Posted by Nydia Streets of Streets Law in Florida Divorce

After a final judgment of divorce is entered in Florida providing for equitable distribution of assets and debts, what happens when one spouse later files for bankruptcy, thereby affecting the distribution scheme? This issue arose in the case Martinez-Noda v. Pascual, 3D19-1646 (Fla. 3d DCA April 1, 2020) in which the former husband appealed a judgment that modified equitable distribution agreed-to by the parties in their marital settlement agreement.

The parties’ marital settlement agreement provided that the former wife would transfer to the former husband her interest in real property held by the parties as tenants by the entireties. The transfer would occur after the former husband satisfied multiple promissory notes payable to a third party. Following the parties’ divorce, the former husband filed for bankruptcy which resulted in the remaining debt on the promissory notes being discharged.

The former wife then filed a partition action on the subject real property which was granted by the trial court. The court ordered that the property be sold and after payment of the mortgage, the proceeds be split between the parties equally. The former husband appealed, arguing it was error for the trial court to order the partition and to fail to consider appropriate credits due to him prior to an equal split of the sale proceeds.

The appellate court upheld the trial court’s decision to partition the property but reversed on the equal split. The court reasoned “As ‘the power of the trial court to deny partition should be invoked only in extreme cases, where otherwise manifest injustice, fraud or oppression would result if the remedy were granted,’ we affirm the propriety of the judgment under review without further elaboration.” The court cited holdings from other cases as follows “‘Although contract principles play a role in dissolution proceedings, courts must remember that ‘proceedings under chapter 61 are in equity and governed by basic rules of fairness as opposed to the strict rule of law.’ (quoting Rosen v. Rosen, 696 So. 2d 697, 700 (Fla. 1997)); Green v. Green, 16 So. 3d 298, 301 (Fla. 1st DCA 2009) (‘Partition principles are flexibly applied in order to arrive at a fair, equitable, and just decree.’)”

As to the credits, the appellate court held that once the divorce decree was entered, the parties became tenants in common regarding the real property. Holding that tenants in common bear equal responsibility in maintaining property, including payments on the same, the court stated, “Accordingly, upon partition, a tenant shouldering a disproportionate responsibility for those obligations ‘is entitled to credit from the proceeds of the sale for the other co-tenant’s proportionate share of those expenses.’ (citation omitted). [. . .] Because [the former husband] asserted he alone paid the taxes and mortgage payments for nearly a decade, the trial court was charged with impounding ‘the fund consisting of the proceeds of sale and conduct[ing] proceedings to establish the credits due to the parties and to determine the final amount awarded to each.’”

If you need help enforcing your Florida marital settlement agreement, contact a Miami divorce lawyer for a consultation to learn about your best options in moving forward.