Family Law Blog
The Marital Settlement Agreement is Not Fair – Can I Get Out of It?
Virginia Courts have long recognized and it is settled law that “martial property settlements entered into by competent parties upon valid consideration for lawful purposes are favored in the law and as such will be enforced unless their illegality is clear and certain.” Cooley v. Cooley, 220 Va. 749, 752, 263 S.E.2d 49, 52 (1980).
The recent Virginia case of Galloway v. Galloway, 47 Va. App. 83 (2005), illustrates the importance of reviewing any proposed property settlement or separation agreement with your attorney prior to signing. Stated simply, the fact that the Agreement may be unfair to one party or may represent less than that party could have obtained in Court does not necessarily make the Agreement unenforceable.
In the Galloway case, the Virginia Court of Appeals upheld the validity of a martial property settlement agreement which provided that Mr. Galloway would receive 94% of the parties’ marital assets.
In Galloway, the parties had been married in June of 1984 and separated in October of 2001. Before the separation, Ms. Galloway inherited a house from her father valued at $279,000 as well as $30,000 in cash. Following the separation, Mr. Galloway presented Ms. Galloway with a proposed property settlement agreement that had been prepared by his attorney. The property settlement agreement gave him the marital residence and the business which had a value in excess of $200,000 and gave Ms. Galloway the 1999 GMC Chevy pickup truck which had a value of $11,000. The parties discussed the proposed agreement between themselves and Ms. Galloway testified at trial that she “knew the agreement was coming.” Mr. Galloway testified that he told his wife “here it is, look at it and if you want to go with it, sign it.” He told Ms. Galloway that she could get an attorney if she wanted to. The next day, he drove her to a bank where both signed the property settlement agreement.
At trial, the notary public at the bank testified that Ms. Galloway did not appear to be under stress or duress. Ms. Galloway testified that she signed the agreement because “[i]f this is what he wants, I’m going to go ahead and sign it. That’s the reason I signed it. Like a fool, I should have had a lawyer.” The Trial Court found the agreement to be enforceable and Ms. Galloway appealed to the Court of Appeals.
The Court of Appeals quoted the public policy of the Commonwealth favoring property settlement agreements and held that Ms. Galloway, as the party appealing, had the burden to prove her claim that the agreement was unconscionable by clear and convincing evidence. The Court of Appeals cited the 1989 Virginia case of Derby v. Derby, 8 Va. App. 19, 378 S.E.2d 74 (1989), in analyzing the case. In the Derby case, it was held that the test of a proposed marital agreement’s enforceability was a two-step test. The Court explained that the person seeking to have an agreement held unenforceable must prove both (1) a gross disparity in the division of the assets and (2) overreaching or impressive influences by the other party.
Mrs. Galloway argued that the disparity in the division of assets in the agreement was so gross that nothing else should be required. The Court of Appeals disagreed, holding that that was not the correct legal standard. The Court opined that although Mr. Galloway did receive 94% of the marital assets, there was no evidence from either party that there was any overreaching or oppressive behavior by the husband. Citing the case of Smyth Bros. V. Beresford, 128 Va. 137 (1920), the Court said “a spouse can give away his/her entire portion of the marital estate as long as there is no oppressive conduct by the other spouse.” Smyth at page 170.
Richard Boatwright (May 5, 2011)
COURT OF APPEALS AGAIN CLARIFIES RULES CONCERNING DIVISION OF RETIREMENT ACCOUNTS
Divorcing spouses are naturally concerned as to how their retirement accounts are going to be treated in the divorce process. The Virginia Court of Appeals recently weighed in again on the issue of the allocation or division of defined contribution retirement accounts in the divorce context. The case is Haney v. Haney (Record No. 1204-10-4) reported on November 2, 2010.
In the Haney case, Mr. Haney appealed a decision of the Circuit Court of Fairfax County (trial court) arguing that the Retirement Orders (QDROs) entered by the trial Court were not in accord with the Final Decree of Divorce entered by the Court.
Mr. and Mrs. Haney had been married for sixteen years (16) prior to their separation. During the marriage Mr. Haney had accrued four (4) different defined contribution retirement accounts (two IRAs, one 403B account and one 401k account). The Final Decree provided that the portions of the retirement accounts accrued during the marriage and before the separation were to be equally divided.
Mr. Haney appealed when the retirement orders entered by the trial court provided Mrs. Haney would also receive any passive gains or losses that accrued on her share of the retirement accounts prior to transfer into accounts in her own name.
The Court of Appeals disagreed with Mr. Haney and dismissed his appeal stating that “the final decree did not award wife half of the marital share as of a particular date” nor did it “specifically state that the parties intended to allot wife only half of the actual amount in account on a specific date.”
The Court said the award of half of the “marital share” included “passive interest after the parties separated and after entry of the final decree. This interest is clearly not part of husband’s marital separate portion of the [retirement accounts].
The Court of Appeal in the Haney case cited its decision in the 2009 case of Lewis v. Lewis, a case out of Chesterfield County where Mr. Lewis had tried a similar argument concerning his Profit Sharing Plan. In the Lewis case the parties had signed a Property Settlement Agreement and Mr. Lewis argued on appeal that the trial court had not followed the Agreement when it entered the retirement order providing that Mrs. Lewis would share in the appreciation that had occurred on her one half share of Mr. Lewis retirement account.
Richard Boatwright (February 12, 2011)
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