Facts: Husband and Wife divorced in 2012. The trial court approved their marital dissolution agreement (“MDA”) in which Wife was awarded the former marital residence. Wife was ordered to pay the mortgage debt and hold Husband harmless from any debt associated with the property.
Curiously, Wife was not required to refinance the debt solely in her name. There also is no provision requiring Wife to sell the residence if she could not pay the debt associated with it.
In 2014, Husband filed an action for civil contempt alleging that Wife failed to pay the debts on the residence.
The trial court found Wife was in “willful civil contempt” of the MDA. The trial court further found “the Wife has not and cannot pay the full monthly payment owed on this indebtedness nor can she pay off the debt.”
The trial court ordered Wife to refinance the debt within 60 days because, according to the trial court, Wife’s inability to pay the debt left Husband with no legal remedy. If Wife did not refinance the debt within 60 days, the residence would be sold.
On Appeal: The Court of Appeals reversed the trial court.
Civil contempt. A claim of civil contempt based upon alleged disobedience of a court order requires four essential elements: (1) the order alleged to have been violated must be “lawful”; (2) the order alleged to have been violated must be clear, specific, and unambiguous; (3) the person alleged to have violated the order must have actually disobeyed or otherwise resisted the order; and (4) the violation of the order must have been “willful.”
In the context of civil contempt, conduct is deemed willful if it is the product of free will rather than coercion. Thus, a person acts “willfully” if he or she is a free agent, knows what he or she is doing, and intends to do what he or she is doing. Stated another way, civil contempt is an available remedy only when the individual has the ability to comply with the order at the time of the contempt hearing.
After reviewing the evidentiary record, the Court reasoned:
The trial court found that Wife was not financially able to comply with the terms of the MDA. Therefore, Wife’s failure to pay the debt was not willful. Without a threshold finding of willfulness, it was error for the trial court to hold Wife in contempt…. Therefore, we vacate the trial court’s holding Wife in contempt.
Selling the residence. An MDA is a contract and is binding between the parties; therefore, interpretation of the MDA is subject to the rules governing construction of contracts.
Once an MDA is approved by court, it becomes a legally binding obligation on the parties. As an enforceable contractual obligation, and MDA contains an implied covenant of good faith and fair dealing both in the performance and in the interpretation of the contract. The covenant of good faith and fair dealing protects the parties’ rights to receive the benefits of their agreement.
The enforcement of a hold harmless agreement in an MDA can be accomplished through an action for contempt or by a breach of contract action.
On this issue, the Court explained:
We conclude that the trial court was mistaken in ruling that Husband did not have a remedy under the facts presented. Although his petition for civil contempt did not provide the remedy he sought, Husband could have pursued an action for breach of contract to achieve the result he desired. Therefore, we reverse the trial court’s order requiring Wife to refinance or sell the former marital residence. Husband is not precluded from filing a breach of contract action and executing on any judgment that may arise therefrom.
Accordingly, the trial court’s judgment was reversed.
K.O.’s Comment: Unless there is some particular reason not to, the wise attorney will include in the marital dissolution agreement the requirement that debt be refinanced within a certain period of time or else the property will be sold.
Information provided by K.O. Herston: Knoxville, Tennessee Divorce and Family Law Attorney.