Posted by Nydia Streets of Streets Law in Florida Divorce

Equitable distribution in a Florida divorce can sometimes become complicated when a marital asset is encumbered by multiple liens. This can be an issue even after the final judgment is entered or after the parties enter a marital settlement agreement. In the case Law v. Law, 3D18-1177 (Fla. 3d DCA March 4, 2020), the former wife sought to have the former husband follow the parties’ agreement as it relates to a debt on a marital asset.

During the parties’ marriage, they pledged their home as security for a personal loan from private lenders. The former husband’s shares in a corporation were also pledged as security for the loan. Later the former husband took out another loan from the same lenders, pledging additional shares from the same corporation as security for this additional loan.

The former wife filed for divorce and the parties entered a settlement agreement which provided for the former wife to be paid lump sum alimony and attorneys’ fees from the former husband’s shares of the aforementioned corporation. The agreement also contained a clause stating “Except as set forth herein the parties shall be solely liable for any debts and obligations in his or her sole name, holding the other harmless.” After the entry of this agreement the private lenders filed legal action seeking a transfer of the former husband’s shares of the corporation to them in light of the security pledge previously made. The former wife eventually emerged from that litigation victorious in that the court ruled that her interest in the corporate shares was superior to that of the private lenders.

The former wife then sought for the former husband to pay her attorneys’ fees and costs incurred in litigating this issue based on the “hold harmless” clause in their agreement. The trial court denied this motion, analyzing the clause as a prevailing party clause. The former wife appealed. The appellate court reversed, holding it was error for the trial court to interpret the hold harmless clause as a prevailing party clause. A prevailing party clause usually provides that if there is litigation to enforce the marital settlement agreement, the party who prevails is entitled to attorneys’ fees and costs. However, the plain language of the parties’ hold harmless clause made it clear this was an indemnity clause rather than a prevailing party clause. The appellate court held “A contract of indemnity differs from a prevailing party attorney's fee provision in one important way: the duty to indemnify is enforceable regardless of whether the indemnitee prevails.”

Sometimes a Florida divorce case is not fully resolved once the marital settlement agreement is entered. Further litigation may be required in order for a party to fully receive the benefits of the agreement. This is why it is important to consult with a Miami divorce lawyer prior to signing your marital settlement agreement so that you can understand what pitfalls may be ahead without certain language included in the agreement to protect you.