Hale v. Hale, 924

• Decision Date: 01 September 1987
• Docket Number: No. 924,924
• Citation: 539 A.2d 247,74 Md.App. 555
• Parties: Edwin Frank HALE v. Sheila Fern HALE. ,
• Court: Court of Special Appeals of Maryland

Page 555

74 Md.App. 555

539 A.2d 247

Edwin Frank HALE v. Sheila Fern HALE.

No. 924, Sept. Term, 1987.

Court of Special Appeals of Maryland.

April 6, 1988.

Certiorari Denied June 27, 1988.

Paul Mark Sandler (Freishtat and Sandler, on the brief), Baltimore, for appellant.

Shale D. Stiller and Peter F. Axelrad (William L. Reynolds, Alan J. Hoff and Frank, Bernstein, Conaway & Goldman, on the brief), Baltimore, for appellee.

Argued before MOYLAN, WEANT and ROSALYN B. BELL, JJ.

WEANT, Judge.

Edwin and Sheila Hale were married in 1966. At the time, they had very little property. They separated briefly in 1975, but resumed the marriage. In May, 1983, Mrs. Hale discovered that her husband was having an affair. He took her to Loch Raven Reservoir and told her he desired a legal separation. She indicated that she did not want the marriage to dissolve. Nevertheless, she agreed to the separation. The couple agreed to have Henry Belsky draw up a separation agreement. Belsky had been the family attorney and friend to the Hales for several years. He also represented Mr. Hale's substantial business interests. On May 20, Mrs. Hale went to London on a long-awaited garden club trip. Upon her return, she met with Belsky to discuss the agreement on June 1. On June 2, both Mr. and Mrs. Hale met with Belsky to discuss the agreement. On June 3 the agreement was signed. Among other things, the agreement provided Mrs. Hale the use of a car owned by her husband's primary business interest, Port East Transfer, Inc. (Port East). In October of 1983, the car, a Mercedes, needed substantial repairs. The Hales agreed that it was not worth fixing. Mrs. Hale asked that it be replaced by a new Mercedes. Mr. Hale declined, but agreed to have Port East buy a $17,000 Toyota for her use. Belsky prepared a letter-agreement to effectuate the substitution of the Toyota for the Mercedes. He had Mrs. Hale sign the agreement, which also stated that the parties were "ratifying and affirming all of the other provisions" of the separation agreement.

During the fall of 1983, Mrs. Hale received benefits under the contract. Although separated from her husband, she testified that she still had hopes of reconciliation. These hopes disappeared when Mr. Hale asked her if he could borrow her luggage to take his girlfriend on a trip to Mexico.

Shortly after that, one of Mrs. Hale's friends convinced her to meet with another attorney. After receiving independent counsel, Mrs. Hale promptly sought rescission of the separation agreement and offered to return the parties to their original positions. Mr. Hale resisted rescission. Mrs. Hale then filed the present action against her husband in the Circuit Court for Baltimore County seeking rescission of the contract and damages for fraud and negligent misrepresentation. (In Hale v. Hale, 66 Md.App. 228, 503 A.2d 271, cert. denied, 306 Md. 118, 507 A.2d 631 (1986), we held that Mrs. Hale could maintain this action separately from a divorce action.) The case was tried before the court without a jury. The trial court ordered the agreement rescinded. The court also found the existence of fraud, but declined to award compensatory or punitive damages. The court dismissed Mrs. Hale's claim for damages based on negligent misrepresentation because it had found that there was fraud. Finally, the court declined to award Mrs. Hale attorneys' fees.

Mr. Hale appeals the trial court's decision to rescind the separation agreement. Mrs. Hale cross-appeals the court's refusal to award her damages and attorney's fees.

Mr. Hale's Appeal

The trial court rescinded the separation agreement for several reasons, which were stated in an oral opinion.

The first ground for rescission was that the agreement was unconscionable. This finding was based on the distribution of the parties' assets provided in the agreement. The court found as a fact that immediately prior to the agreement, Mr. Hale had assets worth $4.99 million while Mrs. Hale's assets totaled $215,000. Mr. Hale's annual salary was approximately $300,000. Mrs. Hale, as secretary/treasurer of Port East, received a salary of $10,400 per year. The judge determined the value of the assets passing to Mrs. Hale under the agreement to be $142,500. The judge felt that this, being roughly four percent of Mr. Hale's assets, was unconscionable.

He then determined that alimony of $40,200 per year provided by the agreement did not alter that conclusion. He noted that Mrs. Hale was forfeiting her salary at Port East ($10,400), which had essentially been an allowance because Mrs. Hale's only duties were to sign papers, which were often brought to the Hales' house for her to sign. Thus, her net income increase under the agreement was only $29,800 per year. Given Mr. Hale's salary of $300,000, the trial court viewed the alimony provision as insignificant.

In reaching its conclusions about the value of the agreement's benefits for Mrs. Hale, the court gave little weight to benefits which would be enjoyed by Mrs. Hale in the future because of the following provision in the agreement:

This agreement has been prepared to reflect the current financial situation and other circumstances of the parties. In the event that Husband's financial situation shall alter adversely and the parties are unable to agree to a modification of the terms of this and subsequent agreements, the terms of this Agreement and subsequent agreements shall be subject to modification and order of the Court.

(Belsky did not insert any provisions for modification in the agreement in the event that Mr. Hale's financial situation improved or Mrs. Hale's deteriorated.) Mr. Hale contended that his net worth at the time of the agreement was roughly $2,000,000, rather than $5,000,000. He also placed a value of $770,000 on the benefits accruing to his wife under the agreement.

The second reason offered by the trial court for rescinding the agreement was that Mr. Hale obtained the agreement by abusing a confidential relationship between himself and Mrs. Hale. Because of this, Mr. Hale had the burden of proving that the terms of the agreement were fair. He failed to meet this burden.

The court's third reason for rescinding the agreement was fraud. The court found that Mr. Hale knew Mrs. Hale's primary desire was reconciliation. Mr. Hale then told her that he would not consider reconciliation until the agreement was signed. But, the court found, Mr. Hale really had no intention of seriously considering reconciliation.

The fourth reason advanced by the court for rescission was duress. The court did not elaborate on this finding, although it noted that, during the months of May and June of 1983, Mrs. Hale was suffering from emotional problems, having trouble eating and sleeping, and had an ulcer.

The final ground for rescission relied on by the court was that Mr. Hale and Mr. Belsky exercised undue influence over Mrs. Hale, causing her to sign an agreement she really did not understand.

Mr. Hale argued that even if the agreement was rescindable when signed, Mrs. Hale was estopped from doing so by subsequent ratification. He urged two theories of ratification: Mrs. Hale's acceptance of benefits under the agreement and the letter-agreement substituting the Toyota for the Mercedes, which expressly ratified the initial agreement. The trial court rejected both theories.

Mr. Hale presents three issues on appeal (which we have renumbered):

1. Whether the Court's determination that Mr. Hale breached a confidential relationship with his wife and that the Agreement was a product of fraud was insufficient in law and clearly erroneous when Mrs. Hale participated in developing aspects of the Agreement and decided to sign the Agreement in the hope of reconciling with her husband.

2. Whether the Court's determination that the Separation Agreement was unconscionable was insufficient in law and clearly erroneous when Mrs. Hale received the following: $42,000.00 [sic, $40,200] in alimony per year; a guaranteed minimum of $300,000.00 from the sale of the family home; life insurance on the life of Mr. Hale in the amount of $500,000.00; and other significant benefits for herself and the parties' son.

3. Whether the Court's determination that Mrs. Hale did not ratify the Separation Agreement when she signed an Addendum to the Agreement for additional benefits five months later, was insufficient in law and clearly erroneous.

1. and 2.

We will consider Mr. Hale's first two arguments together. He argues that all of the reasons offered by the trial court for rescinding the agreement are insufficient as a matter of law and that they are based on clearly erroneous findings of fact. (Although his first question presented does not specifically mention duress or undue influence, the corresponding argument in his brief does challenge those findings.) For the reasons that follow, we hold that the grounds relied on by the court were legally sufficient to justify rescission and that they are supported by the evidence.

Confidential Relationship

"[T]he question of whether a confidential relationship exists between husband and wife [is] a question of fact. Among the various factors to be considered in determining whether a confidential relationship exists are the age, mental condition, education, business experience, state of health, and degree of dependence of the spouse in question." Bell v. Bell, 38 Md.App. 10, 14, 379 A.2d 419 (1977), cert. denied, 282 Md. 729 (1978). The trial court found that Mr. Hale was the dominant party in a confidential relationship with his wife. In reviewing this, as well as the trial court's other findings, "we must first assume the truth of all the evidence and of all the favorable inferences fairly deducible therefrom tending to support the factual conclusions reached by the [trial judge]." McClellan v. McClellan, 52 Md.App. 525, 530, 451 A.2d 334 (1982), cert. denied, 295 Md. 283 (1983) (citations omitted). Md. Rule 1086.

...