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Date: 10-14-2020
Case Style:
In the Matter of the Marriage of SHERRY LYNN NELSON and TERRY ALLEN NELSON
Case Number: 122,190
Judge: Sarah E. Warner
Court: IN THE COURT OF APPEALS OF THE STATE OF KANSAS
Plaintiff's Attorney:
Defendant's Attorney:
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Description:
Abilene, KS - Divorce lawyers represented Terry and Sherry Nelson for dissolving their marriage .
Terry and Sherry Nelson were married in 2001. Sometime before their wedding,
the Nelsons signed an Antenuptial Agreement that explained how certain property and
responsibilities would be distributed in the event of a later divorce or other separation.
Relevant to this appeal, the Nelsons' agreement describes three distinct categories of
property: marital property, separate property, and jointly titled property.
Section 5 of the agreement, titled "Maintenance of status of Separate Property,"
contains substantively identical provisions for the individual property each spouse
possessed before the marriage. Section 5 indicates that this "separate property" would
remain separate and, in the event of a divorce, would not be split between the couple. For
example, the paragraph relating to Terry's separate property states in relevant part:
"It is agreed that the property owned by [Terry] as of the date of marriage of the parties,
whether real or personal, wherever located, whether held in trust or otherwise, any profits
from or appreciation in said property after the date of marriage, . . . shall remain and be
his sole and Separate Property, under his sole dominion and control, including the right to
assign, encumber, sell, deal with generally and dispose of by Deed . . . or otherwise, as if
he were unmarried, irrespective of where the parties now or hereafter may reside, and that
[Sherry], by reason of the contemplated marriage, shall not acquire for herself . . . any
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interest in said property . . . or any substitute or additional properties acquired with and
from the proceeds resulting from the sale of or income from said property."
Section 9, titled "Termination of marriage by divorce or decree of separate
maintenance," explains how different types of property—marital, separate, and jointly
titled—would be divided if the Nelsons were to divorce:
"(a) The parties' Marital Estate, as defined in paragraph 8 hereof, shall be divided
equally between them.
"(b) The parties' Separate Properties, as defined in paragraphs 5 and 6 above and
including each party's personal effects, shall not be subject to a division of property by any
court.
"(c) Any properties titled in the names of the parties as joint tenants with rights of
survivorship or as tenants in common shall be divided equally between them."
Terry and Sherry each brought separate property into the marriage. Terry owned
land in Morris County, various farm equipment, and two trucks and was indebted with
several loans. Sherry owned real estate in Butler County, various livestock, and farm
equipment, and she too had one outstanding loan.
After their wedding, Terry and Sherry maintained their separate farm properties
but lived in Sherry's residence in Rose Hill. Two years later, Terry sold his Morris
County real estate. With the proceeds from that sale, he purchased two properties in
Marion County that had previously been owned by Terry's parents: a 5-acre residential
tract, where Terry and Sherry would live throughout the remainder of the marriage, and
the surrounding 155-acres of adjoining farmland.
There is no dispute that the money for the first transaction came from Terry's sale
of his Morris County property (his separate property under the Antenuptial Agreement).
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But the real estate purchase contract, the settlement statement, and—most importantly—
the joint tenancy warranty deed for the 5-acre residence listed both Terry and Sherry as
the buyers. The deed specifically indicated the owners of the property were "Terry A.
Nelson and Sherry Nelson, husband and wife as JOINT TENANTS with rights of
survivorship and not as tenants in common."
About a year after the purchase of the residential plot, the Nelsons acquired the
155 acres of adjoining land, again with money from the sale of Terry's former property.
The contract of sale, settlement statement, and the joint tenancy general warranty deed all
named Terry and Sherry as the buyers. The deed listed the property's new owners as
"Terry A. Nelson and Sherry Nelson, husband and wife as JOINT TENANTS and not as
tenants in common, with full rights of survivorship."
Over the next decade, the Nelsons made a variety of improvements and repairs to
the land and the house in Marion County. They also mortgaged the Marion County
residence; the mortgage note describes Terry and Sherry as the mortgagor "AS JOINT
TENANTS AND NOT AS TENANTS IN COMMON, WITH FULL RIGHTS OF
SURVIVORSHIP."
In 2015, Sherry petitioned for a decree of legal separation from Terry on grounds
of incompatibility. The court issued a Decree of Divorce in October 2017 and later took
up the question of property division. That question—particularly as it pertained to the
properties in Marion County—proved to be a contentious affair, culminating in a fourday hearing with numerous witnesses.
Terry argued that the Marion County real estate should be considered his separate
property under Sections 5 and 9(b) of the agreement because it had been purchased with
money from his Morris County property—that is, it was his substitute separate property.
Terry testified he did not intend for the Marion County properties to be jointly titled, and
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the deeds created joint tenancies due to his ignorance, not the parties' intent. Sherry
disagreed, contending Section 9(c) of the agreement, which deals with jointly titled
property, controlled. Under that provision, she argued the Marion County properties were
subject to equal division because the deeds were titled to herself and Terry in joint
tenancy with rights of survivorship.
After the hearing, the district court issued a memorandum opinion dividing the
former spouses' debts and assets. The court found that the Antenuptial Agreement was
ambiguous as to how the Marion County properties should be divided, concluding
Sections 5 and 9(c) conflicted as to whether those properties were separate or jointly
owned. The court found that in order to determine which provision controlled, "it [was]
necessary to determine whether [Terry] knowingly placed this land in joint tenancy."
The court then considered the witnesses' testimony and the other evidence
presented. The court concluded that "Terry . . . did not place either of the two Marion
County tracts of real estate into joint tenancy with Sherry . . . with the intent to convey
ownership to her. This took place as a result of his own lack of knowledge and failure to
recognize the significance of joint tenancy status." Put more simply, based on the
testimony regarding Terry's intent, the court determined the property was substitute,
separate property and was never meant to be jointly titled. Accordingly, the court ruled
that the 160 acres of property in Marion County were Terry's separate property and "not
subject to division as part of [the] divorce proceedings, pursuant to the Antenuptial
Agreement." Sherry appeals.
DISCUSSION
Under the Uniform Premarital Agreement Act, K.S.A. 2019 Supp. 23-2401 et seq.,
premarital agreements (also called prenuptial or antenuptial agreements) allow parties
contemplating marriage to "contract with respect to . . . the disposition of property upon
separation [or] marital dissolution." K.S.A. 2019 Supp. 23-2404(a)(3). Once a premarital
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agreement is signed and the parties to the agreement become married, the agreement has
the same effect as any other written contract. See K.S.A. 2019 Supp. 23-2405.
The interpretation and legal effect of a written contract are questions of law
subject to unlimited review. Einsel v. Einsel, 304 Kan. 567, 579, 374 P.3d 612 (2016).
The primary goal in interpreting any written instrument is to ascertain the parties' intent.
When the language of a contract is unambiguous, the parties' intent must be ascertained
from the four corners of the document—the contract itself—without applying additional
rules of construction. See Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan.
943, 963, 298 P.3d 250 (2013); In re Murdock's Estate, 213 Kan. 837, 845, 519 P.2d 108
(1974) ("Where an antenuptial contract is clear and unambiguous, . . . [the intention of
the parties] must be determined from the four corners of the instrument itself without the
aid of parol evidence.").
A contract is ambiguous if it cannot be carried out as written because conflicting
language renders its meaning unclear. Simon v. National Farmers Organization, Inc., 250
Kan. 676, Syl. ¶ 2, 829 P.2d 884 (1992). This occurs when a contract's text can
reasonably support two or more interpretations. Iron Mound, LLC v. Nueterra Healthcare
Management, LLC, 298 Kan. 412, 418, 313 P.3d 808 (2013); Community First National
Bank v. Nichols, 56 Kan. App. 2d 1057, 1070, 443 P.3d 322 (2019). But courts should not
strain to find an ambiguity where in common sense there is none. Waste Connection of
Kansas, Inc., 296 Kan. at 963; American Family Mut. Ins. Co. v. Wilkins, 285 Kan. 1054,
1059, 179 P.3d 1104 (2008). For this reason, contract terms cannot be read in isolation.
Rather, we review the written document as a whole in order to give effect to the parties'
intent. Trear v. Chamberlain, 308 Kan. 932, 936, 425 P.3d 297 (2018).
In its ruling, the district court found the Antenuptial Agreement was ambiguous as
to how the Marion County properties—both purchased from the proceeds of Terry's
separate property but jointly titled to Terry and Sherry—should be treated. In particular,
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the court found Sections 5 and 9 conflicted as to whether the Marion County properties
were substitute separate property (and thus not subject to division) or jointly held (and
should be divided). Because the court found the agreement unclear, it turned to witnesses'
testimony about how the parties intended the Marion County properties to be distributed.
The court then ruled—despite the language in the written deeds—the parties had intended
the Marion County properties to remain Terry's separate property. The court thus
judicially reformed the two Marion County deeds to reflect its ruling.
Our discussion unravels these questions in the order the district court addressed
them. Thus, we first consider the court's interpretation of the agreement and, informed by
that interpretation, we turn to the court's treatment of the Marion County deeds.
1. The Antenuptial Agreement is not ambiguous.
In its original ruling on property division, the district court found that "two
provisions of the Antenuptial Agreement"—Sections 5 and 9—"conflict" as to whether
the Marion County properties were Terry's substitute separate property or were jointly
owned by the former spouses. When Sherry asked the court to reconsider or clarify this
statement, the court explained that it had "found ambiguity existed" in the agreement
"and could therefore look at the parties['] intent" regarding how the property was meant
to be distributed. Despite this finding of ambiguity, the court indicated that it believed "it
followed the terms of the . . . agreement in [its] previous order despite the fact that the
parties relied on conflicting terms in their arguments."
We pause before turning to the language of the agreement to discuss the legal
effect of a finding—like the district court made here—that the text of a written agreement
is ambiguous. As we have previously indicated, the aim of interpreting a written contract
is to give effect to the parties' intent in entering into that agreement. Prairie Land Elec.
Co-op., Inc. v. Kansas Elec. Power Co-op., Inc., 299 Kan. 360, 366, 323 P.3d 1270
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(2014). We presume that the results of all negotiations leading up to the contract are
eventually written down and incorporated—or merged—into the written agreement.
Arensman v. Kitch, 160 Kan. 783, 789, 165 P.2d 441 (1946). For this reason, "[w]hen a
contract is complete, unambiguous, and free from uncertainty, parol evidence"—that is,
testimony and evidence other than the written contract—"tending to vary the terms of the
contract evidenced by the writing [are] inadmissible." Simon v. National Farmers
Organization, Inc., 250 Kan. 676, 679-80, 829 P.2d 884 (1992).
But when the parties' meaning is not clear from the text of an agreement, a court
must still determine what the parties intended the contract to entail. In these
circumstances, the parties' meaning is "ascertained by considering the language
employed, the circumstances existing when the agreement was made, the object sought,
and other circumstances tending to clarify the parties' real intentions." Byers v. Snyder, 44
Kan. App. 2d 380, 386, 237 P.3d 1258 (2010).
At all times, however, the court's focus must be what the parties intended the
agreement to encompass. This point underscores the problem with the manner the issues
were framed before the district court here. The court recognized that it was bound by the
Nelsons' written Antenuptial Agreement. But even if that agreement were ambiguous (a
conclusion we address later), the parties did not offer any evidence about their intentions
to enter into their premarital contract. Rather, they presented evidence about a different
issue—the acquisition of the Marion County properties and the parties' intent as to how
the Marion County deeds should be titled.
We consider to the impact of this extracontractual evidence later in this opinion.
But first, we must consider the text of the agreement itself. The district court found that
two sections of the agreement conflicted with one another—Section 5, which defines
separate property, and Section 9, which determines how various types of property will be
divided in the event of a divorce.
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Section 5 states that any property either spouse owned before the marriage would
remain his or her separate property and—under Section 9(b)—would not be subject to
division in the event of divorce. Section 5 indicates that each spouse will retain "sole
dominion and control" over their separate properties, "including the right to assign,
encumber, sell, deal with generally and dispose of by Deed . . . or otherwise." Section 5
also states that neither spouse will "by reason of the contemplated marriage" acquire "any
interest" in his or her spouse's separate property, including "any substitute or additional
properties acquired with and from the proceeds resulting from the sale of . . . [those
separate] propert[ies]."
Terry argues that Section 5 is ambiguous as to the Marion County properties
because it does not anticipate a way for a separate property to become jointly titled or
part of the marital estate. But Terry reads this provision too narrowly. The agreement
does not demand that each spouse's separate property always remain separate property. In
fact, Section 5 states that either spouse may transfer his or her separate property in any
manner he or she wishes. Instead, the agreement indicates that property previously owned
by either spouse would not be converted to marital property by operation of law when the
marriage took place. Thus, nothing in Section 5 prevented Terry from selling his separate
property, buying another property with proceeds from the previous sale, and titling the
new property in any manner he chose—including in joint tenancy with his wife.
Terry's reliance on the "Waiver of rights" in Section 11 of the agreement is
similarly misplaced. That section describes the rights of a surviving spouse upon the
death of another, stating the surviving spouse would not—by operation of law—become
the owner of the decedent's separate property. This provision has no effect on a person's
ability to transfer separate property in any way he or she chooses while alive. In fact,
Section 11 agrees that neither spouse's will would "prevent either party from transferring
to the other party during the marriage any of the sole and Separate Property owned by
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him or her." Contrary to Terry's arguments on appeal, these provisions can be read in
harmony with Section 5 and are not ambiguous.
Nor does Section 5 conflict with the agreement's property-division provisions in
Section 9. Section 9 does not restrict the parties' ability to create jointly titled property. It
simply states that, in the event of a divorce, any property that is titled to both Terry and
Sherry in joint tenancy or as tenants in common will be divided equally between them,
while any separate property as defined in Section 5 will not.
The district court appears to have perceived a conflict between Sections 5 and 9
because the Marion County properties, though jointly titled, were purchased with the
proceeds from the sale of Terry's separate property. But these facts have no effect on
whether the agreement's language is ambiguous or conflicting. When the agreement is
read as a whole, Sections 5 and 9 do not conflict with one another.
Indeed, our review of the court's reasoning shows it did not actually find the
agreement ambiguous. The court found that the Marion County real estate was Terry's
separate property not because of any language in the agreement, but because the land was
purchased with proceeds from the sale of Terry's Morris County property. The "conflict"
the court found arose from the fact the Marion County deeds were held in joint tenancy
with Sherry. In other words, the court understood that the agreement required property
held in joint tenancy to be evenly split at divorce, and it understood that the deeds were
titled in joint tenancy—the court indicated that its ruling "followed the terms" of the
agreement. The court's difficulty arose because Terry claimed he intended the Marion
County properties to be titled differently than they were.
But the written deeds, executed years after the Nelsons were married, do not
render the Antenuptial Agreement ambiguous. Rather, the agreement can be—and should
have been—enforced as written, with separate property remaining outside the scope of
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property division during the divorce and jointly titled property being split equally
between former spouses. The district court erred when it stated otherwise in its ruling.
2. The district court erred when it considered parol evidence to impeach the
unambiguous language of the Marion County deeds.
As our previous discussion illustrates, the "ambiguity" found by the district court
arose not out of the parties' agreement, but from a conflict between the text of the Marion
County deeds and the witnesses' testimony. To resolve this question, the court "believe[d]
it [was] necessary to determine whether [Terry] knowingly placed this land in joint
tenancy." (Emphasis added.) After four days of testimony, the court found that Terry "did
not place either of the two Marion County tracts of real estate into joint tenancy with
Sherry . . . with the intent to convey ownership to her." And the court found Terry signed
the written deeds "out of ignorance."
It is a general principle of Kansas law that oral testimony "cannot be used to vary
the terms of a written instrument." In re Estate of Moore, 53 Kan. App. 2d 667, 672, 390
P.3d 551 (2017), aff'd 310 Kan. 557, 448 P.3d 425 (2019). This principle, which courts
call the parol-evidence rule, is "not a rule of evidence but of substantive law whose
applicability is for the court to determine." 53 Kan. App. 2d at 672; see Phipps v. Union
Stock Yards National Bank, 140 Kan. 193, 197, 34 P.2d 561 (1934). Thus, no
contemporaneous objection is required to preserve a question regarding the admissibility
of parol evidence for appellate review. In re Estate of Moore, 53 Kan. App. 2d at 672.
Though implicated when interpreting any written document, the parol-evidence
rule is particularly important when it comes to property deeds. In Kansas, any contract for
the sale of land and any interest in land must be in writing. See K.S.A. 33-106 (statute of
frauds). Written deeds are publicly recorded, placing the world on notice of the owner's
(or owners') interest in the real estate. See Miller v. Miller, 91 Kan. 1, 6-8, 136 P. 953
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(1913). Our system of land ownership and transfer hinges on people's ability to rely on
these written records.
For this reason, courts have long recognized that "parol evidence is inadmissible to
contradict, vary, change, or restrict the terms of a valid deed." Brown v. Parmalee, 130
Kan. 165, 175-76, 285 P. 563 (1930). The only exceptions to this rule are instances of
fraud or mutual mistake. Winsor v. Powell, 209 Kan. 292, 299, 497 P.2d 292 (1972).
Neither party in this case argued that the Marion County deeds were fraudulent.
And the parties' conflicting testimony underscored that those deeds were not the result of
any mutual mistake. Under these circumstances, when a deed indicates—as the Marion
County deeds do here—that property is owned by "joint tenants with right of
survivorship," courts must give effect to that intention. "[P]arol evidence is not
admissible to explain or vary the terms of the instrument[s]." 209 Kan. at 299.
If Terry had intended the Marion County real estate to be his own separate,
substitute property—as he testified—he could have titled it in a manner reflecting that
choice. But the deeds indicate otherwise. Consequently, the district court erred in
considering extrinsic evidence of Terry's intent and knowledge about how he intended the
Marion County properties to be owned. The only evidence the court could consider were
the deeds themselves, which unambiguously stated the properties were owned by Terry
and Sherry as joint tenants with rights of survivorship.
This result may seem harsh, particularly given the court's findings regarding the
various witnesses' credibility. But if courts were allowed to question parties' intent in
executing deeds, despite the language of those recorded documents, whenever a person
disputed land ownership, the goals of certainty and notice in real-estate transactions
would be thrown into chaos. Written deeds would have little, if any, meaning. There
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would be no way for a potential purchaser of land to know who owned that property and
to what extent.
Fortunately, that is not the world in which we live. Thus, the Marion County deeds
must be enforced as written—conveying ownership of the Marion County properties to
Terry and Sherry as joint tenants with rights of survivorship. Under Section 9(c) of the
agreement, those properties must be divided evenly between the parties upon their
divorce. We therefore reverse the district court's judgment to the contrary and remand the
case with directions that the court divide the Marion County properties between the
parties under the portions of the agreement governing jointly held property.
3. We deny Sherry's request for attorney fees.
In her final claim on appeal, Sherry asks this court to order Terry to pay her
attorney fees incurred during the proceedings before the district court and on appeal. A
Kansas court cannot "award attorney fees unless a statute authorizes the award or there is
an agreement between the parties allowing attorney fees." Snider v. American Family
Mut. Ins. Co., 297 Kan. 157, 162, 298 P.3d 1120 (2013). Appellate courts may award
attorney fees "for services on appeal in cases where the district court had authority to
award attorney fees." Hodges v. Johnson, 288 Kan. 56, 74, 199 P.3d 1251 (2009).
District courts have broad discretion under K.S.A. 2019 Supp. 23-2715 to award
attorney fees to either party in a divorce case "as justice and equity require." But parties
to a premarital agreement can limit the courts' equitable discretion on any matter,
including attorney fees, as long as their agreement does not violate public policy. K.S.A.
2019 Supp. 23-2404(a)(8). The Nelsons chose to include two provisions in their
Antenuptial Agreement governing their rights to an award of attorney fees in the event of
a divorce. Thus, those provisions—and not K.S.A. 2019 Supp. 23-2715—govern our
consideration of this issue.
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First, Section 9(f) states generally that, in the event of a divorce, "[n]either party
shall claim any amount for attorney fees." Second, Section 18 contains an
indemnification provision, which states:
"Each party shall refrain from attempting to obtain any court order or decision which is
contrary to the terms of this Agreement or which attempts to enlarge or reduce the
amounts to be received by either party in the event of a divorce . . . . Each party hereby
indemnifies the other for any loss, cost or expense (including attorney fees) the other
party incurs for his/her breach in seeking to obtain judicial modification of this
Agreement. This indemnification on behalf of each party shall be binding upon and
include any claims, demands, or litigation filed."
Sherry's argument rests solely on this indemnification provision. She contends that
Terry's attempt "to bar [her] from her share of the parties' 160 acres of real estate in
Marion County" is contrary to the agreement and therefore entitles her to
indemnification. But we disagree. Our review of the record shows that Terry did not seek
to modify the agreement; he argued that the Marion County properties should be
considered separate, not jointly held, property. The indemnification provision is thus
inapplicable.
Instead, we are bound by the parties' unambiguous intent, stated in Section 9(f):
"Neither party shall claim any amount for attorney fees." We therefore deny Sherry's
request for attorney fees for the proceedings before the district court, as well as her
motion for attorney fees on appeal.
Outcome: Reversed and remanded with directions.
Plaintiff's Experts:
Defendant's Experts:
Comments: