child support obligations. The court attributed an additional $2,000 in gross income from those sources and ordered support in the amount of $778 per month. H appealed and W cross appealed and the appeals court held that in order for such income to be attributable for child support there must be either some right to receive the income or the ability to control its distribution. The appeals court then determined that H’s extra hidden income could not be used but that W’s income could be used as she was the sole shareholder of her corporation. W appealed.

ISSUE: Is undistributed income of a closely held corporation that is attributed to a minority shareholder for income tax purposes also accountable for child support obligations?

RULE OF LAW: Yes. Undistributed income of a closely held corporation that is attributed to a minority shareholder for income tax purposes is also accountable for child support obligations.

HOLDING AND DECISION: H contends that the result would be unfair for any parent in his position if gross income is not limited to available income. We disagree as any parent has the ability to rebut the presumptions of the schedule to ensure that the court arrives at a just or appropriate amount of child support.

With respect to the portion of income related to ownership of a closely held corporation, the gross income of the parent is the parent’s proportionate share of the corporation’s gross receipts minus costs of goods sold minus ordinary and necessary expenses required for business operations. If the parent then presents evidence that the gross income thus calculated is not actually available to the parent, the trial court can then find the presumptive amount of support derived from that gross income is rebutted in whole or in part. Under these facts, we conclude that H presented evidence that could support rebuttal findings under the statute. The trial court did not account for this evidence.

DISPOSITION: Reversed and remanded. The decision of the Court of Appeals with respect to W’s gross income is affirmed.

NATURE OF THE CASE: This case involved a legal dispute over an arbitration provision in a divorce settlement.

FACTS: Susan (W) and Roger (H) Faherty had four dependent children at the time of their divorce in 1977. Prior to the divorce they executed a property settlement agreement that was incorporated into the divorce decree. The agreement had an arbitration clause pursuant to the American Arbitration Association rules that provided that the outcome was binding on the parties. Arbitration was a condition precedent to access to the courts to resolve any problems.

W moved in Chancery court for an order regarding past due alimony and child support. W claimed H was in arrears for $24,500 in support payments and had defaulted on an equitable distribution promissory note in the amount of $25,000. H cross entered a cross motion to compel arbitration and the Chancery court issued an order to compel arbitration. The parties selected an arbitrator and submitted their respective claims. The arbitrator found for W and W moved in Chancery to confirm her awards in arbitration. H cross moved to vacate the arbitrator’s award and for court hearings to modify his prior and future payments due to changed circumstances. The court confirmed the award and denied H relief and H appealed.

ISSUE: Are mandatory arbitration clauses in connection with divorce disputes and divorce settlement agreement disputes void per se?

RULE OF LAW: No. Mandatory arbitration clauses in connection with divorce disputes and divorce settlement agreement disputes are not void per se.

HOLDING AND DECISION: Arbitration is a favored remedy and a court generally will enforce an arbitration agreement unless it violates public policy. Since parties may settle spousal support rights and obligations by contract there is no public policy reason to prohibit them from submitting disputes arising out of such contracts to binding arbitration. However, we recognize that the courts have a non-delegable supervisory function in the area of child support that may be exercised upon review of an arbitrator’s award.

If an arbitrator’s award affecting child support is questioned in that it does not provide adequate protection for the child, the trial court should conduct a special review of that award. H claims that the arbitrator failed to weigh evidence of his income and if he had considered the evidence he could not have made the award that he made. H has failed in his burden in that he has provided no record to support this contention other than the final decision of the arbitrator.

DISPOSITION: Affirmed.

NATURE OF THE CASE: This case involved a dispute to set aside a property settlement agreement based on fraud.

FACTS: Mr. and Ms. Jorgensen were married in 1924 and separated in 1944. A property settlement agreement was executed whereby H was to pay W $30,000 annually to support her and their children. W then brought an action for divorce in which H made no appearance. The divorce was granted and the settlement agreement was adopted by the final decree.

W then sued to set aside the part of the decree relating to the property on the basis of fraud. W claimed that certain stock in Jorgensen company was community property but had been misrepresented by H to be his separate property. H denied that the agreement wrongfully classified any community property as his separate property or that he made misrepresentations to W. The lower court entered judgment for H and this appeal resulted.

ISSUE: May a party be barred from equitable relief if the party failed to investigate bald faced claims by a fiduciary?

RULE OF LAW: Yes. A party may be barred from equitable relief if they simply failed to investigate bald faced claims by a fiduciary.

HOLDING AND DECISION: H owed a duty to W to disclose the true nature of the facts because of the fiduciary relationship between husband and wife with respect to community property. The issue is whether W was deprived of a fair opportunity to litigate due to an alleged misrepresentation by H that certain assets were community. The classification of property as separate or community is frequently difficult. H at the time of the divorce was entitled to take a position favorable to him. W must take her own position but chose instead to accept bald faced made by H without any investigation. W was represented by counsel and she cannot now say that fraud was committed upon her.

DISPOSITION: Affirmed.

NATURE OF THE CASE: This case involved a dispute regarding the modification of alimony payments based on a separation agreement under state law.

FACTS: Mr. Goldman filed a compliant for divorce and Ms. Goldman followed with a counterclaim. Prior to the entry of judgment the parties executed a marital settlement agreement that provided that H would pay $1,300 per month to W for support and maintenance. When the court entered judgment on W’s counterclaim he merged that judgment with the property settlement agreement. The agreement itself stated that it would not merge into any subsequent divorce judgment and that modification of the agreement would require the signature of both parties. However, the trial court judge acted on the verbal testimony of W without any objection from H.

About five years later H asked to modify alimony. H alleged a substantial change in circumstances in that W was living openly with an unrelated male for a prolonged period. H’s motion was denied on the basis that the family court lacked jurisdiction to modify the payments because the marital settlement agreement was a viable contract and H appealed.

ISSUE: May a written contract be modified by a subsequent oral agreement even if the parties have failed to employ the particular method of modification as specified in the contract?

RULE OF LAW: Yes. A written contract may be modified by a subsequent oral agreement even if the parties have failed to employ the particular method of modification as specified in the contract.

HOLDING AND DECISION: The testimony of the parties on the day of the entry of the divorce judgment clearly established that they intended the agreement to merge into the divorce agreement. W on direct was asked and responded affirmatively that the agreement merged. There was no objection from H. With the intention of the parties being the controlling factor when determining if a merger has occurred we must say from this evidence that the contract merged. Once merged the agreement lost all vitality as the judgment of divorce then controls the rights, privileges, and obligations of the respective parties.

DISPOSITION: Vacated and remanded.

Goldman v. Goldman, support and maintenance, property settlement agreement, alimony, contracts, merger, law, case briefs, family law

NATURE OF THE CASE: This case involved an appeal from the setting aside of an agreement for the division of marital property.

FACTS: W filed for dissolution of the marriage an April 13, 1979. W and H had signed a separation agreement whereby W would set the price and sell the family home. The agreement provided that W would get the first $60,000 and H would get any excess over $60,000. H was not represented by counsel when he signed the agreement. The house was listed for $129,000 but did not sell and the listing was lowered to $119,000. W also testified that she was to get the first $60,000 so she could buy a condo to keep her monthly payments within her $800 gross monthly income. H’s monthly gross income was $1,800.

H sought to set aside the separation agreement on the basis that he thought the home would sell for $140,000 to $150,000 and that because of his unilateral mistake he was to receive only 5-10% of the net sale proceeds when he had intended to receive 40-50%. The order entered by the district court awarded custody of the two children to W. The court also ordered that H was to pay $250 per month in child support, that the parties waived maintenance, and that the house be sold and the proceeds divided between the parties 60/40.

The trial court set aside the property settlement agreement on the basis that H’s receipt of $10,000 and W’s receipt of $60,000 was not fair, just or equitable and the court of appeals affirmed.

ISSUE: May a court set aside a separation agreement that is unfair, unjust and unreasonable merely on account of a unilateral mistake by one of the parties, even if there was no overreaching, concealment of assets, or sharp dealing?

RULE OF LAW: Yes. A court may set aside a separation agreement that is unfair, unjust and unreasonable merely on account of a unilateral mistake by one of the parties, even if there was no overreaching, concealment of assets, or sharp dealing.

HOLDING AND DECISION: However, in light of the totality of the economic circumstances and the actual result of the agreement in this case we believe that the end result was fair, just and reasonable. We note that traditionally a contract may not be rescinded where one party has made a unilateral mistake as to the value unless the other party knew or had reason to know of the error.

An unconscionable agreement is an agreement that is not fair, just and reasonable. Other courts have rejected the need to find overreaching, inequity of bargaining power or other elements of fraud before setting aside a property settlement agreement as unconscionable prior to its incorporation in a dissolution decree. Unconscionability is determined by looking at the economic circumstances of the parties resulting from the agreement and any other relevant evidence such as the conditions under which the agreement was made including the knowledge of the other party. Because of the fiduciary relationship between husband and wife, separation agreements generally are closely scrutinized by the courts and such agreements are more readily set aside in equity under circumstances that would be insufficient to nullify an ordinary contract. In this case there is no evidence of activity that is inconsistent with the obligations of married parties to deal fairly with each other such as overreaching, fraud, concealment of assets or sharp dealing. However, in the light of the totality of the circumstances in this case there is insufficient evidence to show that this agreement was not fair, just, and reasonable.

DISPOSITION: Reversed.