Opinion ID: 1956395
Heading Depth: 1
Heading Rank: 3

Heading: house proceeds

Text: Mary Ann argues that the district court erred in ordering that the proceeds from sale of the house be divided equally. She argues that the judgment decreed her a constant $60,000 equity interest in the house, and that she should not receive less because the house sold for less than $150,000. Peter argues that it was his intent in drafting the settlement agreement that Mary Ann's equity interest would remain constant only if the house appreciated in value, and that the parties never contemplated the house selling for less when they agreed to the settlement. The parties have presented this question as one involving the interpretation of the parties' settlement agreement. Peter particularly relies upon his own testimony regarding his intent when drafting the stipulation. The majority view, however, is that a settlement agreement that is wholly incorporated into the divorce judgment is merged into that judgment and ceases to be independently viable or enforceable. See Kaleta v. Kaleta, 452 So.2d 1338, 1339 (Ala.Ct.Civ.App.1984); Kulchar v. Kulchar, 1 Cal.3d 467, 462 P.2d 17, 19, 82 Cal.Rptr. 489, 491 (1969); Estate of Gibson, 219 Cal.App.3d 1486, 269 Cal.Rptr. 48, 49-51 (1990); Pannell v. Pannell, 162 Ga.App. 96, 290 S.E.2d 184, 185 (1982); Brooks v. Minn, 73 Haw. 566, 836 P.2d 1081, 1084-1085 (1992); In re Marriage of Lawson, 409 N.W.2d 181, 182 (Iowa 1987); In re Marriage of Bries, 499 N.W.2d 319, 321 (Iowa Ct.App.1993); Peterson v. Leonard, 622 A.2d 87, 89 (Me.1993); Marks v. Marks, 316 N.C. 447, 342 S.E.2d 859, 863 (1986); Isenhower v. Isenhower, 666 P.2d 238, 241 (Okla.Ct.App.1983); Henningsen v. Crandall, 112 Or.App. 466, 828 P.2d 1055, 1057 (1992); Vanatta v. Vanatta, 701 S.W.2d 824, 827 (Tenn.Ct.App.1985). See also 24 Am.Jur.2d Divorce and Separation § 841 (1983); Restatement (Second) of Judgments § 18 (1982). Once the settlement agreement is merged into the divorce decree, it is interpreted and enforced as a final judgment of the court, not as a separate contract between the parties. E.g., In re Marriage of Bries, 499 N.W.2d at 321. We agree with the result and rationale of these cases, and we adopt the merger doctrine in this case. We note that this court has previously applied the underlying principles of the merger doctrine, although not describing it that way. In Harchenko v. Harchenko, 77 N.D. 289, 43 N.W.2d 200 (1950), a plaintiff sued her ex-husband for fraud and deceit for misrepresentations made in the parties' stipulated divorce settlement. The provisions of the settlement were incorporated into the final divorce decree. The court concluded that the suit for fraud on the contract was an impermissible collateral attack on the judgment: The stipulation was an agreement which was to be submitted to the court for his advice and guidance in exercising the powers vested in him under the statute. The decree lost none of its effectiveness because the court accepted in toto the provisions of the stipulation instead of modifying them as he unquestionably had a right to do. Karteus v. Karteus, 67 N.D. 297, 301, 272 N.W. 185, 187. It follows that a decree settling the property rights of the parties to a divorce action and granting alimony is an adjudication of what constitutes a just and proper distribution of the property of the parties, whether the decree be made pursuant to a stipulation or upon a consideration of, and findings made, upon other evidence in the case.... Since the trial court had jurisdiction of the parties and of the subject matter of the divorce action, its judgment imports absolute verity and as long as this judgment stands it may not be attacked collaterally by any of the parties thereto, or by those in privity with them.... Harchenko, 43 N.W.2d at 201 (citations omitted). Although the court labeled its rationale as collateral attack, the underlying principles are the same as those for merger. Once judgment is entered incorporating the settlement agreement, the parties' rights are governed solely by the judgment, and any further action must be on the judgment, not on the contract. Because Mary Ann and Peter's stipulated settlement was incorporated verbatim into the divorce judgment, it was wholly merged into that judgment. Accordingly, we are not concerned with interpreting a contract; we are concerned with interpreting a judgment. Brooks v. Minn, 836 P.2d at 1085 (quoting Jendrusch v. Jendrusch, 1 Haw.App. 605, 623 P.2d 893, 896 (1981)). As this court held in Zent v. Zent, 281 N.W.2d 41, 46 (N.D.1979), interpretation of a judgment is a question of law that is fully reviewable by this court on appeal. The relevant clauses of the divorce judgment say: The plaintiff [Mary Ann] and the defendant [Peter] agree that the value of their residence and property at 1728 Country West Road is One Hundred Fifty Thousand dollars ($150,000.00).... There is a mortgage loan with an outstanding balance of approximately Thirty Thousand dollars ($30,000.00) against the property. The plaintiff and the defendant agree that the net equity in the residence and property shall be determined to be One Hundred Twenty Thousand dollars ($120,000.00) and that each of them shall be entitled to one-half of that amount, or Sixty Thousand dollars ($60,000.00).... In the event that a decision is made to sell the residence, the defendant and the plaintiff shall share the costs of selling. The plaintiff's Sixty Thousand dollars ($60,000.00) equity interest shall not appreciate or increase in value, but shall remain constant in value. In the event of a sale of the residence and property, the plaintiff's Sixty Thousand dollars ($60,000.00) equity interest shall bear such proportion of the reasonable and necessary costs of sale, including but not limited to a real estate commission, as the said Sixty Thousand Dollars ($60,000.00) bears to the sales price. By way of example only, if the sales price is $150,000.00 and the sales costs $9,000.00, the plaintiff's equity interest shall bear one-half, or $4,500.00, thereof if the defendant's equity interest has not appreciated in value since the date of the final divorce decree. If, however, the defendant's equity interest, which is also valued at $60,000.00 as of the date of the final divorce decree, has appreciated in value by the time of the sale, then the defendant shall pay a larger pro rata share of such expenses based upon the increase in the defendant's equity interest. [Emphasis added]. Peter argues that the judgment does not spell out division of the proceeds in the event the house sold for less than $150,000, and therefore argues that the trial court properly clarified the judgment by holding that proceeds were to be split equally. Mary Ann argues that the judgment clearly and unambiguously decrees that Mary Ann's $60,000 equity interest was to be constant in value but Peter's could fluctuate, so the court's order for an equal split of the proceeds was an improper modification of the property distribution. See Wastvedt v. Wastvedt, 371 N.W.2d 142, 144 (N.D.1985) (property division may be clarified, but not modified). Two trial court judges have interpreted this judgment to allow an equal split of the sale proceeds. [3] The general guidelines for interpretation of judgments were explained in Henry S. Grinde Corp. v. Klindworth, 77 N.D. 597, 44 N.W.2d 417, 427-428 (1950) (On Petition for Rehearing): The legal operation and effect of a judgment must be ascertained by a construction and interpretation of its terms, and this presents a question of law for the court. If the language used in a judgment is ambiguous there is room for construction, but if the language employed is plain and unambiguous there is no room for construction or interpretation, and the effect thereof must be declared in the light of the literal meaning of the language used. 49 C.J.S., Judgments, § 436, pp. 862 and 863; Hofer v. Hofer, Ohio App., [35 Ohio Law Abs. 486], 42 N.E.2d 165, 166. The judgment should be so construed as to give effect to each and every part of it, and bring all the different parts into harmony as far as this can be done by fair and reasonable interpretation. Lamb v. Major & Loomis Co., 146 N.C. 531, 60 S.E. 425, 426; ... A judgment, plain and unambiguous in its terms, may not be modified, enlarged, restricted, or diminished by reference to the Findings of Fact. 49 C.J.S., Judgments, § 436, p. 868. See also Zent v. Zent, 281 N.W.2d at 46. These guidelines apply here. We construe the judgment to clearly and unambiguously provide that Mary Ann was entitled to $60,000 equity in the house, even if its value declined. The construction urged by Peter and adopted by the trial court does not give effect to each and every part of the judgment, as required by Klindworth, but rather renders ineffective the clear directive that Mary Ann's $60,000 shall remain constant in value. The first part of that sentence provides that Mary Ann's interest shall not appreciate or increase in value. If the phrase shall remain constant in value refers as well to only increases in valuation, it is mere surplusage. To give effect to each and every part of the judgment, that phrase must be interpreted to mean exactly what it says: Mary Ann is entitled to a constant $60,000 equity interest, notwithstanding fluctuations in the property's value. Further support for this interpretation is found in the part of the judgment that says Mary Ann's Sixty Thousand dollars ($60,000.00) equity interest shall bear such proportion of the reasonable and necessary costs of sale ... as the said Sixty Thousand Dollars ($60,000.00) bears to the sales price. The trial court's interpretation, requiring an equal split of the sale proceeds and equal sharing of the costs of sale, deletes this sentence from the judgment. The trial court, in effect, rewrote the judgment to fit Peter's testimony about his intent in drafting the settlement agreement. The clear import of the judgment language is that Mary Ann's interest was to remain constant, while Peter's interest was subject to fluctuation with the value of the property. The trial court's contrary ruling constituted an improper modification of clear and unambiguous provisions in the judgment. See Wastvedt v. Wastvedt, 371 N.W.2d at 144; Henry S. Grinde Corp. v. Klindworth, 44 N.W.2d at 428. We hold that Mary Ann is entitled to $60,000, less her prorated share of sale costs, from the proceeds from sale of the house.