2ND DCA Reverses Trial Court’s Interpretation of Prenuptial Agreement to Avoid Permitting a Double Recovery by Spouse with Relation to Probate Proceedings

Posted on June 20, 2016

In the subject case, Northern Trust Co. v. Shaw, 2016 Fla. App. LEXIS 8476 (Fla. 2d DCA 2016), the Second DCA found that a wife was not entitled to a $500,000 distribution from the probate portion of her late husband’s estate because she had already received $500,000 from husband’s estate in accordance with a prenuptial agreement. The Court reasoned that if it interpreted the prenuptial agreement to permit her to do so, it would be permitting her to collect the $500,000 distribution from husband’s estate twice.

Prior to marrying in 2009, Natalia (“Wife”) and Andrew Shaw had executed a prenuptial agreement which provided for the disposition of their assets in the event of their deaths. Under the terms of the agreement, Mrs. Shaw waived all of her rights in Mr. Shaw’s estate with exceptions for the following items: (1) the sum of $500,000 from Mr. Shaw’s estate conditioned upon neither party having filed a petition for dissolution of marriage, (2) any testamentary gifts made by Mr. Shaw during the marriage, (3) any retirement and pension benefits for which Mrs. Shaw is a named beneficiary, and (4) a life estate in the interest in any principal residence owned by Mr. Shaw.

In 2012, Mr. Shaw died and Wife received the following pursuant to the agreement: (1) assets Mr. Shaw gifted to her in a tangible personal property list, (2) $480,000 as a named beneficiary of Mr. Shaw’s IRA, and (3) $108,977 for her share of a life estate interest in Mr. Shaw’s principal residence. Wife then filed claim in the probate proceedings seeking the $500,000 distribution, pursuant to the prenuptial agreement, which Northern Trust, as Personal Representative of Mr. Shaw’s estate, denied. Wife then filed a complaint in the circuit court seeking damages for breach of contract.

In response, Northern Trust asserted as affirmative defenses that first, Wife was precluded from receiving the $500,000 distribution because Mr. Shaw had filed a petition for dissolution prior to Mr. Shaw’s death. Secondly, Northern Trust argued that Wife was precluded from receiving the $500,000 distribution because she had already received over $500,000 from Mr. Shaw’s “estate” as defined in the agreement. Wife filed a motion for partial summary judgment in which she argued that she was entitled to the $500,000 distribution under the plain language of the prenuptial agreement. She also argued that Northern Trust’s affirmative defense with regard to the petition for dissolution of marriage failed as a matter of law because the petition was a nullity since Mr. Shaw was incapacitated at the time it was filed and because his counsel had not complied with statutory requirements for filing as a guardian. The trial court entered an order granting Wife’s motion for partial summary judgment.

Wife then filed a motion for final summary judgment as to Northern Trust’s remaining affirmative defense. She did not dispute that she had already received over $500,000 in assets from his estate, in the form of the tangible personal property, the IRA distribution, and for her share of the life estate interest, as entitled pursuant to the agreement. She argued that the agreement contained provisions entitling her to receive these assets in addition to the $500,000 distribution, which Northern Trust did not contest with regard to the life estate interest, but asserted that the IRA distribution and personal property award satisfied the terms of the $500,000 distribution. The trial court disagreed, and granted Wife final summary judgment, awarding her the additional $500,000 from the estate, under the terms of a prenuptial agreement.

Northern Trust appealed to the Second DCA which agreed with them, reversing the trial court. In its reasoning, the Court noted that the agreement contained a choice of law provision which was to be interpreted under North Carolina law.  Under North Carolina law, prenuptial agreements are governed by standard contract interpretation principles, interpreted according to the parties’ intent, and the parties’ intent is ascertained by looking to the plain language of the contract.  See Liptrap v. Coyne, 196 N.C. App. 739, 675 S.E.2d 693, 696 (N.C. Ct. App. 2009).  When a contract defines a term, courts should use that definition. Duke Energy Corp. v. Malcolm, 178 N.C. App. 62, 630 S.E.2d 693, 695 (N.C. Ct. App.). Courts should also construe various terms of a contract harmoniously, giving effect to each word and provision.

The Court noted that under the plain language of the agreement at issue, Mrs. Shaw was entitled to receive $500,000 from Mr. Shaw’s “estate.” Using the definition as stated in the contract, Mr. Shaw’s “estate” included “individual retirement accounts . . . and other assets that may pass by beneficiary designation outside of will or trust documents.” Thus, both the $480,000 IRA distribution and the $103,996 worth of testamentary gifts which Mr. Shaw named in the tangible personal property list were part of his estate. Since these assets had been distributed to Wife and they totaled more than $500,000, the terms of the agreement were satisfied. Meaning, Wife was not entitled to a separate $500,000 distribution. Interpreting the relevant contract provisions as Wife would have liked, would have allowed her to recover the $500,000 distribution from Mr. Shaw’s estate twice. She would have received $500,000 from the portion of the estate, including the IRA and tangible personal property and an additional $500,000 from the probate portion of the estate. The Court noted that this construction would not properly express the parties’ expressed intent in the agreement. In an attempt to also construe the agreement provisions facially, Wife asserted that Northern Trust’s interpretation of the agreement would conflict with the provisions in other sections of the agreement in which Mr. Shaw had the ongoing opportunity to make testamentary gifts and IRA distributions as desired. However, the Court did not find this argument by Wife persuasive and accordingly, reversed the trial court’s finding of summary judgment for Wife.

If you or anyone you know is in need of representation in actions involving Guardianship, Probate and/or Trust Disputes, or questions pertaining to such proceedings, please contact The Law Offices of Glenn M. Mednick, P.L., at (954) 315-1154 or gmednick@mednicklawgroup.com.

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