In re Marriage of Facter, the courts discussed the question arising out of the legality and enforceability of a pre-marital agreement.
FACTS: H, a Harvard-trained attorney, met W, a high school graduate with two minor children, in 1990. She was working part time selling shoes at Nordstrom. H began helping W financially and gave her money to take a real estate class. Parties bought a home together in joint tenancy with H providing the down payment. H had been married before and insisted on a premarital agreement (PMA) which would provide that his earnings would be legally his and would limit his financial postnuptial payments to W to those agreed to in the PMA. W had been married before and was actively engaged in litigation with her former spouse. W agreed and H drafted a PMA without consulting with a family law attorney or doing any research. He only wanted a very basic agreement that would cover his two points.
PMA stated: “1. None of the property acquired during their marriage shall be community property.”
Section 2 provided that upon dissolution, W would receive $100,000, plus an additional $100,000 if the marriage lasted at least 15 years and he was a partner at his law firm for at least seven years; one half of the equity in the residence, less his down payment and costs of sale; the household furnishings; and a Jaguar.
Section 3 provided that these provisions “constitute W’s sole right to property acquired during the marriage and to support, and replace or supersede any entitlement to such property that W might otherwise have under law . . . .” (Emphasis added.)
The PMA also provided for a limit on the amount of any child support (c/s) and that each party would pay his own attorney fees.
W took the PMA to two different attorneys for advice. She was advised that the provisions related to c/s and attorney fees were unenforceable and that there was no waiver of s/s. She was also advised that H’s earnings would become c/p if they were deposited into a joint bank account. She did not tell H that she had been advised that key provisions in the PMA were unenforceable. She signed the PMA and the parties were married.
The parties separated after 16 years of marriage with one minor child. H initially took the position that the PMA waived s/s and limited c/s. A guideline temporary support order was made w/o regard to the PMA. Validity of the PMA was bifurcated. H then filed a “Notice of Limitation of Claims” in which he agreed not to claim that the PMA contained an effective s/s waiver, c/s limitation, or a preclusion on any award of attorney fees to W.
Trial ct. found that the PMA was invalid in its entirety. It held: 1) The waiver of s/s was invalid as a matter of law based on In re Marriage of Higgason (1973) 10 Cal.3d 476; 2) the waiver of s/s was unconscionable when executed and unconscionable now; 3) the PMA was unconscionable based on Civil Code section 1670.5; 4) spousal support waiver was a “package, all interrelated” and not severable; and 5) the PMA was “disingenuous, one-sided, and unfair”.
H appealed and Court of Appeal reversed.
HELD: Unconscionable support limitation provisions should have been excised pursuant to severability clause and property provisions of PMA enforced.
The presence of severability clauses “ ‘ “evidence the parties’ intent that, to the extent possible, the valid provisions of the contracts be given effect, even if some provision is found to be invalid or unlawful.” ’ ” (In re Marriage of Facter, supra, 212 Cal.App.4th at p. 985.)
Relying on Fair v. Bakhtiari [Fair II] (2011) 195 Cal.App.4th 1135, key issue was what was the central purpose of the contract:
“ ‘Courts are to look to the various purposes of the contract. If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.’ ” (In re Marriage of Facter, supra, 212 Cal.App.4th at p. 986.) Here the PMA had three central purposes: 1) waive c/p rights; 2) limit W’s s/s; and 3) limit H’s c/s. The latter two objectives were unconscionable or contrary to law. That left the waiver of c/p rights.
The trial ct. found that the purported waiver of s/s was “inextricably wrapped up in the property rights section of [the Agreement] and in the child support section of the document. It is a package, all interrelated.” (In re Marriage of Facter, supra, 212 Cal.App.4th at p. 986.) The Court of Appeal disagreed:
“ ‘California cases take a very liberal view of severability, enforcing valid parts of an apparently indivisible contract where the interests of justice or the policy of the law would be furthered.’ ” (In re Marriage of Facter, supra, 212 Cal.App.4th at p. 987.)
Trial ct. relied heavily on Civil Code section 1670.5 [unconscionability in commercial contracts], which is inconsistent with the purposes served by premarital agreements. Plus, it is a general statute that is trumped by the specific provisions of Family Code section 1615, which applied specifically to PMAs
Although section 3 of the PMA contained an invalid waiver of s/s, it could be easily excised from the agreement simply by crossing out, “and to support” from section 3. There was no need to “rewrite” the agreement.
One of the purposes of severance is to avoid an inequitable windfall to one of the parties. Here, the trial ct’s interpretation had that effect. W had no cause to expect that she would be entitled to a share of H’s earnings. It also caused H to suffer an undeserved detriment in that he clearly intended for his earnings and accumulations during marriage to remain his separate property and, in drafting the Agreement, he did nothing to hide this intention from W.
The trial ct.’s perception of the PMA as “disingenuous, one-sided, and unfair” was wrong because it was not the touchstone of enforceability. In re Marriage of Bonds (2000) 24 Cal.4th 1, 16-17 held that “the party against whom enforcement of a premarital agreement was sought only could raise the issue of unconscionability, that is, the substantive unfairness of an agreement, if he or she also could demonstrate lack of disclosure of assets, lack of waiver of disclosure, and lack of imputed knowledge of assets.”
NOTES: This case not final as of closing date of this volume. Prior to citing this case, user should verify its official publication status. (See CRC, rule 8.1115.)
Though s/s waivers entered into in 1994 not per se illegal, where parties’ circumstances were “greatly disparate” when signed and where enforcement would be presently unconscionable, waiver was unconscionable and unenforceable.
In re Marriage of Facter (2013) 212 Cal.App.4th 967 [152 Cal.Rptr.3d 79] (1/14/2013) Dondero, J. DCA1
FACTS: See Facts discussed above. Trial ct. erred when it held premarital agreement (PMA) waivers of spousal support (s/s) entered into in 1994 were “illegal.” Trial ct. relied on In re Marriage of Higgason, supra, 10 Cal.3d 476, which was effectively overruled in In re Marriage of Pendleton & Fireman (2000) 24 Cal.4th 39. The waiver in Pendleton was signed in 1991, 3 yrs. before the one in this case. Undertrial ct.’s reasoning, the Supreme Court should have held waivers illegal. Instead, it held them not invalid as a matter of law. However, it reserved for future determination whether the parties’ circumstances might make enforcement unjust. In Pendleton, and in In re Marriage of Howell (2011) 195 Cal.App.4th 1062 parties were similarly situated when they executed the agreements.
NOTES: This case not final as of the closing date of this volume. Prior to citing this case, the user should verify its official publication status. (See CRC, rule 8.1115.)
Unconscionable provision in premarital agreement does not render the entire agreement unenforceable absent failure of disclosure.
In re Marriage of Facter (2013) 212 Cal.App.4th 967 [152 Cal.Rptr.3d 79] (1/14/2013) Dondero, J. DCA1
FACTS: See Facts discussed above. Court of Appeal held that unconscionability upon execution did not render a PMA unenforceable.
“[U]nconscionability upon execution does not, standing alone, render a premarital agreement unenforceable under former section 1615. To render an agreement unenforceable, the contesting spouse also must have lacked actual or constructive knowledge of the assets and obligations of the other party, unless that spouse waived knowledge of such assets and obligations.” (In re Marriage of Facter, supra, 212 Cal.App.4th at p. 984.)
Although the trial ct. found that H had not fairly disclosed his s/p in the PMA, Court of Appeal disagreed. The omitted asset was a house H held in joint tenancy with W. First, “it would have been rather odd to list a home held in joint tenancy as one’s separate property.” In addition, the PMA had an entire section dealing with the residence.
As H’s property interests were fully disclosed to W, “the dual requirements of former section 1615, subdivision (a)(2), have not been satisfied and the agreement as a whole is not unenforceable.” (In re Marriage of Facter, supra, 212 Cal.App.4th at p. 985.)
NOTES: This case not final as of closing date of this volume. Prior to citing this case, user should verify its official publication status. (See CRC, rule 8.1115.)
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Garrett C. Dailey is a Certified Family Law Specialist focusing on appellate issues and consultations, a Fellow in American Academy of Matrimonial Lawyers and publisher/co-author of ATTORNEY’S BRIEFCASE® CALIFORNIA FAMILY LAW, California’s oldest provider of self-contained legal research software. BriefCase is available online and through the Attorney’s BriefCase iPad® app. For more information visit them at www.atybriefcase.com. Also check out their FREE legal education log at www.MyLegalEducationLog.com.
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