Will a separation agreement challenged as fraudulent and unconscionable be upheld in a Virginia divorce brought on grounds of adultery?

Will a separation agreement challenged as fraudulent and unconscionable be upheld in a Virginia divorce brought on grounds of adultery?

Not in the case of Derby v. Derby, 8 Va.App.19, 378 S.E.2d 74 (1989), where the Virginia Court of Appeals affirmed the trial court’s findings that the allegations of adultery were sufficient to support a divorce on those grounds and that the separation agreement should be set aside as invalid.

George and Sandra Derby were married on April 19, 1961, and during their twenty-two years of marriage, the parties had two children. On October 6, 1983, Mrs. Derby filed for divorce, claiming cruelty, and Mr. Derby filed a cross-bill alleging adultery on several specified occasions. Approximately ten months after filing for divorce, Mrs. Derby went to the beauty shop owned by both her and her husband. She brought a copy of a settlement agreement her lawyer had drafted, providing for equal distribution of the parties’ assets.  Mrs. Derby, however, called her husband into the parking lot. After a brief discussion, Mr. Derby signed the agreement with a revision granting Mrs. Derby the majority of the parties’ property assets, including all of the parties’ real property. Mr. Derby alleged he signed the agreement while under the impression that if he did so, Mrs. Derby would return to the family home.

In the lower court proceeding, the Court held that the private investigator’s findings of adultery were sufficient to grant a divorce on those grounds but held that the property settlement as invalid. Mrs. Derby challenged the invalidation, arguing that Mr. Derby did not demonstrate fraud, duress, or undue influence by clear and convincing evidence.  To determine whether this invalidation was proper, the Court examined Virginia Code §20-109.1, which states, “[A]ny court may affirm, ratify and incorporate by reference in its decree dissolving a marriage or decree of divorce whether from the bond of matrimony or from bed and board, any valid agreement between the parties.” At issue in this case was the question of validity, which the Court addresses prior to incorporation in the divorce decree unless otherwise uncontested by the parties. See Forrest v. Forrest, 3 Va.App.236, 349 S.E.2d 157 (1986).

The trial court held that the separation agreement should be declared invalid on the basis of constructive fraud. Constructive fraud requires, “[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 violate confidence.” Wells v. Weston, 229 Va. 72, 77, 326 S.E.2d 672, 275-6 (1985). Here, the lower court ruled that Mrs. Derby’s actions of hiding her adultery from her husband and having him sign the agreement knowing he was fostering ideas of her return constituted constructive fraud; however, the Court of Appeals disagreed, stating that the fiduciary duty between the parties was severed by the separation and retention of attorneys, and, therefore, Mrs. Derby’s actions did not breach any duty. See Barnes v. Barnes, 231 Va. 39, 42, 340 S.E.2d 803, 804 (1986) (holding that when a husband and wife separate and employ attorneys, their former confidential and fiduciary relationship ends).

After examining the issue of fraud, the Court turned to whether the separation agreement should be set aside on the issue of unconscionability, which according to the Restatement, means the agreement “was such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.  Restatement (Second) of Contracts § 208 comment b.  In cases of unconscionability, the court examines whether the disparity of values exchanged and the process involved in the reaching of the agreement were such that one party signed at a severe personal detriment. Here, the Court ruled that the terms were so disproportionate and the means of acquiring Mr. Derby’s signature suggested that the contract was unconscionable and should be set aside. Moreover, the Court held that the misrepresentation of Mrs. Derby about her infidelity and her possible return to the marriage, coupled with her preying on Mr. Derby’s emotional weakness created a situation where it would be inequitable to uphold the agreement. Therefore, the Court of Appeals affirmed the trial court’s decision, although it established a different basis for its decision in regards to the separation agreement.

You should consult with your Virginia divorce lawyer concerning the possibility of setting aside your separation agreement.


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