In re Marriage of Manzo – Property Settlement Agreement
In re Marriage of Manzo, 659 P.2d 669 (Colo. 1983)
NATURE OF THE CASE: This case involved an appeal from the setting aside of an agreement for the division of marital property.
FACTS: W filed for dissolution of the marriage an April 13, 1979. W and H had signed a separation agreement whereby W would set the price and sell the family home. The agreement provided that W would get the first $60,000 and H would get any excess over $60,000. H was not represented by counsel when he signed the agreement. The house was listed for $129,000 but did not sell and the listing was lowered to $119,000. W also testified that she was to get the first $60,000 so she could buy a condo to keep her monthly payments within her $800 gross monthly income. H’s monthly gross income was $1,800.
H sought to set aside the separation agreement on the basis that he thought the home would sell for $140,000 to $150,000 and that because of his unilateral mistake he was to receive only 5-10% of the net sale proceeds when he had intended to receive 40-50%. The order entered by the district court awarded custody of the two children to W. The court also ordered that H was to pay $250 per month in child support, that the parties waived maintenance, and that the house be sold and the proceeds divided between the parties 60/40.
The trial court set aside the property settlement agreement on the basis that H’s receipt of $10,000 and W’s receipt of $60,000 was not fair, just or equitable and the court of appeals affirmed.
ISSUE: May a court set aside a separation agreement that is unfair, unjust and unreasonable merely on account of a unilateral mistake by one of the parties, even if there was no overreaching, concealment of assets, or sharp dealing?
RULE OF LAW: Yes. A court may set aside a separation agreement that is unfair, unjust and unreasonable merely on account of a unilateral mistake by one of the parties, even if there was no overreaching, concealment of assets, or sharp dealing.
HOLDING AND DECISION: However, in light of the totality of the economic circumstances and the actual result of the agreement in this case we believe that the end result was fair, just and reasonable. We note that traditionally a contract may not be rescinded where one party has made a unilateral mistake as to the value unless the other party knew or had reason to know of the error.
An unconscionable agreement is an agreement that is not fair, just and reasonable. Other courts have rejected the need to find overreaching, inequity of bargaining power or other elements of fraud before setting aside a property settlement agreement as unconscionable prior to its incorporation in a dissolution decree. Unconscionability is determined by looking at the economic circumstances of the parties resulting from the agreement and any other relevant evidence such as the conditions under which the agreement was made including the knowledge of the other party. Because of the fiduciary relationship between husband and wife, separation agreements generally are closely scrutinized by the courts and such agreements are more readily set aside in equity under circumstances that would be insufficient to nullify an ordinary contract. In this case there is no evidence of activity that is inconsistent with the obligations of married parties to deal fairly with each other such as overreaching, fraud, concealment of assets or sharp dealing. However, in the light of the totality of the circumstances in this case there is insufficient evidence to show that this agreement was not fair, just, and reasonable.
DISPOSITION: Reversed.