The Test(s) for Unconscionability
April 17, 2018 § 1 Comment
Carl Smith filed an action to set aside or modify the final judgment in his divorce case, alleging coercion and unconscionability. The irreconcilable differences divorce, incorporating the agreement between his ex-wife Lisa Doe and him, was entered two and one-half years before the filing of Carl’s action. The chancellor rejected Carl’s arguments, and he appealed.
After addressing and disposing of Carl’s MRCP 60 issues, the MSSC affirmed in Smith v. Doe, decided January 25, 2018. On the issue of unconscionability, Justice Maxwell wrote for the 7-2 majority:
¶16. The chancellor alternatively found that, even if Carl’s filing was deemed timely under Rule 60, it still lacked merit. After review, we agree. While we find no abuse in the chancellor refusing to set aside the agreement under Rule 60(b), we also see no error in the chancellor’s finding Carl was not overly browbeaten or otherwise coerced into signing a procedurally or substantively unconscionable agreement.
A. Procedural Unconscionability
¶17. “Procedural unconscionability may be proved by showing ‘a lack of knowledge, lack of voluntariness, inconspicuous print, the use of complex legalistic language, disparity in sophistication or bargaining power of the parties and/or an opportunity to study the contract and inquire about the contract terms.’” East Ford, Inc. v. Taylor, 826 So. 2d 709, 714 (Miss. 2002) (quoting Pridgen v. Green Tree Fin. Servicing Corp., 88 F. Supp. 2d 655, 657 (S.D. Miss. 2000)). But here, the chancellor found none of these problems.
¶18. To the contrary, after sifting the testimony and evidence, the chancellor found Carl “was able to make the payments, he understood the terms ofthe contract[,] and he voluntarily entered into the Agreement.” Our review of the record shows strong support for these discretionary findings.
¶19. The agreement was incredibly clear. It emphasized that its terms strongly favored Lisa, and it mentioned why. The written explanation of Carl’s enhanced obligations was not inconspicuous or hidden in fine print or a footnote—it was front and center in the agreement.
¶20. Furthermore, Carl’s new procedure-based challenge is also completely at odds with his prior written acknowledgment that his and Lisa’s negotiations were even-handed and not the product of duress, coercion, or overreaching. The agreement says so:
ACKNOWLEDGMENT OF FAIRNESS IN EXECUTION OF DOCUMENT:
Husband and Wife agree that this Settlement Agreement is not entered into as a result of any fraud, duress, misrepresentation, overreaching, coercion, or undue influence. In executing this document, both Husband and Wife acknowledge and agree that they are free from any of these matters, and are executing this agreement as their own voluntary and free act, and that they do so knowingly and willingly . . . .
And his claim that Lisa kept him from obtaining counsel not only conflicts with her testimony but is also undercut by the agreement:
. . . Husband agrees that he has been encouraged to and has had adequate opportunity and has been free to seek his own legal representation or other advice concerning this matter, before he signed and obligated himself to this Settlement Agreement.
¶21. The chancellor essentially found Carl knew exactly what he was doing and exactly what he was obligating himself to do when he signed the settlement agreement. Indeed, according to the agreement, Carl accepted its strict terms based on “the unique difficulties in which [his] behavior has placed the family unit[.]” The chancellor recognized this and noted that “[Carl] was in a place of self-loathing and felt extreme guilt for his choices that had caused the destruction of his marriage and family.” That his extramarital activities and devious behavior gave Lisa the upper hand in negotiating a favorable settlement did not negate that Carl “freely and willingly” agreed to the settlement’s terms. Nor did Carl’s “self-imposed guilt” and Lisa’s “obvious hostility,” in the chancellor’s view, amount to an unconscionable disparity of bargaining power. Based on his advanced education, Carl was certainly aware of the finality of signed legal contracts and judgments. And the chancellor’s findings and the agreement’s express acknowledgments undermine Carl’s newly minted procedural-unconscionability claim.
B. Substantive Unconscionability
¶22. “Substantive unconscionability occurs when the terms of the agreement are so one-sided that no one in his right mind would agree to its terms.” West v. West, 891 So. 2d 203, 213 (Miss. 2004) (citing In re Johnson, 351 So. 2d 1339, 1341 (Miss. 1977)). Considering the agreement’s terms, the chancellor found Carl “was able to make the payments . . . .” And he understood the heightened terms, which he voluntarily accepted. Though the settlement agreement was disadvantageous to Carl, the chancellor could not find that no person in his senses would accept it. See id. This finding is supported by the record.
¶23. In addition, Carl testified he is “very stable” financially. Indeed, his Rule 8.05 [Fn omitted] disclosure shows a monthly surplus of more than $5,000 after support obligations, expenses, and taxes are paid. It is also undisputed that Carl has abided by the agreement’s terms, making all required payments for more than two-and-a-half years.
¶24. The chancellor did recognize support provisions are modifiable where an unanticipated substantial or material change in circumstances arises. See Wallace v. Bond, 745 So. 2d 844, 848-49 (Miss. 1999); McDonald v. McDonald, 683 So. 2d 929, 931 (Miss. 1996). But Carl did not suggest or prove his financial circumstances had materially changed. So the court found no showing of a material change in circumstances warranting a downward modification.
¶25. An agreement made between parties should ordinarily be enforced. Williams v. Williams, 37 So. 3d 1171, 1174 (Miss. 2010). And courts should “take a dim view of efforts to modify it, as we ordinarily do when persons seek relief from their improvident contracts.” Id. (quoting West, 891 So. 2d at 211). Absent a finding of unusual circumstances—like fraud, overreaching, or mistake—“parties are afforded wide latitude in entering property settlement agreements.” Id. (citing Steiner v. Steiner, 788 So. 2d 771, 776 (Miss. 2001)).
¶26. Here, the chancellor “expressly determined that no fraud or overreaching existed in this matter.” Thus, he deemed “all provisions of the agreements regarding fixed alimony or a division of property” nonmodifiable. We therefore find, even if Carl’s motion was not snagged on the chancellor’s Rule 60(b)(1) and Rule 60(b)(6) timeliness findings, the chancellor did not abuse his discretion in alternatively rejecting the merits of the unconscionability claims.
A couple of morals to this story come to mind …
- One is that the words of the agreement are powerful and binding. Some of that boilerplate you have been adding to your agreements can carry some serious weight. Why? Because the court looks first to the words used by the parties in trying to determine their intent. If Carl felt coerced in the inducement he should not have said expressly that he had not been coerced. If he was deprived of the right to counsel, he should not have signed off on the language to the contrary.
- Another is that it’s hard as the dickens to get a judgment — particularly an agreed judgment — set aside. Oh, it can be done, but it’s a herculean task.
The authority for unconscionability in this case is something you might use to analyze and present a claim that a pre-nuptial agreement does or does not meet the test of conscionability as set out in the MSSC’s 2015 Sanderson v. Sanderson case about which I posted at this link.
This was a difficult Opinion. The majority sounded like the decision was affirmed because the fellow agreed to a bad deal all the while knowing it was a bad deal and is therefore stuck with it. The dissent explained just how bad it was. If this agreement could not be set aside, I am not sure any agreement could ever be set aside so long as it has a sentence that says this is a bad deal. Also, the sua sponte remand for considerations of lifting the seal seems to have come out of left field.