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Reece v. Elliott - 208 S.W.3d 419 (Tenn. Ct. App. 2006)

Rule:

Regarding prenuptial/antenuptial agreements, the term "knowledgeably" is interpreted as meaning that the proponent of the agreement had to prove that a full and fair disclosure of the nature, extent and value of the party's holdings was provided or that such disclosure was unnecessary because the spouse had independent knowledge of the same. The extent of what constitutes "full and fair" disclosure varies from case to case depending upon a number of factors, including the relative sophistication of the parties, the apparent fairness or unfairness of the substantive terms of the agreement, and any other circumstance unique to the litigants and their specific situation. While disclosure need not reveal precisely every asset owned by an individual spouse, at a minimum, full and fair disclosure requires that each contracting party be given a clear idea of the nature, extent, and value of the other party's property and resources. Though not required, a fairly simple and effective method of proving disclosure is to attach a net worth schedule of assets, liabilities, and income to the agreement itself.

Facts:

Plaintiff Bonnie Reece, as the widow of Eugene Reece, filed this declaratory judgment action against Linda Elliott and Diane Dempsey, Individually and as Co-Executrixes of the Estate of Eugene Reece. Bonnie stated that she was the surviving widow of Eugene Reece, that they had married on December 4, 1999, and Reece died intestate on July 5, 2003. Contemporaneously with the filing of this action, Bonnie applied for statutory benefits as surviving widow and attached a copy of the antenuptial agreement dated November 29, 1999. She sought a declaration regarding the rights and liabilities of the parties, and also sought rescission of the document based upon her late husband's failure to make a full disclosure regarding his assets and financial condition. The Chancery Court for Union County (Tennessee) entered judgment, finding that the antenuptial agreement was valid and enforceable and dismissed Bonnie’s action. Co-executrix Bonnie appealed.

Issue:

Was the antenuptial agreement valid and enforceable notwithstanding the late husband's failure to make a full disclosure regarding the value for one particular asset?

Answer:

Yes

Conclusion:

Affirming, the appellate court held that widow/co-executrix Bonnie had full knowledge that her husband was a man of wealth, as shown by the list of assets that was provided. The fact that there was no value listed for one particular asset, even though it was significant, did not invalidate the agreement that she entered freely. She consulted with independent counsel and admitted to clearly understanding what the agreement meant and that she would have no claim to any of those assets. She had the opportunity to ask questions about the assets and did not have her counsel investigate, stating that it "did not matter" because she knew the assets would not be hers. She admitted that her husband was never dishonest with her and was very straightforward and open with her about his financial dealings and never misled her. The widow did not avail herself of the opportunity to ask her husband the value of the stock nor make any independent investigation; therefore, the agreement was binding and enforceable on the widow. The court noted that prenuptial/antenuptial agreements are favored by public policy in Tennessee, and will be upheld so long as the parties enter into the agreements voluntarily and knowledgeably. The court also noted that Tennessee courts have long adhered to the American rule, concluding that an award of attorney's fees as part of the prevailing party's damages is contrary to public policy.

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