The marriage of James and Peggy Foran was dissolved by decree of the court in August 1990. James contends that the court erred by determining that the parties' prenuptial contract was unenforceable. He further contends that the corut erroneously based its property, main
Facts
James Foran and Peggy Estes first became acquainted in 1975 when Peggy was 22 and James was in his mid-forties. When they begаn living together a year later, Peggy was working at Jay Jacobs. She terminated her employment there, at James' request, because it involved working weekends, and took a job as a teller at Seafirst Bank. In April 1977, James reactivated one of his businesses, Jim Foran Trucking, Inc., and Peggy began working for that company as a dispatcher and bookkeeper, while continuing to work for the bank. In November 1977, Peggy terminated her employment at the bank in order to work full time for Jim Foran Trucking, Inc.
The parties were married in Las Vegas on January 17, 1980. On January 11, 1980, 1 day before the parties left for their wedding trip, they signed a prenuptial contract. Peggy first saw the contract on January 10, although she had known that such an agreement was being prepared since late December 1979. The contract was prepared by James' business attorney, Jeffrey Pewe, at James' request. Peggy had worked with Mr. Pewe on various matters related to James' business affairs during her employment at Jim Foran Trucking, Inc. As a result, she had grown to trust Mr. Pewe and to respect him.
Unbeknownst to Mr. Pewe, there had been several episodes of domestic violence during the 31/2 years the parties had cohabited. The episodes had occurred at about 1-year intervals. Each was followed by profuse apologies from James and by promises that it would never happen again. Peggy testified that James told her that she would be signing a paper before they got married. She testified that she knew she would be hit if she did not sign the paper.
Peggy also tеstified that, after meeting with Mr. Pewe, she believed this was an agreement that would provide a community estate:
My understanding of it was that it was supposed to create a community estate so that while I was working in the business and everything, it was building a community; it was a legal agreement that what we were building, we were building together.
Instead, the contract, by its terms, gave James the opportunity either to preclude altogether or substantially restrict the accumulation of community property. Moreover, the contract enabled James to enrich his separate estate at the expense of the marital community. James took full advantage of these opportunities.
At the time the agreement was signed, Peggy's net worth was $8,200. James' net worth was $1,198,500.
Peggy continued to work for Jim Foran Trucking, Inc., throughout the marriage, as did James. Purportedly for tax reasons, neither party received much by way of salary. In some years neither party received any salary at all. The parties' living expenses were paid primarily from James'
During the marriage, the episodes of domestic violence escalated, both in frequency and severity. By the time of the separation, Peggy, who also suffers from lupus, was in need of treatment for posttraumatic stress disorder stemming from the severe physical and emotional abuse she endured throughout the marriage. She was last employed in January 1989, in the operation of the gravel pit and dump site and for the trucking company, and had been unemployed and in therapy from then until the trial in June 1990. Her lupus had earlier flared up, requiring hospitalization, but by the time of trial was being contrоlled with medications.
Peggy's therapist testified that Peggy was in need of at least 2 more years of intensive psychotherapy, and perhaps as much as 5 more years of such therapy. Her lupus will require continuous monitoring, at least monthly, for the remainder of her life, and can be expected to flare up periodically, in spite of the medications she is on. Peggy's medical and psychological care required approximately $1,000 per month as of the time of trial. Peggy's therapist testified that she is likely to become employable again, although she should not make that effort until she experiences further progress in the psychothеrapy. Peggy had commenced a program of vocational planning prior to trial but had been unable to fully concentrate on that program, due to her need to concentrate on regaining her emotional equihbrium.
James had also been hospitalized, prior to separation, for a colostomy operation. He had not completed all the necessary surgery by the time of trial. The court found James to have an earning capacity of $50,000 a year, a finding which James disputes.
Prenuptial Contract
The trial court concluded that the prenuptial contract was valid at the time it was executed and that Peggy signed it voluntarily and after an adequate opportunity to seek the advice of independent counsel. The court also found that Peggy was aware of the nature and extent of James' separate property. The court concluded, however, that it would be inequitable to enforce the contract in light of James' conduct toward Peggy after the marriage. 2 The court therefore ruled that James was estopped 3 from relying upon the prenuptial agreement to preclude Peggy from making a claim against his separate assets, in order to equitably balance the economic circumstances of the parties as provided in RCW 26.09.080.
We disagree with the trial court's determination that the agreement was valid at the time of execution, but affirm its conclusion that the prenuptial agreement was unenforceable. A trial court's decision may be sustained on any theory within the pleadings and the evidence, even if the trial court did not consider it.
LaMon v. Butler,
First, the court must decide whether the agreement provides a fair and reasonable provision for the party not seeking enforcement of the agreement. If the court makes this finding, then the analysis ends and the agreement may be validated. . . . The second prong of this analysis involves two tests . . .
(1) whether full disclosure has been madе by [the parties] of the amount, character and value of the property involved, and (2) whether the agreement was entered into fully and voluntarily on independent advice and with full knowledge by [both spouses of their] rights.
In re Marriage of Matson,
Here, although the record does not affirmatively so state, we assume that the trial court decided that the contract failed to pass the first prong of the 2-part analysis. 4 Indeed, this contract fails the first part of the test as a matter of law. In the instant matter there is no issue as to the "interpretation" of the contract; rather the issue is one of "construction":
Construction of a contract determines its legal effect. "Construсtion ... is a process by which legal consequences are made to follow from the terms of the contract and its more or less immediate context, and from a legal policy or policies that are applicable to the situation."
Berg v. Hudesman,
By the terms of this contract, Peggy waived any and all equitable liens which the marital community might otherwise acquire by virtue of the expenditure of community funds or community labor on or for the benefit of
[i]n this case, [Peggy] had negligible separate property at the time the parties executed their prenuptial agreement. . . . [James] had a great deal of separate property. It was insignificant for [James] to promise not to invade [Peggy's] separate property; it was a significant promise for [Peggy] to make the same promise.
Finding of fact 8. 5
There was no contractual requirement that the marital community be reimbursed for the value of any financial contributions and personal services it might contribute to James' separately owned businesses.
6
The lack of such a provision, in conjunction with the waivers as to any equitable hens which might otherwise arise by virtue of community funds and services expended on or for the benefit of James' separate estate, allowed James effectively to foreclose the accumulation of any significant community estate.
Although we find no discussion in the case law as to the standard of review for the second prong of the
Matson
test,
7
both in terms of logic and as consistently applied by the appellate courts since
Hamlin v. Merlino
in 1954,
8
the analysis involves mixed issues of legal policy and fact, and accordingly is trеated as a question of law, but one to be viewed in the light of those findings of the trial court which are undisputed or supported by substantial evidence and which in turn support the trial court's ultimate conclusion.
9
For example, in
Matson,
as in the instant matter, the trial court found that Judith Matson had been advised of her right to seek independent legal counsel, and that finding was undisputed. Nevertheless, the
Matson
contract was invalidated, based on an overriding legal policy that disfavors the waiver of marital rights without the benefit of
In addition to the letter which Mr. Pewe addressed and delivered to James Foran, another letter was addressed and delivered to both parties on the same day that the prenuptial contract was executed, in which Mr. Pewe outlined the general law relating to separate and community property. In the letter Mr. Pewe stated:
One of the purposes of a separate property agreement (known variously as pre-nuptial agreements, prе-marital agreements and agreements as to status of property) is to insure that, by reason of the agreement, a court will not be able to award the separate property of one spouse to the other spouse in the event that the parties' marriage is subsequently dissolved. In other words, a court can award the separate property of one spouse to the other in a divorce action, unless the parties have agreed by contract that they shall not be entitled to claim the separate property of the other in the event of a dissolution.
. . . Ms. Estes should be aware that I am Jim's attorney and have drafted the Agreement with his legal and financial interests in mind, rather than hers. Understandably, I cannot serve two masters. Therefore, if after reviewing the proposed agreement and this letter, Ms. Estes has further questions regarding her rights and the legal import and effect of the various provisions in the Agreement, she should seek the counsel of another attorney to review the contract on her behalf.
If, notwithstanding her right to seek the counsel of another attorney regarding the Agreement, Ms. Estes elects to execute the agreement without doing so, I want to make it clear in the Agreement that. . . the opportunity to seek independent counsel was made available to her, but was voluntarily not exercised by her.
Exhibit C to prenuptial contract, trial exhibit 151. 10
Attorneys have a duty of zealously representing their clients within the bounds of the law. When their clients have opposing interests with third parties, attorneys are supposed to represent their clients' interests over the interests of others.
. . . [A]n attorney should advise the unrepresented pаrty to seek independent counsel before the attorney discusses the transaction with that party. It was not enough in this case that Cody told Bohn that he was not acting as her attorney. This information does not sufficiently convey to the general public the adversarial stance an attorney must take toward those having interests different from the client's own interests. Moreover, if the attorney undertakes to tell part of the story to an unrepresented party with whom the attorney's client is doing business, the attorney must take reasonable steps to tell the whole story, not just the self-serving portions of it.
(Italics ours.)
Bohn v. Cody,
In the instant matter, Mr. Pewe found himself in a position that is all too fаmiliar to attorneys who work with prenuptial contracts. The economically disadvantaged party may not only be reluctant to obtain independent legal counsel but also he or she may decline to do so, even after being advised to do so by the attorney for the represented party. It was so in this case. It was so in Matson.
11
An attorney in this
In this case of Foran, Peggy was handed a proposed contract which not only attempted to preserve James' separate estate but also left James with every opportunity to preclude the acquisition of community property and to enrich his separate estate at the expense of the marital community. James took that opportunity, and, if the contract were to be enforced, there would be virtually no community property in this case.
15
Although Mr. Pewe explained that the purpose of the contract was to preclude the court from awarding any of James' separate estate to Peggy in the event of a divorce, it was not explained to Peggy that, by virtue of the contract, James' already substantial wealth could be increased at the expense of the marital community Although Mr. Pewe advised James to рay himself an adequate salary for his services to his businesses, and explained the risks of not following this advice
to James,
no explanation was given
Peggy
of the risks to her if the advice was not followed. Finally, although Peggy was advised of her right to seek
In Matson, after observing that the requirement of independent counsel is not absolute, the court stated:
We still strongly urge both parties to seek advice from independent counsel before signing a premarital agreement. This would provide the best opportunity for both sides to receive objeсtive and independent information regarding the legal consequences of the agreement. Because of the close and confidential nature of the relationship of a soon to be married couple, we will continue to insist, however, that each party enter into a premarital agreement intelligently and voluntarily before we will bind the parties to an agreement by which one party forgoes its statutory and common law rights.
(Italics ours.)
Matson,
In the companion case of
In re Estate of Crawford,
There is no absolute requirement of independent counsel. Whitney, at 111. Whitney, however, did not require the advice of independent counsel because the agreement was fair and reasonable, and there was no showing of fraud or overreaching. Here the agreement was patently unreаsonable. Independent counsel was required.
(Italics ours.)
That the Crawford prenuptial contract was patently unreasonable is something that Genevieve Crawford was ill equipped to determine on her own. Peggy Foran was similarly ill equipped to make that determination with respect to the contract in this case. We hold that the Foran contract, which placed no restrictions upon James' opportunity to
Admissibility of Testimony Concerning Abuse
James contends that, by allowing testimony of the abuse Peggy endured during the course of the parties' relationship, the trial court erroneously considered fault in violation of RCW 26.09.080 and 26.09.090, which provide that a court shall make its disposition of property and maintenance in a dissolution proceeding without regard tо marital misconduct.
The trial court considered the manner in which Peggy was treated during the relationship in relation to two issues: whether Peggy was coerced into signing the prenuptial agreement, and her present employability and prospective earning capacity, in light of the posttraumatic stress disorder from which she suffered as a result of the abuse. Evidence that reasonably tends to establish the theory of a party or to qualify or disprove the testimony of the adversary is relevant.
Brown v. Spokane Cy. Fire Protec. Dist. 1,
Affirmed.
Coleman and Agid, JJ., concur.
Notes
James also argues that Peggy received far too much by way of property, maintenance and attorney fees. In her cross appeal, Peggy contends that the court's property, maintenance and attorney fee awards were so inadequate as to constitute an abuse of discretion. Each party argues that the court erred in valuing and characterizing certain assets. We conclude that the property division was fair and equitable in all the circumstances. The maintenance and attorney fee awards were well within the bounds of the court's discretion. The issues not related to the validity of the prenuptial contract and to the evidence of physical abuse are treated in the unpublished portion of this opinion.
Based on the court's oral decision, we believe that the court was referring to James' conduct in preventing the accumulation of community property, rather than to his physical and emotional abuse of Peggy.
James correctly points out that an equitable estoppel theory is not supported by the evidence or findings. To assert equitable еstoppel, each of the following elements must be established by clear, cogent and convincing evidence: (1) an admission, statement or act by the party against whom estoppel is asserted inconsistent with a later claim by that party; (2) action by the party asserting estoppel on the faith of such admission, statement or act; and (3) injury resulting from allowing the repudiation of such admission, statement or act.
In re Marriage of Sanborn,
We make this assumption because the court focused almost entirely on the second prong of the analysis, that designed to ascertain procedural fairness. Had the court concluded that the contract was economically fair on its face, the analysis would have ended.
Matson,
The stated consideration for the contract was the mutual promises of the parties and the marriage itself. In Washington, marriage alone is adequate consideration to support a prenuptial contract.
Friedlander v. Friedlander,
Mr. Pewe clearly recognized that the contract made no such provision, and that there was the potential for attack upon the enforceability of the contract for that reason. In a letter addressed to James Foran, dated and delivered on the same day as the prenuptial contract was signed, Mr. Pewe told Mr. Foran:
With respect to your corporation, there is one unique problem of which I want you to be aware. Your earnings in the employ of the corporation after your marriage will be community property. If you do not take an adequate salary, an argument can be made that the salary which you should have taken during your marriage has built up in the corporation and the community therefore has an ownership interest in the corporation. Likewise, pay yourself an adequate salary for providing services to the Jim Foran Company.
Respondent's trial exhibit 178.
The first part of the 2-prong analysis is entirely a question of law, unless there are factual disputes which must be resolved in order to enable the court to interpret the meaning of the contract.
Berg v. Hudesman,
Hamlin v. Merlino,
Judicial construction of a contract is a process which includes an examination of the immediate context and the legal policies which are applicable to the situation.
Berg v. Hudesman,
The record reflects that Mr. Pewe was not aware that the parties were planning to leave for their wedding trip on the following day, January 12, 1980, nor was he aware of the date of the parties' wedding (January 17, 1980). It should also be noted that Mr. Pewe was operating without the benefit of
Matson,
See
also In re Marriage of Hadley,
We encourage this approach.
"Parties to [a prenuptial] agreement do not deal at arm's length with each other. Their relationship is one of mutual trust and confidence. They must exercise the highest degree of good faith, candor and sincerity in all matters bearing on the proposed agreement."
Hamlin v. Merlino,
These simple truths may seem to be self-evident. Nevertheless, parties who would never agree to a divorce settlement or death settlement without the benefit of independent counsel frequently will fail to perceive the true nature and purpose of a prenuptial contract.
In
Friedlander v. Friedlander,
The record reflects that the parties acquired some furniture, their personal vehicles and two small IRA's. Even their personal vehicles were arguably James' separate property, by the terms of the prenuptial contract.
We do not question Mr. Pewe’s good faith. In fact, as noted by the trial court, Mr. Pewe made much greater effort than many, if not most, attorneys of that era were making in similar situations. As noted above, Mr. Pewe was working without the benefit of Matson and Crawford, which had not yet been decided when this contract was prepared.
We agree with the trial court that the evidence of the premarital domestic violence was not sufficient to support a finding that Peggy's signature was coerced. Nevertheless, we recognize the potentially inhibiting effect of such violence on a subservient party's willingness to invoke the right of independent counsel.
ln light of this ruling, we need not address the trial court's determination that a court may ignore a validly executed prenuptial contract if necessary to achieve a just and equitable result as required by RCW 26.09.080.
See Matson,
We summarily reject James' contention that Peggy's only remedy for her damages resulting from the physical abuse sounded in tort. RCW 26.09.090 permits the court to consider all factors which are relevant to the economic circumstances of the parties.
