I. INTRODUCTION Including Texas, there are nine states that characterize themselves as community property states. So far, the other states have permitted Texas to remain “in the fold” despite the recent enactment in Texas of § 3.401 et seq . of the Texas Family Code. The author suspects this oversight is due to the fact that none of the other states have any more idea about the application of the section to traditional community property rights in Texas than Texas practitioners do. The states that hold themselves out as community property states are: · Louisiana · Wisconsin · Idaho · California · New Mexico · Arizona · Nevada · Washington · Texas The Council of Community Property States was created in 1988 primarily through the efforts of several pioneer members of the Family Law Council that believed Texas community property principles could be refined and improved by interchanges with other community property practitioners, and that these other states would benefit from Texas “know-how.” These practitioners included Lindsey Short, current President of the American Academy of Matrimonial Lawyers, Scott Cook, John Compere, Larry Schwartz, and Ken Fuller, among many others. The states annually congregate for a comparison symposium on important community property issues. The author has been privileged to be a delegate from the Family Law Section of the State Bar to the last two years. Each year the delegates address different areas of interest that commonly arise in other community property states, specifically delineating each state’s laws and decisions, and that state’s approach and analysis as to timely issues. It is the hope of the presenters of the Advanced Course that an analysis of each state’s resolution of the issues in this year’s topic, “The Enforceability of Marital Agreements,” will benefit practitioners in Texas on issues that arise in your practice. Each state’s approach to community property in general is often important to give the practitioner a background to understand that state’s development of and approach to enforcing marital agreements under the state’s statutory and/or case law. You will find some states with little statutory law and some states with no case law. Most of the community property states have adopted the Uniform Premarital Agreement Act in some form. Only Louisiana, Washington, and Wisconsin have not, as of this writing. Typical of the law in most jurisdictions other than Texas, many of the other states are far behind Texas in their approach to marital agreements in this author’s unbiased view, in that many still struggle to a significant degree with the enforcement of marital agreements in general. The author leaves this analysis to the reader’s examination. The author would like to acknowledge and thank the authors of each article upon which is paper is drawn. They are, in order of presentations in this paper: LOUISIANA Kenneth Rigby 330 Marshall Street, Suite 1400 Shreveport, Louisiana 71101 WISCONSIN Linda Roberson 217 S. Hamilton Street, Suite 302 Madison, Wisconsin 53703 lr@b-rlaw.com IDAHO Elizabeth Barker Brandt University of Idaho College of Law P.O. Box 442321 Moscow, Idaho 83844-2321 ebrandt@uidaho.edu CALIFORNIA Leonard Weiler 2680 Bishop Drive, Suite 260 San Ramon, California 94583 ldw@weilerlaw.com NEW MEXICO Twila B. Larkin 6501 Americas Parkway, Suite 620 Albuquerque, New Mexico 87110 twilal@waltherlarkin.com ARIZONA Todd Franks Franks & Bodinet 301 E. Bethany Home Road, Suite C-275 Phoenix, Arizona 85012 t.franks@azfamlaw.com NEVADA Marshal S. Willick 3551 E. Bonanza Road, #101 Las Vegas, Nevada 89110 mwillick@aol.com WASHINGTON Peter (Pete) S. Lineberger U.S. Bank Building 422 West Riverside, Suite 1407 Spokane, Washington 99201 psline@hotmail.com TEXAS Harry L. Tindall Angela G. Pence Tindall & Foster, P.C. 1300 Post Oak, Suite 2200 Houston, Texas 77056-3014 web: tindallfoster.com II. Louisiana Prior to the adoption in Louisiana of the present Matrimonial Regimes Act (Articles 2325-2369 and 2370-2376 of the Louisiana Civil Code) by La. Acts 1979, No. 709, eff. Jan 1, 1980, the husband was the exclusive manager of community property and obligations, being the “head and master” of the community. With a few limited statutory exceptions, he had the exclusive and unlimited power of administration, alienation of community property, and the incurring of community obligations and their satisfaction. The wife had no rights with respect to the management or administration of community property and obligations. In order to protect the wife against imposition by her husband, all contracts, with limited statutory exceptions, between husband and wife were prohibited and declared to be void. The spouses lacked contractual capacity to contract with each other.[1] The Matrimonial Regimes Act completely changed these rules. Husbands and wives are treated equally; there is no longer any presumption of unequal economic or other bargaining position or power. The wife is no longer deemed to be in need of protection from her husband. With a few statutory exceptions, spouses have complete authority to contract with each other. Each possesses the same capacity to contract with the other that any other competent consenting adult has to contract with any other person. A contract between the spouses is treated as any other contract, except for a few form requirements and some subject matter proscriptions. Consequently, Louisiana does not require some familiar prerequisite to the validity of a prenuptial agreement, i.e., representation by independent counsel, disclosure of assets and obligations or a proper waiver of disclosure, proof that the agreement was not unconscionable when it was signed, and other common law and statutory prerequisites adopted by particular states. Another fundamental rule governing the relationship between spouses was changed by the Matrimonial Regimes Act. Previously, because the husband was the head and master of the community and had the exclusive right and authority with respect to community property and obligations, he stood in fiduciary relationship to his wife. With the adoption of the Matrimonial Regimes Act, spouses no longer owe a fiduciary duty to each other either before or during marriage with respect to the legal regime of community of acquets and gains. They have a negative duty to each other not to commit fraud or be in bad faith in the management of community property during the existence of the legal regime. All of the usual contractual defenses are applicable to a contract between spouses, i.e., fraud, error, duress, improper form, incapacity to contract, as well as the confirmatory acts of ratification and confirmation. See Brumfield v. Brumfield, 477 So.2d 1161 (La.App. 1 Cir.1985). It is important to note, also that under Louisiana law accumulation of community property ends on separation of the parties so long as a divorce ensues. With this background in mind, this paper shall review the Matrimonial RegimesAct and jurisprudence interpreting it to understand the similarities and differences between contracts generally and those contracts between spouses called interspousal contracts, and, secondly, the differing requirements of a particular type or specie of Interspousal Contract called a Matrimonial Agreement. First, the definition of some terms: A. The Nature of the Contract 1. Definition of Regime. a. Regime. In French Law. A system of rules and regulations. Black’s Law Dictionary, 4th ed., p. 1448. 2. Definition and Nature of a Matrimonial Regime. a. C.C. 2325. A matrimonial regime is a system of principles and rules governing the ownership and management of the property of married persons as between themselves and toward third persons. b. A matrimonial regime is not a legal entity. Comment (c) to Civil Code art. 2336 states that the community of acquets and gains is not a legal entity (juridical person), but a patrimonial mass. The patrimony of each spouse includes an undivided one-half of the mass of the community property during the existence of the regime, plus that spouse’s separate property. Oliver v. Oliver, 561 So.2d 908, 914 (La.App. 2 Cir. 1990). 3. Permissible types of matrimonial regimes. a. CC 2326. A matrimonial regime may be (1) legal, (2) contractual or (3) partly legal and partly contractual. (bracketed materials added) b. CC 2328. A matrimonial agreement is a contract establishing a regime of separation of property or modifying or terminating the legal regime. Spouses are free to establish by matrimonial agreement a regime of separation of property or modify the legal regime as provided by law. The provisions of the legal regime that have not been excluded or modified by agreement retain their force and effect. B. Distinguishing Matrimonial Agreements and Other Interspousal Contracts 1. The difference between a Matrimonial Agreement and an Interspousal Contract: Two commentators have defined the difference between these two (2) types of contracts as follows: The basic characteristic that distinguishes a matrimonial agreement from other types of contracts entered into between spouses or between persons contemplating marriage is that a matrimonial agreement contracts with reference to the property regime that exists or will exist between them during the marriage. A property regime is a system of principles and rules that govern the ownership and management of the property of spouses during marriage, both as between themselves and towards third persons. If the agreement modifies any of the principles or rules of a particular regime, or one system of principles or rules is substituted for another in whole or in part, the agreement is a matrimonial agreement. Spouses are at liberty, however, to enter into a myriad of other contracts or agreements between themselves before or during marriage which are not matrimonial agreements. For convenience, those agreements between spouses that are not matrimonial agreements have been denominated as “interspousal contracts.” These types of contracts between spouses have no special form, court approval, or recordation requirements, as do matrimonial agreements. They are subject only to the general rules governing the proof of obligations and the special rules regulating the proof of some particular types of obligations. There is no requirement for court approval if entered into during the marriage. Kenneth Rigby, The 1997 Spousal Support Act, 58 La. L. Rev. 887 (1998), at 937-939. (Footnotes omitted) When spouses contract with respect to presently owned community property, they do not modify any of the governing rules and principles of the legal regime classifying property as community or separate. Property is classified as community or separate property (or partially community and partially separate, as may be in the cases of incorporeal movables) at the moment of acquisition by application of the rules and principles governing the legal regime. Likewise, if the spouses contract with future property in a manner that does not affect any of the classification or management rules of their matrimonial regime, that agreement is not a matrimonial agreement. Spouses may agree as between themselves on the classification of a particular item of property at the time of its acquisition. Neither is a Matrimonial Agreement, as neither terminates the legal regime nor modifies any of the rules constituting their matrimonial regime. C. Significance of Correctly Distinguishing Between a Matrimonial Agreement and an Interspousal Contract. 1. Form and Other Requirements of Matrimonial Agreements a. Must be by authentic act or by act under private signature duly acknowledged by the spouses, whether executed prior to marriage or during marriage. b. CC 2331 requires that if the matrimonial agreement is executed as an act under private signature duly acknowledged that it must be acknowledged by both parties to be valid. c. Where the matrimonial agreement was signed by one of the witnesses after the marriage ceremony and outside the presence of the parties, the matrimonial agreement was not an authentic act. Ritz v. Ritz, 666 So.2d 1181 (La.App. 5 Cir. 1995). d. If executed during the marriage, a matrimonial agreement, to be valid, requires a joint petition by the parties to the agreement and dual findings by the court (1) that the matrimonial agreement serves the best interests of the parties and (2) that they understand the governing principles and rules. It requires no disclosures. CC 2329 e. Exceptions to these requirements: a matrimonial agreement in which the parties during the marriage subject themselves to the legal regime and a matrimonial agreement entered into by married persons during the first year after the parties move into and acquire a domicile in Louisiana. This agreement need not be approved by the court. f. The agreement may be signed first and the petition seeking the dual judicial findings filed thereafter. g. A matrimonial agreement is effective toward third persons as to immovable property when it is filed for registry in the conveyance records of the parish in which the immovable property is situated, and as to movables when filed for registry in the parish or parishes in which the spouses are domiciled. h. Lack of proper recordation of the matrimonial agreement does not invalidate the matrimonial agreement as between the parties. 2. Form and Other Requirements of Interspousal Contracts a. In contrast to a matrimonial agreement, interspousal contracts, whether the subject matter (object) be property, obligations, support, or anything else, do not have any special form requirements or other requirements because the parties are married unto each other at the time of the agreement. They are subject only to the general rules governing the proof of obligations generally and the special rules governing the proof of some particular types of obligations. b. There are no special registry (recordation) requirements for interspousal contracts, as there are for matrimonial agreements. D. What Happens When Matrimonial Agreements are Mistaken for Other Types of Interspousal Contracts La. Civ. Code art. 2329 (1979) reads: Spouses may enter a matrimonial agreement that modifies or terminates a matrimonial regime during marriage only upon joint petition and a finding by the court that this serves their best interests and that they understand the governing principles and rules. They may, however, subject themselves to the legal regime by a matrimonial agreement at any time without court approval. E. Interspousal Contracts 1. Public Policy Limitations on Both Matrimonial Agreements and Interspousal Contracts. a. CC 2330 limits the contractual freedom of the spouses as to certain matters of public order, or public policy. Therefore, spouses may not, either before or during marriage, renounce or alter the marital portion (a right similar to dower rights) or the established order of succession, nor may they limit with respect to third persons the right that one spouse alone has under the legal regime to obligate the community or to alienate, encumber, or lease community property. 1) Under CC 2346, each spouse acting alone may manage, control, or dispose of community property unless otherwise provided by law. A matrimonial agreement limiting this equal management rule is not prohibited as between the spouses . However, a limitation on this right of equal management produces effects between the spouses only. the limitation does not affect third persons. b. Additionally, all other rules of public order, or public policy, apply both to matrimonial agreements and interspousal contracts. Any act or derogation of such laws is an absolute nullity. 1) A waiver of alimony pendente lite, whether executed before or during marriage, is null and void as against public policy. 2) An agreement between spouses to limit sexual intercourse to about once a week is against the public policy that marriage obligates the spouses to fulfill "the reasonable and normal sexual desires of each other." 3) Strong public policy considerations militate against contracting with regard to the succession of a living person and in favor of a testator having the power to revoke his will. 4) An agreement between parents to permanently set aside the duty of child support is contrary to public policy and is void. F. Possible Interspousal Contracts 1. Possibilities: a. Sales, leases, mortgages, assignments, employment contracts, partnership agreements, loans, partition of community property, donations, transmutation of community property into separate property of a spouse by donation, the transmutation of separate property into community property (CC 2343.1), etc. b. An agreement specifying the amount of or a formula for determining an interim allowance and final periodic spousal support. c. An agreement specifying the division of the community property, the payment of community obligations, and the disposition of the reimbursement claims of the parties upon divorce. The parties are free to partition the community, in whole or in part, during the existence of the legal regime. III. Wisconsin A. Interplay Between Marital Property Law and Divorce Law 1. Wisconsin employs different property regimes during marriage and at divorce. Wisconsin is unique among community property states in that Wisconsin community property law applies during the ongoing marriage and at death, but not at divorce. Wisconsin divorce law, enacted some eight years prior to the enactment of Wisconsin community property (in Wisconsin, "marital property") law, is a common law, equitable division statute. Thus, legislation in Chapter 766 of the Wisconsin Statutes, titled "Property Rights of Married Persons; Marital Property," does not control issues of spousal rights at dissolution of the marriage by divorce, annulment, or legal separation; these are set forth in Chapter 767, titled "Actions Affecting the Family." 2. Though the two property regimes have many policies and outcomes in common, important differences exist between them in the manner in which the property interest of each spouse are classified or characterized. a. Marital Property Law classifies as marital property all property earned or accrued by spouses during their marriage, with certain exceptions as provided by statute (primarily gifted and inherited property). This definition of marital property includes income generated by non-marital property, unless the titled spouse has provided the other spouses with a written statement that preserves the non-marital classification of the income. Each spouse has an equal, undivided, present, vested interest in such property acquired at the time of acquisition of the property. b. Wisconsin divorce law is a common law equitable division statute. It applies to all property owned by spouses at the time of the divorce, with the exception of gifted and inherited property. The law presumes that property will be divided equally between the parties, but the Court can alter this presumption after considering various factors set forth in the statute. This definition of shared property differs in some crucial respects from that used during marriage or at the death of a spouse. First, property acquired prior to the marriage is presumed equally divisible at divorce, though the Court can alter the presumed equal division after considering each spouse's contributions. Second, the classification of property as individual or marital property is not relevant to its distribution upon divorce. A spouse may thus be awarded at divorce an interest in property he or she did not have during the marriage and would not have if the other spouse died. 3. Because Wisconsin employs a community property regime to govern property interest of spouses during marriage and at death, and a common law property regime to determine spousal property rights at dissolution, marital property agreements may be subject to differing standards for enforcement, depending on whether the agreement contains provisions relating to disposition of property at dissolution, use of property during marriage and its disposition at death, or both. a. If enforcement is sought during the marriage or at the death of a spouse, enforceability is determined under Chapter 766 of the Wisconsin Statutes. b. If enforcement is sought at the dissolution of the marriage by divorce, annulment, or legal separation, enforceability is determined under Chapter 767 of the Wisconsin Statutes. 4. Terminology a. "Marital property" is property owned equally by husband and wife. In general, all income earned by a spouse or generated by a spouse's property is marital property. Unearned income generated by non-marital property may be classified as the owner's individual property by means of a unilateral statement. All property of spouses is presumed to be marital property. "Marital property" is roughly analogous to "community property." b. "Individual property" is property owned solely by one spouse. c. "Unclassified property" is property acquired by a spouse prior to January 1, 1986-the effective date of Wisconsin's Marital Property Act-or prior to the spouses' establishment of their domicile in Wisconsin. B. Who May Enter Into a Marital Property Agreement 1. Only spouses may be parties to a marital property agreement. 2. Persons intending to marry may enter into a marital property agreement in contemplation of their marriage. C. Permissible Subjects of Marital Property Agreements 1. Statutes a. General authority to enter into a marital property agreement 1) Rights in and obligations with respect toany of either or both spouses' property whenever and wherever acquired or located. 2) Management and control of any or either or both spouses' property. 3) Disposition of any of either or both spouses' property upon dissolution or death. 4) Modification or elimination of spousal support. 5) Making a will, trust or other arrangement to carry out the marital property agreement. b. Limitations Limitations on matters that can be contracted are discussed, supra . 2. The legislature intended that married couples have broad ability to affect their economic rights by means of a marital property agreement. This intention is exemplified by the specific enumeration of subjects in the statute that may be part of a marital property agreement. a. Classification of Property 1) The basic purpose of a marital property agreement is to classify property as either individual property or marital property. Classification by marital property agreement is designed to avoid classification and tracing problems that result from Wisconsin's 1986 adoption of community property law, or from a couple's relocation to Wisconsin from a common law state. a) Spouses who do not choose to share property ownership as contemplated by the Marital Property Act may execute what is sometimes called an "opt-out marital property agreement." Under such an agreement, assets are generally distributed based on ownership as established by title, and are classified as the individual property of the titled spouse. b) So-called "opt-in marital property agreements" can classify all property owned by the spouses as marital property, regardless of how titled or how or when acquired. b. Management and Control Rights Absent an agreement to the contrary, a spouse holding title to marital property has the authority to manage and control it. c. Spouses' Obligations for Debts Obligations incurred in the interest of the marriage and the family may be satisfied from all marital property and from all other property of the incurring spouse. Obligations incurred by spouses during marriage are presumed to be incurred in the interest of the marriage and the family. An obligation incurred by a spouse that is attributable to an act or omission occurring before marriage may be satisfied only from individual property of the incurring spouse and from that part of marital property which would have been that spouse's individual property but for the marriage (e.g., the spouse's income stream). A spouse's tort obligations may be satisfied from his/her half of the marital property and from all of his or her other property. In a marital property agreement spouses may specify that neither spouse has any obligation for the other spouse's debts, whenever incurred. However, this provision is not binding on a creditor unless the creditor had notice of the provision at the time the debt was incurred. d. Disposition of Property at Death or Occurrence of Event A marital property agreement may provide for the disposition of either or both spouses' property upon the death of one or both spouses. e. Disposition of Property at Dissolution The statute permits spouses to contract in advance regarding division of their property in the event of dissolution of their marriage. f. Will Substitute Agreement 1) The statute authorizes an agreement that upon the death of either spouse, any of either or both spouses' property (including after-acquired property) will be distributed without probate to a designated person or entity by non-testamentary disposition. 2) Such a provision will automatically be revoked at the dissolution of the marriage by divorce, annulment or legal separation. g. Spousal Support Rights and Obligations 1) During marriage a) Spouses may enter into agreements about spousal support during marriage, as long as the agreement does not leave a spouse without "necessary and adequate" support. 2) At dissolution a) The statute provides that an agreement about support after dissolution is permissible as long as it does not leave a spouse eligible for public assistance. D. Restrictions on Marital Property Agreements Generally, spouses may freely contract regarding their economic rights and duties. Statutory restrictions on this right include the following: 1. Duty of Good Faith Spouses owe an obligation to each other to act in good faith. This obligation may not be waived or changed by a marital property agreement. 2. Protection of Creditors' Interests a. A marital property agreement may not adversely affect a creditor's interest unless the creditor had actual knowledge of the provision at the time the obligation was incurred. b. This protection for creditors may not be varied by a marital property agreement. 3. Protection of Children's Interests A marital property agreement may not adversely affect a child's right to support. 4. Protection of Bona Fide Purchases A bona fide purchaser who buys marital property from a spouse having the right to manage and control the property acquires the property free of any claim of the other spouse. 5. Spousal Support a. Modification of spousal support by agreement may not result in a spouse having less than necessary and adequate support. b. At dissolution or death: The statute prohibits agreements to modify or eliminate spousal support that make one spouse eligible for public assistance at time of dissolution or death of the other spouse. c. At divorce a spouse is entitled to such support as may be necessary to permit that spouse to continue to live at the standard of living enjoyed during the marriage; this may not be modified by agreement. 6. Types of Provisions that May be Void as Against Public Policy a. Responsibility for household tasks. b. Rights or responsibilities in sexual matters. c. A spouse's obligation to remain gainfully employed or to refrain from seeking employment. d. The spouse's agreement on whether to have children. e. Child custody and child placement provisions. E. Types of Marital Property Agreements Wisconsin law provides three statutory marital property agreements. 1. Statutory Individual Property Classification Agreement a. This statute provides that spouses may classify their property as "the individual property of the owner," and determines ownership "as if it were December 31, 1985,” which is to say that all property is governed by title ownership. 2. Statutory Terminable Marital Property Agreement a. An agreement under this section classifies all assets of spouses as marital property, but does not affect divorce property division or support rights. b. Financial disclosure is not required for enforceability of an agreement under this section. c. An agreement under this section may be terminated by either spouse by giving a 30-day written notice of termination to the other spouse. 3. Statutory Terminable Individual Property Classification Agreement a. An agreement under this section classifies all assets of spouses as the individual property of the titled spouse. b. Financial disclosure is not required for enforceability of an agreement under this section. However, if financial disclosure is not provided, the agreement terminates in three years. c. An agreement under this section may be terminated by either spouse by giving a written notice of termination to the other spouse. F. Enforceability of Marital Property Agreements 1. Requirements for Execution. a. A marital property agreement must be in writing and signed by both spouses. Witnesses are not required. b. However, if the agreement is to be recorded, the spouses must comply with the notarization and other recording formalities. 2. Amendment or Revocation a. A marital property agreement can be amended or revoked only by another marital property agreement. 3. Effective Date While persons who intend to marry each other can sign a marital property agreement, the agreement becomes effective only upon marriage. 4. Consideration a. Wisconsin Statutes provide that a marital property agreement is enforceable without consideration. b. Wisconsin case law requires that an agreement be “substantively fair.” 5. Standard of Review The enforcement standards for marital property agreements at dissolution of marriage are different from the enforcement standards for marital property agreements during marriage or at the death of a spouse. Accordingly, agreements that might be enforced during the marriage or at the death of a spouse might not be enforced by the Court at dissolution. a. During Marriage or at Death Marital property agreements are enforceable during marriage and at the death of a spouse, unless the spouse proves any of the following: (1) the agreement was unconscionable when made; (2) the spouse did not execute the agreement voluntarily; or (3) before executing the agreement, there was not fair and reasonable financial disclosure under the circumstances, and the complaining spouse did not have fair notice of the other spouse's property or financial obligations. 1) Financial Disclosure a) Wisconsin Statutes refer to financial disclosure as that which is “fair and reasonable under the circumstances.” b) Actual knowledge may substitute for disclosure. b. At Dissolution of Marriage (equivalent to Texas Property Settlement Agreement) 1) An agreement about property division upon dissolution of a marriage is enforceable by the Court unless it is determined to be inequitable. The Court must presume the agreement to be equitable. 2) Case law interpretation: In Button v. Button, 131 Wis.2d 84, 388 N.W.2d 546 (1986), the Court set forth factors a court should consider in deciding whether this meaningful choice existed: a) Whether each party had independent counsel; b) Whether each party had adequate time to review the agreement; c) Whether the parties understood the terms of the agreement and their effect; and d) Whether the parties understood their financial rights in the absence of the agreement. 3) Financial Disclosure Statutory language sets forth a stringent for financial disclosure at divorce, requiring complete disclosure of all income, assets and liabilities. 4) In determining the “substantial fairness” issue, the court should consider the following factors in determining fairness of an agreement: a) An indication that the spouses considered their respective circumstances at the time of the agreement; b) An indication that the spouses considered that the marriage would be of unknown duration; c) The spouses' objectives in executing the agreement; d) The spouses' economic circumstances; e) Property brought to the marriage by each spouse; f) Each spouse's family relationships and obligations to others; g) The earning capacity of each spouse; h) One spouse's anticipated contribution to the other spouse's education, training, or increased earning power; i) Future needs of both spouses; and j) The age and physical and emotional health of each spouse. 6. Timing a. The unconscionability of a marital property agreement sought to be enforced during marriage or at death of a spouse is to be ascertained as of the time of execution of the agreement. b. In determining enforceability of a marital property agreement at the time of dissolution, a court will look at the fairness of the agreement at two points in time. First, a court should examine procedural and substantive fairness at the time of the execution. Secondly, if circumstances have changed significantly since execution, a court should look at substantive fairness at the time of dissolution. 7. Common Law Contract Defenses Marital property agreements can be invalidated by common law contract defenses, including incapacity, duress, misrepresentation/ non-disclosure, undue influence, impracticability/frustration of purpose, impairment of family relations, and mistake in fact. G. Agreements Made in Contemplation of Divorce An agreement made in order to resolve the issues of a contemplated or pending divorce is not binding on the parties untilit is approved by the Court, and thus can be repudiated at any time prior to trial. IV. Idaho Marital Agreements in Idaho. A. Pre-Marital Agreements 1. UPAA In 1995, the Idaho Legislature adopted the Uniform Premarital Agreements Act ("UPAA"). a. Enforcement Provisions A premarital agreement is not enforceable if the party challenging the agreement proves either that he/she did not execute the agreement voluntarily or, that the agreement was unconscionable when executed. With respect to unconscionability, Section 6 provides that the challenging party must establish that she or he was not provided full and fair disclosure of the other party's property and financial information, did not waive disclosure, or did not know or reasonably could not have known of the other party's property or financial information. b. Burden of Proof In a number of cases, courts had taken the position that if the premarital agreement made no provision or a disproportionately small provision for the economically un-empowered spouse, a presumption of overreaching arose and the burden of proof shifted to the proponent of the agreement to establish that the execution of the agreement by the un-empowered spouse was voluntary and based on a full understanding of that spouse's property rights and the nature and extent of the property. c. Voluntariness The comments to section 6 support a broad interpretation of the voluntariness requirement. 1) Pre-UPAA Idaho Case Law Liebelt v. Liebelt, 801 P. 2d 52 (Id. Ct. App. 1990) reasoned that "[w]hen examining, or determining the validity of, a prenuptial agreement we apply ordinary contract principles unless otherwise noted by statute or case precedent." Regarding duress the Court held that "[t]o be voidable on the grounds of duress, an agreement must not only be obtained by means of pressure brought to bear, but the agreement itself must be unconscionable, or illegal; the defense of duress cannot be predicated on demands which are lawful or the threat to do that which the demanding party has a right to do." d. Unconscionability In addition to requiring voluntariness, the UPAA imposes a requirement that premarital agreements not be unconscionable. Pursuant to the UPAA, unconscionability is to be evaluated at the time of execution. In addition, the UPAA does not expressly require disclosure in all circumstances, only that full disclosure of property and finances is a defense to unconscionability. Moreover, the UPAA permits waivers of voluntary disclosure. Finally, the UPAA permits enforcement of a premarital agreement without disclosure where the spouse knew or reasonably could have known of the financial situation of the other spouse. B. Idaho Post-Marital Agreements 1. Statutory Framework All contracts for marriage settlements must be in writing, and executed and acknowledged or proved in like manner as conveyances of land are required to be executed and acknowledged or proved. When such contract is acknowledged or proved, it must be recorded in the office of the recorder of every county in which any real estate may be situated which is granted or affected by such contract. a. Agreements during marriage Reed v. Reed, 970 P. 2d 6 (1998). The Court held that because the agreement involved a transfer of real property and was not acknowledged and recorded as required by Idaho Code §§32-917-918, it was not enforceable. b. Agreements in contemplation of divorce 1) Standards for attacking agreements are merged into the decree if so designated. Where the agreement is not challenged until after it has become the basis for the final decree of divorce, the courts have required evidence of extrinsic fraud to set aside the judgment. 2) Contents of Property Settlement Agreements Bond v. Levy, 829 P. 2d 1342 (1992). The Court held that traditional rules of contract construction applied to marriage settlement agreements. C. Modification of Property Settlement Agreements that become part of the Divorce Decree 1. Cases a. Keeler v. Keeler, 978 P. 2d 599 (1998). The Court held that agreements are rebuttably presumed to not be integrated and therefore, stand alone and aprt from the award in the divorce decree. Integration must be shown by clear and unambiguous language in the agreement. No such language existed; therefore, the agreement was not merged and could be enforced apart from the decree. b. Terteling v. Payne, 957 2d 1387 (1998). H and W entered into a property settlement and spousal maintenance agreement which, by its express terms was not merged into the decree of divorce. The agreement provided that H could bring a "contract action" to reduce or eliminate spousal support by showing a substantial and material change in financial circumstances brought on by W's remarriage. W planned to remarry and entered into a prenuptial agreement with H2 in which they agreed that their property would remain separate property. When H filed to reduce the spousal support W argued that, as a result of the prenuptial agreement with H2, her remarriage did not result in a substantial or material change in financial circumstances. The Court agreed. V. California A. Pre-Marital Agreements 1. In General The Uniform Pre-Marital Agreement Act (UPAA) was adopted by the California legislature in 1985. The UPAA requires that, to be valid, a pre-marital agreement must be in writing, signed by both parties. No other consideration is required. Enforceability of such an agreement has generally been favored, provided that the agreement was entered voluntarily and was not unconscionable when entered. Indeed, a charge of unconscionability can not be raised if there is full financial disclosure prior to execution of the agreement. The burden of proof regarding validity of such agreements falls on the challenging party. Generally, parties to a premarital agreement may contract to most anything having to do with their property rights, including characterization of property, management and control of property, disposition of property on death or divorce, choice of law for interpretation of the agreement, and most any other matters "including their personal rights and obligations" not in violation of public policy. However, child support may not be adversely affected by a premarital agreement. And, spousal support rights may not be abridged, unless the party adversely affected had the benefit of independent legal counsel, as discussed. 2. Limitations Regarding Spousal Support Prior to 1985, California decisional law had determined that waivers of spousal support in premarital agreements were generally unenforceable as being against public policy. Additionally, the California legislature chose to delete a section of the Uniform Act which listed "the modification or elimination of spousal support" as a permissible subject of premarital agreements. However, in August 2000, the California Supreme Court issued its decision in the case of Marriage of Pendleton and Fireman (2000) 24 Cal.4th 39, 99 Cal.Rptr. 2d 278, in which it held that spousal support waivers were not per se prohibited. The Court concluded that a voluntary waiver by persons who understand the affect of their agreement is permissible. The court left open the question of whether the court could void or otherwise ameliorate a support waiver "as applied." The California legislature took up the challenge by passing SB78 last year, operative January 1, 2002. SB78 amends section 1612 of California's PMAA to add the following subdivision: (c) Any provision in a pre-marital 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 provisions is sought was not represented by independent counsel at the time the agreement containing the provision was signed, or if the provision regarding spousal support is unconscionable at the time of enforcement. Thus, under current law, spousal support waivers in premarital agreements are void if the adversely affected party was not represented by counsel when the agreement was made. With or without counsel, any provision of a premarital agreement affecting the right to spousal support may be challenged on the ground of the unconscionability at the time of enforcement. 3. Requisites for Voluntariness a. The Bonds Case In August 2000, the California Supreme Court decided Marriage of Bonds (2000) 24 Cal.4th 1, 99 Cal.Rptr.2d 252, involving slugger Barry Bonds, which addressed many of these issues of voluntariness. Barry's wife, Sun Bonds, alleged that their premarital agreement should be set aside as "involuntary" for a variety of reasons, including the fact that she was not represented by counsel when she signed it, she had language difficulties, and the agreement was executed just one day prior to the parties' wedding. The trial court upheld the agreement, finding that Sun was aware of her right to counsel, but chose not to exercise it. The intermediate appellate court reversed the trial court, concluding that where a party to a premarital agreement is not represented by counsel, evidence on the issue of voluntariness must be subject to strict judicial scrutiny. The California Supreme Court disagreed. The Supreme Court reiterated that voluntariness of consent was a question of fact, and representation or non-representation by legal counsel was but one factor, albeit an important one, in considering the issue. In determining questions of voluntariness, a court can and should consider all relevant factors, including lack of capacity, fraud, duress, inequality of bargaining power, imminence of the wedding, undue influence, and, yes, the absence of independent counsel for one side. Substantial evidence support the trial court's finding that Sun had entered into the premarital agreement voluntarily, and the trial court's decision that the agreement was enforceable was upheld. One interesting aspect of the supreme court's discussion in Bonds is its analysis of the differing standards applicable to engaged individuals who negotiate a premarital agreement as compared to spouses negotiating a marital settlement agreement in the divorce context. Under California law, married persons have a fiduciary relationship which informs and governs their interactions, including negotiating and executing property settlements and other divorce agreements. This fiduciary relationship includes not only a duty of full disclosure but also a fairness component, which imposes a presumption of undue influence whenever an interspousal transaction appears to favor one spouse over the other. The favored spouse has the burden of establishing the absence of undue influence in such circumstances. However, no such presumption exists between unmarried parties to a premarital agreement. b. Legislative Reaction: SB78 and the Need for Independent Legal Counsel Accordingly, just one year after the Bonds decision was released, SB78 was passed, amending §1615 of the UPAA to define and clarify the requirements of a voluntary premarital agreement: (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: (1) 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. (2) 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. (3) 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 premarital agreement, execute a document declaring that he or she received the information required by this paragraph and indicating who provided that information. (4) The agreement and the writings executed pursuant to paragraphs (1) and (3) were not executed under duress, fraud, or undue influence, and the parties did not lack capacity to enter into this agreement. (5) Any other factors the court deems relevant. B. Postmarital Agreements - Marital Settlement Agreements 1. In General The general rule in California is that a husband and wife may enter into any transaction with the other respecting property which he or she might do if unmarried (§721). Generally, property agreements reached by parties are favored by the courts and will not be second-guessed. In Re: Marriage of Cream (1993) 13 Cal.App.4th 81, 16 Cal.Rptr.2d 575. However, as noted in the preceding section, parties to a post-nuptial agreement - unlike the unmarried parties to a pre-nuptial agreement - stand in a fiduciary relationship to one another which requires the highest degree of good faith and fair dealing in the negotiation of interspousal agreements, along with the precept that neither spouse shall "take any unfair advantage of the other." 2. Representation by Counsel Unlike the recently revised UPAA, there is no direct or indirect requirement that parties to post-nuptial agreements in California be represented by legal counsel. It has been held that a party who actively dissuades his spouse from seeking counsel or who interferes with the spouse's efforts to obtain counsel may be guilty of exercising undue influence and/or extrinsic fraud, which will justify setting aside any agreement or stipulation obtained by such means. 3. Statutory and Policy Limitations on Marital Agreements a. The Court's Jurisdiction to Set and Modify Child Support and Child Custody May Not be Abridged b. Limitations on Religious and/or Racially Based Provisions: Provisions in a post-nuptial agreement mandating religious practices or affiliations for minor children, or prohibiting certain religious practices or affiliations, are probably unenforceable. Similarly, any restriction on custody, or visitation contained in a post-nuptial agreement that is based on race criteria will be void and unenforceable. c. Property and Support Provisions of Post-Nuptial Agreements are Severable California formerly had a rule protecting so-called "integrated" post-nuptial agreements from challenge where, for example, support rights were eliminated or adjusted in exchange for other concessions, such as enhanced property rights or a cash payment. That rule has been abrogated by Family Code § 3590 which provides, "The provisions of an agreement for support of either party shall be deemed to be separate and severable from the provisions of the agreement relating to the property." What this means, is that courts are free to modify or alter negotiated support agreements absent clear statements in such agreements that the provisions are not subject to modification. d. Limitations on a Court's Spousal Support Jurisdiction will be Narrowly Construed California law assumes that any agreement for spousal support is subject to modification or extension subsequently. § 4336 of the Family Code provides: “Except on written agreement of the parties to the contrary...the court retains jurisdiction indefinitely in a proceeding for dissolution of marriage or for legal separation of the parties as it relates to support where the marriage is of long duration.” C. California's Disclosure Requirements In 1992, the California legislature enacted a comprehensive set of disclosure rules requiring parties in divorce or legal separation proceedings to fully disclose all information potentially relevant to financial issues in their case. Disclosure must be complete regardless of whether the other party requests the information. Failure to fully comply with the disclosure requirements may, as we will see, jeopardize the enforceability of any stipulated judgment or marital settlement agreement. However, the accumulation of community property in California ends with the filing of the divorce. The aim of the disclosure statutes is stated in Family Code § 2100 to include the protection and preservation of community assets until the time of distribution, to ensure fair child and spousal support awards, and to reduce the adversarial nature of divorce through the fostering of full disclosure and cooperative discovery. The essential goal of these rules is stated in subdivision (c) of § 2100: "A full and accurate disclosure of all assets and liabilities in which one or both parties have or may have an interest must be made in the early stages of a proceeding for dissolution of marriage or legal separation of the parties, regardless of the characterization as commonly or separate, together with a disclosure of all income and expenses of the parties. Moreover, each party has a continuing duty to immediately, fully and accurately update and augment that disclosure to the extent there have been any material changes, so that at the time the parties enter into an agreement for the resolution of any of these issues, or at the time of trial on these issues, each party will have a full and complete knowledge of the relevant underlying facts." Pursuant to Family Code § 2105 the parties have the additional duty of preparing and serving a "Final Declaration of Disclosure" on one another prior to or at the time they enter into a marital settlement agreement. The final declaration of disclosure must be executed under penalty of perjury and shall include all of the following: 1. All material facts and information regarding the characterization of all assets and liabilities. 2. All material facts and information regarding the valuation of all assets that are contended to be community property or in which is contended the community has an interest. 3. All material facts and information regarding the amounts of all obligations that are contended to be community obligations or for which it is contended the community has liability. 4. All material facts and information regarding the earnings, accumulation, and expenses of each party that have been set forth in the income and expense declaration. 5. Property acquired after suit is filed is separate property, not community. No judgment may be entered unless the parties have fully complied with the foregoing disclosure requirements, and any judgment which is so entered may be set aside. D. Rules for Setting Aside Marital Settlement Agreements and Stipulated Judgments 1. Code of Civil Procedure § 473 Pursuant to California Code of Civil Procedure § 473, courts have long had the authority to set aside judgments, including those based on marital settlement agreements or stipulations, upon allegations that the same were entered through a party’s “mistake, inadvertence, surprise or excusable neglect.” An action to set aside a judgment on this basis has to be brought within six months of entry of the judgment, however, thus limiting its utility. 2. Family Code §§ 2120 through 2129 Since 1993, California has had a codified set of rules for setting aside marital agreements and stipulated judgments, when § 473 does not apply. Those types of wrongful conduct which a court found deprived a party of his/her opportunity to present her claim in court or fully participating in the proceeding were deemed extrinsic fraud. Examples included concealment of the existence of community asset; failure to give notice of the action or proceeding to the other party; and convincing the other party not to obtain legal counsel or preventing the other party from learning his/her legal rights. On the other hand alleged fraud that was deemed to be “intrinsic” was not a valid ground for setting aside a judgment. As a prerequisite for relief under the new set aside rules, the party must first establish and the court must find that “The facts alleged as the grounds for relief materially affected the original outcome and that the moving party would materially benefit from the granting of the relief. With these qualifications in mind, the meat of the set aside provisions is set out in Family Code § 2122 as follows: “The grounds and time limits for a motion to set aside a judgment, or any part or parts thereof, are governed by this section and shall be one of the following: “(a) Actual fraud where the defrauded party was kept in ignorance or in some other manner was fraudulently prevented from fully participating in the proceeding. An action or motion based on fraud shall be brought within one year after the date. “(b) Perjury brought within one year after the date on which the complaining party either did discover, or should have discovered, the perjury. “(c) Duress. An action or motion based upon duress shall be brought within two years after the date of entry of judgment. “(d) Mental incapacity. An action or motion based on mental incapacity shall be brought within two years after the date of entry of judgment. “(e) As stipulated or uncontested judgments or that part of a judgment stipulated to by the parties, mistake, either mutual or unilateral, whether mistake of law or mistake of facts. An action or motion based on mistake shall be brought within one year after the date of entry of judgment. “(f) Failure to comply with the disclosure requirements of Chapter 9. An action or motion based on failure to comply with the disclosure requirements shall be brought within one year after the date on which the complaining party either discovered, or should have discovered, the failure to comply.” [emphasis added]. 3. Undivided Asset Motions § 2128(a) reconfirms a party’s right to separately seek division of a “missed” or omitted asset, i.e. one not referenced in the matrimonial agreement, without the need to set aside the existing agreement. Most of the cases in this area seem to concern retirement benefits. VI. New Mexico New Mexico adopted the Uniform Premarital Agreement Act in 1995. New Mexico has no case law interpreting New Mexico’s version of the uniform premarital agreement act. New Mexico made a significant alteration to the uniform act’s language by deleting from the “Content” section the language concerning modification or elimination of spousal support in a premarital agreement. The Content section of the uniform act provides that parties to a premarital agreement may contract with respect to the modification or elimination of spousal support. Thus, it appears that parties in New Mexico cannot contract in a premarital agreement concerning spousal support. Finally, New Mexico made another significant change to Section 3 of the uniform act by adding language to sub-paragraph (b) of the uniform act. The uniform act states that a premarital agreement cannot adversely affect the right of a child to child support. New Mexico added the requirement that an amendment or revocation of a premarital agreement not only be signed, but also acknowledged. The New Mexico legislature further added language that allows parties to amend or revoke their premarital agreement by “consistent and mutual course of conduct, which evidences an amendment to or revocation of the premarital agreement.” Matrimonial Agreements in California: Requirements for Validity VII. Arizona A. Arizona’s Community Property Framework Discussion of Arizona marital agreements requires a context in Arizona marital property law. Arizona is a community property state. All property acquired by either husband or wife during the marriage, is the community property of the husband and wife except for the property that is: (1) Acquired by gift, devise or descent. (2) Acquired after service of a petition for dissolution of marriage, legal separation or annulment if the petition results in a decree of dissolution of marriage, legal separation or annulment. A spouse’s real and personal property that is owned by the spouse before marriage and that is acquired by that spouse during the marriage by gift, devise or descent, and the increase, rents, issues and profits of that property is the separate property of that spouse. as is property that is acquired by a spouse after service of a petition for dissolution of marriage, legal separation or annulment is also the separate property of that spouse if the petition results in a decree of dissolution of marriage, legal separation or annulment. Separate property brought into the marriage remains separate property unless it is converted to community property by agreement or otherwise is transmuted. B. Creation of Marriage Any discussion of premarital agreements would be incomplete without mention of the conditions Arizona recognizes as necessary for creation of a valid marriage. Arizona recognizes marriages validly contracted within the State of Arizona. Arizona also recognizes marriages validly contracted in other states. One cannot enter into a “common law marriage” in Arizona. However, both by statute and case law, Arizona does recognize marriages, including common law marriages, which were validly established by the laws of an alternative jurisdiction where the marriage was contracted. C. Prenuptial Agreements 1. Generally In 1991, Arizona enacted the Uniform Premarital Agreement Act. The agreement must be in writing and is enforceable without consideration. The agreement becomes effective upon the parties’ marriage. Parties to a premarital agreement may modify or revoke the premarital agreement at any time during the marriage, but the amendment or revocation must be in writing signed by the parties. 2. Enforcement of Rights Granted by Prenuptial Agreements In connection with a divorce, annulment or legal separation proceeding, the divorce court will determine validity of a prenuptial agreement. If the divorce court holds a spousal maintenance waiver is invalid because it will leave a party dependent upon public assistance, than the divorce court will set an amount of spousal maintenance necessary to avoid that eligibility. To the extent a prenuptial agreement creates or recognizes joint, common or community property rights, those rights should be subject either to division as dictated by the prenuptial agreement, or to equitable division in the divorce proceeding. To the extent a prenuptial agreement creates or preserves separate property for either party, the family court must award that property to the separate property owner in connection with a divorce or legal separation. Because of Arizona trial courts’ lack of jurisdiction in dissolution proceedings to enter a judgment against one spouse for damage to the separate property of the other spouse, the injured spouse must bring a separate cause of action against the tortfeasor spouse for trespass for injury done to the injured spouse’s property pursuant to ARS § 12-542. In light of the two (2) year statute of limitation associated with that cause of action, the injured spouse may need to institute that cause of action either prior to or in the midst of a dissolution proceeding. D. Post-Nuptial Agreements 1. Generally Neither Arizona’s version of the Uniform Premarital Agreement Act, nor statutory provisions addressing “Property Rights and Contract Powers”, explicitly create spouse’s rights to alter the statutory marital property scheme by private post-nuptial agreement. Nevertheless, Arizona case law recognizes validity of post-nuptial agreements between spouses. See In Re Harber’s Estate, 104 Ariz, 79, 449 P.2d 7 (1969). In accordance with Harber, the proponent of any post-nuptial agreement bears the burden of proof to demonstrate by “clear and convincing evidence” all of the foregoing: (1) the transaction was free from any taint of fraud, coercion or undue influence; (2) the opposing party acted with full knowledge of all the properties involved and all legal rights therein; and (3) the settlement was fair and equitable. However, a post-nuptial agreement may be subject to challenge by creditors as a fraudulent conveyance or as a preference. 2. Deed as Post-Nuptial Agreement a. Joint Tenancy Deeds Generally, transfer of sole and separate property into joint tenancy or use of sole and separate funds to acquire property in joint tenancy is rebuttably presumed to be a gift of a one-half (1/2) interest in the property to the other spouse. By contrast, placement of sole and separate funds in a joint account within a financial institution gives rise to a rebuttable presumption that the title change occurred for inheritance purposes, rather than as a present gift. The recently decided Arizona Supreme Court case, Toth v. Toth, 190 Ariz. 218, 946 P.2d 900 (1997), in one fell swoop, has altered the entire landscape concerning domestic relations gift issues, simultaneously creating enormous clarity, uncertainty and trial court discretion in this area, particularly with respect to deeds made during marriage. As a summary, Toth holds: (1) Arizona requires an “equitable” division of joint, common or community property, which is not necessarily an “equal” division of that property; (2) the trial court has broad discretion to decide equitable terms of division of property (beyond consideration of excessive or abnormal expenditures, destruction, concealment or fraudulent disposition), based upon the concept of fairness as applied to the particular facts of the case; (3) joint property is separate property of each spouse during the marriage, but, by specific exception, is subject to equitable division in the same manner as community property upon divorce ; and (4) gifts of joint tenancy property are not irrevocable inter vivos transfers, but, instead, are equitable rights in property . b. Disclaimer Deeds Disclaimer deeds generally contain a recitation: “the property above described is the sole and separate property of the spouse having been purchased with the separate funds of the spouse.” Notwithstanding the presumed effectiveness of a disclaimer deed, the grantor preserves the right to demonstrate at trial the existence of “fraud” or “mistake.” E. Agreements in Connection with Separation or Divorce As previously noted, Arizona’s divorce statutes contemplate parties’ entry into “written separation agreements” in order to resolve disputes “attendant on their separation or the dissolution of their marriage.” 1. To promote amicable settlement of disputes between parties to a marriage attendant on their separation or the dissolution of their marriage, the parties may enter into a written separation agreement containing provisions for disposition of any property owned by either of them, maintenance of either of them, and support, custody and parenting time of their children. A separation agreement may provide that its maintenance terms shall not be modified. 2. In a proceeding for dissolution of marriage or for legal separation, the terms of the separation agreement, except those providing for the support, custody and parenting time of children, are binding on the court unless it finds, after considering the economic circumstances of the parties and any other relevant evidence produced by the parties, on their own motion or on request of the court, that the separation agreement is unfair. 3. If the court finds the separation agreement unfair as to disposition of property or maintenance, it may request the parties to submit a revised separation agreement or may make orders for the disposition of property or maintenance. 4. If the court finds that the separation agreement is not unfair as to disposition of property or maintenance and that it is reasonable as to support, custody and parenting time of children, the separation agreement shall be set forth or incorporated by reference in the decree of dissolution or legal separation and the parties shall be ordered to perform them. If the separation agreement provides that its terms shall not be set forth in the decree, the decree shall identify the separation agreement as incorporated by reference and state that the court has found the terms as to property disposition and maintenance not unfair and the terms as to support, custody and parenting time of children reasonable. 5. Except for terms concerning the maintenance of either party and the support, custody or parenting time of children, entry of the decree shall thereafter preclude the modification of the terms of the decree and the property settlement agreement, if any, set forth or incorporated by reference. Matrimonial Agreements in California: Requirements for Validity VIII. Nevada Nevada allows for pre- and post- marriage contracts by statute. Generally, the agreements or contracts need the basic requirements of full disclosure of all assets, a writing, and both parties signing. In order for a prenuptial agreement to be held valid, the marriage must occur. If it does not, then the agreement is held valid only to the extent of avoiding an inequitable result. A. Antenputial/Premarital Agreements 1. Generally Nevada became an adopting state of the Uniform Premarital Agreement Act in 1989. By definition, a premarital agreement is one between prospective spouses made in contemplation of marriage and to be effective upon marriage. A premarital agreement must be in writing and signed by both parties. It is enforceable without consideration on the condition that the parties actually marry. All marriage contracts must be in writing and executed and acknowledged or proved in like manner as a conveyance of land and is required to be executed and acknowledged or proved. The parties may amend the agreement after marriage or revoke it, in whole or in part, by a later signed written agreement. 2. Case law In Sogg v. Nevada State Bank, 108 Nev. 308, 832 P.2d 781 (1992), the court concluded that if the disadvantaged party would have received more under community property laws, the agreement is presumed to be fraudulent. That presumption can be overcome by giving the disadvantaged party ample opportunity to obtain the advice of independent counsel. Other factors to overcome the presumption include making certain the disadvantaged party was not coerced into making rash decisions, proof the party had substantial business experience and acumen, and that the party was aware of the financial resources and understood the rights that were being forfeited. As with all contracts, the court retains the power to refuse a particular premarital agreement if it is unconscionable, obtained through fraud, misrepresentation, material nondisclosure or duress. The premarital agreement may provide for the return of separate property contributions if such contributions are used to acquire or improve property held jointly or in common. The court is under no obligation to independently determine the validity and substantive fairness of the premarital agreement. Kantor v. Kantor, 116 Nev. ___, 8 P.3d 825 (2000) The parties are required to deal in good faith and disclose assets. A premarital agreement should be enforced and is not void as against public policy if its provisions are fair and reasonable, the agreement is understandable, and not procured through fraud, misrepresentation or nondisclosure. B. Postnuptial Agreements – Marriage Contracts 1. Generally Similar to the Premarital Act, the Nevada Revised Statutes allow for post-marriage contracts under Chapter 123, a subset of the chapter dealing with “Rights of Husband and Wife.” 2. Form and Consent The parties are free to engage in marriage contracts. Either husband or wife may enter into a contract with the other, or with any other person affecting property, which either might enter into if unmarried. A common use is the property settlement agreement at divorce. Nevada law ends property of the marriage on filing of the petition. All marriage contracts or settlements must be in writing, executed and acknowledged or proved in like manner as a conveyance of land is required to be executed, acknowledged or proved. The agreement is not valid for real property if no attempt is made to record the document, except as the agreement relates between the parties. Separate or community property can be transumated by the agreement of the parties. The agreement may be oral. An oral agreement supported by documents of note and deed of trust can satisfy the statute of frauds. Parties are estopped to assert the requirement that an agreement be in writing where an oral agreement at time of separation dividing assets has been fully performed. An agreement can provide for support and the division of property and survive the decree of divorce. To do so, the decree must provide the agreement is not merged, but survives the decree. 3. Judicial Review, Disclosure and Fairness Under NRCP 60, the court will review all orders, including adopted property settlement agreements, merged or not, for clerical mistakes, inadvertence, excusable neglect, or extrinsic fraud. The time limitation is six months from entry of the order. Parties in Nevada may also bring an independent action for relief under contract theory at any time in the Civil Division. Merger of the two actions is possible. However, if issues of instrinsic fraud, misrepresentation and mistake as to value are not raised at trial, an independent action to reform the agreement is subject to motion to dismiss being granted as barred by res judicata. Failure to disclose assets will give rise to partition actions. The parties have a fiduciary duty to each other. If there is misrepresentation, mutual mistake, fraudulent nondisclosure, an NRCP Rule 60(b) motion may be brought. The court may use its equitable powers to alter an agreement if there has been a misrepresentation by one party. A bankruptcy filing by one party after the agreement for division of property and debts is made gives rise to “changed circumstances” for modification of alimony. Where the period of alimony has not elapsed, the district court has jurisdiction to modify the alimony portion of the divorce decree regardless of whether the supporting spouse made all the required alimony payments. IX. Washington The three types of agreements dealt with in this paper are: prenuptial and antenuptial agreements; community property agreements; and separation contracts. A. Community Property Statutes All discussion of prenuptial and spousal agreements, with the exception of the addition of the statute in regard to separation contracts, are subject to the provisions of Revised Codes of Washington (RCW) 26.16.010, et seq. In existence in its generally current form since statehood, these statutes form the reference for prenuptial and community property agreements. Conveyances of real property may be made between husband and wife, giving to the other any or all of his interest in separate or community property. The formalities for deeds apply. RCW 26.16.120 forms the basis for what is known in Washington as the “statutory community property agreement.” With regard to community property agreements which take place at the death of a spouse, this section requires that such an agreement must meet all of the statute’s formalities: husband and wife must execute an instrument in writing under their hands and seals, and it should be witnessed, acknowledged and certified in the same manner as deeds to real estate. Finally, RCW 26.16.210 requires that where any question arises as to the good faith of any transaction between husband and wife, the burden of proof shall be upon the party asserting the good faith. B. Prenuptial Agreements A prenuptial agreement is a contract entered into between prospective spouses in contemplation and consideration of marriage. Prenuptial agreements must be in writing. Otherwise, there are few statutory requirements, but it is suggested by commentators that (1) the parties should have their signatures acknowledged before a notary; (2) the document should include a page to be signed by the attorney for each party, certifying that the attorney explained the nature and effect of the document to the client and that the client acknowledged the same, signing it freely and voluntarily; and (3) there should be included a listing of all the items being disclosed regarding assets, liabilities and income. Prenuptial agreements made in consideration of marriage only go into effect when the parties marry, and if they do not marry, the agreement fails. In determining the validity of a prenuptial agreement, Washington courts engage a “two prong analysis” as established in Friedlander v. Friedlander, 80 Wn.2d 293, 494 P.2d 208 (1972). The first prong requires the court to decide whether the agreement provides a fair and reasonable provision for the party not seeking enforcement of the agreement. If the court finds that it does, the analysis ends and the agreement will be validated as of the time of execution. The second prong of the analysis occurs in the event that the court determines that the provisions are not fair and reasonable and involves two tests: (a) whether full disclosure has been made by the parties of the amount, character and value of the property involved; and (b) whether the agreement was entered into fully and voluntarily on independent advice and with full knowledge by both prospective spouses of their rights. The closeness to the date of marriage that the agreement was executed is a significant factor in determining its voluntariness. The proponent of the agreement has the burden of proving its validity. As a matter of policy, prenuptial agreements are not disfavored in Washington, so long as the forgoing safeguards are observed. In most reported cases, the first prong of the analysis (fairness at the time of execution) is not especially litigated. Indeed, often the parties stipulate that the agreement is, on its face, unfair. It is the second prong of the analysis (full disclosure and full voluntary participation on the independent advice, with full knowledge of rights) which gets most of the attention. However, in some cases it is important to analyze the first prong very carefully, because if the agreement was fair at the time it was entered into, the inquiry stops and the agreement is upheld. C. Community Property Agreements In Washington, a community property agreement is a contract, and as such is governed by the general laws of contract in respect to execution, interpretation, modification and rescission. This statutory community property agreement must adhere to the formalities required that the spouses execute an instrument in writing under their hands and seals, that it be witnessed, acknowledged and certified in the same manner as deeds to real estate, and that any alterations thereto must later be made in the same manner. Washington practitioners are accustomed to the so-called three-pronged community property agreements. The agreement containing the first “prong” involves the conversion of existing separate property into community property (or visa versa); and the second “prong” involves the conversion of future-acquired separate property into the community property (or visa versa); a transfer upon death provision is referred to as the third “prong.” Often an agreement involves all three “prongs.” A special problem has vexed Washington courts and practitioners for some time, that is, what to do with a community property agreement if the marriage becomes “defunct” under Washington community property doctrine. The “defunct marriage doctrine” is defined by Weber, Section 6.1 as “one in which the conduct of the spouses has exhibited their will to renounce the marriage with no intention of ever resuming the marriage relationship.” This doctrine derives from the “living separate and apart” language of RCW 26.16.140, the first sentence of which states: “When a husband and wife are living separate and apart, their respective earnings and accumulations shall be the separate property of each…” Therefore, courts will not divide property acquired following separation. Problematic situations have frequently arisen where the parties’ marriage becomes defunct, but (1) the parties continue to accumulate earnings, or (2) a spouse dies. D. Separation Contracts Separation contracts are governed by a part of Washington’s dissolution of marriage-legal separation statutory scheme found in RCW 26.09.002, et seq. The policy underlying separation contracts are largely established by the statutory and case law regarding contracts in general. Obviously, separation contracts can provide for the division of assets, payment of debts, rights of inheritance, support and parenting plan for children, maintenance, effective date, public or private nature of the contract, and whether the contract will have an independent existence even if incorporated into the decree. However, with spousal maintenance, the parties may agree to the non-modifiability of maintenance in a separation contract. As in all agreements, and those touching upon the marital relation, the court will be bound by the other terms of the separation agreement “unless it finds, after considering the economic circumstances of the parties and any other relevant evidence produced by the parties on their own motion or on request of the court, that the separation contract was unfair at the time of its execution….” This “fair at the time of execution” requirement is that the parties must act freely and voluntarily, with knowledge of pertinent facts, and with access to independent legal counsel. In both Marriage of Shaffer, 47 Wn. App. 189, 733 P.2d 1013 (1987), and Marriage of Cohen, 18 Wn. App. 502, 569 P.2d 79 (1977), the test is stated as follows: “(1) whether full disclosure has been made by respondent 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 the spouse of her right.” E. Conclusion Matrimonial agreements in Washington receive somewhat more scrutiny than ordinary contracts; yet they are valid under reasonable conditions, and even encouraged. The fiduciary relationship of spouses and spouses-to-be, requires increased solicitude to those in the weaker bargaining position. The scrutiny is highest with prenuptial agreements, and decreases though community property agreements to separation contracts. X. Texas A. Scope of Article Premarital and marital property agreements allow persons about to marry and spouses to confirm and modify the characterization of property. Such contractual recharacterization, when enforceable, limits the property which will be subject to division upon the death of one of the parties or divorce. Property agreements can also be used to predetermine the award of alimony or spousal maintenance, allocate the management of property during the marriage, designate or waive homestead interests, and provide for the choice of law to be applied in any future dispute. 1. Statutory Formalities a. Premarital Agreements Subchapter A of Chapter 4 of the Texas Family Code provides for the adoption of the Uniform Premarital Agreement Act in Texas. Section 4.001 defines a “premarital agreement” as one made between prospective spouses, in contemplation of marriage, which shall become effective on marriage. A ceremonial marriage is required. Uniform Premarital Agreement Act § 2 cmt. Property which may be subject to a premarital agreement is broadly defined to include any “interest, present or future, legal or equitable, vested or contingent, in real or personal property, including income and earnings.” Tex. Fam. Code Ann. § 4.001(2). A premarital agreement must be in writing and signed by both parties. Section 4.003 provides a comprehensive listing of matter which might be dealt with in a premarital agreement. These include: (1) the rights and obligations of each of the parties in any of the property of either or both of them whenever and wherever acquired or located; (2) the right to buy, sell, use, transfer, exchange, abandon, lease, consume, expend, assign, create a security interest in, mortgage, encumber, dispose of, or otherwise manage and control property; (3) the disposition of property on separation, marital dissolution, death, or the occurrence or nonoccurrence of any other event; (4) the modification or elimination of spousal support; (5) the making of a will, trust, or other arrangement to carry out the provisions of the agreement; (6) the ownership rights in and disposition of the death benefit from a life insurance policy; (7) the choice of law governing the construction of the agreement; and (8) any other matter, including their personal rights and obligations, not in violation of public policy or a statute imposing a criminal penalty. Tex. Fam. Code Ann. § 4.003(a). Subsection (b) makes clear that child support may not be “adversely affected” by a premarital agreement. Tex. Fam. Code Ann. § 4.003(b). Subsection (a)(4) clearly allows for the modification or elimination of spousal support. Tex. Fam. Code Ann. § 4.003(a)(4). Given the stated rehabilitative nature and intent of Texas’s spousal maintenance statutes, sound legal argument could be made that an unconditional waiver of spousal maintenance is in “violation of public policy,” particularly in those cases involving family violence or where a spouse’s waiver of maintenance will create a need for government assistance. b. Partition and Exchange Agreements Partition and exchange agreements allow spouses to partition or exchange their community property interests between each other: At any time, the spouses may partition or exchange between themselves any part of their community property, then existing or to be acquired, as the spouses may desire. Property or a property interest transferred to a spouse by a partition or exchange agreement becomes that spouse’s separate property. Tex. Fam. Code Ann. § 4.102. Spouses may further agree that income or property arising from the separate property that is owned by them at the time of the agreement, or thereafter acquired, shall be the separate property of the owner. Tex. Fam. Code Ann. § 4.103. The intent of the parties to effectuate an actual partition and exchange of property should be included. A mere listing of assets designated as the separate property of one spouse, although a writing signed by the parties, does not constitute a partition and exchange agreement. See Collins v. Collins, 752 S.W.2d 636 (Tex. App. --Fort Worth 1988, writ ref’d). c. Agreements to Convert Separate Property into Community Property H.B. 734 adds a subchapter C to Chapter 4 of the Texas Family Code. The following is selected portions thereof: Subchapter C: Agreement To Convert Separate Property into Community Property § 4.203. Formalities of Agreement. (a) An agreement to convert separate property to community property: (1) must be in writing and: (A) be signed by the spouses; (B) identify the property being converted; and (C) specify that the roperty is being converted to the spouses' community property; and (2) is enforceable without consideration. (b) The mere transfer of a spouse's separate property to the name of the other spouse or to the name of both spouses is not sufficient to convert the property to community property under this subchapter. § 4.205. Enforcement. (a) An agreement to convert property to community property under this subchapter is not enforceable if the spouse against whom enforcement is sought proves that the spouse did not: (1) execute the agreement voluntarily; or (2) receive a fair and reasonable disclosure of the legal effect of converting the property to community property. (b) An agreement that contains the statutory statement, or substantially similar words, prominently displayed in bold‑faced type, capital letters, or underlined, is rebuttably presumed to provide a fair and reasonable disclosure of the legal effect of converting property to community property: "THIS INSTRUMENT CHANGES SEPARATE PROPERTY TO COMMUNITY PROPERTY. THIS MAY HAVE ADVERSE CONSEQUENCES DURING MARRIAGE AND ON TERMINATION OF THE MARRIAGE BY DEATH OR DIVORCE. FOR EXAMPLE: "EXPOSURE TO CREDITORS. IF YOU SIGN THIS AGREEMENT, ALL OR PART OF THE SEPARATE PROPERTY BEING CONVERTED TO COMMUNITY PROPERTY MAY BECOME SUBJECT TO THE LIABILITIES OF YOUR SPOUSE. IF YOU DO NOT SIGN THIS AGREEMENT, YOUR SEPARATE PROPERTY IS GENERALLY NOT SUBJECT TO THE LIABILITIES OF YOUR SPOUSE UNLESS YOU ARE PERSONALLY LIABLE UNDER ANOTHER RULE OF LAW. "LOSS OF MANAGEMENT RIGHTS. IF YOU SIGN THIS AGREEMENT, ALL OR PART OF THE SEPARATE PROPERTY BEING CONVERTED TO COMMUNITY PROPERTY MAY BECOME SUBJECT TO EITHER THE JOINT MANAGEMENT, CONTROL, AND DISPOSITION OF YOU AND YOUR SPOUSE OR THE SOLE MANAGEMENT, CONTROL, AND DISPOSITION OF YOUR SPOUSE ALONE. IN THAT EVENT, YOU WILL LOSE YOUR MANAGEMENT RIGHTS OVER THE PROPERTY. IF YOU DO NOT SIGN THIS AGREEMENT, YOU WILL GENERALLY RETAIN THOSE RIGHTS. "LOSS OF PROPERTY OWNERSHIP. IF YOU SIGN THIS AGREEMENT AND YOUR MARRIAGE IS SUBSEQUENTLY TERMINATED BY THE DEATH OF EITHER SPOUSE OR BY DIVORCE, ALL OR PART OF THE SEPARATE PROPERTY BEING CONVERTED TO COMMUNITY PROPERTY MAY BECOME THE SOLE PROPERTY OF YOUR SPOUSE OR YOUR SPOUSE'S HEIRS. IF YOU DO NOT SIGN THIS AGREEMENT, YOU GENERALLY CANNOT BE DEPRIVED OF OWNERSHIP OF YOUR SEPARATE PROPERTY ON TERMINATION OF YOUR MARRIAGE, WHETHER BY DEATH OR DIVORCE." § 4.206. Rights of Creditors; Recording. (a) A conversion of separate property to community property does not affect the rights of a preexisting creditor of the spouse whose separate property is being converted. (c) A conversion of real property from separate property to community property is constructive notice to a good faith purchaser for value or a creditor without actual notice only if the agreement to convert the property is acknowledged and recorded in the deed records of the county in which the real property is located. A unilateral transfer of separate property to the other spouse would not be effective to create community property, but would be presumed to be a gift—and therefore, the separate property of the receiving spouse. Further, spouses can only convert existing property at the time of the agreement. Accordingly, spouses can not agree in advance that any inheritance or gifts received or anticipated to be received will be part of the community estate. Rather, separate agreements will be required throughout the marriage as the need arises. 2. Enforcement of Property Agreements The Texas Family Code expressly provides that the attack of an otherwise validly executed premarital or partition and exchange agreement is limited to one of two defenses. The party attempting to attack the agreement must show that: (1) the party did not sign the agreement voluntarily; or (2) the agreement was unconscionable when it was signed and, before signing the agreement, the party: (A) was not provided a fair and reasonable disclosure of the property or financial obligations of the other party; (B) did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and (C) did not have, or reasonably could not have had, adequate knowledge of the property or financial obligations of the other party. Tex. Fam. Code Ann. §§ 4.006(a); 4.105(a). Agreements to convert separate property into community property are also subject to attack on rather narrow statutory grounds. The spouse attempting to attack the agreement must show that the spouse did not: (1) execute the agreement voluntarily; or (2) receive a fair and reasonable disclosure of the legal effect of converting the property to community property. a. Voluntariness Voluntary has been defined as being “done by design or intentionally or purposely or by choice or of one’s own accord or by the exercise of will. A voluntary act proceeds from one’s own free will or is done by choice on or of one’s own accord, unconstrained by external interference, force, or influence.” Prigmore v. Hardware Mutual Ins. CO., 225 S.W.2d 897 (Tex. Civ. App.—Amarillo 1949, no writ). b. Unconscionability A number of cases have interpreted the issue of unconscionability in the context of marital property agreements. In Pearce v. Pearce, the appellate court stated that the issue must be evaluated on a “case-by-case basis, looking to the entire atmosphere in which the agreement was made” and found an agreement to be conscionable even when the wife did not have an attorney, did not read or understand the agreement, and had no understanding of the effect of the agreement’s terms upon her. 824 S.W.2d 195, 199 (Tex. App.--El Paso 1991, writ denied). More recently, in Marsh v. Marsh, the Houston court of appeals reviewed whether or not a premarital agreement was unconscionable. 949 S.W.2d 734 (Tex. App.--Houston [14 th Dist.] 1997, no writ). The agreement before the court expressly provided that “each party entered the agreement freely and knowingly.” Id. at 740. The complaining party testified at trial that he knew he was free to consult with an attorney or accountant before signing the agreement and that he had been under no threats, fraud, overreaching, duress, or misrepresentations to execute the agreement. The agreement itself further stated that despite being “strongly recommended” that he “obtain counsel for representations in the negotiation of this ‘agreement’ [Husband] has elected not to retain independent counsel.” Id. at 741 fn. 5. Thus, the appellate court held “the premarital agreement is not unconscionable as a matter of law” despite the husband’s arguments that the parties had disparate bargaining power, the agreement was signed shortly before the wedding, he was not represented by counsel, and the agreement was allegedly one-sided. Id. at 741-743. c. Disclosure of Property or Financial Obligations Upon the adoption of subchapter C to Chapter 4, we must now speak in terms of two types of disclosure in the context of marital property agreements. First, in the context of a premarital or partition or exchange agreement, once the court finds that an agreement is unconscionable as a matter of law, the complaining party must further show that there has been an inadequate disclosure of the property or financial obligations of the other party. See Tex. Fam. Code Ann. §§ 4.006 (a)(2)(A); 4.105(a)(2)(A). Furthermore, it must be shown that the complaining party did not have, or reasonably could not have had, adequate knowledge of the other party’s property or financial obligations, and that there had been no waiver or the required disclosure. Id. at §§ 4.006(a)(2)(B)-(C); 4.105(a)(2)(B)-(C). d. Disclosure of the Legal Effect of Conversion of Separate to Community Property In the context of an agreement between spouses to convert separate property to community property, there must be a full and complete disclosure to the parties of the legal effect of the agreement upon the spouses’ property rights. Independent legal representation is obviously one way to preempt an attack on this basis. More precisely, however, the Legislature has provided that an agreement containing the previously set forth language at page 36, “prominently displayed in bold-faced type, capital letters or underlined” is rebuttably presumed to provide a fair and reasonable disclosure of the legal effect of converting property to community property. e. Nonstatutory Defenses Sections 4.006(c) and 4.105(c) limit the attack of premarital and partition and exchange agreements to the statutory defenses of voluntariness and unconscionability. However, the amendment applies only to agreements “executed on or after” September 1, 1993. The three most popular common law defenses are fraud, duress, and overreaching. At least one appellate court has held that such common law defenses as duress, overreaching, undue influence, fraud, estoppel, and breach of fiduciary duty are necessarily incorporated into the 1993 statutory defenses. In Blonstein v. Blonstein, 831 S.W.2d 468, 471 (Tex. App.—Houston [14th Dist.] 1992, writ denied), the court of appeals affirmed the trial court’s denial of special, additional instructions on these common law defenses, finding that they were already included in the court’s instructions regarding voluntariness, unconscionability, and disclosure. B. Practice and Drafting Tips The following suggestions are included for review by counsel in drafting any premarital or marital property agreement. 1. Independent Counsel In the negotiation, drafting, and execution of a premarital or post-marital agreement, it isimperative that both parties be represented by independent, competent counsel. If, after much persuasion, the other party still refuses to seek and retain counsel, include provisions within the document itself that the party was repeatedly encouraged to have independent representation but has knowingly and willfully waived their right to do so. 2. Timing of Agreement Whenever possible, the negotiations, drafting, and execution of the premarital agreement should be timed so that the process is completed as far in advance of the wedding date as possible. However, execution close in time to the wedding is not necessarily fatal. The Texas Supreme Court, in Williams v. Williams, 569 S.W.2d 867 (Tex. 1978), upheld a premarital agreement which was presented and executed on the afternoon before the wedding date, particularly in light of the prior conversations of at least 6 months earlier between the parties regarding the terms of the agreement and the relative sophistication of both parties. 3. Full and Complete Financial Disclosure A full and complete disclosure of all assets and liabilities is in order. When the parties to such an agreement are on unequal financial footing, it is especially important to comply with this requirement. While a party may “voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided,” such waiver must be signed "before execution of the agreement.” 4. Videotape As in the execution of wills, the use of video should be considered to insure the enforceability of a premarital or post-marital agreement. 5. Declaratory Judgment The Uniform Declaratory Judgment Act provides a means for parties to seek a judicial determination as to the validity of a premarital or marital property agreement prior to a future dispute regarding its enforcement. Section 37.004 of the Texas Civil Practice and Remedies Code covers the types of controversies that can be determined by declaratory judgment: (a) A person interested under a deed, will, written contract, or other writings constituting a written contract or whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract, or franchise may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder. (b) A contract may be construed either before or after there has been a breach. Tex. Civ. Prac. & Rem. Code Ann. § 37.004. Having a premarital or marital property agreement declared valid and enforceable at the time of execution will preclude the issues of enforcement at a later time, ie., upon death or divorce. 6. Choice of Law Section 4.003(a)(7) of the Family Code allows for parties to a premarital agreement "to contract with respect to the choice of law governing the construction of the agreement.” Tex. Fam. Code Ann. § 4.003(a)(7). In today’s mobile society, this right of contract becomes very important. The agreement may be drafted and executed in Texas, but there is no guarantee that the parties will divorce or die in this state. Thus, preplanning can ensure that if properly drafted in accordance with the Texas Family Code, it will be enforceable under the Texas Family Code. 7. Spousal Support and Maintenance While it may be found to be a violation of public policy if attacked later, it is advisable to include the provisions in the agreement when drafted. 8. Waiver of Retirement Benefits The waiver of a party’s interest in the qualified retirement benefits of a spouse or future spouse is governed by both state and federal law. Strict construction of the federal statute seems to invalidate waivers of survivor benefits only. 9. Cohabitation Agreements Prior to the 1997 recodification of Title 1 of the Texas Family Code provisions for nonmarital property agreements specifically applied only to those person intending to marry. However, the Legislature has moved what used to appear at Section 26.01 of the Texas Business & Commerce Code to a new section 1.108 of the Texas Family Code: § 1.108. Promise or Agreement Must Be in Writing. A promise or agreement made in consideration of marriage or nonmarital conjugal cohabitation is not enforceable unless the promise or agreement or a memorandum of the promise or agreement is in writing and signed by the person obligated by the promise or agreement. Furthermore, while it would appear that such agreements would be governed by mere contract rules, many feel that a successful argument could be made that the same degree of confidentiality or fiduciary obligation exists between those living together as exists between those married or about to marry. With that in mind, it seems wise to follow the same strict formalities in execution of a cohabitation agreement as one would follow in the execution of a premarital or marital agreement. C. Beyond Enforceability The contractual defenses of waiver, estoppel, reciprocal breach, abandonment, or ratification would be applicable to premarital and marital property agreements, as in other contractual matters. 1. Construction and Interpretation A premarital or marital property agreement is subject to the same general rules of construction and interpretation as any contract. a. Use of Extrinsic Evidence and “Surrounding Circumstances” Where a question relating to the construction of a contract is presented, as here, we are to take the wording of the instrument, considering the same in the light of the surrounding circumstances, and apply the pertinent rules of construction thereto and thus settle the meaning of the contract. City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 519 (Tex. 1968). The surrounding circumstances does not necessarily encompass statements by the parties regarding what they intended the contract to mean, however, as it is the objective, not subjective, intent which is relevant: [T]he circumstances to be considered are not the parties’ statements of what they intended the contract to mean, but circumstances known to the parties at the time they entered into the contract, such as what the industry considered to be the norm or reasonable and prudent. KMI Continental Prod. Co. v. ACF Petroleum Co., 946 S.W.2d 238, 241 (Tex. App.--Houston [1 st Dist.] 1987, writ denied). b. Plain Meaning Courts will generally give each word and phrase within an agreement its plain, ordinary, popular, and common meaning. Therefore, it may be important to expand upon or clearly identify by specific definitions any stipulated meanings or terms of art that might later be subject to a different or multiple interpretation than what was intended. For example, in a property agreement involving multiple jurisdictions, it might be appropriate to include definitions for what amounts to “community property,” “separate property,” “marital property,” “non-marital property,” “spousal maintenance,” or “alimony.” c. The “Whole” Contract When constructing or interpreting a contract, it is important that the entire agreement be read and taken as a whole to effectuate the parties’ true intentions. Thus, “an interpretation which gives a reasonable, lawful, and effective meaning to all of the terms is preferred to an interpretation which is hypertechnical. 2. Defenses for Enforceable Agreements a. Abandonment of the Agreement Numerous courts have held that parties to a valid and enforceable agreement may, by their conduct subsequent to the agreement, abandon the entire agreement or at least certain benefits thereunder. To avoid a subsequent finding of abandonment, prudent drafters will include language providing that the parties may in fact, during the marriage, and despite the agreement, own commingled or joint property, and that this in no way indicates an intent to abandon the agreement. b. Waiver and Rescission Rescission, like a new contract, requires mutual agreement, which may be expressly stated, or established by the actions of the parties. On the other hand, waiver may be done unilaterally by only one party, not requiring mutual agreement. Therefore, if a party becomes complacent, he or she may be found to have waived the performance of a specific provision or promise under the agreement by failing to require strict compliance by the other party. c. Breach of the Agreement As in contracts generally, when one party materially breaches a premarital or marital property agreement, the other party may, at his or her own option, rescind the contract. d. Estoppel and Ratification Finally, a party may, by acts subsequent to the execution, ratify an agreement. For example, one court has held that in light of an agreement containing waivers of each spouse’s interest in the other’s real property, wife’s sale of her own real property during the marriage, combined with her treatment of all proceeds as her separate property, was sufficient to ratify the agreement. See Schutterle v. Schutterle, 260 N.W.2d 341 (S.D. 1977). XI. CONCLUSION As one can see, state rules on the attack of marital property agreements in our sister community property states run the whole gamut from fully enforceable to easily overturned. Each state has varying approaches – some allow for the elimination of spousal support; some do not. Much is dependent on the timing of post-marital agreements in some states. What Texas refers to as a partition and exchange agreement, or agreement to convert separate property into community is unheard of in many states. Others have almost no rules, as “wives” are considered to be as capable of contracting as are “husbands” without the need for judicial approval. Many states dwell on what are, in effect in Texas, Agreements Incident to a Divorce. Texas, of course, does not recognize such agreements as enforceable until approved by the Court. For the vast majority of states, however, enforcement of these agreements are in their infancy, and very little case law exists. Some states struggle mightily with the concept of what “regime” is applicable to the agreement. And the timing when community property is no longer accumulated is particularly in issue in many states since several of the community property states end accumulation of community property prior to ultimate disposition. For instance, these states end accumulation: · Louisiana: at separation · Wisconsin: as though it never existed from inception · California: at filing (and issues are bifurcated, i.e., divorce granted shortly after filing -- property settlement much later) · Arizona: upon service of citation on respondent · Nevada: at filing · Washington: until the marriage becomes “defunct” and the parties live apart. Many of these states, however, allow for courts to award meaningful spousal support, if appropriate, to offset the accumulating value of what otherwise would be community assets, although there is no particular uniformity. As with many issues in the community property states, it is compelling to view how these jurisdictions deal with the enforcement of marital property agreements and provide ideas and insights for our practitioners, but the author prefers the Texas approach. One interesting concept that has come from reviewing the various states is to consider if Texas is ready for a rule that cuts off the accumulation of community property at some point in the process prior to the final divorce hearing in protracted family law litigation. Such an idea bears further scrutiny by our practitioners and legislative committees.
La. Civ. Code art. 1790 (1870), repealed La. Acts 1979, No. 709 eff. Jan. 1, 1980
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