Galloway v. Galloway
47 Va. App. 83, 622 S.E. 2d 267, 2005 Va. App. LEXIS 483 (2005)
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Rule of Law:
A property settlement agreement is unconscionable and thus unenforceable only if there is both a gross disparity in the division of assets AND clear and convincing evidence of overreaching or oppressive influences by one party, not merely a voluntary bad bargain made by the other.
Facts:
- David Galloway purchased a 3.5-acre parcel, which included the marital home property, in February 1984.
- Diana Merget and David Galloway were married on June 1, 1984, and Diana gave David a contiguous 0.9-acre parcel as a wedding present.
- David started his own business, Cassenvey Heating, Air Conditioning and Refrigeration, Ltd., in 1988, for which he was the sole stockholder and president.
- Diana retired from Eastern State Hospital in July 1993 and began working as a secretary, and later an installer, for David's business, where she worked continuously for eleven years.
- In 2000, Diana inherited her father's debt-free residence, valued at $275,000, along with $30,000 in cash.
- The parties separated on October 1, 2001.
- At the end of September 2001, David presented Diana with a property settlement agreement prepared by his attorney, which he had discussed with her previously.
- On September 29, 2001, Diana signed the agreement after reading it, declining David's suggestion to consult a lawyer, with the agreement granting David all interest in the marital residence and business, and Diana receiving a 1999 GMC Chevy pickup truck valued at $11,000, while both waived spousal support and pension interests.
Procedural Posture:
- Diana Ruth Merget Galloway and David William Galloway separated.
- The dispute over the property settlement agreement was referred to a commissioner in chancery.
- The commissioner in chancery found the property settlement agreement unconscionable due to a gross disparity in asset division and Diana's waiver of spousal support.
- David William Galloway (husband) filed exceptions to the commissioner's finding in the Circuit Court of Mathews County.
- The Circuit Court of Mathews County (trial court) sustained David's objections, finding the agreement was not unconscionable because there was no evidence of accompanying bad faith or inequity.
- Diana Ruth Merget Galloway (appellant/wife) appealed the trial court's judgment to the Court of Appeals of Virginia.
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Issue:
Did the trial court err in finding that the property settlement agreement between Diana and David Galloway was not unconscionable, despite a gross disparity in asset division, absent proof of overreaching or oppressive influences?
Opinions:
Majority - Judge Robert P. Frank
No, the trial court did not err in finding the property settlement agreement was not unconscionable, because despite a gross disparity in asset division, there was no clear and convincing evidence of overreaching or oppressive influences by David. The court reiterated that to prove unconscionability, a party must show both a 'gross disparity in the value exchanged' and 'oppressive influences affected the agreement to the extent that the process was unfair and the terms of the resulting agreement unconscionable,' citing Derby v. Derby. Mere inadequacy of price or inequality in value alone is insufficient unless the case is extreme, and a person may legally make a 'bad bargain' (Smyth Bros. v. Beresford). The court found that Diana had not proven the second prong of this test, as she had discussed the terms, read the agreement, was advised she could get an attorney (but declined), was not forced to sign, and was not under stress or duress according to the notary. Her waiver of spousal support was considered in light of her substantial inheritance ($30,000 cash and a $275,000 debt-free home) and her ability to obtain re-employment. The court concluded that there were no accompanying circumstances indicative of bad faith or inequity under the law, and that marital property settlements are favored and enforced unless their illegality is clear and certain (Cooley v. Cooley).
Analysis:
This case reinforces the high bar for proving unconscionability in marital property settlement agreements in Virginia. It clarifies that a significant imbalance in asset distribution ('gross disparity') is a necessary but not sufficient condition; there must also be clear and convincing evidence of 'overreaching or oppressive influences' such as bad faith, concealment, misrepresentation, or a party's severe incapacity. The ruling emphasizes the importance of a party's opportunity to seek legal counsel, even if declined, and that a voluntary 'bad bargain' will generally be upheld. This case serves as an important precedent for upholding the enforceability of such agreements unless clear and convincing evidence demonstrates both unfair terms and an unfair process.
