Care Required in Drafting Prenuptial Agreements

What happens if there is unclear language in a prenuptial agreement, will it be enforced by the court?

An example is the case of the Estate of Timmer. In the case the court was asked to decide how the language in the prenuptial agreement applied to a condo after both had passed away.

Each party was previously married and had children from their previous marriage. They also had assets from their previous lives and marriages. The prenuptial stated contained a paragraph that indicated that they could purchase jointly held property. The jointly held property would basically pass to the other spouse by operation of the law and be exempted from the prenuptial agreement.  There was an additional sentence which specifically stated that they intended to purchase a condo (the condo at issue).  The condo would be held jointly by the parties and included language that it would pass to the other party upon death of either, but, it went on to say that the surviving spouse would retain a life estate in the property after the death of the first spouse to pass away.

The life estate would allow the surviving spouse to continue living in the condominium until he or she passed away and then it would be divided between the couple’s two estates. The prenuptial agreement did not state this intent specifically, rather it used conflicting legal terms which were inaccurate.

The problem is that it would not be necessary to reserve a life estate to the surviving spouse if the property was, to pass to the other party upon the death of the first spouse, because the entire property would be owned by the surviving spouse. This created an ambiguity in the prenuptial agreement.
The wife passed away first and the husband transferred the condominium to a trust for the benefit of his heirs. When he passed away the children of the wife requested a fifty percent interest in the condominium from the husband’s heirs, which they refused to grant. The two estates then sued each other in probate court.

The trial court should have considered evidence of the parties’ intent in drafting this agreement. This means that the Michigan Court of Appeals found that this ambiguity would allow the two competing estates to provide evidence from experts and other witnesses as to what they intended to do with this condominium, even though they couple signed this prenuptial agreement which they must have expected to deal with this issue.

The drafting lawyer should have used more specific language regarding how the parties intended to handle this property. The drafter, the husband's brother also used the wrong words when referring to the manner in which the property was to be held.

This ambiguity defeated the reason for the prenuptial agreement in the first place. The court may have decided that the intent was different then what the parties had really intended. Care must be taken to specifically explain the intent of the parties and use proper language that does not conflict and one should not use a relative to draft their legal documents.

Served with Divorce Papers, Now What?

The Issue


Last week I answered the telephone and a gentleman from Troy, Michigan asked me, I have been served with divorce papers, now what?

The Answer

First, you must look at the papers that your spouse has filed. There should be a complaint for divorce and a summons at the least. You should also look to see whether there are ex-parte orders and whether your case is scheduled as an e-filing case.

If there is only a summons and complaint, you have twenty-one days from the date that you were served to file an answer to the complaint. The answer should be captioned in the same way as the complaint and you should provide an answer to each numbered paragraph in the complaint. For instance, you should admit or deny the allegations such as admitting or denying that you have lived in the State of Michigan for at least 180 days prior to the date of filing. The answer must be filed with the court and served upon your spouse’s attorney within twenty-one days after you were served.

If you fail to file an answer your spouse can seek to enter a default against you. If a default is entered against you, you will have very little if any input in how the case proceeds. Your spouse can then, after the appropriate waiting period, attempt to enter a default judgment of divorce with very little input from you. If the judge believes that the proposed default judgment is “equitable” then the judge will sign the judgment and that will be that. It is very important that you file an answer within the twenty-one day period.

In addition, when you file the answer to the complaint for divorce, you should file any counterclaim for divorce at that time. If you do not file it when you file the answer to the complaint for divorce, you will not be able to file a counterclaim.

If you have been served with ex-parte orders as well, then you have fourteen days to file an objection to the ex-parte orders. An ex-parte order is an order that the court will grant at the beginning of the case without the presence of the other party and without a motion. If you fail to file an objection and schedule a hearing then the ex-parte order will be a standing order that will be in force until further order by the court or the end of the case. Two frequently granted ex-parte orders are an order to maintain the status quo and a restraining order against transfer of property. A status quo order will require the parties to continue to pay the bills during the divorce as they did during the marriage and a restraining order will stop either party from withdrawing funds other than for everyday use.

If your case is an e-filing case, then you must follow the rules indicated on the forms provided to you to file your documents online. If you try to simply file the documents by mailing them to the court or filing them at the court, this will not work. You have to use the e-filing system in order to preserve your rights.

The best thing to do is to find a divorce or family law attorney as soon as possible and meet with them. You can speak with your accountant, friends or family to help you locate an attorney. You should look to meet with an attorney that limits their practice to family law as many attorneys will handle divorce matters, but that is not their primary area of practice. Even if you believe that you have a simple matter, it is always advisable to have a lawyer help you with this process. There are many pitfalls in this area and you do not want to make things worse than they have to be when you are already facing a difficult situation.

No Credit for Negative Equity

The Issue
The married parties own a home or other real estate that has an appraised value that is lower than the amount of secured debt owed on the home.  This is often referred to as being "upside down" on your home.  If one spouse keeps the property in the divorce, can they request a credit against other savings or assets for their assumption of this negative equity?

The Apparent Answer
There is no currently published (or unpublished) court of appeals or supreme court decisions in Michigan directly addressing this relatively new phenomenon.  It appears that the circuit court judges are not willing to grant the party that assumes this potential liability a credit against other assets.  There are several potential reasons behind these decisions.

1. The parties are both still liable on the note or underlying debt.  Even if there is a hold-harmless or indemnification clause, if the party that takes the house then walks away and stops paying, the note holder (bank) can still sue both parties on the debt.  The divorce judgment cannot force the bank to remove one of the parties from the liability associated with the same and if the parties owe more money on the home than it is worth, in most cases the bank won't agree to remove one name or allow refinancing.  So the party that does not keep the house may still be sued on the liability despite the divorce judgment and the hold harmless clause may be useless if the spouse that kept the house is "uncollectable".  Finally, if this situation occurs and the spouse that kept the house was given additional property to credit them for this liability, then the other spouse is facing a double loss, the loss of the property and getting sued for the deficiency by the bank.
2. The court believes that there is greater value to the party that keeps the house than the appraised value.  The court looks at the holder's value of the property rather than the appraised value.  The court thinks that if the person is willing to keep the house despite this apparent negative equity that it must be worth more to that person than the general home buying public, perhaps due to the children's school, some amenities in the house or the party really just doesn't want to move.
3. The court may look at the house like the stock market, the value is down now but it will go up.  If one party wants to keep the house, then they must bear the risk of loss as well as the potential benefit of gain.

There are likely other reasons that the courts have not wanted to grant a credit for the negative equity, but these are some potential reasons.

Solutions to the Negative Equity Issue

1. The parties can sell the house and come to the table with money from joint funds for the deficiency between the proceeds from the sale and the overall debt.
2. One party can keep the house and then agree to sell it in a set number of years to wait and see if the market goes up and then divide either the debt or the gain.  The parties must then decide what will happen if the spouse responsible for paying the debt defaults and how to handle the payment of taxes and the deductions for payment of the mortgage.
3. The parties could short sell the home.  In a short sale, one of the parties will have to include the difference between the sale price and the debt as income on their tax returns.  The parties must work out a mechanism to share the taxes on this reported income.
4. Finally, both parties could walk away from the home, allow the foreclosure and both will potentially face the bank filing a complaint against them to collect the deficiency in the future.  

These are only some potential ways of dealing with this solution.  The parties divorce lawyer must be creative but practical as there are several potential pitfalls in this evolving area of divorce law.

DIVORCE AND COLLAPSE OF THE REAL ESTATE MARKET

DIVORCE JUDGMENT LANGUAGE
On April 7, 2011, the Michigan Court of Appeals decided a case that dealt with the interplay of the real estate market collapse and judgments of divorce. In the case of Neill /f/k/a Schmoke v Schomke, Docket No. 294878, unpublished, the husband agreed in the consent divorce judgment to a provision where he would pay his wife the amount of $1,074,000 for her share of the value of the marital home upon the sale of the home or after five years from the entry of the judgment. Further, the judgment stated that this sum would become a money judgment after five years.

COLLAPSE OF THE REAL ESATE MARKET
The house did not sell, not only that, the Defendant lost the home in foreclosure before the expiration of the five year period. His former wife then executed upon the money judgment and sought payment of the $1,074,000. The reality of the situation is that the real estate market in Michigan collapsed and most people, regardless of their intelligence, did not foresee the devastating extent of this collapse. The defendant in this case is a doctor and a well-educated and intelligent person whom like most here did not foresee this collapse.

The trial court took this problem into consideration and decided basically that due to the collapse of the real estate market that it would not be fair to force the Defendant to pay this full amount. The flip side of this argument whether it is fair to the ex-wife in this situation where she bargained for and contracted for an exact amount of money for her share of the home.

IMPORTANCE OF THE SPECIFIC LANGAUGE IN THE DIVORCE JUDGMENT
The Michigan Court of Appeals reversed this decision. The court paid a lot of attention to the exact wording of the judgment which stated that the amount due would become a money judgment. The appellate court found that due to this specific language particularly that after five years the amount would become a money judgment, the judgment was not subject to modification except in very limited circumstances.

The appellate court decided that it would be more unfair to the ex-wife to modify the amount of money due to her from the ex-husband as they both made a strategic decision to settle the matter and that he should not be relieved from his bad decision merely because his assessment of the consequences was incorrect. So it would appear that the court held the Defendant to his bad bargain and looked more to contract law in enforcing the judgment than it did to the traditional equitable or fairness arguments that would otherwise control in a divorce matter.

One last note of interest in the decision itself, was that the trial court believed the collapse of the real estate market in Michigan was an extraordinary circumstance that should allow revision of the judgment, the appellate court stated that while the “downturn was unfortunate” it could not be characterized as “entirely unforeseeable or extraordinary”. So despite the fact that it appears the extent of the collapse of the market is historically unique in this part of the country, the court still decided that people should have somehow been prepared for this potential when drafting the judgment of divorce.

COMPARE TO PRENUPTIAL AGREEMENTS
The court treated this judgment the way that the courts appear to be treating prenuptial agreements. The court favors enforcing the contractual provisions without attempting to balance the equities of the situation. Just as the courts have strongly trended toward enforcement of prenuptials as written without attempting to rebalance the equities between the parties, so here the court held the defendant to his bargain without attempting to rebalance the burden between these parties. Ten years ago, it is my belief that the outcome of this case would have been different and that this is an example of the ascendancy of contract law in the area of matrimonial law.

LESSONS LEARNED
There are a number of lessons one may learn from this case. First, every word and phrase in a judgment of divorce must be drafted and reviewed with care. If the use of the term “money judgment” was avoided, there may have been a different outcome in this case. Second, that the term foreseeable is very narrow when viewed in the eyes of the court and applied to divorce judgments. Finally, the court continues to rely more and more upon contractual principles in the area of matrimonial and appears to be moving away from equitability or fairness to both parties. From prenuptials to judgments of divorce, one must be very careful when drafting these agreements as the courts will enforce them as written.

Save Your Marriage, Be Nice to Your Spouse

I deal with divorcing couples all the time.  No-one wants to get divorced, but by the time they get to me, the relationship is typically over.  Do not take your marriage or your relationship for granted.  Here are some suggested thoughts on trying to make your spouse happy, which in turn should make for a better relationship and hopefully avoid the disastrous consequences that can be a result of a relationship turned bad.

Try taking a weekend trip somewhere that your spouse wants to go or visit.  It does not have to be "Dutch Amish Country" but just get out of the house.  Maybe even a local hotel with a swimming pool and sauna.  Have the grandparents watch the kids or hire a babysitter to watch them overnight.

Take your spouse to an event that they would enjoy.  Maybe try the Detroit Opera House for your wife or a Red Wings game for your husband.  Go see a movie together and indulge with a big tub of popcorn.  Then stay the night out somewhere.

Next time you disagree with your spouse, maybe let them have the final word.  You are sometimes better off not saying everything that you think.  The instant gratification of telling your spouse that they are an idiot often results in serious negative consequences that are just not worth it.  We all act like idiots sometimes, your spouse will figure it out.  You don't have to point out all of their errors or shortcomings.

Try to be as supportive as possible.  Listen to what they tell you when they are complaining about something.  You do not have to offer a solution, you just have to listen and act like you care (because you do of course care about them). 

Say something nice to your spouse about them.  We all have to deal with difficulties and people that are trying to cause problems for us, when we come home we as spouses should attempt to be there for our partners.  A kind word here and there really helps and who doesn't like to hear nice things about themselves.\

Don't worry if you feel that you are the only one that is trying to please the other person.  Hopefully they will come around after some persistent niceness and caring on your part.  Even if you feel like you are doing all the accommodating of the other person's feelings, it may be worth it.  Like my dad says, life is hard but the alternative is worse.

Good luck, be nice.

Amicable Divorce Solutions Avoid Astronomical Attorney Fees

I practice in the area of family law or divorce in Oakland County, Michigan. My experience leads me to believe that power and control issues are the biggest cause of divorce. There are several reasons to avoid carrying these issues forward into a divorce proceeding.


Huge attorney fees can result from power and control issues in divorce cases.

When a divorcing couple cannot resolve parenting time and custody issues, the result, among other things, is astronomical attorney fees. Unfortunately these important issues often become another opportunity for a power and control struggle between two adults that can't talk to one another. Too often one divorced parent will make a decision regarding the child and take action on that decision without discussing it with the other parent. This appears to be what happened in the case of the Pierron family.

In the post-divorce case, Pierron v. Pierron, decided by the Michigan Supreme Court in 2010, a divorced couple could not come to an agreement on which school their child should attend, which appears to be the result of unresolved power and control issues between this divorced couple.

One should undestand that in Michigan where parents share joint legal custody, they share joint decision making powers regarding important life issues that affect their children. The courts usually grant joint legal custody.  Case law indicates hat where a child attends school is one of these issues that the parents must decide together when they share joint legal custody. If they cannot, the courts will decide for them and this is what happened in the Pierron case.

This issue of which school the child should attend in the Pierron case led to a protracted legal battle which led all the way to the Michigan Supreme Court. After the court made its decision, the mother of the child filed a motion to have the father pay for her attorney fees. In Michigan, a court may order one parent to pay for the other parent’s attorney fees in a divorce (or post-divorce case) where the court finds that the parent requesting payment does not have sufficient assets to pay for the attorney fees and the other parent does have sufficient assets.

In this case, the mother apparently incurred a whopping bill of $136,449.12 in attorney fees in a struggle over which school the child should attend. The court ordered the father to pay for $64,599.12 of her attorney fees.  This means he had to pay her attorney this money in addition to whatever amount he incurred in his own attorney fees, ouch!

This is a whole lot of money to pay over a dispute about which school their child should attend. It would seem that they both would have saved a lot of time, money and emotional stress if they could have rationally and reasonably discussed this issue and come to a decision between the two of them without the court intervention.

Neither party comes out ahead when the mother still has to pay for close to $72,000 in attorney fees and the father has to pay $64,599.12 of her attorney fees in addition to his own. Further, this was a post-divorce case and does not even address the amount of fees they incurred in the original divorce. This is all money that they could have kept for themselves or spent on their child’s college education if they were so concerned about the child’s education and welfare.

The conclusion is that allowing power and control issues to motivate and control a divorce proceeding is a big mistake. Resolving all matters in a reasonably amicable divorce without egos and emotions is the best way to go, particularly when there are children involved. If one does not, then this can result in repeated court struggles throughout the life of one's children. This is not only damaging to the children but it can result in astronomical attorney fees as well. One must be careful in choosing a divorce lawyer, a family law attorney that does not understand the cost of litigation and the value of an amicable divorce can cause a lifetime of problems.

Reading List for People in all Stages of Divorce

I have practiced in the area of family law (sometimes considered a euphemism for divorce lawyer) in the Rochester Hills, Michigan area for several years. The following books may be helpful for you to read if you are considering divorce, are in the middle of a divorce, or have just come through a divorce. Probably the most important issues in any divorce is preparation and support. Knowing what to expect from the process of divorce can help alleviate some of the loss and confusion associated with this process.


Contemplating Divorce: A Step-by-Step Guide to Deciding Whether to Stay or Go
by Susan Pease Gadoua

The book includes practical lessons in what needs married couples have and ways to fix problem areas in your relationship. By taking a look at the assumptions and expectations of the relationship with your spouse, you will be in a position to explore the reasons you are thinking about divorce.

Divorce and Money : How to Make the Best Financial Decisions During Divorce
by Violet Woodhouse

This book offers detailed and practical advice on how to look at your finances with a clear mind through this difficult time. Everyone needs to learn the hard facts about their financial future after a divorce.

The Divorce Organizer & Planner
by Brette Sember

This divorce workbook streamlines the process even when enduring a difficult split. You'll find easy to understand planners for everything needed to prepare for the legal, emotional, and financial aspects of your divorce.

Nolo's Essential Guide to Divorce
by Emily Doskow, Attorney

The book is well organized and easy to read, without all the legal language getting in the way, but enough to make the information valuable. If you're looking for no-nonsense divorce information, try this book first.

Helping Your Kids Cope with Divorce the Sandcastles Way
by M. Gary Neuman

This book is based on the group session for children of divorced parents. In this book you'll find exercises designed to increase communication, understanding, and togetherness between parents and kids. You'll find suggestions on how to break the divorce news to a child, how to handle the holidays, visitation, custody arrangements, anger, discipline, co-parenting, single parenting, overcompensation, sorrow, custody fights, and much more.

Standing on My Own Two Feet: A Child's Affirmation of Love in the Midst of Divorce
by Tamara Schmitz

This book focuses on the preschool to first grader. The main points of this book are unconditional love and not being blamed for the divorce. Because of this book's positive attitude and easy-to-understand message, this book is an excellent choice for young children, and their parents.

Dinosaurs Divorce
by Marc Brown

Sometimes kids can express their feelings better through friendly, recognizable characters. Dinosaurs are beloved by most young kids, so when dinosaur-kids are going through difficult divorce situations, young readers can relate.
How to Parent with Your Ex: Working Together for Your Child's Best Interest
by Brette McWhorter Sember

With simple, commonsense advice, this book gives parents, both custodial and non-custodial, the tools they need to raise their children after a divisive divorce. The book encourages both sides of divorce to understand the other’s point of view. By focusing on the child, both parents are able to form a solid relationship with the child and maintain necessary, positive communication with the ex-spouse.


The Co-Parenting Survival Guide: Letting Go of Conflict after a Difficult Divorce
by Elizabeth Thayer Ph.D. & Jeffrey Zimmerman Ph.D.

Divorce is painful for everyone involved. However, when couples harbor resentment and anger toward each other, the children suffer even more. Too often arguments over visitation, holiday plans, and simple day-to-day events can send family's into chaos, pain, frustration, and very often acting-out in the child. This guide can help parents work through their conflict and come together for the children.

Rebuilding: When Your Relationship Ends
by Bruce Fisher

This book is written by a divorce therapist who uses a realistic, but comforting, look at the process of healing after a divorce.  This nineteen-step process walks you through the pain of the aftermath of divorce all the way to recovery. Many people say after they go through the process outlined in the book, they come out feeling better than they ever have.

The above are only some of the many books about divorce, separation and depression that you may find helpful. You should be able to find any of these books at your local library in Oakland County, Michigan.