“Separation Of Estates” Marriage Contract Held Enforceable

When it comes to marriage – Viva La Difference! Yesterday, the First Department upheld a marriage contract known as a “Separation of Estates” which apparently is common in France – Van Kipnis v Van Kipnis, 2007 NY Slip Op 06074.

In brief, the facts were as follows. The plaintiff wife and defendant husband were married in Paris, France, in 1965. The wife was a Canadian citizen, and the husband was a citizen of the U.S. Prior to the marriage, and at the specific request of the wife, the parties agreed to execute a “Contrat de Mariage” (Contract), which is a form of prenuptial agreement under the French Civil Code. The wife made all the arrangements for the Contract, including securing the presence of a “Notaire,” the French official who presides over the execution of such contracts, and obtaining an American attorney and interpreter to protect the husband’s interests. The expressly stated purpose of the Contract was to opt out of the “community property regime,” which is the custom in France, in favor of a “separation of estates” property regime.

The Contract provided:

The future spouses declare that they are adopting the marital property system of separation of estates, as established by the French Civil Code. Consequently, each spouse shall retain ownership and possession of the chattels and real property that he/she may own at this time or may come to own subsequently by any means whatsoever. They shall not be liable for each other’s debts established before or during the marriage or encumbering the inheritances and gifts that they receive. The wife shall have all the rights and powers over her assets accorded by law to women married under the separate-estates system without any restriction.

Shortly after the marriage, the couple moved to New York. During their respective careers, the husband acquired liquid assets of approximately $7 million and the wife acquired approximately $700,000-$800,000. Consistent with their 1965 selection of a separate property regime, the parties held these liquid assets in their own separate accounts. However, the parties did jointly own two properties, a country home in Lenox, Massachusetts, and co-op apartment on Fifth Avenue, in Manhattan.

Alas, after 38 years of marriage, the memories of the Eiffel Tower and strolling along the Seine faded and the parties sought a divorce. New York is an equitable distribution property state. So, you guessed it. During the divorce the wife realized how much she would lose if the Contract was enforced, and thus claimed that the Contract was not enforceable. She claimed that the Contract was executed for the purposes of opting out of the community property system of France, and so as to avoid the claims of creditors. She claimed that it was never intended to apply to divorce proceedings. During the proceedings, the husband likewise testified that the Contract was meant to protect themselves from creditors, and he never thought if had relevance in a divorce proceeding. Nevertheless, he argued that the terms of the Contract were unambiguous and should be enforced according to its terms.

Both parties called expert witnesses on marriage contracts in France. Both experts essentially testified that article 1536 of the French Civil Code provided different choices of matrimonial regimes. They also agreed that by signing the Contract the parties opted out of France’s community property regime and chose a regime of separate property; that the legal effect of this selection was that each spouse retained the unfettered right to administer, enjoy and freely dispose of his or her separate property throughout the marriage and continuing through its dissolution; and that divorce is never mentioned in a marriage contract. Thus, their opinion was that the Contract was legally binding and enforceable.

The First Department upheld the enforceability of the Contract. The Court relied on traditional notions of contract law that public policy favors individuals deciding their own interest through contracts, and that if the language of the contract is unambiguous evidence outside the wording of the contract should not be considered. The Court found that the wording of the Contract was in fact unambiguous, and was  susceptible of only one reasonable interpretation, namely, that the parties chose to have a separate property regime govern the economics of their marriage without any durational limitation, contingencies or exceptions. And such separate ownership of property should continue after the divorce.

Even though the parties had testified that the Contract was not intended to apply in divorce proceedings, the Court stuck to the Contract. Thus, the wife was out of luck in obtaining access to the husband’s more substantial assets.

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