Webb v. Webb

• Decision Date: 08 June 1993
• Docket Number: No. 0137-92-4,0137-92-4
• Citation: 431 S.E.2d 55,16 Va.App. 486
• Parties: Henry Reiter WEBB, Jr. v. Michaela Cullen WEBB. Record
• Court: Virginia Court of Appeals

Page 55

431 S.E.2d 55

16 Va.App. 486

Henry Reiter WEBB, Jr. v. Michaela Cullen WEBB.

Record No. 0137-92-4.

Court of Appeals of Virginia.

June 8, 1993.

From the Circuit Court of Fairfax County; Kaletah N. Carroll, Judge Pro Tempore ^*.

[16 Va.App. 488] Arlene Lyles Pripeton (Emilia Castillo, on briefs), for appellant.

Edward J. Walinsky (Melanie C. Eyre, Law Offices of Edward J. Walinsky, on brief), for appellee.

Present: BAKER, COLEMAN and FITZPATRICK, JJ.

FITZPATRICK, Judge.

In this divorce case, the trial court set aside the parties' property settlement agreement as having been procured by fraud and for being unconscionable. On appeal, Henry Reiter Webb, Jr., (husband) contends that the trial court erred in voiding the agreement because (1) the evidence was insufficient to prove fraud or unconscionability, and (2) that even if the agreement was voidable, his partial performance prevents rescission of the remaining executory obligations. We disagree and affirm the trial court.

BACKGROUND

The parties were married in 1975 and separated on October 15, 1988. It was a second marriage for both, and each had children from their previous marriages. Husband was an executive with the federal government until his retirement in 1981. He then worked as a consultant and, thereafter, began actively practicing law with a Virginia law firm prior to the parties' separation. He currently receives his government pension and a salary from his law In the summer and fall of 1988, while still living together, the parties began to negotiate a property settlement agreement. Husband drafted the agreement and had it signed in his law office shortly after their actual separation. He discouraged his wife from seeking separate legal counsel and when she mentioned seeing another lawyer, he asked her why she felt she needed further "advisement." He also continued to give her legal advice on other aspects of their divorce.

firm of approximately $52,000 per year. Michaela Cullen Webb (wife) worked part-time as a fashion consultant for minimal income. Wife had continuing health problems throughout the marriage. At the time of the separation she had undergone surgery for colitis and had developed psychological problems. She was taking medication and had consulted a psychologist for stress caused by her health problems and by her husband's alleged excessive drinking.

At the time of the separation, the parties had assets consisting of (1) the marital home in McLean, Virginia with an equity of $245,500; (2) three automobiles titled in wife's name valued at $18,683.33 and one automobile in husband's name with a negative value; (3) furniture and household appliances valued at $15,000; (4) two Individual Retirement Accounts, one in each party's name, in the amount of $18,000; (5) a Keogh account valued at $26,556 in husband's name; (6) a vacation time-share in Massanutten Village valued at $6,000; and (7) the marital share of husband's pension valued at approximately $77,346.

The parties' agreement disclosed in general terms the existence of "pension rights or plans," but did not identify the exact plans referred to nor did it specify the respective values of these plans. Paragraph 11 of the agreement provides:

11. Pensions. After full disclosure of the nature and extent of the vested pension rights or plans (referred to herein as "Plans") of each of the parties and acknowledgement by the parties that the present value of such Plans are marital property rights subject to division herein, the parties have, in this Agreement, adjusted the division of their other marital properties, their individual assumptions of marital debts or both, to take into account the value(s) of such pension rights; and, therefore, each of the parties hereby releases and waives any claim he or she may have in any Plans titled in the name of the other party or held for his or her benefit; and each party shall have full and absolute title to, or beneficial interest in, any such Plans now titled in his or her name, or held for his or her benefit, free from any claim of the other party now and forever.

In making such releases and waivers, both parties are aware that Wife has a vested survivorship annuity interest in the civil service annuity of Husband, and that, by operation of law, such vested survivorship annuity interest can be terminated only by divorce of the parties or the death of Wife.

In October 1989, husband filed a bill of complaint for divorce alleging separation for more than six months and the existence of a valid property settlement agreement. See Code § 20-91(9)(a). Wife filed a cross-bill with a prayer for equitable distribution and contested the validity of the property settlement agreement. The case was referred to a commissioner in chancery for a hearing on the grounds of divorce. He recommended that the parties be granted a divorce based on separation for six months and the existence of a valid property settlement agreement. Wife excepted to the finding of validity of the property settlement.

The trial judge held a two day ore tenus hearing limited solely to the issue of the validity of the agreement. At the conclusion of the hearing, the trial judge found, inter alia, that (1) the parties continued to cohabit while negotiating the agreement; (2) wife relied on her husband "to do the right thing with regard to the disposition of their property;" (3) husband discouraged his wife from seeking counsel "at a critical juncture;" (4) husband, who is an attorney versed in uncontested divorce matters and property settlement agreements and who The trial court then found, contrary to the stated terms of the agreement, that there was not "full disclosure" and that husband breached his fiduciary duty when, acting as both a party and legal advisor, he drafted the agreement and failed to disclose to his wife the value of his pension and Keogh Plans. In addition, the trial court found that, based on the totality of the circumstances, the agreement was procured by constructive fraud and was unconscionable in its application. Accordingly, the trial judge set aside the agreement.

has superior knowledge of financial matters, was the party throughout the marriage who handled all the major financial transactions and, thus, he was in a far superior position to understand the ramifications of the agreement; and (5) wife suffered from ill emotional and physical health. Based on these findings of fact, the trial judge concluded that a special relationship existed between the parties that imposed a fiduciary duty upon them in their inter-marital dealings.

CONSTRUCTIVE FRAUD

Husband contends that as a matter of law wife failed to prove that he committed fraud in procuring the parties' separation agreement. In addition, assuming arguendo that there was evidence of fraud, husband asserts that wife never relied on any of his actions and, therefore, her allegation of constructive fraud must fail.

"[M]arital property settlements entered into by competent parties upon valid consideration for lawful purposes are favored in the law and such will be enforced unless their illegality is clear and certain." Cooley v. Cooley, 220 Va. 749, 752, 263 S.E.2d 49, 52 (1980) (citation omitted); Derby v. Derby, 8 Va.App. 19, 25, 378 S.E.2d 74, 77 (1989). Therefore, in this case, wife "had the burden at trial to prove by clear and convincing evidence the grounds alleged to void or rescind the agreement." Drewry v. Drewry, 8 Va.App. 460, 463, 383 S.E.2d 12, 12 (1989). On appeal, we review the evidence in the light most favorable to the wife as the prevailing party below and determine whether that evidence established as a matter of law any of the grounds she relied upon to vitiate the agreement. Id. at 463, 383 S.E.2d at 12-13.

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 violate confidence.' " Wells v. Weston, 229 Va. 72, 77, 326 S.E.2d 672, 675-76 (1985) (quoting Nuckols v. Nuckols, 228 Va. 25, 38, 320 S.E.2d 734, 741 (1984)). Furthermore, "[t]he duty by which conduct is measured to determine fraud is established by the relationship and circumstances which exist between parties." Drewry, 8 Va.App. at 469, 383 S.E.2d at 16.

"[T]o establish constructive fraud one must prove the following by clear, cogent and convincing evidence: that there was a material false representation, that the hearer believed it to be true, that it was meant to be acted on, that it was acted on, and that damage was sustained." Nationwide Ins. Co. v. Patterson, 229 Va. 627, 629, 331 S.E.2d 490, 492 (1985).

Initially, we examine whether there was sufficient evidence at trial to support the trial judge's determination that there was a "special relationship" between the parties that imposed upon the husband a continuing duty of trust in the negotiation and preparation of the settlement agreement. The existence of a "special relationship" depends on the specific facts of each case. Generally, if the parties have separated, employed independent counsel and are then negotiating a property settlement agreement, it is an arms length transaction and their former fiduciary relationship is deemed to have ended. Barnes v. Barnes, 231 Va. 39, 42, 340 S.E.2d 803, 804 (1986).

In the case at bar, the trial judge made several findings of fact that resolved any disputed testimony in favor of the wife. Much of the negotiations for the separation agreement transpired while the parties were still living together in the same house and sleeping in the same room. The agreement, however, was signed in husband's law office a few days after he In addition, however, the evidence established that husband is a licensed Virginia attorney, that he drafted the agreement, gave his wife legal advice on other aspects of their divorce as well as property matters, and discouraged his wife from seeking...