Opinion ID: 854000
Heading Depth: 1
Heading Rank: 2

Heading: Enforceability of Provision Shifting Attorney Fees

Text: In its decree of dissolution, the trial court approved the parties' agreement with the exception of Paragraph 25, which provides: In the event an attack by one party as to the validity of this agreement is unsuccessful, the party initiating such action shall be responsible for all attorney's fees and costs incurred by both parties in the prosecution or defense of such action. Record at 817. After rejecting Paragraph 25, the trial court ordered the husband to pay a substantial portion of the wife's attorney fees. [10] The husband argues that general principles of contract law require enforcement of Paragraph 25 unless the contract is contrary to law or public policy. Brief of Appellant at 29. Dissolution settlement agreements are encouraged under the Indiana Dissolution of Marriage Act. IND.CODE § 31-1-11.5-10(a); Voigt v. Voigt, 670 N.E.2d 1271, 1277 (Ind.1996). Parties are expressly authorized to agree in writing to provisions for the maintenance of either of them, the disposition of any property owned by either or both of them and the custody and support of their children. Voigt, 670 N.E.2d at 1277 (quoting IND.CODE § 31-1-11.5-10(a)). While this provision does not make express reference to the allocation of attorney fees, we decline to construe narrowly the statutory language to exclude attorney fees from among those matters that may be resolved by settlement agreement. We recently emphasized that parties drafting dissolution settlement agreements are free to make such continuing financial arrangements as they wish. Voigt, 670 N.E.2d at 1277. As a general rule, a contract for attorney fees is enforceable according to its terms unless contrary to law or public policy. Hacienda Mexican Restaurant of Kalamazoo Corp. v. Hacienda Franchise Group, Inc., 641 N.E.2d 1036, 1042 (Ind.Ct.App.1994). It is well established that the public policy of this state generally favors the freedom of contract between private parties. There is a very strong presumption of enforceability of contracts that represent the freely bargained agreement of the parties. Continental Basketball Ass'n, Inc. v. Ellenstein Enter., Inc., 669 N.E.2d 134, 139 (Ind. 1996). Indiana courts have not hesitated to enforce a divorce settlement agreement which would have been in excess of the divorce court's authority had it been crafted by the divorce court and which was shown to be, over time, grossly inequitable. Bowman v. Bowman, 567 N.E.2d 828, 831 (Ind.Ct.App. 1991) (citing Smith v. Smith, 547 N.E.2d 297 (Ind.Ct.App.1989)). However, a court is not bound to accept every proffered settlement. Voigt, 670 N.E.2d at 1277. In reviewing a settlement agreement, a court should concern itself only with fraud, duress, and other imperfections of consent, or with manifest inequities, particularly those deriving from great disparities in bargaining power. Id. at 1278. However, the power to disapprove a settlement agreement must be exercised with great restraint. A trial judge should not reject such agreements just because she believes she could draft a better one. Id. at 1277. In the present case, the trial court did not find the agreement to have been entered as a result of fraud, duress, or misrepresentation. Rather, the court found the agreement valid, Record at 365, and expressly found that [a]lthough [the wife] contended that the agreement was invalid based upon unconscionability, lack of consideration, undue influence and coercion in its execution, and fraud based upon misrepresentations of [the husband], [the wife] has failed to present any substantive evidence in support of her contentions, Record at 364. The trial court only declined to enforce Paragraph 25, the attorney fee provision, stating the following reasons: [T]he Court has determined that paragraph 25 of the Postnuptial Agreement as written would cause an economic impossibility to anyone but Petitioner Husband to challenge the agreement, but that the agreement as written was decidedly in favor of Petitioner Husband even though the Court has found that the agreement was valid. The division of marital assets as provided in the agreement, for instance, would most decidedly not be the division if the division of assets was presented to the Court absent such an agreement. There is no attempt in this order to rewrite the contract between the parties, but to give them a parity in determining the validity of an agreement which required many hours of preparation and in the presentation of evidence by both parties. Principally, the Court is concerned with the huge disparity of income between the parties and that by a ruling of this Court to require Respondent Wife to pay for the challenge which she made against the agreement would otherwise act as a deterrent only to her. Record at 243-44. We observe that Paragraph 25 does not purport to make the wife responsible for all of the husband's attorney fees. It does not apply to attorney fees relating to the resolution of property division, maintenance, custody, visitation, support, or other issues often incidental to dissolution proceedings. Rather, Paragraph 25 has a limited, narrow scope. It refers only to fees and costs incurred in the prosecution or defense of an attack by one party as to the validity of this agreement, and only imposes such fees if such challenge is unsuccessful. Record at 817. Paragraph 25 does not impair the wife's right to seek attorney fees pursuant to Indiana Code section 31-1-11.5-16 [11] for her fees related to the litigation of all issues other than the validity of the agreement. We find, in accordance with Voigt, that the trial court's findings with respect to Paragraph 25 are insufficient to establish fraud, duress, other imperfections of consent, or manifest inequities. To the extent that the judgment of dissolution rejects and refuses to enforce Paragraph 25, we reverse. As previously noted, the trial court, intentionally disregarding Paragraph 25, determined that the husband should pay $69,000.00 of the $89,262.25 attorney fees claimed by the wife. [12] On remand, the trial court shall give full force and effect to this provision by determining the amount of reasonable attorney fees and costs that the parties incurred directly from the challenge to the validity of the parties' settlement agreement, and shall reduce its prior award of attorney fees accordingly.