5.3 Counsel, Enforcement, and Waivers

• Library: Negotiating and Drafting Marital Agreements (Virginia CLE) (2019 Ed.)

5.3 COUNSEL, ENFORCEMENT, AND WAIVERS

5.301 Representation by Counsel. ⁴³

A. In General. Parties who are separated typically have no fiduciary relationship with the other party when negotiating a separation agreement, and an agreement will not be invalidated simply because one

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party who has the opportunity to obtain counsel chooses not to do so. ⁴⁴ The fact that one party was not represented by counsel, however, is an important factor that the court will consider when deciding whether or not an agreement should be set aside as unconscionable. ⁴⁵ If one party does not have counsel, especially if he or she has no professional background, it is advisable to include a statement that the pro se party had the opportunity to obtain counsel, was advised to do so, and expressly waived that opportunity. ⁴⁶

B. One Lawyer for Both Sides. One sure way to have an agreement overturned is to represent both parties. An attorney should never represent both parties in an agreement.

5.302 Validity of Agreement. ⁴⁷

A. In General. An agreement must be just, reasonable, and fair. ⁴⁸ A court of equity will therefore carefully scrutinize all transactions between spouses so that neither spouse can take unconscionable advantage of the other through concealment, fraud, or intimidation. ⁴⁹ If the property settlement agreement appears valid on its face and its validity is not challenged by the parties, section 20-109.1 does not require the court to conduct a separate inquiry into its validity. ⁵⁰

B. Voluntary Execution. For the contract to be valid, the parties must enter into it voluntarily. A party signing an agreement under duress has the burden to prove that the duress was exercised "by him who claims the benefit of the contract, or by someone acting in his behalf or with his knowledge." ⁵¹ If the disposition of the property is unequal, the contract should acknowledge the disparity but assert that it is not a gross disparity and that the parties agree to be bound by the agreement despite any perceived

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inequality. To diminish the appearance of coercion, it may be helpful to describe any valuable nonmaterial consideration that will be exchanged.

C. Disclosure of Finances. Most cases involving allegations of fraud in the inducement of an agreement relate to full disclosure of financial resources. One of the few Virginia cases on the subject is Drewry v. Drewry, ⁵² which addressed an inadequate showing of failure to disclose, among other issues.

D. Relationship Between Spouses. In Barnes v. Barnes, ⁵³ the Virginia Supreme Court held that when separated spouses employ attorneys to negotiate a property settlement agreement, they become adversaries and their former fiduciary or confidential relationship ends. In this posture, neither has a duty to disclose and each is responsible for discovering relevant facts. Thus, in Barnes, failure to disclose adultery did not entitle an opposing spouse to rescind the agreement where the parties were adversaries and dealing at arm's length.

A special relationship can exist between a husband and a wife that may create more dependency and room for overreaching than the law infers from the husband-wife relationship generally. Such a relationship was found in Webb v. Webb. ⁵⁴ The facts relied on by the Virginia Court of Appeals in Webb were:

		1.	The parties were still living together in the same house and sleeping in the same room during negotiations;
2.	The husband was an attorney and the agreement was signed in his office a few days after he left the marital home;
3.	The husband handled all major financial transactions during the marriage;
4.	The wife relied on the husband to do the right thing with regard to the disposition of their property;
5.	The husband drafted the agreement;

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		6.	The husband gave the wife legal advice on other aspects of their divorce as well as property matters; and
7.	The husband discouraged the wife from seeking legal counsel.

The court concluded that the husband's position as attorney and advisor placed him in a "special relationship" with his wife. He had an affirmative duty to make full disclosure and to inform her of her rights under section 20-107.3 of the Virginia Code.

E. Constructive Fraud. "Constructive fraud" is the breach of a legal or equitable duty that, irrespective of moral guilt, is declared by law to be fraudulent because it tends to deceive others or violate confidences. It is generally determined by reviewing the conduct of the parties in relation to their legal and equitable duties to one another. It must be established by "clear, cogent, and convincing evidence." ⁵⁵ To establish constructive fraud, one must prove that (i) there was a material false representation, (ii) the hearer believed it to be true, (iii) it was meant to be acted on, (iv) it was acted on, and (v) damage was sustained.

F. Unconscionability. "Unconscionability" is concerned with the intrinsic fairness of the terms of the agreement. While no fiduciary duty exists between a separated husband and wife who have employed attorneys to negotiate an agreement in settlement of their property rights, marriage and divorce create a relationship that is particularly susceptible to overreaching and oppression. Where the disparity in the value of the property disbursed under the separation agreement is gross and shocking, the court may find an unconscionable agreement. ⁵⁶ Generally, the questions to be addressed are:

		1.	Was the challenging party represented by counsel?
2.	What were the facts and circumstances surrounding the negotiations and execution?

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		3.	What was the mental condition of the challenging party?
4.	What percentage of the marital estate did the challenging party receive?
5.	Did the challenging party waive spousal support?

Nevertheless, a court will not invalidate a separation agreement merely because it is ill-reasoned or ill-advised, ⁵⁷ and the Virginia Court of Appeals has considerably refined the law of separation agreement set-aside in the years since Drewry and Derby. ⁵⁸ But the whole law of separation agreement set-aside still continues to fall between the opposite poles of these two apparently contradictory cases. The burden is on the party contesting the agreement to prove by clear and convincing evidence that the grounds exist to void or rescind it. ⁵⁹

In O'Bryan v. O'Bryan, ⁶⁰ the Virginia Court of Appeals reversed a circuit court decision incorporating a property settlement agreement into a final decree of divorce. The Court of Appeals held that marital agreements demand enhanced scrutiny for intrinsic fairness and determined that the agreement was unconscionable. The evidence established a gross disparity in the value of property exchanged between the parties, and the husband was not represented by counsel.

In Plogger v. Plogger, ⁶¹ the husband signed, without reading, an agreement that had been prepared by the wife's attorney. The support provisions in the agreement left him with only $186 to meet his monthly expenses. The Virginia Court of Appeals reversed the trial court's order enforcing the agreement because the support obligations enumerated in the agreement "shocked the conscience" and amounted to overreaching by the wife, who had detailed knowledge of the husband's finances.

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In Allocca v. Allocca, ⁶² the Virginia Court of Appeals found that the evidence adduced at trial did not support the wife's contention that there was a gross disparity in the value of the property the parties received under their property settlement. The wife's evidence demonstrated a probable disparity in value between the parties' pension plans (each kept his or her own plan), but she did not prove the actual differences in the values of the plans and, therefore, could not demonstrate a gross disparity in the values.

In Guirguis v. Salib, ⁶³ the Virginia Court of Appeals reversed the circuit court's decision invalidating the parties' separation agreement. Although the court found that the requirements of the agreement were "significant and burdensome" to the husband, he had not proved overreaching or oppressive behavior by the wife. There was no evidence of bad faith or of some incapacity on the husband's part that, when combined with the disparity of the division, could support the husband's position.

As the court noted in Guirguis, one important factor that can be considered is the language in the agreement itself because recitations in the agreements "create a prima facie presumption that they are factually correct." ⁶⁴ Virginia Code section 20-151(A) addresses these concerns. To create this presumption, an agreement should include specific language that the parties acknowledge they each (i) were provided a fair and reasonable disclosure of the property or financial obligations of the other party; and (ii) voluntarily and expressly waived any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided in the agreement.

G. Mistake of Fact Versus Mistake of Law. Generally, a mutual mistake of fact, as opposed to a unilateral mistake of fact, is grounds to invalidate all or a portion of a separation agreement. ⁶⁵ A mistake of law, however, is not grounds to invalidate an agreement unless the other party has knowingly taken advantage of such ignorance for fraudulent purposes. ⁶⁶

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5.303 "Binding on Heirs and Assigns" Provision. ⁶⁷

A. In General. A "binding on heirs and assigns" provision gives added protection to the obligee of the agreement. It is designed to ensure that certain provisions of the agreement continue in full force and effect even after the death of the obligor. The provision should be used carefully and, preferably, should make specific reference to those paragraphs that will be binding on the heirs, executors, and administrators. Specificity is also a good idea because the...