Jones v. Star Credit Corp., 298 N.Y.S.2d 264 (Sup. Ct. 1969)
FACTS:
The plaintiffs, who were welfare recipients, entered into an agreement on August 31, 1965, to purchase a home freezer unit following a visit from a door-to-door salesman representing Your Shop At Home Service, Inc. In addition to the purchase price of $900, the plaintiffs were also charged time credit charges, credit life insurance, credit property insurance and sales tax. The purchase price in the end would total $1,234.80.
At trial, it was established that the freezer had a maximum retail value of $300. The plaintiffs had paid $619.88 at the time of trial but still owed $819.81. The trial court found that the agreement was unconscionable and that the payment previously made would replace the contract in full. The seller began the appeal process.
Seller argued that the contract on June 15th, 1966 was a financing contract and not a sales contract. The finance agreement stated” Refinance of Freezer”. This agreement requested for refinancing and signed by the seller and purchaser. The June 15th, 1966 contract was exactly the same as the original August 31st, 1965 contract and constituted a novation and replacement of the original contract.
ISSUE:
1. Can this transaction and the resulting contract be considered unconscionable within the meaning of UCC § 2-302 based on the price that was charged from the Jones’?
HOLDING:
Yes. The contract should be reformed to deal only with what had already been paid.
RATIONALE:
The court ruled that the contract was unconscionable according to section 2-302 of the Uniform Commercial Code. The court ruled that the $600 difference between the selling price and retail value was enough evidence to conclude that the contract was unconscionable. The credit charges exceeded the retail value of the freezer by more than $100. Further, uneducated consumers should be protected from greedy merchants and the dangers of unequal bargaining power. The mathematic disparity between $900 and $300 was the most convincing evidence leading to the conclusion that the contract was unconscionable.
Further supporting the court conclusion was found in a number of other cases that had already been decided. For example, in American Home Improvement v. MacIver (supra) the Supreme Court of New Hampshire held that a contract to install windows, a door and paint, for the price of $2,568.60, of which $809.60 constituted interest and carrying charges and $800 was a salesman's commission was unconscionable as a matter of law. In Frostifresh Corp. v. Reynoso (supra) the sale of a refrigerator costing the seller $348 for $900 plus credit charges of $245.88 was unconscionable as a matter of law.
Derby v. Derby, 378 S.E.2d 74 (Va. Ct. App. 1989)
FACTS:
George and Sandra Derby were married April 19, 1961 and remained in marriage for twenty-two years of marriage. Two children were born to the marriage. On October 6, 1983, the wife filed for divorce. On October 14, 1985, the husband filed a cross-bill claiming adultery by the wife on several specified occasions. On June 26, 1984 the wife amended the complaint to allege a one-year separation. Both husband and wife had gotten obtained attorneys. On July 9, 1984, the wife went to the beauty shop owned by the couple to meet with her estranged husband. The husband believed the wife had with her a copy of the property settlement agreement that had been drafted by her lawyer which provided for an equal division of most of their property.
The separation agreement had been delivered to the husband’s attorney the prior Thursday; however, the husband had not discussed the matter of the agreement with his attorney. The wife asked her husband to meet with her in the parking area where they briefly discussed the agreement. The paragraph providing for equal division of the property had been removed and without the husbands knowledge the wife replaced it with "Husband agrees to relinquish his portion of property located at 1824 E. Ocean View Ave., and to sign ownership of property over to his wife at earliest possible date." Both parties then signed the agreement in the parking lot on the hood of a car. The wife then secured a deed conveying the Ocean View Avenue property, which the husband signed before a notary public at 4 p.m. that afternoon. The husband at no time consulted with his attorney concerning the agreement or deed prior to their execution. The agreement and deed signed by both parties relinquished the entire value of essentially all of the valuable real estate which the parties owned to the wife.
ISSUE:
1. Whether the court erred in finding the separation agreement invalid because it was unconscionable and obtained by constructive fraud or duress.
HOLDING:
Yes. The court found that the evidence was insufficient to prove fraud but the court affirmed the order granting the divorce and invalidating the separation agreement.
RATIONALE:
The facts of the Derby case are very similar to the Cooley v. Cooley, 220 Va. 749, 752, 263 S.E.2d 49, 52 (1980) case. The Cooley case decided that "Marital 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." This section allows trial court discretion in dealing with agreements that discretion extends only to "valid agreements." As a result, before a court may exercise its discretion, it must determine the threshold issue of validity. The trial judge ruled that the Derbys' agreement was invalid because it was unconscionable and was obtained by constructive fraud or duress.
The Court of Appeals of Virginia disagreed with the holding of the trial court. The court found there was a gross disparity when you look at the value of the property that each party received under the separation agreement. Mrs. Derby became sole owner of the majority of the parties' marital property valued at $260,000 as apartments or $423,000 if converted into condominiums. The trial judge found: "By this property settlement agreement the husband gave up essentially everything he had ever earned and accumulated in his lifetime for an ephemeral promise on the part of the wife to permit him to reside in one of the apartment units in the building if he `did not pull anything'”.
The court further found that there was a small amount of remaining marital property that was divided evenly, but the agreement provided that Mr. Derby waived his rights to spousal support while Sandra Derby retained hers. They found there was evidence of concealment, misrepresentation, and undue advantage on the part of Mrs. Derby as well as emotional weakness on the part of Mr. Derby (thought his wife wasn’t cheating and was going to return to the family home). Neither party was represented by counsel during the final "negotiations." Having found the agreement invalid, the court properly declined to affirm, ratify or incorporate it into the divorce decree.
Galloway v. Galloway, 622 S.E.2d 267 (Va. Ct. App 2005)
Facts
Parties were married June 1, 1984, and separated on October 1, 2001. There were no children born or adopted of this marriage. In 1988 husband started his own business, Cassenvey Heating, Air Conditioning and Refrigeration, Ltd. Husband was, and continues to be, the sole stockholder and president of this business. In July of 1993 the wife began working at Cassenvey Heating, Air Conditioning and Refrigeration, Ltd. Wife worked for husband continuously from 1993 until six months before the April 20, 2004 commissioner's hearing. During their eleven years employed together, both parties worked to expand the business, with its gross receipts for 2002 reaching over $ 1,000,000. In February of 1984 and prior to the marriage, husband purchased and titled in his own name the marital home property located on a 3.5-acre lot. Since the business and the marital property were located on the 3.5-acre parcel, husband had the business and real property appraised as a unit in 2003 for a total of $ 200,000.
Prior to official separation date both the husband and wife had discussed the terms of the property settlement agreement. The husband met with his wife to discuss an agreement for separation of property. At that time the husband advised the wife that she could advise an attorney. The wife proceeded forward with signing the opposed agreement.
The separation agreement between the husband and wife provided the wife would receive a pickup truck valued at $11,000. Each party waived spousal support. The husband was granted all of the interest in the marital residence and the business. The agreement was executed on September 29, 2001.The trial court entered in an order that the agreement was valid. The wife proceeded with an appeal.
Issue
1. Did the trial court err in finding the property settlement agreement not unconscionable?
Holding
No. The judgment of the Va. Circuit Court was affirmed.
Rational
The facts of the Galloway case are in comparison to the Derby v. Derby, 8 Va.App. 19, 378 S.E.2d 74 (1989), which sets forth the basis for analyzing this issue. The Derby case held that in order to find relief the “gross disparity existed in the division of assets, and overreaching or oppressive influences” are found. Of the two prong test gross disparity in the division of assets was proven to be true, and overreaching/ oppressive influences was not proven. The court did not find that the plaintiff proved the defendant had coerced, mislead, bribed, or acted incorrectly in the dealings prior or during the proposal of the settlement agreement. The appeals court affirmed the settlement agreement was valid and enforceable and that there was no err on the trial court’s ruling.
Jeff E. Howie, III v. Atlantic Home Inspection, Inc., 62 Va. Cir. 164 (Va. Cir. 2003)
Facts
The Homeowner was in the process of purchasing his new house. The Homeowner hired the defendant to perform a home inspection on March 27, 2000, prior to finalizing the purchase of the home. The inspection cost the Homeowner $195.00. The inspection report did not entail the house in question had any foundational damage. The Homeowner then finalized the purchase of the house. After moving into the new home, the Homeowner notices hints of foundational damage with the Florida Room Addition. After consulting with a contractor the Homeowner was informed the foundation of the addition was inadequate.
The Homeowner files suit against the Inspector. Homeowner claims that the Inspector failed to provide proper service due to the foundational problems not being detected, and provided false warranty on the recently inspected home.
Issues
Is Atlantic Home Inspection, Inc. financially responsible for financial burdens acquired by Jeff E. Howie, due to inspection warranty contract being unconscionable?
Holding
Yes. Judgment entered for Plaintiff, but only in the amount of $ 195.00, the cost Plaintiff paid for the inspection.
Rational
The facts of the Jeff E. Howie, III v. Atlantic Home Inspection, Inc. case are similar to the Ash v. All Star Lawn & Pest Control, 256 Va. 520, 506 S.E.2d 540 (1998), in the matter that both plaintiffs where in the process of buying a dwelling property and both Mr. Ash’s and Mr. Howie’s inspection resulted in finical distress. Howie related his case to the Baird v. Dodson Brothers Exterminating Co., 217 Va. 745, 232 S.E.2d 770 (1977), due to the judgment of the Virginia Supreme Court in Baird held that "mere inspection, however casual or cursory and effectual to disclose obvious damage, [does not] insulate [the company] from liability." If mere inspection insulated the company from liability, "[it] would reward inaction or negligent performance by [the company], and would defeat the purpose of the contract to protect Baird's residence from further insect damage."
The court found the Ash and Baird are distinguishable from the case at bar in that the Atlantic Home Inspection, Inc. disclaimers are clear and conspicuous, and specific, not generalized. The disclaimers appeared in bold, capital letters as part of the written report, which Plaintiff later admitted he received. It was upon the plaintiff to prove unconscionability with clear and convincing evidence according to Pelfrey v. Pelfrey, 25 Va. App. 239, 244, 487 S.E.2d 281 (1997). An unconscionable bargain is one that no man in his senses would make, and as no fair man would accept. According to Uniform Commercial Code a contract may include limitations of liability and will be recognized only when in bold capital letters, and provide no confusion to what is being offered, as did the Defendant’s contract. In this case Jeff Howie agreed to pay Atlantic Home Inspection, Inc. $195.00 to promise to inspect the property at 124 East Severn Road, Norfolk, Virginia. The contract between both parties provided circumstances upon the inspector making an error which would allow the Plaintiff to recovery the full amount paid for inspection.
The Plaintiff did not prove any intentional wrong doing on the Defendant, or “gross disparity in value exchange”. Michael L. Pelfrey v. Linda M. Pelfrey, 25 Va. App. 239, 244, 487 S.E.2d 281 (1997).
Michael L. Pelfrey v. Linda M. Pelfrey, 25 Va. App. 239, 244, 487 S.E.2d 281 (1997).
Facts
The Plaintiff (husband) and Defendant (wife) were married on August 3, 1973, and were divorced on December 8, 1988. They remarried on September 12, 1991, and separated again in the fall of 1992. October of 1992 the wife obtained an attorney to draft a settlement agreement, and the husband signed the agreement on November 19, 1992. The husband later decided to dispute the agreement claiming it was sign without representation but the court found that the assets where distributed fairly.
The husband pursued an appeal.
Issues
Was the trial court in err when ruling to honor the property settlement agreement due to it being unconscionable?
Holding
No. The higher court ruled to affirm the settlement agreement.
Facts
The facts of the Pelfrey case are compaired to that of Drewry v. Drewry, 8 Va. App. 460, 466, 383 S.E.2d 12, 14 (1989) case. The Drewry v. Drewry case suggests that an agreement can be considered unconscionable "adequacy of price" or "quality of value" have been unfairly, by all eyes of the law, been distributed between parties. If gross disparity in value exchanged' exists then the court should consider whether oppressive influences affected the resulting in an unfair distrabutuion of property then the case shall be considered for overruling.
According to Derby v. Derby, 8 Va. App. 19, 26, 378 S.E.2d 74, 77 (1989), it is upon Mr. Pelfrey to prove the agreement unconscionable. The agreement provides that Mr. Pelfrey would pay $ 1,700 per month in support until Mrs. Pelfrey remarries. Mr. Pelfrey also agreed to pay for Mrs. Pelfrey's medical and telephone bills. In return, Mrs. Pelfrey relinquished any interest in Mr. Pelfrey's pension, profit-sharing or deferred compensation plans, of which none existed, and any interest in his two corporations, TEI, Inc. and Tidewater Express, Inc.
The trial court also recognizes in Drewry v. Drewry, 8 Va. App. 460, 466, 383 S.E.2d 12, 14 (1989) that when the parties have entered into a valid agreement, the trial court may incorporate that agreement into its final decree of divorce. The court finds that just because an agreement might seem unfair does not mean it is subject to equitable relief. Mr. Pelfrey suggested that although Mrs. Pelfrey directed via email to contact an attorney prior to signing the agreement, he still contended that the property settlement agreement entered into with Mrs. Pelfrey was the product of duress due to Mrs. Pelfrey claiming to commit suicide. Mrs. Pelfrey admitted to threatening to kill herself twice in February, 1992, when Mr. Pelfrey told her that he did not love her. The facts and circumstances of this case support the trial court's determination that duress did not excuse enforcement of the agreement. There is no evidence of oppressive conduct or overreaching on behalf of Mrs. Pelfrey. The evidence supports the trial court's approval of this conclusion.