Domestic Relations – Separation Agreement & Property – Settlement – Car Loan – Breach of Contract – Indemnification

Nix v. Nix (Lawyers Weekly No. 12-16-0089, 11 pp.) (Robert N. Hunter Jr., J.) Appealed from New Hanover County District Court. (Melinda H. Crouch, J.) N.C. App. Unpub. Click here for full-text opinion.

Holding: Although the defendant-wife did not obtain the advice of counsel before she signed the parties’ separation agreement and property settlement (SAPS), she had the opportunity to do so during the several months she held on to the SAPS prior to signing it. Moreover, she accepted the child support that the plaintiff-husband paid pursuant to the SAPS, implicitly acknowledging that she considered the SAPS to be binding and legally enforceable.

We affirm the trial court’s denial of the husband’s claim for indemnity under the SAPS; however, we reverse the denial of the husband’s claim for breach of the SAPS.

Facts

During their marriage, the parties borrowed money from a credit union to buy a car. They defaulted on their loan payments.

The parties separated, and the plaintiff-husband presented the defendant-wife with the SAPS. The wife held on to the SAPS for several months before signing it. In the meantime, the credit union obtained a judgment against the parties for the balance of the car loan.

The SAPS required the wife to pay the car loan and to hold the husband harmless from subsequent claims. The wife made no payments on the judgment. The husband filed this action alleging, among other claims, breach of contract and indemnification.

Analysis

The portion of the SAPS providing for indemnification only pertains to subsequent claims. Since the lender obtained its judgment against the parties prior to the execution of the SAPS, we agree with the trial court that the judgment is not a subsequent claim. The trial court correctly denied the husband’s claim for indemnification.

However, the trial court erred by denying the husband’s breach of contract claim because the wife admitted that she failed to abide by the SAPS’ terms.

Since the SAPS sets out in plain, unambiguous language that the wife would take on full responsibility for the car-loan debt, and the wife read and signed the SAPS, her failure to pay the debt owed on the car constitutes a breach of the agreement.

Regardless of any purported failure to understand the agreement’s terms or ignorance of her rights with regard to the separation generally, the wife had a duty to read and understand the contract prior to signing it. She had ample time to do so during the “few months” when she held onto the SAPS and was never unduly coerced or compelled to sign the agreement against her will.

Furthermore, the wife testified that the husband paid $250 in child support every two weeks pursuant to the SAPS. Her acceptance of child support payments pursuant to the SAPS constitutes an implicit acknowledgement that she considered the SAPS binding and legally enforceable.

No provision in the SAPS specifies that a breach of contract may only be found with regard to subsequent claims. Thus, a failure to abide by the specific terms of the SAPS constitutes a breach even if the breach relates to a debt that became delinquent prior to the execution of the SAPS. Therefore, the trial court erred in finding that the wife’s failure to pay the car-loan debt did not constitute a breach of the SAPS.

Affirmed in part, reversed in part, and remanded.