Louis J. PORRECO, Appellant, v. Susan J. PORRECO, Appellee.
Supreme Court of Pennsylvania.
Nov. 27, 2002.
811 A.2d 566
Argued Sept. 11, 2001. Resubmitted June 6, 2002.
ORDER
The Order of the Superior Court is affirmed. The Petition for Permission to File Post-Submission Communication in Accordance with
Justice EAKIN did not participate in the consideration or decision of this case.
Frank L. Kroto, Joanne Ross Wilder, for Susan J. Porreco.
Before ZAPPALA, C.J., and CAPPY, CASTILLE, NIGRO, NEWMAN, SAYLOR and EAKIN, JJ.
OPINION ANNOUNCING THE JUDGMENT OF THE COURT
Justice NEWMAN.
In this case we must decide whether a misstatement by one party to a prenuptial agreement of the assets of the other party constitutes fraud such that the prenuptial agreement is voidable. We find that there is no justifiable reliance by the party claiming fraud with respect to this representation and, accordingly, we reverse the Superior Court on that issue. We also remand this case to the Superior Court to review the determination by the trial court that a confidential relationship existed between the parties.
FACTUAL AND PROCEDURAL BACKGROUND
Appellant Louis Porreco (“Louis“) was forty-five years old, and previously married, when he met Appellee Susan Porreco (“Susan“), who was seventeen years old, in high school, living with her parents, and working part-time at a ski shop. The parties dated for over two years, during which time Louis provided Susan with an apartment, an automobile, insurance, a weekly allowance, access to one of his credit cards as a secondary card holder, and a gas charge account at his car dealership‘s fueling station.
When the parties engaged to be married, Louis presented Susan with an engagement ring. The parties dispute whether Susan knew at the time Louis gave her the ring that it was not a genuine diamond but, instead, a cubic zirconium. The trial court credited Susan‘s testimony that she believed the engagement ring contained a real diamond and did not discover that it was fake until the parties separated many years later.
In July of 1984, Louis presented Susan with the first draft of a prenuptial agreement. Louis did not discuss the agreement with Susan, other than to say that it was a standard agreement with the provisions left blank, and that Susan should seek legal counsel. This first draft of the agreement made no provision for Susan, other than that she was to retain her separate property in the event of a divorce. Louis later presented Susan with a second version of the agreement, which provided that, in the event of divorce, Susan was to receive $3,500.00 for each year of marriage in lieu of alimony, alimony pendente lite, and spousal support. Also pursuant to this agreement, Louis would provide Susan with an automobile and health insurance for one year. In all other respects, the agreement provided that the parties would retain their separate property, including all increase in value thereof.
Prior to the execution of the final version of the agreement, Louis prepared, in his own handwriting, a personal financial statement that listed Susan‘s assets. Included in this list was an entry for the engagement ring, with the value listed at $21,000.00. Although the financial statement described the ring as an engagement ring, it did not state that the ring
When the parties separated more than ten years later, Susan took the ring to a jeweler in South Carolina, who informed her that it was not a diamond. Subsequently in the divorce proceedings, Susan filed a Petition for Special Relief to set aside the prenuptial agreement. Susan alleged three grounds for invalidation of the prenuptial agreement: (1) that Louis fraudulently induced her to enter the prenuptial agreement by misrepresenting the value of the ring; (2) that Louis breached a confidential relationship with her; and, (3) that Louis violated his duty, pursuant to our decision in Simeone v. Simeone, 525 Pa. 392, 581 A.2d 162 (1990), of a full and fair disclosure.
The trial court invalidated the prenuptial agreement. The court concluded that a confidential relationship existed between Louis and Susan, due to the difference in the parties’ age, sophistication, wealth and status, and Susan‘s dependence on Louis for her material and social well-being. Louis breached this confidential relationship, according to the trial court, by having a prenuptial agreement drafted that was lopsided in his favor. Additionally, the court found that Louis misrepre-
The Superior Court affirmed3 in a 2-1 unpublished decision. The majority determined that Susan had proven, by clear and convincing evidence, that Louis fraudulently induced her to enter the prenuptial agreement by misrepresenting the value of the ring. Because the majority agreed with the trial court that the prenuptial agreement was voidable due to Louis’ fraud, they did not address the merits of the determination by the trial court that Louis breached a confidential relationship with Susan. Judge Kelly dissented. In Judge Kelly‘s view, the remedy of invalidating the entire prenuptial agreement was too harsh. Instead, Judge Kelly would have required Louis to pay Susan $21,000.00 to compensate her for the value of the ring as stated in the prenuptial agreement, but would otherwise have enforced the agreement.
DISCUSSION
We begin our analysis with a recitation of the standard of our review of an appeal from the decision of a court sitting in equity. We are bound by the facts found by the court, when supported by competent evidence in the record. Kepple v. Fairman Drilling Co., 532 Pa. 304, 312, 615 A.2d 1298, 1302 (1992). “However, no such deference is mandated for conclusions of law, and we are at liberty to review such conclusions.” Id. (citing Presbytery of Beaver-Butler of United Presbyterian Church v. Middlesex Presbyterian Church, 507 Pa. 255, 266, 489 A.2d 1317, 1323 (1985)).
The starting point for assessing the merit of any challenge to the validity of a prenuptial agreement is our decision in Simeone. In that opinion, we reevaluated our criteria for enforcing prenuptial agreements and rejected the paternalistic assumption in our caselaw that courts must scrutinize these agreements and refuse to enforce those that failed to make a reasonable provision for the other spouse. As we stated in Simeone, “[s]uch decisions rested upon a belief that spouses are of unequal status and that women are not knowledgeable enough to understand the nature of contracts that they enter.” Simeone, 525 Pa. at 399, 581 A.2d at 165. Instead, we placed prenuptial agreements on the same general footing as other contracts, to be enforced pursuant to the well-settled principles of contract law: “[p]renuptial agreements are contracts, and, as such, should be evaluated under the same criteria as are applicable to other types of contracts.” Id. at 400, 581 A.2d at 165.
In reorienting our standards for enforcing prenuptial agreements to the traditional principles of contract law, however, we did not lose sight of the fact that parties to these agreements do not necessarily deal with each other at arm‘s length. Accordingly, we reaffirmed “the longstanding principle that a full and fair disclosure of the financial positions of the parties is required.” Id. at 402, 581 A.2d at 167. “Absent this disclosure, a material misrepresentation in the inducement for entering a prenuptial agreement may be asserted.” Id. (citing Hillegass’ Estate, 431 Pa. 144, 152-53, 244 A.2d 672, 676-77 (1968)). Thus, despite the prevailing theme in Simeone that the provisions of prenuptial agreements should be subject to no greater scrutiny than ordinary business contracts, we nevertheless continued the principle from our previous decisions that these agreements will only be enforced where the parties make a “full and fair” disclosure. In addition to preserving this vestige of our common-law caution towards the enforcement of prenuptial agreements, we af-
Presently, we are not asked to decide the extent of the “full and fair” disclosure rule of Simeone; neither the trial court nor the Superior Court relied on this rule to invalidate the prenuptial agreement. Rather, we must consider whether the trial court properly concluded that Louis fraudulently induced Susan to sign the prenuptial agreement by misrepresenting the value of the engagement ring on the list of her individual assets, which he prepared as part of the prenuptial agreement.
The elements of fraudulent misrepresentation are well settled. In order to void a contract due to a fraudulent misrepresentation, the party alleging fraud must prove, by clear and convincing evidence: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) resulting injury proximately caused by the reliance. Bortz v. Noon, 556 Pa. 489, 499, 729 A.2d 555, 560 (1999); Gibbs v. Ernst, 538 Pa. 193, 207, 647 A.2d 882, 889 (1994). All of these elements must be present to warrant the extreme sanction of voiding the contract.
To be justifiable, reliance upon the representation of another must be reasonable. See In re Allegheny International, Inc., 954 F.2d 167, 178 (3d Cir. 1992) (applying Pennsyl-
Whether reliance on an alleged misrepresentation is justified depends on whether the recipient knew or should have known that the information supplied was false. Scaife Co. v. Rockwell-Standard Corp., 446 Pa. 280, 285 A.2d 451 (1971) (citing Emery v. Third National Bank, 308 Pa. 504, 162 A. 281 (1932)). Where the means of obtaining the information in question were not equal, the representations of the person believed to possess superior information may be relied upon. Siskin v. Cohen, 363 Pa. 580, 70 A.2d 293, 295 (1950).
Fort Washington Resources, Inc. v. Tannen, 858 F. Supp. 455, 460 (E.D. Pa. 1994). Additionally, in Moore v. Steinman Hardware Co., 319 Pa. 430, 179 A. 565 (1935), a case in which the plaintiff alleged fraud in connection with the sale of corporate stock, we stated, “[i]t has many times been pointed out that a buyer or seller is not entitled to rely on such statements where he has an equal opportunity to ascertain the facts affecting the value of the thing to be sold.” Id. at 433, 179 A. at 566. Since Simeone, we have moved towards treating parties to a prenuptial agreement the same as parties to other contracts, with the attendant duties of investigation and due
care for their bargain. We will, accordingly, judge the reasonableness of a party‘s reliance by the same standards.
In the present case, although we are bound by the factual conclusions of the trial court,5 we cannot agree that Susan‘s alleged reliance on Louis’ misrepresentation of the value of the ring on the schedule of her assets was justifiable. Susan had possession of the ring and was not impeded from doing what she ultimately did when the parties separated: obtain an appraisal of the ring.6 She had sufficient opportunity to inform herself fully of the nature and extent of her own assets, rather than rely on Louis’ statements concerning the valuation of her holdings. We find her failure to do this simple investigation to be unreasonable. Although we do not excuse Louis’ actions, we will not sanction the avoidance of an entire prenuptial agreement—the consequences of which Susan admittedly understood—on the basis of fraud in these circumstances.
Because the Superior Court never reviewed the determination by the trial court that a confidential relationship existed between Louis and Susan, however, we will reverse and remand for consideration of that issue.
Justice SAYLOR files a dissenting opinion in which Justice NIGRO joins.
Justice EAKIN files a dissenting opinion.
Chief Justice ZAPPALA, concurring.
I join Justice Newman‘s opinion. I write separately to address my grave concern that the filing of an opinion that expresses itself in rhyme reflects poorly on the Supreme Court of Pennsylvania. While one may disagree intellectually with another‘s judicial philosophy, and the exchange of differing views is at the very core of a jurist‘s function, it is the substance of our views that should be the focus of discussion. The gravity of differing judicial views is diminished when the focus is taken away from their substance because of the form in which they are presented. I believe the integrity of this institution depends in great part upon the understanding that we engage in careful, deliberate and serious analysis of the legal issues that we undertake to examine. The integrity of the Supreme Court of Pennsylvania should never be placed in jeopardy by actions that would alter the perception of those whose lives and interests are affected by the decisions of the Court.
It is of little import whether the issue before the Court involves the decision to impose the death penalty on an individual, the economic interests of individuals or businesses, or the effect of divorce actions in Pennsylvania. Each issue addressed by this Court commands our thorough, weighty consideration. No matter addressed by this Court is frivolous.
The dignity of the Supreme Court of Pennsylvania, and the deserved respect that has been hard-earned, should not be diminished. I feel strongly that the expression of opinions issued by the highest court in the Commonwealth of Pennsylvania should reflect the gravity of our constitutional responsibility to our citizens. Our oath of office demands nothing less.
Justice CAPPY, concurring.
I concur only in the result reached by the majority opinion. I write in this case not because the legal issues presented by the parties require further elucidation, to the contrary my learned colleagues have presented ample discourse on those topics. I write because I too am genuinely concerned with the point raised by the learned Chief Justice in his concurring opinion.
It is axiomatic and I firmly believe that every jurist has the right to express him or herself in a manner that the jurist deems appropriate. My concern, however, and the point on which I concur completely with the Chief Justice, lies with the perception that litigants and the public at large might form when an opinion of this Court is reduced to rhyme. I, too, feel strongly that no case with which this court deals is any more or less important than any other; I will endeavor to prevent a contrary impression whenever possible.
Accordingly, although respectful of the wishes of my esteemed colleague in the dissent, I am constrained to join the concurrence offered by the Chief Justice.
Justice CASTILLE, concurring.
I join the lead opinion, but write separately to emphasize that there is another issue, which the courts below may have to address, before this matter can be finally resolved. Our reversal today is limited to the single issue brought before this Court: whether the prenuptial agreement was invalid as a result of fraud. But this is not the only open issue in the case.
In the initial action, appellee Susan Porreco alleged three distinct grounds for invalidation of the prenuptial agreement: (1) that appellant Louis Porreco fraudulently induced her to enter the prenuptial agreement by misrepresenting the value of the ring; (2) that appellant breached a confidential relationship with her; and (3) that appellant violated his duty of full and fair disclosure, as articulated in Simeone v. Simeone, 525 Pa. 392, 581 A.2d 162 (1990). Although appellee argued these three separate grounds, only the first ground is resolved by
In this regard, I note that neither of the courts below has yet to rule on the question of whether appellant violated his duty of full and fair disclosure by misstating the value of the ring given to appellee. This Court in Simeone held that full and fair disclosure of the parties’ financial positions is required in a prenuptial agreement. 581 A.2d at 167. “Parties to [prenuptial] agreements do not quite deal at arm‘s length, but rather at the time the contract is entered into stand in a relation of mutual confidence and trust that calls for disclosure of their financial resources.” Id. As noted in the lead opinion, a prenuptial agreement may be invalidated “where a party fails to make ‘full and fair’ disclosure of his or her own assets prior to entering the agreement.” Op. at 570 (citing Simeone).
The trial court invalidated the agreement in this case on two of appellee‘s three grounds. First, the trial court found that appellant made a material misrepresentation regarding the value of the engagement ring, and thereby fraudulently induced appellee to enter into the agreement. Second, the trial court found that there was a confidential relationship between the parties, which appellant breached. The trial court did not, however, specifically pass upon the Simeone question.
On direct appeal, the Superior Court agreed that appellant fraudulently induced appellee into entering the prenuptial agreement by misrepresenting the value of the ring. Agreeing with the trial court‘s determination that fraud had occurred, the Superior Court did not address the alternative question of whether or not appellant breached the confidential relationship, nor did it reach the full and fair disclosure question raised pursuant to Simeone, which the trial court itself did not reach.
The only issue before this Court on discretionary review is whether the courts below properly concluded that appellant fraudulently induced appellee into the prenuptial agreement by misrepresenting the value of the engagement ring on the
Thus, although I agree with the lead opinion that the prenuptial agreement is valid with respect to the issue before this Court, i.e. fraud, I caution that the case is far from over since, upon remand, the prenuptial agreement may be found invalid on one of the two remaining grounds.
Justice SAYLOR, dissenting.
As I would not impose a duty to investigate upon Appellee, I respectfully dissent. Preliminarily, in the context of fraud or misrepresentation, the elements necessary to avoid a contract correspond with those required to establish tort liability. See generally RESTATEMENT (SECOND) OF CONTRACTS (Topic 1. Misrepresentation, Introductory Note) (1979) (explaining that the rules applicable in the contractual context conform to those provided for in tort, although because “tort law imposes liability in damages for misrepresentation, while contract law does not, the requirements imposed by contract law are in
Here, taking into consideration that the parties did not deal at arm‘s length, their age and experience disparity, the absence of any evidence indicating that Appellee failed to act in
Justice NIGRO joins this dissenting opinion.
Justice EAKIN, dissenting.
A groom must expect matrimonial pandemonium
when his spouse finds he‘s given her a cubic zirconium
instead of a diamond in her engagement band,
the one he said was worth twenty-one grand.
Our deceiver would claim that when his bride relied
on his claim of value, she was not justified
for she should have appraised it; and surely she could have,
but the question is whether a bride-to-be would have.
The realities of the parties control the equation,1
and here they‘re not comparable in sophistication;
the reasonableness of her reliance we just cannot gauge
with a yardstick of equal experience and age.
by which the “reasonable fiancée” is assessed.
She was 19, he was nearly 30 years older;
was it unreasonable for her to believe what he told her?
Given their history and Pygmalion relation,
I find her reliance was with justification.
Given his accomplishment and given her youth,
was it unjustifiable for her to think he told the truth?
Or for every prenuptial, is it now a must
that you treat your betrothed with presumptive mistrust?
Do we mean reliance on your beloved‘s representation
is not justifiable, absent third party verification?
Love, not suspicion, is the underlying foundation
of parties entering the marital relation;
mistrust is not required, and should not be made a priority.
Accordingly, I must depart from the reasoning of the majority.