Shenk v. Shenk

• Decision Date: 19 November 2002
• Docket Number: Record No. 2723-01-3.
• Citation: 571 S.E.2d 896,39 Va. App. 161
• Parties: William R. SHENK v. Brenda C. SHENK.
• Court: Virginia Court of Appeals

571 S.E.2d 896

39 Va. App. 161

William R. SHENK v. Brenda C. SHENK.

Record No. 2723-01-3.

Court of Appeals of Virginia.

November 19, 2002.

Stephen G. Cochran, McLean (William H. Ralston Jr., Harrisonburg; Lisa L. Knight; The Ralston & Knight Law Firm, on briefs), for appellant.

David A. Penrod (Hoover, Penrod, Davenport & Crist, on brief), Harrisonburg, for appellee.

Present: ANNUNZIATA, BUMGARDNER and FRANK, JJ.

FRANK, Judge.

William R. Shenk (husband) appeals from a final decree of divorce entered by the Circuit Court for Rockingham County, which included an order finding husband and Brenda C. Shenk (wife) entered into a marital agreement when they signed an "assignment." Based on this ruling, the trial court determined several businesses were the separate property of wife. Husband argues the "assignment" did not convert marital property into separate property and the "assignment" was unconscionable. For the reasons stated below, we affirm the trial court's ruling.

1. BACKGROUND

The parties were married in 1981. In mid-1997, husband left the marital home in Harrisonburg, Virginia, and did not return, although he stayed in town and continued his involvement in the family's businesses. In June 1998, husband left Virginia. He occasionally returned to visit his children, but he did not live in the Commonwealth nor did he send wife any money for child or spousal support.

When husband left Virginia, he and wife owned several businesses in Harrisonburg.¹ Shenk Enterprises, a Honda motorcycle dealership, was sold by the parties around the time husband left. The proceeds from this sale, after the debts were paid, consisted of several promissory notes totaling approximately $375,000, payable over eighty-four months. The parties also owned and operated the Shenandoah Heritage Farmer's Market (the Market),² which rented space to independent stores, and a store within the Market known as Grandma's Pantry.

Prior to their separation, the parties both worked in the Market and Grandma's Pantry. When the parties separated, these businesses were in financial trouble. The Market had over $2.2 million dollars in debt on its books and a negative cash flow. The Market's assessed value was $1.75 million as of March 1999. Its construction loan through Community Federal Savings Bank was in danger of foreclosure and needed to be replaced by permanent financing. Grandma's Pantry was not profitable.

Knowing the state of the businesses, husband decided unilaterally and secretly to leave Virginia in June 1998. He left a letter for wife:

For sometime now I have been a perceived liability and embarrassment to your family, my family and I feel to you. Because of our inability to live our lives privately, and the relentless pursuit of WBW, my high visibility in the community and the belief of you and other family around me that I am a liability to the success and health of the market. I will no longer settle for that or even a zero effect to those close to me. I will and I must for my own health be a positive force and a source of pride to those around me. I know that I have the ability to make a difference and must find out how and were [sic] that is to be. I will be leaving Harrisonburg and not returning....

I wish for you happiness, fulfillment, contentment, and to finally have a peace about who you are. I do, and will always believe that you can do and be anything you would like or need to be if you will just visualize and believe in yourself. I believe that I have been an overwhelming shadow of intimidation for you and at the same time have not been able to be all that I can be and for that I am sorry.

You and others always thought money was my motivation YOU WERE WRONG ... I am motivated by challenge and the stewardship of using or losing my talents . . My greatest pain comes from the knowledge that what really matters is relationships.... I have always been able to develop meaningful relationships (Business and Social) with those outside your circle of influence.. (Lightspeed, Lemco, Racing, etc.). I feel like a hostage with Cory, Joy, and Brian, for it seems I can only have a relationship with them if it includes you "or us" and in that environment I do not feel like I am the positive example I can be for our children

As for the proceeds from Shenk Honda, SHFM, Grandma's Pantry etc., I leave it all...

I will do what I can to answer questions and give direction in my absence if it is desired or needed.

(Ellipses in original). The letter then listed the proceeds of the Shenk Honda sale.

Husband left town and was never again involved with the businesses. He made no significant financial contribution to the businesses after he left town,³ although he claimed, when he returned to town to visit his children, he did some gardening work around the Market. On one of these return visits, husband told John Bincie, the parties' accountant, that "he was leaving and that he was turning everything over to [wife]."

Wife attempted to refinance the construction loan. However, officials with Community Federal Savings Bank were concerned about the effect of the parties' divorce on their ability to reach the assets. Bincie testified, "[T]hey didn't want to get in the middle of a marital asset dispute, so they wanted to know that [husband] was completely out of this as far as having any access to these assets." After negotiating with the bank, Bincie understood the bank wanted the parties to sign an agreement "that would prevent any marital asset issues from coming up after they made the loan."

Steven Weaver, the attorney for the businesses, testified he prepared a document to "transfer all right, title, and interest in those various entities to [wife]." When asked by the trial court if the document was "necessarily a predicate . . . to the Mercantile loan," Weaver responded, "Not that I'm aware of." Wife testified she understood the document "just confirmed what was reality."

On March 19, 1999, husband and wife signed a document labeled an "assignment." The document said, in part:

1. [Husband] desires to withdraw as an owner of Shenandoah Heritage Farmers Market, L.L.C. (hereinafter "the Market"), Shenk and Heatwole, Inc. t/a Grandma's Pantry (hereinafter "Shenk and Heat-wole"), and Shenk Enterprises, Inc. (hereinafter "Shenk Enterprises").

2. [Husband] has agreed to assign all of his right, title, and interest, in the aforesaid entities to [wife], individually, and/or the Market, as hereinafter set forth,

* * * * * *

1. [Husband] does hereby give, grant, assign and transfer unto [wife] his 50% membership interest in the Market, thereby giving [wife] a 60% ownership in the Market.

2. [Husband] does hereby assign all of his right, title, and interest, both individually and as a shareholder in Shenk Enterprises to [wife]. . . .

3. [Husband] does hereby assign, transfer, and convey all of his right, title, and interest, in and to [Grandma's Pantry], to [wife]. . .⁴

The document noted husband remained "personally liable, to the extent of his current personal liability, on any and all debts of the aforesaid entities." The "assignment" also recognized wife's agreement "to use her best efforts to continue the business operations. . . [and] to pay the debts, liabilities, and obligations of the aforesaid entities."

With this document, and increased rent payments from Grandma's Pantry, the loan to the Market was refinanced. The businesses made a profit, for the first time, in 1999, and were expected to improve in 2000.

Husband testified he signed the "assignment" in order to "smooth out the management, to transfer responsibility to get things where they needed to be." He explained wife was attempting to "destroy" him by destroying the Market, so he wanted to become "a totally separate entity" in the hope that "she won't try to destroy it any longer." On cross-examination, husband said he believed he needed to sign the "assignment" "[f] or the Community Federal financing." He claimed he "absolutely" did not intend "to sign away any of [his] marital rights in the property."

The trial court ruled from the bench that the agreement conveyed the properties to wife, as her separate property, under "the provisions relating to marital and premarital agreements" in Code §§ 20-147 through 20-155. The court's order, entered on April 30, 2001, held, "[T]he parties' Assignment of March 19, 1999 is a valid contract and marital agreement." The order explained the court's decision relied mainly on the 1998 letter and the 1999 "assignment." The court noted neither document included a reservation "whereby the husband suggests that these post separation transfers to his wife were anything other than complete and final." The court also found, even if the agreement was invalid, husband was estopped from challenging the "assignment."⁵

II. ANALYSIS

Husband argues the trial court (1) used the wrong burden of proof and (2) erred in finding the "assignment" was intended to convert marital property into wife's separate property. Husband further argues, even if such intent were present, the assignment is unconscionable and, therefore, unenforceable. We disagree with husband.

A. Burden of Proof

First, husband claims the trial court did not require wife to prove "clearly and unambiguously" under Kelln v. Kelln, 30 Va. App. 113, 515 S.E.2d 789 (1999), that he transferred all his rights, including his marital rights, to her. However, husband has taken the court's comments out of context.

When the judge announced the decision from the bench, he noted "a curious thing" about the presumption that property is marital property, codified in Code § 20-107.3. He explained:

But that presumption is not applicable because whatever was conveyed here was conveyed to her after the last separation. So I don't think we have a question of something being presumed to be marital. But in any event I don't really think that's dispositive of my ruling, but one of you may need it in the

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