BILL ANALYSIS
SB 78
Page 1
Date of Hearing: June 26, 2001
ASSEMBLY COMMITTEE ON JUDICIARY
Darrell Steinberg, Chair
SB 78 (Kuehl) - As Amended: June 21, 2001
SENATE VOTE : 39-0
SUBJECT : PRE-MARITAL AGREEMENTS
KEY ISSUES :
1)WHEN SHOULD COURTS BE PERMITTED TO ENFORCE PRE-MARITAL
AGREEMENTS THAT REQUIRE SPOUSES TO WAIVE SPOUSAL SUPPORT?
2)WHAT CIRCUMSTANCES MUST BE PRESENT FOR A COURT TO FIND THAT A
GIVEN PRE-MARITAL AGREEMENT WAS EXECUTED VOLUNTARILY?
SYNOPSIS
This bill seeks to clarify the circumstances when courts may
enforce pre-marital agreements requiring spouses to waive
spousal support upon dissolution of the marriage. Rather than
simply prohibiting the waiver of spousal support in pre-marital
agreements, a view adopted by a small minority of states, the
bill continues to keep California statutorily in line with the
over 40 states which take the view that waivers of spousal
support contained in pre-marital agreements are not "void per
se," and instead may be enforced on a case-by-case basis if
specified conditions are met. To assist the courts in
performing this responsibility, the bill sets forth several
fairness conditions which must be present for spousal support
waivers to be enforceable. Among other things, the bill
requires that pre-marital waivers of spousal support may only be
enforced if (1) the party whom allegedly waived spousal support
was represented by independent counsel at the time the agreement
was signed; and (2) the court does not later determine that
enforcement of the spousal support waiver would be
unconscionable at the time enforcement is sought. The bill also
makes clear the fact that a waiving party was represented by
independent counsel at the time of signing a spousal support
waiver shall not ipso facto make the spousal support waiver
enforceable.
The measure also seeks to assist the courts when more generally
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considering the enforceability of all pre-marital agreements.
It does this in two ways. First, it clarifies that pre-marital
agreements are not enforceable, whether they contain spousal
support waivers or not, if the party against whom enforcement is
now sought did not, prior to signing the agreement, receive a
full, as well as fair and reasonable disclosure, of the property
or financial obligations of the other party. Second, it
clarifies the circumstances that must be present for a court to
find that a particular pre-marital agreement was executed
voluntarily. The enumerated conditions include, among other
things, that the party against whom enforcement of the
pre-marital agreement is sought was either represented by
independent legal counsel at the time of signing the agreement
or, after being advised to seek independent legal counsel,
expressly waived, in a separate writing, representation by
independent legal counsel.
SUMMARY : This bill seeks to clarify two important areas of
California's family law pertaining to pre-marital agreements.
The first pertains to the circumstances when courts may enforce
pre-marital agreements requiring spouses to waive spousal
support upon dissolution of the marriage. The second pertains
to the circumstances when courts may find particular pre-marital
agreements were executed voluntarily. Specifically, this bill :
1)Sets forth several fairness conditions which must be present
for spousal support waivers to be enforceable, including that
such waivers may only be enforced if (1) the party whom
allegedly waived spousal support was represented by
independent counsel at the time the agreement was signed; and
(2) the court does not later determine, at the time
enforcement of the premarital agreement is sought , that
enforcement of the spousal support waiver would be
unconscionable.
2)Makes clear that the fact a waiving party was represented by
independent counsel at the time he or she signed a spousal
support waiver shall not, in and of itself , make the spousal
support waiver subsequently enforceable.
3)Clarifies that pre-marital agreements are not enforceable,
whether they contain spousal support waivers or not, if the
party against whom enforcement of the agreement is now sought
did not, prior to signing the agreement, receive a full, as
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well as fair and reasonable disclosure, of the property or
financial obligations of the other party; and
4)Clarifies the circumstances that must be present for a court
to find that a particular pre-marital agreement was executed
voluntarily. This provision requires the court to find all of
the following conditions present at the time enforcement of
the agreement is sought in order to hold that a given
pre-marital agreement was executed voluntarily:
a) The party against whom enforcement is sought was
represented by independent legal counsel at the time of
signing the agreement or, after being advised to seek
independent legal counsel, expressly waived, in a separate
writing, representation by independent legal counsel.
b) The party against whom enforcement is sought had not
less than seven calendar days between the time that party
was first presented with the agreement and advised to seek
independent legal counsel and the time the agreement was
signed.
c) The party against whom enforcement is sought, if
unrepresented by legal counsel, was 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
the agreement, and was proficient in the language in which
the explanation of the party's rights was conducted and in
which the agreement was written. The explanation of the
rights and obligations relinquished shall be memorialized
in writing and delivered to the party prior to signing the
agreement. The unrepresented party shall, on or before the
signing of the pre-marital agreement, execute a document
declaring that he or she received the information required
by this paragraph and indicating who provided that
information.
d) The agreement and the writings executed pursuant to the
above requirements were not executed under duress, fraud,
or undue influence, and the parties did not lack capacity
to enter into the agreement.
e) Any other factors the court deems relevant.
EXISTING LAW :
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1)Regulates pre-marital agreements by, among other things,
listing the specific subject areas appropriate to such
agreements. (Family Code section 1612(a). All further
references are to this code unless otherwise stated.)
2)Does not include spousal support on its list of appropriate
subject areas. The law does provide, however, that in
addition to the enumerated subject areas, pre-marital
agreements may include "any other matter, including [the
parties'] personal rights and obligations, not in violation of
public policy or a statute imposing a criminal penalty."
( Id .)
3)Further provides that "the right of a child to support may not
be adversely affected by a pre-marital agreement." (Section
1612(b).)
4)Provides that a pre-marital agreement is not enforceable if
the party against whom enforcement is sought proves that a)
that party did not execute the agreement voluntarily, or b)
the agreement was unconscionable and the party reasonably
could not have known of, did not receive fair and reasonable
disclosure of, and did not waive disclosure of the other
party's property and financial obligations. (Section 1615.)
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : The author introduced this bill in response to two
decisions last year by the California Supreme Court which
focused on the enforceability of pre-marital agreements
generally, as well as on the enforceability of waivers of
spousal support in such agreements specifically. This important
measure responds to and clarifies several of the key issues
addressed by the Supreme Court in those cases, including when
courts should be permitted to enforce pre-marital agreements
requiring the waiver of spousal support, as well as when courts
may find that a given pre-marital agreement was voluntarily
executed.
General Background : The doctrine of community property law has
governed marriage and dissolution in California for over 150
years. For just as long, California has recognized the right of
parties to agree to marriage terms at variance with this law
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through pre-marital agreements. These agreements normally have
been considered enforceable unless they violated general
contractual concepts of fraud, duress, or undue influence, or
otherwise were contrary to public policy.
As economic conditions, attitudes toward marriage, and views on
the status of men and women changed over the latter half of the
twentieth century, the use of pre-marital agreements also has
increased. Their general lack of uniformity, however, as well
as uncertainty as to their legally permissible scope, has meant
that many pre-marital agreements between couples who
subsequently divorced have become the subject of protracted
court battles, with some agreements being found to be
unenforceable.
In 1983, legislation was introduced to adopt the model Uniform
Pre-marital Agreement Act (UPAA) into California law. The UPAA
had been developed to make pre-marital agreements more
enforceable by defining both their permissible subject matter,
and the circumstances under which they would be considered
unenforceable. As introduced, the proposed California law
contained the entire model UPAA, including two provisions
allowing pre-marital agreements to include a waiver of spousal
support. This was significant, because at that time, California
case law considered the waiver of spousal support to be void as
against public policy because the waiver of spousal support was
believed to encourage divorce. After hearing testimony opposing
the bill's waiver provisions on several grounds, including
policy reasons independent of the current case law, the
Legislature deleted the two provisions permitting waiver of
spousal support before enacting the rest of the UPAA into law.
(Current Family Code sections 1612-1617.)
As noted above, last year the California Supreme Court issued
two decisions last year relating to pre-marital agreements.
First, the Court held that a party's lack of representation by
independent counsel in the executing of a pre-marital agreement
was only one factor to consider in determining whether the
overall agreement was entered into voluntarily, as opposed to
being unenforceable under California's version of the UPAA. (In
re Bonds (2000) 24 Cal. 4th 1.)
In the second case, the Court held that the Legislature's
deletion of spousal support waiver provisions prior to enacting
the UPAA did not signal a legislative intent to prohibit such
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waivers in pre-marital agreements, since the Legislature could
have gone farther and affirmatively prohibited waivers of
spousal support, as it did for waivers of child support. (In re
Pendleton (2000) 24 Cal. 4th 39, 49.) Instead, the Court
reasoned, the Legislature intended to leave the matter to the
courts. ( Id .)
The Court further held that, due to changes in society and in
the laws affecting marital dissolution over the years, the
common law doctrine holding the waiver of spousal support in a
pre-marital agreement to be unenforceable as against public
policy, specifically because it supposedly encouraged marital
dissolution, was anachronistic, and such waivers no longer would
be found per se unenforceable. ( Id . at p. 53.) The Court
declined to determine whether other public policy reasons might
support the continued unenforceability of waivers of spousal
support. Instead, however, it noted that "the Legislature may,
of course, limit the right to enter into pre-marital waivers of
spousal support and/or specify the circumstances in which
enforcement should be denied." ( Id . at p. 54.)
The Pendleton Case and the Issue of Spousal Support Waivers : As
noted above, this measure addresses the key issues raised
regarding per-marital agreements in both the recent Pendleton
and Bonds cases. Turning first to Pendleton , the bill takes up
the invitation made by the Supreme Court noted above to address
the issue.
In Pendleton (which was decided by the Court the same day as
Bonds ) the Court reversed a long-standing California public
policy declaring provisions in pre-marital agreements that waive
or limit spousal support rights to be invalid. (See, e.g.,
Barham v. Barham , 33 Cal. 2d 416 (1949); Whiting v. Whiting , 62
Cal. App. 157 (1923), where in both cases the courts concluded
such spousal support waivers promoted divorce.) In Pendleton ,
Candace Pendleton and Barry Fireman were married in July 1991
and separated four years later. At the time of their marriage,
both parties were, according to the Court, "wealthy and
well-educated people." Prior to their marriage, they had
entered into a pre-marital agreement in which each had waived
any right to seek spousal or child support from the other in the
event of a subsequent dissolution. Moreover, both had been
represented by independent counsel in connection with the
negotiation of the agreement.
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At the time that the dissolution petition was filed, each party
had a net worth of over $2 million. Pendleton had a master's
degree and was an aspiring writer, and Fireman held a doctorate
in pharmacology and a law degree, and was a businessman with
ownership interests in numerous companies and business ventures.
Despite the similarities in their net worths, however,
Fireman's income was significantly higher than Pendleton's, and
Pendleton sought temporary spousal support from the trial court.
In response, Fireman cited the waiver of spousal support
contained in their pre-marital agreement as a defense against
Pendleton's temporary support application. However the trial
court held that the spousal support waiver was against public
policy, and ordered Fireman to pay temporary spousal support of
$8,500 per month to Pendleton. (This excellent summary of the
case, and a probing analysis of this and the Bonds case, may be
found in Wasser, Dennis, "Prenuptual Disagreements: The
enforcement of prenuptial agreements in California has been
strengthened, but provisions in violation of public policy will
still be struck down," Los Angeles Lawyer, December 2000.)
Fireman appealed from that temporary support order, and the
court of appeal reversed the trial court's order, concluding
that such waivers are not automatically unenforceable. The
Supreme Court then granted Pendleton's petition for review of
the court of appeal's ruling. In a 6 to 1 decision, the Court
affirmed the ruling of the court of appeal upholding the
enforcement of the spousal support waiver in the couple's
pre-marital agreement.
Among other things, the Court noted that at least 41
jurisdictions already had authorized waivers of spousal support
either by statute or judicial decision, and declared that
California's previous blanket rejection of spousal support
waivers was "anachronistic." ( Id. at 49.) After discussing the
other recent "dramatic" changes in California's approach to the
spousal support obligations of former spouses to each other, the
Court concluded, "No basis appears on which to distinguish
pre-marital waivers of spousal support from agreements governing
property rights insofar as either has a potential for promoting
dissolution." ( Id. )
The Bill's Treatment of the Pendleton Decision and Enforcement
of Spousal Support Waivers : As noted above, this measure
addresses the Pendleton decision by following the Court's view,
and that of over 40 states, that waivers of spousal support
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contained in pre-marital agreements are not "void per se."
Instead, the bill clarifies that such waivers may be enforced on
a case-by-case basis if specified conditions are met.
Responding to the Court's earlier invitation to clarify this
issue, the bill sets forth several fairness conditions which
must be present for spousal support waivers to be enforceable.
Among other things, the bill requires that pre-marital waivers
of spousal support may only be enforced if (1) the party whom
allegedly waived spousal support was represented by independent
counsel at the time the agreement was signed; and (2) the court
does not later determine, at the time enforcement is sought ,
that enforcement of the spousal support waiver would be
unconscionable. The bill also makes clear the fact that a
waiving party was represented by independent counsel at the time
of signing a spousal support waiver shall not ipso facto make
the spousal support waiver enforceable. Even if independent
counsel advised the client, the waiver may still be found
unenforceable due to other factors.
The Bonds Case and the General Issue of Voluntariness in All
Pre-Marital Agreements : As noted above, the other major part of
this legislation clarifies the circumstances that must be
present for courts to find particular pre-marital agreements
were voluntarily executed. This part of the bill is in direct
response to the Bonds case noted above. In that case, Barry
Bonds, now one of the country's most famous professional
baseball players, was married to Sun, a native of Sweden who had
emigrated to Canada in 1985, Sun was working in Montreal as a
waitress and bartender when she met Barry in the summer of 1987.
In October 1987, at Barry's invitation, Sun visited him for 10
days at his home in Arizona, and a month later, she moved to
Arizona to live with him. One week later they became engaged to
be married. On February 5, 1988, they signed a pre-marital
agreement that had been prepared by Barry's attorney, and that
same day they flew to Las Vegas, where they were married the
following day. The pre-marital agreement provided that all of
each party's earnings and accumulations from personal services
rendered during marriage would be that party's separate
property. Subsequently, the parties moved to California and, in
1994, Barry filed a petition for legal separation in San Mateo
County. The trial court bifurcated trial on the issue of the
validity of the parties' prenuptial agreement, so that issue was
tried first.
As in many divorce cases, the two parties' versions of the
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events surrounding the execution of the pre-marital agreement
were quite different. The trial court, however, expressly found
that the testimony of Barry and his witnesses was more credible,
and in its statement of decision the court found, among other
things, that: (1) Sun had known since the commencement of the
parties' relationship that Barry wanted to keep his property and
earnings separate; (2) Sun was an intelligent woman who was
fluent enough in English to understand the agreement; (3) Sun
had an opportunity to read the document before it was signed;
(4) Sun had been advised that she had the right to obtain
independent counsel at least a week before the agreement was
presented to her, and she voluntarily elected not to retain
independent counsel; (5) and the close proximity of the wedding
to the execution of the agreement was not a significant factor
in the court's view because Barry and Sun's wedding was "a
small, impromptu affair" that easily could have been postponed
if Sun had wanted more time to review the agreement.
Consequently, the trial court held that Sun had entered into the
pre-marital agreement freely and voluntarily and, therefore, the
agreement was valid and enforceable. (Wasser, "Prenuptual
Disagreements," supra, Los Angeles Lawyer, December 2000.)
In a split decision, the court of appeal reversed the trial
court's ruling and remanded the case to the trial court for
further litigation on the issue of the agreement's
voluntariness. In so ruling, the lower appellate court
promulgated a rule that would have subjected pre-marital
agreements to stricter judicial scrutiny in situations in which
one spouse did not have independent counsel. Nevertheless, the
California Supreme Court unanimously held the court of appeal
had erred in taking this position. Instead, the Court held that
a reasonable opportunity to consult with independent counsel
should be only one of the factors to be considered by the courts
to determine voluntariness. Consistent with the goal of this
legislation, however, the Court noted that whether a party had
been afforded a reasonable opportunity to obtain his or her own
counsel was an "important factor" in the analysis of whether a
pre-marital agreement had been voluntarily executed. (24
Cal.4th at 24.)
The Bill's Treatment of the Bonds Decision and the Issue of
Voluntariness : As noted above, this measure addresses the Bonds
decision head on by clarifying in two ways the circumstances
that must be present for a court to find that a particular
pre-marital agreement was executed voluntarily. First, it
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clarifies that pre-marital agreements are not enforceable if the
party against whom enforcement of the agreement is now sought
did not, prior to signing the agreement, receive a full, as well
as fair and reasonable disclosure, of the property or financial
obligations of the other party. Second, it enumerates
pre-conditions that must be present for a court to find that a
particular pre-marital agreement was executed voluntarily,
including, among other things, that the party against whom
enforcement of the pre-marital agreement is sought was either
represented by independent legal counsel at the time of signing
the agreement or, after being advised to seek independent legal
counsel, expressly waived, in a separate writing, representation
by independent legal counsel.
ARGUMENTS IN SUPPORT : It appears that the Family Law Section of
the California State Bar now supports the bill due to the recent
amendments made to the bill which clarify that courts should
make their determination whether a spousal support waiver is
unconscionable at the time enforcement is sought. Writes the
Section:
[We] generally support the rights of prospective
spouses to contract with respect to marital rights,
including the right to receive spousal support, so
long as such agreements are made voluntarily and with
full knowledge of one's rights. Generally speaking,
parties should be as free to contract in this area as
in others... However, [we] recognize that spousal
support, and the role that it can play at the time a
marriage is ending, is worthy of some special
protection [and] that the potential hardships created
by waivers or limitations on spousal support cannot be
solved merely by requiring that an attorney be present
at the time the agreement is made.
The Committee on Moral Concerns also supports this bill, stating
it will "mandate fairness and honesty in pre-marital agreements
by ensuring the voluntariness and right to counsel by both
parties." It also contends the bill will strengthen marriages
by requiring "both parties to respect the legality of premarital
agreements," further commenting that "Common sense and fairness
are not optional."
ARGUMENTS IN OPPOSITION : The Family Law Section of the Los
Angeles County Bar Association (as opposed to the statewide
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family law section of the bar) continues to oppose the bill,
contending no other contracts require representation by counsel
or explicit documentary proof that information was conveyed by
counsel in the way this bill does. The Section also opposes the
bill's provision clarifying that pre-marital agreements are not
enforceable, whether they contain spousal support waivers or
not, if the party against whom enforcement of the agreement is
now sought did not, prior to signing the agreement, receive a
full, as well as fair and reasonable disclosure, of the property
or financial obligations of the other party. The Section states
that "This proposed addition might likely mean that any
oversight [in providing full disclosure], no matter how slight,
might be grounds for a set aside because the requirements of
'full' whatever is meant by that term) had not been met." The
Section also expresses concern about the "catch-all" factor
contained in the bill's proposed new clarifications for
determining whether a pre-marital agreement was executed
voluntarily, stating this factor (that the court may consider
"Any other factors the court deems relevant") will "alone leave
every premarital agreement vulnerable to being set aside."
Possible Technical Amendments:
1) To avoid potential inadvertent confusion over the bill's
provision regarding spousal support waivers, the author may wish
to amend the bill (at page 2, lines 26-31) as follows:
(c) Any provision in A a premarital agreement
regarding spousal support, including, but not limited
to, a waiver of it, is not enforceable if the party
against whom enforcement of the spousal support
provision is sought was not represented by independent
counsel at the time the agreement containing the
provision was signed, or if the agreement provision
regarding spousal support is unconscionable at the
time of enforcement.
2) To avoid confusion with the general unenforceability
provisions in the bill applying to all premarital agreements
contained at page 3 (lines 6-8), and to avoid an automatic
invalidation of all other provisions in pre-marital agreements
that are unrelated to spousal support, the author may wish to
amend the bill at page 3, deleting the provision at lines 22-23.
3) To facilitate appellate review of the trial court's
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determination of the voluntariness of the execution of a
premarital agreement, the author may wish to amend the bill (at
page 3, line 28) to ensure the court's findings regarding
voluntariness are in writing or placed in the court record, as
follows:
(c) For the purposes of subdivision (a), it shall be
deemed that a premarital agreement was not executed
voluntarily unless the court finds in writing or on
the record all of the following:
REGISTERED SUPPORT / OPPOSITION :
Support
Family Law Section of the California State Bar
Committee on Moral Concerns
Opposition
Family Law Section of the Los Angeles County Bar Association
Analysis Prepared by : Drew Liebert / JUD. / (916) 319-2334