John and Sheila handled their own divorce to save themselves attorney's fees. Now they had to return to court to settle who was entitled to what part of their home sale proceeds based on their divorce agreement.
During their divorce, Sheila wrote up a very short divorce settlement agreement of only a few pages and very few details and both parties signed it. This agreement was accepted and approved by the Rhode Island Family Court which only required that the court find that it was fair and equitable and that it was also freely and voluntarily entered into by the parties.
John and Sheila would soon find out that the importance of a divorce settlement agreement relies on the words used and that it needs to address things that could and/or should happen while parties are waiting for the house to sell, including the obligations of each party. Regrettably, John and Sheila would end up learning that when it comes to settling a divorce and putting together a divorce settlement agreement that the "devil is in the details" and that the details matter greatly.
Their divorce agreement provided, in pertinent part, the following:
1. The parties were each responsible for the debts in their own name.
2. The parties' home was to be sold as soon as possible.
3. The parties were each to be responsible on a 50/50 basis for any repairs and improvements for the home that were reasonably necessary for the home's sale.
4. On the sale of the home, John was to receive 30% of the net proceeds and Sheila was to receive 70% of the net proceeds.
Four years later, the house sold. However, Sheila had not kept the home on the market the entire time.
At the closing, Sheila claimed she was to receive $117,000 at the time of the closing and John was only to receive $26,000. The numbers didn't add up and John wouldn't agree to that distribution so the closing attorney was forced to hold the funds until the matter was resolved by the parties or the court.
Sheila claimed that she paid for a bunch of improvements and repairs over the past four years that John had not contributed to and she was due a credit for half of all those improvements and repairs. John knew nothing about any improvements or repairs and was never consulted about them. Sheila also claimed that she was due a credit for all the mortgage payments she had made over the past four years because those payments protected the equity in the home. Sheila also claimed that one of John's creditors put a lien on the house because he didn't pay one of his debts so she had to refinance in order to pay off the lien so the house wouldn't be lost to a judicial sale. John was not aware of any lien on the house.
John asked Sheila for the bills and invoices showing the cost of the repairs and improvements for the house as well as the lien and the refinance documents and refinance amount. Sheila was not willing to provide the requested documents.
The parties must now to court to have the court determine who was entitled to what portion of the proceeds from the sale of their home by trying to enforce their divorce agreement.
The court has the power to interpret a divorce settlement agreement but it may not modify such an agreement. Therefore, the court must enforce the agreement as it is written, except that it may be required to fashion a remedy where the agreement is silent on the particular issue between the parties.
Unfortunately, the divorce agreement creates legal issues for both parties because it is silent on too many issues here. Specifically, the agreement did not address any of the following, namely:
1. Loans taken out against a home's equity prior to sale of the home;
2. Liens recorded against the home pending sale and unilateral payoff of a lien by one party;
3. What constitutes an improvement or a repair to the home;
4. How improvements and repairs are determined to be "reasonably necessary";
5. Whether one party may unilaterally make improvements and repairs to the home;
6. Who was required to pay the mortgage, taxes, and insurance costs to maintain the home;
7. Whether a person paying any of the mortgage, taxes, insurance costs for the home pending its sale is entitled to any credit or reimbursement for any such payments;
8. Whether either party is entitled to receive credits against the others percentage of the net proceeds if the percentage of proceeds are stated specifically but no credits are allowed for in the agreement.
9. What is a party's remedy for a breach of a provision of the agreement?
These are only a few of the myriad of issues created by a short handwritten agreement by one of the parties which failed to address things that divorce lawyers commonly anticipate and include in the agreements in advance so that there is little or no question as to what is to happen if these circumstances arise.
The agreement itself is perhaps the most delicate and important part of the resolution of a divorce because the vast majority of the time it is the contractual provisions contained in your divorce agreement that the court is asked to read, interpret and enforce. If the agreement and the terms are clear, there is little or no argument to be had and the proceeding before the court, if any, is often shortlived because the agreement addressed the issue and the only obligation of the court is to enforce it as written.
The details of a divorce agreement (aka Property Settlement or Marital Settlement Agreement) are the lifeblood that prevent issues in the future. John and Sheila have most likely learned a valuable lesson. Specifically, it is worth having an experienced divorce lawyer draft a proper divorce agreement to anticipate future events and put them in the agreement. If you fail to do so, you are very likely going to spend considerably more money than the divorce attorneys fee later in order to return to court and argue against a poorly written agreement and then take your chances on the outcome.