In re Marriage of South

1

NOT DESIGNATED FOR PUBLICATION

No. 118,807

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

In the Matter of the Marriage of

ALAN E. SOUTH,
Appellee,

and

GRACE ANN STOUT SOUTH,
Appellant.

MEMORANDUM OPINION


Appeal from Johnson District Court; THOMAS M. SUTHERLAND, judge. Opinion filed December
21, 2018. Affirmed.

T. Bradley Manson, of Manson Karbank McClaflin, of Overland Park, for appellant.

Jessica A.B. White and G. Peter Bunn III, of Feree, Bunn, Rundberg & Ridgway, Chartered, of
Overland Park, for appellee.


Before MALONE, P.J., PIERRON, J., and BURGESS, S.J.

PER CURIAM: This is the second appeal in the divorce of Alan E. South and Grace
Ann Stout South. The parties had a premarital agreement covering the division of their
property in the event of a divorce. The district court entered an original judgment
addressing the division of the parties' property in accordance with this agreement. Grace
appealed. On review, this court affirmed, but remanded for the district court to determine
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Grace's liability for the parties' 2014 income tax. In re Marriage of South, No. 114,846,
2017 WL 840233 (Kan. App. 2017) (unpublished opinion) (South I).

On remand, the district court determined the dollar amount of Grace's tax liability.
But Alan also moved to have the district court determine the dollar amount of the parties'
marital property awards. After the district court entered judgment on this motion, Grace
moved to alter or amend the judgment, arguing the district court had exceeded the scope
of the remand. The district court denied her motion, finding it had jurisdiction to
determine the amount of the parties' marital property awards. Grace appeals the district
court's judgments on both motions.

This appeal mainly deals with Grace and Alan's premarital agreement. That
agreement identified several categories of property. The agreement's provisions on
marital property are relevant to this appeal. The agreement defined marital property as
"[p]roperty that is acquired by the parties during the marriage and not jointly titled or
deemed Separate Property." In case of a divorce after more than 60 months of marriage,
the agreement provided that Grace would receive the greater of $500,000 or one-half the
net fair market value of the marital property. The agreement defined net fair market value
as "the fair market value of the Marital Property at the termination of the marriage, less
debt secured thereby."

After almost 6 years of marriage, Alan petitioned for divorce. The district court
held a trial in April 2015. Before trial, Grace and Alan agreed on an exclusive list of
property they had acquired during their marriage. Along with other property not relevant
to this appeal, this list included (1) a vacation home in Sanibel, Florida; (2) stock in
Alan's law firm, SouthLaw, PC; (3) a golf club membership; (4) a yacht club
membership; (5) a 2013 Jeep Wrangler; and (6) a 1956 Chevrolet Corvette. The parties
agreed that Grace would receive the yacht club membership, Alan would receive the
stock, and they would sell the rest of the items. The parties also agreed the Wrangler was
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marital property, but they disputed whether the other items were marital or joint property.
They disputed whether Grace was liable for the parties' 2014 federal and state income
taxes.

After the trial, the district court entered a divorce decree. The court later entered a
judgment on the division of Grace and Alan's property. It held that the Sanibel home, the
stock, the club memberships, and the Corvette were all marital property. Because the
Sanibel home had not sold yet, the court entered judgment on how the proceeds from the
sale would be distributed. The proceeds would be used to pay the outstanding mortgage,
closing costs, and to reimburse Alan for carrying costs, as well as several other expenses.
The court found: "The parties agree that the net proceeds from the sale of the Sanibel
property, after accounting for whichever expenses the Court deems appropriate, shall be
divided in accordance with the parties' Agreement." It also held that Grace was liable for
part of the parties' 2014 income taxes, but it determined no specific dollar amount. Grace
appealed the court's judgment.

While the appeal was pending, the Sanibel home sold. According to the United
State Department of Housing and Urban Development (HUD) Settlement Statement, the
home sold for a contract sales price of $2,500,000. Grace and Alan's mortgage debt on
the home was $1,557,771.05. The parties were also responsible for $177,182.39 in
settlement charges and $20,000 in escrow for repairs to the home. The settlement charges
included sale costs such as the broker's commission, property taxes, and title insurance.

According to the HUD Settlement Statement, the net proceeds from the sale were
$748,711.99. This amount was deposited in a trust account. Grace and Alan also received
refunds from their mortgage carrier, title company, and insurance carriers after closing.
These refunds were also deposited into the trust account.

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After the Sanibel home sold, but while the appeal was still pending, Grace and
Alan also entered an agreement addressing several property items as well as
reimbursements. The agreement was memorialized in a letter signed by counsel for both
parties. The parties agreed that Alan would receive $275,000 from the trust account as
reimbursement for carrying costs as explained in the district court's judgment. While the
district court had found no proceeds should be used to reimburse Grace, the parties still
agreed that Grace would receive $5,000 from the trust account to cover any claim she
may have for reimbursement. As for the other property items, the parties agreed Alan
would buy the Wrangler and the Corvette, and each party would receive half of the sale
price. The parties also agreed to divide the refunds evenly.

The South I court affirmed the district court's finding that the Sanibel home, the
Corvette, and the club memberships were all marital property. 2017 WL 840233, at *8-9.
The court also affirmed the district court's holding that Grace was liable for part of the
couple's 2014 income tax and remanded for the district court to determine the exact dollar
amount of Grace's tax liability. 2017 WL 840233, at *9-11.

In South I, Grace argued for the first time on appeal that assigning any of the debt
to her violated the premarital agreement. She asserted the agreement guaranteed she
receive at least $500,000. She contended that holding her liable for the tax debt would
reduce her award in violation of this guarantee.

The South I court rejected her argument, holding the premarital agreement
contained no provision on the allocation of the parties' general debts and liabilities.
Because the agreement did not govern the parties' debts and liabilities, the district court
could apportion them in any way that was fair, just, and equitable to the parties. 2017 WL
840233, at *12. The court went on to hold:

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"The district court can apportion the parties' 2014 income tax liability without
violating the terms of the premarital agreement; the agreement does not 'guarantee' that
Grace will receive $500,000 or half the fair market value of the marital property after
taking into account the entirety of the district court's property division. Instead, the
premarital agreement simply provides that in the event of a divorce, Grace will receive a
certain amount of the marital property depending on the length of the marriage. However,
there is nothing in the premarital agreement that indicates that Grace cannot also be
ordered to pay any portion of parties' debt, even if this would effectively reduce the total
amount of assets she is awarded in the divorce. Grace is asking the district court to add
terms to the premarital agreement that are not found therein. We conclude there is no
merit to Grace's argument that allocating a portion of the parties' 2014 income tax
liability to her violates the terms of the premarital agreement." 2017 WL 840233, at *12.

Judge Arnold-Burger concurred in part, but she dissented from the majority's
holding that Grace's tax liability could be subtracted from her marital property award.
Judge Arnold-Burger reasoned: "[T]o the extent that the contract incorporates the general
meaning of the term net, which means the amount of the total value remaining after the
deduction of expenses or liabilities, then the premarital contract did provide for the
treatment of marital debt." 2017 WL 840233, at *13. Judge Arnold-Burger also noted that
under her interpretation of the plain language of the agreement, "the $500,000 was clearly
a failsafe amount." 2017 WL 840233, at *13. As a result, the district court should not be
able to reduce Grace's $500,000 lump sum payment by her tax liability. 2017 WL
840233, at *13.

Grace filed no petition for review in South I. On remand, the district court denied
Grace's request for additional discovery. The court found that South I did not suggest the
evidence was insufficient to determine her tax liability. The district court then ordered the
parties to submit briefs and limited briefing to Grace's tax liability. The district court
ultimately held that Grace was liable to reimburse Alan for $68,669 worth of income tax
that Alan had already paid.

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Grace moved to alter or amend judgment. She argued South I erred in finding the
premarital agreement did not guarantee she should receive at least $500,000. She urged
the district court to adopt the reasoning in Judge Arnold-Burger's dissent. The court
denied her motion.

Alan also filed a "Motion to Reconcile Division of Marital Property and Enforce
the Previous Orders of the Court." He explained that the parties had sold all their marital
property and the proceeds were being held in a trust account. But the parties could not
agree how to divide the money. He argued that according to the premarital agreement, the
parties should calculate the fair market value of all the marital property and subtract the
amount paid to close the mortgage. The remaining amount would be the net fair market
value of the marital property. That amount should be divided in half and allocated to each
party. Additional adjustments should then be made to account for the home's sale costs,
and any refunds and reimbursements. According to his calculations, Grace would receive
$243,999.38, and he would receive $286,537.38.

In response, Grace argued that the adjustments for sale costs, refunds, and
reimbursements should be accounted for before dividing the property in half. Doing the
calculation this way would make half the value of the marital property less than
$500,000. Under the premarital agreement, she would then receive $500,000 from the
division of marital property. After subtracting her tax liability and what she had already
received, she would receive $356, 251.

After hearing oral argument, the district court entered judgment adopting Alan's
reasoning and calculations. To calculate the marital property's net fair market value, the
court subtracted the amount used to pay the Sanibel home's mortgage, $1,557,771.05,
from its sales price, $2,500,000, leaving $942,228.95. The court then added these
amounts:

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$942,228.95 Sanibel home's net fair market value
$100,000 SouthLaw, PC Preferred Stock
$45,760.02 Sanctuary Gold Club Membership
$5,200 Captiva Island Yacht Club
$29,000 2013 Jeep Wrangler
$65,000 1956 Chevrolet Corvette

$1,187,188.97 Marital property's net fair market value

The court divided the marital property's net fair market value, $1,187,188.97, in
half, resulting in $593,594.49 each to Grace and Alan. Because this amount was more
than $500,000, the court continued to use it in the calculations.

Next, the court totaled these adjustments:

$31,861.95 Items paid by seller in advance (Lines 406-411 of HUD
Settlement Statement)
$24,479.57 Refund of escrow account funds from Sanibel home
$5,152.64 Refund of homeowner's insurance premium
$2,996.94 Refund of flood insurance premium
$1,009.20 Interest from accounts holding proceeds of Sanibel home
($197,192.50) Reductions in amount due to seller (Lines 502, 506, and 507
of HUD Settlement Statement)
($275,000) Reimbursement to Alan for carrying costs and other expenses
($5,000) Reimbursement to Grace

-$411,692.20 Value of adjustments

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The district court then divided the value of the adjustments in half and applied the
amount to each party's award, resulting in $387,748.39 going to each party. The court
then subtracted $75,080.01 from Grace's share for assets and funds she had already
received. The court also subtracted $68,669 for Grace's tax liability. This resulted in an
award of $243,999.38 for Grace.

Several weeks later, Grace moved to alter or amend the judgment. She argued the
district court lacked jurisdiction to apply the adjustments for sale costs, refunds, and
reimbursements. She asserted the court was limited to determining the amount of her tax
liability on remand. She reasoned the court exceeded the scope of the remand in applying
the adjustments to the marital property division, and it thus lacked jurisdiction to do so.

After hearing oral argument, the district court again denied Grace's motion. The
district court held it had jurisdiction to apply the adjustments. The court found South I did
not rule on the issue explicitly or by necessary implication. The court also found
consideration of the adjustments was essential to carrying out the mandate, and none of
its orders were contrary to the mandate. Grace appeals.

Value of Marital Property

First, Grace argues the district court erred in calculating the value of her marital
property award. While the marital property division includes other items, the main point
of contention is how to divide the proceeds from the Sanibel home. Grace claims the
Sanibel home's net fair market value equals the net proceeds from its sale. She accuses
Alan of trying to inflate the home's net fair market value by making deductions for sale
costs and reimbursements later in the property division.

Alan responds that Grace conflates the determination of net fair market value with
the allocation of net proceeds. According to Alan, the net fair market value of the Sanibel
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home is the sales price minus their mortgage debt. All other adjustments must be made
later in the property division.

A district court's division of property in a divorce action is governed by K.S.A.
2017 Supp. 23-2801 et seq. The standard of review is abuse of discretion. In re Marriage
of Wherrell, 274 Kan. 984, 986, 58 P.3d 734 (2002); In re Marriage of Vandenberg, 43
Kan. App. 2d 697, 715, 229 P.3d 1187 (2010). A judicial action constitutes an abuse of
discretion if (1) no reasonable person would take the view adopted by the trial court; (2)
it is based on an error of law; or (3) it is based on an error of fact. Wiles v. American
Family Life Assurance Co., 302 Kan. 66, 74, 350 P.3d 1071 (2015).

Resolution of this issue also requires interpretation of the parties' premarital
agreement. A premarital agreement is a contract subject to the same rules as any other
contract. In re Marriage of Cutler, No. 103,148, 2011 WL 1877703, at *4 (Kan. App.
2011) (unpublished opinion). We exercise unlimited review over the interpretation and
legal effect of written contracts. We are not bound by the district court's interpretation.
Prairie Land Elec. Co-op v. Kansas Elec. Power Co-op, 299 Kan. 360, 366, 323 P.3d
1270 (2014). Any mistake of law in interpreting the contract would constitute an abuse of
the district court's discretion. See In re Estate of Einsel, 304 Kan. 567, 579, 374 P.3d 612
(2016) (noting any mistake of law in interpreting earlier divorce decree would be abuse
of discretion).

"The primary rule for interpreting written contracts is to ascertain the parties'
intent." Stechschulte v. Jennings, 297 Kan. 2, 15, 298 P.3d 1083 (2013). If the contract's
terms are clear, courts should determine the parties' intent from the contract's language
without applying rules of construction. 297 Kan. at 15. When interpreting a contractual
provision, courts should consider the entire instrument from its four corners, instead of
isolating a particular sentence or provision. Waste Connection of Kansas, Inc. v. Ritchie
Corp., 296 Kan. 943, 963, 298 P.3d 250 (2013).
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In dividing the marital property under the premarital agreement, Grace is entitled
to the greater of $500,000 or half the marital property's net fair market value. The first
step in dividing the marital property then is to determine its net fair market value. But the
parties disagree on the meaning of net fair market value. Alan contends the Sanibel
home's net fair market value is the selling price minus their mortgage debt. Grace
contends the net proceeds determine the net fair market value.

The language of the agreement resolves this dispute. The premarital agreement
defines net fair market value as "the fair market value of the Marital Property at the
termination of the marriage, less debt secured thereby." Fair market value is "[t]he price
that a seller is willing to accept and a buyer is willing to pay on the open market and in an
arm's-length transaction." Black's Law Dictionary 1785 (10th ed. 2014). On the other
hand, net proceeds are "[t]he amount received in a transaction minus the costs of the
transaction (such as expenses and commissions)." Black's Law Dictionary 1399 (10th ed.
2014). Based on this language, Grace's argument that "net fair market value" means "net
proceeds" lacks merit.

The Sanibel home sold for $2,500,000. This is the home's fair market value—the
price the buyer was willing to pay. The home secured a $1,557,771.05 mortgage.
According to the premarital agreement, this is the only expense that can be subtracted
from the home's fair market value when calculating the net fair market value. Subtracting
$1,557,771.05 from $2,500,000 leaves $942,228.95. This is the Sanibel home's net fair
market value under the agreement. Adding the net fair market value of the other marital
property, the marital property's total net fair market value is $1,187,188.97.

The district court held in its original judgment that the Sanibel home's net
proceeds would be divided according to the agreement, after accounting for any expenses
the court found appropriate. To determine the Sanibel home's net proceeds, the sale costs
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must be subtracted from the marital property's net fair market value. These costs would
include the settlement charges and the amount paid for repairs (listed as "reductions in
amount due to seller" on the HUD Settlement Statement and in the district court's
judgment).

The district court also held in its original judgment that the proceeds from the
Sanibel home must also be used to reimburse Alan for carrying costs. The parties agreed
Alan would receive $275,000 for reimbursement in their letter agreement. In that same
agreement, the parties also agreed Grace would receive $5,000 as reimbursement, and
they would divide the refunds between them evenly. The district court thus did not err
because its calculation of Grace's marital property award complied with the original
judgment and the parties' agreements.

Grace alternatively suggests she should receive half the net fair market value as
calculated by the district court, but without deducting the sale costs and reimbursements
or adding the refunds at all. But this flouts the district court's original judgment. As
already explained, the court held that the Sanibel home's net proceeds would be divided
according to the agreement, after accounting for any expenses the court found
appropriate. As Grace notes in her brief, the district court had to deduct these costs to
calculate the net proceeds in accordance with its original judgment. Grace also agreed
Alan would receive $275,000 in reimbursements as ordered by the district court. As a
result, this argument also lacks merit.

Did the District Court Exceed the Scope of Remand?

Grace also argues the district court exceeded the scope of the remand when it ruled
on Alan's motion to reconcile and enforce. She contends the mandate in South I limited
the district court's jurisdiction to calculating her 2014 tax liability and subtracting that
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from her marital property award. According to Grace, the district court lacked jurisdiction
to make any adjustments to the marital property award.

Alan argues South I did not address the particular issue of the adjustments, so the
district court could consider them. The district court's order also did not run contrary to
any rulings in South I. He adds that the adjustments Grace complains about fall into three
categories: (1) sale costs the parties had already agreed to pay out of the sale proceeds;
(2) reimbursements Grace agreed to pay in the letter agreement; and (3) refunds received
at or after closing on the Sanibel home. By filing his motion, Alan contends he was not
asking the district court to modify or change the property division but to enforce it.

"Interpretation of an appellate court mandate and the determination of whether the
district court complied with it on remand are both questions of law subject to de novo
review." State v. Morningstar, 299 Kan. 1236, 1240-41, 329 P.3d 1093 (2014). Whether
jurisdiction exists is also a question of law over which this court has unlimited review. In
re Care & Treatment of Emerson, 306 Kan. 30, 34, 392 P.3d 82 (2017).

The mandate and opinion from an appellate court "shall be controlling in the
conduct of any further proceedings necessary in the district court." K.S.A. 60-2106(c).
When an appellate court remands for further proceedings after a decision, the district
court must proceed in accordance with the appellate court mandate. Gannon v. State, 303
Kan. 682, Syl. ¶ 2, 368 P.3d 1024 (2016). "The district court must implement both the
letter and spirit of the mandate, taking into account the appellate court's opinion and the
circumstances it embraces, and it has no authority to consider matters outside the
mandate." 303 Kan. 682, Syl. ¶ 2. "Where the mandate of an appellate court merely
reverses a ruling of the district court and remands the case for further proceedings but
does not direct the judgment of the district court, the district court has discretion to
preside over the remaining trial proceedings, as if the district court had originally made
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the ruling mandated by the appellate court." Edwards v. State, 31 Kan. App. 2d 778, 781,
73 P.3d 772 (2003).

The South I court affirmed the district court's judgment in part but remanded the
issue of Grace's tax liability. 2017 WL 2017 WL 840233, at *1. "[T]he district court
should calculate a precise dollar amount for which Grace must reimburse Alan for her
share of the 2014 income tax liability, and the district court should make specific findings
to support its calculation." 2017 WL 2017 WL 840233, at *11.

In ruling on Grace's motion to alter or amend, the district court held it did not
violate South I's mandate by applying the adjustments to the marital property award. The
district court found that an appellate court can limit a district court on remand by either
(1) preventing the district court from reconsidering issues the appellate court has decided,
or (2) restricting the district court's jurisdiction. The court found that neither circumstance
applied here.

The district court found South I did not explicitly rule on the adjustments nor did it
rule on them by necessary implication. The court noted an appellate court rules by
necessary implication in three scenarios: (1) the appellate court necessarily had to have
considered the issue in the prior appeal to reach a decision; (2) consideration of the issue
on remand would abrogate the appellate court's decision; or (3) the issue is so closely
related to an issue explicitly resolved by the appellate court that it needs no more
consideration. The district court held that none of these applied to the adjustments.

The district court also found South I's mandate did not limit its jurisdiction over
the adjustments. The district court held that South I had directed a judgment as to all the
findings and conclusions it affirmed. The district court noted that none of its orders were
contrary to those affirmed by South I. The district court also held that all the adjustments
were newly discovered facts essential to implementing South I's mandate.
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On appeal, Grace argues that applying the adjustments were not essential to
implementing South I's mandate and the district court was limited to calculating her tax
liability and then determining her marital property award without the adjustments. Alan
reiterates the district court's reasoning. He also argues the adjustments were essential
because the parties would still be "deadlocked" if the district court did not rule on them.

Both parties seem to have misframed the issue. When the district court determined
Grace's and Alan's marital property awards, it was not doing so as part of the remand; it
was doing so in response to Alan's motion to reconcile and enforce. While a district court
lacks continuing jurisdiction to change or modify the division of property in an original
divorce decree, the court has inherent jurisdiction to enforce or clarify its previous order.
Koch Engineering Co. v. Faulconer, 227 Kan. 813, 830, 610 P.2d 1094 (1980); In re
Marriage of Nelson, No. 102,574, 2010 WL 4977112, at *3 (Kan. App. 2010)
(unpublished opinion). Here, the district court's original order provided that the Sanibel
home's net proceeds would be divided in accordance with the premarital agreement after
accounting for any expenses. The original order provided no exact dollar amount. In
issuing its second order, the court was clarifying and enforcing its prior judgment by
calculating the actual dollar amount. The court thus had jurisdiction to enter the order.

Grace also argues that Alan presented "additional issues . . . after the conclusion of
this case." But as Alan argues, all the district court's adjustments to the marital property
value were addressed in prior orders or agreements. In its original judgment, the court
held that the Sanibel home's net proceeds would be distributed in accordance with the
premarital agreement. In calculating the net proceeds, the court would subtract expenses
such as closing costs, carrying costs, and the mortgage. In addition, in the letter
agreement, Grace agreed to reimburse Alan $275,000 for carrying costs. The parties also
agreed on how to divide the refunds received after the Sanibel home's sale.

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Minimum Payment Under Premarital Agreement

Finally, Grace resurrects her argument that the premarital agreement guarantees
she receive at least $500,000. She argues the district court violated the agreement by
subtracting her tax liability and the adjustments related to the Sanibel home from her
marital property award. She contends both the district court and we have misinterpreted
the agreement, and she invites us to adopt Judge Arnold-Burger's dissent in South I.

Alan argues the South I court already rejected Grace's argument. He contends we
should not reconsider the ruling under the law of the case doctrine because Grace has not
shown that the South I court's ruling was clearly erroneous or manifestly unjust. He also
asserts that in addition to the premarital agreement, the district court's prior orders and the
letter agreement also control the outcome of the case.

While the law of the case doctrine is discretionary, once a court has decided an
issue, that issue should ordinarily not be relitigated or reconsidered unless clearly
erroneous or manifestly unjust. State v. Collier, 263 Kan. 629, Syl. ¶¶ 2-3, 952 P.2d 1326
(1998). Courts generally consider issues decided on a first appeal as settled law of the
case in a second appeal in the same case. State v. Parry, 305 Kan. 1189, 1195, 390 P.3d
879 (2017). If a party fails to appeal a court ruling, it becomes the law of the case. See
Thoroughbred Assocs. v. Kansas City Royalty Co., 297 Kan. 1193, 1212, 308 P.3d 1238
(2013).

In this appeal, Grace's argument is slightly different from her argument in South I.
She claims the district court violated the premarital agreement by not only subtracting her
tax liability from her award but also by applying the adjustments. But this argument is not
materially different from her argument in South I. She is reasserting that the premarital
agreement guarantees she receive at least $500,000. The South I court rejected this
argument. 2017 WL 840233, at *12. If Grace disagreed with this court's ruling in South I,
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she could have filed a petition for review with the Kansas Supreme Court. Grace has not
shown that the South I court's decision was clearly erroneous or manifestly unjust. As a
result, we decline to reconsider the issue under the law of the case doctrine.

Affirmed.