Originally released January 26, 2018
Ever had a case involving the future sale of a house? Of course. A domestic violence claim implicating the Fifth Amendment? It happens. So two opinions this week should catch your eye.
“You Pay Me $118,500 When You Sell the House” Doesn’t Necessarily Mean “Only If You Sell”
That, oversimplified, is one way to read Kirchner v. Kirschner, Case No. 4D17-851 (Fla. 4th DCA Jan. 24, 2018).
A condition precedent isn’t necessarily what you—or the trial court—might think. And you’ve got to be careful when drafting future property sale provisions into your MSA or proposed final judgment.
Here, the original MSA had a plain provision requiring the sale of the house at a mutually agreed price. They later amended the MSA with a more elaborate provision. In it, the parties agreed the fair market value was $725,000, with a mortgage balance of $328,000. Therefore they agreed that each was entitled to half the current equity, or $198,500 each.
So here’s what they would do. By signing the addendum, wife would quitclaim her interest, and husband would pay her $80,000 within ten days. The remaining $118,500 would be paid at closing. If the house wasn’t sold within five years, husband would make “diligent efforts” to refinance to pay her the $118,500. She was entitled to no other sum regardless of the sale price, and even if it sold for less than their fair market value, “Husband shall pay to the Wife, by any means available to him, the sum of $118,500.”
Six years later, she moved to enforce and demanded $118,500 with interest. At the time of hearing, the house had been listed at $725,000 for several months, more than its current fair market value. Before that, he had not listed it for sale for seven years because it was underwater, had depreciated over 60%, and in his opinion a sale would give wife a windfall and leave nothing for him. He had tried four times to refinance—only as recently as four years before the hearing—but always failed for either insufficient collateral or because he was behind on the mortgage payments.
Husband claimed he had no obligation to pay the $118,500 unless he sold or refinanced. The sale or refinance was a condition precedent – the only thing wife could do was to have the debt reduced to a money judgment. The court essentially agreed, and held it could not “rewrite” the addendum to construe the $118,500 sum as a general debt obligation owed by husband. It also found that he had been diligent in his efforts to sell or refinance the house.
Not so fast, said the Fourth District. The addendum was ambiguous, and the trial court shouldn’t have viewed the sale or refinance as a condition precedent.
No to condition precedent, because there were no “phrases of conditional performance.” The parties agreed husband would pay her $118,500 for equitable distribution, and the proceeds from a sale or refinance were merely a source for payment. That amount was due to wife, period.
But the MSA didn’t say when and how he would pay the amount without a sale or refinance, which rendered it ambiguous. This was a latent ambiguity, not obvious at the time of the contract, but which required the trial court to take extrinsic evidence about the parties’ intent while drafting the addendum for what they would do if the sale or refinance did not occur.
The Fourth DCA also agreed with wife that there was no competent, substantial evidence to support the finding that husband had diligently tried to sell or refinance the house. You can dig into the details in the opinion, but either way the result was the same: reversal so the trial court could examine evidence of the parties’ intent if the house wasn’t sold or refinanced.
This is possibly a good result for wife on appeal – setting up for her to possibly get paid for the house without having borne the risk of depreciation for the house. Though on the other hand she was denied the use of the $118,500 she was owed for six years, plus however long this took on appeal, plus however long it takes to resolve below.
But I wonder if this was in fact a latent ambiguity – that is, not obvious at the time of the contract. Given husband’s behavior since the addendum, it looks like he really thought the remaining payment wouldn’t be triggered until he sold or refinanced. And the language of the addendum leaves enough wiggle room that you can see why the trial lawyer’s argument below persuaded a circuit judge. You could see why a lawyer glancing at the last pertinent paragraph of the addendum might argue that, construing the addendum as a whole, the sale or refinance had to happen first.
But the district court disagreed. That’s de novo review for you.
One thought if you’re crafting a provision calling for future work by one or both parties. If you leave out a big “what if,” because you think you know the answer from the provision you’ve crafted just so, and you think the court would agree … what if the trial or district court disagrees?
The history here suggests that husband might have been able to take other steps, like selling for less, to mitigate the damage of ongoing depreciation, late payments, and impending foreclosure. But he didn’t because he thought wife would win and he would lose. What would he give today to go back and iron out the addendum so that he’s not litigating “evidence” of intent almost a decade later, with a ravaged credit history and an outstanding $118,500 bill to pay wife?
You Can Plead the Fifth, But You Might Not Delay the DV Hearing
When an alleged domestic violence incident occurs, a respondent could be facing concurrent criminal and DV cases. An attorney representing such a respondent will often agree to the temporary injunction and request a stay on the hearing for permanent injunction. After all, testifying in the DV hearing could jeopardize the respondent’s Fifth Amendment right. And if the injunction is extended, then how could petitioner be harmed by a stay on the hearing?
Here, the DV court denied the stay, conducted the hearing over respondent’s objection, and entered a permanent injunction after petitioner, but not respondent, testified.
And the First District affirmed. There was no per se rule requiring a court in a civil proceeding to grant a stay if there were related criminal matters and Fifth Amendment concerns. Granting the stay would have been within the court’s broad discretion – and so was denying it.
So if you thought that a respondent’s offer to extend the temporary injunction was enough to guarantee a stay, not so. Bear this in mind in a DV case – whether you represent the petitioner or respondent.
You can read Speegle here.
Disclaimer: This Mattson Memo/Giel File was originally released in January 2018. But please do not consider it legal advice. And do not assume it reflects the current state of the law. Family law changes all the time. Statutes are enacted, amended, or repealed. Case law goes on, and the apparent effect of a case decided years ago may be limited, or expanded, by other courts considering the same or similar issues.
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