Virginia Equitable Distribution: Courts Aren’t Stupid

Assume an agreement states: “The parties shall apply any and all remaining proceeds from the sale of the Dey Street [P]roperties toward the principal balance of the mortgage obligations on Shady Oaks . . . If the mortgages are satisfied prior to the sell [sic] of Shady Oaks, the parties will divide equally any and all proceeds from the sale of Dey Street [P]roperties.”  Assume that Shady Oaks properties were sold to pay off their mortgages.  Assume that the Dey Street Properties are sold thereafter.  What should happen to the Dey Street proceeds?

In Hartley v. Hartley, CL-08-2443-03 (Norfolk Cir. Ct 2015), the trial court held that the proceeds sure as hell shouldn’t solely go into one party’s pocket.  In that case, the husband kept the lion’s share of the proceeds.  He argued that he didn’t have to pay over the remainder owed to his former wife because there was a condition precedent that had not been met, namely that the Shady Oaks mortgages were not satisfied before that property was sold.  In other words, he argued that this specific order of operations was essential, and that the agreement was effectively silent on what to do with the Dey Street proceeds when the Shady Oaks mortgage were only satisfied after that property was sold.

The trial court wasn’t buying it.  As the trial court noted, if the Shady Oaks mortgages had been paid off before that property’s sale, the parties were supposed to benefit equally from the proceeds.  If the Shady Oaks mortgages had not been paid off while still due, the parties were supposed to benefit equally from the reduction in the principal mortgage balance.  In sum, everyone was supposed to benefit equally under either of the specific scenarios contemplated under the agreement.  Yet, the husband failed to pay down the mortgages from the proceeds from sale of the Dey Street Properties, which was explicitly contemplated under the agreement.  And when the Shady Oaks mortgages were finally paid off upon that property’s sale, he still didn’t pay his former wife her half share of the proceeds he pocketed from the Dey Street Properties, which again was explicitly contemplated under the agreement.

So the trial court threw the book at him.[1]  The court said he owed his former wife $190,900 in unpaid proceeds plus interest.  He also owed her prejudgment interest in the amount of $152,808.73 for all of the proceed distributions that he received that should have gone to his former wife.  He also owed her reasonable attorney’s fees and costs, which was presumably many thousands of dollars given what seemed to be a pretty document intensive hearing.  Oh, and the court said that there would be further sentencing for contempt of court if he didn’t pay this all off in about 30 months.

[1] It certainly didn’t help that he told his attorney that he wasn’t showing for the hearing and then didn’t show for the hearing.  Courts hate that.  A lot.

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