An interesting decision came down yesterday from the Court of Appeals for California, First District, Division Four regarding the enforceability of premarital agreements.
Family Code Section 1615(c) creates a presumption “that a premarital agreement was not executed voluntarily” unless the court makes five designated findings (In re Marriage of Friedman (2002) 100 Cal.App.4th 65, 72). One of the designated findings is that the party against whom enforcement is sought had at least seven calendar days between the date he or she was “first presented” with the agreement and advised to seek independent counsel, and the time he or she signed the agreement.
In the case of In re Marriage of Cadwell-Faso and Faso, Cari Cadwell-Faso and Joe Cadwell were negotiating a premarital agreement during their engagement. Both Cari and Joe were represented by independent counsel throughout the duration of their negotiations, and both had ample time for their counsel review their agreement. At the time of marriage, Cari’s net worth was estimated to be $1million, while Joe, a retired business man had an estimated net worth of $30million. Cari was 43 years old and Joe was 21 years her senior. At the time of their engagement, Cari owned and operated two businesses that generated sufficient income to support her lifestyle. However, Cari agreed to sell her businesses upon marrying Joe so that the two of them could travel and live a life of “semi-retirement”.
Cari and Joe went back and forth with four different versions of the premarital agreement until finally, Cari threatened to call off the wedding due to their inability to agree. After Cari called off the wedding, Joe said “Let’s just get this thing done” and the two resumed negotiations. Cari had her attorney send over the fifth and final version of the addendum to the premarital agreement on May 19th. On May 22nd, Joe faxed it to his attorney. On May 25th, Joe and Cari met in Joe’s attorney’s office, where Joe’s attorney inserted one single word (the word “reasonable” relating to health care costs). The couple got married two days later on May 27th.
Eighteen months later, Cari filed for divorce and sought to enforce the addendum to their premarital agreement that was signed two days before their wedding. Joe fought enforcement of the agreement saying that he did not have the benefit of the seven day waiting period and therefore the agreement was unenforceable in this situation.
Joe Faso testified that he did not want to sign the addendum, but did so because Cari indicated that “her attorney said that we had already passed the time of limitation between when you agree upon the agreement and when you sign the agreement and when you get married.” His own attorney confirmed that notion. When the parties were in Faso’s attorney’s office, he told them both that the Addendum was not a binding agreement “and the only way that it’s going to be is if you come back and sign a post-nuptial.”
The trial court concluded that the seven-day rule designated in Family Code Section 1615 applied regardless of both parties being represented by attorneys from the outset. The court of appeals concluded that the trial court erred in deeming the execution of the addendum was involuntary and therefore unenforceable, reversed the judgment and awarded costs to Cari Cadwell-Faso on appeal. In making their ruling, the court of appeals ruled that the Legislature, in drafting Family Code Section 1615 was concerned with protecting unrepresented parties and the purpose of the statute is to allow each party the opportunity to seek and obtain legal advice prior to execution. In this case, both parties were represented throughout the negotiations and therefore received the benefits and protection intended in Family Code Section 1615.
This opinion should be interpreted and applied narrowly, as the court was careful to note that the parties were represented from the “outset of the proceedings”. Further, the court spends a great deal of time on the legislative history stating the the cooling off period was for unrepresented parties, not those with ongoing representation. Finally, , the party who was trying to set aside the agreement had an estate of $30million and the trial court found “there was strong evidence that H (Joe Faso), a sophisticated business executive, was . . . playing ‘hardball’. He was refusing to negotiate with W (Cari Cadwell-Faso) and at the very end when she threatened to call the wedding off, he agreed to sign only because the matter had come to a head within the seven day window and he had legal advice that he could sign with impunity. Rather than being a ‘victim’ of circumstances, H shrewdly maneuvered W to the alter [sic] in a manner that frustrated her desire to reach a mutually acceptable agreement.”