Vacating a property settlement agreement (MSA) in California
This blog post will briefly discuss some of the issues involved in vacating a property settlement agreement also known as a marital settlement agreement, in California. In particular, vacating a property settlement agreement based on one party having an undue influence on the other party because of undue influence such as taking advantage of another due to distress or weakness of mind.
The author worked on a case some years ago in which the wife had signed a property settlement agreement in which she agreed to accept the sum of $6,000.00 as full and complete reimbursement for her share of the community property. At the time that the wife signed the agreement she was not represented by counsel, and she did not consult with any attorney prior to signing the agreement.
Further, at the time that the wife signed the agreement, her rent was already late and she was going to be served with a 3-Day notice to pay rent or quit by her landlord. She did not have any money to pay her rent as she was not working at the time she signed the agreement.
The husband had a large amount of property, much more than the wife, and the wife may have had a community property share. And the agreement was signed before any petition for dissolution of marriage (divorce) had even been filed.
A brief discussion along with some of the statutes and cases that were used in the memorandum of points and authorities are set forth below.
The confidential relationship between spouses imposes a duty of the highest good faith and fair dealing on each spouse, and neither may take any unfair advantage of the other. See California Family Code § 721(b).
Thus the least overreaching or misrepresentation allowing one spouse to gain the property of the other is fraudulent, and will justify an action to avoid the agreement. Haseltine v. Haseltine (1962) 203 Cal. App. 2d 48, 56.
In this case, the wife signed the agreement to not go after anything of her husband’s if he gave her $6,000.00. She only signed the agreement because her rent was 3 days late and she had no money and no job and would be evicted otherwise. Clearly this was a case of not only one spouse taking unfair advantage of the other spouse, but overreaching of the highest degree as someone who is flat broke and about to be evicted is obviously under extreme stress, and therefore highly vulnerable.
And another issue is that the agreement was signed before the petition for dissolution of marriage (divorce) had even been filed. Thus no preliminary or final declarations of disclosure were completed and exchanged.
An exchange of prescribed “preliminary” disclosure declarations is mandatory and nonwaivable California Family Code § 2104; Marriage of McLaughlin (2000) 82 Cal.App. 4th 327, 335–336.
In dissolution proceedings commenced after 1992, no agreement is enforceable with respect to the parties property rights unless both spouses have executed and served on the opposition the final declaration of disclosure required by Family Code § 2105 unless both parties have signed a voluntary waiver of those requirements. California Family Code § 2106.
That fact alone requires the Court to vacate the agreement. And now we come to the issues of duress, undue influence and gross inadequacy of the consideration received.
Marital settlement agreements, insofar as they are not merged into the judgment, are voidable under general contract principles where a party lacked contractual capacity, or consented due to fraud, duress, undue influence or mistake. In re Marriage of Gonzalez (1976) 57 Cal. App. 3d 736, 743-744.
A marital settlement agreements that is not part of the judgment may be set aside if the court finds it to be inequitable, even in the absence of fraud or compulsion. Also, the courts will carefully scrutinize agreements made by a party without the advice of legal counsel. In re Marriage of Moore (1980) 113 Cal. App.3d 22, 27.
Courts are likely to carefully scrutinize marital settlement agreements affecting substantial rights and obligations when one party acted in pro per. Adams v. Adams (1947) 29 Cal. 2d 621, 628.
An agreement lacks valid consent where one party takes unfair advantage of the other party’s weakness of mind or distress. The exertion of the “undue influence” deprives the other party of the ability to exercise “free will”. California Civil Code § 1575, In re Marriage of Saslow (1985) 40 Cal. App. 3d 848, 864.
By statute, spouses stand in a confidential relationship in transactions between themselves and in that context, are subject to the general rules governing fiduciary relationships. California Family Code §§ 721(b), 1100(e).
Undue influence can be shown by the physical or mental weakness of the party claiming undue influence due to economic distress. In re Marriage of Dawley (1976) 17 Cal.3d 342, 355..
And undue influence can also be shown by gross inadequacy of the consideration received by the party claiming undue influence. In re Marriage of Baltins (1989) 212 Cal. App. 3d 66, 85.
Note that once a marital settlement agreement has been merged into a judgment that it will not be voidable under general contract principles.
It may be possible to vacate the judgment if one party did not fully comply with the California Family Code relating to declarations of disclosure. That issue will be covered in a later blog post.
Those provisions of the marital settlement agreement that are merged in the judgment become an order of the court; the “merged” agreement is superseded by the judgment and ceases to be of independent legal significance. As a result, the agreement can then be enforced only as a judgment (by contempt, execution, etc.) it is no longer enforceable by contract remedies and, unless otherwise provided by the judgment, any warranties are extinguished by the judgment. Marriage of Lynn (2002) 101 CalApp. 4th 120, 130 (citing text).