In a dissolution of marriage proceeding in which the parties were married for 16 years, after contested proceedings, the Trial Court declared the Premarital Agreement invalid in its entirety. The Appellate Court agreed in part and found that the unlawful terms in the Agreement could be severed, but that the balance of the Agreement was enforceable. The Appellate Court determined that the spousal support waiver in this case was uconscionable both at the time the parties entered into the Agreement and at the time of enforcement
At the Trial, the parties testified that when H and W met, W had a part-time retail job. H was a Harvard Law graduate and a partner at his law firm. When the parties decided to marry, H presented W with a premarital agreement that he drafted. W testified that she had an attorney review the Agreement on her behalf. H and W signed the Agreement the day before their wedding.
The Agreement stated that none of the property acquired during the marriage would be community property and limited the property W was to receive in the event of divorce to $100,000; another $100,000 if the marriage lasted longer than 15 years and H had been partner at his firm for seven years; half of any sum earned from the sale of the marital residence, minus the down payment paid by H; the home’s furnishings; and an automobile. This section further stated that the enumerated list would “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 the law.”
The Trial Court concluded that the spousal support waiver was unconscionable. Trial court further concluded the Agreement was inseverable, and therefore unenforceable in its entirety. H appealed and the Court of Appeal reversed and remanded “with orders to enter a new judgment not inconsistent with this opinion.”
The Court of Appeal undertook an analysis of the Family Code, case law and equitable principles and concluded that the Trial Court correctly found the spousal support waiver to be unconscionable and therefore invalid, but erred in refusing to sever the invalid provisions from the rest of the Agreement.
The Court of Appeal agreed with H that the Trial Court erred in holding the spousal support waiver was illegal as a matter of law. Citing the Uniform Premarital Agreement Act (UPAA), enacted in 1985, the Appellate Court affirmed spousal support waivers in premarital agreements are not invalid per se. [Id. at p. 980.]
However, the Court of Appeal found the spousal support waiver in the instant case to nevertheless be unconscionable both at the time the parties entered the Agreement and at the time of enforcement. The Trial court’s reliance on Family Code section 1612(c) was misplaced, because case law has established this subsection is not retroactive to premarital agreements entered into before 2002. Instead, the Court of Appeal relied on case law, citing In re Marriage of Pendelton and Fireman (2000) 24 Cal.4th 39, 53-54): “it is enough to conclude here that no public policy is violated by permitting enforcement of a waiver of spousal support executed by intelligent, well-educated people, each of whom appears to be self-sufficient in property and earning ability, and both of whom have the advice of counsel regarding their rights and obligations as marital partners at the time they execute the waiver. Such a waiver does not violate public policy and is not per se unenforceable.” The Appellate Court agreed with the Trial Court in finding the Agreement unconscionable at execution because at the time there was a “great disparity in the parties’ respective incomes and assets” and education, as well as a “significant inequality of bargaining power.” [Id. at p. 983.]
In light of the parties’ long term marriage, during which W did not work or pursue her education and H continued to earn substantial income and amassed a separate property fortune of upwards of $10 million, the Appellate Court also found the Agreement to be unconscionable at the time of enforcement.
Finally, the Appellate Court found the spousal support waiver to be severable from the rest of the Agreement and concluded the rest of the Agreement should be enforced. First, Family Code section 1615(a)(2) provides that unconscionability only renders a premarital agreement unenforceable if there was also an absence of fair and reasonable disclosure of premarital assets. Here, H fully disclosed his assets. Furthermore, the Agreement contained a severability clause, which California courts generally construe liberally. The Appellate Court also concluded trial court erred in relying on sections of the Civil Code pertaining to commercial contracts, noting that the UPAA assumes such statutes are inconsistent with the purposes served by PMAs. Finally, Appellate Court deemed it inequitable to deny severance in light of the parties’ testimony regarding their respective intents upon entering the PMA.
This case suggests that courts will scrutinize spousal support waivers. In light of California’s liberal interpretation and application of severability clauses, a court may comfortably invalidate a spousal support waiver while upholding the remainder of the Agreement. Prospective spouses and their lawyers will need to be aware of future Court findings that will impair, or benefit, the party seeking to enforce a Pre-Marital Agreement in the event of divorce.
Robert C. Brandt and Amy S. Kapner are with the firm Feinberg Mindel Brandt & Klien, LLP in Los Angeles, California.