The property division in a high net worth Texas divorce may require one party to convey their interest in certain assets to the other spouse. In some cases, the parties may agree to liquidated damages in the event one party fails to cooperate and take the actions necessary to transfer their interests. In a recent case, a former spouse challenged a liquidated damages judgment against him.
The parties, S.K.F. and K.J.W., entered into a mediated settlement agreement, which included an agreement incident to divorce (“AID”). The agreed final divorce decree incorporated the AID and ordered the parties to do the things necessary to effectuate their agreement.
The AID confirmed as K.J.W.’s sole and separate property two condominiums in Puerto Vallarta. It awarded S.K.F. $550,000 for the condominiums, as his sole and separate property. The AID set out the payment schedule of: a check for $150,000 the date the MSA was signed, a check for $275,000 on the date the agreed final divorce decree was signed, and $125,000 paid to a law firm to be held in trust to ensure S.K.F. signed the deeds for the condos. It further provided if K.J.W. did not submit a formal written request to sign the deeds within 12 months after the divorce, he was to instruct the firm to pay S.K.F. half of the funds. If he did not make a formal request between the 12th and 24th month after the divorce, K.J.W. was to instruct the firm to pay S.K.F. the other half. If, however, S.K.F. signed the deeds as required to transfer his interest in the condos at any point during the 24 months after the divorce, K.J.W. was to instruct the firm to pay the entire balance of the funds to S.K.F. immediately. S.K.F. agreed that, upon receiving the written notice, he would have 90 days to arrange travel to Puerto Vallarta and sign the deeds on the date specified. K.J.W. agreed to pay for his reasonable travel expenses up to $1,300. S.K.F. further agreed that if he failed to sign the deeds within 24 months, K.J.W. would be awarded $600,000 in liquidated damages. The AID also included a general cooperation provision in which both parties agreed “to sign any and all additional documents necessary to effectuate the transfer of any asset, liability or interest in any entity or stock(s) to the other party.”
Subsequent Proceedings
K.J.W. sued S.K.F. in January 2021, seeking an order directing him to comply with the decree and AID with regard to the execution of documents. Although there was a hearing on May 5, 2021, there was no record of it and it did not result in an order.
S.K.F. filed a petition for enforcement of the AID and agreed divorce decree. K.J.W. then filed a counterclaim for breach of contract. The parties agreed to bifurcate the matters, with the jury trial on the counterclaim to be held before the bench trial on the enforcement petition.
K.J.W. was awarded $600,000 in liquidated damages and $61,194 in attorney’s fees on his breach of contract counterclaim. The judgment also ordered that S.K.F. “take nothing on the claims S.K.F. appealed.
S.K.F.’s Appeal
To prove breach of contract, K.J.W. had to show there was a valid contract; he performed; S.K.F. breach the contract; and he was damaged resulting from the breach.
S.K.F. argued the liquidated damages provision only applied if he failed to sign the deeds tendered by K.J.W., but the evidence showed K.J.W. had not tendered a deed.
The AID provided that K.J.W. would be awarded a judgment for liquidated damages only if S.K.F. had not signed the deeds to the Puerto Vallarta condos pursuant to the AID’s provisions within 24 months. The appeals court concluded there was no evidence S.K.F. failed to comply with this provision because the documents he was provided were not “deeds.” The appeals court noted the documents authorized instructions to a Mexican bank identified as the “Trustee.” The documents instructed the Trustee “to appear at the signing of the Public Instrument . . .”
The appeals court concluded the documents did not convey an interest in land, but instead just instructed the Trustee to take certain actions. The appeals court held there was not evidence supporting the liquidated damages award. It reversed the part of the judgment awarded the liquidated damages and attorney’s fees. The appeals court did not, however, address the court’s order that S.K.F. take nothing because S.K.F. had not preserved those issues for appeal.
Call Experienced Dallas Divorce Counsel
The liquidated damages clause in this case was tied specifically to signing the deeds, but it appears trust assets may have been involved, requiring execution of additional documents. Whether you are considering ending a marriage with a high net worth or your former spouse is breaching your settlement agreement, a knowledgeable Texas divorce attorney can help you protect your assets. Call 214.692.8200 for a consultation with McClure Law Group.