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

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 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)

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

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 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

KINSER VITAE

Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

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

i Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

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

ii Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

COHABITATION, DOMESTIC have a long, complex history steeped in the community property presumption, the state constitution, statutes, PARTERSHIP, PREMARITAL & and case law. Originally, such agreements were POST-MARITAL PROPERTY disfavored by the Texas courts and traditionally found AGREEMENTS to be unenforceable. However, as a result of amendments to the Texas Constitution, evolving I. INTRODUCTION statutes, recent case law, and improved draftsmanship, This article is designed to provide the family law the agreements are generally held to be a valid and practitioner with creative ideas that should be enforceable. considered when preparing cohabitation, domestic partnership, pre- and post-marital agreements. For B. Cohabitation and Domestic Partnership ease of use and reference, the paper is divided into Agreements three main parts: The agreements made by non-married couples regarding their obligations during a cohabitation period 1) An overview of the agreements addressed in are contracts that are enforceable under contract law if the paper and their history; they are drafted correctly. The main difference 2) The substantive law that underlies all the between these agreements and those drafted under the agreements; and statutes found in the Texas Family Code is the 3) Creative drafting and issues to consider, requirement of consideration. Without consideration including, helpful hints, practice tips and being recited and paid, the contract will be reminders for drafting the agreement. unenforceable. There are other practical and statutory reasons for II. DIFFERENT TYPES OF AGREEMENTS persons living at the same residence to enter into a A. Background cohabitation agreement. For example, if the couple Cohabitation and domestic partnership agreements wants to purchase a home, the agreement may set out have been utilized over time to address many different terms of payment, percentage ownership, terms and types of issues that arise when couples, both opposite conditions for one to buy out the other and/or the rights sex and same sex, agree to share a residence or of the survivor in the event of death of one of the domicile when they are not married. For some parties. This situation is especially true if one or both couples, the living arrangement is a precursor to parties has heirs that might attempt to force the sale of marriage; for others, there is no intent to ever marry, or the property during the lifetime of the surviving party. the marriage is prevented by law, as it is in Texas for Terms and conditions of payment of all living same sex couples. expenses of the parties may also be included in a While the predominant thought is that cohabitation or domestic partnership agreement. As in cohabitation agreements and domestic partnership any contract, the clearer and more specific the terms agreements usually involve gay or lesbian couples, that are, the easier they will be to enforce. is simply not the case. Under the current rules of In the circumstance where one party is moving Social Security, military benefits and some insurance into the home of the other, the owner of the home is disability programs, benefits may be lost if the most benefitted by an agreement which not only sets beneficiary, or in the case of the parent of a child out terms and conditions of payment of living expenses receiving benefits, if the parent, remarries. Therefore, but also the conditions under which the home owner many couples choose to live together without the can force the other party to move. The two statutory benefit of marriage to keep their benefits, or those of schemes that are sometimes utilized by parties in this their children, from being lost. situation are the homestead and landlord/ tenant In another typical scenario, couples who have statutes found in the Property Code. previously been divorced, and who may have children, Tex. Prop. Code Section 41.002 sets out the simply do not want to have their assets at risk by a definition of a homestead in Texas. Property claimed subsequent marriage and divorce. In situations as a family homestead must “be used for the purposes involving inherited funds and/or trust funds, trustors of a home, or as both an urban home and a place to and/or beneficiaries do not want to place family money exercise a calling or business, of the homestead at risk. When the circumstance includes young claimant.” TEX. CONST. art XVI, Section 51. children, adult children, grandchildren, extended Therefore, understanding that the property is the home families and elderly parents, some couples choose to of both the owner and the domestic partner, if the shelter their own resources from the real or perceived owner then wants the partner to move, the partner may obligations of their partner. attempt to claim a homestead right in the property, Premarital and post-marital agreements in Texas regardless of the fact that there is no ownership 1 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 interest. Simply put, the owner has permitted the Austin 1992, writ denied). domestic partner to share the property, use it as their A premarital agreement must be in writing and domicile and residence, and may face obstacles to signed by both parties. TEX. FAM. CODE ANN.§ 4.002. getting their partner to leave. No actual consideration is required; however, it may be “Family” is defined as a relationship by blood or wise in some cases to provide for benefits the non- marriage in which the head of the family has a legal or monied party, to avoid a later finding of moral obligation to support other family members and unconscionability, particularly if the financial those family members are dependent on the head of the condition of the non-monied party under the agreement family for support. NCNB Texas Nat’l Bank v. will be poor. If the benefits are good enough, it may Carpenter, 849 S.W.2d 875 (Tex. App.—Fort Worth defuse any impetus to challenge enforceability. 1993, no writ). Even though the blood or marriage Section 4.003 provides a comprehensive listing of relationship is not present, a domestic partner may matters which might be dealt with in a premarital claim that same dependency in an attempt to remain in agreement. These include: the unowned property. Additionally, in the case of heterosexual partners, absent a cohabitation agreement, (1) the rights and obligations of each of the the non-owner partner may look no further that the parties in any of the property of either or common law marriage statutes to keep from having to both of them whenever and wherever move from their home. Common law marriages are acquired or located; recognized as a family for the purposes of the (2) the right to buy, sell, use, transfer, exchange, homestead exemption and, theoretically, to establish abandon, lease, consume, expend, assign, rights to reside in the homestead. Baker v. Mays & create a security interest in, mortgage, Mays, 199 S.W.2d 279 (Tex. Civ. App.—Fort Worth encumber, dispose of, or otherwise manage 1946, writ dism’d). and control property; Another legal issue that may be raised by a non- (3) the disposition of property on separation, owner domestic partner who is requested to vacate marital dissolution, death, or the occurrence their home is a claim that they are a tenant and have or nonoccurrence of any other event; rights arising under Tex. Prop. Code Title 8, Chapter (4) the modification or elimination of spousal 92. This circumstance is particularly true if the non- support; owner partner has paid for any portion of the mortgage, (5) the making of a will, trust, or other utilities, insurance and/or maintenance of the property. arrangement to carry out the provisions of the If that is the case, the owner partner may have to go agreement; through an eviction suit to regain sole possession of (6) the ownership rights in and disposition of the their property. See Tex. Prop. Code Title 4, Chapter death benefit from a life insurance policy; 24, regarding forcible entry and detainer when tenant (7) the choice of law governing the construction claims an oral rental agreement. of the agreement; and (8) any other matter, including their personal C. Premarital Agreements rights and obligations, not in violation of Subchapter A of Chapter 4 of the Texas Family public policy or a statute imposing a criminal Code adopted the Uniform Premarital Agreement Act penalty. in Texas, slightly modified. Section 4.001 defines a “premarital agreement” as Subsection (b) makes clear that child support may not one made between prospective spouses, in be “adversely affected” by a premarital agreement. contemplation of marriage, which shall become TEX. FAM. CODE ANN. § 4.003(b). Therefore, a effective on marriage. While not clear from the provision providing for the elimination of or reduction statutory text and unanswered in Texas case law, the of a parties’ child support obligation in the event of Official Comments to the Act indicate that a divorce would be unenforceable. Other issues ceremonial marriage is required. Uniform Premarital regarding the children of the contemplated marriage, Agreement Act § 2 cmt. however, might be properly included in a premarital Property which may be subject to a premarital agreement, including provisions for private education, agreement is broadly defined to include any “interest, college expenses, and choice of residence. All present or future, legal or equitable, vested or limitations on support obligations owed to minor contingent, in real or personal property, including children, and some restrictions on parental rights, are income and earnings.” TEX. FAM. CODE ANN. probably subject to review by the court as “a violation §4.001(2). Texas law defines “property” very broadly of public policy” if found to unduly limit a parent’s to include every species of valuable right and interest. obligations, violate a child’s best interest, or impinge Winger v. Pianka, 831 S.W.2d 853, 857 (Tex.App.– upon a parental right. See, e.g., Zummo v. Zummo, 574 2 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

A.2d 1130, 1148 (Pa. Super. Ct. 1990) (premarital partitioned property unless the spouses agreed in a promise to raise child in certain religion not record that the future earnings and income would be enforceable; “while we agree that a parent’s religious community property after the partition or exchange. freedom may yield to other compelling interests, we TEX. FAM. CODE ANN. § 4.102 (repealed). This change conclude that it may not be bargained away”); In re applied to a partition and exchange agreement made on Weiss, 49 Cal. Rptr. 2d 339 (Calif. Ct. App. 1996) or after September 1, 2003. In 2005, the Legislature (mother’s premarital written agreement to raise her amended section 4.102 to delete the automatic partition children in Jewish faith is not legally enforceable). of future earnings and income from partitioned After marriage, a premarital agreement may be property and made it discretionary. This change amended or revoked only by a written agreement applied to a partition and exchange agreement made on signed by the parties. TEX.FAM.CODE. §4.005. The or after September 1, 2005, and a partition and amended agreement or the revocation is also exchange agreement made before September 1, 2005 is enforceable without consideration. Id. governed by the law in effect on the date the agreement was made and the former law is continued in effect for D. Post-Marital Agreements that purpose. As a result, partition and exchange Subchapter B of Chapter 4 sets out the statutory agreements executed between September 1, 2003 and requirements of a property agreement executed as August 31, 2005 will automatically include future between spouses. Again, “property” is broadly defined earnings and income from the partitioned property in the post-marital agreement context. TEX. FAM. unless the spouses agree in a record that the future CODE ANN. § 4.101. Through post-marital agreements, earnings and income would be community property spouses can partition or exchange their community after the partition or exchange. property interests between each other: E. Premarital vs. Post-Marital Agreements At any time, the spouses may exchange Most reported Texas cases discussing enforcement between themselves any part of their of post-marital agreements deal with those entered community property, then existing or to be during marriage, rather than before. Marsh v. Marsh, acquired, as the spouses may desire. 949 S.W.2d 734, 745 (Tex.App.–Houston [14th Dist.] Property or a property interest transferred by 1997, writ denied). The statutory defenses for a partition or exchange agreement becomes premarital and post-marital agreements are, however, the spouse’s separate property. identical. It has been stated that, in post-marital agreements, a fiduciary duty exists that is not present TEX. FAM. CODE § 4.102. Spouses may also agree, at in premarital agreements between prospective spouses. any time, that income or property arising from the Id.; see also, Daniel v. Daniel, 779 S.W.2d 110, 115 separate property that is owned by them at the time of (Tex.App.-Houston [1st Dist.] 1989, no writ) the agreement, or thereafter acquired, shall be the (recognizing the confidential relationship between a separate property of the owner. TEX. FAM. CODE ANN. husband and wife imposes the same duties of good § 4.103. faith and fair dealing on spouses as required of partners Like premarital agreements, agreements between and other fiduciaries). However, adverse parties who spouses must be in writing and signed by the parties. have retained independent counsel may not owe TEX. FAM. CODE § 4.104; see also, Miller v. Miller, fiduciary duties to one another. See Miller v. Ludeman, 700 S.W.2d 941, 951 (Tex.App.–Dallas 1985, writ 150 S.W.3d 592, 597 (Tex. App.—Austin 2004, pet. ref’d n.r.e.)(partition agreement must be in writing); denied); see also Toles v. Toles, 113 S.W.3d 899, 916 Recio v. Recio, 666 S.W.2d 645, 649 (Tex.App.– (Tex. App.—Dallas 2003, no pet.). Corpus Christi 1984, no writ)(partition or exchange In Sheshunoff v. Sheshunoff, 172 S.W.3d 686, agreements must be in writing to be enforceable). The 700-701 (Tex. App. – Austin 2005, pet. denied), the intent of the parties to effectuate a present partition and Austin Court of Appeals addressed the applicability of exchange of property, on hand or to be acquired, a fiduciary duty in a post-marital agreement: Our should be included. See Collins v. Collins, 752 S.W.2d conclusion is not altered by Mr. Sheshunoff's 636 (Tex. App.--Fort Worth 1988, writ ref’d) (finding assertions that Ms. Sheshunoff, as his spouse, owed that a mere listing of assets as separate property of one him a fiduciary duty to be truthful during their spouse on the parties’ joint tax return, although a negotiations. Assuming without deciding that such a writing signed by the parties, does not amount to a duty would apply under the circumstances of this case, post-marital agreement). the Texas Legislature enacted section 4.105 with the In 2003, the Legislature amended section 4.102 to understanding that married spouses owing fiduciary provide that partitioned property automatically duties to one another would negotiate and execute included future earnings and income from the post-marital agreements. Notwithstanding these duties, 3 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 the legislature manifested the strong policy preference premarital agreement. A “contract,” however, must be that voluntarily made post-marital agreements be based upon a valid consideration. Federal Sign v. enforced. We have concluded that Mr. Sheshunoff has Texas Southern University, 951 S.W.2d 401, 408 (Tex. not raised a fact issue regarding the sort of involuntary 1997); see also, American Nat'l Ins. Co. v. Warnock, execution the legislature could have intended to bar 114 S.W.2d 1161, 1164 (Tex. 1938) (consideration is a enforcement of post-marital agreements. That fundamental element of every valid contract). Can it conclusion would control even in the face of the be argued that a marital agreement is not a “contract”? fiduciary duties Mr. Sheshunoff claims. Id. at 700-701 Does it matter? It might. As discussed hereinbelow, (citations and footnote omitted). courts frequently resort to a discussion of “commercial In addition, under Texas law, breach of fiduciary contract” issues when examining a premarital duty is arguably a defensive issue which is subsumed agreement. Is it appropriate to consider commercial or into the issue of whether each spouse was provided a contract law in the context of a premarital agreement? fair and reasonable disclosure of the property or Although Texas courts, and Texas lawyers, assume so, financial obligations of the other spouse (i.e., the the issue is not definitively resolved, and some unconscionability prong of section 4.105). See, difficulties exist with the “accepted” approach. Blonstein v. Blonstein, 831 S.W.2d 468, 471 (Tex.App.–Houston [14th Dist]), writ denied per III. CREATIVE DRAFTING curiam, 848 S.W.2d 82 (Tex. 1992). In other words, A. Don’t Be Afraid to Put the Form Book Down an alleged breach of fiduciary duty relates exclusively While the forms that have been promulgated for to the “unconscionability” prong of section 4.105. It use by family law practitioners are often helpful, it is a may also be possible for spouses to waive (or disservice to any client to rely solely on form book discharge) any possible fiduciary duty with respect to language. entering into a post- marital property agreement. Cohabitation agreements, domestic partnership Nonetheless, it should also be noted that a agreements, premarital and post-marital agreements are fiduciary duty may arise before marriage. See, contracts. However, cohabitation agreements and Andrews v. Andrews, 677 S.W.2d 171, 174 (Tex.App.- domestic partnership agreements both require Austin 1984, no writ) (fiduciary duty existed between a consideration to be recited in the contract and the couple who had been seeing each other for consideration must be paid. There are no statutory approximately seven years, were living together and exemptions with regard to consideration for these two engaged to be married, and who had agreed to types of agreements. purchase a house jointly for use as their marital When preparing cohabitation, domestic residence). partnership, premarital or post-marital agreements, some attorneys simply put in their client’s information F. The Nature of the Beast and leave all of the form book language in their client’s Is a marital agreement a contract? Certainly, agreement. Instead of using general language that may language in the Texas Family Code would so imply. have no benefit to either your client or the other party, See, TEX.FAM.CODE §4.003 (“[t]he parties to a it is wise to be willing to put the form down and use premarital agreement may contract...”) (emphasis some common sense. added). Texas appellate courts treat marital In preparing this paper, the authors asked several agreements like contracts. See, e.g., Marsh, 949 prominent family law attorneys across the state to fill S.W.2d at 743-744 (wife’s payment of gift taxes was out a short survey about the most creative provisions not a “condition precedent” to husband's performance they have seen in marital agreements, as well as what of his obligations under the parties’ premarital advice they had to lawyers regarding the drafting of agreement requiring him to fund trust). Legal premarital agreements. One lawyer put it best when commentators often also suggest that marital they said, “Don’t be wedded to form book proposals.” agreements constitute contracts. See, Harry L. Tindall Because of the unique nature of these agreements, & Angela G. Pence, Premarital and Marital Property some creativity is not just suggested, it is required. Agreements at 18, ADVANCED FAMILY LAW Cohabitation, domestic partnership, premarital COURSE (San Antonio 2001)(“[a] premarital or agreements and post-marital agreements can be as marital agreement is subject to the same general rules creative as the attorneys or parties want them to be. of construction and interpretation as any contract”). Clearly, cohabitation and domestic partnership Finally, the “Official Comment to Uniform Premarital agreements do not pose the same types of problems Agreement Act,” Section 2, states “...a premarital dealing with the client and their partner as premarital agreement is a contract.” Yet, as stated above, agreements as no marriage is imminent. The balance Texas Family Code §4.002 and §4.401 specifically between preparing documents that protect spouses’ provide that consideration is not required for a rights in the event of divorce, while the parties are 4 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 eagerly preparing for their wedding, should remind the payment or transfer at the outset of the partnership or family law practitioner to be creative and careful in marriage is that it might over-reward a short their drafting of the proposals. relationship and under-reward a long one. Negotiate for the transfer of as much property or B. Setting the Tone money as you can up front, since there will be less Whether you represent the monied or the non- chance of performance failures when the agreementis monied partner or spouse, the tone that you take in new and on everybody’s minds. Such transfers could negotiating and drafting the these agreements can include not only money, but also an interest in the shape the course of a case. When meeting with the family home, furniture, jewelry, an automobile, client for the first time in the initial consultation it is a retirement benefits, etc. good idea to discuss not only the client’s goals, but the tenor and tone they want to take in the case. E. Recurrent Transfers in Premarital or Post- Sometimes these will conflict with each other and the Marital Agreements client is unaware of the conflict. For example, the Bargain for monthly or annual transfers that go client may want to engage in negotiations from a very beyond paying for the current living expenses. An aggressive standpoint with a “take it or leave it” attraction to recurrent transfers is the fact that they can attitude. However, the client’s overall goal may be to be structured so that they will not come due unless the simply protect their property. In such a case, the tone marriage continues. in which they want to proceed may be counterproductive to achieving their goals. F. Guaranteed Lifestyle During Marriage As every family law practitioner knows, there are If there is to be no community property income, or many ways to skillfully obtain their clients’ goals insufficient community property income during without alienating the affections of the parties. In the marriage, try to include a contractual duty of support case of the preparation and negotiation of cohabitation, during the marriage from the monied spouse’s separate domestic partnership and premarital agreements, it is estate. wise to consider the overall effect of the drafting and negotiating of the agreement. Sometimes taking a G. The “Exit Bonus” hardline stance only ensures that the parties are setting One creative drafting technique to consider is the themselves up for several difficult months and possibly idea of a “exit bonus” for the non-monied partner or not having a partnership or wedding at all. spouse if the relationship ends. There are many ways this can be handled. One way is to pay one lump sum -Practice Tip- amount if the relationship ends. Another way is to pay There is a fundamental dilemma in negotiating the non-monied partner or spouse a certain amount of hard for your client. The more successful you are in money for each year the parties are together or wrestling concessions from the other party, the weaker married. This “exit bonus” provides two key your client’s arguments will be to set aside the advantages. First, it makes a clean break and clearly agreement in the future. It is prudent to explain this sets out what both parties are negotiating for in the dilemma to your client and allow him or her to make agreement. Second, it provides security and a sense of the decision on how they would like to proceed. fairness to the non-monied partner or spouse so that they do not feel like they are signing away everything. C. Keep Earnings as Community in Premarital There may be some resistance from the monied Agreements partner or spouse to enter into such an agreement. If The usual purpose of a premarital agreement is to so, a creative way to overcome such resistance is to eliminate or at least restrict the community estate. The provide incentive for not contesting the agreement. party without the major income obviously wants This creative clause has been referred to by one family narrower restrictions. Often the effect of a premarital law practitioner as “the poison pill.” agreement can be limited to passive income, on the basis that the marital partners should share in the H. The “Poison Pill” earnings from labor during the marriage. In order to provide incentive to the monied partner or spouse to provide an “exit bonus”, and to minimize D. The “Signing Bonus” the risk of the agreement being attacked, a creative Another way to address this is the non-monied technique is to insert a clause that says if the non- party could receive a transfer of property in exchange monied partner or spouse attacks the validity of the for giving up rights through an agreement. This could agreement, they forfeit the “exit bonus”. Of course, involve a cash payment, or a transfer of an undivided language should be included in this clause that clearly one-half interest in the home, etc. The problem with a states that the non-monied partner or spouse has every 5 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 right to attempt to attack the agreement, however, if L. House, Car and “Nest Egg” they do so, they do not receive the “exit bonus” and If you can obtain a guarantee upon dissolution of essentially receive nothing at all. The combination of marriage of a nice place to live, a nice car to drive, and these two creative provisions makes it more likely that a chunk of money to save for a rainy day, this can the agreement will not be attacked and will be make up somewhat for giving up a community enforced as the parties intend. property claim to community income.

I. Expiration Clause in Premarital Agreement M. Interaction With Homestead Rights A premarital agreement can contain a clause that Article XVI, §52 of the Texas Constitution the agreement expires after ten years, or after a child is provides that the homestead shall not be partitioned born, etc. One wonders whether this type of expiration among the heirs of the deceased during the lifetime of could retroactively alter ownership rights that have the surviving husband or wife, or so long as the already vested, but the expiration certainly can apply survivor may elect to use or occupy the same as a on a prospective basis. homestead; such provision is sometimes referred to as the “probate homestead.” Williams, 569 S.W.2d 867, J. Deny at Your Own Risk 869 (Tex. 1978). A creative clause that can be added to premarital Such rights, provided by law for the protection of agreements governs responses to requests for the family and to secure a home for the surviving admissions. Request for admissions are an underused, spouse, may be waived, however, particularly where, valuable discovery tool. The family law practitioner in the absence of any suggestion of fraud, overreaching could include a clause in the premarital or post-marital or lack of understanding, (1) the parties to a premarital agreement that provides if the non-monied spouse agreement are mature individuals, (2) full disclosure is answers a request for admission about the agreement made of the nature and extent of the property interest being fully enforceable in any way other than “admit”, involved, (3) both parties have substantial separate the forfeiture of the “exit bonus” becomes automatic. property which they desire to preserve for themselves, This provision is easy to add to a premarital agreement and (4) there are no interests of any minor children to and goes to the core of what the agreement means. If protect. Id. at 869-870. the parties are unwilling to admit that the agreement is enforceable when they are preparing it, there is an N. Anticipating “Eviction” from Separate obvious problem already brewing. On the back end, if Property Residence a party is unwilling to admit that the agreement is In instances where one party will be moving into a enforceable, the forfeiture of the “exit bonus” provides separate property house belonging to the other party, some incentive for them to reassess their desire to the agreement should include specific terms regarding attack the validity of the agreement. the terms and conditions of payment of expenses Caution should be used when being creative. The associated with the property, including the mortgage, issues in this paper are designed to encourage attorneys tax, utility and maintenance expenses. The agreement to draft creatively, however, there are professional and should also contain provisions which anticipate the ethical obligations that limit the “creativity” of necessity of the later “eviction” of the party. Those overzealous attorneys. For example, while it is provisions should include the conditions under which permissible to include a clause that a party forfeit the the homeowner can force the other party to move, as “exit bonus” if they fail to answer a request for well as a specific timetable for notice of the demand to admission that asks if the agreement is fully vacate the residence and the time period upon which enforceable, it is not wise to include clauses that vacancy must occur. Although provisions remain attempt to penalize or eliminate a party for wanting to subject to challenge, the agreement should specifically go to mediation or to take away their right to a jury recite that the parties agree that the party moving into trial. the residence is not a “tenant” and accordingly does not have tenant rights arising under the Texas Property K. Recurrent Performance Obligations by the Code, even in instances where the non-owner party has Monied Partner or Spouse paid for a portion of the mortgage, utilities, insurance Recurrent obligations of the monied party may be and/or maintenance of the property. The agreement breached, and could possibly serve as a basis to avoid should also recite that the eviction formalities set forth the agreement. No case has ruled on whether material in the Texas Property Code do not apply and that the breach of an agreement is grounds to avoid the parties specifically agree to be contractually bound by agreement, for contracts signed on or after September the specific provisions set forth in the agreement. 1, 1993.

6 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

O. Permit Gifts and Bequests they are capable of drastically changing the status of An agreement may define certain property to be the law in a legislative session. In order to protect separate property of a partner or spouse, or as against future changes that could have a negative belonging to the owning or acquiring partner or impact on your client’s rights that they are spouse. Gifts or bequests would contravene these contractually bound to in the agreement, the agreement descriptions, so a paragraph should be included that itself should state that if any question as to the validity overrides the original characterization if there is a gift or enforcement of the agreement is raised, the laws of or bequest. the State of Texas on the date of the signing of the agreement will control the interpretation of said P. Right of Survivorship agreement. A survivorship right in community property (if any) is a death-related term to be considered. U. Creative Provisions in a Changing World – However, a survivorship right cuts both ways, and can Civil Unions and Same Sex Marriages remove wealth from the non-monied party’s probate There are already several states that have estate, working to the disadvantage of any heirs. recognized, in varying degrees, either civil unions or Required bequests from the monied spouse’s estate, or same sex marriage. What is the effect of a claims against the monied spouse’s estate, would Massachusetts same sex couple who lived in Boston operate one-way only, and might be preferable. for five years as a married couple, have a premarital agreement, then one or both of the spouses are Q. Life Insurance transferred to Texas, and one party seeks enforcement Since the spouses will not be building a of the agreement. What is the effect of the premarital community estate (or at least not as much of one) agreement in a state that does not recognize same sex because of the agreement, the non-monied spouse may marriage? want an insurance policy on the life of the monied In order to avoid such a problem for clients in spouse. The obligation might be extended to include Texas, the clients can contract and enter cohabitation children born or adopted as beneficiaries of life and domestic partnership agreements between them insurance on the life of the monied spouse. that may be different from what is permissible under the Family Code. For example, if a same sex couple in R. Post-divorce Alimony in Lieu of Property Texas wished to enter into an agreement regarding the A popular term is one year of post-divorce division of their property, debts, and provisions for alimony for every year of marriage. their children, they can do so. Such provisions would probably need to begin with language that states, S. Choice of Law - Where Did They Go? “Whether the state recognizes the marriage of Mr. In thinking creatively, attorneys should Greenacre and Mr. Blackacre, the agreement is incorporate choice of law provisions into cohabitation, intended to be a contract between the parties.” Such domestic partnership, premarital and post-marital provisions can provide some assurance and stability in agreements that they prepare. Attorneys may want to an atmosphere where sister states are addressing the include an arbitration clause that states that the issue of same sex marriage differently than the State of agreement will be arbitrated by a neutral third party if Texas. Any such agreement needs a recitation of the any question regarding the validity of the agreement consideration and the consideration actually needs to comes up. Problems arise when, fifteen or twenty be paid. years down the road, the parties have left the great state of Texas and have moved to Delaware. In order to V. Setting the Fee avoid a choice of law problem, the arbitration clause Some lawyers will not draft cohabitation, can contractually bind the parties to apply Texas law domestic partnership, premarital or post-marital thus eliminating a future question of what law applies agreements because of the risk of a contest at a later to an agreement drafted in Texas for parties who later time. In setting your fee, consider that you may later move out of the state. be required to testify to who drafted what, the circumstances surrounding execution, discussions with T. 2010 - an Enforcement Oddity your client, etc. Worse yet, you may be the vehicle for Another provision that family law attorneys an attack on the agreement, based on failing to advise should use in preparing cohabitation, domestic your client properly, or worse, for conspiring with the partnership, premarital and post-marital agreements is monied party to take advantage of your client. a provision that the controlling law is the law on the Consider these possibilities when setting your fee. A day the agreement is signed. Though they only meet straight hourly rate only compensates you for your every two years, the Texas Legislature has proven that time spent in negotiations and drafting, not the 7 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 potential for later involvement. probability it would be outcome determinative of the cause of action asserted. Mere relevance is W. Paper as You Go insufficient. A contradiction in position without more If your client decides to try to challenge is insufficient. The confidential communication must enforcement of the agreement, the client may allege go to the very heart of the affirmative relief sought. that he or she did not understand the agreement Third, disclosure of the confidential communication because you did not explain it to him or her must be the only means by which the aggrieved party adequately. The more one-sided the agreement is, the may obtain the evidence. [FN10] If any one of these more important it is that your advice to the client be requirements is lacking, the trial court must uphold the documented, preferably in the form of an extensive privilege. [FN11] [Content of footnotes omitted] explanation, signed by the client. In Republic Ins. Co. v. Davis, the “offensive use” If there are unusual or complicated terms, make a principle was applied to the attorney-client privilege. record of your discussions with the opposing lawyer as In Owens-Corning Fiberglas v. Caldwell, 818 S.W.2d well as your client. Redline each set of changes and 749 (Tex. 1991), it was applied to the attorney work keep all drafts in case a dispute develops later over the product privilege. In Parten v. Brigham, 785 S.W.2d meaning of a clause. 165, 168 (Tex. App.--Fort Worth 1989, no writ), the offensive use doctrine was applied to a bill of review X. Disqualification from Divorce brought to set aside a property division upon divorce. It is possible, if the relationship ends or a divorce The plaintiff alleged that community assets were occurs, that your client may wish to hire you to hidden from her at the time of divorce. The appellate represent him or her. Many forms contain a waiver of court held that her divorce lawyer’s files were open to disqualification provision. If the agreement is discovery to the extent they reflected the plaintiff’s contested, the opposing party may wish to disqualify knowledge of community property assets. you on the grounds that you will be a witness. In such If the party seeking enforcement of the agreement a case, your ethical obligations may supercede the can show affirmative relief, outcome determinative, waiver provision. If you do accept employment when and exclusive means to the information, they may be the relationship ends, be sure to disclose to the client at able to see your file and take your deposition and call the time you accept employment, of the possibility of a you to testify at trial. motion to disqualify. IV. CASE LAW AND STATUTORY Y. Loss of Confidentiality AUTHORITY Advise your client that, if he or she contests A. Interspousal Fiduciary Obligations enforceability of the agreement, the “offensive use” One court has said that post-marital agreements doctrine of Ginsberg v. Fifth Court of Appeals, 686 are evaluated in the context of the fiduciary S.W. 2d 105, 107 (Tex. 1985), may apply. In relationship that exists between spouses. Daniel v. Ginsberg, the Supreme Court of Texas held that a party Daniel, 779 S.W.2d 110, 115 (Tex. App.-- Houston seeking affirmative relief cannot invoke a privilege to [1st Dist.] 1989, no writ); compare to Pearce v Pearce, preclude the defendant from obtaining information 824 S.W.2d 195, 197 (Tex. App.--El Paso 1991, writ necessary to defend against the claim. That is "using denied) (“Texas courts have closely scrutinized the privilege as a sword, not a shield," and in that property agreements made by spouses during the situation the trial court can force the party invoking the marriage”). In ordinary fiduciary litigation, the burden privilege to either waive the privilege or suffer of proof is on the fiduciary to prove that his transaction dismissal of his affirmative claims. In Ginsberg, a with the beneficiary was fair. See Archer v. Griffith, woman was contesting the validity of a deed to land, 390 S.W.2d 735, 739 (Tex. 1964) (“The burden of on the ground that she was fraudulently induced to sign establishing its perfect fairness, adequacy, and equity, the deed. The point at which she became aware of the is thrown upon the attorney, upon the general rule, that transfer affected the statute of limitations, and the he who bargains in a matter of advantage with a Supreme Court held that her psychiatrist’s records on person, placing a confidence in him, is bound to show that issue were discoverable. In Republic Ins. Co. v. that a reasonable use has been made of that confidence; Davis, 856 S.W.2d 158, 163 (Tex. 1993), the Supreme a rule applying equally to all persons standing in Court articulated a three-pronged test to apply in such confidential relations with each other”); Jackson Law situations: Office, P.C. v. Chappell, 37 S.W.3d 15, 27-28 (Tex. First, before a waiver may be found the party App.--Tyler 2000, pet. denied) (”where ‘self-dealing’ asserting the privilege must seek affirmative relief. by the fiduciary is alleged, a ‘presumption of [FN9] Second, the privileged information sought must unfairness’ automatically arises and the burden is be such that, if believed by the fact finder, in all placed on the fiduciary to prove (a) that the questioned 8 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 transaction was made in good faith, (b) for a fair permits persons about to marry to partition or exchange consideration, and (c) after full and complete between themselves salaries and earnings to be disclosure of all material information to the principal”). acquired by the parties during their future marriage”). If this rule were to be applied to a post-marital agreement, it would reverse the burden of proof in C. Community Property Survivorship TEX. FAM. CODE §§ 4.006, 4.105, which provide that a By constitutional amendment in 1987, Texas premarital or marital agreement is not enforceable if spouses can create a right of survivorship in the party against whom enforcement is sought proves community property. Such agreements are governed the two statutory defenses. by Tex. Probate Code §§ 451-457. An agreement must be in writing and signed by both spouses (§ 452). V. THE EFFECT OF A PRE OR POST- MARITAL AGREEMENT DURING VI. THE EFFECT OF THE AGREEMENT AT MARRIAGE DIVORCE A. Partition of Community into Separate A. Temporary Support Since 1980, both premarital and post-marital Texas Family Code § 4.003 specifically provides agreements can partition and exchange community that a premarital agreement can cover the modification property on hand and yet to be acquired. TEX. CONST. or elimination of spousal support. There is no statutory art. XVI, § 15, provides in part: authority for spouses to modify or eliminate spousal . . . . support in a post-marital agreement. provided that persons about to marry and spouses, without the intention to defraud pre-existing creditors, B. Child Support may by written instrument from time to time partition As already stated, Texas Family Code section between themselves all of part of their property, then 4.003(b) specifically provides that the right of a child existing or to be acquired, or exchange between to support may not be adversely affected by a themselves the community interest of the other spouse premarital agreement. Clearly, parties to a premarital in other community property then existing or to be agreement may not agree to eliminate the obligation to acquired, whereupon the portion or interest set aside to pay child support. However, other issues related to each spouse shall be and constitute a part of the child support, such as private education, college separate property and estate of such spouse or future expenses, or choice of residence, might be included in spouse . . . . a marital agreement, subject, of course, to court review. See Ex parte Hall, 854 S.W.2d 656, 658 (Tex. 1993) B. Agreement That Income from Separate Will Be (orig. proceeding). Separate TEX.CONST. art. XVI, § 15, provides in part: C. Interim Attorney’s Fees and Litigation Expenses spouses also may from time to time, by Texas Family Code § 4.003 does not specifically written instrument, agree between themselves provide for the waiver in a premarital agreement of the that the income or property from all or part of right to recover attorneys’ fees in connection to a the separate property then owned or which divorce. An argument is sometimes made that Texas thereafter might be acquired by only one of Family Code § 6.502, permitting the award of interim them, shall be the separate property of that fees, provides a basis for the award of interim fees spouse. . . even in the face of a premarital agreement to the contrary. Note that the constitutional power to agree is limited to spouses, and thus does not include persons about to D. Separate Property Is Indivisible marry. In one case the Court held that a clause in a The case of Eggemeyer v. Eggemeyer, 554 S.W.2d premarital agreement that income from separate would 137 (Tex. 1977), established that the Texas be separate was not enforceable. Fanning v. Fanning, Constitution prohibits a court, in a divorce, from taking 828 S.W.2d 135 (Tex. App.--Waco 1992), aff'd in part the separate property of one spouse and awarding it to and rev'd in part, 847 S.W.2d 225 (Tex. 1993). the other spouse. Partitioning community property into However, the language in that agreement was peculiar, separate property is the most effective way to protect and a subsequent case held that persons about to marry ownership of that property in a divorce. could achieve such a recharacterization through partition and exchange of future income. Winger, 831 E. Division of Community Assets and Debts S.W.2d at 858; (“We hold that the 1980 amendment to Texas Family Code § 4.003(3) specifically Article XVI, section 15, of the Texas Constitution provides that a premarital agreement can address “the 9 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 disposition of property on separation, marital Section 59A. Contracts Concerning dissolution, death, or the occurrence or nonoccurrence Succession of any other event . . .”. In Fanning v. Fanning, 828 S.W.2d 135 (Tex. App.--Waco 1992), aff'd in part and (a) A contract to make a will or devise, or rev'd in part, 847 S.W.2d 225 (Tex. 1993), the not to revoke a will or devise, if appellate court noted that a clause requiring a 50-50 executed or entered into on or after division of community property upon divorce “appears September 1, 1979, can be established to encroach upon the trial court's statutory duty to’ only by: order a division of the estate of the parties in a manner that the court deems just and right, having due regard (1) provisions of a written agreement for the rights of each party’ . . . ." In light of the that is binding and enforceable; or Family Code language, however, the court ruled that (2) provisions of a will stating that a the trial court erred in deviating from a 50-50 division contract does exist and stating the of community property. Id. at 143. material provisions of the contract.

F. Waiver of Reimbursement and Economic (b) The execution of a joint will or Contribution Claims reciprocal wills does not by itself suffice Although Texas Family Code § 4.003 does not as evidence of the existence of a specifically list the waiver of reimbursement and contract. economic contribution claims as terms for a premarital agreement, TEX. FAM. CODE § 3.410 provides that a TEX. PROBATE CODE § 59A. waiver clause in a premarital or post-marital agreement is “effective to waive, release, assign, or partition a B. Family Allowance claim for economic contribution under this subchapter The Texas Probate Code provides for a family to the same extent the agreement would have been allowance, in appropriate cases, for the support of the effective to waive, release, assign, or partition a claim surviving spouse and minor children of the deceased for reimbursement under the law as it existed during the first year after the deceased's death. The immediately before September 1, 1999, unless the section specifically allows any person who is agreement provides otherwise.” authorized to act on behalf of the minor children of the deceased to apply for the family allowance. TEX. G. Bifurcation and Discovery PROB. CODE § 286. The amount of the allowance is PJC 207.1 recommends that the court consider a addressed to the trial court's discretion. San Angelo separate trial to determine the validity of a premarital Nat. Bank v. Wright, 66 S.W.2d 804, 805 (Tex. Civ. or post-marital agreement, when contested. Separate App.--Austin 1933, writ ref'd). “The allowance shall trials raise the related issue of bifurcating discovery, to be fixed with regard to the facts or circumstances then permit the contesting party to have discovery in existing and those anticipated to exist during the first advance of the first trial of only evidence relating to year after such death.” TEX. PROB. CODE § 287. “No the enforceability of the agreement. See TEX.R.CIV.P. such allowance shall be made for the surviving spouse 174(b). when the survivor has separate property adequate to the survivor's maintenance; nor shall such allowance be H. Fees upon Final Hearing made for the minor children when they have property Chiles v. Chiles, 779 S.W.2d 127, 129 (Tex. in their own right adequate to their maintenance.” App.–Houston [14th Dist.] 1989, writ denied), holds TEX. PROB. CODE §288. If the non-monied spouse that where the premarital agreement precludes a doesn’t have enough estate to be disqualified for a community estate, attorneys’ fees cannot be awarded in family allowance, he or she will need the allowance. the final judgment. With regard to the non-married partners, this provision should be specifically addressed in the VII. THE EFFECT OF THE AGREEMENT AT cohabitation or domestic partnership agreement if one DEATH or both partners have children. This statutory A. Agreement to Make Will authority, coupled with a written contract, will permit When couples include in a cohabitation, domestic one partner to obtain a family allowance for the partnership, premarital or post-marital agreement deceased partner’s children. provisions relating to the making of a will, special consideration should be given to Section 59A of the C. Surviving Spouse Homestead Rights Texas Probate Code: In Texas, a surviving spouse may occupy the homestead during the spouse's lifetime without it being 10 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 partitioned to the heirs of the deceased spouse until the an express disclaimer of reliance on representations by survivor's death. TEX. CONST. art. XVI § 52; Tex. the other party may in some instances preclude a fraud Prob. Code § 272& 284. In Williams v. Williams, 569 claim. “The contract and the circumstances S.W.2d 867 (Tex. 1978), the Texas Supreme Court surrounding its formation determine whether the ruled that persons about to marry can by premarital disclaimer of reliance is binding.” Id. at 179. agreement waive the probate homestead right of a surviving spouse provided by Art. XVI, § 52, of the C. Attorneys’ Representations Texas Constitution. Unlike the family allowance, the Some forms call for the attorneys to sign written homestead right is not based on need, and the surviving representations of their client’s competency, that the spouse’s life estate can tie up the inheritance of the lawyers have explained the terms of the agreement to home for some time. The surviving spouse’s the client, and that the client understands, is acting homestead rights are a prime candidate for waiver, or voluntarily, etc. The lawyer would normally want to limitation to a fixed term of years. delete such a clause, since it turns the lawyer into a witness supporting enforcement of the agreement. D. Allow for Gifts or Bequests However, the written recital does not bind the lawyer’s If the agreement describes certain assets, or types later testimony–rather it is a matter to be explained if of assets, as belonging solely to one partner or spouse, the later testimony is to the contrary. include a clause the recognizes that inter vivos gifts and bequests by will override the characterization of IX. CONTESTING ENFORCEMENT OF PRE the property in the agreement. AND POST-MARITAL AGREEMENTS The Texas Family Code expressly provides that VIII. OTHER CLAUSES TO PONDER an attack on a written premarital, or partition and A. Merger Clause exchange (and by extension) income agreement, is A clause saying “This document contains the limited to two defenses. The party attempting to attack entire agreement between the parties with regard to the the agreement must show that: subject matter,” is commonly called a merger clause. A merger clause establishes the parties' intent that the (1) the party did not sign the agreement written agreement be their complete agreement. voluntarily; or Weinacht v. Phillips Coal Co., 673 S.W.2d 677, 679 (2) the agreement was unconscionable when it (Tex. App.--Dallas 1984, no writ). The reason for was signed and, before signing the placing a merger clause in a written contract is to agreement, that party: invoke the parol evidence rule which excludes proof of extrinsic agreements. Burleson State Bank v. Plunkett, (A) was not provided a fair and reasonable 27 S.W.3d 605, 615 (Tex. App.-Waco 2000, pet. disclosure of the property or financial denied). Since TEX. FAM. CODE §§ 4.002 & 4.104 obligations of the other party; require premarital and post-marital agreements to be in (B) did not voluntarily and expressly waive, writing, an oral side agreement would not be in writing, any right to disclosure of the admissible, even without a merger clause. However, property or financial obligations of the the merger clause would eliminate the possibility of other party beyond the disclosure any pre-existing or contemporaneous written provided; and agreement (perhaps an earlier hand-written agreement (C) did not have, or reasonably could not between the parties) that would survive the formal have had, adequate knowledge of the agreement. property or financial obligations of the In Dallas Farm Machinery Co. v. Reaves, 307 other party. S.W.2d 233, 239 (1957), the Supreme Court held that a merger clause can be avoided based on fraud in the TEX. FAM. CODE ANN. §§ 4.006(a); 4.105(a). inducement and that the parol evidence rule does not bar proof of such fraud. However, Schlumberger Tech. A. Voluntariness Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997) Voluntary has been defined as being “done by (discussed below), said that a merger clause can design or intentionally or purposely or by choice or of sometimes bar a fraudulent inducement claim, one’s own accord or by the exercise of will. A depending on circumstances. voluntary act proceeds from one’s own free will or is done by choice on or of one’s own accord, B. Disclaimer of Reliance unconstrained by external interference, force, or In Schlumberger Tech. Corp. v. Swanson, 959 influence.” Prigmore v. Hardware Mutual Ins. Co., S.W.2d 171 (Tex. 1997), the Supreme Court held that 225 S.W.2d 897 (Tex. Civ. App.—Amarillo 1949, no 11 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 writ). One court of appeals has considered they were already included in the court’s instructions voluntariness in terms of duress. See e.g., Osorno v. regarding voluntariness, unconscionability, and Osorno, 76 S.W.3d 509, 511 (Tex. App.--Houston disclosure: [14th Dist] 2002, no pet.). In representing a client in the preparation and . . . [Duress, overreaching, and undue signing of such an agreement, you would not want the influence] inquired as to whether David client to act involuntarily. You will naturally take Blonstein’s free will was overcome by threats steps to see that the client understands what he/she is or other acts of Esther Blonstein. The first doing, and is not acting under compulsion. If the question actually submitted to the jury asked signing is in your opinion not voluntary, document that “Did David Blonstein voluntarily execute the point well in your file. You will no doubt be a witness marital property agreement?” This broad- when the agreement is challenged at a later time. form question encompassed those three defensive issues. . . .Asking whether David B. Unconscionability Blonstein acted voluntarily is the same as Whether or not an agreement is unconscionable is asking whether he acted by free will. a matter of law to be decided by the Court. TEX. FAM. CODE ANN. §§ 4.006(b); 4.105(b). Unconscionability . . . [Fraud, estoppel, and breach of fiduciary in premarital and marital agreements has been duty] concerned whether Esther Blonstein evaluated in the context of unconscionability as it had misrepresented or failed to disclose applies in general contract law: information about the property schedule In determining whether a contract is attached to the marital agreement. The unconscionable or not, the court must look to the entire question actually submitted to the jury asked: atmosphere in which the agreement was made, the “Was David Blonstein provided a fair and alternatives, if any, which were available to the parties reasonable disclosure of the property or at the time of making the contract; the non-bargaining financial obligations of Esther Blonstein or ability of one-party; whether the contract is illegal or did David Blonstein have or reasonably against public policy, and whether the contract is could have had an adequate knowledge of the oppressive or unreasonable. property or financial obligations of Esther Wade v. Austin, 524 S.W.2d 79 (Tex. Civ. App.— Blonstein?” This question contained, Texarkana 1975, no writ). Because unconscionability because of his broad form, those defensive is so ill-defined, document the circumstances issues requested by the appellant. surrounding the negotiation and signing, so you will make a better witness at the enforcement trial. Blonstein, 831 S.W.2d at 471. In a per curium opinion, the Texas Supreme Court denied the application for C. Common Law Defenses writ of error, but expressly stated that in doing so, it Section 4.006(c) and 4.105(c) limit the attack of neither approved nor disapproved of the analysis of the premarital and post-marital agreements to the statutory court of appeals. Blonstein v. Blonstein, 848 S.W.2d defenses of voluntariness and unconscionability. 82 (Tex. 1992). However, the amendment applies only to agreements “executed on or after” September 1, 1993. Daniel v. D. The Effect of Pregnancy on Enforcement Daniel, 779 S.W.2d 110, 114 (Tex. App.--Houston [1st 1. Texas Dist.] 1989, no writ). Because “an agreement In Texas, the effect of the woman being pregnant executed before that date is governed by the law in at the time a marital agreement is negotiated and effect at the time the agreement was executed,” executed has recently been decided. In Osorno v. common law defenses regarding the enforcement of Osorno, 76 S.W.3d 509 (Tex. App. – Houston [14th contracts may still be available to attack pre-Sept. 1, Dist.] 2002, no pet.), after Gloria became pregnant, 1993 agreements. Exactly what common law defenses Henry agreed to marry her if she would sign a apply, and how they apply, has not been conclusively premarital agreement. Gloria signed a premarital established in Texas case law. agreement and they were married the next day. When One appellate court has held that such common Henry filed for divorce six years later, Gloria law defenses as duress, overreaching, undue influence, unsuccessfully contested the enforceability of the fraud, estoppel, and breach of fiduciary duty are premarital agreement. On appeal, Gloria argued that necessarily incorporated into the 1993 statutory she signed the premarital agreement involuntarily defenses. In Blonstein v. Blonstein, 831 S.W.2d 468, because she was forty, unmarried and pregnant. Id. at the court of appeals affirmed the trial court’s denial of 510-11. The Fourteenth Court of Appeals stated the jury instructions on common law defenses, finding that “for duress to be a contract defense, it must consist of a 12 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 threat to do something the threatening party has no that there had been no fraud, duress, or coercion. legal right to do.” Id. at 511. The appellate court However, the appellate court nevertheless invalidated concluded that Henry had no legal duty to marry the agreement on the basis of overreaching, since the Gloria and that his threat to do something he had the agreement had been prepared entirely by the husband’s legal right to do is insufficient to invalidate the attorney, without any input from the wife, the premarital agreement. Id. husband’s attorney was unaware that the wife was pregnant at the time the agreement was signed and had 2. Other Jurisdictions failed to advise the wife of the rights she was giving up Courts of other states have also considered the and her right to independent counsel, and the wife “pregnancy” problem. signed only after being advised in the office of the husband’s attorney, procedures which the appellate a. Agreement Invalidated court considered to be a violation of the Ohio Canons In Munson v. Munson, No. FA 950325174S, 1997 of Ethics. Id. at 319-321. WL 585754, *4-*5 (Conn. Super. 1997), the Superior In Williams v. Williams, 617 So.2d 1032, 1035 Court of Connecticut held that a premarital agreement (Ala. 1992), the Alabama Supreme Court held that the was invalid because the wife signed the agreement evidence created a genuine issue of fact, precluding under duress. The Superior Court specifically found summary judgment against the wife, as to whether the that, since the wife was four months pregnant at the father’s conditioning of the marriage on the pregnant time the agreement was signed, and the husband mother’s signing the premarital agreement, joined with insisted on her signing the agreement “some weeks the mother’s moral objection to abortion and the before the marriage,” duress was established. Id. It importance of legitimacy in a small town, engendered a should be noted, however, that the wife also testified coercive atmosphere in which the mother had no viable that she saw the agreement only once, that the husband alternative to accepting the father’s condition for made the agreement a condition of marriage, that the marriage, i.e., signing the agreement. husband prepared the agreement, and that the wife had In West Virginia, the only statutory grounds for not received full disclosure of the parties’ assets. Id. at voiding a premarital agreement are that either of the *4. In finding duress, the Superior Court focused parties is a minor at the time the agreement is signed or nevertheless on the wife’s pregnancy and the that the female party to the agreement is pregnant at immediacy of the marriage. the time the agreement is signed. See, Gant v. Gant, In Persichilli v. Persichilli, No. FA920293938S, 329 S.E.2d 106, 112 (W.Va. 1985). 1993 WL 574304, *2-*3 (Conn.Super. 1993), the In Bassler v. Bassler, 593 A.2d 82 (Vt. 1991), the Superior Court of Connecticut determined that a trial court refused to enforce a premarital agreement. premarital agreement was invalid because the wife had On appeal, the husband argued that the agreement was not voluntarily signed the agreement. Factors the valid, and that the trial court erred in admitting the Superior Court considered were that the wife had no testimony of the wife that the husband insisted that she previous experience with legal matters or with lawyers sign the agreement before the marriage, and that the (immediately before signing the agreement, the wife wife was induced to sign by the pending wedding and had been advised not to sign the agreement), the wife her advanced pregnancy. 593 A.2d. at 88. The was under extreme emotional distress after the husband husband argued that the wife’s testimony sought to told her the marriage, scheduled for the next day, contradict or negate the terms of the agreement because would be canceled unless she signed the agreement, it was inconsistent with the agreement’s and the wife was four months pregnant at the time. Id. acknowledgment clause and was therefore barred as at *2. Under the circumstances, stated the Connecticut parol evidence. Id. The Supreme Court of Vermont, Superior Court, “...the wife would have signed however, held that evidence of unconscionability did anything the husband wanted in order to have the not offend the parol evidence rule because such marriage take place the next day.” Id. at *3. evidence may be offered to disaffirm or avoid the In Rowland v. Rowland, 599 N.E.2d 315, 319 binding force of the contract. Id. Thus, the trial court (Ohio Ct. App. 1991), motion to certify overruled, 62 did not err by admitting the testimony of the wife, Ohio St.3d 1442, 579 N.E.2d 215 (Ohio 1991), an since her testimony did not vary or add to the terms of appeal of a judgment upholding a premarital the agreement, but rather challenged the validity of the agreement, the appellate court found “evidence of what contract. Id. might characterized as duress or coercive circumstances: appellant’s age [18], lack of experience, b. Agreement Valid morning sickness, and indeed the pregnancy itself,” but In Margulies v. Margulies, 491 So.2d 581 (Fla. since such circumstances were fact issues, the appellate Dist. Ct. App. 1986, rev. denied), the wife alleged at court considered itself bound the trial court’s finding trial that, after the parties’ child had been born, she had

13 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 been coerced into signing a premarital agreement. The voluntariness, with competent, independent advice and trial court upheld the agreement. On appeal, the full disclosure. Id. at 885. appellate court noted that whether the wife believed In Marriage of Dawley, 551 P.2d 323 (Cal. 1976), that the signing of the agreement was a mandatory the Supreme Court of California held that an premarital condition precedent to marriage and whether the agreement, signed after the parties entered into a husband would have refused to marry the wife, were contemplated short-term marriage of convenience, questions that were not openly discussed at or before which altered community status of property acquired the time the wife signed the agreement. Id. at 583. during marriage, could not be said to be “oppressive or Even if the wife was motivated by a strong desire to unfair,” and thus was not procured by undue influence, legitimize the child, the appellate court found where, even though the wife was compelled to enter substantial evidence that she entered into the into the agreement by her unplanned pregnancy and by agreement with “her eyes wide open,” after complete her fear that she would lose her job, the husband, who disclosure of the husband’s financial condition and was threatened with a paternity suit and also the likely negotiations through counsel resulting in modifications loss of his job, was in no position to take advantage of to the agreement. Id. Thus, the trial court’s conclusion the wife’s distress; further, the wife did not rely on the that the agreement was not coerced, the result of undue husband’s advice but consulted her own attorney influence, or otherwise unlawfully procured, was before executing the agreement. 131 Cal.Rprt. at 11- amply supported by the evidence. Id. 12. In Hamilton v. Hamilton, 591 A.2d 720 In Baumgartner v. Baumgartner, No. L-88-032, (Pa.Super.Ct. 1991), the wife, who was 18, pregnant, 1989 WL 80947, *10 (Ohio Ct.App. 1989) unemployed, and “probably frightened,” was told by (unreported), the trial court refused to enforce the her husband that without a premarital agreement, there parties’ premarital agreement, stating, “....the only would be no wedding. 591 A.2d at 722. At the time of reason [the wife] signed the agreement was because divorce, the trial court refused to enforce the waiver of she was pregnant, and that she wanted her baby to have spousal support contained in the premarital agreement the [the husband’s] last name, and the [the husband] and the husband appealed. The appellate court held made it clear that if [the wife] did not sign the that the trial court erred by refusing to enforce the agreement, [the husband] would not marry her.” The premarital agreement, because it was clear that there appellate court found that the trial court’s statements was neither force nor threat of force used to induce the were indeed supported by evidence, but that such wife to execute the agreement. Id. She had been statements were totally irrelevant to whether the represented by counsel, who advised her not to sign the premarital agreement was valid, because a party’s agreement, but she signed anyway. The appellate court statement that he will not marry, and thereby not give state that where a party has been free to consult his child his name, unless the other party signs a counsel before signing an agreement, the courts have premarital agreement, is not fraud, duress, coercion or uniformly rejected duress as a defense to the overreaching. Id. The appellate court also noted that if agreement. Id. all premarital agreements failed because one party In Kilborn v. Kilborn, 628 S.W.2d 884 refused to marry the other if the agreement wasn’t (Ala.Civ.App. 1993), the trial court enforced a signed, then virtually all premarital agreements would premarital agreement which had been signed by the 20 be unenforceable. Id. at *11. year old wife at time when she was three months pregnant. The husband had informed her that she E. Ratification would have to sign the agreement before he would Ratification of a premarital agreement, alleged to marry her. She contacted an attorney, who advised her be unenforceable, is a potential issue in any premarital to sign the agreement, but qualifying her signature with agreement case. See, e.g., Marsh, 949 S.W.2d at 741, the words, “due to duress and being pregnant.” The n. 7 (the appellate court, because it held the agreement husband promptly refused to go through with the valid, did not reach the wife’s claim that the husband, wedding. Some months later, the husband again by making payments to a trust pursuant to the proposed marriage and the premarital agreement. The agreement, ratified the agreement); see also Nesmith v. wife contacted another attorney who also advised her Berger, 64 S.W.3d 110, 115 (Tex. App. – Austin 2001, not to sign the agreement. Nonetheless, the wife no pet.). signed the agreement, to which was attached a list of Ratification is the adoption or confirmation by a the husband’s assets and expected inheritance. On person with knowledge of all material facts of a prior appeal, the appellate court rejected the wife’s act which did not then legally bind him and which he arguments that she did not sign the agreement had the right to repudiate. Spellman v. American voluntarily, but rather under coercive circumstances, Universal Inv. Co., 687 S.W.2d 27, 29 (Tex.App.- stating that there was sufficient evidence of Corpus Christi 1984, writ ref’d n.r.e.). Ratification 14 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 occurs when one, induced by fraud to enter into a Dist.] 2001, pet. denied) (The purpose of a declaratory contract, continues to accept benefits under the judgment is to establish existing rights, status, or other contract after he becomes aware of the fraud or if he legal relations). The Declaratory Judgments Act is conducts himself in such a manner as to recognize the remedial only. Bonham State Bank v. Beadle, 907 contract as binding. See, e.g., Daniel v. Goesl, 341 S.W.2d at 467. S.W.2d 892, 895 (Tex. 1960). Once a contract has The Declaratory Judgments Act does not confer been ratified by the defrauded party, the defrauded jurisdiction on the trial court, but, rather makes party waives any right of rescission or damages. Old available the remedy of a declaratory judgment for a Republic Ins. Co., Inc. v. Fuller, 919 S.W.2d 726, 728 cause of action already within the court's jurisdiction. (Tex.App.-Texarkana 1996, writ denied). State v. Morales, 869 S.W.2d at 947; Rush v. Barrios, An express ratification is not necessary; any act 56 S.W.3d at 105. A declaratory judgment is based upon a recognition of the contract as subsisting appropriate only if a justiciable controversy exists as to or any conduct inconsistent with an intention of the rights and status of the parties and the controversy avoiding it has the effect of waiving the right of will be resolved by the declaration sought. Bonham rescission. Id. In other words, ratification may be State Bank v. Beadle, 907 S.W.2d at 467; City of inferred from conduct Spellman, 687 S.W.2d at 29. Longview v. Head, 33 S.W.3d 47, 51 (Tex. App. – One who asserts ratification must prove that the Tyler 2000, no pet.); Rush v. Barrios, 56 S.W.3d at ratifying party acted upon full knowledge of all 105. A justiciable controversy must be distinguished material facts. See, e.g., K.B. v. N.B., 811 S.W.2d 634, from an advisory opinion. Longview v. Head, 33 638 (Tex.App.-San Antonio 1991, writ denied) (the S.W.3d at 51. husband, who did not consent in writing to the artificial Texas courts do not have the authority to render insemination procedure performed on his wife, ratified judgments that merely constitute advisory opinions. the parent-child relationship with the child born as the Patterson v. Planned Parenthood of Houston & S.E. result of the procedure, where the husband knew about Tex., Inc., 971 S.W.2d 439, 443 (Tex.1998);Waite v. the artificial insemination process and participated in it Waite, 64 S.W.3d 217, 223 (Tex. App. – Houston [14th willingly from the beginning, acknowledged the child, Dist.] 2001, pet. denied); Texas Dept. of Public Safety and publicly held him out as his son for several years). v. Moore, 985 S.W.2d 149, 153 (Tex. App. – Austin Ratification is an issue that is normally a question of 1998, no pet.). An opinion is advisory when the fact, but it may become one of law if the facts and judgment sought would not constitute specific relief to circumstances are admitted or clearly established. a litigant or affect legal relations. Continental Cas. Co. Williams, 932 S.W.2d at 685. v. Texas Bd. of Chiropractic Examiners, 2001 WL In addition, mental intent or reservation does not 359632 at *2 (Tex. App. – Austin April 12, 2001, no affect determination of the question of ratification. pet.); Brinkley v. Texas Lottery Comm'n, 986 S.W.2d See, e.g., Oram v. General American Oil Company of 764, 767 (Tex.App.-Austin 1999, no pet.). The Texas, 513 S.W.2d 533, 534 (Tex. 1974); see also, distinctive feature of an advisory opinion is that it Spellman, 687 S.W.2d at 30 (even if the appellants decides an abstract question of law without binding the stated that they did not intend to ratify the lease by parties. Continental Cas. Co. v. Texas Bd. of accepting rental payments, the acceptance of the Chiropractic Examiners, 2001 WL 359632 at *2; payments was inconsistent with the intention to avoid Brinkley v. Texas Lottery Comm'n, 986 S.W.2d at 767. the lease and recognized the lease as subsisting and Unless there is a justiciable issue, the trial court binding; therefore, the appellants waived or abandoned does not have subject matter jurisdiction under the any right of rescission or of attack upon the initial Texas Declaratory Judgment Act. J.E.M. v. Fidelity & invalidity, if any, of the lease). Cas. Co. of New York, 928 S.W.2d 668, 671 (Tex.App.-Houston [1st Dist.] 1996, no writ). Subject F. The Effect of Prior Declaratory Relief matter jurisdiction refers to the court’s power to hear a The Declaratory Judgments Act is a procedural particular type of suit, a power that exists by operation device for deciding cases that are within the court’s of law only, and cannot be conferred upon any court by jurisdiction. State v. Morales, 869 S.W.2d 941, 947 consent or waiver. Federal Underwriters Exch. v. (Tex.1994); Chambers County v. TSP Development, Pugh, 541, 174 S.W.2d 598, 600 (Tex. 1943). Ltd., 63 S.W.3d 835, 840 (Tex. App. – Houston [14th Lack of subject matter jurisdiction renders a Dist.] 2001, pet. filed). The purpose of the Declaratory judgment void, rather than merely voidable, so that it Judgments Act is to settle and afford relief from may be challenged either directly or collaterally. See, uncertainty and insecurity with respect to rights, status, Browning v. Placke, 698 S.W.2d 362, 363 (Tex. 1985) and other legal relations. Bonham State Bank v. (on collateral attack judgment was not shown to have Beadle, 907 S.W.2d 465, 467 (Tex.1995); Rush v. been rendered by a court without jurisdiction); see Barrios, 56 S.W.3d 88, 105 (Tex. App. – Houston [14th also, Mapco, Inc. v. Forrest, 795 S.W.2d 700, 703

15 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

(Tex. 1990) (an order is void only if the court a judgment regular on its face that contains recitations rendering it had no jurisdiction over the parties, no stating that potential jurisdiction has been activated, jurisdiction of the subject matter, no jurisdiction to then the judgment is voidable, not void, and may be set enter the judgment, or no capacity to act as a court). aside only by a direct attack. Akers v. Simpson, 445 Errors other than lack of jurisdiction render the S.W.2d 957, 959 (Tex. 1969). The unassailability of judgment merely voidable and must be attacked within the judgment arises because a court of potential prescribed time limits. Browning, 698 S.W.2d at 363 jurisdiction has the power to determine whether its (Tex. 1985). The distinction between a void and jurisdiction has been activated, and the recitations voidable judicial act is: while a void act is entirely null making that determination are immune from attack in a within itself, not binding on either party, and not collateral proceeding. McEwen v. Harrison, 345 susceptible of ratification or confirmation, so that its S.W.2d 706, 710 (Tex. 1961). nullity cannot be waived, a voidable act is not Consequently, depending on how the declaratory absolutely void within itself, but rather is binding until judgment is drafted, a collateral attack may not be disaffirmed, and may be made finally valid by failure possible. The issue, if and when finally visited by a within the proper time to have it annulled, or by Texas appellate court, will make for interesting subsequent ratification or confirmation. Brazzel v. reading. (Even if a collateral attack on the declaratory Murray, 481 S.W.2d 801, 803 (Tex. 1972), quoting, judgment is possible, the existing declaratory judgment Murchison v. White, 54 Tex. 78, 81 (1880). may well constitute evidence--perhaps dispositive--as Accordingly, a collateral attack on declaratory to issues of “voluntariness” or intent). judgment affirming the enforceability of a premarital If a collateral attack is not possible, the Texas agreement might successfully allege that no justiciable lawyer also may not have many viable options for issue existed at the time the court entered the direct attack upon a declaratory judgment affirming the judgment, i.e., there was no existing controversy enforceability of a premarital agreement. It is unlikely concerning the enforcement of the agreement and thus that a direct appeal will still be available, since an the issue was not ripe. Further, because no justiciable appeal must be perfected within 30 days after the issue existed, the court rendering the judgment lacked judgment was signed. TEX.R.APP.P. 26.1. subject matter jurisdiction, and the parties’ attempt to If the declaratory judgment was signed within the bestow such jurisdiction was ineffective. Thus, the preceding six months, a restricted appeal (formerly an declaratory judgment represents, at best, an appeal by writ of error) may be available. See, impermissible advisory opinion. TEX.R.APP.P. 30. To bring a restricted appeal, a No reported Texas case discusses the validity of a litigant must demonstrate that (1) he or she is a party to declaratory judgment affirming the enforceability of a the suit, (2) he or she filed the restricted appeal within premarital agreement. In their article, Tindall and six months of judgment; (3) he or she did not Pence cite nine opinions from courts of other states. participate at trial; and (4) error is apparent on the face See, Tindall and Pence at 12; see also, Bavido v. of the record. It is very unlikely that a declaratory Weixel, 459 So.2d 701 (La. Ct. App. 1984); Eaton v. judgment, entered by consent of the parties, will show Eaton, 366 A.2d 121 (Md. Ct. App. 1976); Richardson error on the face of the record. v. Richardson, 606 N.E.2d 56 (Ill. App. Ct. 1992); Finally, the equitable bill of review may be Wolfe v. Wolfe, 491 A.2d 281 (Pa. Super. Ct. 1985); available. To be successful in a bill of review, the Stenson v. Stenson, 359 N.E.2d 787 (Ill. App. Ct. plaintiff must allege and prove: (1) a meritorious 1977); Kosik v. George, 452 P.2d 560 (Or. 1969); defense to the cause of action alleged to support the Miller v. Miller, 151 So.2d 869 (Fla.Dist.Ct.App. judgment, (2) which fraud, accident, or the opposing 1963); Trossman v. Trossman, 165 N.E.2d 368 party’s wrongful act prevented him from presenting, (Ill.App.Ct. 1960). (3) without any fault or negligence of his own. Baker It must be stated again that a collateral attack on a v. Goldsmith, 582 S.W.2d 404, 406-407 (Tex. 1979). declaratory judgment affirming the enforceability of a It is doubtful that a bill of review will correct a premarital agreement is untested in Texas law. declaratory judgment affirming the validity of a marital Counter-arguments to such an attack may well exist. agreement entered by consent of the parties. For example, the Texas Supreme Court has stated that, if a court having potential jurisdiction renders a G. Effect of Remarriage judgment when the potential jurisdiction has not been In Marshall v. Marshall, 735 S.W.2d 587, 592 activated, and the defect is apparent from the face of (Tex.App.-Dallas 1987, writ ref’d n.r.e.), the parties the judgment, then the judgment is void and subject to were first married on April 26, 1982. On June 14, either direct or collateral attack. Fulton v. Finch, 346 1982, they executed a separate property agreement, S.W.2d 823, 827 (Tex. 1961) (emphasis added). If, which provided: “All income and/or property arising however, the court having potential jurisdiction renders from the separate property now owned by [said spouse] 16 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 or hereafter acquired by [said spouse], shall be the sole H. Contingent Fee and separate property of [said spouse].” Id. The Contingent fees are frowned upon in many family parties then divorced, and the October 15, 1982 law matters. Tex R. Disciplinary Conduct 1.04, judgment of divorce recited that the agreement was Comment 9, provides: valid. Id. Approximately five months later the parties Contingent and percentage fees in family law remarried, only later to file for divorce again. Id. On matters may tend to promote divorce and appeal after the trial of the second divorce, the husband may be inconsistent with a lawyer's argued that the parties’ 1982 agreement was still in obligation to encourage reconciliation. Such effect at the time of the second divorce. Id. The fee arrangements also may tend to create a Dallas Court of Appeals rejected the husband’s conflict of interest between lawyer and client argument, noting that the parties’ agreement contained regarding the appraisal of assets obtained for no express provision providing for the termination or the client.... Because of the human continuation of the agreement. Id. When the duration relationships involved and the unique of a contract is not expressly dictated by the character of the proceedings, contingent fee agreement, stated the Dallas appellate court, Texas arrangements in domestic relations cases are courts frequently presume that the parties intended that rarely justified. the agreement should continue for a reasonable time. Id. However, when it appears, from the intrinsic nature See TEX. DISCIPLINARY R. PROF'L CONDUCT 1.04(a), of the agreement, that an agreement is necessarily reprinted in TEX. GOV'T CODE ANN., tit. 2, subtit. G limited as to duration by the happening of any one of app. A (Vernon 1998) (TEX. STATE BAR R. art. X, § 9). several contingencies, this ascertainable contingency However, the only outright prohibition of a determines the duration. Id. contingent fee in the Texas Rules of Disciplinary The Dallas Court of Appeals then examined the Conduct is in criminal cases. Tex R. Disciplinary agreement, which had been executed less than two Conduct 1.04(e). Especially where the agreement puts months after the first marriage, and specifically the non-monied spouse in a situation where he or she focused on the following provisions: cannot afford to pay a reasonable fee for legal representation and professional assistance, then the WHEREAS, JOSEPH WOODROW right to be represented by counsel of choice may only MARSHALL and ARLENE O'BRIEN be available through a contingent fee arrangement. MARSHALL were married on April 26, 1982, and are now husband and wife; I. Summary Judgment for Pre and Post-Marital Agreements WHEREAS, at the time of said marriage Summary judgment procedure is available with each owned separate property and each regard to premarital and post-marital agreements, and expects that each might hereafter acquire many appellate opinions review and some affirm separate property; and summary judgments upholding premarital and post- marital agreements. See e.g., Grossman v. Grossman, WHEREAS, both desire the income and/or 799 S.W.2d 511 (Tex. App.--Corpus Christi 1990, no property arising from all of the respective writ) (court of appeals upheld husband's summary separate property now owned or which judgment seeking enforcement of a premarital hereinafter might be acquired by each shall agreement). Whether a summary judgment can be be the respective separate property of each, it supported in a particular case is fact intensive, and is therefore agreed between them as can’t be predicted in advance. follows....Id. J. Trial for Pre and Post-Marital Agreements From such provisions, the Dallas appellate court If you are challenging an agreement and you concluded that the parties were contracting in relation survive summary judgment, you get a trial on your to the existing [first] marriage only, and that it was voluntariness and unconscionability defenses. There is unreasonable to assume that they anticipated a series of enough potential overlap in the two defenses that remarriages and divorces. Id. According to the Fifth ordinarily both defenses will be alleged. Court of Appeals, the first divorce was the Unconscionability is an issue to be tried to the Court. ascertainable contingency that determined the duration Voluntariness can be tried to a jury. But since of the agreement; consequently, the agreement had no unconscionability, under the case law, involves an bearing on either the second marriage or the second assessment of “the entire atmosphere in which the divorce. Id. agreement was made,” Marsh v. Marsh, 949, S.W.2d 17 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

734, 740 (Tex. App.– Houston [14th Dist.] 1997, writ 1993)--reversing trial court for failing to denied), the trial judge will often listen to exactly the enforce premarital agreement same evidence as the jury, before making a decision. VII. Fazakerly v. Fazakerly, 996 S.W.2d Courts sometimes even wait until after the return of the 260, 265 (Tex. App.--Eastland 1999, jury verdict to render a decision or unconscionability. pet. denied)–affirming trial court which In many instances, the parties will agree to-- or upheld premarital agreement the Court will order--separate trials, with the first phase VIII. Fellows v. Fellows, 2000 WL 1073609 involving enforceability of the agreement to be (Tex. App--Dallas 2000, no pet.)– concluded before discovery occurs on the remaining affirming trial court which issues in the divorce. If there are not separate trials, upheld premarital agreement then tracing can become very complicated since the IX. Grossman v. Grossman, 799 S.W.2d enforceability of the agreement often will determine 511 (Tex. App.--Corpus Christi 1990, the character of property that is presumptively no writ)–affirming trial court which community, and two tracings will be required, one upheld premarital agreement assuming that the agreement is valid and one assuming X. Larson v. Prigoff, 2001 WL 13352 (Tex. it is not. App.--Dallas 2001, no pet.) (not for publication)–affirming trial court’s K. Appeal which upheld premarital agreement. It is unclear whether the enforceability of an XI. Marsh v. Marsh, 949 S.W.2d 734 (Tex. agreement is subject to an interlocutory appeal. (The App.- -Houston [14th Dist.] 1997, no Marsh case, 949 S.W.2d at 738, suggests that the issue writ)–affirming trial court which upheld can be brought separately, that’s the test for premarital agreement severability.) If not, the validity of the first phase of XII. Pearce v Pearce, 824 S.W.2d 195, 197 the case cannot be tested on appeal until the remaining (Tex.App.--El Paso 1991, writ denied) issues have been resolved and the judgment on the reversing trial court for failing to entire case is appealed. uphold premarital agreement In most Texas appellate cases involving the XIII. Pletcher v. Goetz, 9 S.W.3d 442, enforcement of premarital and post marital agreements, 446 (Tex. App.--Fort Worth 1999, pet. the appellate court has upheld the trial court’s denied)--affirming trial court which judgment upholding the agreement. Here is a partial upheld partition and exchange list: agreement XIV. Rathjen v. Rathjen, 1995 WL 379322 I. Beck v. Beck, 814 S.W.2d 745 (Tex. (Tex. App.--Dallas 1995, writ denied)– 1991), cert. denied, 112 S.Ct. 1266 reversing trial court for failing to uphold (1992) affirming trial court which premarital agreement upheld premarital agreement XV. Sheshunoff v. Sheshunoff, 172 S.W.3d II. Blonstein v. Blonstein, 831 S.W.2d 468 686, 693 (Tex. App.--Austin 2005, pet. (Tex.App.--Houston [14th Dist.] 1992, denied)-husband who executed writ denied) affirming trial court which agreement with knowledge and upheld premarital agreement understanding of its terms, but did not III. Chiles v. Chiles, 779 S.W.2d 127 believe that wife would avail herself of (Tex.App.--Houston [14th Dist.] 1989, her rights under the agreement did not writ denied) -- reversing the trial court execute agreement “involuntarily” so as which set aside a premarital agreement to prevent enforcement of agreement IV. Daniel v. Daniel, 779 S.W.2d 110 XVI. Winger v. Pianka, 831 S.W.2d 853 (Tex.App.--Houston p1st Dist.] 1989, no (Tex. App.--Austin 1992, writ denied)– writ)--affirming trial court which upheld affirming trial court which upheld premarital agreement premarital agreement V. Dokmanovic v. Schwarz, 880 S.W.2d XVII. Young v. Young, 854 S.W.2d 698 (Tex. 272 (Tex.App.--Houston [14th Dist] App.--Dallas 1993, writ denied)– 1994, no writ)--affirming the trial court reversing trial court which upheld which upheld premarital agreement premarital agreement, on procedural VI. Fanning v. Fanning, 828 S.W.2d 135 ground that wife was entitled to trial de (Tex.App.--Houston [14th Dist.] 1994, novo on appeal of master’s ruling. no writ)--Wqaco 1992), aff’d in part and rev’d in part, 847 S.W.2d 225 (Tex. 18 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

L. Shifting of Attorney’s Fees jury found that the husband both breached and Whether the agreement in question shifts the repudiated the contract, awarded the wife $100,000 in payment of attorneys’ fees can be a big factor in damages for breach of contract, but found zero deciding whether to challenge the enforceability of a damages for repudiation. Id. After the trial court cohabitation, domestic partnership, premarital or post- reduced the damages for breach of contract to $68,000 marital agreement. for the past due and unpaid alimony payments from August 1991 through November 1992, the judgment X. ANTICIPATORY BREACH became final. Id. Under Texas law, when one party repudiates a In April 1993, the former wife demanded alimony contract, the nonrepudiating party has the right to payments due under the same alimony contract that accept the repudiation and bring a cause of action for was the subject of the prior litigation. Id. In response, damages immediately, or to keep the contract alive and the former husband filed a suit for declaratory relief to sue for damages as they accrue. Thomas v. Thomas, the effect that the rights and obligations of the parties 902 S.W.2d 621, 624 (Tex.App.-Austin 1995, writ under the alimony contract had been fully and finally denied); see also, Hardin Assocs., Inc. v. Brummett, adjudicated in the previous lawsuit. Id. The trial court 613 S.W.2d 4, 6 (Tex.Civ.App.-Texarkana 1980, no ruled in the former husband’s favor. Id. writ) (noting that upon repudiation, nonrepudiating On appeal, the Austin Court of Appeals upheld party has right to maintain action at once for entire the trial court’s ruling, stating that the former wife breach and thus receive in damages the present value “elected” to terminate the contract when she chose, in of future payments due under contract) (emphasis the original suit, to sue for anticipatory repudiation, added). The two distinct options available to the non- instead of waiting to enforce the contract and sue to breaching party are inconsistent, substantive rights. collect the alimony installments as they became due Thomas, 902 S.W.2d at 624. Thus, when the and unpaid. Id. at 625. Thus, according to the Austin nonrepudiating party decides to file a suit for appellate court, the trial court in the second action unaccrued future damages immediately upon correctly determined that all contractual obligations repudiation of the contract, that party resolves the right between the parties had been terminated and that the to recover such future contract payments “into a mere former husband had no obligation to make alimony cause of action for damages,” giving up the right to payments after November 1992 (the month that the later sue on the contract. Id.; quoting, Greenwall first case was tried). Id. Theatrical Circuit Co. v. Markowitz, 79 S.W. 1069, Another potential trap lurking in anticipatory 1071 (Tex. 1904). breach claims involves proof of damages. As stated, According to the Texas Supreme Court, “a under an anticipatory breach claim, the nonbreaching contract cannot be thus treated, for one purpose, as party may sue for the present value of the payments subsisting, and, for another purpose, as at an payable under the agreement. See, e.g., Taylor Pub. end...[upon such a repudiation ... the other may make Co. v. Systems Marketing Inc., 686 S.W.2d 213, 217 his choice between the two courses open to him, but (Tex.App.-Dallas 1984, writ ref’d n.r.e.). An can neither confuse them together nor take both.” anticipatory breach does not change the usual rule for Greenwall Theatrical Circuit Co., 79 S.W. at 1071-72. measuring damages, (i.e., damages for breach of If the nonrepudiating party accepts the renunciation as contract are to compensate the innocent party for loss terminating the agreement, that party may not later sue or damage actually sustained), but rather merely on the contract. Thomas, 902 S.W.2d at 625. In other requires that an accurate estimate of the probability of words, the decision to pursue a claim for anticipatory future performance be substituted for the certainty of breach involves an “election of rights,” and such performance. Kiewit Texas Min. Co. v. Inglish, 865 election may have far-reaching implications, often S.W.2d 240, 245 (Tex.App.-Waco 1993, writ denied). misunderstood or misperceived by the practitioner. The face value of a contract is ordinarily different than See, Id. at 624. the value of its expected performance, with the Thomas, for example, illustrates a potential trap in uncertainty of future performance usually accounting anticipatory breach claims. In Thomas, the parties for the difference. Id. Thus, plaintiffs are only entitled were divorced in 1989. Id. at 622. As part of the to recover the value to them of the “expected divorce settlement, the husband agreed to pay performance” of the contract, which is the loss they contractual alimony to the wife. Id. at 622-623. In actually sustained from the anticipatory breach; they December, 1991, the former wife sued the former are not automatically entitled to recover the present husband, alleging breach of the alimony contract as value of the remaining face value of the contract. Id. well as anticipatory repudiation of the contract and Consequently, plaintiffs have the burden of seeking judgment for all payments due, both past and establishing with reasonable certainty the value of the future, under the alimony contract. Id. at 623. The expected performance. Id. 19 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33

Moreover, it must be emphasized that, once the Inc., 962 S.W.2d 507, 528 (Tex. 1998). There are two right to sue for anticipatory breach is elected, the right legal sources for an award of prejudgment interest: (1) to sue for installments due under the contract is likely general principles of equity and (2) an enabling statute. lost. Therefore, if the party electing to sue for Id. Section 302.002 of the Texas Finance Code, anticipatory breach fails, for whatever reason, to prove effective September 1, 1997, provided:When no its damages, such party will not later be able to sue on specified rate of interest is agreed on by the parties, the contract, even if, at that later date, damages have interest at the rate of six percent per year is allowed on become more ascertainable. all accounts and contracts ascertaining the amount payable, beginning on the 30th day after the date on XI. DAMAGES which the amount is due and payable. TEXAS FINANCE Although a complete discussion of available CODE §302.002 derives from former TEX.REV.CIV. contract damages is beyond the scope of this article, STAT. art. 5069-1.03, which was repealed in 1997 and certain generalized comments are appropriate. The recodified §302.002. Former art. 5069-1.03 read: universal rule for measuring damages for the breach of “When no specified rate of interest is agreed upon by a contract is just compensation for the loss or damage the parties, interest at the rate of six percent per annum actually sustained. Phillips v. Phillips, 820 S.W.2d shall be allowed on all written contracts ascertaining 785, 788 (Tex. 1991). Thus, a party usually should be the sum payable, from and after the time when the sum awarded neither less nor more than his actual damages. is due and payable; and on all open accounts, from the Id.; see also, Stewart v. Basey, 150 Tex. 666, 245 first day of January after the same are made.” S.W.2d 484, 486 (Tex. 1952) (measure of damages for However, in 1999, section 302.002 of the Texas breach of contract is just compensation for damages Finance Code was amended and now provides:If a actually sustained by plaintiff as a result of defendant’s creditor has not agreed with an obligor to charge the default). To restore an injured party to the position he obligor any interest, the creditor may charge and or she would have been in had the contract been receive from the obligor legal interest at the rate of six performed, it must be determined what additions to the percent a year on the principal amount of the credit injured party’s wealth have been prevented by the extended beginning on the 30th day after the date on breach and what subtractions from that party’s wealth which the amount is due. For the purposes of have been caused by it. Lafarge Corp. v. Wolff, Inc., prejudgment interest calculated under former article 977 S.W.2d 181, 187 (Tex.App.-Austin 1998, writ 5069-103, a contract is one “ascertaining the sum denied), citing, 5 Corbin on Contracts §992 (1964). In payable” when it (1) “provides the conditions upon other words, damages for breach of contract protect which liability depends,” and (2) “fixes a measure by three interests: a restitution interest, a reliance interest, which the sum payable can be ascertained with and an expectation interest. O'Farrill Avila v. reasonable certainty, in the light of the attending Gonzalez, 974 S.W.2d 237, 247 (Tex.App.-San circumstances.” Great American Ins. Co. v. North Antonio 1998, writ denied). Marsh, again, illustrates Austin Mun. Utility Dist. No. 1, 950 S.W.2d 371, 372- relevant considerations. In Marsh, without filing for 373 (Tex. 1997) (construing former art. 5069-103). divorce, the wife sued the husband for a “simple” breach of contract. 949 S.W.2d at 738. The wife 2. Prejudgment Interest in Marsh simply sought to enforce the parties’ agreement, which In Marsh, 949 S.W.2d at 744, the husband required the husband to transfer certain of his assets complained on appeal that the trial court erred in into a trust. Id. As the successful party, the wife was awarding his wife pre-judgment interest at 10% per awarded a judgment in the amount that the husband annum, which exceeded the 6% rate authorized at the was obligated to transfer, attorney’s fees, prejudgment time by former art. 5069-1.03. The parties’ agreement interest, and postjudgment interest. Id. at 737. In this did not contain a provision for prejudgment interest. manner, the trial court adhered to the “universal rule” The Houston appellate court first noted that former art. of contract damages, and placed the wife in the 5069-1.03 did not apply when the damages cannot be position she would have occupied but for the calculated from the face of the contract itself. Id., husband’s breach. citing, Rio Grande Land & Cattle Co. v. Light, 758 S.W.2d 747, 748 (Tex. 1988). The Fourteenth Court A. Prejudgment Interest of Appeals therefore stated that when damages are not 1. In General ascertainable from the face of the contract, a trial court Prejudgment interest is “compensation allowed by may award 10% pre-judgment interest. Id., citing, law as additional damages for lost use of the money Perry Roofing Co. v. Olcott, 744 S.W.2d 929, 930-31 due as damages during the lapse of time between the (Tex. 1988). In other words, according to the appellate accrual of the claim and the date of judgment.” court, when extrinsic evidence is needed to determine Johnson & Higgins of Texas, Inc. v. Kenneco Energy, the amount of contract damages, former art. 5069-1.03 20 Cohabitation, Domestic Partnership, Premarital & Post-Marital Property Agreements Chapter 33 did not apply. The appellate court then examined the prejudgment interest is sought at common law as an parties’ agreement. The amount of the husband’s element of damages, the plaintiff must plead for it. interest in the accounts, of which he was to transfer Such is not the case where prejudgment interest is one-half to his wife under the agreement, was not sought on the basis of a written contract fitting the determined at the time of the execution of the contract. description of article 5069-1.03. An award of this Id. at 745. One of the accounts contained assets that statutory interest, or interest eo nomine as it is known, formerly belonged to the husband’s late wife, in which may be supported by a prayer for general relief.726 the husband’s interest had not yet been determined. Id. S.W.2d at 25. Consequently, the Texas Supreme Court Under the agreement, the husband was to transfer one- held in Benavidez that the trial court’s refusal of a half of the value of his interest “as it may be requested trial amendment for prejudgment interest determined.” Id. Consequently, the Houston Court of was arbitrary and unreasonable, and therefore an abuse Appeals held that, the parties’ premarital agreement of discretion, since the recovery of prejudgment was not a contract “ascertaining the sum payable” as interest upon stipulated damages did not require any required by former art. 5069-1.03, and therefore the evidentiary proof at trial, but rather only a mechanical trial court did not abuse its discretion in permitting application of an established formula by the trial court prejudgment interest to accrue at 10% per annum. Id. after the verdict has been returned, and since the trial amendment could not have caused any surprise or 3. Marsh Overruled? prejudice to the opposing party. Id. at 26. In Great American Ins. Co., 950 S.W.2d at 373 (decided on July 31, 1997, exactly three weeks after XII. POST-TRIAL MATTERS the motion for rehearing was overruled in Marsh), the A party asserting an affirmative defense (like Texas Supreme Court held that former art. 5069-1.03 release or waiver) in a trial before the court must applied when calculating prejudgment interest, even if request findings in support thereof in order to avoid extrinsic evidence is needed to quantify contract waiver. Augusta Dev. Co. v. Fish Oil Well Serv. Co., damages, so long as the contract fixes a measure by 761 S.W.2d 538, 542 (Tex.App.--Corpus Christi 1988, which the sum payable can be ascertained with no writ); Pinnacle Homes, Inc. v. R.C.L. Offshore Eng. reasonable certainty in light of the attending Co., 640 S.W.2d 629, 630 (Tex.App.-Houston [14th circumstances. (Emphasis added.) The Texas Dist.] 1982, writ ref'd n.r.e.). Furthermore, if the Supreme Court specifically disapproved of those court findings issued by the court do not encompass any of appeals opinions holding that former art. 5069- element of the defense asserted, then the failure to 1.03 cannot be applied when resort to extrinsic request additional findings relevant thereto effects a evidence to determine damages is necessary. Id. waiver. Id. Don’t make this mistake. The opinion in Great American Ins. Co. did not mention Marsh. Nonetheless, the holding concerning XIII. CONCLUSION prejudgment interest in Marsh no longer appears There are many creative steps a family law viable, having survived a mere three weeks after practitioner can take in preparing cohabitation, inception. Furthermore, the amendment of section domestic partnership, pre- and post-marital 302.002 of the Texas Finance Code in 1999 also agreements. Lawyers should always remember that indicates that the holding concerning prejudgment they are not bound by the language in the form book interest in Marsh is no longer viable. and should use creativity in drafting these agreements. Whether it is the inclusion of an “exit bonus” or a 4. Prejudgment Interest in Pearce “signing bonus”, an expiration clause or a poison pill The El Paso Court of Appeals in Pearce also clause, or contractual language that addresses the addressed a prejudgment interest issue. Pearce, 824 forum or controlling laws that control the agreement, S.W.2d at 201. In Pearce, the trial judge refused to the attorney has a vast canvas to creatively fill while allow the wife’s post-trial amendment, requesting preparing these agreements. The best service an prejudgment interest, and on appeal, the wife claimed attorney can provide for their client is to tailor the that this refusal constituted reversible error. Id. The El creative techniques discussed in this paper to the Paso appellate court agreed, holding that the trial court individual needs of their client on a case by case basis. erred in refusing to allow such an amendment, since no Such a strategy will most appropriately address the evidentiary proof was required and the wife’s request client’s needs, goals, and will most likely cut down on could not have or should not have operated as a any future attack of the agreement, which benefits both surprise to the husband, relying on the Texas Supreme the client and the attorney. 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

21