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In re Marriage of Kremer

Court of Appeals of Minnesota

January 9, 2017

In re the Marriage of: Michelle Beth Kremer, petitioner, Respondent,
v.
Robbie Michael Kremer, Appellant.

         Nobles County District Court File No. 53-FA-10-425 Smith, Tracy M., Judge

         Affirmed in part, reversed in part, and remanded

          William J. Wetering, Steven R. Forrest, Hedeen, Hughes & Wetering, Worthington, Minnesota (for respondent)

          Kay Nord Hunt, Mark A. Johannsen, Lommen Abdo, P.A., Minneapolis, Minnesota (for appellant)

          Considered and decided by Johnson, Presiding Judge; Hooten, Judge; and Smith, Tracy M., Judge.

         SYLLABUS

         The procedural fairness of an antenuptial agreement that covers or includes marital property is assessed under the common law, using the multifactor test outlined in In re Estate of Kinney, 733 N.W.2d 118 (Minn. 2007).

          OPINION

          SMITH, TRACY M., Judge

         In this family-law case, appellant husband challenges the district court's order declaring invalid the antenuptial agreement he executed with respondent wife. Husband also challenges the district court's subsequent order awarding wife (1) $750, 000 as her share of marital property, (2) temporary rehabilitative and permanent spousal maintenance, and (3) need-based attorney fees. We conclude that the district court did not err in determining that the antenuptial agreement is invalid and did not abuse its discretion in awarding marital property, temporary rehabilitative spousal maintenance, and attorney fees to wife. However, we conclude that the district court abused its discretion in its award of permanent spousal maintenance. We therefore affirm in part, reverse in part, and remand.

         FACTS

         Appellant Robbie Kremer and respondent Michelle Kremer began living together in 1997 and, in August 2000, agreed to get married. While they were living together before their marriage, husband informed wife that he would not marry her without an antenuptial agreement, but they did not discuss any terms. When they agreed to marry, husband was the owner of a farming operation with equity of $643, 756. Wife worked at a gas station and later on husband's farm. This was husband's first marriage, and wife was previously married and divorced. When the parties married, wife had children.

         The parties planned a March 6, 2001 destination wedding in the Cayman Islands, together with family and friends. The parties planned to travel from their home in Nobles County to the Twin Cities on March 1, in anticipation of their March 2 flights. Beginning in late January or February, unbeknownst to wife, husband began meeting with his lawyer to draft an antenuptial agreement. Husband had a minimum of six contacts with his attorney to create the document. On February 26, husband met with his attorney and signed the agreement; sometime later that day, husband gave the signed agreement to wife and told her to talk to an attorney. Husband made clear that there would be no wedding if she did not sign the agreement. By this time, family and friends had paid for their lodging and airfare to the Cayman Islands, and some of them had started their travels.

         Wife attempted but failed to secure an appointment with her attorney from her previous divorce, but she was able to consult with a different attorney on February 28. The attorney reviewed the agreement with wife, and wife signed the agreement at that meeting and returned it to husband the same day. The agreement foreclosed any claims to spousal maintenance and provided that marital property would be divided "in proportion to the actual monetary consideration provided by each [party]."

         The next day, the parties traveled to the Cayman Islands, and they were married on March 6. After the wedding, wife worked less on the farm than she had prior to getting married. After the parties' child was born in 2008, wife's time spent working on the farm further decreased, but she still contributed to the farm operation. Wife's contributions to the farm included driving the combine, bringing seed out to the field, making meals for farm workers, and mowing the lawn. Wife also maintained the house, purchased groceries, and cared for the children. While the parties were married, wife at times worked part-time outside the home.

         By December 2009, husband's equity interest in the farming operation had increased by $1, 896, 516. That year, husband signed wife up for a federal farm program, and, although he testified that wife was not contributing to the farm, husband represented to the government that they were in a 70/30 joint venture.

         Wife petitioned for marriage dissolution in April 2010. During the dissolution action, wife moved to set aside the antenuptial agreement on the grounds that it "was a product of duress and coercion" and that she did not have "sufficient legal advice" to fully understand the agreement. Wife further claimed that the agreement was unfair at inception and that it was unfair at enforcement due to wife's change in financial circumstances. The district court bifurcated the dissolution action, separating the property issues from the other issues for later resolution. After a hearing in 2011, the district court concluded that the agreement was invalid.

         The parties' marriage was dissolved on January 10, 2012, and they agreed to that date as the valuation date of assets. Husband claims that the dissolution affected his ability to obtain financing and that he had to downsize his farming operation in 2012. Husband farms land that he rents; he does not own tillable land. Husband's father also farms. From 2009 to 2011, husband farmed approximately 2, 500 acres, and his father farmed approximately 500 acres. During 2012, husband downsized his farming operation to 172 acres. Husband also sold $1.5 million of stored grain, paid off a debt, and purchased new equipment, which he used to custom farm his father's land for no pay.[1] That year, husband's father farmed the balance of the land previously farmed by husband in the operation, totaling about 3, 000 acres.

         After a two-day trial on the property issues in December 2014 and January 2015, the district court filed an order requiring husband to pay both temporary rehabilitative and permanent spousal maintenance. In addition, the district court found husband's claim that he was forced to reduce his farm operation not credible and concluded that husband dissipated $1.5 million in assets during the dissolution proceeding in violation of Minn. Stat. § 518.58, subd. 1a (2016). The district court ordered husband to pay $750, 000 as an equitable distribution of marital property. The district court also ordered husband to pay $168, 000 toward wife's need-based attorney fees. Husband appeals.

         ISSUES

I. Did the district court err in concluding that the parties' antenuptial agreement is invalid?
II. Did the district court abuse its discretion in its division of the marital estate?
III. Did the district court abuse its discretion in awarding spousal maintenance?
IV. Did the district court abuse its discretion in awarding respondent need-based attorney fees?

         ANALYSIS

         I. The district court did not err in invalidating the antenuptial agreement.

         Wife contested the validity of the parties' antenuptial agreement. The agreement addresses the disposition of nonmarital and marital property, as well as spousal maintenance, upon dissolution of the marriage. The district court awarded husband his nonmarital property, and wife does not challenge that decision. However, the district court concluded that the antenuptial agreement was invalid and awarded wife marital property and spousal maintenance without regard to the agreement. Husband argues that the district court erred in invalidating the agreement.

         "Statutory construction is a question of law, which this court reviews de novo." In re Estate of Rutt, 824 N.W.2d 641, 645 (Minn.App. 2012) (quotation omitted), review denied (Minn. Jan. 29, 2013). Where the relevant facts are undisputed, the application of a statute to those facts is a question of law we undertake de novo. Id. Where facts are in dispute, appellate courts will defer to the findings of the district court, unless those findings are clearly erroneous. Rasmussen v. Two Harbors Fish Co., 832 N.W.2d 790, 797 (Minn. 2013). We defer to the district court's credibility determinations. Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988).

         A. Standard of law

         The critical initial issue is identifying the appropriate legal standard for evaluating the validity of antenuptial agreements that, like the one at issue here, are entered into after the effective date of Minn. Stat. § 519.11 (2016), and that address marital property. Section 519.11 states that it "shall apply to all antenuptial contracts and settlements executed on or after August 1, 1979." Minn. Stat. § 519.11, subd. 6. Here, it is undisputed that the parties' antenuptial agreement was executed after August 1, 1979. Therefore, the statute applies to the parties' agreement.

         Under subdivision 1 of the statute,

[a] man and woman of legal age may enter into an antenuptial contract or settlement prior to solemnization of marriage which shall be valid and enforceable if (a) there is a full and fair disclosure of the earnings and property of each party, and (b) the parties have had an opportunity to consult with legal counsel of their own choice. An antenuptial contract or settlement made in conformity with this section may determine what rights each party has in the nonmarital property, defined in section 518.003, subdivision 3b, upon dissolution of marriage, legal separation or after its termination by death and may bar each other of all rights in the respective estates not so secured to them by their agreement. This section shall not be construed to make invalid or unenforceable any antenuptial agreement or settlement made and executed in conformity with this section because the agreement or settlement covers or includes marital property, if the agreement or settlement would be valid and enforceable without regard to this section.

         The first sentence of this subdivision states that an antenuptial agreement "shall be valid" if the parties made full disclosure and had access to counsel. Id., subd. 1. This sentence does not otherwise limit itself. Generally, "'[s]hall' is mandatory." Minn. Stat. § 645.44, subd. 16 (2016). Therefore, if this sentence is read in isolation, it could be argued that it applies to all antenuptial agreements entered into after the effective date of the statute. But we conclude that the Minnesota Supreme Court's decisions in McKee-Johnson v. Johnson, 444 N.W.2d 259 (Minn. 1989), and In re Estate of Kinney, 733 N.W.2d at 118, direct otherwise.

         McKee-Johnson addressed an antenuptial agreement executed after the effective date of Minn. Stat. § 519.11. 444 N.W.2d at 262. That agreement covered both marital and nonmarital property, but it was challenged only with respect to marital property. Id. at 261. The district court ruled that section 519.11 rendered the portion of the agreement addressing marital property void and unenforceable as a matter of law. Id. at 262. This court affirmed the district court's ruling, concluding that section 519.11 excluded, as a matter of law, marital-property rights from the scope of rights able to be addressed by an antenuptial agreement. McKee-Johnson v. Johnson, 429 N.W.2d 689, 692-94 (Minn.App. 1988), rev'd 444 N.W.2d at 261. The supreme court disagreed, concluding that Minn. Stat. § 519.11 does not preclude antenuptial agreements from addressing marital property. McKee-Johnson, 444 N.W.2d at 264-65.

         Critical to the supreme court's ruling in McKee-Johnson was the court's interpretation of the third sentence of subdivision 1: "This section shall not be construed to make invalid or unenforceable any antenuptial agreement or settlement made and executed in conformity with this section because the agreement or settlement covers or includes marital property, if the agreement or settlement would be valid and enforceable without regard to this section." Id. at 263 (quoting Minn. Stat. § 519.11, subd. 1 (1988)). The supreme court reasoned that this sentence was ambiguous, and resorted to the legislative history of section 519.11 to discern the meaning of the sentence. Id. After reviewing the legislative evolution of what became Minn. Stat. § 519.11, the supreme court stated, "[t]he thrust of the bill was directed to codification of procedural fairness requirements in the execution of a valid antenuptial contract and, with respect to nonmarital property, to make it more difficult to subsequently challenge the validity of an antenuptial agreement covering nonmarital property." Id. at 264. The court explained that the legislative history showed no hostility to antenuptial contracts addressing marital property. Id. at 265. "To the contrary, " the court wrote, "the statute recognizes the validity of such a contract so long as 'it would be valid and enforceable without regard to this section.'" Id. at 264-65. "Therefore, " the supreme court concluded, "to determine whether the provisions of this contract relating to 'after acquired' [i.e., marital] property are valid and enforceable, we must look to our common law for guidance." Id. at 265. McKee-Johnson thus decided that if an antenuptial agreement addresses marital property, its validity is assessed under the common-law standard rather than the statutory standard.[2]

         McKee-Johnson then reviewed Minnesota antenuptial-agreement cases decided under common law and stated that those cases show that antenuptial agreements, "if fairly arrived at, following full disclosure of financial condition, and with opportunity to consult independently with counsel, have been favored in the common law of Minnesota-even though marital property was included within their scope." Id. The supreme court went on to explain that the common-law standard for assessing the validity of antenuptial agreements includes separate inquiries addressing the agreement's procedural and substantive fairness. Id. McKee-Johnson also stated that (a) "Minn. Stat. § 519.11 did not alter common law rules of procedural or substantive fairness applicable to provisions relating to the allocation of marital property;" and (b) "[t]he procedural review focuses on determining whether at the inception the agreement was fairly procured, and, under the common law, relevant factors to be considered are substantially identical to those which the legislature codified in Minn. Stat. § 519.11, subd. 1 (1988)." Id.

         Thus, McKee-Johnson ruled that the two-part disclosure-and-access-to-counsel standard in the first sentence of Minn. Stat. § 519.11, subd. 1, is "substantially identical" to the common-law standard for procedural fairness. Apparently as a result of what McKee-Johnson identified as the symmetrical requirements of the statute and the common law for the procedural fairness of an antenuptial agreement, McKee-Johnson then stated that "[u]nder the common law, and, as well, the statute, " procedural fairness requires full financial disclosure and the opportunity to consult counsel. Id. at 265-66. Critical for purposes of this appeal is the idea that, according to McKee-Johnson, both the statutory and common-law standards for assessing the validity of an antenuptial agreement require that the parties to that agreement have had the opportunity to consult independent counsel.[3]

         In 2007, the supreme court decided Kinney. Because Kinney involved an antenuptial agreement entered into in 1969, the agreement was not governed by Minn. Stat. § 591.11. 733 N.W.2d at 122. This court's unpublished decision ruled the agreement in Kinney invalid under the common law because the wife had not had the opportunity to consult independent counsel. In re Estate of Kinney, No. A05-1794, 2006 WL 1806386, at *3 (Minn.App. July 3, 2006), rev'd 733 N.W.2d at 120. The supreme court disagreed, concluding that "the opportunity to consult with independent counsel is a relevant factor in the analysis, " but it is not "a requirement for a valid antenuptial agreement under common law." Kinney, 733 N.W.2d at 124.

         The supreme court laid out a multifactor test for assessing whether an antenuptial agreement ...


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