Texas Supreme Court Holds Wife Waived Rights to Payment Provided for in Pre-Marital Agreement by Seeking Rescission of the Agreement

As with any contract, parties drafting a pre-marital agreement prior to getting married should take the utmost care to ensure they fully understand the terms of the agreement and how their conduct can affect their right to recover under the agreement. The Texas courts favor the right to contractual freedom, and it is very difficult to get them to overturn a pre-marital agreement. In the Matter of the Marriage of I.C. and Q.C., the Texas Supreme Court recently denied a wife’s request to rescind a pre-marital agreement due to husband’s failure to make required payments, and found that her effort to rescind the agreement resulted in a forfeiture of her right to certain assets. If you are held to a pre-marital agreement and are considering ending your marriage, a Texas family law attorney can assist you in understanding the terms of your agreement and how certain actions can impact your right to distribution of marital assets.

In The Matter of the Marriage of I.C. and Q.C., wife and husband signed a pre-marital agreement that stated wife would receive a lump sum payment of $5 million if the parties divorced. The agreement contained a clause that stated, in part, if wife tried to invalidate the agreement she would forfeit her right to the lump sum payment.

Husband filed for divorce. Wife petitioned to enforce the agreement, which required husband to make certain payments to wife. Husband fell behind in payments, and wife petitioned the court to require him to pay past due amounts, which the court granted. Wife then filed a counter-petition for breach of contract and breach of fiduciary duty and requested rescission of the agreement. In response, husband filed a declaratory judgment asking the court to rule that by seeking rescission wife waived her right to the lump sum payment, and filed a motion for summary judgment on his declaratory judgment. Following a trial, a jury found wife’s request to rescind the agreement was excused due to husband’s breach by failure to make payments. Husband requested a new trial, which the court granted. The court subsequently granted husband’s motion for summary judgment on the issue of whether wife waived her right to the lump sum payment. Wife petitioned the Supreme Court of Texas for review, which they granted.

On appeal, the court noted the language of the agreement clearly stated wife would waive the right to the lump sum payment if she sought to rescind the contract. The court explained contracts are to be interpreted in a manner that comports with the intent of the contract. In analyzing the effect of a rescission of the agreement, the court found it would result in equitable distribution of the marital assets, which was in clear contravention of several provisions of the agreement, and would result in wife receiving a much greater share of the marital asset than she would under the agreement. The court was not persuaded by wife’s argument that her request to rescind the contract as alternative relief in her pleading was not sufficient to trigger the forfeiture.

The court also declined to adopt wife’s “just cause” argument that her request was justified by husband’s breach of the agreement, noting that the lower court found husband had not breached the agreement. The court pointed out wife had other remedies under the agreement, rather than seeking rescission. The court noted it would not uphold agreements it found to be unconscionable or not entered into voluntarily, but did not find that to be applicable to the current case. Further, the court stated if the parties had intended for a “just cause” exception to apply that should have been written into the terms of the contract. The court declined to impose an equitable exception to the terms of the contract as written. As such, the court affirmed the trial court ruling.

If you signed a pre-marital agreement prior to getting married and now seek to end your marriage it is important that you do not violate any terms of the agreement that might affect your right to marital assets. Before you take any other action, you should consult with a skilled divorce attorney as soon as possible to analyze your case. Rick Davis is an experienced family attorney skilled at navigating the emotional and legal complexities that come with divorce. Contact us at (979) 779-4357 or via our online form to setup a consultation.

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