One concern for real property attorneys has been effectively eliminated. For some time there has been a question as to the enforceability of postnuptial free trader agreements. The statutes seem to expressly authorize their use and eliminate the requirement for consideration without quite saying so or specifically mentioning them. The older cases dealing with antenuptial agreements did not favor them and often found them unenforceable on public policy grounds or for lack of consideration. This lead to legislation specifically authorizing prenuptial contracts. Therefore, we were left with statutes specifically protecting separation and prenuptial agreements and with a substantial body of case law clearly indicating a willingness to scrutinize marital contracts closely and invalidate those found wanting. The absence of a specific authorizing statute or an on-point appellate decision specifically sanctioning postnuptial agreements left many practitioners concerned about their efficacy.

Judge Greene’s dissenting opinion in Williams v. Williams, 120 N.C. App. 707, (1995) has provided encouragement, but no assurance to those who maintain that the statutes mean what they say and may be relied upon as evidencing that postnuptial property agreements do not violate public policy. “ The North Carolina General Assembly first evidenced a change in public policy as to marital agreements in 1981 with the adoption of N.C. Gen. Stat. § 50-20(d). This statute permits parties "[b]efore, during or after marriage" to agree to the distribution of the marital property at the time of their separation. Thus, an agreement entered pursuant to this statute is valid even though the parties continue to live together after its execution. Buffington v. Buffington, 69 N.C. App. 483, 317 S.E.2d 97 (1984). In 1987 the General Assembly again indicated its choice of public policy when it adopted the Uniform Premarital Agreement Act (UPAA). N.C.G.S. ch. 52B (1987). Prior to the adoption of the UPAA, the public policy forbad some premarital agreements on the grounds that they encouraged divorce. I Suzanne Reynolds, Lee's North Carolina Family Law § 1.13(B) (5th ed. 1993). Under the UPAA, parties who anticipate marriage are permitted to contract with regard to support and property rights that may arise upon divorce. N.C.G.S. § 52B-4(a) (1987). Thus with regard to property settlement agreements and premarital agreements, the General Assembly has decided that such agreements do not incite divorce nor separation but instead promote marital stability by defining the expectations and responsibilities of the parties.”

Dawbarn, v. Dawbarn, COA05-364 filed on February 7, 2006 in the North Carolina Court Of Appeals squarely and affirmatively addresses the question. The Court begins by declaring that public policy “‘is not offended by permitting . . . spouses to execute a complete settlement of all spousal interests in each other's real and personal property and yet live together.’ In re Estate of Tucci , 94 N.C. App. 428, 438, 380 S.E.2d 782, 788 (1989).” In this case, the plaintiff argued that the postnuptial agreement should not be enforced because it provided an economic incentive to his wife to leave the marriage and was repugnant to public policy.

The postnuptial agreement at issue transferred the property to the wife upon the signing of the agreement. The parties’ future separation had no effect on the terms of the agreement. The Court held that the agreement did not provide any incentive to end the marriage and was therefor not void as against public policy.

The facts cited in the opinion can be summarized as follows. The parties were married in 1985 and in 1993, the defendant confronted the plaintiff about his involvement in an extramarital affair. Subsequently, the plaintiff drafted a note, at the defendant's request, stating his intent to convey the three jointly owned houses and their contents, to the defendant. The plaintiff suggested having the agreement formalized by his attorney and the defendant had already hired an attorney to represent her and preferred that they formalize the agreement there. After reviewing the Agreement and the deeds at issue, the plaintiff signed the Agreement, deeds, and a memorandum of agreement.

The Agreement provided:
“The parties hereto do contract and agree as follows: That since the marriage of the Parties, the property as is hereinafter specifically enumerated has been acquired or owned by either the Party of the First Part/Husband or the Party of the Second Part/Wife or both.”

“That it is the contract and agreement of the Parties that from and after the date of this document, the property enumerated below will be the sole and separate property of the Party of the Second Part/Wife, free and clear of any right, title, claim, or interest of the Party of the First Part/Husband whatsoever, including but not limited to, claims pursuant to N.C.G.S. § 50-20 et seq. and the said Party of the First Part/Husband does hereby bargain, sell, convey and quitclaim unto Party of the Second Part/Wife all of his right, title and interest therein.”

Pursuant to the Agreement the defendant transferred the three homes purchased during the marriage, all of the vehicles owned by the parties, and all of the furnishings in the homes. The plaintiff also assumed responsibility for all future costs associated with the homes, including, but not limited to, ad valorem taxes, repairs, and “redecorating costs and the like.” At the execution of the Agreement, the value of the property conveyed to the defendant was approximately $850,000.00. Subsequently the plaintiff conveyed another parcel of property to Defendant to complete the conveyance of the properties to her according to the Agreement.

After this, the parties lived together as husband and wife for more than nine years and did not treat the property as belonging solely to Defendant. In May 2003, the plaintiff requested the defendant to take out a loan secured by one of the properties and, defendant refused and the parties separated. In August 2003, the plaintiff filed this action to set aside the Agreement “on the grounds of undue influence, fraud, duress, breach of a fiduciary duty, lack of consideration, and contravention of public policy.” The trial judge granted summary judgment in favor of the defendant on all claims.

On appeal, the plaintiff contended that the trial court erred in granting summary judgment on his claim that the Agreement was void as against public policy. The Court of Appeals disagreed.

Citing North Carolina General Statute section 52-10(a) the Court notes:

“(a) Contracts between husband and wife not inconsistent with public policy are valid, and any persons of full age about to be married and married persons may, with or without valuable consideration, release and quitclaim such rights which they might respectively acquire or may have acquired by marriage in the property of each other; and such releases may be pleaded in bar of any action or proceeding for the recovery of the rights and estate so released.”

The Court reviews public policy doctrine and states that it “‘is not offended by permitting . . . spouses to execute a complete settlement of all spousal interests in each other's real and personal property and yet live together.’ Tucci, 94 N.C. App. at 438, 380 S.E.2d at 788. However, when an agreement provides an economic inducement to leave the marriage, it is void as against public policy. Matthews v. Matthews, 2 N.C. App. 143, 162 S.E.2d 697 (1968).”

The plaintiff argued that the Court of Appeals' decision in Matthews supported his contention that the Agreement violates public policy. The Court distinguished Matthews, stating that the contract at issue in that case “provided that the plaintiff had promised ‘that if I ever leave [the defendant], everything I have or will have will be hers to have and hold for the benefit of our children and herself[.]’ Id. We held that this contract was void as against public policy because enforcing the agreement would ‘induce the wife to goad the husband into separating from her in order that the agreement could be put into effect[.]” Id. at 147, 162 S.E.2d at 699.”

The court determined that there was no evidence in the record suggesting that the Agreement provided any economic inducement to end the marriage. The properties became the defendant's upon the execution of the documents and a future separation would have no effect on the terms of the Agreement. The testimony of the plaintiff was that the Agreement encouraged him to stay in the marriage as he felt that he “had no choice but to remain married to Linda Kay Dawburn, even though our marriage has been less than happy for quite some time in the recent past.”

The Court concludes that where “‘it appears the execution of the Agreement was intended to encourage the parties to reconcile and improve their marriage[,]’ public policy is not violated. Tucci, 94 N.C. App. at 438, 380 S.E.2d at 788 (emphasis in original). Because there is no evidence in the record to suggest that the Agreement would give either spouse an incentive to end the marriage, and, based on Plaintiff's affidavit and Defendant's deposition testimony, the execution of the Agreement encouraged the parties to reconcile and remain married, the Agreement does not violate public policy.”

The plaintiff’s next argument that the Agreement was unconscionable, that it was executed under duress, and that it should be rescinded was disposed of by the Court of Appeals in favor of the defendant also. The Court held that the trial court correctly granted summary judgment in favor of the defendant on the grounds that the three-year limitation set forth in section 1-52(9) barred the plaintiff's assertions of duress.

This decision can be summarized for title purposes by stating that post-nuptial agreements are not intrinsically void as against public policy. Further that a properly executed agreement of record can be relied upon in the absence of knowledge of any defect in its execution. And lastly, that a non-collusive purchaser for value takes good title. This is so because even though the agreement and any conveyances may be voidable as between the parties, absent actual knowledge of the facts giving rise to violability, a purchaser for value takes good title in reliance upon a recorded instrument that is otherwise valid on its face.

When dealing with a party to such an instrument a closing attorney would be prudent to inquire as to whether there were any controversies or claims by the other party. When representing a purchaser from such a party, prudence would suggest an inquiry of the purchaser as to knowledge of any such claims. Beyond this, it would seem that we should be entitled to rely upon the record in subsequent transactions in the absence of any knowledge that would suggest further inquiry. Reliance on such matters should be reported to the title insurer if applicable and any resulting requirements for further inquiry should be scrupulously observed.