In re Marriage of Bernard

• Decision Date: 09 April 2009
• Docket Number: No. 80348-0.,80348-0.
• Citation: 204 P.3d 907
• Parties: In re the Matter of the Marriage of Gloria BERNARD, Respondent, and Thomas Bernard, Petitioner.
• Court: Washington Supreme Court

204 P.3d 907

In re the Matter of the Marriage of Gloria BERNARD, Respondent, and

Thomas Bernard, Petitioner.

No. 80348-0.

Supreme Court of Washington, En Banc.

Argued May 27, 2008.

Decided April 9, 2009.

Douglas Paul Becker, Attorney at Law, Seattle, WA, Kenneth Wendell Masters, Wiggins & Masters PLLC, Bainbridge Island, WA, for Petitioner.

Cynthia B. Whitaker, Jerry Richard Kimball, Melissa Mager, Law Offices of Cynthia B. Whitaker, Catherine Wright Smith, Valerie A. Villacin, Edwards Sieh Smith & Goodfriend PS, Seattle, WA, for Respondent.

STEPHENS, J.

¶ 1 Gloria Bernard filed for dissolution from Thomas Bernard.¹ We are asked to determine the enforceability of their prenuptial agreement. We hold the agreement is not enforceable because it is substantively and procedurally unfair. We affirm Gloria's award of attorney fees and costs.

FACTS AND PROCEDURAL HISTORY

¶ 2 In 1995 Thomas hired Gloria to be the operations manager for Bernard Development Company. In late 1998, after the death of Thomas's first spouse, Thomas and Gloria began dating. Thomas asked Gloria to marry him but informed her he would require a prenuptial agreement because of the disparity in their relative wealth. At the time of their engagement, Thomas was 55 and a successful real estate developer with a net worth of approximately $25 million; Gloria was 49, held undergraduate and master's degrees in business administration, and had a net worth of approximately $8,000. The events surrounding the signing of the prenuptial agreement and its amendment are the subject of this litigation.

¶ 3 In January 2000, Thomas and his long-time attorney, Richard Keefe, began working on the prenuptial agreement. Thomas and Keefe repeatedly advised Gloria to obtain independent counsel but did not provide her with a draft of the proposed agreement. Lacking a draft, Gloria took no action to obtain representation. On May 24, Keefe prepared a prenuptial checklist for Thomas and Gloria and encouraged Gloria to obtain counsel. He provided her with the names of three attorneys but did not provide her with a draft agreement. On June 8, Keefe again encouraged Gloria to obtain independent representation, resending the prenuptial checklist. Gloria still did not have a draft of the agreement, however, and did not consult counsel at that time. Not until June 20, 18 days before the wedding, did Gloria receive a draft of the prenuptial agreement.

¶ 4 On July 5, Gloria met with Marshall Gehring, an attorney experienced in prenuptial negotiations. That evening Gehring received a working draft of the prenuptial agreement from Keefe. It was substantially different from the draft Keefe gave to Gloria on June 20.

¶ 5 Gehring testified at trial that he did not have sufficient time to conduct a full review of the agreement or draft a counteragreement. Instead, in a letter to Gloria dated July 7, the day before the wedding, he identified five areas of major concern with the prenuptial agreement. He indicated in his letter that he had additional minor concerns but did not specify what those were. Gehring's letter recommended that Gloria negotiate some kind of additional written instrument to address the concerns he outlined. In testimony, Gehring agreed that he had time to only "hit the high points" in his letter and said he would have reviewed the agreement "page by page" if he had been given more time. He further testified that during the short time he had to review the agreement, it was very difficult to talk directly with Gloria, as she was busy with guests, wedding details, and honeymoon preparations.

¶ 6 In addition, Thomas testified that he would have called off the wedding on its eve, or even the day of, had Gloria not signed the prenuptial agreement. Gloria testified that she believed Thomas would not have married her if she had refused to sign the agreement.

¶ 7 Gloria signed the prenuptial agreement the day before the wedding, on July 7, with the understanding that it would be amended. Thomas and Gloria's wedding took place at the Seattle Tennis Club on July 8 and included approximately 200 guests, some of whom had come from out of town.

¶ 8 Gloria and Thomas signed a "side letter" on the day of the wedding, agreeing to renegotiate the five areas of major concern Gehring noted in his July 7 letter. Both Gloria and Gehring testified that they believed the negotiations that followed the side letter were limited to the five areas identified by Gehring. Report of Proceedings (RP) (Sept. 6, 2005) at 112;² RP (Sept. 12, 2005) at 17.³ The side letter required the anticipated amendment to be finalized no later than October 7, 2000, but the amendment would not be finalized until August 28, 2001. When it was eventually finalized, the amendment ratified the original prenuptial agreement and altered several provisions in accordance with each of Gehring's concerns.

¶ 9 Gloria filed for dissolution on February 4, 2005. Thomas demanded arbitration under the terms of the prenuptial agreement. Gloria moved for summary judgment, challenging the enforceability of the prenuptial agreement.⁴ The trial court bifurcated its analysis of the enforceability of the prenuptial agreement.

¶ 10 The court determined that the prenuptial agreement, as amended, was substantively unfair as a matter of law. The court directed a trial on the question of procedural fairness. After a four day trial, the court found the prenuptial agreement, as amended, was procedurally unfair. First, the court found that the draft sent to Gehring on July 5 was substantially different from the version Gloria received on June 20. The court further found that Gloria and Gehring received the revised draft of the agreement only a few days before the wedding, "too late to provide time for meaningful negotiation and full advise [sic]." Clerk's Papers (CP) at 1814. The trial court also found that "[b]ecause of the impending wedding [Gloria] was faced with the choice of the humiliation of calling off a wedding or signing a substantively unfair document." CP at 1816. Next, the court found the subsequent amendment did not cure the procedural defects of the original agreement because the terms of the side letter restricted the scope of renegotiation. Id. Accordingly, "[a]s the scope of the negotiations allowed by the `side letter' were so specifically limited, the fact that there was sufficient time for independent review and for the advice of counsel was insufficient to cure the defects of the first agreement." Id. The trial court concluded that the agreement lacked procedural fairness.

¶ 11 Division One of the Court of Appeals affirmed. In re Marriage of Bernard, 137 Wash.App. 827, 155 P.3d 171 (2007). The Court of Appeals first held the agreement, as amended, was substantively unfair. Id. at 834-35, 155 P.3d 171. The court then held the agreement, as amended, was procedurally unfair. Id. at 835, 155 P.3d 171. The Court of Appeals reasoned that Gloria did not have the benefit of independent counsel, that her bargaining position was grossly imbalanced, and "at no time did [she] have full knowledge of her legal rights." Id. Moreover, the court observed that because Gloria and Gehring believed the side letter dictated the subsequent amendment and because the side letter was entered into within 24 hours of the wedding, the subsequent amendment did not remedy the agreement's procedural unfairness. Id. at 837, 155 P.3d 171.

¶ 12 We granted review. In re Marriage of Bernard, 163 Wash.2d 1011, 180 P.3d 1290 (2008).

ANALYSIS

¶ 13 To determine the enforceability of a prenuptial agreement, this court undertakes a two-prong analysis. In re Marriage of Matson, 107 Wash.2d 479, 482-83, 730 P.2d 668 (1986); see also In re Estate of Crawford, 107 Wash.2d 493, 730 P.2d 675 (1986); In re Marriage of Hadley, 88 Wash.2d 649, 565 P.2d 790 (1977); Friedlander v. Friedlander, 80 Wash.2d 293, 494 P.2d 208 (1972); Hamlin v. Merlino, 44 Wash.2d 851, 272 P.2d 125 (1954). The burden of proof lies with the spouse seeking enforcement. Friedlander, 80 Wash.2d at 300, 494 P.2d 208.

¶ 14 Under the first prong, the court determines whether the agreement is substantively fair, specifically whether it makes reasonable provision for the spouse not seeking to enforce it. Matson, 107 Wash.2d at 482, 730 P.2d 668. If the agreement makes a fair and reasonable provision for the spouse not seeking its enforcement, the analysis ends; the agreement is enforceable. This is entirely a question of law unless there are factual disputes that must be resolved in order for a court to interpret the meaning of the contract. In re Marriage of Foran, 67 Wash.App. 242, 251 n. 7, 834 P.2d 1081 (1992).

¶ 15 If, however, the agreement is substantively unfair to the spouse not seeking enforcement, the court proceeds to the second prong. Under the second prong, the court determines whether the agreement is procedurally fair by asking two questions: (1) whether the spouses made a full disclosure of the amount, character, and value of the property involved and (2) whether the agreement was freely entered into on independent advice from counsel with full knowledge by both spouses of their rights. Matson, 107 Wash.2d at 483, 730 P.2d 668. If the court determines the second prong is satisfied, then an otherwise unfair distribution of property is valid and binding. Id. at 482, 730 P.2d 668.

¶ 16 Analysis under this second prong involves mixed issues of policy and fact, and accordingly review is de novo but undertaken in light of the trial court's resolution of the facts. See Foran, 67 Wash.App. at 251, 834 P.2d 1081. On appeal, a trial court's findings of fact will be upheld if supported by substantial evidence. Sunnyside Valley Irrigation Dist. v. Dickie, 149 Wash.2d 873, 879, 73 P.3d 369 (2003). "Substantial evidence is evidence sufficient to persuade a fair-minded person of the truth of the declared premise." In re Marriage of Hall, 103 Wash.2d 236, 246, 692 P.2d 175 (1984).

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