Matter of Marriage of Moler and Moler

444 P.3d 1017 (Table)

In the MATTER OF the MARRIAGE OF Jody L. MOLER, Appellee/Cross-appellant, and William R. MOLER, Appellant/Cross-appellee.

No. 119,113

Court of Appeals of Kansas.

Opinion filed July 26, 2019

Joseph W. Booth, of Lenexa, and Peggy S. Bisping, of Shawnee, for appellant.

Gary L. Ayers, of Foulston Siefkin LLP, of Wichita, and Anne E. Burke, of Burke McClasky Stevens, of Overland Park, for appellee.

Before Gardner, P.J., Green and Atcheson, JJ.

MEMORANDUM OPINION

Per Curiam:

This appeal arises from a district court's interpretation and application of supplemental child support and supplemental maintenance provisions in the parties' post-divorce settlement agreement. Both parties have appealed, challenging the supplemental amounts due for 2015.

Factual and Procedural Background

William and Jody Moler married in 1990 and had three children, born in 1993, 1998, and 2000. They divorced in 2013. The decree included the parties' Separation and Property Settlement Agreement (Settlement Agreement) and Parenting Plan approved by the court. When the parties divorced, the youngest two of the three children were minors subject to the jurisdiction of the district court. Now, all the children are over 18.

The parties agreed that William would pay Jody $3,560 per month in "base child support." The base child support calculation was made by averaging the extended and nonextended income formulas based on William's salary of $275,000.

In addition to base child support, the parties agreed to a supplemental child support provision:

"[I]n addition to the Base Child Support described above ... [Jody] shall receive 10% of the amount, if any, by which the sum of all [William's] earned income (wherein ‘earned income’ shall be defined as bonus income and cash distributions from stock options/restricted stock options and excluding any income from investments including but not limited to those investments shown on the attached spreadsheet and the actual stock options or restricted stock options [William] may receive) exceeds his current salary ($275,000 per year). The supplemental child support shall be prorated for the last year the support is due (any year a child emancipates)."

The parties challenge the district court's application of this provision and the supplemental maintenance provision on appeal.

Both parties waived their rights to statutory maintenance from the other and agreed to a supplemental maintenance provision. It defined "earned income" identically to the definition of that term in the supplemental child support provision:

"[I]n lieu of any month to month maintenance and in consideration for the division of marital assets, that [Jody] shall receive 20% of the amount, if any, by which the sum of all [William's] earned income (wherein 'earned income' shall be defined as bonus income and cash distributions from stock options/restricted stock options and excluding any income from investments including but not limited to those investments shown on the attached spreadsheet and the actual stock options or restricted stock options [William] may receive) exceeds his current salary ($275,000 per year)."

The primary issues on appeal are whether certain income William received during 2015 is included in the Settlement Agreement's definition of "earned income," and whether the parties could use that definition instead of the Kansas Child Support Guidelines' (Guidelines) definition of income in calculating supplemental child support.

William and Jody agreed to exchange their relevant tax and financial documents each year to facilitate calculation of the amounts due. Unless one party died or Jody remarried or cohabitated with another adult, William would pay supplemental maintenance through 2020. The parties also agreed to his payment of other items, such as insurance costs relating to the children, college costs not covered by the children's college funds, pet care, vehicles for the children, and other expenses. The Settlement Agreement also divided the marital assets and debts. Jody received $2,429,819—about 56% of the marital estate—while William received the remaining $1,839,082.

Careers and Salaries

Jody did not work outside the home for the large majority of the marriage. Around the time of the divorce, Jody took a minimum wage job as a paraprofessional in a school. She began teaching second grade full-time in August 2016 with an annual salary of $40,950.

From 2004 to 2012, William worked for Inergy Midstream, LLC, a midstream oil and gas company. In October 2012, William left his position as Chief Operating Officer of Inergy to work at Tallgrass Energy Partners (Tallgrass), a company that "builds critical energy of a structure for the transportation of crude oil and natural gas." William described Tallgrass as starting with "nine guys and the bank." By the time of the parties' divorce, William was Chief Operating Officer, Executive Vice President, and a board member of Tallgrass, which had grown to 650 employees.

In June 2013, 33 days after the court approved the parties' Separation Agreement, William was awarded 50,000 Equity Participation Units (EPUs) in Tallgrass in accordance with the company's long-term incentive plan. The plan defined EPUs as "a phantom (notional) unit granted under the Plan which entitles the Participant to receive, in the discretion of the Committee, a Unit or amount of cash equal to the Fair Market Value of a Unit" which would later be converted to common units of the partnership. The vesting schedule was subject to an "in-service date"—meaning the date that the Pony Express Crude Oil Pipeline was completed and began service. One-third of the EPUs were to vest on the latter of May 13, 2015 or the in-service date, while the other two-thirds were to vest on the latter of May 13, 2017 or the in-service date. Vesting depended on William's continued employment.

William could not choose whether to receive a stock option or an EPU, nor did he participate in any meeting in which the board determined whether he got cash, a stock option, or a unit. But he was part of the discussion when developing the EPUs, and he described the EPU system as something good for both the employees and the company:

"We wanted it to be more upbeat and supportive of the employees. Everybody in the company got some form of equity participation unit. And we wanted it to be titled something that was indicative of what we wanted them to have, which everybody pulling the rope the same direction, doing the same things for the same good and value, working as a team. So equity participation unit we felt met that standard."

In May 2015, the first third of William's EPU award—16,667 units—vested with a fair market value of $809,350. William received no cash as a result of this portion of the award vesting, but the receipt of the award was a taxable event. The dollar amount was considered "federal taxable wages" according to William's earnings statement, and they were reported under wages and salaries—not investment income or options—on his 2015 tax return. William had 6,239 units withheld to satisfy his tax liability.

William also received a $500,000 discretionary cash bonus in 2015, which he did not dispute was bonus income that Jody had a right to include in calculating supplemental support. His 2015 tax return showed that he received $895,426 of nonpassive income and a cash distribution of $12,292,331 from Tallgrass KC, LLC—a Tallgrass subsidiary company related to the one William worked for.

Litigation Leading to this Appeal

In June 2016, Jody and William's middle child turned 18 and William moved to modify both the base child support and the supplemental child support formulas. He asked that the supplemental support, 10% for two children, be prorated for 2016 and 5% thereafter for the remaining minor child, as was consistent with the Separation Agreement. Jody moved to modify child support, alleging that William's income had materially increased since the decree of divorce was filed. William later moved for determination of the amount owed in supplemental support in 2015. The court set the matter for a two-day trial in May 2017.

The parties filed several motions in limine about the anticipated testimony of their expert witnesses. William's expert was Professor Edwin T. Hood, Emeritus Professor of Law at the University of Missouri-Kansas City. Jody's expert was G. Matt Barberich, Jr., CPA. The parties and their experts testified at trial.

District Court's Memorandum Decision

The district court found that the supplemental support provisions in the parties' Settlement Agreement were subject to at least two possible interpretations, so they were ambiguous. The court admitted extrinsic evidence to aid in clarifying the intent and purposes of the uncertain language of the contract, but not to vary or nullify its clear provisions.

The district court found that EPUs are a form of equity compensation that does not constitute earned income as defined in the parties' Settlement Agreement, so it excluded EPUs from the supplemental spousal support calculations. It determined that the parties "specifically excluded forms of equity compensation and investment income" when determining the supplemental support calculation. It found Hood, William's expert, to be "far more persuasive and logical" than Barberich, Jody's expert, and adopted Hood's testimony and opinions in its findings.

The court also found supplemental spousal maintenance included William's annual salary, bonuses, and cash distributions from stock options/restricted stock options but excluded William's income from investment and his equity compensation, whether in the form of stock options, restricted stock options, or EPUs. Its decision did not, however, mention which category William's income from Tallgrass KC fit into.

Finally, the district court held that the parties' redefinition of income for supplemental child support was unenforceable because their definition of "earned income" differed...