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Posting for
Wednesday, November 18, 1998
by: Bert Rush
brush@firstam.com
MARITAL RIGHTS/PRE-NUPTIAL AGREEMENTS/TITLE UNDERWRITING
Gene Turk (Reno) has been asked to insure a gentleman as sole and separate owner of three properties in the Las Vegas area--in policy amounts of $800,000, $700,000 and $600,000, respectively--in reliance upon a memorandum of a pre-nuptial agreement, which reads as follows:
"MEMORANDUM OF PRE-MARITAL AGREEMENT
THIS MEMORANDUM OF PRE-MARITAL AGREEMENT shall become effective as of the date the marriage is solemnized and is by and between (Husband) and (Wife).
WITNESSETH
1. Husband and Wife have entered into a Pre-Marital Agreement of even date herewith ("Pre-Marital Agreement"), whereby each of them has waived certain rights, title and interest in and to property resulting from the personal services, skill, effort and work of the other during the entire marriage (which property, in accordance with the terms of said Pre-Marital Agreement, shall be the separate property of such other party), and in and to separate property of the other party owned or acquired before or during marriage.
2. Husband and Wife, for valuable consideration and pursuant to the provisions of the Pre-Marital Agreement, have forever remised, released and quitclaimed certain rights which either might have (or hereafter acquire as the result of their subsequent Marriage) to real property interests now owned or hereafter acquired by the other party and held in such other party's sole name, or in any form of co-ownership with any other person or entities. All such real property interests now owned or hereafter acquired shall be the separate property of the party in whose sole name said property interest may be recorded.
3. Pursuant to the provision of the Pre-Marital Agreement, any and all debts incurred by Husband shall be his sole responsibility. Creditors of Husband shall look only to Husband's separate property for repayment of his debts. Any and all debts incurred by Wife shall be her sole responsibility. Creditors of Wife shall look only to Wife's separate property for repayment of her debts. Recordation of this Memorandum of Pre-Marital Agreement constitutes notice to all third party creditors of this agreement between the parties.
4. All of the terms, covenants and conditions of the unrecorded Pre-Marital Agreement of even date herewith, executed by Husband and Wife, are hereby made a part hereof as fully and completely as if set forth herein.
EXECUTED this 22 day of June, 1987 at Los Angeles, California.
/s/________________
(Husband)
/s/________________
(Wife)"
This memorandum is notarized, appears to have been recorded (probably in L.A. County), but does not appear to have been prepared by a lawyer.
It should come as no surprise that Gene declined to rely on this memorandum to insure the Husband as sole owner, but he says he has been known to rely on pre-nuptial agreements which were (1) executed within one year or so of the transaction at hand; (2) well-written; and (3) apparently drafted by competent legal counsel.
I would be wary of any such agreement, particularly where a large policy amount is involved, because of the risk of a claim that the pre-nuptial agreement was modified by subsequent agreement or conduct of the parties (such as Husband's acceptance of Wife's separate property to buy or improve property vested in Husband's name, solely), and because it should be easy to get Wife's estoppel affidavit signed for your particular transaction. And, it wouldn't make much difference to me if I was offered a copy of the actual agreement (in addition to the memorandum), and/or an attorney's opinion letter.
I wonder what other Savants do about such requests--what are your rules of thumb? My impression is we haven't had many claims resulting from reliance on pre-nuptial agreements--so we must be doing something right. Let's hear from those of you who have encountered this--just press the "reply" button....
**********
Following last Wednesday's posting Keith Pearson (Glendale/L.A.) writes:
If we are talking about insuring a purchase money lender and the husband in question (HIQ), and we investigate certain facts like:
1-How big is the difference in value of estate of husband and wife?
2-Does the wife have substantial assets of her own?
3-Are husband and wife of similar age and background?
4-When was the prenup entered into (i.e. the church steps, two months before marriage, two months after marriage (post-nuptual agreement))
I think if the husband got himself a trophy wife and she had no assets going into the wedding, we should tread very carefully, because all of the things I inquired about will be allegations in the complaint to set aside the prenup and enforce community property rights on the unsuspecting third parties like our insureds. Even if we win the court case, we lose for defense costs which would probably be through a full trial. Not to mention, is this the type of claim that we want to defend?
On the other hand if you have a mature man and woman that simply do not want to commingle assets and liabilities with substantially similar net worths, and you are insuring a purchase money loan, the risks go down substantially.
Reply: You folks in the Heartland, remember, Keith's in L.A. They get claims like this. This is where "palimony" started....
Robert Wasserman (Cleveland) writes:
We encounter prenuptial agreements primarily when the married title holder is attempting to convey the property without the signature of the untitled spouse releasing dower.
We reject this approach and require the untitled spouse to join in the execution of the deed. We take this underwriting approach for two reasons. First, prenuptial agreements in Ohio are generally not recorded so the "world" has no notice of the waiver of rights. Secondly, and more importantly is this:
If, during a divorce, the Ohio Court determines there was not a full, fair and complete disclosure of assets scheduled as an exhibit to the prenuptial agreement, the Court will void the agreement, ab initio. If we had relied on the prenuptial agreement to effectuate release of dower that, too, would be void; and the purchaser-insured would now be in title subject to the dower of the grantor's untitled spouse; and this interest would also take priority over the lien of the lender-insured.
**********
Following up on last Wednesday's posting, with what he calls a "late reply," Jim Dondero (Grand Rapids, MI) writes:
Ignoring "community property" issues that folks in those states must deal with, in order to create a marketable title in Michigan (and probably most common law dower states) a wife must either join in the conveyance or her written waiver be recorded in the real estate records. Accordingly, even with good circumstances and language in a marital agreement, the husband will often balk at having it recorded in the "public record".
Editorializing for a moment, the whole concept of common law dower appears to be absurd in a modern society which affords a widow far greater rights in the estate of her deceased husband under the probate laws in virtually every state. Let's not forget its original purpose of providing subsistence for a feudal lord's widow under medieval law which, of course, otherwise passed title in a decedent's land to his first-born son! Modern "dower" is an archaic vestige of that fuedal concept and, today, merely serves to cloud titles during a wife's lifetime (while the right even remains inchoate)! It should be abolished (as was the husband's reciprocal right of "courtesy" years ago by Michigan statute). And what of "equal rights"?
Reply: Could this explain why, for his recent nuptials, Dennis Rodman wore a dress? But seriously, folks--I think it would be a good thing if our marital rights/community property laws could be harmonized as between the states. We have a Uniform Commercial Code, Uniform Partnership Act, Uniform Fraudulent Transfer Act, even model legislation (drafted by the National Assn. of Insurance Commissioners) known as the Unfair Claims Settlement Practices Act--so why not a Uniform Marital Rights Act which might be offered to state legislatures for adoption?
Aside from your point, Jim, that existing marital rights laws can be antiquated, the benefits of a uniform marital rights law would be that this area of law might be better taught at our law schools (to students who will practice out of a school's home state), and better understood by the general public since, if we had uniform laws, marital rights issues could be more effectively covered by the national media. Sounds good in theory, doesn't it??? (Rhetorical question.)
**********
Following up on our last reply, with lightning speed, Jon Reynolds (Phoenix) writes:
Ah, Bert, I believe there is one; and I think it was even promulgated by the ALI as well. It's called the Uniform Marital Property Act, or UMPA, for short.
Reply: Well what am I ranting about, then? I just checked and it appears no part of UMPA has been enacted in California--a fact which recommends it. Can anyone supply further info? Is more to be found on some website??
