On appeal from Superior Court of New Jersey, Chancery Division, Family Part, Burlington County, Docket No. FM-03-277-06.
The opinion of the court was delivered by: Parker, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 29, 2008
Before Judges Wefing, Parker and LeWinn.
On leave granted, the parties cross-appeal from an order entered on October 19, 2007, denying plaintiff's motion for reconsideration of an order entered on July 16, 2007, declaring that a prenuptial agreement entered into by the parties before their 1981 marriage was unconscionable and thereby unenforceable. Both orders were entered after extended plenary hearings. After careful consideration of the cross-appeals, we modify the orders under appeal to the extent that defendant may seek an alimony award if and when he can demonstrate substantially changed circumstances. The remainder of the prenuptial agreement remains in effect.
We briefly summarize the facts relevant to this appeal. The parties married on May 16, 1981. At the time of the marriage, plaintiff had graduated from Princeton University and during the marriage she obtained an MBA degree from the Wharton School of Business at the University of Pennsylvania. Defendant had a high school education and was employed by the United States Postal Service (Postal Service) at the time of the marriage. He obtained an associate science degree in physics over a period of nine years during the marriage.
During their twenty-four-year marriage, they had four children, all now emancipated. Shortly before the marriage, they executed a prenuptial agreement (agreement) on May 12, 1981. Their statements of financial condition were appended to the agreement. On June 19, 1987, defendant signed a declaration in which he acknowledged that he was "familiar with the estate plan adopted by" plaintiff and accepted "the provisions" made for him under both the estate plan and the agreement.
From 1977 to 1989, defendant was employed by the Postal Service. In 1990, he left the Postal Service and took a position as a machine operator in plaintiff's father's company, Micro-Tek Corp. (Micro-Tek). Micro-Tek is a small, technical manufacturing company specializing in drawing, stranding and insulating wires.
In January 2002, plaintiff purchased Micro-Tek from her father and defendant served as "plant supervisor" from January 2003 until September 2005. In 2005, defendant's gross income from Micro-Tek was $63,000.*fn1
On September 2, 2005, plaintiff filed the complaint for divorce and enforcement of the agreement. Thereafter, defendant's position was changed from a salaried plant supervisor to an hourly machine operator paid at the rate of $32 per hour. Plaintiff's father assumed the job of plant supervisor until his retirement in 2007.
Notwithstanding the pending divorce, the parties continued to live in the same house until December 1, 2006, when defendant was removed by a court order after the court determined that it was in the best interest of the parties' youngest daughter. Defendant's removal was not based on any allegations of domestic violence.
Defendant sought to have the trial court find enforcement of the agreement unconscionable because of the substantial change in his circumstances. According to defendant, the changed circumstances included allegations that (1) defendant had become an at-will employee of plaintiff's company and feared he would be fired upon conclusion of the divorce; (2) he is not qualified to find similar supervisory employment at his $63,000 salary because his work experience is specialized to plaintiff's business and he has limited education; (3) he contributed his "entire paycheck" to the family, but has never controlled any of the family's finances by paying bills, making real estate decisions, paying taxes, planning vacations, paying for schooling costs, insurance, and vehicles; (4) plaintiff has not disclosed the value of her assets, or her true net worth, and defendant is not privy to her records because plaintiff has claimed that a majority of her assets were exempt from disclosure; and (5) plaintiff earns $578,000 while defendant currently earns $63,000.
Defendant argued before the trial court that the agreement should not be enforced because to do so would (1) deny defendant equitable distribution of any asset in plaintiff's name to which he contributed during the marriage; (2) leave defendant with assets only in his name, which pale in comparison to the value of assets in plaintiff's name; and (3) deny defendant alimony.
On February 7, 2007, the trial court began a four-day plenary hearing to determine whether enforcing the agreement would be unconscionable. The trial court rendered a decision on the record and entered an order on July 16, 2007. The court found that enforcement of the agreement would be unconscionable because "it would result in the [d]efendant maintaining a standard of living far below that which was enjoyed during marriage."
Plaintiff moved for reconsideration and on October 19, 2007, after further plenary hearings, the motion was denied. The parties cross-moved for leave to file interlocutory appeals and we granted the motions on November 30, 2007.
In this appeal, plaintiff argues that the trial court erred (1) in finding that unconscionability of the pre-Act*fn2 agreement should be determined at the time of enforcement rather than at the time of execution; (2) in the application of the unconscionability standard; (3) in failing to consider defendant's pre-marital lifestyle as a factor in its unconscionability determination; (4) in not determining marital lifestyle; (5) in finding that defendant would be fired from plaintiff's company once the final judgment of divorce was entered, that defendant would be unable to secure adequate subsequent employment, and that his projected post-divorce annual budget would be $49,890; and (6) in improperly considering facts not in evidence to arrive at its conclusion.
Defendant contends in his cross-appeal that the trial court erred in failing to include a savings component and only included a small retirement component in its analysis of defendant's post-divorce lifestyle.
New Jersey adopted the Uniform Pre-Marital Agreement Act (the Act), N.J.S.A. 37:2-31 to -41, in 1998. The Act expressly applies to agreements "executed on or after" the effective date of the Act and does not, therefore, apply to the parties' 1981 agreement.
In Marschall v. Marschall, 195 N.J. Super. 16 (Ch. Div. 1984), the court distilled the prior case law and held definitively that prenuptial agreements were valid and enforceable and that "[s]uch agreements, subject to [certain] conditions . . . should be welcomed and encouraged." Id. at 28. The court indicated that principles governing property settlement agreements "should be viewed as equally applicable to antenuptual agreements governing those same issues." Ibid. (citing Petersen v. Petersen, 85 N.J. 638, 645-46 (1981)). The "conditions" under which prenuptial agreements would be deemed valid and enforceable evolved into a three prong test: (1) that there be "full disclosure by each party as to his or her financial conditions;" (2) that the party sought to be bound by the agreement understood and accepted the terms and conditions of the agreement; and (3) that the agreement be fair and not unconscionable, that is, that the agreement will not "leave a spouse a public charge or close to it, or . . . provide a standard of living far below that which was enjoyed both before and during the marriage." Id. at 29-31.
We approved the Chancery Division's "comprehensive exposition and analysis" in D'Onofrio v. D'Onofrio, 200 N.J. Super. 361, 366 (App. Div. 1985). There, we indicated that alimony provisions in prenuptial agreements need not "cover all eventualities, since upon changes in circumstances a spouse may apply to the court for an appropriate modification." Id. at 369-70 (citing Lepis v. Lepis, 83 N.J. 139, 158 (1980)). We remanded the matter to the trial court for reconsideration of the agreement because it "provide[d] for no alimony and fail[ed] to establish the standards for plaintiff's continued support." Id. at 370. We noted, however, that where the agreement provides for substantial equitable distribution of property and a dependent spouse's own income will be supplemented by unearned income from the investment of ...