Be Neutral
A Publication of the Georgia Office of Dispute Resolution

 
 
Case Watch: For Mediators

The following case analyses are part of a regular series we publish to help neutrals broaden their knowledge of rulings of Georgiaís appellate courts that may affect your practice. Remember: mediators should not give legal advice or opinions.

Review of Darroch v. Willis, 286 Ga. 566, decided March 1, 2010, appeal to the Georgia Supreme Court of a ruling by Judge Gail Tusan, Fulton County Superior Court.

When the Marital Dream Home Becomes a Financial Nightmare
The slowing economy, tightening credit and the bursting of the real estate bubble have created major difficulties for divorcing couples who hold joint mortgages Ė mortgages in which both Husband and Wife are obligors.  For those parties, the marital dream home becomes a financial divorce nightmare.  Even if the parties agree on how to divide their home, itís harder to refinance and itís harder to sell.  That means more and more parties are failing to perform joint-mortgage obligations under their divorce decrees.

The Joint-Mortgage Nightmare
Letís say under a divorce agreement Husband moves out of the marital home, and Wife agrees to refinance the home within 30 days and thus remove Husband from the mortgage.  If Wife does not remove Husband from the mortgage, the consequences for Husband can be severe:

-- He may not qualify for another mortgage as long as he remains on the mortgage for the marital home;

-- He may share with ex-Wife a continuing years-long contractual commitment for a house he no longer owns or lives in;

-- He may continue to be financially liable if the mortgage is not paid timely, including liability for any deficit balance in the event of foreclosure or bankruptcy; and

-- He may find his credit ruined.

Courts Canít Always Help
How can a court help a divorcing party such as Husband who has been financially injured by an ex-spouse who failed to remove him from a joint mortgage as ordered?  Surely a contempt motion can force the ex to comply with a divorce decree that is a court order.  Not always.

Courts cannot enforce a court order if the nonperforming party is genuinely unable to comply.  Using the above example, if Wife can demonstrate that she has in good faith exhausted her financial resources and still cannot fulfill her obligation to refinance the joint mortgage, the court will deny Husbandís contempt motion.  Yes, in this instance Wife is in contempt, but her failure is not willful, and Husband is left without a satisfactory remedy.

Courts also will not enforce provisions if the divorce agreement is too vague.  A party may not be held in contempt for violation of a court order unless such agreement informs them in definite terms as to the duties the agreement imposed upon them (Farris v. Farris, 285 Ga. 33l).  If a court finds ambiguity in the divorce provisions regarding refinancing, for example, it may not enforce the provisions (Buckley v. Buckley, 239 Ga. 433). 

Lessons from Darroch
The Georgia Supreme Courtís decision in Darroch highlights another way in which courts are limited in their power to enforce a divorce agreement.  In Darroch, the divorce decree required that Husband remove Wifeís name from the mortgage on the marital home by refinancing it within 30 days of his remarrying.  Husband remarried but did not refinance, leaving Wife on the mortgage.  At a contempt hearing the trial court ordered Husband to refinance the marital home within 30 days of the hearing or put the home up for sale.  The courtís action seems reasonable, yes?  Not according to the Georgia Supreme Court.

The Supreme Court ruled that the trial court improperly modified the divorce agreement by requiring the sale of the marital residence where the agreement required only that Husband remove Wifeís name from the mortgage.  In other words, the trial court improperly modified the terms of the divorce agreement.  A court is permitted to interpret an agreement, but lacks the authority to modify it in contempt proceedings (Smith v. Smith, 281 Ga. 204).  It is the function of the trial court to construe the contract as written and not to make a new contract for the parties (Roquemore v. Burgess, 281 Ga. 593).

Darroch further instructs us that a trial court cannot compel a party who was awarded a specific asset to sell or otherwise convert that asset in order to comply with some other provision of the divorce decree.   Fixed allocations of economic resources between spouses, those that are already vested or perfected, are not subject to modification by the Court (Spivey v. McClellan, 259 Ga. 181).

(In Darroch the Supreme Court did agree with the trial court that Husbandís failure to refinance the marital home and remove Wifeís name from the mortgage was willful.  Husband had more than adequate financial resources to fulfill his obligation, the court said.)

Mediators Can Help Parties Avoid Joint-Mortgage Nightmares
As mediators, our job is not to complicate the divorce process, nor is it to set up the parties for future problems.  We must be particularly careful not to craft ambiguous agreement terms.

Given the courtís limited power to enforce terms of a divorce decree through a contempt motion, a good practice for mediators in writing settlements involving joint mortgages would be to state very plainly that if one party is unable to refinance within the specified time period (regardless of reason), he or she is required to sell the marital residence to remove both partiesí names from the mortgage.  Make sure deadlines and consequences for missing those deadlines are clear.

Another practical tip: divorcing parties often agree that one party shall receive exclusive use and ownership of the home and be solely responsible for the payment and refinancing of the mortgage into their name only.  And they mistakenly believe that their simply sending the mortgage company a copy of their divorce decree terminates their liability for the joint mortgage.  IT DOES NOT.  Contracts with third-party mortgage holders are not changed by terms of a divorce settlement, even those that are court orders.

So in our example above, what is a possible but unlikely solution that would give relief to Husband?  Wife may thereafter voluntarily consent to sell the martial home she was awarded.  However, this arrangement would have to be between the parties, not through a court contempt citation.  Levels of animosity between the parties would certainly determine whether this could correct a faulty divorce agreement.













 

Mary Ellen Cates is an attorney and registered mediator in Avondale Estates, Ga.  She has practiced domestic law exclusively since 1985.  A divorce mediator since 1998, she is also a domestic arbitrator, and she has been appointed as special master for DeKalb County Superior Court.

Phone: 404-292-3803; fax: 404-292-1510;
mary.cates@att.net or
mecates@mindspring.com