Court of Appeals clarifies remedies to sell marital home in face of one party’s intransigence

Part of the family court’s goals in affecting an equitable distribution of separated spouses’ marital property is severing all entangling legal relationships and placing the parties in a position to begin anew.  Often the hardest item to disentangle is the marital home.  Even before the recent downturn in the housing market, there were numerous cases in which the marital home needed to be sold in order to effectuate equitable distribution.  With many couples now lacking equity in their home, “distributing” the home often requires the couple to bring cash to sell the home–often cash they don’t have.

Frequently the spouses’ incentives to sell the marital home are misaligned.  The spouse who wanted, but didn’t get, to keep the marital home  may try to delay the sale to remain in the home as long as possible.  Sometimes one spouse receives a portion of the equity but has no responsibility for the ongoing debt and can increase his or her equity by delaying the sale.

Clients, and their attorneys, have developed myriad strategies to delay the sale of the marital home in the face of a final order requiring the home be sold.  I’ve participated in two appears in which my client delayed the disposition of the marital home for years.  In Garrett v. Garrett my respondent-appellant wife was able to remain in the marital home, rent free, that was awarded to husband as part of a May 6, 2003 decree of divorce, until July 30, 2007, when the Supreme Court denied certiorari.  In Fernandes v. Fernandes, my appellant husband was ordered to sell the marital home as part of a September 9, 2004 order.  On appeal he unsuccessful fought for the right to buy out his ex-wife’s interest in the home.  However, even upon remand, further litigation brought by wife did not advance the sale of the home.  My client was finally able to purchase his ex-wife’s interest in the home on November 3, 2009.

The March 30, 2011 Court of Appeals opinion in Brown v. Brown, 392 S.C. 615, 709 S.E.2d 679 (Ct.App. 2011), provides the South Carolina family court bench, bar and litigants guidance into what a family court judge can and cannot do to effectuate the sale of the marital home when a final order requires the home to be sold but does not reserve jurisdiction to handle disputes arising from the marketing of the home.  In Brown, the June 9, 2006 decree of divorce required:

[Wife] should be given the option of purchasing [Husband]’s remaining equity in the amount of $60,191.02 either by refinancing the marital residence, taking out an equity line, or by other independent means within ninety (90) days from the date of the entry of this Final Order.  If she is unwilling or unable to buy out [Husband]’s equitable share, the marital residence shall be placed on the market with an agreed upon realtor for the sale price of at least $225,300[.]  [Wife] will continue to remain in the home until it is sold and be responsible for all expenses associated therewith.  Once it is sold, the parties shall divide the net proceeds so that [Husband] receives 32.14% of the net proceeds but shall not exceed $60,191.02[.]

The order was silent as to how the parties should proceed if the home were placed on the market but did not sell.  With this order giving Wife no incentive to sell the home or pay Husband in a timely manner, the home, not surprisingly, didn’t sell.  The parties brought cross rules to show cause regarding the marketing of the home, resulting in a consent order (from a different judge than the one who issued the divorce decree) in which the parties agreed:

The listing Agent shall have the authority to determine the listing price, provided however, the house shall be sold at the highest and best price attainable . . . and upon the best terms attainable under current market conditions in a timely fashion and as soon as practicable. . . . If the house is not sold or under contract within [a] ninety (90) day period, the parties may agree to continue with said agent, may mutually agree on an alternative agent or if they are unable to agree, may return to this Court for further Order in connection with the sale of the family residence.

That new judge selected a realtor who listed the home for sale, and Wife executed a listing agreement setting the sale price at $274,000.  The home did not sell.  Some nine months later, Husband filed a motion for relief seeking an order requiring Wife to purchase his equity in the marital home, refinance the home or reduce its selling price, pay him post-judgment interest on the amount of his equity in the home, and pay his attorney’s fees related to the motion.  That motion was heard by the judge who issued the divorce.  She modified her own order by “clarifying” it, claiming her original divorce decree had contained clerical errors.

This “clarification” awarded Husband post-judgment interest at 11.25% per annum on the amount of his equity in the marital home, renewed the requirement that the home be listed for sale and establishing a plan for determining the listing price.  The family court judge based her decision to award Husband post-judgment interest on the court’s authority to correct clerical errors under Rule 60(a), SCRCP, and upon a finding the terms of the divorce decree addressing Husband’s equity in the marital home were ambiguous and required further construction.  She imposed new requirements for sale of the home pursuant to the contempt order.  Specifically, she ordered both parties to enter a six-month listing agreement with a realtor of the family court’s selection, set the home’s initial listing price at $255,550, and required the listing price to be reduced by five percent every sixty-day period the home remained unsold.  She further required the parties to accept an offer within three percent of the listing price of the property at the time of the offer and authorized both Husband and Wife to receive “any and all information pertaining to the marketing of the home and potential buyers.” Finally, she modified the equity award to Husband from 32.14% of the net proceeds not to exceed $60,191.02 to a sum certain of $60,191.02.

Wife appealed, arguing that the family court lacked authority to impose any of these new conditions.  The Court of Appeals agreed, in part, with Wife.  It held that the provisions of the divorce decree that did not award Husband post-judgment interest and awarded Husband 32.14% of the net proceeds not to exceed $60,191.02 were not clerical errors and thus the modification of these provisions impermissibly “modified the substance of the judgment reflected in the divorce decree.”

However the Court of Appeals approved the family court’s new provisions regarding the sale and marketing of the home.  Citing S.C. Code Ann. § 20-3-660(A) (Supp. 2010), it noted:

In equitably apportioning marital property, “the family court may order the public or private sale of all or any portion of the marital property upon terms it determines.” (emphasis added). Furthermore, the family court is authorized to construe and enforce contracts relating to property involved in a divorce action.  S.C. Code Ann. § 20-3-690 (Supp. 2010).  A court approved divorce settlement must be viewed in accordance with principles of equity and there is implied in every such agreement a requirement of reasonableness.  Ebert v. Ebert, 320 S.C. 331, 340, 465 S.E.2d 121, 126 (Ct. App. 1995).  When the terms of an agreement omit a necessary provision such as the time for performance, a court will imply a reasonable term.  Id.

Based on these legal principals, the Court of Appeals explained why the new marketing and pricing scheme was permissible:

Contrary to Wife’s argument, establishing the terms of the sale is well within the family court’s statutory authority.  See § 20-3-660(A) (authorizing the family court to establish terms for the sale of marital property).  In this case, Judge Cate’s order establishing a pricing scheme for the marital home merely enforced the terms of both the divorce decree and the parties’ prior agreement reflected in the order entered by Judge Segars-Andrews.  In that agreement, the parties concurred that “the house shall be sold at the highest and best price attainable . . . and upon the best terms attainable under current market conditions in a timely fashion and as soon as practicable.”  In the event the house failed to sell and they differed on how to proceed, the parties agreed to seek further guidance from the family court.  Husband sought that guidance, and Judge Cate provided it.  The pricing scheme Judge Cate established did not conflict with the minimum listing price of $225,300 set by the divorce decree and complied with the goals set out in the parties’ subsequent agreement.  In light of Wife’s failed attempt to sell the home for $274,000, a lower initial listing price with small periodic reductions is a reasonable approach to severing this remaining tie between Husband and Wife.  Accordingly, the family court did not err.

In the two unpublished appeals mentioned above, my clients were able to remain in the marital home years after they were ordered to move or sell it because the family court’s final order misaligned the parties’ incentives to sell the home.  I am currently negotiating a separation agreement in which marital real estate will need to be sold and the opposing counsel’s draft proposal misaligns, to my client’s detriment, the parties’ incentives to sell these properties.  Before my client executes the agreement it will need to be modified to remedy this issue.  Attorneys and judges who anticipate the sale of marital real estate to effectuate equitable distribution should make certain there is clarity on how the property is to be marketed and sold and insure that the agreement or order is not drafted in a manner that allows one party to profit to the other party’s detriment by any delay in the sale.

The Brown decision provides the family court bench and bar guidance that post judgment motions authorize remedies to affect the marketing and sale of marital real estate when one party’s actions are delaying the sale.

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