Case Name: In the Matter of the Marriage of James T. Matson, Petitioner, and Judith A. Matson, Respondent
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1986-12-31
Citations: 107 Wash. 2d 479
Docket Number: No. 52049-6
Parties: In the Matter of the Marriage of James T. Matson, Petitioner, and Judith A. Matson, Respondent.
Judges: Utter, Callow, and Durham, JJ., and Cunningham and Horowitz, JJ. Pro Tern., concur.
Reporter: Washington Reports
Volume: 107
Pages: 479–492

Head Matter:
[No. 52049-6.
En Banc.
December 31, 1986.]
In the Matter of the Marriage of James T. Matson, Petitioner, and Judith A. Matson, Respondent.
Donald H. Bond (of Halverson & Applegate, P.S.), for petitioner.
Ronald F. Whitaker (of Walters, Whitaker, Finney & Falk), for respondent.

Opinion:
Dolliver, C.J.
Petitioner James Matson challenges a Court of Appeals decision voiding his prenuptial agreement with respondent Judith Matson. We affirm the Court of Appeals and remand the case for further proceedings.
Judith Matson worked for James Matson as a secretary during the 1969 legislative session when he was a member of the Washington State Senate. Judith subsequently moved to Yakima and filed for divorce from her husband in July 1969. James recommended Judith use his personal attorney as her attorney for the divorce. This attorney was also petitioner's business attorney and friend.
In the early part of 1970, James and Judith became engaged to marry. During this same period, around February, James began discussing his desire for a prenuptial agreement with Judith. He told her he wanted to protect the interest of his three sons from his previous marriage in his estate. James' specific intent of making certain everything obtained in the future would be separate and go to his sons was not relayed to respondent.
In early March 1970, James asked his attorney to prepare a prenuptial agreement for the upcoming marriage. The attorney testified he was representing James in this transaction. Shortly after, in the week before their marriage, the couple met with the attorney on two occasions to discuss prenuptial agreements. The first meeting on March 17, 1970 (4 days before the wedding) was to discuss the nature of the prenuptial agreement, the need for it, the effect of it, and the property involved. The attorney and the couple reviewed, paragraph by paragraph, a sample prenuptial agreement.
On the eve of the wedding, the couple met again to execute the prenuptial agreement. The attorney had drafted a prenuptial agreement which provided all income and earnings derived from petitioner's separate property would remain separate, as would any increases in value to that property. At this time, the couple was given separate copies of the agreement to read through before meeting with the attorney. The attorney did not advise Judith to seek independent counsel but did say to both parties, if "[y]ou want somebody else to look at this, fine." In addition, paragraph 15 of the agreement stated (just above the couple's signatures):
This agreement is being signed only after having been read completely by each party, and after each has had an opportunity to seek advice and counsel of his or her own choosing.
After being advised of the nature and value of the other's property, both parties signed the prenuptial agreement. Judith did not receive a copy of the agreement. James testified that if Judith had objected to signing the agreement on the eve of the wedding it would have been delayed until an unobjectionable agreement could have been prepared. The couple was married the next day on March 21, 1970.
At the time of the agreement, James owned one-half of the shares of stock in the Matson Fruit Company and real estate in Yakima County consisting of approximately 44 acres (part in orchard). This property was worth about $330,000. Petitioner's net worth, as of the trial date, was approximately $830,000. Judith, on the other hand, owned only her personal effects.
In June 1983, James Matson petitioned for dissolution of the couple's marriage. He requested the court divide their property in accordance with the prenuptial agreement. Judith Matson then challenged the validity of that agreement.
Following a hearing limited to this issue, the trial court upheld the validity of the prenuptial agreement even though it found the agreement "grossly disproportionate in favor of the petitioner ." The Court of Appeals reversed, holding the agreement void. The key issue before us is whether either court applied the appropriate legal standard regarding prenuptial agreements.
A prenuptial agreement, created freely and intelligently, is regarded as "conducive to marital tranquility and the avoidance of disputes about property in the future." Friedlander v. Friedlander, 80 Wn.2d 293, 301, 494 P.2d 208 (1972). Although prenuptial agreements are not directly authorized by statute, we have long recognized the right of the members of a prospective marital community to contract between themselves regarding their property. Washington State Bar Ass'n, Community Property Deskbook § 18.1 (1977); Comment, Antenuptial and Postnuptial Contracts in Washington, 54 Wash. L. Rev. 135, 137-38 (1978). If fair and fairly made, we have held prenuptial agreements between competent parties to be valid and binding. Whitney v. Seattle-First Nat'l Bank, 90 Wn.2d 105, 579 P.2d 937 (1978); Hamlin v. Merlino, 44 Wn.2d 851, 272 P.2d 125 (1954).
Preliminarily we observe that if a prenuptial agreement merely operated to direct that the separate property of each party was to remain the separate property of each party, RCW 26.09.080, which deals with disposition of property and liabilities, would control and all property (separate and community) would be before the court for a just and equitable distribution. However, if, as here, the prenuptial agreement operates to waive the marital partners' statutory right to an equitable distribution, a different analysis will take place. A prenuptial agreement of this kind must be achieved only without the attendant dangers of abuse and overreaching by the dominant party. Friedlander, at 301.
During the past 30 years, we have developed a 2-pronged analysis for evaluating the validity of a prenuptial agreement. First, the court must decide whether the agreement provides a fair and reasonable provision for the party not seeking enforcement of the agreement. If the court makes this finding, then the analysis ends and the agreement may be validated. This was the situation in Whitney. Because the agreement was fair and reasonable and because the challenging party had not shown fraud or overreaching, there was no need to advance to the second prong of the analysis. Whitney v. Seattle-First Nat'l Bank, supra at 111.
The second prong of this analysis involves two tests derived from our past cases. Whitney, at 110. See In re Marriage of Hadley, 88 Wn.2d 649, 565 P.2d 790 (1977); Friedlander v. Friedlander, supra; Hamlin v. Merlino, supra. The two tests are:
(1) whether full disclosure has been made by [the parties] 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 [both spouses of their] rights. . . .
Whitney, at 110 (quoting Hadley, at 654).
Although the earlier cases of Friedlander and Hamlin appeared to require each party be represented by independent counsel, we indicated in Whitney that the actual standard should be applied on a case-by-case basis.
A clear and important distinction certainly exists between saying that in particular circumstances a transaction could not be supported in the absence of independent advice, and saying that a general rule of equity exists which makes independent advice indispensable to the validity of transactions between persons occupying a fiduciary relationship.
Where it is plainly shown that a transaction was fair and free from objectionable influence, and especially where the person supposed to have been at a disadvantage is shown to have been of strong and independent mind and in a position to form an intelligent judgment, a requirement that in addition he must have had independent advice "would seem to be arbitrary and unnecessary."
Whitney, at 109 (quoting Annot., Independent Advice as Essential to Validity of Transaction Between Persons Occupying a Confidential or Fiduciary Relationship, 123 A.L.R. 1505, 1512-13 (1939)).
We further observed:
"Parties to a [prenuptial] agreement do not deal at arm's length with each other. Their relationship is one of mutual trust and confidence. They must exercise the highest degree of good faith, candor and sincerity in all matters bearing on the proposed agreement."
Whitney, at 108 (quoting Hamlin, at 864).
The demise of the rule in this state that the husband was deemed to be the sole manager of all community property in favor of the "equal manager" concept (see RCW 26.16-.030) has not resulted, however, in the demise of a fiduciary duty. Rather, the duty has become gender neutral. Cf. RCW 26.16.210. To uphold the validity of a prenuptial agreement under Washington law still requires full disclosure by both parties of all aspects of each party's assets, with the agreement entered into fully and voluntarily on independent advice and with full knowledge by each spouse of the individual rights of each party. Whitney, at 110.
In the second prong of the prenuptial agreement test, the circumstances or procedure surrounding the execution of the agreement are the crucial factors. The bargaining positions of the parties, sophistication of the parties, presence of independent advice, understanding of the legal consequences and rights, and timing of the agreement juxtaposed with the wedding date are some of the factors involved in the circumstances surrounding the document signing. Thus, even though our state laws have, in theory, reached equality of the sexes (see, e.g., Const. art. 31 (Equal Rights Amendment) and RCW Title 26 (domestic relations)), the status of the relationship between the two parties entering into the agreement requires a procedural fairness necessary to allow both parties the knowledge and sufficient opportunity to act voluntarily and intelligently. The circumstances involved in each case become crucial.
An example of a court applying a procedural fairness test on a case-by-case basis is found in In re Marriage of Knoll, 65 Or. App. 484, 671 P.2d 718 (1983). In Knoll, the wife challenged the validity of the prenuptial agreement. The court found the agreement valid judged in light of the circumstances in the case and the wife's range of experience. Important facts in the court's decision were: (1) the wife was advised of the necessity of a prenuptial agreement at least 9 months before the wedding and knew and understood the purpose of the agreement; (2) she had been given a copy of the agreement at least 7 months before the wedding; (3) she was advised on numerous occasions by her husband's attorney to seek independent counsel; (4) she had an excellent understanding of her husband's assets because she handled the bookkeeping and payroll for her husband's businesses and was in charge of 10 of his business checking accounts; and (5) both parties had to reaffirm and sign the agreement 3 years later because they had lost the original document. The court decided that the failure to provide the wife with a detailed explanation of the agreement and her failure to follow advice and seek out independent counsel was offset by her knowledge and the procedural fairness provided her.
The court in Knoll found the wife's advance knowledge of the agreement, subsequent advice to seek independent counsel, and her extensive understanding of her husband's assets put her in a fair position to sign the agreement freely and intelligently. The determination of the fairness of a prenuptial agreement depends on the specific circumstances and the independent knowledge of the challenging spouse. Thus, all circumstances leading to the execution of the agreement should be within the court's review in evaluating the procedural fairness of the agreement.
The Court of Appeals stated the beneficial aspects of a prenuptial agreement must be obtained without abuse, and in particular, without any overreaching on the part of the spouse initiating the agreement. In re Marriage of Matson, 41 Wn. App. 660, 663, 705 P.2d 817 (1985). This is consistent with the legal standard in this state. The court held the agreement void for several reasons (all involving the circumstances leading up to the execution of the agreement): (1) the reasonable expectation on Judith's part that her husband's attorney would protect her interests; (2) the attorney never advised Judith that the practical effect of the agreement was to eliminate any accumulation of com munity property; (3) the disparity between the parties in business experience and assets mandated a more vigorous urging by the attorney that Judith seek independent advice; and (4) the timing of the agreement negated any inclination respondent may have had to secure independent advice. In re Marriage of Matson, at 666-68. The court concluded that when an agreement, as here, attempts to eliminate, totally, community property rights, the court must zealously and scrupulously examine it for fairness. We agree.
The trial court concluded Judith signed the prenuptial agreement voluntarily because she had been informed of her opportunity to independent advice of counsel. It also apparently considered the fact that she had previously worked as a secretary in a Yakima law firm and had more access to counsel than someone without that experience.
Although the trial court found the respondent had been specifically informed and advised of her right to seek independent counsel and this finding is undisputed, we concur with the Court of Appeals and find the circumstances surrounding her signing of the agreement did not afford her with sufficient opportunity to sign, intelligently and voluntarily, the agreement.
As the trial court found, the prenuptial agreement was grossly disproportionate in favor of petitioner. In fact, after over 13 years of marriage, the agreement would serve to deny respondent any of her common law and statutory rights for a just and equitable distribution of property. Specifically, the agreement allowed James to devote substantial portions of his time to the management and reinvestment of his separate property, while all appreciation in value, all income, and all earnings of his separate property remained his separate property throughout. Paragraph 14 of the prenuptial agreement then acted to bar Judith from making any claim against or seeking any rights in James' separate property.
The time between the presentation and signing of the agreement with the actual wedding date was extremely short. The first meeting to review a sample agreement was on March 17, 1970, and the signing of the final agreement was on the evening of March 20, 1970 (the night before the wedding). Judith did not receive a copy of the agreement. James testified the wedding would have been delayed until an unobjectionable agreement could have been drawn up. Under those circumstances, although Judith had been advised of her right to counsel, she had no reasonable opportunity to seek independent counsel for advice as to the legal consequences of the agreement.
In viewing the circumstances surrounding execution of this agreement, we find Judith did not have an opportunity, freely and intelligently, to waive her rights to a just and equitable division of property. The circumstances here were dramatically unlike those in the In re Marriage of Knoll, 65 Or. App. 484, 671 P.2d 718 (1983) case where the spouse had plenty of time to seek advice, numerous specific suggestions to seek independent advice over this period, and a strong understanding of the businesses and assets involved. Here, Judith had an extremely short period of time in which to consider the prenuptial agreement; she received no specific verbal encouragement to seek independent advice; and from the record it is not apparent she had even a minimal understanding of the legal consequences of the rights she was signing away.
Unlike the spouse in In re Marriage of Hadley, 88 Wn.2d 649, 565 P.2d 790 (1977), who had time to seek independent advice and did so but failed to follow through with the necessary additional information, Judith's time to seek advice was limited in time as well as by the prospect of a delayed wedding. Also unlike the attorney in Hadley, James' attorney was not the "family" attorney and represented only the petitioner.
Unlike the spouse in In re Marriage of Cohn, 18 Wn. App. 502, 569 P.2d 79 (1977), Judith did not have her own attorney draw up the agreement and did not receive half the equity in the family home and half of the community property. Unlike the spouse in Whitney v. Seattle-First Nat'l Bank, 90 Wn.2d 105, 579 P.2d 937 (1978), Judith's agreement was found to be grossly disproportionate instead of fair.
We still strongly urge both parties to seek advice from independent counsel before signing a premarital agreement. This would provide the best opportunity for both sides to receive objective and independent information regarding the legal consequences of the agreement. Because of the close and confidential nature of the relationship of a soon to be married couple, we will continue to insist, however, that each party enter into a premarital agreement intelligently and voluntarily before we will bind the parties to an agreement by which one party forgoes its statutory and common law rights.
In light of the circumstances in the present case, we find respondent Judith Matson did not intelligently and voluntarily sign the prenuptial agreement. Because of this, we affirm the Court of Appeals decision and remand this case to the trial court for further proceedings.
Utter, Callow, and Durham, JJ., and Cunningham and Horowitz, JJ. Pro Tern., concur.