3.1 SUPPORT AND PROPERTY PROVISIONS GENERALLY
3.101 Preparation. Obviously, the support and property provisions counsel should recommend cannot be determined until the factual and financial situation of the parties has been ascertained, including their assets, earning capacity, needs, and debts. The recommended provisions for support may also depend on other provisions of the total agreement, such as waiver or limitation of spousal support in return for transfer of the jointly owned residence.
Section 20-121.03 of the Virginia Code provides that no agreement may contain the Social Security number of any party or child or financial information of any party that provides identifying numbers for specific assets, liabilities, accounts, or credit cards. This information must be contained in a separate addendum and incorporated by reference into the agreement. The addendum can be distributed as required by statute; otherwise it remains sealed.
3.102 Tax Considerations. Tax considerations enter into almost every decision regarding the provisions of an agreement. Although custody provisions may have tax consequences, the primary tax considerations relate to support and property provisions, and counsel must consider them in drafting the agreement. To ensure that both parties are aware of the tax consequences of the various provisions, counsel should consider including an explanation or acknowledgment of the tax consequences in the agreement or state that each party has been encouraged to consult with his or her tax advisor about the tax implications and consequences of the agreement before signing. 1
3.103 Practical Aspects.
A. Benefits. Because the parties may agree to more than the circuit courts have jurisdiction to order, the agreement may benefit both of the parties more than any judicial determination. But it is important to
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consider whether the proposed solution is in fact a workable resolution or one that will create more problems in the future than it resolves. One test is to consider how the provision would be applied if some of the facts were to change. For example, what happens if the previous congenial relationship between the parties deteriorates to a feud or one or both of the parties remarries, moves out of the area, or has a substantial change in income? In another instance, continuing a family business in joint ownership might solve the immediate problem of what to do with the asset, but one party's purchase of the other's interest might be a more permanent resolution. In Walter W.B. v. Elizabeth P.B., 2 the trial court recognized this problem and, where there had been discord within the family, required one spouse to buy out the interest of the other in the family business. Those jointly held business entities can pose classification problems if there has been an increase in value during the marriage or waste by one of the joint owners affecting value during the separation.
B. Curative Provisions. If a proposed solution has a potential obstruction, the agreement should provide a way around it. For example, if one spouse is to buy the interest of the other in the marital home, the agreement should provide for difficulties that might reasonably be expected to arise. If the spouse is to assume the mortgage balance, the lender may accelerate the loan upon the contemplated transfer. If the purchasing spouse is to pay cash or obtain a new loan, he or she may be unable to do so. In this situation, it would be prudent to provide that after an agreed-upon period, if the purchasing spouse is unable to obtain the consent of the lender to the proposed transfer or alternative financing, the property will be sold and the costs of the sale and proceeds allocated as specified.
C. Particulars. It is usually better to agree as far as possible to all of the particulars of a proposed solution rather than leaving it to "we all know that is what we intended to do," or to what is agreed upon in the future (an agreement to make an agreement), or delegating the decision to one of the parties without limitations. 3
In Fisher v. Fisher, 4 the property settlement agreement provided that the husband could purchase the wife's interest in the marital residence for a sum certain, or, if he sold it, he could pay her half of the proceeds after paying "all mortgages," commissions, and other costs of sale. He sold it, but
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before he sold it he put more liens on it, so the wife's half was very small. Even though the agreement did not expressly say he could increase the secured debt, it did not prohibit him from doing so, thus affording him the opportunity to unilaterally increase the debt to the disadvantage of the wife.
D. Interpretation. Property settlements are contracts and are subject to the rules of interpretation applicable to contracts generally. Sometimes the rules of contract law as applied to marital agreements have harsh consequences. Virginia recognizes the "plain meaning" rule that ordinary words in contracts are to be given their ordinary meanings. In Tiffany v. Tiffany, 5 the husband agreed to pay for a child's college education as long as he was consulted and allowed to participate in the selection of the college. The agreement failed to require his consent to the choice of school, so he was ultimately forced to pay for his son to attend a college of which he did not approve. In Shoup v. Shoup, however, the Court of Appeals allowed parol evidence to establish the "real" contract between the parties when the contractual language was ambiguous. 6 The Court of Appeals is not bound by the trial court's construction of disputed provisions in an agreement and reviews disputed terms de novo. 7
E. Omissions. Although it would not be wise to knowingly omit a specific provision or oversimplify an agreement, a provision allowing the later insertion of an inadvertent omission may be warranted. 8
F. Ill-Reasoned Provisions. Neither counsel nor a party should rely on the court to bar enforcement of a provision they may later wish to avoid. The Virginia Court of Appeals has held that Virginia courts will not invalidate a premarital agreement (or presumably a separation agreement) merely because subsequent history discloses that the contractual provisions are ill-reasoned or ill-advised. 9
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In Galloway v. Galloway, 10 the wife signed the property settlement agreement drafted by the husband's lawyer in which she waived support and received only six percent of the marital assets. Even the commissioner found the agreement unconscionable, but the trial court and the Court of Appeals agreed that disparity of division was not enough to declare the agreement unconscionable. The wife would also have to prove that it was the product of "overreaching or oppressive influences," which she could not do, so the agreement was valid. 11
As more couples rely on the Internet to draw up their own agreements, there is an inevitable increase in challenges to unfair agreements. Contract law may afford some usable defenses even though unfairness or unconscionability generally seem doomed to fail in Virginia. This is why it is important to incorporate, but not merge, agreements into the final decree of divorce, as the nonmerger provision preserves the contractual remedies. 12 Some of these defenses are discussed in paragraph 3.108 below concerning marital agreements.
G. Requirement of Writing. Section 20-155 of the Virginia Code states that marital agreements for the purpose of settling the rights and obligations of the spouses need not be in writing and physically signed by the parties if the terms of the agreement are contained in a court order endorsed by counsel or the parties or are recorded and transcribed by a court reporter and affirmed personally by the parties on the record. Obviously, the better practice is still to reduce the agreement to a writing that is thoroughly reviewed and signed by the parties in order to avoid later misunderstandings. It is also important to remember that, under section 20-155 of the Virginia Code, a reconciliation of the parties after the signing of a separation or property settlement agreement will abrogate the agreement unless otherwise expressly set forth in the agreement.
In Gaffney v. Gaffney, 13 the parties' failure to affirm their "courthouse steps" last-minute settlement on the record before the court resulted in the agreement being declared unenforceable.
H. Attorney's Apparent Authority to Settle. In Walson v. Walson, 14 the Court of Appeals discussed the type of authority an attorney
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must have to sign a valid written settlement agreement on behalf of a client. Counsel for the husband and counsel for the wife had been trying to settle the case for about a year. Four days before the long-awaited trial, a settlement conference was held at which the wife declined to appear. Her counsel contacted her by phone at least ten times during the four-hour conference, and on the last call, concerning a single remaining issue, he got the impression she was backing out on many issues he thought were resolved. He later got an email from her that he interpreted to be acquiescence to his last recommendation, and he drew up an agreement. She did not return his phone calls so he signed it. She objected to its entry and prevailed. The reasoning in the case, which restates existing law on apparent authority, gives some nuts and bolts insight into why the wife's counsel had no apparent authority to sign the agreement on her behalf.
By contrast, in De Avies v. De Avies, 15 the parties acknowledged in open court that they had reached an agreement, and the husband confirmed his consent to the settlement before the trial court and authorized counsel to sign a consent decree. After both parties' counsel had endorsed the decree "Seen and Agreed" and a year after the judge had entered it, the husband tried to have it vacated as to both property and support because he had not personally...
