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In re Estate of Wolhar

Court of Chancery of Delaware

February 6, 2018

IN RE: THE MATTER OF THE ESTATE OF KENNETH R. WOLHAR NATALIYA V. WOLHAR Petitioner,
v.
CAROLYN WOLHAR, Executrix of the Estate Of KENNETH R. WOLHAR, Respondents.

          Date Submitted: January 12, 2018

          MASTER'S REPORT

          Patricia W. Griffin Master in Chancery

         Petitioner, Nataliya V. Wolhar (hereinafter "Nataliya"), surviving spouse of Kenneth R. Wolhar (hereinafter "decedent"), filed this petition for an elective share of the decedent's estate.[1] Respondent, Carolyn Wolhar (hereinafter "Carolyn"), executrix of decedent's estate, filed an answer and counterclaim asserting that Nataliya and decedent executed pre-nuptial and post-nuptial agreements in which Nataliya waived her right to take an elective share against decedent's estate or to claim a spousal allowance.[2] Carolyn seeks a declaratory judgment denying Nataliya's claim for an elective share, precluding her from receiving a spousal allowance from the decedent's estate, and providing that Nataliya is only entitled to the $5, 000 bequest provided for in the decedent's will, and attorney's fees.

         Pending before me are Nataliya's motions for a preliminary injunction and a protective order, and to quash subpoenas; motions to quash a subpoena and for a protective order filed by Veta McCarther (hereinafter "McCarther"), a third party; and Carolyn's motion to compel the production of documents under the subpoena to McCarther, along with her request for attorney's fees incurred related to these discovery disputes.

         I recommend that the Court deny Nataliya's motion for a preliminary injunction, and the discovery motions filed by Nataliya and McCarther. I also recommend that the Court decline to grant Carolyn's motion to compel at this time, and reject Carolyn's request for attorney's fees. This is a final report.

         BACKGROUND

         The factual background has not been fully developed at this point. It appears that Nataliya, who is from Ukraine, and decedent, a Delawarean, met while decedent was on a trip to Ukraine in May 2007, and became engaged around December 2007, with decedent taking steps following their engagement to obtain visas for Nataliya and her minor daughter to come to the United States. Nataliya and the decedent married in Kiev, Ukraine on May 27, 2010. They had previously executed a pre- nuptial agreement, with the decedent signing the English version of the agreement in Delaware on or about March 1, 2010, and Nataliya executing the agreement, which had been translated into Ukrainian, in both English and Ukrainian, on or about April 20, 2010, in the presence of a Ukrainian attorney. Section 2 of the pre-nuptial agreement states:

2. Release of Marital Rights by Nataliya Ohorodnychuk.
Nataliya Ohorodnychuk hereby waives and releases all statutory or common law rights which she may have as a spouse or surviving spouse in the property (including the home derived there from) or estate of Kenneth Wolhar, owned by him at the time of the marriage or acquired by him at any time thereafter, under the present laws of the State of Delaware or any amendments or supplements thereto and under the same or similar laws of any other jurisdiction including, without limitation:
(a) The right to elect to take against the provisions of any will of Kenneth Wolhar, whether heretofore or hereafter made;
(b) The right to take a distributive share in the event of Kenneth Wolhar's death in testate.
(c) The right to share in Kenneth Wolhar's estate by way of courtesy, elective share, spouse's allowance or otherwise;
(d) The right to be named as beneficiary of benefits payable under any pension benefit plan in which Kenneth Wolhar is a participant or former participant; and
(e) The right to act as administrator of Kenneth Wolhar's estate.[3]

Section 23 of the agreement provides if the decedent "should die during the marriage a provision is provided in the will for Nataliya."[4]

         After a lengthy process to obtain visas for Nataliya and her daughter, it appears that they received the necessary visas in May 2011, and moved to Newark, Delaware with the decedent sometime between May 2011 and August 12, 2012. The parties also executed a post-nuptial agreement in August 2012 in Delaware, which contained the same substantive provisions as the pre-nuptial agreement, including the waiver of marital rights. The decedent executed his Last Will and Testament on April 12, 2012, in which he bequeathed $5, 000 to Nataliya and $1, 500 to Nataliya's daughter, among a few other specific bequests, and named his sisters, Carolyn and Shirley Wolhar, as the main beneficiaries and Carolyn as executrix of the estate. The decedent died on May 11, 2016.

         Nataliya, acting pro se, filed a petition for an elective share of the decedent's estate in this Court on October 28, 2016. Nataliya also filed a petition to set aside pre-nuptial and post-nuptial agreements in Family Court on December 21, 2016. Carolyn filed an answer and counterclaim to Nataliya's petition in this Court, and a motion to dismiss Nataliya's Family Court petition for lack of jurisdiction. On March 7, 2017, the Family Court granted Carolyn's motion and dismissed Nataliya's petition, finding the action seeks to determine the distribution of assets from the decedent's estate and the Court of Chancery is the proper forum to exercise jurisdiction over this matter.[5] Following the proceedings in Family Court and other motions that are unnecessary to review here, Nataliya filed her answer to Carolyn's counterclaim and an amended complaint.

         On September 28, 2017, Nataliya filed a motion for a preliminary injunction, [6]and Carolyn responded that Nataliya has not met the required elements for preliminary injunctive relief.[7] The motion for a preliminary injunction is fully briefed.

         In November 2017, discovery disputes began to arise between the parties related to subpoenas issued by Carolyn to persons or entities that are not parties to this action. On November 7, 2017, Nataliya filed a motion to quash Carolyn's subpoena issued to Main Street Court LLC on October 25, 2017, claiming that the documents sought (related to Nataliya's apartment lease) are irrelevant to this action. Carolyn responded that Nataliya has no standing to move to quash the subpoena issued to a third party.

         On December 5, 2017, McCarther, a third party, filed a motion to quash the subpoena issued to her by Carolyn claiming it was not properly served on her. Carolyn responded in a letter dated December 21, 2017, that, rather than filing a response opposing the motion to quash, a subpoena was reissued to McCarther on December 13, 2017, making McCarther's motion to quash moot.

          On December 22, 2017, Nataliya filed a motion to quash the subpoena issued to McCarther and asked the Court to prohibit Carolyn from conducting "further third party discovery on absolutely non-related matters."[8] On December 28, 2017, Carolyn responded that Nataliya's motions to quash and for a protective order should be denied because Nataliya has no standing to quash subpoenas issued to a third party, and communications sought by the subpoena are relevant and reasonably calculated to lead to discovery of admissible evidence. She also sought attorney's fees under Court of Chancery Rules 26(c) and 37(a)(4). Nataliya's January 12, 2018 reply argued that the McCarther subpoena would not produce relevant evidence, was issued in bad faith and unreasonably cumulative, and imposes an undue burden.

         On December 26, 2017, McCarther filed a motion for a protective order, claiming that the subpoena served on her on December 13, 2017 was issued in bad faith, sought her private communications with Nataliya which are not relevant to the issue in this case, and was being used for intimidation and personal revenge. Carolyn's December 28, 2017 response sought denial of McCarther's motion for a protective order and to compel McCarther to comply with the subpoena, as well as attorney's fees under Court of Chancery Rules 26(c) and 37(a)(4). Briefing is complete on the parties' current discovery motions.

         ANALYSIS

         1. PRELIMINARY INJUNCTIVE RELIEF

         A. Standard of Review

         To obtain a preliminary injunction, the movant must demonstrate: (1) a reasonable likelihood of success on the merits at a final hearing; (2) an imminent threat of irreparable harm; and (3) a balancing of the equities that tips in favor of issuance of the requested relief.[9] Some showing is required for each element but the elements "are not necessarily weighted equally, " because "a strong showing on one element may overcome a marginal demonstration of another."[10]

         Nataliya's motion for a preliminary injunction seeks the following relief: Carolyn deposit one-third of the estate (or $829, 960.67 in Nataliya's estimation) into an escrow account; post bond; file lis pendens; and provide to Nataliya a Form 706 tax return to facilitate elective share calculations.[11]

         B. Reasonable Probability of Success

         To determine if a party seeking a preliminary injunction has a reasonable likelihood of success on the merits, the Court considers all of the evidence currently in the record and decides if it is reasonably likely that the movant will establish the necessary facts by a preponderance of the evidence.[12] Nataliya claims she is likely to succeed on the merits because the pre- and post-nuptial agreements were unconscionable and not voluntarily entered into. Carolyn asserts Nataliya has not shown that she is reasonably likely to succeed on the merits because she has not demonstrated the elements necessary to overturn the pre- and post-nuptial agreements to allow her to take an elective share of the decedent's estate. The critical issue in determining whether Nataliya may take an elective share under 12 Del. C. § 901, and a spousal allowance under 12 Del. C. § 2308, is whether she waived her surviving spouse rights as authorized by 12 Del. C. § 905 through her execution of the pre- and post-nuptial agreements. Since Family Court has extensive experience in determining the enforceability of pre-nuptial agreements, I look to that Court's decisions for guidance on the interpretation of the statutory provision governing enforcement of pre-marital agreements, 13 Del. C. § 326. For marital agreements, "public interest requires that a financial agreement among spouses or prospective spouses be executed under conditions of candor and fairness, " since they "stand in a confidential relationship."[13] The enforceability of a pre-nuptial agreement is determined by a court based upon a case-by-case fact-specific analysis.[14]

         Section 326 of title 13 of the Delaware Code provides that the enforceability of a pre-marital agreement turns on: 1) whether the agreement was entered into voluntarily; 2) the agreement was unconscionable at the time it was executed; 3) whether, prior to execution of the agreement, the party seeking enforcement of the agreement provided fair and reasonable disclosure of their property and financial obligations; and 4) the party trying to set aside the agreement did not voluntarily and expressly waive their rights to additional disclosure in writing, and did not have, or reasonably could not have had, adequate knowledge of the other party's property and obligations. The spouse seeking to set aside the pre-marital agreement has the burden of proving a basis for non-enforcement under section 326. However, if the other spouse is found to be the dominant party in the relationship, then the burden shifts to them to prove the fairness of the agreement.[15]

         Courts analyze pre-nuptial agreements for procedural and substantive fairness, consistent with section 326.[16] Caselaw indicates that the decision whether to set aside pre-nuptial agreements focuses on voluntariness and adequate disclosure of the spouse's financial circumstances to determine whether each spouse had "meaningful choice."[17] Courts look at factors such as whether each party had independent counsel, had adequate time to review the agreement, understood the terms of the agreement and their effect, understood their financial rights in the absence of the agreement, adequately disclosed financial assets and obligations prior to execution of the agreement, as well as other influences, including the time frame during which the agreement was negotiated, the timing of its negotiation and execution as compared to the couple's wedding date, and the disparity in bargaining power between the spouses.[18]

         When determining substantive fairness, or unconscionability, courts consider factors such as the "objectives of the parties in executing the agreement, the economic circumstances of the parties, the property brought to the marriage by each party, each spouse's family relationships and obligations to persons other than the spouse, the earning capacity of each person, the anticipated contribution by one party to the education, training or increased earning power of the other, the future needs of the respective spouses, the age and physical and emotional health of the parties, and the expected contribution of each party to the marriage, giving appropriate economic value to each party's contribution in homemaking and child care services."[19] These factors are generally considered from the perspective of the parties at the time of the agreement.[20]

         In this case, Nataliya alleges the pre- and post-nuptial agreements are invalid because they were based upon fraudulent misrepresentation; there was overreaching by the decedent, who was a dominant party and 31 years older than Nataliya, his wife; she had limited education and did not understand English or the legal concepts in the agreements; the translations of the agreements into Ukrainian were poor, resulting in incorrect translations of the legal terms and concepts such as "elective share" and "spousal allowance, " which are concepts not recognized in Ukraine; the decedent failed to list all of his assets; she has been left destitute; she did not have the opportunity to review the agreements in any depth prior to executing them; and she did not receive good legal advice from the Ukrainian attorney who was unilaterally chosen by the decedent to represent her for the pre-nuptial agreement during their "five minute" meeting, nor from the attorney in Delaware who she met with related to the post-nuptial agreement for "five minutes" (with no interpreter present during that meeting).[21]

         Carolyn argues that the pre-nuptial agreement was in compliance with 13 Del.C. § 323(a) and provided for a waiver of various marital rights, including the right to take an elective share and spousal allowance. It contained a proper and accurate disclosure of the decedent's financial assets, [22] and provided that, if the decedent died during the marriage, there was a provision for Nataliya in his will. Carolyn asserts Nataliya received the draft agreement in English and in Ukrainian (it had been translated by a Ukrainian based certified translation company) for review and comment in March 2010. She further claims Nataliya actively and voluntarily participated in the drafting process, selected the attorney to represent her and, after meeting with her Ukrainian attorney, executed the agreement in Kiev, Ukraine on or about April 20, 2010, approximately one month before the parties' marriage. Carolyn contends that Nataliya understood and communicated well in English at the time she executed the pre- and post-nuptial agreements, conversing exclusively with the decedent in English and choosing to conduct her visa application interview in English, and that Nataliya was represented separately by a Delaware attorney with ten years of experience when she executed the postnuptial agreement. Carolyn further alleges that, during their six years of marriage, the parties acted in conformity with the agreements and it was not until after the decedent's death that Nataliya challenged the agreements.[23] She denies Nataliya's assertion that the decedent was the dominant party, arguing that Nataliya was 30 years old, previously married and divorced, raising a ten-year old daughter, and was "hardly a naïve party."[24]

         Determinations whether pre- or post-nuptial agreements are enforceable are highly fact sensitive. Nataliya asserts that she did not enter into either agreement voluntarily and lacked an understanding of what she was giving up by waiving her marital rights in the pre- and post-nuptial agreements because she had limited English skills, the agreements were translated into Ukrainian poorly, the legal advice she received from her Ukrainian attorney was ineffective because there are not the same marital rights in Ukraine, decedent failed to list all of his financial assets in the agreement, she did not negotiate the agreements and only saw the agreements and met with her counsel, who were selected by the decedent, right before she signed the agreements, and was pressured into signing the agreements by the decedent, who was the dominant party in the relationship, and because of the upcoming wedding date.

         Carolyn responds that Nataliya entered into the agreements voluntarily and that the decedent provided full financial disclosure with the agreements, and that she participated in the drafting of the agreement (provided an email showing that Nataliya discovered an error in a draft of the agreement), the agreement was translated by a certified translator into Ukrainian and that Nataliya understood English well when she entered into both agreements; Nataliya selected the Ukrainian attorney who represented her, met with her separately (not in the presence of the decedent) and had the opportunity to seek any guidance that she wished, and the Delaware attorney who represented her was experienced; the decedent, although older, was not dominant and Nataliya was not naïve, but 30 years old, divorced and a parent at the time of the marriage.

         There is not sufficient evidence in the current record for me to find that there is a reasonable probability that Nataliya will succeed on the merits. Nataliya's assertions have been addressed, for the most part, through Carolyn's arguments. While Nataliya may ultimately succeed on the merits once the factual record is fully developed at trial, the current record sustains only a weak showing of Nataliya's likelihood of prevailing on the merits. Without a strong showing on the other two factors necessary for a preliminary injunction, Nataliya's claim for preliminary injunctive relief fails.

         C. Imminent Threat of Irreparable Injury

         "Irreparable harm generally exists where the injury cannot be adequately compensated in damages."[25] Since a preliminary injunction is "an extraordinary form of equitable relief, " if the injury is "merely speculative" or can be adequately compensated for by monetary damages after a trial on the merits, ...


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