KIMN HESTER v. ERIC HESTER (2010)

Kimn Y. Hester (Kimn) appeals from an Order of the Hardin Family Court which amended its Findings of Fact, Conclusions of Law, Judgment and Decree (dissolution decree) entered on September 20, 2007.   The family court held that the parties' Property Settlement Agreement (settlement agreement) that was incorporated in the dissolution decree was ambiguous, and the court admitted parol evidence in support of Eric's preferred interpretation of the settlement agreement.   For the reasons set forth below, we affirm.

FACTS

Kimn and Eric were married on April 25, 1981, and were divorced on September 20, 2007.   During the divorce, Kimn was represented by counsel, who drafted a settlement agreement.   The settlement agreement set aside the parties' non-marital property, divided marital property and debt, and provided non-modifiable maintenance to Kimn. Eric was not represented by counsel, but signed the settlement agreement.   In its dissolution decree entered on September 20, 2007, the family court incorporated, by reference, the settlement agreement between the parties.

On April 1, 2009, Eric filed a motion moving the family court “[t]o clarify the Order entered September 20, 2007, which incorporated the parties' settlement agreement or, in the alternative, to modify the said order pursuant to [Kentucky Rules of Civil Procedure (CR) ] 60.02.”   Eric argued that the settlement agreement that was incorporated into the dissolution decree was ambiguous with respect to what percentage of his military retirement pay Kimn was awarded as maintenance.   The pertinent portions of the agreement are as follows:

Section III

Maintenance

From February 1, 2007 and continuing through February 28, 2009, Respondent shall pay to the Petitioner non-modifiable maintenance in the amount of 50% of all his disposable military retirement, all cost of living increases, plus all (100%) of Respondent's VA disability and Concurrent Retirement Disability Pay. On March 1, 2009, 100% of Respondent's VA disability shall be available for Respondent's own use.   It is understood and agreed by the parties that during this time period from February 1, 2007 and continuing through February 28, 2009, that Petitioner is also receiving 50% of all of Respondent's disposable military retirement pay and cost of living increases as part of her division of marital property as more fully described in Section IV, styled “Military Retirement”․

Upon the court entering a divorce decree, Petitioner shall make application to the Department of Finance and Accounting Services for 15% of Respondent's disposable military retirement pay and concurrent retirement disability pay to be paid directly to Petitioner by the Department of Finance and Accounting Services for a portion of the maintenance owed Petitioner from February 1, 2007 to February 28, 2009 and then said allotment shall continue from March 1, 2009 as follows:

Beginning March 1, 2009, Respondent shall pay to the Petitioner, permanent, non-modifiable maintenance in the amount of 15% of his disposable military retired pay and concurrent retirement disability pay to include cost of living increases and said percentages shall continue until Petitioner dies.   This amount is in addition to Petitioner's benefit under Section IV, “Military Retirement”.

IV

Military Retirement

․

1. Beginning February 1, 2007, Respondent shall pay to the Petitioner 50% of all of his disposable military retirement pay․

․

It is understood and agreed by the parties that the 50% share of the Respondent's military retirement, and cost of living increases as described in this section is a division of marital property and is in addition to the 50% of Respondent's disposable military retirement pay, 100% of VA disability, 100% of concurrent retirement disability pay and cost of living increases Petitioner shall receive from February 1, 2007 to February 28, 2009 as maintenance and is in addition to the 15% of the Respondent's disposable military retirement pay and concurrent retirement disability pay, including any cost of living increases which shall be paid to Petitioner beginning March 1, 2009 as maintenance and more fully described in Section III styled “Maintenance”.

In summary, Section IV of the settlement agreement awarded Kimn 50% of Eric's military retirement pay as part of the division of marital property.   Additionally, pursuant to Section III, from February 1, 2007, to February 28, 2009, Kimn was awarded the other 50% of Eric's military retirement pay as maintenance.   Thus, from February 1, 2007, to February 28, 2009, Kimn was awarded 100% of Eric's military retirement pay:  50% as marital property and 50% as maintenance.   Then, beginning March 1, 2009, Kimn was to receive “15% of his disposable military retired pay” as maintenance.

The dissolution decree entered by the family court on September 20, 2007, stated the following:

2. The Property Settlement Agreement entered into by the parties on August 2, 2007 and Exhibit A and Exhibit B are not unconscionable and are hereby incorporated as if set out verbatim.

3. Petitioner shall receive 50% of the Respondent's disposable military retirement pay as a division of marital property plus cost of living increases and 50% of any other pay granted Respondent due to his military service as designated by the military and is available for division under the Uniform Former Spouses Act.

4. Petitioner shall receive 15% of Respondent's disposable military retirement pay plus cost of living increases and concurrent retirement disability pay plus cost of living increases as permanent non-modifiable maintenance.

In his motion, Eric contended that the provision in the settlement agreement stating that beginning March 1, 2009, Kimn was to receive “15% of his disposable military retirement pay” was ambiguous.  (Emphasis added).   He argued that it was his understanding the additional 15% of his military retirement pay that Kimn was to receive as maintenance was to be 15% of his portion of the military retirement pay.   Thus, he argued that Kimn was only awarded 15% of the 50% he would receive, which was 7.5% of his whole military retirement pay.

The trial court held a hearing on Eric's motion on April 7, 2009.   Kimn argued that the dissolution decree did not need to be clarified and that the settlement agreement was clear that she was to receive 15% of Eric's whole military retirement pay.   The family court agreed with Eric that the settlement agreement was ambiguous and entered an order on April 14, 2009, amending the dissolution decree.   In its order, the family court stated the following:

[T]he Findings of Fact, Conclusions of Law, Judgment and Decree entered September 20, 2007 shall be amended as follows:

Effective March 1, 2009, that the Petitioner shall receive 7.5% of the Respondent's disposable military retirement pay plus cost of living increases and concurrent disability pay plus cost of living increases as permanent non-modifiable maintenance.

On April 21, 2009, Kimn filed a motion pursuant to CR 59.05 to vacate the order entered on April 14, 2009.   The family court held a hearing on Kimn's motion, and on May 18, 2009, it entered an order denying her motion.   This appeal followed.

STANDARD OF REVIEW

Although the trial court made findings of fact with respect to what the terms of the settlement agreement were, the issue in this case involves the interpretation and meaning of certain terms in the settlement agreement.   Questions relating to the construction, operation, and effect of a settlement agreement are generally governed by the rules and provisions applicable to the construction of other contracts.  Frear v. P.T.A. Industries, Inc., 103 S.W.3d 99, 105 (Ky.2003);  KRS 403.180(5).   The interpretation of a contract, including determining whether a contract is ambiguous, is a question of law for the courts and is subject to de novo review.  First Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 835 (Ky.App.2000).

ANALYSIS

On appeal, Kimn argues that the family court erred when it concluded that the terms of the settlement agreement were ambiguous.   Kimn contends that the terms of the settlement agreement are clear and that “15% of his disposable military retirement pay” means 15% of Eric's whole military retirement pay.   Thus, Kimn contends that the family court improperly modified her non-modifiable maintenance award from 15% to 7.5% in its April 14, 2009, order.

Our first determination is whether the provision in the settlement agreement stating that beginning March 1, 2009, Kimn is to receive “15% of his disposable military retirement pay” as maintenance is ambiguous.   As stated in Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 384-85 (Ky.App.2002):

The primary object in construing a contract or compromise settlement agreement is to effectuate the intentions of the parties.   Any contract or agreement must be construed as a whole, giving effect to all parts and every word in it if possible.

Where a contract is ambiguous or silent on a vital matter, a court may consider parol and extrinsic evidence involving the circumstances surrounding execution of the contract, the subject matter of the contract, the objects to be accomplished, and the conduct of the parties.   Absent an ambiguity in the contract, the parties' intentions must be discerned from the four corners of the instrument without resort to extrinsic evidence.   A contract is ambiguous if a reasonable person would find it susceptible to different or inconsistent interpretations.   The fact that one party may have intended different results, however, is insufficient to construe a contract at variance with its plain and unambiguous terms.

(Citations and internal quotation marks omitted).

After reviewing the settlement agreement, we believe that “a reasonable person could find it susceptible to different or inconsistent interpretations.”   Id. First, the contested maintenance provision only states that beginning March 1, 2009, Kimn was to receive 15% of “his” military retirement pay.   It does not say 15% of his total or all of his military retirement pay.   Additionally, other maintenance provisions in the settlement agreement specifically say “of all his” military retirement pay.   For example, Section II of the settlement agreement provides that:

From February 1, 2007 and continuing through February 28, 2009, Respondent shall pay to the Petitioner non-modifiable maintenance in the amount of 50% of all his disposable military retirement․

(Emphasis added).   Thus, one could interpret the provision to mean that the 15% was only to be taken from the 50% share Eric would actually receive.

However, one could also reasonably conclude that the 15% was to be taken from Eric's total military retirement pay.   As argued by Kimn, Eric is the only party to this action that had disposable military retirement pay.   Thus it would be reasonable to conclude that “his” was referring to all of Eric's military retirement pay.   Based on the foregoing, we find no error in the family court's determination that the maintenance provision was ambiguous.

When a contract term is susceptible of two meanings, doubts will be resolved against the drafter of the instrument.  B. Perini & Sons v. Southern Ry. Co., 239 S.W.2d 964, 965-66 (Ky.1951).   Because the settlement agreement was prepared by Kimn's attorney, the family court correctly construed it against Kimn's and in favor of Eric's interpretation of the maintenance provision.

For the foregoing reasons, we affirm the order of the Hardin Circuit Court.

ALL CONCUR.

KELLER, JUDGE: