PDDs must be served after or concurrently with service of disso petition . . .
In affirmance, Fifth District holds that property agreement executed before the disso petition was filed is enforceable even though parties had not exchanged PDDs and made agreement in contemplation of disso
In re Marriage of Evans
(August 29, 2014)
California Court of Appeal 5 Civil F068323 __ Cal.App.4 th __, __ Cal.Rptr.3d __, 2014 FA 1656, per Franson, J (Cornell, Acting PJ and Chittick, J, concurring). Kern County: Schuett, J, affirmed. For appellant: Edward Quirk, CFLS, (661) 321-3200. For respondent: Richard Fanning, (805) 543-3426. CFLP §§J.22.214.171.124.1, J.126.96.36.199.
Joy and William Evans were married in July 1985 and separated in March 2007. In May 2007, they signed a written agreement entitled “ ‘PRE-DIVORCE AGREEMENT,’ ” which provided that William would buy out Joy’s interest in their family home. The couple assumed that the residence, which was their most valuable asset, had a net equity of $600,000; thus, William was to pay Joy $300,000. The agreement also stated that William’s final payment would “ ‘BE DETERMINED AT THE TIME OF THE FINAL DIVORCE AGREEMENT’ ” and that the disposition of their other community assets would “ ‘BE SET FORTH IN THE FINAL DIVORCE AGREEMENT.’ ” Neither party served the other with a preliminary disclosure declaration (PDD) before signing the agreement. After signing, William paid Joy $197,000, leaving $103,000 to be paid later.
Joy filed for divorce in February 2009. She and William served PDDs on each other in early 2010. By the time that the disso trial took place, the fair market value of their former family home was $420,000. The house was secured by a first deed of trust with an unpaid balance of $350,000, and the equity in the place was about $70,000, far less than the $103,000 William was to pay Joy. William moved to set aside the pre-disso property agreement, claiming that it was unenforceable because he and Joy had not exchanged PDDs before they signed it. The trial court bifurcated the motion, received declarations from the parties, and considered written argument. In a tentative decision issued in September 2012, the trial court determined that the failure to exchange PDDs was irrelevant to the enforceability of the agreement and that the agreement was enforceable. The court ordered that the terms of the agreement would be incorporated into the disso judgment dividing the parties’ community property. In October 2012, the trial court issued its order and agreed statement of facts. The following month, William filed a motion to appeal the bifurcated issue and the Fifth District granted that motion.
Acting on William’s appeal, the Fifth District affirmed.
Nice try, but . . .
William renewed his contention that the parties’ failure to exchange PDDs before they signed the pre-disso settlement agreement in contemplation of divorce made the agreement unenforceable. The justices pointed out that per Fam C §2104, PDDs must be served “ ‘[a]fter or concurrently with service of the [disso] petition.’ ” Moreover, they did not believe that the statute was ambiguous. The panel recognized that the disclosure requirements are intended to promote the public policy of ensuring that all of the community assets and liabilities are known before property division and support orders are issued and that the division and orders are fair and adequate. However, the justices continued, the plain language of Fam C §2104 states that the exchange of PDDs is required only when the disso proceeding has actually commenced. Therefore, they concluded, spouses who enter into a pre-disso agreement without exchanging PDDs do not violate Fam C §2104 or make its provisions unenforceable. The panel was similarly unconvinced that the parties were required to serve FDDs before a pre-disso agreement was signed. They reasoned that the Legislature called the documents preliminary and final in order to designate the order in which they were required to be served. Thus, logic would dictate that service of an FDD was supposed to take place after the service of the PDD. Since they had already determined that an FDD was required to be served only after the disso commenced, the justices found that the PDD need not be served before a pre-disso agreement is signed.
No help from Burkle II . . .
William also maintained that disclosure requirements should be mandated by the intent of the parties, not just the timing of the declaration and that his interpretation of the requirements was supported by the court in In re Marriage of Burkle (Burkle II) (2006) 139 Cal. App.4 th 712, 43 Cal.Rptr.3d 181, 2006 CFLR 10305, 2006 FA 1243 [disclosure requirements apply only to agreements executed incident to disso]. The justices, however, interpreted Burkle II a little differently. They pointed out that the agreement in that case was executed incident to an attempted reconciliation, not to a disso. Moreover, they believed that the court in Burkle II had found that the disclosure requirements did not apply when a disso petition was not pending. The panel stated that they read Burkle II as setting up two conditions to be met before the PDD and FDD disclosure provisions apply: (1) the spouses must be parties to a disso; and (2) they must have negotiated and signed their settlement agreement in contemplation of a disso judgment. In line with that thinking, the panel concluded that the Legislature intended the disclosure requirements to apply where service of a disso petition has occurred and the parties executed their agreement in contemplation of a judgment dissolving their marriage. Summing up, the justices held that the disclosure requirements do not apply to pre-petition agreements. Finding no merit in William’s other contentions, the panel affirmed the judgment.
As the justices point out, this is a case of first impression as to the issue presented regarding PDDs. The opinion is well reasoned, clearly explained, and thorough in its analysis. In addition, it clarifies, somewhat, the distinguishing factors between this case and Burkle , although at times, the justices really seem to be reaching to make the distinctions that they do. Nonetheless, this is a nice little case to keep in mind the next time PDDs and/or FDDs are an issue in your case.