In Re The Marriage Of: Barbara G. Kaye, Res. And Karl H. Kaye, Jr., App.

Court of Appeals of Washington·Decided October 6, 2014·No. 71017-6·Unpublished

Opinion

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

In re the Matter of the Marriage of NO. 71017-6-1 sr ©

a

—t

BARBARA G. KAYE, DIVISION ONE

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en

Respondent,

and

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KARL H. KAYE, JR., UNPUBLISHED OPINION ©

Appellant. FILED: October 6, 2014

Lau, J. — This case involves a marital dissolution action involving Karl and Barbara Kaye.1 After a bench trial, the court invalidated the parties' prenuptial agreement on grounds of substantive and procedural unfairness, determined the marriage was defunct when Barbara moved out of the home, and ordered Barbara to pay three months of spousal maintenance. Karl appeals, arguing the prenuptial agreement's validity, the marriage's defunct date based on service of process date, and insufficient evidence for the maintenance award. Because the trial court properly concluded both substantive and procedural unfairness renders the agreement invalid,

We refer to the parties by their first names to avoid confusion.

we affirm that determination. But because the court misapplied the legal standard for determining the date the marriage was defunct, we reverse the court's property distribution and maintenance award and remand for further proceedings on the existing factual record and consistent with this opinion. We affirm the decree of dissolution in part and reverse and remand in part.

FACTS

The main facts are undisputed. Karl and Barbara Kaye married on July 12, 1984.

Before the wedding, Karl presented Barbara with a prenuptial agreement. Barbara and Karl signed the prenuptial agreement two days before the wedding.

At the time of the agreement, Barbara disclosed a savings account, stock shares, real estate, and other personal property totaling approximately $111,900. She also earned $25,000 per year working for a local bank. Karl disclosed substantial assets primarily comprised of stocks and bonds and two waterfront Bainbridge Island rental properties. Karl's stocks and real estate assets, combined with life insurance policies and other personal property, totaled over $1 million. Karl has been unemployed since 1979. There was no expectation that he would look for work at the time he and Barbara married.

The prenuptial agreement mainly protected the parties' separate property even if it increased in value during the marriage or became commingled with community assets. For instance, paragraph 6 of the agreement provides:

The assets presently owned by the parties . . . shall be and remain the separate property of each of the respective parties .... In addition thereto, any addition or enhancement in the value of the separate property of either party shall remain the separate property of each of the parties. Any additions to or enhancement in the value of separate property of either part which occurs due to major structural

improvements to said property shall be and remain the separate property of the party owning such separate property. In addition, any enhancement in the value of separate property . . . and the proceeds therefrom due to mere appreciation shall be and hereby remains the separate property of the party owning such separate property which has appreciated. In the event any community funds are utilized for the direct benefit of any separate property of either party, such community funds so utilized shall be deemed a gift of community property to the party owning the separate property benefited by such community funds.

Paragraph 6 also states, "[A]ssets acquired through the proceeds of loans secured by separate property shall be the separate property of the party whose property secured or was collateral for the loan." The clause meant that if the community received a loan, the party owning the property that secured the loan controlled the proceeds, but the community was liable for the debt.

The agreement also ensured that any proceeds derived from separate property would remain separate, while proceeds from wages or salaries became community property. Paragraph 7 states, "[A]ssets acquired during [the] marriage which are the proceeds of separate property shall retain the separate ownership and character of the assets from which said proceeds were originally derived." However, "any wages, salaries or other employment benefits attributable to the labor of either of them during such time that they shall be living together. .. shall be deemed community property."

Finally, the agreement waived the parties' rights to certain claims upon marriage dissolution or death of either party. Paragraph 8 provides:

[l]n the event of a dissolution of their marriage . . . each of them expressly waives any right or interest that he or she may have or subsequently acquire in the separate property of the other. In addition, ifthe separate property contains any community property investment or lien therein which is to be divided by reason of marriage dissolution, such separate property shall nevertheless be awarded to the party who owned said property as his or her own separate property notwithstanding any community investment therein.

Paragraph 9 contains similar provisions in the event that one of the parties died:

Upon the death of either party, it is hereby contemplated and agreed by them that neither of them will claim any interest in the separate properties as defined herein of the other.... In addition, if any separate property of the deceased party contains any community investment, over which the surviving party would have the power to will one-half thereof, it is hereby expressly agreed between the parties that said separate property shall be awarded to the deceased party's heirs at law, or by will, whichever is applicable notwithstanding said community investment.... The parties also expressly waive any right he or she may have to claim a homestead and/or family allowance out of the separate real property of the other party, notwithstanding a potential community investment therein.

These clauses eliminate either party's potential claims to the other's separate property in the event of dissolution or death even if they invested community assets in that separate property.

The parties' trial testimony indicates that neither party fully understood the

agreement's consequences when they signed it. For instance, when Karl was asked whether he was aware that paragraph 6 of the agreement meant that any community

funds spent on his separate property was deemed a gift to him, Karl responded, "I am now, yes." Report of Proceedings (July 8, 2013) (RP) at 188. Later, counsel asked Karl whether he understood that if the community received a loan secured by his separate

property that the loan proceeds were also a gift to him:

Q. Well, it's in the prenuptial agreement that your attorney wrote. And you didn't understand it?

A. If I—the way you're interpreting it I guess I didn't.

RP at 193-94. Karl also expressed confusion about other portions of the agreement:

Q. At the time you never thought about whether it was fair or not?

A

I didn't know anything about details as far as these paragraphs go. I had nothing to do with drafting the logic of it. Ididn't know the logic of it. I've never seen a prenuptial agreement in my life up to that point....

I didn't know anything special about these gifts and other things. I didn't know that concept. I didn't—it wasn't part of my thinking.

Q. Ifyou'll look at paragraph 9 of the agreement, sir, were you aware that that paragraph was in there and what it meant?

A. I—I probably wasn't—yeah. When I signed this I read this thing too, you know, just like Barb did, so I was aware of it at that point in time.

Q. Did you know what it meant?

A. I don't know what it means now.

RP at 201-03.

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In Re The Marriage Of: Barbara G. Kaye, Res. And Karl H. Kaye, Jr., App., (Wash. Ct. App. 2014).

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