Marriage of Facter: Appellate Court Clues About Unconscionability
of Spousal Support (and Other) Waivers
in Prenups at Time of Enforcement
By TWA III
The lawyers among you will know that California adopted the Uniform Premarital
Agreement Act in 1985, amended it effective 1994, and that the last major
amendments were added in 2001 by the Legislature in response to the California
Supreme Court's decision in
Marriage of Bonds (2000) 99 Cal.Rptr.2d 252, which refused to reverse the burden of proof
on the part of the party attacking the validity of a prenuptial agreement
even though that party was not represented by counsel in the negotiation
of the agreement.
The result was the amendment of
Family Code section 1612(c) (which made a spousal support waiver unenforceable if (1) the waiving
party was not represented by independent counsel at the time of signing
and (2) "or if the provision regarding spousal support is unconscionable
at the time of enforcement") and
Family Code section 1615(c), subsections (1) through (5), both of which have created much consternation for prenup drafting matrimonial
and family lawyers ever since.
Section 1615(c) is not limited to spousal support waivers, and augments
the 'unconscionability at time of enforcement' exception of section
1612 to whether a premarital agreement is valid and enforceable. In other
words, prior to 2001, a premarital agreement might be set aside if the
party who later attacked it could establish he or she did not sign it
"voluntarily" with 'voluntariness' being established
by whether they were "provided a fair, reasonable, and full disclosure
of the property or financial obligations of the other party" [section
1615(a)(2)(A)]; proof that that party did not "voluntarily and expressly
waive, in writing, any right to disclosure of the property or financial
obligations of the other" [section 1615(a)(2)(B)]; and that that
party did not, and could not reasonably have had, "an adequate knowledge
of the property or financial obligations of the other...." [section
1615(a)(2)(C)]. These additions, taken together with pre-existing subsection
(b) which requires trial courts to determine "unconscionability"
"as a matter of law", effectively added a second layer of scrutiny
and attack. But those changes don't apply to this case, because agreements
under the UPAA will be enforced according to the laws in place when they
were executed. In
Marriage of Facter, discussed below, 1994 law applies to prenup validity.
Considerations Relating to Premarital Agreement 'Time of Enforcement' Validity
The Key is "Unconsionability"
Family Code section 1615(c) introduced five new considerations that create
a presumption against time of enforcement validity relating to "voluntariness," to wit:
- the party against whom enforcement is sought was not represented by independent
legal counsel "at the time of signing" or after being so advised
did not expressly waive "in a separate writing" representation
by such counsel. [1615(c)(1)].
- less than seven days passed between the time the party "was first
presented with the agreement" and advised to seek independent counsel
and the time the agreement was signed. [1615(c)(2)].
- the unrepresented party, against whom enforcement is sought, was not fully
informed of the terms "and basic effect" of the agreement "as
well as the rights and obligations he or she was giving up by signing"
and was proficient in the language in which the explanation was given
and the agreement was written AND another separate writing be signed by
that party setting forth they received this information and who provided
- the agreements and writings provided for by the first and third bullet
points above "were not executed under duress, fraud, or undue influence."
- "Any other factors the court deems relevant." [1615(c)(5)].
What does "unconscionable at the time of enforcement" look like? After all, it seems a simple matter to determine whether a party
had "independent counsel". The answer to this larger remaining
question is an evolving target.
Burden of Proof on Party Seeking Enforcement of Pre-Nup
These factors effectively shift the burden of proof to the party who hopes
to enforce the ante-nuptial agreement to establish each of the foregoing,
as applicable. Since most parties are represented by independent counsel
(if the higher wealth, higher earner spouse who wants the prenup has a
brain in his or her head) - even if the soon to be "in-spouse"
has to pay for the less empowered spouse to obtain an explanation by independent
counsel of the terms of the premarital agreement, and the attorney then
to sign a certification that the explanation was given - the more common
battleground will be unconscionability at time of enforcement.
BTW, if you've wondered why you should pay for your cohabitating partner's
attorney in order to get him or her to sign a prenup, this is why. Pay
it. It is cheap insurance for you if done correctly.
Estate lawyers who draft or review premarital agreements, and family law
attorneys who likewise do so, have had until recently little guidance
as to how to anticipate and avoid the "unconscionability at time
of enforcement" problem. We've long known that prenuptial agreements
that are "promotive of divorce" are void as against public policy.
So what is "promotive of divorce?"
To Waive or Not Waive Spousal Support?
It is extremely common in premarital agreements, particularly where there
is no waiver of support, to attempt to limit the spousal support that
the higher asset-ed, higher earner may have to pay in the future and to
tie the amounts that may be paid or ordered or their duration to certain
events or milestones. This would seem to be a completely reasonable aim
and way to achieve an enforceable waiver, and indeed it could provide
valuable incentives to the supported party to induce their signing of
a prenup. After all, they may be "guaranteed" a minimum level
of alimony or spousal maintenance that ultimately exceeds the parties'
standard of living at the time of marriage, so that
at that time, in a role reversal it looks and sounds quite attractive to the supported
party to end the marriage now; maybe following separation the once more-empowered
spouse will seek to declare his or her own spousal provision invalid on
these grounds. Things, after all, often look and feel quite different
years into the future.
My guess is that in a certain percentage of prenup cases where there is
no waiver of support, but instead some form of limitation (or floor) of
alimony, they will go unchallenged - just as many people who receive a
preprinted waiver of liability for damage to their car may believe they've
assumed the risk that a Valet will run it into a wall. Many lawyers write
their premarital agreements with this hope - that even as they are throwing
the enforceability dice, only a small number of people will ever challenge
how the dice fall. This can create, however, sleepless nights for matrimonial
lawyers and it is a good explanation for why these things cost way more
than the consumer feels they should ("Jeez," the client says,
"this is just a simple agreement!"). The consumer is forgetting
the malpractice quotient. Some Los Angeles family law firms that draft
premarital agreements charge thousands extra just to cover the malpractice
premium, given that a claim could erupt against them many years later
when the marriage disintegrates.
Many premarital agreements that estate and family law attorneys have written
are, at least in part, likely unenforceable, particularly if they contain
spousal support waivers or limitations that are tied to some event or
timeframe. For instance, many contain graduated payments that are pegged
to milestones like the length of marriage. Some contain provisions that
the waiver evaporates if the parties achieve the fabled "ten-year"
mark that defines a "long term marriage" pursuant to
Family Code section 4336.
Imagine a situation where the wife is to receive $10,000/month in spousal
support in year nine, possibly after a series of graduated increases -
sounds like this promotes the marriage because it encourages her to stay
married to receive the higher amounts, right? But what if, as many prenup
agreements provide, at the ten year mark the limitation goes away - i.e.,
the spousal limitation evaporates? Assume further that wife's spouse
isn't doing so well any more. Maybe $10,000/month is far more than
wife would receive under then current circumstances. Doesn't she have
an incentive to divorce NOW? If so, these terms "at time of enforcement"
look very promotive of divorce, don't they?
Marriage of Facter
Marriage of Facter provides some important clues to the answers: Create an incentive for
ending the marriage, and the agreement may be promotive of divorce and
therefore unconscionable either at the time of signing or the time of
enforcement. I'll endeavor to give you the short version of the case's
facts and shorten the quotes form the First District Court of Appeals.
Jeffrey and Nancy signed a four page premarital agreement in 1994, which
Jeffrey himself prepared shortly after graduating from Harvard Law School
(that makes you competent, right? - gotta love these attorney cases),
even though he had no experience in family law and never intended to practice
family law. It purported to avoid the creation of community property and
to waive or limit "support" rights - including both spousal
and child support (and attorney fees in the event of divorce). Sixteen
years later, after a long term marriage, they separated.
In 2011, after the dissolution was filed, Nancy filed a motion for temporary
spousal support and child support, and for attorney fees. She declared
she was a stay-at-home mom and that Jeffrey earned a lot of dough as an
attorney (between $475,000 and $700,000 for the prior five years). Jeffrey
had told her, she said, that she would never get spousal support because
of the prenup, and her rights to child support were limited. Jeffrey filed
opposition pleadings to Nancy's requests, including points and authorities
that argued she'd waived spousal in that prenup all those years before,
but conceding that the child support and attorney fees limits were puffery.
The trial court granted Nancy's requests - including temporary spousal
support - and set the matter for an early trial bifurcation of the enforceability
of the prenup, which is exactly how these things get determined.
Before the bifurcated trial, Jeffrey again conceded that the agreement
was unenforceable as to child support and attorney fees, and made a possibly
glib offer that he would forego claiming the spousal support waiver was
effective IF Nancy agreed the agreement was enforceable as to its separate
property provisions (i.e., no community property). Indeed, there was no
clear waiver of spousal support in this agreement, drafted as it was by
a baby attorney (Jeffrey) back at the time of marriage. The bifurcated
trial took two days.
On the issue of independent counsel, Nancy testified that she had been
advised by two attorneys before signing the agreement, one of whom she
could not remember the name of. She testified she spent 30 minutes with
a San Rafael attorney, who gave her certain opinions, like that a child
support limitation was unenforceable and that there was no spousal support
waiver in the agreement. Nancy admitted to reading the entire agreement
before signing it. She did not allege undue influence. She did claim that
Jeffrey made certain oral promises outside the agreement (i.e., "pillowtalk"),
and that she didn't understand that those promises might not be enforceable
because of an "integration clause" the prenup contained (integration
clauses purport to limit the court's review of the parties' agreement
to the four corners of the document itself, and exclude anything outside of it).
The attorney that Nancy remembered testified at trial. That attorney, some
sixteen years later, had no recollection of Nancy, of their supposed meeting,
or of what she said - nor would most humans or attorneys. Instead, the
attorney testified as to what she thought she would have said to a client
about such an agreement at that time.
Jeffrey testified Nancy was involved in a prior divorce, and had some sophistication
he lacked about the divorce litigation process and that, for instance,
she was knowledgeable about the "Dissomaster" way of calculating
spousal and child support. Jeffrey admitted that when he drafted the prenup,
he had no family law experience. He also admitted telling Nancy he would
"take care of her" for "so long as they were together."
The trial judge threw out the entire premarital agreement. She found the
spousal waiver to be unenforceable, and that each provision of the entire
agreement was inseverable from the others and that therefore Jeffrey separate
property claims arising from the prenup's terms regarding the non-creation
of community property were also unenforceable. The trial court apparently
did not like Jeffrey.
However, the trial court's ruling was reversed on appeal as it related
to the property division, so that possibly Jeffery does win this case.
The agreement had a standard "severability clause" which effectively
provided that 'even if one portion of this agreement is found to be
enforceable, the rest of it will be. Jeffrey withdrew his claims regarding
the spousal support waiver by the time of the appeal, in order to salvage
his property claims. Smart move. However, not so fast.
IRMO Facter Is a Guide for Writing Enforceable Premarital Agreements
Justices Margulies and Banke (concurring), two very important appellate
court jurists, render a thoughtful and important decision in their Opinion
that can help to guide us attorneys in drafting premarital agreements.
Expect to see one or both of them on our California Supreme Court one
day. They found that the spousal support waiver was severable from the
rest of Jeffrey's agreement and on that basis reversed the trial court
findings. However, what makes their Opinion interesting to this discussion
is what they said in their evaluation of spousal support waivers generally
- which they decided even though Jeffrey was no longer making that argument
at the appellate level. Thanks for that, as their analysis is instructive
as it addresses whether the spousal support waiver was unconscionable.
It was. However, note that this decision turns on an earlier version of
Family Code section 1615, after the 1994 amendments but before the amendments
that occurred in 2001 which I mention at the beginning of this Blog. It
does appear that premarital agreements will be interpreted according to
the version of the UPAA in effect at the time the agreement was entered into.
Justice Margulies ruled as follows:
"As Jeffrey correctly notes, unconscionability 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. Pursuant to former section 1615, 'a
premarital agreement will be enforced unless the party resisting enforcement
of the agreement can demonstrate either (1) that he or she did not enter
into the contract voluntarily, or (2) that the contract was unconscionable
when entered into and that he or she did not have actual or constructive
knowledge of the assets and obligations of the other party and did not
voluntarily waive knowledge of such assets and obligations.' (In re
Marriage of Bonds (2000) 24 Cal.4th 1, 15 [(Bonds); see former §
1615, subd. (a)(2).)
Nancy does not claim she entered into the Agreement involuntarily. Accordingly,
former section 1615, subdivision (a)(2), applies and the trial court had
to find both unconscionability and an absence of fair and reasonable disclosure
of Jeffrey’s premarital assets in order to deem the entire Agreement
unenforceable. The trial court concluded that Jeffrey violated this provision
by failing to list the jointly held marital home as his separate property.
We do not view this circumstance as constituting a failure to provide
fair and reasonable disclosure. In the first place, it would have been
rather odd to list a home held in joint tenancy as one’s separate
property. In any event, the Agreement specifically discloses the existence
of the home in Paragraph No. 2, including the fact that Jeffrey had paid
the down payment, and that he would be entitled to reimbursement of that
payment. There is nothing in the record to suggest Nancy was unaware of
these facts, and she does not claim that Jeffrey failed to disclose any
other asset. Thus, there was no evidence that she lacked 'an adequate
knowledg'” of Jeffrey’s property and financial obligations
within the meaning of former section 1615, subdivision (a)(2)(C). Accordingly,
as Jeffrey’s property interests were fully disclosed to her, the
dual requirements of former section 1615, subdivision (a)(2), have not
been satisfied and the agreement as a whole is not unenforceable."
He also stated:
"We note the Supreme Court in
Pendleton [24 Cal.4th 39] did not set a precise standard for when a spousal waiver
is deemed unconscionable. However, the opinion is instructive: 'We
need not decide here whether circumstances existing at the time enforcement
of a waiver of spousal support is sought might make enforcement unjust.
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
persons, 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....
(Pendleton, supra, 24 Cal.4th 39, 53–54, fn. omitted, italics added.)
In Pendleton, the wife, who held a master’s degree and was an aspiring
writer, sought spousal support in spite of a waiver of such support contained
in the parties’ premarital agreement. At the time the dissolution
petition was filed, each party had a net worth of approximately $2.5 million.
(Pendleton, supra, 24 Cal.4th 39, 42.) Our Supreme Court found the waiver
to be valid, observing that the premarital agreement contained an acknowledgment
that 'each party had been represented by independent counsel in the
negotiation and preparation of the agreement, that counsel had advised
each of the meaning and legal consequences of the agreement, and that
each party had read and understood the agreement and its legal consequences.
Their respective counsel certified that this had been done and that their
clients understood the meaning and legal consequences of the agreement
and executed it freely and voluntarily.' (Id. at p. 41.)
Similarly, in Howell, the parties had comparable net incomes when they
executed their premarital agreement in 1999. (citation omitted). The trial
court had ruled that the wife failed to prove the agreement was unconscionable,
finding the parties had made '"fair, reasonable and full"'
(id. at p. 1069) disclosures of property within the premarital agreement.
Additionally, the trial court in that case had found there was not a great
disparity in the income of the parties and their respective assets at
the time they entered into the premarital agreement, which established
there was not 'any significant inequality of bargaining power.'
(Id. at p. 1080.) The appellate court affirmed the trial court’s
conclusion that the spousal support waiver contained in the agreement
was not unconscionable.
Unlike the wife in Pendleton, Nancy was not a 'well-educated person,
self-sufficient in property and earning capacity,' at the time that
she entered the Agreement. Rather, she was a recently unemployed high school graduate with two minor
children, living rent-free in the home Jeffrey had financed for them.
In contrast, Jeffrey was an accomplished attorney, a graduate of Harvard
Law school who earned roughly half a million dollars a year and had $3
million of separate property at the time of the marriage, including a
home in Tiburon. Nancy had no property of her own. Thus, unlike circumstances
here there was a great disparity in the parties’ respective incomes
and assets at the time they entered into the Agreement. This factor also suggests a 'significant inequality of bargaining
power' (citation omitted), an inference that is further supported
by the fact that Jeffrey not only drafted the Agreement himself but also
told that her the spousal support waiver could not be negotiated.
The Supreme Court in Pendleton also suggested that circumstances existing
at the time of the enforcement of a spousal support waiver 'might
make enforcement unjust.' (Pendleton, supra, 24 Cal.4th 39, 53.) The
marriage in the present case lasted 16 years, during which Nancy, with
Jeffrey’s assent, did not pursue her education or seek gainful employment.
Instead, she devoted her efforts to child-rearing and maintaining the
family home, while Jeffrey continued to successfully pursue a financially
rewarding career. Without reasonable spousal support, the evidence supports
the conclusion that Nancy will never come close to replicating the marital
standard of living. As noted above, under Paragraph No. 2 of the Agreement,
she will receive a cash payment of $200,000, half of which Jeffrey has
the option of paying in undefined increments over a five-year period.
In addition, she will receive half of the net proceeds from the sale of
the marital home (an amount that cannot be determined at this time), along
with the home’s furniture and a Jaguar automobile.
Compared to what she is likely to receive in court-ordered spousal support,
these assets are manifestly inadequate. Given that Jeffrey’s self-reported separate property is now in
excess of $10 million and his earnings $1 million per year,
whereas Nancy amassed no separate property during the marriage and has
no income at all, we have little difficulty in concluding that the Agreement’s
spousal support waiver is presently unconscionable." [Italics added].
Finally, Justice Margulies noted the historical and evolving public policy
as to spousal support waivers in California. He observed:
"At the time the California version of the Uniform Act was adopted,
this court had held that agreements waiving the right to spousal support
were unenforceable as being against public policy if the waiver would
promote or encourage dissolution. This court had held in In re Marriage
of Higgason (1973) 10 Cal.3d 476, 485 (Higgason), speaking of both spousal
support and property division, that to be valid, premarital agreements
must be made 'in contemplation that the marriage relation will continue
until the parties are separated by death.
Contracts which facilitate divorce or separation by providing for a settlement
only in the event of such an occurrence are void as against public policy. [Citations.] [¶] Insofar as an antenuptial agreement relates to
the disposition of the property of the respective parties, and does not
seek to alter support obligations imposed by law, it will be upheld.'
At issue in Higgason was an agreement in which both husband and wife waived
all interest in the property of the other party as well as the right to
support. The court concluded that a purported waiver was invalid as against
public policy insofar as the agreement sought to alter the wife's
statutory obligation to support the husband during marriage. The court
also held that the agreement did not preclude exercise of the court's
discretionary power to award post-dissolution support. (10 Cal.3d at pp.
487-488.) Although the basis for the latter holding is not made clear
in the opinion, it appears to be that married persons assume, by means
of the marriage contract, an obligation for support that continues throughout
the lifetime of the parties regardless of whether they live together or
apart, and any agreement to waive that obligation is also unenforceable."
Tips and Take-Aways for Drafting Premarital Agreements
Therefore, this decision gives us important clues for drafting enforceable
premarital agreements. Remember, Jeffrey had abandoned his spousal support
claims, but Justice Margulies had the bit firmly in his teeth - possibly
to help family law practitioners reason through this landscape by giving
us some insights. Family Code section 1615(b) states unconscionability
in these agreements are to be decided "as a matter of law."
These tips include:
- Provisions in agreements that promote divorce, or could be so construed,
may be set aside.
Recitals to premarital agreements concerning the parties relative circumstances
at the time of drafting may be very important to their later interpretation
and enforcement, and may provide an avenue for helping to secure validity
(or setup downstream invalidity!) - especially where those recitals are
made conclusively true by reference to
Civil Code section 622.
- The attorney representing the non-drafting party who is responding to limitations
or waivers tendered by the other party has a very different role then
attorneys traditionally do when they endeavor to write agreements that
will pass muster - their clients may have an interest in inserting little
bombs into the agreement, or allowing bombs the drafting party inadvertently
placed in the prenup or missed the implications of, to remain.
- Milestone events seem to promote divorce, because they may create an incentive
to file a dissolution proceeding in order to achieve the benefits of the
milestone. However, whether they do render the agreement or its provision
enforceable or not may depend on who is attacking the agreement, and when.
- The separate property provisions of a prenup may be upheld, and are certainly
severable from unenforceable spousal support waivers and yet those self
same property provisions may guarantee the unenforceability of the spousal
- The parties' relative financial and educational circumstances at both
the date of execution and date of enforcement matter a lot, including
how they will end up with whatever property division that does take place.
- Trial courts are apparently entitled to calculate the value of a spousal
support waiver by taking into account how much temporary support, if not
waived, a supported spouse might have received and then purportedly gave
up - at the time of enforcement - by comparing these numbers to how else
the party fared under the agreement (including division of property) in
determining "unconscionability" at enforcement time! They certainly
have wide discretion in evaluating the parties' relative circumstances.
- If you want a spousal limitation or waiver in your prenup, but had hoped
to avoid litigation and lawyer fees by signing such an agreement in the
first instance, you may not get what you bargained for.
The property aspects of this prenup may well survive, but Jeffrey will
be paying spousal support (and child support, of course). Each party was
ordered to pay their own costs on appeal - and you can be sure these were
each in the tens of thousands, not to mention what came before. It is
difficult to tell who the loser was here, but it looks to be Nancy given
that Jeffrey had withdrawn his support waiver claims and the litigation
at the appellate level really involved the property provisions.
Settle your cases instead and good luck out there! Collateral attack on
premarital agreements at relationship road's end is alive and well!
Thurman W. Arnold, III, C.F.L.S.