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In re Marriage of Evans

California Court of Appeals, Fifth District

August 29, 2014

In re the Marriage of JOY and WILLIAM EVANS. JOY EVANS, Respondent,
v.
WILLIAM EVANS, Appellant.

APPEAL from a judgment of the Superior Court of Kern County No. S-1501-FL-608766. Stephen D. Schuett, Judge.

Page 375

[Copyrighted Material Omitted]

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COUNSEL

Law Offices of Edward J. Quirk, Jr. and Edward J. Quirk, Jr. for Appellant.

Law Offices of Richard O. Fanning and Richard O. Fanning for Respondent.

OPINION

Page 377

FRANSON, J.

This appeal presents a question of first impression about the Family Code provisions that require spouses who are dissolving their marriage to exchange declarations of disclosure of assets and liabilities.[1] Specifically, is a property settlement agreement valid and enforceable when executed by spouses (1) after they have separated but before a petition for dissolution of marriage has been filed and (2) without an exchange of disclosure declarations?

In this case, the spouses entered into a written agreement to resolve the property rights to their residence. The husband agreed to buy out the wife’s interest for one-half the value of the equity. When they signed the agreement, they were separated, but a petition for dissolution of marriage had not been filed. The husband now contends the agreement is unenforceable because they did not exchange disclosure declarations before signing the agreement.

The trial court ruled the agreement was enforceable because the Family Code did not require disclosure declarations be exchanged before a petition was filed. The court stated the terms of the agreement would be incorporated into the judgment of dissolution of marriage that divided the community property.

We interpret section 2105, subdivision (a) and the other provisions in Chapter 9 to mean that an exchange of disclosure declarations is not required for a pre-petition agreement to be enforceable, even when spouses make the agreement in contemplation of dissolution. In addition, we do not read In re Marriage of Burkle (2006) 139 Cal.App.4th 712 [43 Cal.Rptr.3d 181] (Burkle) as supporting an interpretation that extends the statutory disclosure requirements to pre-petition agreements.

We therefore affirm the trial court’s order.

FACTS

Appellant William Evans and respondent Joy Evans[2] married in July 1985. They separated in March 2007.

Page 378

The only significant asset in their marital estate was a house located in Kern County. They agreed that William would buy out Joy’s interest in the residence, and Joy prepared a typed “PRE-DIVORCE AGREEMENT” to that effect (Agreement). Both parties signed the Agreement on May 5, 2007. At the time of signing, the parties assumed the residence had a net equity of $600, 000 and the Agreement accordingly called for William to pay $300, 000 to Joy for her one-half interest.

The terms of the Agreement unequivocally show that it was made in contemplation of the dissolution of William and Joy’s marriage. The Agreement was entitled “PRE-DIVORCE AGREEMENT” and the terms of the final payment were to “BE DETERMINED AT THE TIME OF THE FINAL DIVORCE AGREEMENT.” Further, the Agreement specified that the disposition of any assets not covered by the Agreement were to “BE SET FORTH IN THE FINAL DIVORCE AGREEMENT.”

Before signing the Agreement, neither party served the other with either a preliminary or final disclosure declaration. However, there is no indication in the record that Joy was “in possession of information pertinent to the contractual exchange [and] elect[ed] not to reveal that information to [William].” (Wonnell, The Structure of a General Theory of Nondisclosure (1991) 41 Case W. Res. L.Rev. 329.) Thus, there was no “failure to disclose intrinsic facts pertaining to the [residence]” and no “failure to disclose extrinsic facts pertaining to the general environment affecting the economic value of [the residence].” (Id. at p. 332.)

After signing the Agreement, William paid Joy $197, 000, leaving an unpaid balance of $103, 000.

PROCEEDINGS

In February 2009, Joy filed a petition for dissolution of marriage. In early 2010, Joy and William served preliminary disclosure declarations on one another.

In October 2012, Joy served William with a final disclosure declaration. William never served Joy with a final disclosure declaration.

At the time of the dissolution proceedings, their residence had an approximate fair market value of $420, 000 and was encumbered by a promissory note secured by a first deed of trust with an unpaid balance of $350, 000, making the actual net equity of the residence about $70, 000. The value of the equity was less than the $103, 000 William still owed Joy under the terms of the Agreement.

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William brought a motion to set aside the Agreement, claiming that the parties’ failure to comply with the disclosure declaration requirements of Chapter 9 prior to signing the Agreement made the Agreement invalid and unenforceable. The motion to set aside was bifurcated and heard on declarations and written argument.

In September 2012, the trial court issued a tentative decision that the Agreement was valid and enforceable. The trial court stated that by signing the Agreement prior to filing a petition for dissolution, the parties’ failure to exchange disclosure declarations was irrelevant and did not prevent the enforcement of the Agreement. The trial court ordered the terms of the Agreement be incorporated into a judgment of dissolution of marriage dividing the parties’ community property.

In October 2013, the trial court issued an order and agreed statement of facts.

In November 2013, William timely filed a motion to appeal the order on the bifurcated issue, pursuant to California Rules of Court, rule 5.392(d)(1), which was granted by this court.[3]

DISCUSSION

I. JUDICIAL REVIEW

A. Issues Presented

The primary issue on appeal is whether a settlement agreement made before the filing of a petition for the dissolution of marriage, but in contemplation of it, is unenforceable due solely to the parties’ failure to first serve each other the disclosure declarations described in the Family Code. Our answer is no.

During oral argument, William’s counsel identified two additional issues that would arise if he prevailed on the primary issue.

First, if the exchange of disclosure declarations was required, was William required to show prejudice in regard to the Agreement to obtain an order setting it aside? In other words, did he have to show prejudice to obtain relief? Second, was William’s failure to serve a final disclosure declaration after Joy served hers in October 2012 fatal to his motion to set aside the

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Agreement, which was prepared and signed over five years earlier? Because we have decided against William on the primary issue and concluded a pre-petition agreement is enforceable without an exchange of ...


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