Francois v. Francois

Brief Fact Summary.

A husband and wife entered into an agreement to split up their assets in order to "save their marriage."  The husband was wealthy and the wife did not bring anything into the marital estate.  The validity of the agreement was at issue.

Synopsis of Rule of Law.

"If a party in whom another reposes confidence misuses that confidence to gain his own advantage while the other has been made to feel that the party in question will not act against his welfare, the transaction is the result of undue influence. The influence must be such that the victim acts in a way contrary to his own best interest and thus in a fashion in which he would not have operated but for the undue influence."

Facts.

The Plaintiff, Victor H. Francois (the "Plaintiff"), was married to the Defendant, Jane Francois (the "Defendant"), on May 13, 1971.  The Plaintiff was fifty and the Defendant was thirty at the time of the marriage.  The Plaintiff was very wealthy.  The Defendant was twice divorced and had two children ages sixteen and thirteen.  Shortly after the parties' marriage, they began having problems.  Nonetheless, the Plaintiff purchased a home for the parties and he paid the down payment and assumed responsibility for the mortgage payments.  The Plaintiff adopted the Defendant's children.  The Plaintiff conveyed real property and securities to the Defendant.  The Defendant also was given power of attorney over the Plaintiff's stock portfolio.  Additionally, the Plaintiff purchased the Defendant a boat, which she subsequently sold and kept the proceeds.  The parties "also executed reciprocal wills leaving the entirety of the marital estate to the surviving spouse or, if no spouse survived, to the children."  The Defendant decided to divorce the Plaintiff on October 8, 1974 and contacted an attorney.  The Plaintiff was then invited to the Defendant's attorney's office and presented for his signature a "Property Settlement and Separation Agreement" (the "Agreement").  The Plaintiff and her attorney told the Defendant that the only way he could save his marriage was if he signed the Agreement.  An attorney named Ball advised the Plaintiff that the agreement was financial suicide, but he signed the Agreement nonetheless.  The Agreement transferred the Plaintiff's interest in much of his property including his remaining securities and the marital home to the Defendant.  After the Agreement was signed the parties only lived with one another for one more year, and the Defendant began selling the Plaintiff's securities.  The Defendant eventually left the Plaintiff.  The Plaintiff sued for rescission of the Agreement and reconveyance of all property the Plaintiff sold.  The District Court found that the Agreement was null and void for four reasons:  "1) the cohabitation of the parties subsequent to the signing of the agreement; 2) the undue influence exerted by Jane over Victor in connection with the signing of the agreement; 3) fraud and misrepresentation on the part of Jane; and 4) the unconscionable terms of the agreement."

Issue.

Was the District Courts determination that the Agreement was null and void sustainable due to the undue influence exerted by the Defendant towards the Plaintiff?

Held.

Yes.  The court observed that the first question it faced was whether the parties had a confidential relationship.  This type of relationship "arises when one party places confidence in the other with a resulting superiority and influence on the other side." The court observed "[t]he evidence supports the district court's findings that the relationship between the parties was one in which Victor reposed total trust and confidence in Jane who used her superior position in the marriage to Victor's financial detriment."  The next inquiry was whether the Defendant could demonstrate that the agreement was fair.  The court recognized there was not a precise definition of undue influence.  However, the essence of the idea is that "[i]f a party in whom another reposes confidence misuses that confidence to gain his own advantage while the other has been made to feel that the party in question will not act against his welfare, the transaction is the result of undue influence. The influence must be such that the victim acts in a way contrary to his own best interest and thus in a fashion in which he would not have operated but for the undue influence."  Further, "the particular transaction must be scrutinized to determine if the agreement was truly the product of a free and independent mind." 
•    Here, the court accepted the District Court's conclusions and found "[t]he terms of the agreement were hardly fair. Attorney Ball's assessment that the agreement was financial suicide for Victor was accurate." The court then imposed a constructive trust over all the assets acquired by the Defendant. 

Discussion.

This case demonstrates how only a case-by-case determination can be undertaken to determine undue influence.  As the court recognized:  "[t]he degree of persuasion that is necessary to constitute undue influence varies from case to case. The proper inquiry is not just whether persuasion induced the transaction but whether the result was produced by the domination of the will of the victim by the person exerting undue influence."