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Case of the Month (from CFLR Monthly)

September 2021
[Archive]

Premarital agreements that fail to comply with Fam.C. §1615(c)(1) [presumption that premarital agreement was not executed voluntarily if unrepresented party did not sign a waiver of legal representation] are void, not voidable. . .

 

In a reversal of summary judgment, the Second District held that where an unrepresented party to a premarital agreement (PMA) did not sign a waiver of legal representation as required per Fam.C. §1615(c)(1), the PMA is void and, therefore, as a matter of law cannot be ratified.

 

Knapp v. Ginsberg

(August 5, 2021)

Court of Appeal 2 Civil B307559 (Div 4) ___ Cal.Rptr.3d ___, 2021 WL 3417811, 2021 FA 1996, per Collins, J. Los Angeles County: Lui, J., order reversed. For appellant (Knapp): Adam Pines. For respondent (Ginsberg): Jennifer Kay Saunders and Arezoo Jamshidi. CFLP §U.110.6.

 

On March 25, 2004, Grant Tinker and Brooke Knapp signed a premarital agreement (PMA) that focused in relevant part on ownership and testamentary disposition of a marital home. Brooke was represented by Larry Ginsberg, an attorney and certified family law specialist, during the negotiation, drafting, and execution of the PMA. Grant, meanwhile, did not have apparent legal representation throughout any stages of the PMA. The PMA itself, however, contained a provision that both parties were represented by counsel. Other relevant portions of the PMA stated that the couple would jointly own the marital home and that if Grant predeceased Brooke, Brooke would receive Grant's one-half interest "'in the residence free and clear of any encumbrance, lien, assessment, or other debt.'" The PMA also read that if Grant died while an encumbrance remained on the marital home, "'Brooke shall have a lien against Grant's estate in an amount sufficient to promptly pay the full amount of such lien or encumbrance so as to ensure that Brooke receives the property free and clear of any such liens or encumbrances.'" After the execution of the PMA, the couple married on April 5, 2004.

 

In subsequent years, Grant executed several amended versions of his trust, which frequently acknowledged the PMA and included provisions for carrying out its terms. On December 22, 2004, while represented by an attorney, Grant executed a Second Amended Trust that acknowledged the existence of the PMA and provided that a successor trustee was to set aside $450,000 for "'property taxes, assessments, insurance, maintenance, and ordinary repairs' on the [marital home]." On April 29, 2015, Grant, again represented by an attorney, executed a Fifth Amended Trust, again providing that $450,000 should be set aside to carry out the PMA requirement. Finally, on July 15, 2015, Grant executed a Sixth Amended Trust, which revoked a Residence Trust that was created concurrently with his Fifth Amended Trust. This sixth and final amendment did not mention the PMA but provided $450,000 for payment of expenses related to the marital home.

 

On November 28, 2016, Grant died, leaving behind a $3.9 million mortgage on the marital home. After Grant's death, Brooke sold the home for $10.2 million and used the proceeds to pay off the mortgage, purchase a new home, and fund a newly created trust. On July 24, 2017, Grant's children filed a probate petition to set aside the Sixth Amended Trust, alleging that Brooke exerted undue influence over Grant. Meanwhile, on November 28, 2017, Brooke filed a $4 million creditor's claim against Grant's estate after Grant's son refused to reimburse Brooke for her payment of the marital home mortgage. During litigation of their claims, the parties became aware that the PMA might be invalid because Grant did not execute a signed waiver of legal representation per Fam.C. §1615(c)(1) [presumption that premarital agreement was not executed voluntarily if unrepresented party did not sign a waiver of legal representation]. After learning about the potential issue with the PMA, Brooke addressed her concern with Ginsberg, who had continued to provide representation relating to the marital home to Brooke throughout the years. On October 11, 2018, Brooke and Ginsberg entered into a tolling agreement whereby Ginsberg denied any wrongdoing in the drafting and execution of the PMA but agreed to toll the running of the statute of limitations until April 30, 2019.

 

On October 19, 2018, Grant's children and Brooke settled their claims against each other. This settlement agreement required Brooke to forgo certain estate assets, pay attorney's fees, and amend her trust to provide that $2 million of her estate would pass to Grant's four children at the time of her death. On April 2, 2019, Brooke filed a malpractice action against Ginsberg, alleging that the PMA that she hired him to prepare was void because Grant was not represented by counsel and did not sign a separate waiver of counsel per Fam.C. §1615(c)(1). In her suit, Brooke alleged that her damages included $111,000 that she was forced to forgo in the probate action, $500,000 in attorney's fees, and the present value of the loss of transferability of $2 million of her estate at the time of her death. In response, Ginsberg filed a motion for summary judgment. Among other arguments, Ginsberg contended that Brooke could not prove causation of her malpractice claim because Grant later ratified the terms of the PMA through his several trust amendments, each of which "'cured his purported lack of consent.'" Ginsberg also argued that he presented evidence to establish that Grant was represented by counsel during the execution of the PMA. On August 5, 2020, the trial court granted Ginsberg's motion for summary judgment on the grounds that Grant ratified the PMA by "repeatedly acknowledg[ing] the existence and terms of the PMA and fail[ing] to rescind it." Brooke appealed and the Second District reversed.

 

On appeal, Ginsberg argued that Grant was not required to execute a written waiver of legal representation because the evidence established that Grant was represented by counsel. For support for his argument, Ginsberg relied on a provision of the PMA that read that "'each party has been represented by and relied exclusively on independent counsel.'" But the justices were unpersuaded that such "boilerplate language in the PMA" conclusively established that Grant was represented by counsel. Neither were they persuaded with Ginsberg's contention that Grant "'never told Knapp that he was not advised by an attorney prior to signing the Agreement.'" Instead, the justices held that whether Grant was represented by counsel is a triable issue of material fact.

 

As a matter of law, an involuntarily executed PMA may not be later ratified. . .
The panel next turned to whether a PMA that was not voluntarily executed due to failure to comply with statutory requirements could be later ratified. Relying on the plain language of Fam.C. §1615, its legislative history, and relevant case law, the justices determined that it cannot. Section 1615 reads in pertinent part "that a premarital agreement 'is not enforceable if the party against whom enforcement is sought proves…That party did not execute the agreement.'" The justices agreed with Knapp's argument that to construe "not enforceable" to mean voidable instead of void would "render the separate waiver portion of the statute superfluous."

Finally, the justices rejected Ginsberg's argument that the malpractice claim was barred by the statute of limitations. Specifically, Ginsberg argued that since the PMA was executed over 15 years ago, CCP §340.6 bars Brooke's recovery. The justices noted, however, that CCP §340.6 contains a tolling provision in which that statute of limitations does not begin to run until after plaintiff sustains an actual injury. Here, the justices found that Brooke sustained her injury in December 2017 when Grant's children refused to honor the lien. The panel noted that the statutory tolling would have made the statute of limitations run in December 2018, but because Brooke and Ginsberg agreed to toll the statute of limitation until April 30, 2019, Brooke's suit, filed April 2, 2019, was not barred by the statute of limitations. Accordingly, the Second District reversed the trial court's judgment.

 

Library References
11 Witkin, Summary of Cal. Law (11th ed. 2021) Com Prop, §29
Hogoboom & King, Cal. Practice Guide: Family Law (The Rutter Group) ¶¶9:154.5, 9:183.1

 

 

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