In re Marriage of Burkle

Decision Date18 May 2006
Docket NumberNo. B179751.,B179751.
Citation43 Cal.Rptr.3d 181,139 Cal.App.4th 712
CourtCalifornia Court of Appeals Court of Appeals
PartiesIn re MARRIAGE OF Janet E. and Ronald W. BURKLE. Janet E. Burkle, Appellant, v. Ronald W. Burkle, Respondent.

Philip Kaufler, Hugh John Gibson, Beverly Hills, and Hillel Chodos, for Plaintiff and Appellant.

Wasser, Cooperman & Carter, Dennis M. Wasser and Bruce E. Cooperman, Los Angeles; Greines, Martin, Stein & Richland and Irving H. Greines, Los Angeles; Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro and Patricia L. Glaser, Los Angeles, for Defendant and Respondent.

BOLAND, J.

SUMMARY

The issue in this case is the enforceability of a post-marital agreement. We affirm the trial court's order finding the agreement valid and enforceable. Our conclusions are:

• A presumption of undue influence does not arise in an interspousal transaction unless one spouse obtains an unfair advantage or obtains property for which no or clearly inadequate consideration has been given. The presumption does not apply to a post-marital agreement in which both spouses obtain advantages; both are represented by independent and competent legal counsel; the wife is offered full access to the husband's business records relating to the marital assets; and both spouses acknowledge in the agreement that neither has obtained any unfair advantage as a result of the agreement.

• Even if a presumption of undue influence applied to the parties' post-marital agreement and the trial court erred in allocating to the wife the burden of proving the agreement was invalid, substantial evidence supported the trial court's finding that the credible evidence "established overwhelmingly" that the agreement was not procured by undue influence.

• The wife's claim that the post-marital agreement was procured by the husband through actual fraud, by reason of his failure to provide written information to her on the effects of a prospective merger that would later affect the value of marital assets, is without merit.

Family Code sections 2104 and 2105, requiring parties to a marital dissolution action to serve preliminary and final verified declarations disclosing all assets and liabilities, do not apply to spouses who negotiate and execute a post-marital agreement while a dissolution proceeding is in abeyance, and the spouses are attempting to reconcile rather than contemplating the imminent dissolution of the marriage.

• The wife's claim that she properly rescinded the post-marital agreement for "non-performance and failure of consideration" is without merit, because the wife repudiated the agreement in her dissolution petition, excusing further performance by the husband pending judicial determination of the validity of the agreement.

• The doctrines of ratification and estoppel preclude the wife from claiming the post-marital agreement is unenforceable.

FACTUAL AND PROCEDURAL BACKGROUND

Ronald W. Burkle and Janet E. Burkle were married on March 23, 1974. In April 1997, Ms. Burkle hired a personal attorney who assisted her in interviewing and obtaining family law counsel. In May, Ms. Burkle retained Barry T. Harlan, a certified family law specialist with more than 30 years of legal experience, and in June 1997 she filed a petition for dissolution of the marriage. Ms. Burkle was also advised by two other certified family law specialists, as well as by other lawyers in Harlan's firm with expertise in tax law, real estate law and other areas. She engaged forensic accountants (Gursey, Schneider & Co.) and hired a private investigative firm. After Ms. Burkle's petition was filed, Mr. Burkle engaged David S. Karton to represent him in the dissolution proceeding.

The marriage did not proceed to dissolution in 1997. Instead, by August 1997, both parties were seriously considering an effort to reconcile, coupled with a post-marital agreement that would resolve all present and future financial issues between them. The parties resumed living together in September 1997, and executed a post-marital agreement in November 1997. According to Ms. Burkle, they lived together until April 2002. On June 13, 2003, Ms. Burkle filed the current petition for dissolution of marriage, in which she contends the post-marital agreement is void and unenforceable.

We first describe the post-marital agreement, and then turn to the events surrounding its execution and the subsequent proceedings leading to this appeal, including the relevant findings and conclusions of the trial court.

I. The post-marital agreement.

In broad strokes, the significant financial effects of the agreement executed by the Burkles in November 1997 were these:

• Schedules were prepared by Mr. Burkle listing and valuing community property assets (Schedule A) and assets he claimed as separate property (Schedule C), as of June 6, 1997. As to these schedules:

• The community property schedule showed property with a tax-effected fair market value of $60,028,267.

• The property listed as separate was acquired during a five-year period between 1992 and 1997, during which Mr. Burkle contended the parties had lived separate and apart (a contention disputed by Ms. Burkle), and was valued at a tax-effected fair market value of $86,755,898.1

• All appreciation and income from the community property accruing from the date of the agreement were to be Mr. Burkle's separate property.

• Mr. Burkle was to pay Ms. Burkle, on the anniversary date of the agreement for every year (or pro rata portion) the parties lived together, one million dollars in cash or negotiable securities, deemed her distributive share of the appreciation and income from community assets for the preceding year, and considered her separate property upon receipt.

• If either party sought a dissolution of the marriage, or elected a division of the community property, then:

• Mr. Burkle would be awarded, as his share of the community assets, all the assets on the community property schedule and/or all assets acquired with any proceeds derived from those assets.

• Ms. Burkle would be awarded, as her share of the community assets, in cash and tax free, $30,014,134 (50% of the total net value as of the date of the agreement, adjusted for liabilities and tax consequences), plus five percent simple interest per annum accruing from the date of the agreement. Of this amount, Mr. Burkle would pay Ms. Burkle (a) $5 million within 90 days of service of a petition for dissolution (or written notice of an election to divide the community property); (b) $5 million with 90 days after the first payment; and (c) $10 million on each annual anniversary date of the second $5 million payment, until paid in full.

• Mr. Burkle was given sole management and control over all community property as if it were his separate property, with no duty to account for the community assets so long as he made the agreed annual million-dollar payments to Ms. Burkle.

• If either party sought a dissolution of the marriage or elected a division of community property, Mr. Burkle was to purchase a residence for Ms. Burkle, selected by her, provided the residence was within three miles of the residence in which the parties were then living. The cost was to be the amount necessary to purchase a residence valued at up to $3 million as of June 1997.

• Mr. Burkle was obligated to pay all family living expenses, described as "all expenses necessary to maintain the Parties and the Parties' minor children in a lifestyle consistent with that which each of them has maintained while living separate and apart during the last five (5) years." The agreement recited that Mr. Burkle had paid, as Ms. Burkle's marital living expenses during that period, an amount between $400,000 and $500,000 per year, net of taxes, an amount Ms. Burkle acknowledged had "more than adequately maintained her in her desired lifestyle."

• Ms. Burkle waived any rights to spousal support.

The post-marital agreement was initially drafted in August 1997, and was signed by Ms. Burkle on November 5, 1997 and by Mr. Burkle on November 21, 1997. The parties initialed each page of the agreement. It was also signed by Harlan, Ms. Burkle's attorney, who certified that he had fully explained to Ms. Burkle the effect the agreement had upon the rights she would otherwise have as a matter of law, and that she acknowledged to him that she understood the legal effect of the agreement. The agreement included a statement of intent and other recitals and provisions, including the following:

• Ms. Burkle desired financial security and assurance she would be able to enjoy her present lifestyle without hindrance or risk of loss.2

• Mr. Burkle desired the financial freedom to make investments that could yield high returns but which carried the risk of significant loss.

• If the parties were ultimately unable to reconcile their differences and either of them desired to dissolve the marriage, both parties wanted the agreement to fully resolve all possible financial issues so they would be spared the financial and emotional costs of litigation.

The parties had been living separate and apart for approximately five years. They disputed the legal effect of their separate residences, and acknowledged the dispute would create a substantial difference in the value of the community estate, depending on which party prevailed.

The parties acknowledged that:

They discussed with their respective legal counsel, "at length, numerous alternatives available with respect to the form and substance of a postmarital agreement, and that they have adopted the provisions of this agreement after careful consideration of such available alternatives."

They were aware that the assets on Schedules A and C "may, and probably will, increase dramatically in value in the future and that Jan's interest therein is being fixed at this time, notwithstanding the possibility of future increases."

They had the right...

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