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Unfair Property Settlement Agreements
Clients who have signed a Property Settlement Agreement, aka Marital Agreement, aka Separation Agreement with their spouse often ask whether it is possible to avoid or “get out” of the Agreement. The short answer is that avoiding the obligations set out in a signed Agreement is quite difficult. Our appellate Courts in Virginia have stated that these agreements resolving issues arising out of the separation of married persons are “favored in the law and such will be enforced unless their illegality is clear and certain.” (Cooley v. Cooley, 220 Va. 749, 752, (1980).
In the case of Galloway v. Galloway, our Court of Appeal stated the policy as follows: “‘Every person is entitled to dispose of his property, in such manner and upon such terms as he chooses, and whether his bargains are wise, or discreet, or profitable, or unprofitable, or otherwise, are considerations not for courts of justice, but for the party himself to deliberate upon.’” Galloway, 47 Va. App. 83 (2005),
Often the Agreements will contain language stating that “each party considers the terms of this Agreement to be fair and not unconscionable [dramatically unfair] and entered into voluntarily.” Such language creates a presumption that the agreement is not unconscionable. (Virginia Code § 20-151(B),)
Marriage and Property Settlement
Marriage is a confidential relationship of trust imposing the highest fiduciary duty upon the spouses in their inter-marital dealings. However, “[i]f a husband and wife separate and employ attorneys to negotiate an agreement in settlement of their property rights, they become adversaries and their former fiduciary or confidential relationship ends.” Barnes v. Barnes, 231 Va. 39, 42, (1986)
As a result the husband or wife who asserts that the Agreement is invalid “ha[s] the burden at trial to prove by clear and convincing evidence the grounds alleged to void or rescind the agreement.” (Drewry v. Drewry, 8 Va.App. 460, 463, 1989 )
In order to meet this burden, the objecting spouse is required to demonstrate 1) a gross disparity existed in the division of assets and 2) the presence of overreaching or oppressive influences.( Galloway v. Galloway, 47 Va. App. 83, 92, (2005) .
Drewry v. Drewry
In the case of Drewry v. Drewry ( cited above) Mrs. Drewry appealed a decision of the Botetourt County Court holding the Agreement she signed with her husband valid. Mrs. Drewry contended on appeal that although she received a cash payment from her husband under the Agreement she had waived her claims to the marital home, the family business and spousal support and that the Agreement was unfair. She also claimed to be suffering from mental illness when she signed the Agreement and her doctors supported her claim. Lay witnesses however testified she appeared to be in control of her faculties. The Court of Appeals upheld the trial court. Significantly there was no evidence Mr. Drewry had taken advantage and in fact, it was Mrs. Drewry who suggested they enter into the Agreement. So gross disparity in the Agreement coupled with testimony of mental illness by doctors was insufficient to enable Mrs. Drewry to avoid the consequences of the Agreement.
Sims v. Sims
However in the case of Sims v. Sims (55 Va. App. 340 (2009) the Court of Appeals reversed the trial court’s decision which had upheld the validity of the parties’ Agreement. In Sims, the Mr. Sims retained all of the marital assets of value, including the home, a profit sharing plan and other assets. Mrs. Sims received a truck and her personal property. Significantly, Mrs. Sims at the time she signed the Agreement was physically and mentally disabled and unable to work. She was eligible to receive food stamps. The Court said the State had an interest in the outcome if one spouse was left in “necessitous circumstances” and might become “a public charge.” The Court stated, “[a]accordingly, we [hold] that the agreement, which relinquished Mrs. Sims’ claim to “almost 100% of the marital estate,” and “left her penniless with no practical means for supporting herself,” [is] unconscionable. Sims, Id. at 353,
Mrs. Sims circumstances were extreme and she was able to avoid the consequences of signing the Agreement. Mrs. Drewry’s circumstances were not extreme enough. It is most advisable to review any proposed Separation Agreement/Marital Agreement or Property Settlement Agreement with your attorney to determine whether it is fair under Virginia law.
For more information, check out What is a Prenuptial Agreement