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Domestic Relations – PSA – Marital Residence – Net Sale Proceeds

A divorce court erroneously construed a couple’s property settlement agreement to relieve wife of her obligation to pay husband the amount specified in the agreement if the net proceeds from sale of the marital residence were insufficient to provide that amount, and the Court of Appeals reverses that decision and remands.

An appraisal of the marital residence when the parties signed their PSA in July 2006, indicated the property had a value of $645,000, and the parties determined that dividing the equity evenly would give each spouse a share of $148,495.

First, we hold the trial court properly concluded a controversy existed between the parties that was justiciable under Va. Code § 8.01-184 and thus, the trial court’s denial of husband’s demurrer was proper. When wife filed the declaratory judgment action on Feb. 26, 2009, she continued to reside in the marital home with the parties’ child and had not yet paid husband pursuant to the agreement.

Wife averred she had attempted to refinance the property in late 2008 in an effort to pay husband but learned the appraised value of the property had decreased by almost 30 percent and refinancing would no longer provide her with sufficient funds to pay him $148,495. The dec action averred the parties disagreed over whether wife would be personally responsible to husband for any shortfall between the net proceeds of the sale and the amount of his equity as listed in the PSA.

Turning to the PSA, we hold the challenged portions of section 7 of the contract are not ambiguous and conclude the trial court erred in determining its meaning.

The language in paragraph 4 indicates how the proceeds of a forced sale are to be disbursed. That paragraph also details wife’s obligation, in the event of a shortfall, to make payments to certain third parties and requires that wife shall indemnify and hold husband harmless from any such shortfall as against those third parties. That paragraph is wholly silent regarding wife’s obligation to make any payment directly to husband in the event of a shortfall. Paragraph 1 clearly defines the nature and amount wife owes husband as $148,495 and the nature of the payment wife owes husband, the other party to the contract, is clearly distinguishable from any indemnity payments wife may owe to third parties under any other contracts or instruments.

Paragraph 4 applies only to obligations to third parties and thus, that paragraph’s failure to mention wife’s obligations to husband under the agreement does not indicate a modification of the payment terms clearly expressed in paragraph 1.

Affirmed in part, reversed in part and remanded.

Trimble v. Trimble (Elder, J.) No. 2394-09-4, April 27, 2010; Fairfax Cir.Ct. (Smith) Douglas E. Milman for appellant; Cary S. Greenberg for appellee. VLW 010-7-157(UP), 12 pp.

VLW 010-7-157

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