Legal Question in Real Estate Law in California
My wife and Her Ex husband split 3 years ago. He was more than willing to give the house up to her as long as she took his name off the loan. As soon as the divorce was finalized my wife was able to take his name off the loan and put my name on. The issue is that the bank would not let her take the ex�s name off of the second. Now we are trying to short sell the house and he is being less than cooperative. At first he agreed to the short sell as he in the past told us that if we could not get his name off he would force us into one. And now that he has realized that we can�t get his name off and we are no longer able or willing to pay for a house that is so upside down now he is throwing around the I will take you to court stuff. In there divorce paper work the only stipulation is that the document says that she would re-finance to get his name off. And that was physically impossible. And then a letter was typed up by my wife to her ex that said she takes full financial responsibility for the house and she will make payments. We have never missed a payment until we decided to short sell. The realtor recommend that in order to get this process going we needed to not make the payment to have negotiang power. So we did not make the payment on the loan. The EX freaked out as I am sure he should and made a lot of threats. Then he paid the payment and said that we owe him a check for the amount and that he is no longer working with us on the short sale or talking to us and we will see him court. Can he really sue us for defaulting when we are planning on short selling? What grounds do we have and can he really take us to court and win a settlement against us for the house payment?
2 Answers from Attorneys
Can he sue? Sure. Is he likely to sue? You didn't say how much money is now involved, but watch out for a possible small-claims action; they are easy and cheap to file. Will he win? That seems uncertain, but consider this. In some way or another, he has covered a debt for his ex-wife that would not exist at all IF she had refinanced as ordered by the divorce court. She seems to be in breach of a court order, and the excuse of "physical impossibility" will probably not stand up as a defense, because the refinancing should have been done, or attempted, sooner, while the divorce judgment was appealable and could have been corrected to remove or water down an "impossible" term.
This looks like a real mess, and I cannot see an easy way out of it; maybe a family law attorney can see a way to avoid on-going liability issues on the second D/T resulting from failure to get the "ex" out of liability exposure.
The letter from your wife agreeing to take full financial responsibility doesn't help, either.
I again disagree with Mr. Whipple for the third time today. Although she was subject to court order to refinance, a refinance requires the lender, and it is clear that the lender was not a party to the divorce action. So I think physical impossibility is a defense.
I also have qualms about your realtor telling you to default to get the second to agree to a short sale. None of the short sales that I have been consulted on required a default. The second may not agree to the short sale, because they will lose their security, and you may be asking them to waive the balance, leaving them nothing.
In that case, the second will sue both you and your husband on the note, and get a judgment, unless you could establish that the second was a purchase money mortgage, which it does not sound like it is. Determining whether the second was purchase money is factually intensive, and you have not provided any facts to make that determination either way.
Most importantly, I have concern that the written agreement between your wife and her ex is an indemnity agreement, giving him the right to sue her if she defaults and he has to make a payment.
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