Court Opinion

ID: 1075414
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:14:47.69802+00
Date Added: 2024-06-11T13:06:51.980161
License: Public Domain

COURT OF APPEALS OF VIRGINIA

Present: Chief Judge Fitzpatrick, Judges Coleman and Elder
Argued at Salem, Virginia

KATHY R. GOBBLE McELRAFT
                                            MEMORANDUM OPINION * BY
v.           Record No. 0124-98-3            JUDGE LARRY G. ELDER
                                               NOVEMBER 24, 1998
DON L. McELRAFT

              FROM THE CIRCUIT COURT OF WASHINGTON COUNTY
                      Charles H. Smith, Jr., Judge
             W. R. McCall for appellant.

             E. Craig Kendrick (Morefield, Kendrick,
             Hess & Largen, P.C., on brief), for appellee.

     Kathy R. Gobble McElraft (wife) appeals from the trial

court's entry of an award of divorce to Don L. McElraft

(husband).    On appeal, she contends the trial court erred in

ruling that the parties' real property and residence became

husband's separate property pursuant to a deed of gift and that

the parties' separation agreement was valid.      For the reasons

that follow, we affirm the rulings of the trial court.

                                     I.

                                    FACTS

     The parties married in 1974 and separated on June 29, 1995.

 During the marriage, they acquired two tracts of land which they

operated as a cattle farm.    Both parties also were employed off

the farm.    On September 1, 1994, the parties executed a deed of
     *
      Pursuant to Code § 17-116.010 this opinion is not
designated for publication.
gift, as grantors, transferring the two parcels of land to

husband.   These parcels were the major marital assets.

     On June 29, 1995, the parties executed a separation

agreement and began living separate and apart.   That agreement

provided for the mutual relinquishment of various property and

spousal support rights.   It specifically mentioned the land

transferred to husband by deed of gift of September 1, 1994,

stating that "wife agrees to release and relinquish to husband

all right, title and interest she has in the real property . . .

described in [that deed]."
     The agreement specifically recited that the parties "have

had the opportunity to obtain independent legal advice with

regard to this Agreement"; "have entered into this Agreement

freely and voluntarily, without undue influence or coercion, and

. . . have read and understand the terms hereof."   The agreement

also provided that each party entered into the agreement "with

full knowledge . . . of the extent and probable value of all the

property in the estate" of the other.   Finally, the agreement

acknowledged that husband was represented by an attorney, who had

drafted the separation agreement, and that wife was not

represented.

     On May 26, 1996, wife filed a bill of complaint for divorce,

equitable distribution, and spousal support.   Husband contended

that the separation agreement barred the court's consideration of

the equitable distribution and support issues.   Wife sought

                               - 2 -
recision of the deed of gift and separation agreement, alleging

the documents were unconscionable and had been procured through

"duress and fraud."

     The court held a hearing on the issue on November 1, 1996.

Wife testified, presented the testimony of another witness, 1 and

introduced into evidence a chart showing her understanding of the

parties' property ownership, value and distribution as effected

by the separation agreement.   She estimated the value of the real

and personal property received by husband at $267,000.    She

estimated the value of property she received, less the debt she

assumed, at about $1,000 plus the value of being allowed to

remain in the marital home for eight months.   Husband did not

testify and presented no evidence.
     By letter opinion of February 24, 1997, the trial court held

that the deed of gift changed the character of the property from

marital to separate and that the deed and separation agreement

were valid.   Wife filed a motion to reconsider, which was denied.

 On June 12, 1997, the trial court entered an order embodying

both rulings.

     On June 23, 1997, wife testified by deposition regarding the

execution of the deed of gift and separation agreement.   Husband

objected to inclusion of the deposition in evidence on the ground
     1
      Wife contends on brief that "the trial court declined to
hear evidence as to the reasons why [wife] was afraid not to sign
the documents." However, the record does not contain a
transcript of this proceeding, and the statement of facts
provides no support for wife's assertion.

                               - 3 -
that the trial court had already ruled on the validity and effect

of those documents.   The trial court, in signing the parties'

written statement of facts for appeal, agreed.   It ruled that

wife had had the opportunity to present relevant testimony at the

ore tenus hearing on November 1, 1996 and that her deposition,

taken after the court had already ruled on the validity of the

deed of gift and separation agreement, was not a part of the

record.
     On December 19, 1997, the trial court entered the final

decree of divorce into which it incorporated the separation

agreement.

                                 II.

                               ANALYSIS

     Wife contends that her execution of the deed of gift on

September 1, 1994 was insufficient to convert the parties' real

property, including their residence, into husband's separate

property.    She also contends that the separation agreement, in

which she again "agree[d] to release and relinquish to husband

all right, title and interest" in the real property and residence

is invalid because it was procured by duress and constructive

fraud and is unconscionable.    Assuming without deciding that the

deed of gift was insufficient to convert the real property and

residence into husband's separate property under McDavid v.

McDavid, 19 Va. App. 406, 451 S.E.2d 713 (1994), we nevertheless

conclude that the trial court did not err in holding the

                                - 4 -
separation agreement valid.

     As wife concedes, she bore the burden of proving by clear

and convincing evidence that the separation agreement was

invalid.   See, e.g., Derby v. Derby, 8 Va. App. 19, 26, 378

S.E.2d 74, 77 (1989).   We review the evidence in the light most

favorable to husband as the prevailing party.       See id.   However,

because neither wife's deposition of June 23, 1997, nor a

transcript of the November 1, 1996 ore tenus hearing is part of

the record on appeal, we have little evidence to review beyond

the separation agreement itself.
     Wife alleges first that the agreement was procured by duress

and constructive fraud.   "Constructive fraud is a '[b]reach of

legal or equitable duty which, irrespective of moral guilt, is

declared by law to be fraudulent because of its tendency to

deceive others or to violate confidence.'"       Id. at 26, 378 S.E.2d

at 78 (quoting Wells v. Weston, 229 Va. 72, 77, 326 S.E.2d 672,

675-76 (1985)).   "[It] is generally determined by reviewing the
conduct of the parties in relation to their legal and equitable

duties to one another . . . ."     Id. at 28, 378 S.E.2d at 78.

Here, as set out above, the record contains very little evidence

of the parties' conduct to review.       It indicates only that the

parties executed the property settlement agreement at a time when

husband was represented by counsel and wife was not.

     Wife contends that husband owed her a fiduciary duty by

virtue of their marital status until they separated and hired

                                 - 5 -
attorneys to negotiate a settlement of their property rights.    We

disagree.   As we noted in Derby, the triggering event is not the

bilateral hiring of attorneys; rather it is a change in the

nature of the relationship such that "the parties are dealing at

arm's length, whether or not they are represented by counsel."

Id. at 27, 378 S.E.2d at 78 (citing Barnes v. Barnes, 231 Va. 39,

43, 340 S.E.2d 803, 805 (1986)).    In negotiating an agreement to

settle property rights in anticipation of separation or divorce,

the parties were dealing at arm's length regardless of whether

wife had hired an attorney.   See Drewry v. Drewry, 8 Va. App.

460, 470, 383 S.E.2d 12, 16 (1989) (holding that wife's failure

to retain counsel to represent her in settlement negotiations and

signing did not invalidate separation agreement); see also Pillow

v. Pillow, 13 Va. App. 271, 275, 410 S.E.2d 407, 409 (1991).

     That the parties may have lived together as husband and wife

until the day they signed the separation agreement also does not

negate a finding that they were dealing at arm's length in

signing the separation agreement.   That document sets out in

plain terms that it is a "SEPARATION AGREEMENT" entered into due

to "irreconcilable difficulties" and that the parties have been

"living separate and apart" since the signing of the agreement

and "mutual[ly] desire . . . to adjust, terminate and settle all

[property] rights."   In addition, the agreement states that the

parties "have entered into this Agreement freely and voluntarily,

without undue influence or coercion."   Therefore, under the facts

                               - 6 -
and circumstances set out in the record, viewed in the light most

favorable to husband, we cannot say that the trial court

erroneously rejected wife's contention that husband's actions in

allowing her to sign the separation agreement while unrepresented

amounted to constructive fraud or duress.

     We also reject wife's contention that the separation

agreement was unconscionable because it contained no evidence of

disclosure of the marital assets and "it divests her of

practically all interests in the marital estate."   Whereas fraud

relates to the parties' conduct,
          unconscionability is more concerned with the
          intrinsic fairness of the terms of the
          agreement in relation to all attendant
          circumstances, including the relationship and
          duties between the parties. . . . If
          inadequacy of price or inequality in value
          are the only indicia of unconscionability,
          the case must be extreme to justify equitable
          relief.

Id. at 28, 378 S.E.2d at 78-79.   Code § 20-151, which applies to

marital agreements executed pursuant to Code § 20-155, sets out

certain affirmative defenses to the enforceability of such

agreements.  It provides that
               A. [A marital] agreement is not
          enforceable if the person against whom
          enforcement is sought proves that

              *   *      *      *      *      *      *
               2. The agreement was unconscionable
          when it was executed and, before execution of
          the agreement, that person (i) was not
          provided a fair and reasonable disclosure of
          the property or financial obligations of the
          other party; and (ii) did not voluntarily and
          expressly waive, in writing, any right to
          disclosure of the property or financial

                              - 7 -
          obligations of the other party beyond the
          disclosure provided.
               B. Any issue of unconscionability of a
          premarital agreement shall be decided by the
          court as a matter of law. Recitations in the
          agreement shall create a prima facie
          presumption that they are factually correct.

Code § 20-151 (emphasis added).

     Here, the separation agreement itself recites that each

party entered into the agreement "with full knowledge . . . of

the extent and probable value of all the property in the estate"

of the other.    Under Code § 20-151, this recitation constituted
prima facie evidence of such knowledge, and wife has presented no

evidence to rebut that presumption.

     Therefore, the only evidence of unconscionability is the

inequality in value of the property received by the parties under

the agreement.   On the record before us, we cannot conclude that

the inequality was extreme enough to compel the trial court to

provide equitable relief.   A court "'cannot relieve one of the

consequences of a contract merely because it was unwise' [and]

'[it] is not at liberty to rewrite a contract simply because the

contract may appear to reach an unfair result.'"    Rogers v.

Yourshaw, 18 Va. App. 816, 823, 448 S.E.2d 884, 888 (1994)

(citations omitted).   Here, although husband received the bulk of

the marital estate, including the parties' real property and

residence, the record on appeal contains no evidence regarding

the source of the assets used to acquire and operate that

property and no evidence regarding the parties' nonmonetary

                                - 8 -
contributions to the property's maintenance and operation.    In

the absence of such evidence and in light of evidence that wife

worked outside the home during the marriage, we cannot conclude

that the trial court erred in rejecting wife's claim that the

separation agreement was unconscionable.

     For the foregoing reasons, we affirm the trial court's

rulings.

                                                       Affirmed.

                              - 9 -