The Opinion of the Court was delivered PER CURIAM.
1. This
Court reviews the circuit court's final order and ultimate disposition under
an abuse of discretion standard. We review challenges to findings of fact
under a clearly erroneous standard; conclusions of law are reviewed de
novo. Syllabus Point 4, Burgess v. Porterfield, 196 W. Va.
178, 469 S.E.2d 114 (1996). 2. A
determination of unconscionability must focus on the relative positions of
the parties, the adequacy of the bargaining position, the meaningful alternatives
available to the plaintiff, and 'the existence of unfair terms in the contract.'
Syllabus Point 4, Art's Flower Shop v. C & P Telephone Company,
186 W. Va. 613, 413 S.E.2d 670 (1991).
Per Curiam: This is an appeal by Angela
Lang from an order of the Circuit Court of Jefferson County which declared
that a contract entered into by her and Robert S. Derr and Florence W. Derr
was a valid and enforceable contract. On appeal, the appellant claims that
the evidence demonstrates that the contract was unconscionable and that under
the circumstances, the court should have declared it void and unenforceable.
After reviewing the questions presented and the record, this Court agrees
with the appellant's assertions.
The record in this case
shows that in 1985 or 1986, the appellee, Florence W. Derr, moved into the
household of Robert W. and Nancy Welsh as a paying boarder. At the time, the
appellant, who is the Welshes' daughter, was a minor and living at home. Shortly after Florence Derr
moved into the Welsh household, Ms. Welsh was diagnosed with cancer and became
bedridden, and Florence Derr undertook to care for her and also did cleaning
and cooking for the Welsh family, including the appellant. This continued
until Ms. Welsh died.
After the death of Ms. Welsh,
Florence Derr continued to live with Mr. Welsh and the appellant, and according
to the record, helped maintain the household. Sometime later, Ms. Derr's husband,
the appellee, Robert Derr, also moved into the Welsh household. In 1994, Robert W. Welsh
was diagnosed with cancer, and the Derrs cared for him until his death on
August 19, 1998. Upon his death, the appellant Angela Lang became his sole
heir of his estate which was later appraised as having probate assets worth
$68,929.33, and which, by some accounts, was actually worth in excess of $90,000. Less than a week after Mr.
Welsh's death, the appellant, on August 25, 1998, was asked to sign, and did
sign, a typed statement called a Consent to Qualify in which she
waived her right to serve as administratrix of her father's estate, and consented
to the qualification of the Derrs as co-administrators of the estate. On the
next day, August 26, 1998, the appellant signed the contract which is in issue
in the present case. Under the contract, she agreed to sell the Derrs her
entire interest in the estate for $100. The contract stated: I, Angie
L. Lang, and all heirs do hereby agree that once the estate of Robert
William Welsh is settled, I agree to sell this estate to Robert S. Derr
and/or Florence W. Derr for the sum of $100.00
Sometime after signing the contract,
and apparently after talking to an aunt, the appellant changed her mind, and
on October 15, 1998, she instituted the present declaratory judgment action.
In her complaint, she alleged, among other things, that she had difficulty in
comprehending written words and that the Derrs had fraudulently and intentionally
coerced her into signing the contract. She also alleged that the contract was
unconscionable. She prayed that the court declare the contract null and void. A bench trial was conducted
in the case, and, after the trial, on January 10, 2001, the court entered
an order holding that the contract was a valid contract. The court found that
there was no showing that the contract had been obtained by fraud. The court
also found that the appellant understood what she was doing at the time she
signed the contract and that it could not, thus, be held unconscionable. The
court further noted that while the payment of $100 for the estate might seem
small, in light of the long history of the close relationship between the
appellant and the Derrs, and in light of the fact that the Derrs had cared
for the appellant's mother and father, as well as the appellant, the contract
was not unconscionable. In the present appeal, the
appellant argues that the contract was unconscionable and that the court erred
in holding that it was a valid contract. In Syllabus Point 4 of Burgess
v. Porterfield, 196 W. Va. 178, 469 S.E.2d 114 (1996), the Court
stated: This Court reviews the circuit court's final order and ultimate
disposition under an abuse of discretion standard. We review challenges to
findings of fact under a clearly erroneous standard; conclusions of law are
reviewed de novo.
This Court has recognized
that a contract may be invalidated because of so- called unconscionability.
See, e.g., Arnold v. United Companies Lending Corporation, 204 W. Va.
229, 511 S.E.2d 854 (1998); Troy Mining Corporation v. Itmann Coal Company,
179 W. Va. 599, 346 S.E.2d 749 (1986); McMellon v. Adkins, 171
W. Va. 475, 300 S.E.2d 116 (1983). The Court has also recognized that,
generally, Restatement (Second) of Contracts § 208 (1981), articulates
what constitutes unconscionability in West Virginia. See, n.1, Troy
Mining Corporation v. Itmann Coal Company, supra. That Restatement
section provides:
If a contract or term thereof is unconscionable at the time the contract
is made a court may refuse to enforce the contract, or may enforce the remainder
of the contract without the unconscionable term, or may so limit the application
of any unconscionable term as to avoid any unconscionable result. The comment on the Restatement
section indicates that generally at least two things must be present for a
contract to be unconscionable, such as to justify a court refusing to enforce
it. First, there must be an inadequacy of consideration. As stated by the
Restatement: Inadequacy of consideration does not of itself invalidate
a bargain, but gross disparity in the values exchanged may be an important
factor in a determination that a contract is unconscionable and may be sufficient
ground, without more, for denying specific performance. The second factor
normally considered in determining whether a contract is unconscionable is
whether the parties were in unequal bargaining positions at the time they
entered into the contract. The Restatement indicates that a number of factors
can shed light upon the bargaining positions of the parties. Specifically,
the Restatement says that, knowledge of the stronger party that the
weaker party is unable reasonably to protect his interests by reason of physical
or mental infirmities, ignorance, illiteracy or inability to understand the
language of the agreement, or similar factors are factors bearing upon
whether the parties were equal in the bargaining process. Restatement (Second)
of Contracts § 208 cmt. (1981).
In analyzing the case presently
before the Court, the Court notes that the contract which the appellant signed
calls for her to receive $100 for her entire interest in her father's estate,
which is worth at least $60,000 and possibly worth over $90,000. Thus, the
appellant has agreed to accept $100 for assets which were worth some 600 to
900 times that amount. The Court believes that this can only be interpreted
as indicating that there was a gross disparity in the values to be exchanged
under the contract.
(See footnote 1)
Apart from the evidence of the
disparity in the values exchanged under the contract, there is evidence which
shows that the appellant was a child during much of the time when the Derrs
resided with her parents and that, in certain respects, they exercised parental
authority over her. The evidence also shows that the appellant is deaf and that
the contract in question in the case was entered into a week after the death
of her father during a period when the appellant was arguably suffering from
disorganization and grief as a result of the death of her sole surviving parent.
Finally, the Court has examined the record in this case and believes that the
circuit court's conclusion that the appellant entered into the contract with
a full understanding of its consequences and an independent desire to do so
is not supported by the evidence presented. For instance, the appellant was
questioned about her understanding of her father's estate and the appointment
of Robert and Florence Derr as co-administrators of his estate. The testimony
proceeded as follows:
Q. Because
somebody had to do it, isn't that right? At another point, the appellant
in response to leading questions at one point affirmatively indicated that
she wished to sell Robert and Florence Derr her father's house. However, when
questioned about the circumstances surrounding the signing of the contract
in question, the appellant testified as follows:
At another point, the appellant
was asked to read a sentence from the complaint in the case and to explain
what it meant. The testimony proceeded as follows: After reviewing the record
in this case, this Court believes that it shows that the parties were not
in equal bargaining positions and that, contrary to the trial court's conclusion,
the record fails to establish that the appellant entered into the contract
with a full understanding of its consequences. Under the circumstances, given
the uneven bargaining positions of the parties and the inequality of the values
exchanged by the parties, the Court concludes that the contract was, in fact,
unconscionable under the law of West Virginia.
(See footnote 2)
No. 29959
John W. Askintowicz, III, Esq.
Charles Town, West Virginia
Attorney for Appellant Garry G. Geffert, Esq.
WV Legal Services Plan, Inc.
Martinsburg, West Virginia
Attorney for Appellees
As has previously been indicated,
the appellant's claim in the present appeal is that the contract which she
entered into with Robert S. Derr and Florence W. Derr was unconscionable,
and that as a consequence, the trial court should have held the contract invalid.
In Art's Flower Shop, Inc.
v. C & P Telephone Company, 186 W. Va. 613, 413 S.E.2d 670 (1991),
this Court essentially adopted the points discussed in the comment on the Restatement
section. In Syllabus Point 4 of Art's Flower Shop, Inc. v. C & P Telephone
Company, id., the Court stated: A determination of unconscionability
must focus on the relative positions of the parties, the adequacy of the bargaining
position, the meaningful alternatives available to the plaintiff, and 'the existence
of unfair terms in the contract.'
Q. Did
your father have a will?
A. Yes.
Q. What
happened to it?
A. Did
he work?
Q. No,
did he have a will when he died? Did he have a will?
A. No.
(WHEREUPON,
the document presented was marked as Deposition Exhibit Number One for identification
purposes.)
Q. Mrs.
Lang, I'm going to show you a one page document. It's been marked Exhibit Number
One. I want you to take a minute and look at that please. Have you seen this
document before? (Indicating)
A. Yes.
Q. Is
that your signature? (Indicating)
A. Yes.
Q. What
do you understand this document to mean? (Indicating)
A. I
didn't hear you.
Q. What
does this document mean? (Indicating)
A. Why
or . . .
Q. What
does it mean? Let me ask it a different way.
A. Could
you repeat it again? Because Flo and Scott were co-administrators.
Q. Why
did they become co-administrators?
A. I
don't know.
Q. Well,
why didn't you become administrator?
A. I
don't know.
Q. Did
you want to do that?
A. No.
Q. So
you asked them to do it, right?
A. Yes.
A. Yes.
Q. Did
your aunt, Ellen want to be administrator?
A. I
didn't know what co-administrators meant.
Q. Why
did you sign the paper?
A. I
didn't sign it first.
Q. Who
did?
A. Frank
[the appellant's husband] did.
Q. Well,
all right. Why was it signed?
A. Huh?
Q. Where
were you when this paper was signed?
A. My
house, outside in the driveway.
Q. Did
you talk to Frank about signing it?
A. Yes.
Q. What
did you talk about?
A. If
he wanted Flo and Scottie to be co-administrators. He said go ahead and sign
it, so he signed it first.
Q. Then
you signed it?
A. Then
he told me to sign it, yes.
Q. Did
Mr. and Mrs. Derr make you sign it?
A. No.
Q. What
did you think would happen after you signed this? (Indicating)
A. Could
you repeat please?
Q. What
did you think would happen after you signed this exhibit, Exhibit One?
A. I
don't know. I don't know.
Q. Did
you think you would have to do anything with your father's estate?
A. I
don't know.
Q. And
did the notary ask you if you understood what was on the paper?
A. Yes.
Q. What
did you tell her?
A. I
can't remember.
Q. You
told her you understood it didn't you?
A. Yes.
Q. Why
were you going to sell the house to Mr. and Mrs. Derr for either one hundred
or one thousand dollars?
MR. ASKINTOWICZ: I believe it's
her understanding that the estate was going to be sold.
Q. Why
were you going to sell the estate for that money?
A. I
don't know.
Q. Well,
why did you sign the paper?
A. Huh?
Q. Why
did you sign the paper?
A. I
couldn't hear you, I'm sorry. I don't know.
Q. I
want you to look on the second page of Exhibit Three, paragraph number 14.
Would you read out loud for me please?
A. Which
one?
Q. Number
14, right there. (Indicating)
A. This
one? (Indicating)
Q. Yes,
ma'am.
A. That
the defendants, Robert S. Derr and Florence W. Derr fraudulently and intentionally
-- I don't know that word -- Angela L. Lang into -- tax. (sic.)
Q. Do
you know what that sentence means? (Indicating)
A. Sir?
Q. Do
you know what that sentence means? (Indicating) Can you explain that to me?
A. No,
I don't.
Q. Did
you know what it meant when you signed the paper?
A. No.
For the reasons stated, the
judgment of the Circuit Court of Jefferson County is reversed, and this case
is remanded with directions that the court enter judgment for the appellant,
Angela L. Lang.
A, the executor of a will under which a tract of land has been devised to B, makes a contract with B to buy the tract from him.
Before making the contract, A tells B all relevant facts about the transaction.
The contract is voidable by B unless the court concludes that it is on fair
terms.
Restatement (Second) of Contracts § 173 cmt. illus. (1981).
This Court has plainly stated that:
The personal representative
of the estate of a deceased acts in a fiduciary capacity. His duty is to manage
the estate under his control to the advantage of those interested in it and
to act on their behalf. In the discharge of this duty, the executor or administrator
of a deceased's estate is held to the highest degree of good faith and is
required to exercise the ordinary care and reasonable diligence which prudent
persons ordinarily exercise, under like circumstances, in their own personal
affairs.
Syllabus Point 1, Latimer v. Mechling, 171 W.Va. 729, 301 S.E.2d 819 (1983).
In the same case, the Court has indicated that if a personal representative
of an estate undertakes to sell property of the estate, his fiduciary obligation
requires him to secure the best price obtainable under the circumstances.
The Court believes that it is implicit in this, as it is in § 173
of the Restatement, that it is inappropriate for a fiduciary to sell to himself,
or for him to contract to buy from an estate, property of the estate for an
amount which is unfair.
While it is not clear that the Derrs were actually fiduciaries of the estate of Robert W. Welsh at the time the contract in the present case was entered into, it is clear that the relationship was contemplated and that Angela Lang had already consented to their being fiduciaries.