In re Marriage of Dimitrov, 2024 IL App (1st) 231794-U.pdf

Summary

Case Summary: In re Marriage of Dimitrov, 2024 IL App (1st) 231794-U.pdf - In the case of In re Marriage of Dimitrov, the Illinois Appellate Court affirmed the lower court's ruling that the couple's postnuptial agreement was substantively unconscionable and unenforceable, despite meeting the procedural formalities. The court emphasized that Illinois marital agreements can be invalidated for unconscionability if they are extremely one-sided, as the Dimitrov agreement allocated nearly all assets to one spouse while burdening the other with debt, and the disadvantaged spouse had limited understanding and bargaining power.

Illinois Appeals Court Strikes Down "Unconscionable" Postnuptial Agreement in Dimitrov Case

In the recent case of In re Marriage of Krassimir Dimitrov and Tsveta Dimitrova, 2024 IL App (1st) 231794-U, the Illinois Appellate Court for the First District affirmed a lower court's ruling invalidating the couple's postnuptial agreement on the grounds that it was substantively unconscionable. The court's decision provides important guidance on the enforceability of marital agreements in Illinois and the factors courts will consider in evaluating their fairness.

Krassimir Dimitrov had sought a declaratory judgment to enforce the postnuptial agreement he entered into with his wife Tsveta. The agreement purported to allocate nearly all of the couple's marital assets to Krassimir while saddling Tsveta with marital debts. Although the agreement ostensibly met the procedural formalities for a valid postnuptial agreement under the Illinois Uniform Premarital Agreement Act (UPAA), 750 ILCS 10/1 et seq., the trial court found it was so grossly one-sided and oppressive as to be unenforceable.

The agreement awarded Krassimir 100% of the assets listed in the agreement, including the marital home, vehicles, bank accounts, and retirement benefits. Tsveta, in contrast, received virtually nothing of value. Evidence presented at trial indicated Tsveta was pressured into signing the agreement under duress, with Krassimir allegedly threatening to limit her contact with their children and family if she refused.

Although Tsveta was represented by independent counsel in the transaction, the court concluded her actual understanding of the agreement was limited based on her lack of financial sophistication and English language skills. Tsveta testified she felt she had no choice but to sign the "oppressive" and "completely unfair" agreement despite the enormous disparity.

Krassimir argued the agreement was balanced because it assigned certain debts to him. However, the court found these liabilities were heavily outweighed by the substantial assets Krassimir retained under the agreement. The net effect was a "draconian" arrangement that served no equitable purpose, the court said.

In affirming the judgment, the appellate court emphasized that marital agreements in Illinois can be invalidated if they are substantively unconscionable, even if the statutory formalities are followed. Substantive unconscionability looks at whether an agreement is "improvident, totally one-sided or oppressive," according to In re Marriage of Gorman, 284 Ill. App. 3d 171 (1996).

The Dimitrov agreement failed this test because it allocated essentially 100% of the couple's assets to one spouse while leaving the other with nothing but debt. Such an arrangement is presumptively suspect, the court said, citing the Illinois Supreme Court's seminal ruling in In re Marriage of Gurin, 212 Ill. 2d 169 (2004). An agreement that serves no purpose except to benefit one spouse at the expense of the other cannot be considered fair and reasonable.

The court rejected Krassimir's argument that Tsveta was precluded from challenging the agreement because she had an attorney and voluntarily signed it. Retaining counsel and signing an agreement doesn't automatically insulate it from an unconscionability challenge, the court said, particularly where there is a gross disparity in bargaining power and one party's comprehension is limited.

"The fact that the disadvantaged spouse had an attorney will not save an otherwise unconscionable agreement," the court wrote, citing In re Marriage of Richardson, 237 Ill. App. 3d 1067 (1992). Courts must look beyond the facial formalities to the substance of the transaction.

The Dimitrov decision provides a stark example of when a postnuptial agreement crosses the line into unconscionability. Marital agreements that are completely one-sided, allocating all or nearly all assets to one spouse, are highly vulnerable to challenge in Illinois. The fact that an agreement is formally valid and both spouses had counsel will not preclude a finding of unconscionability where there is a gross disparity in the division of assets.

To withstand judicial scrutiny, postnuptial agreements in Illinois should strive for a relatively equitable division of assets that doesn't unduly benefit one spouse over the other. Lopsided agreements that give everything to one spouse are presumptively suspect. And if one spouse's bargaining power or comprehension is diminished, courts will apply heightened scrutiny to the substantive fairness of the agreement.

Some "red flags" that an agreement may be vulnerable to an unconscionability challenge include:

• Giving 100% or nearly 100% of assets to one spouse
• Saddling the disadvantaged spouse with all or most debts
• Allegations of duress, coercion, or threats to induce signing
• Diminished bargaining power or comprehension by one spouse
• Rushed negotiations that prevent meaningful review
• Lack of full financial disclosure prior to signing

While having independent counsel and observing the technical formalities are important, they provide no guarantee an unfair agreement will be upheld. The substance of the agreement is key. If the net result is a draconian arrangement that leaves one spouse with everything and the other with nothing, the agreement is unlikely to survive a challenge, as the Dimitrov case illustrates.

To maximize the chances of enforcement, parties should negotiate postnuptial agreements well in advance of signing and ensure both spouses have ample time to review the terms and obtain independent counsel. There should be full financial disclosure so both parties enter the agreement with eyes wide open. And most importantly, the final division of assets should be relatively balanced and equitable, not completely one-sided.

Postnuptial agreements can be an effective tool for resolving property issues during marriage. But as the Dimitrov case demonstrates, they must be substantively fair and reasonable, not just facially valid. Agreements that cross the line into unconscionability by allocating everything to one spouse and nothing to the other will not withstand judicial scrutiny in Illinois.

References

• In re Marriage of Krassimir Dimitrov and Tsveta Dimitrova, 2024 IL App (1st) 231794-U
• Illinois Uniform Premarital Agreement Act (UPAA), 750 ILCS 10/1 et seq.
• In re Marriage of Gorman, 284 Ill. App. 3d 171 (1996)
• In re Marriage of Gurin, 212 Ill. 2d 169 (2004)
• In re Marriage of Richardson, 237 Ill. App. 3d 1067 (1992)

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