Premarital Agreement Waives Surviving Spouse Rights In California

In Estate of Eskra, a May 3, 2022 opinion, the California Appellate Court, First Appellate District, determined that a surviving spouse waived spousal rights upon the death of her husband in a premarital agreement, and that the failure to read the agreement prior to signing was not grounds for rescission.

The Facts of Estate of Eskra

Brandy and Scott married in 2015.  Scott had one daughter from a previous marriage.  The day before Brandy and Scott got married they executed a premarital agreement (Agreement).

The Premarital Agreement

In April 2015, shortly before their wedding date, Brandy learned that Scott wanted a premarital agreement. Brandy engaged the services of attorney Tracy Rain and met with her on April 24. On May 1, Brandy and Scott signed the Agreement at the office of Scott’s attorney, Laurence Ross.  Mr. Ross was present at the signing, along with a notary, but Ms. Rain was not present.

The Agreement:

expressly waives on behalf of each party, “all right, claim, or interest, … that he or she may acquire in the separate property of the other by reason of the marriage, including, without limitation: [¶] 1) Community property rights; [¶] 2) The right to a family allowance; [¶] 3) The right to a probate homestead (a homestead set apart by the court for the use of a surviving husband or wife and the minor children out of the common property or out of the real estate belonging to the deceased); [¶] 4) Right to have exempt property set aside[.]”

After Scott died in 2018, Brandy, as surviving spouse, petitioned to be appointed personal representative to administer his estate.  Scott’s ex-wife, as guardian ad litem for the minor daughter, objected, based upon the waiver of surviving spouse rights under the premarital agreement and California law.  Scott’s parents filed a competing petition for appointment as personal representative.

The Evidence

At trial, Scott’s attorney, Mr. Ross, testified Scott said he wanted a premarital agreement that would provide that his property would remain his property, in the event of either divorce or his death.

Mr. Ross prepared a draft agreement and emailed it to Brandy’s attorney, Ms. Rain. Ms. Rain testified she met with Brandy to go over the draft premarital agreement in the morning on April 24, 2015.  Ms. Rain testified Brandy had understood Scott wanted an agreement addressing what would happen if they divorced, but the inclusion of provisions relating to death “was news to her.” Brandy testified she became “really upset,” telling Ms. Rain that the agreement “wasn’t supposed to be about death” but was “only in the event of a divorce.” Ms. Rain testified she told Brandy at the end of the meeting, “I’ll seek to have the death applicable clauses redacted, and you’ll talk to your husband or your fianc[é] to confirm that that’s what both of you want.” Brandy testified that Ms. Rain told her to go home and talk to Scott and that she did not have a specific understanding about which section or sections Ms. Rain believed should be removed.

Brandy testified she talked to Scott about 45 minutes later and he said he “didn’t know anything about death” in the draft agreement. She further testified that he immediately telephoned his attorney, Mr. Ross, in her presence and that she heard Scott say, “This isn’t about death. It’s about divorce only. Take it out.”

On April 24, 2015, Ms. Rain sent an email to Mr. Ross stating, “[Brandy] believes that it is the intent of both [Scott] and herself to protect the separate property nature of their acquisitions — both before and during marriage — in the event that the marriage ends in divorce, but not in the event that the marriage ends in death.” She continued, “I believe [Brandy] intends to discuss/confirm this [with Scott] today. To that extent she is hopeful that [Scott] will agree to redact from the [draft agreement], prior to its execution,” several subsections of paragraph 5.01 waiving specified spousal property interests following death.

Mr. Ross testified that he discussed Ms. Rain’s email with Scott and that Scott confirmed he wanted the premarital agreement to apply in case of death as well as divorce.  Mr. Ross advised Scott that the deletions requested by Ms. Rain would be “inconsequential because those subsections were only examples, and the opening paragraph of 5.01 was broad and said ‘including, but not limited to.’ ” If Scott had said he did not want the premarital agreement to apply in the event of death, Mr. Ross would have done a “major rewrite.”

Ms. Rain testified she “intended to redact every clause that changed the nature of the marital property in the event of death.” She could not explain her failure to request changes to the “without limitation” wording in paragraph 5.01 and to certain other “death-related provisions.” Brandy testified she did not see Ms. Rain’s e-mails until after Scott died, and she did not know at the time of signing what Ms. Rain had said to Mr. Ross.

Brandy testified that she did not understand she should meet again with Ms. Rain and that she believed the provisions making the Agreement inapplicable in the event of death had been removed because she heard Scott tell Mr. Ross to remove them. On May 1, 2015, Brandy and Scott went to Mr. Ross’s office to sign the Agreement. Neither Brandy nor Scott reviewed the Agreement before they signed it.

The trial court also heard testimony that Scott intended his property to go to his daughter in the event of his death.

The California Probate Court’s Decision

The California probate court found the doctrine of mutual mistake did not apply because “Scott was not mistaken when he signed the” Agreement. The court relied on Mr. Ross’s testimony that the Agreement reflected Scott’s intentions and the testimony of other witnesses that Scott wanted his estate to go solely to his daughter.

As to unilateral mistake, the trial court found that Brandy and Ms. Rain’s testimony “established that Brandy did not want the [Agreement] to apply in the event of Scott’s death.” The court also acknowledged “there was evidence that Scott knew that Brandy did not want the [Agreement] to apply in the event of his death, and that she thought that the revised [Agreement] applied only in the event of divorce.” The court found, based on Mr. Ross’s testimony, that “Scott knew that the [A]greement did apply in the event of divorce or death.” But the court held Brandy’s unilateral mistake did not justify rescission of the Agreement because “there was insufficient evidence that Scott encouraged or fostered Brandy’s mistaken belief.” Further, the court determined Brandy “bears the risk of her mistake” because she did not act “with reasonable care” when she failed to read the Agreement or consult with her attorney after it was revised.

The court denied Brandy’s petition for appointment as personal representative of Scott’s estate and granted respondents’ petition for appointment.

When Can a Premarital Agreement Be Rescinded Under California Law?

The ability to rescind a premarital agreement by a surviving spouse under California law can often turn (as in this case) on whether there was a mistake of fact or a mistake of law, and whether the mistake was mutual or unilateral.

Section 1577 of the California Civil Code provides:

Mistake of fact is a mistake, not caused by the neglect of a legal duty on the part of the person making the mistake, and consisting in: 1. An unconscious ignorance or forgetfulness of a fact past or present, material to the contract; or, 2. Belief in the present existence of a thing material to the contract, which does not exist, or in the past existence of such a thing, which has not existed.

Section 1578 provides:

Mistake of law constitutes a mistake, within the meaning of this Article, only when it arises from: 1. A misapprehension of the law by all parties, all supposing that they knew and understood it, and all making substantially the same mistake as to the law; or, 2. A misapprehension of the law by one party, of which the others are aware at the time of contracting, but which they do not rectify.

In the present case, Brandy claims she was mistaken as to the content of the Agreement, because she believed it had been amended to remove all provisions making it applicable in the event of death. Thus, Brandy testified she did not read the Agreement before signing it because she “had heard [Scott] tell [Mr.] Ross to remove death, and I was fine with that. And that’s what I thought had been done.”

Brandy’s mistake claim is that she did not “know[] the facts as they really [we]re,” not that she had a “mistaken belief as to the legal consequences of” the real facts.

The California Court concluded that Brandy’s beliefs that Ms. Rain requested appropriate changes, that Scott shared her intent and asked Mr. Ross to amend the Agreement accordingly, and that the premarital agreement had been amended to make it inapplicable in the event of surviving spouse rights at death were all interconnected mistakes of fact.

When Does a Mistake Of Fact Support Rescission?

The California appellate court discussed the California Supreme Court case of Donovan v. RRL Corp at length in determining whether the premarital agreement and its provisions waiving surviving spouse rights upon death could be rescinded:

The Donovan court held rescission of the contract was warranted and concluded the court of appeal erred “to the extent it suggested that a unilateral mistake of fact affords a ground for rescission only where the other party is aware of the mistake.” (Donovan, supra, 26 Cal.4th at p. 279.) The California Supreme Court “adopt[ed]” “as California law” “the rule in section 153, subdivision (a), of the Restatement [], authorizing rescission for unilateral mistake of fact where enforcement would be unconscionable.” (Id. at p. 281.)

Section 153 of the Restatement states, “Where a mistake of one party at the time a contract was made as to a basic assumption on which [the party] made the contract has a material effect on the agreed exchange of performances that is adverse to [the party], the contract is voidable by [the party] if [it] does not bear the risk of the mistake under the rule stated in § 154, and [¶] (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or [¶] (b) the other party had reason to know of the mistake or [the other party’s] fault caused the mistake.” (Rest.2d Contracts, § 153.)

Donovan summarized the rule as follows: “Where the plaintiff has no reason to know of and does not cause the defendant’s unilateral mistake of fact, the defendant must establish the following facts to obtain rescission of the contract: (1) the defendant made a mistake regarding a basic assumption upon which the defendant made the contract; (2) the mistake has a material effect upon the agreed exchange of performances that is adverse to the defendant; (3) the defendant does not bear the risk of the mistake; and (4) the effect of the mistake is such that enforcement of the contract would be unconscionable.” (Donovan, supra, 26 Cal.4th at p. 282.)

The Surviving Spouse Bore The Risk of Her Mistake And the Premarital Agreement Could Not Be Rescinded Under California Law

The critical question in the present case was whether the surviving spouse’s failure to read the Agreement and meet with Ms. Rain regarding the changes to the premarital agreement constituted neglect of a legal duty within the meaning of California law.  The California appellate court said no:

The California Supreme Court has previously addressed whether the failure to read a contract constitutes such neglect. In Casey, supra, 59 Cal.2d 97, a plaintiff sued for personal injuries allegedly sustained in a car accident. The defendant argued the action was barred because the plaintiff had signed a release (negotiated by the plaintiff’s insurer) discharging the defendant from all liability. (Id. at pp. 99–100.) The plaintiff claimed that he “mistakenly believed that the release related only to property damage claims” and that the release should be reformed or rescinded. (Id. at p. 102.) The Supreme Court stated the “question” before it was “whether plaintiff’s failure to read the release, or, if he did read it, his failure to understand that it extended also to claims for personal injuries was, as a matter of law, the neglect of a legal duty (see [] § 1577).” (Casey, at p. 104.) The court observed “there is nothing in the record to indicate that at the time he signed the release [the plaintiff] was suffering from any disability which would prevent him from giving it his full attention or which would prevent him from exercising his independent judgment.” (Id. at p. 104.) The court concluded, “Under these circumstances, the failure of plaintiff to recognize that the release included a discharge of liability for personal injuries has been held to be attributable to his own neglect, both under California authority [citations] and in the vast majority of other jurisdictions. [Citations.] It must be concluded, therefore, that plaintiff’s mistaken belief that the release related only to claims for property damage does not entitle him to rescind the release under the circumstances of this case.” (Casey, at pp. 104–105.)

Here, under Donovan, Brandy’s request for rescission fails if she bore the risk of her mistake, and Brandy’s failure to read the Agreement and consult with Ms. Rain means that she did bear the risk of her mistake:

As the trial court observed, in addition to failing to read the Agreement, Brandy “had access to and was advised by independent counsel, she (or her attorney) had the revised agreement nearly one week before signing it, and there was nothing preventing Brandy from reading it at Mr. Ross’s office prior to signing it.” Further, Ms. Rain testified she expected that she and Brandy would review the Agreement as revised at a “follow-up” meeting on May 1. Brandy’s failures are made more profound by her awareness that the initial draft contained provisions that surprised and deeply disturbed her. That should have led her to exercise additional caution to ensure the final version was in accordance with her intent. Brandy bore the risk of her mistake; her error regarding the contents of the Agreement was not due to “ ‘excusable neglect.’ ”

The impact of a premarital agreement on a California surviving spouse is a critical consideration not to be overlooked.  Here, the premarital agreement clearly waived surviving spouse rights under California law, and the failure of the surviving spouse to read the agreement was no excuse.

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To read more about the impact of premarital agreements in other states, click here, here, here, and here.

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