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Case of the Month Archive

March 2018

The fact that husband did the initial drafting doesn’t extend the 7-day review period or constitute waiver of statutory rights under Fam C §1615(c)(3). . .

 

In affirmance, First District holds that prenup initially drafted by husband, but revised by wife’s attorney, is not enforceable against husband, who was not represented by counsel and did not have at least 7 days to review final version before he signed it; statement in prenup that the parties each had the 7-day review period before they signed it is not binding against unrepresented party

 

In re Marriage of Clarke and Akel

(January 24, 2018)

California Court of Appeal 1 Civil A149052 (Div 5) 19 Cal.App.5th 914, 228 Cal.Rptr.3d 483, 2018 FA 1823, per Needham, J (Jones, PJ and Bruiniers, J, concurring). San Mateo County: Franchi, affirmed. For appellant wife: Ester Adut. For respondent husband: Charles DeLacey, CFLS, (415) 528-7000. CFLP § U.110.20.

 

After Matthew Clarke and Claudia Akel became engaged, they set their wedding date as March 7, 2008. On February 26, 2008, Matthew, using a downloaded form as a guide, drafted a prenup which, among other things, provided that his separate property house would remain his separate property after the marriage. However, it also provided that Claudia would acquire a 2% interest in the house for each year of their marriage, and the house would become community property after 7 years of marriage. In addition, Claudia and any children would have a lifetime tenancy in the house.

 

Matthew retained attorney, Clifford Chernick, to represent Claudia in the negotiation and execution of the prenup, but “did not believe he needed an attorney himself” and did not seek advice from independent counsel. He mailed a copy of his draft prenup to Chernick on February 29 and followed up with a revised draft on March 3, which contained the same provisions regarding his house. Chernick reviewed the draft and made notes regarding certain issues.

 

On March 4, 2008, Matthew and Claudia met with Chernick to discuss the prenup. The attorney advised Matthew to seek independent counsel, but Matthew said “he was able to represent himself.” Chernick then met separately with Claudia to explain the provisions of the prenup and its legal effect. The attorney also asked Matthew about his understanding of the term “divorce” in connection with Claudia’s acquiring a 2% interest in his house and also discussed whether Matthew intended to waive his right to Fam C §2640 reimbursement if the house became community property after 7 years.

 

On March 5, 2008, Chernick sent Matthew and Claudia each copies of the revised prenup, to which he had added several provisions regarding the parties’ waiver of their separate property interests in any community property (including Fam, C §2640 reimbursement), Matthew’s separate waiver of such reimbursement in connection with his house, and his obligation to pay all expenses of the house during Claudia’s lifetime tenancy. The revised prenup also contained a statement that each party had had more than 7 days to review the document before signing it. Matthew and Claudia signed this prenup on March 8, 2008. Matthew also executed a separate written waiver of counsel, stating that Chernick had advised him to retain separate counsel and acknowledging that the attorney represented Claudia alone.

 

Matthew and Claudia separated “in 2013 or 2014” and began disso proceedings. She sought to enforce the prenup provision giving her a lifetime tenancy in his house. After the trial court bifurcated the issue, Claudia, Matthew and Chernick testified. The lower court concluded that the prenup was not enforceable because Matthew was not presented with the final version at least 7 days before he signed it, as required by Fam C §1615(c)(2). It also found that the document was unenforceable under Fam C §1615(c)(3) because Matthew had not received a written advisement of the rights he was giving up under the prenup and had not signed a written waiver of those rights.

 

Claudia appealed, but the First District affirmed.

 

Rules of the road . . .
At the outset, the justices noted that Fam C §1615(c) provides that a prenup will be considered to have been executed involuntarily (and thus unenforceable) unless the unrepresented party against whom enforcement is sought had not less than 7 days to review it before signing and had been advised to seek independent counsel before signing it. If the party chooses not to seek independent counsel, he or she must execute a written waiver of representation by separate counsel. And, the statute requires that an unrepresented party against whom enforcement is sought must be fully informed of the terms and basic effects of the prenup, as well as the rights and obligations he or she would give up on signing it. This information must be memorialized in writing and delivered to the unrepresented party, who must then execute a declaration of having received the writing and by whom the information was given. Moreover, a prenup is not enforceable if it or the accompanying documents were signed under duress, fraud, or undue influence or by parties who were not competent to enter into them.

 

Shortchanged on time . . .
With all that in mind, the justices focused on whether Matthew had had the required 7-day review period to go over the prenup before he signed it. They noted that the final version was presented to him on March 5, 2007, and contained several important revisions to the terms of the prenup that he himself had drafted, including a waiver of his right to Fam C §2640 reimbursement. Given the material nature of the revisions, the panel found that Matthew should be considered as having been “‘first presented’” with the prenup on March 5. Moreover, the panel continued, he was not advised to seek independent counsel until March 4, when he first met with Chernick. Whether the 7-day review period began to run on March 4 or on March 5, the justices concluded, Matthew had not received the full 7-days mandated by the statutes.

 

Boilerplate bust . . .
Claudia contended that the boilerplate provision which stated that the parties acknowledged that they each had more than 7 days to review the prenup and had ample time to review it with independent counsel, should preclude Matthew from arguing that he had not had the required review period. In support, she cited Ev C §622, which provides that except for the recital of a consideration, the facts recited in a written instrument are conclusively presumed to be true as between the parties and their successors in interest. The panel pointed out, however, that §622 is based on the doctrine of estoppel by contract and does not apply to situations that do not involve arm’s length negotiations or invalid contracts. Here, the justices reasoned, Fam C §1615(c)(2) makes a prenup involuntary and thus, invalid, when the unrepresented party has not had the required 7-day review period, and is designed to protect unrepresented parties. That intention, they determined, “would be thwarted” if the parties to a prenup could circumvent its requirements by means of a boilerplate provision that misstated the true facts.

 

No getting around it . . .
Moving on, the justices pointed out that the trial court had found another basis besides the 7-day review period for finding the prenup invalid. Matthew had not been advised in writing of the rights and obligations he was giving up by signing the document. In addition, he had not executed a written waiver of those rights. The panel was not convinced that, as Claudia contended, Matthew’s having drafted the first version of the prenup should make this provision inapplicable. They found nothing in Fam C §1615(c)(3) to support her contention. And, they declined to consider Matthew’s waiver of his right to counsel as an acceptable substitute. As for Claudia’s assertion that the trial court should have simply invalidated the provisions that Chernick had added and left the rest of the prenup intact, the panel found no statutory support for that either. The statutes speak of the lack of enforceability of the entire premarital agreement when statutory requirements are not met. And even if the justices could pick and choose among prenup provisions, the panel concluded, Matthew’s failure to comply with the provisions of Fam C §1615(c)(3) would still render the prenup invalid. Accordingly, the justices held that the lower court had not erred by finding that the prenup was invalid.

 

 

Comment

  

Claudia’s contention that the trial court should have simply invalidated the provisions that Chernick added was not successful in this case. However, it would have been if the parties had included a severability clause. In In re Marriage of Facter (2013) 212 Cal.App.4 th 967, 152 Cal.Rptr.3d 79, the attorney husband drafted the prenup, which included this severability clause: “‘If any clause or provision of this agreement should be determined to be wholly or partly unenforceable, that determination shall not affect the enforceability of the other clauses and provisions of this agreement.’” After a bifurcated trial to determine the validity of the prenup when the parties divorced, the trial court ruled that a spousal support waiver in the document was unconscionable, that the agreement was inseverable, and that it was totally unenforceable. On appeal, the First District reversed. Citing CC §1599 [contract that includes lawful and unlawful distinct objects is void as to the latter and valid as to the remainder], the justices held that the lower court had abused its discretion by failing to sever the invalid provisions pertaining to spousal support, child support, and attorney’s fees in accordance with the severability clause in the prenup.

 

 

Remember that the 7-day waiting period before signing does not apply when the party against whom enforcement is sought was represented by counsel from the outset of the transaction. In In re Marriage of Cadwell-Faso and Faso (2011) 191 Cal.App.4 th 945, 119 Cal.Rptr.3d 818, the First District reversed a trial court that found that an addendum to a prenup signed two days before the parties’ wedding was not enforceable. Looking to the legislative history, context, and language of Fam C §1615(c), the justices concluded that the 7-day waiting period was intended to benefit unrepresented parties. And, they reasoned that it made little sense to insist on a waiting period that enabled a party to seek independent counsel when that party is already represented.

 

 

Note that in In re Marriage of Friedman (2002) 100 Cal.App.4 th 65, 122 Cal.Rptr.2d 412, the Second District held that Fam C §1615 does not apply to postnuptial agreements.

 

 

 
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