Court Finds Prenuptial Agreement Unenforceable and Divides Farmland

 

On November 7, 2018, the Iowa Court of Appeals issued an opinion regarding the proper division of farmland for a divorcing couple. The court found the prenuptial agreement signed by the couple unenforceable and the farming assets to be divisible, despite the fact that they were gifted to or inherited by the husband.

Background

An Iowan couple started dating in 2002 and married in 2004. The marriage lasted for thirteen years before the husband filed for divorce. When the couple married, the wife worked as a nurse while the husband worked at a manufacturing company and farmed on a part-time basis. Eventually, the husband left his manufacturing job to farm the 400 acres full time. The farm never had a profitable year during the marriage; however, the husband was able to continue to farm by using the wife’s income to pay for their living expenses and by refinancing his operating loans.

This was the second marriage for the husband and the wife’s third. On the couple’s wedding day, the husband presented a prenuptial agreement to the wife, which she signed. The lower court found the wife had no time to consult an attorney before she signed and no financial disclosures were made.

At the time of the divorce, both the husband and wife were limited by various medical conditions. The husband lost several fingers in a work accident in 2002. He also received triple bypass surgery during the marriage. The wife suffered from a painful nerve damage condition and moved to Colorado to medicate with legal, medical cannabis oil. The husband filed the divorce action upon the wife’s move to Colorado. He sought to enforce the prenuptial agreement. At the time of the divorce, the farm’s value had increased significantly due to improvements made on the land.

Prenuptial Agreement

Under Iowa law, prenuptial agreements are valid if executed correctly. Prenuptial agreements are still enforceable even if it “is a bad fiscal bargain for one party.” In re Marriage of Spiegel, 553 N.W.2d 309, 316 (Iowa 1996). However, a prenuptial agreement is not enforceable if:

  1. The person did not execute the agreement voluntarily.
  2. The agreement was unconscionable when it was executed.
  3. Before the execution of the agreement the person was not provided a fair and reasonable disclosure of the property or financial obligations of the other spouse; and the person did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other spouse.

Iowa Code § 596.8(1) (2018). To determine if a prenuptial agreement is procedurally unconscionable, the court will consider factors such as whether legal counsel was retained, the legal and financial expertise of the party challenging the agreement, the amount of time before the wedding the party had to consider the agreement, and any fraudulent practices to encourage the other party to sign.

The husband signed and dated the agreement three days before the wedding, but the wife testified that he presented it to her on the day of the wedding. The court found there was no time for her to consult an attorney. Additionally, the court found that the wife did not have any specialized knowledge of legal or financial matters. A final blow to the husband’s case was the lack of any financial disclosures in the agreement. Given these facts, the Court of Appeals affirmed the lower court’s finding that the agreement was unconscionable. Therefore, the prenuptial contract was unenforceable and the property could be divided without regard to the agreement.

Property Division

When dividing a couple’s property during a divorce, the court will attempt to divide assets equitably. Iowa courts will consider factors such as the property each spouse brought to the marriage, the economic contribution of each spouse to the marriage, including homemaking, the age and health of each spouse, and any other factors the court determines to be relevant. Iowa Code § 598.21(5).

Premarital assets are generally not subject to division. The lower court found that because the husband received his farming assets through inheritance or gifts, these premarital assets should not be divided. The Court of Appeals reversed this holding, finding that the wife was entitled to a property settlement. Without her financial support, the husband would have lost the farm. In addition, the wife’s illness made her unable to work. Because the wife was not entitled to spousal support, a property settlement would help provide for her needs.

Iowa courts try to avoid forced sales of farming operations and the court recognized that a property division might require the husband to sell all or a part of his farmland. However, the Court reasoned that this did not negate the wife’s right to a fair settlement. The Court of Appeals found that the wife was entitled to half of the husband’s net worth minus any assets or support already awarded to her. The Court also invalidated an award of alimony that the district court had made to her, finding that she did not demonstrate entitlement to any proper category of spousal support: rehabilitative, reimbursement, or traditional.

Conclusion

Prenuptial agreements can be a tool to preserve wealth that is brought into a marriage. These agreements must be in writing and signed by both parties to the marriage. Prenuptial agreements are unenforceable if a party did not enter into the agreement voluntarily, the agreement is unconscionable when it was executed, or the party was not provided a fair and reasonable disclosure of the property or financial situation of the other spouse and had no way of knowing this information. While prenuptial agreements are generally enforceable, this case illustrates an exception. Those wishing to protect premarital assets with a prenuptial agreement should seek the advice an attorney.

The case is In re the Marriage of Edward D. Gutcher and Nancy A. Gutcher, No. 17-0593 (Iowa Ct. App. Nov. 7, 2018).

CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.

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