Carmen Dalton Phelps v. William P. Dalton

NOT DESIGNATED FOR PUBLICATION

ARKANSAS COURT OF APPEALS

OLLY NEAL, Judge

DIVISION IV

CA01-69

SEPTEMBER 12, 2001

CARMEN DALTON PHELPS AN APPEAL FROM THE SALINE

APPELLANT COUNTY CHANCERY COURT v. [E99-1347-1]

WILLIAM P. DALTON HON. ROBERT W. GARRETT,

APPELLEE CHANCERY JUDGE

AFFIRMED

This is an appeal from the Saline County Chancery Court wherein the chancellor found that pursuant to a prenuptial agreement entered into between the parties prior to the marriage, the appellant, Carmen Dalton Phelps, was not entitled to claim any part of the property placed in a family trust by William Dalton, the appellee. Specifically, on appeal, appellant contends that (1) the chancellor erred in finding that non-related business real estate, namely a home in Montana and a condominium in Florida, and non-related personal property, namely a mobile home, acquired after the marriage could be placed into the subsequently created William P. Dalton Family Trust, and thus avoid being marital property in violation of the pre-marital agreement; and (2) that the chancellor erred in finding that the appellee's personal income was not marital property. We affirm.

William Dalton and Carmen Phelps were married on December 31, 1997. On December 24, 1997, the couple entered into a prenuptial agreement. Under the agreement, each party maintained the right to completely control his or her separate property. The parties also agreed that if their marriage was dissolved by death, divorce, or other proceedings, neither would claim any interest in the estate or property of the other based on curtesy, dower, homestead, family allowance, or any other similar rights. The agreement also set forth property that the parties were entitled to keep in the event of death, divorce, or other proceedings. This included Ms. Phelps's right to keep all jewelry and other items that Mr. Dalton had given her. It also included her right to keep the automobile that she was driving at the time of the divorce, subject to any outstanding debt.

After almost two years of marriage, Mr. Dalton filed for divorce. Mrs. Dalton counter-claimed and was granted the divorce. Applying the terms of the prenuptial agreement, the chancellor ruled that "marital property" in the agreement meant "property acquired during the marriage and titled in either or both names." In his ruling, the chancellor found, inter alia, the following: (1) real property located in Florida and Montana and titled in the name of appellee's revocable family trust was not marital property because the property was not titled in either Mr. or Mrs. Dalton's name jointly or individually; (2) unless the title to the mobile home lists as its owners either Mr. or Mrs. Dalton or happens to be in both of their names and was purchased after the marriage, then appellant would have no interest in that property and it would be the sole property of appellee; and (3) under the prenuptial agreement, appellant agreed to make to claim to any part of the property, income,or estate of Mr. Dalton.

On appeal, chancery cases, such as divorces, are reviewed de novo. Skokos v. Skokos, 344 Ark. 420, 40 S.W.3d 768 (2001); Tyler v. Talburt, 73 Ark. App. 260, 41 S.W.3d 431 (2001). With respect to the division of property in a divorce case, the appellate court reviews the chancellor's findings of fact and affirms them unless they are clearly erroneous, or against the preponderance of the evidence. Jablonski v. Jablonski, 71 Ark. App. 33, 25 S.W.3d 433 (2000); Hoover v. Hoover, 70 Ark. App. 215, 16 S.W.3d 560 (2000)

Parties are free to make contracts based on whatever terms and conditions they agree upon, provided the contract is not illegal or tainted with some infirmity such as fraud, overreaching, or the like. Holytrent Properties, Inc. v. Valley Park Ltd. Partnership, 71 Ark. App. 336, 32 S.W.3d 27 (2000). Arkansas permits parties contemplating marriage to enter into prenuptial agreements. Brawley v. Rogers, 188 Ark. 655, 67 S.W.2d 176 (1934). These agreements are contracts, and marriage is sufficient consideration for a prenuptial agreement settling property rights. Id. Prenuptial agreements must be entered into freely and in good faith absent fraud or undue influence. Brawley, supra. Such contracts should be liberally construed to carry out the intentions of the parties. Id.

Appellant argues that the chancellor's approach to this case was not in furtherance of the parties' intent under the agreement. Appellant believes that the issue is unsettled under Arkansas law and relies on two Massachusetts cases that she proposes address the issue. Nile v. Nile, 734 N.E.2d 1153 (Mass. 2001); See Eaton v. Eaton, 124 N.E. 37 (Mass. 1919). In Eaton, the precise question that the court dealt with was whether or not a man who hasmade an antenuptial contract with a woman, and who agrees to give her by will a share of his estate equal to that to be given by will to others, may by deliberate design, for the express purpose of diminishing the money value of the testamentary value of the testamentary provision for the wife, make lavish gifts to others during his lifetime. The Supreme Judicial Court of Massachusetts found that the husband could not dissipate his estate at the expense of his wife. In Nile, supra, the husband agreed, after entering into a divorce settlement, to leave two-thirds of his estate to the children of his former wife. He then placed most of his assets in a marital trust, which effectively reduced the value of the estate to which the children were entitled under the divorce settlement. The court held that Nile was not free to divest himself of his assets so as to leave the children with an amount so disproportionate to what they were entitled to receive under the settlement.

The case at bar can be distinguished from Eaton and Nile. In each of those cases, there was a promise or agreement made to the other party that the estates would be shared. Here, we have no such promise. Because this case involves basic contract law, it is not necessary that we travel outside of our jurisdiction to decide the case.

The appellant argues that appellee, by placing his non-related business real estate and his non-related personal property in a family trust, violated the agreement by not acting in good faith and deal fairly with the appellant. Relying on the Vermont case of Lynch v. Lynch, 522 A.2d 234 (Vt. 1987), the appellant argues that because Mr. Dalton retained control over the revocable trust, his intent was to circumvent Mrs. Dalton's rights under the agreement. However, grantors of trusts create a legal entity separate and apart fromthemselves. Payless Bldg. Ctr. v. L. Dean Wilmoth, 581 N.W.2d 450 (Neb. 1998). Except as the law may otherwise provide, such grantors are not free to alternately embrace or disown their creation as their individual interests may dictate at a particular moment. Id. As long as the trust exists, its separate nature must be respected. Id.

I. Distribution of Property

Mobile Home

According to the appellant, the circumvention is most evident with the purchase of the mobile home. Shortly after the marriage, Mr. Dalton purchased a mobile home in his own name. He argues that the mobile home actually belongs to the trust. Appellant contends that because the purchase contract for the mobile home reflects that the buyer is Bill Dalton and it is signed by William P. Dalton, Purchaser, the home belongs to the appellee personally and clearly exhibits his intent to breach the premarital agreement.

Under Arkansas law, there is a presumption that all property acquired during a marriage is marital property. McDermott v. McDermott, 336 Ark. 557, 986 S.W.2d 843 (1999). Whether or not property is marital does not depend upon when the property is received, but rather depends upon when the right to the property is acquired. Id. Here, the premarital agreement between the parties provides the definitive definition of marital property. Under the agreement, marital property included "all real and personal property acquired by the parties during the term of their marriage and titled in either or both of their names, other than the retirement account and increases in value thereof, and the businesses and the increases in value thereof, and the sale proceeds of the businesses identified inParagraph 5(a) above. . . ."

Paragraph five provides as follows:

[w]ife agrees that in the event of termination of the marriage relationship between the parties, she will make no claim nor receive any interest in any part of the property, income, or estate of first party [William Dalton] arising out of the rights granted by law because of the marriage relationship including, but not limited to, all statutory or common law rights of dower, homestead allowances, or any other rights except as expressly stated herein below. Specifically, she will make no claim or receive any interest in B&D Transport, Inc., or husband's retirement account with B&D Transport, Inc., and any increase in value thereof, Game Day Apparel, LLC, and Red River Knitting, LLC, and the appreciation in value of these companies or in retirement account, nor will she claim any interest in the appreciation in value of these companies or in the proceeds of the sale of any of these companies or any portions thereof.

We agree with the appellant in that the record reveals that appellee signed a purchase contract on the mobile home in his own name and not in the name of the trust. However, the record is devoid of any evidence as to how the mobile home was actually titled. Therefore, we affirm the chancellor's finding.

Montana home and Florida condominium

It is also appellant's contention that the home in Montana and the condominium in Florida were marital property in accordance with the premarital agreement. These properties were purchased by appellee for his daughters who were away at college. As the aforementioned definition reveals, in order to be martial property, the property must be acquired by and titled in either or both names of the appellant and appellee.

The record reveals that the homes were purchased from retained earnings from the business. In both purchases, funds were wired directly from the bank account of B&DTransport, appellee's business, to the closing agents. In addition, all of the real property was deeded in the name of the William P. Dalton Family Trust established by the appellee. We agree with appellee that these two pieces of real property are not marital property subject to division by the court. First, the paper trail clearly establishes that the funds for the purchase came from the retained earnings of B&D. As established by paragraph five of the premarital agreement above, appellant can claim no interest in B&D. Nor can she claim an interest in B&D's or any other of appellee's companies appreciation in value and their sale proceeds. Further, the deeds were not acquired and titled in either or both of their names; it was acquired and titled in the name of the William P. Dalton Family Trust. Therefore, the chancellor correctly found that the Montana home and Florida condominium were not martial property.

II. Appellant's personal income

The appellant also argues that the chancellor erred in finding that the appellee's personal income was not marital property. It is appellant's contention that all real and personal property acquired by the parties after the marriage, with the exception of those properties owned by Mr. Dalton, defined as "the retirement account, any increases in value thereof, the business and increases in value thereof, and the sale proceeds of the business . . . will be marital property." Appellant urges that if "sale proceeds" means the sale of the business and the proceeds therefrom and not sale receipts generated by the B&D Trucking business, then the income was marital property. Arguing that the provision is susceptible to more than one reasonable interpretation, the appellant asserts that the contract isambiguous or uncertain in its terms, and should therefore be interpreted most strongly against the party who selected the language.

The purpose of interpretation and construction of a contract is to ascertain and give effect to the intention of the parties to the contract as expressed by the writing, and in doing this, it is necessary to consider the circumstances surrounding the making of the contract, its subject, the situation and relations of the parties and the sense in which, taking these things into consideration, the words used would be commonly understood. U.S. for Use and Benefit of Commercial Equip. Co. v. Wooten, 121 F. Supp. 130 (Ark. 1954). Although the general rule states that a contract will be construed most strongly against the one who prepared it, this rule will not be applied where terms are plain and unambiguous. Bodcaw Oil Co. v. Atlantic Refining Co., 217 Ark. 50, 228 S.W.2d 626 (1950). A contract must be construed as a whole, all parts being considered, to determine the meaning of any part or as a whole. U.S. Fidelity & Guaranty Co. v. Sellers, 160 Ark. 599, 255 S.W. 26 (1923).

In the instant case, the terms of the agreement are not ambiguous. Under the premarital agreement, and as determined by the chancellor, the definition of marital property included property acquired and titled in either or both names. Appellant asserts that if the chancellor was correct in holding that the appellee's income was not marital property, then by definition Mr. Dalton makes no personal income and therefore cannot acquire marital assets.

A review of the agreement as a whole indicates that the parties intended that their personal income be excluded from the definition of marital property. Appellant testified thatshe was free to do as she pleased with her salary as a school teacher. She also testified that appellee was free to do with his money as he pleased. When paragraphs five and seven of the agreement, cited above, are read in concert, they include both the "the sale proceeds of the businesses" and the "proceeds of the sale of any of these companies or any portions thereof." Sale proceeds generally means the sale of items or services of a company or money generated from the operation of a business. Proceeds of a sale generally refers to the sale of any business. Both are excluded by agreement of the parties.

In summary, we agree with the chancellor that neither the home in Montana nor the condominium in Florida were marital property under the definition of marital property set forth in their prenuptial agreement. We also hold that although appellant proved that the mobile home was acquired in appellee's name, she failed to prove that it was titled in his name. Therefore, we cannot determine from the record whether it falls within the definition of marital property. Additionally, we affirm the chancellor and hold that the appellee's personal income was excluded from the definition of marital income and that the premarital agreement was not ambiguous.

Accordingly, we affirm.

Stroud, C.J., and Griffen, J., agree.