Appeal from Johnson District Court; THOMAS E. FOSTER, judge.
1. K.S.A. 60-2103(b) is analyzed and applied.
2. K.S.A. 60-259(f) is analyzed and applied.
3. Separation agreements are subject to the normal rules of contract law. The fact that a separation agreement is incorporated into a divorce decree does not extinguish those contractual aspects.
4. A hold harmless provision in a separation agreement is the same as an indemnity agreement.
5. The cardinal rule in construing an indemnity agreement is to ascertain the intention of the parties and to give effect to that intention if it can be done consistently with legal principles.
6. If the terms of the contract are clear and unambiguous, meaning that the contract is not understood to reach two or more possible interpretations, the court will enforce the contract in accordance with its terms.
7. Unless an indemnity agreement encourages the commission of the illegal act, a contract to indemnify against the consequences of an illegal act that has already been committed has generally been upheld.
8. In Kansas, our courts have held that contracts in contravention of public policy are void and unenforceable.
9. Principles governing the unenforcability of contracts are analyzed and applied.
The opinion of the court was delivered by: Pierron, J.
Before MALONE, P.J., PIERRON, J., and BUKATY, S.J.
William B. Hudson appeals the district court's finding that his agreement to indemnify Brenda S. Loscher in their separation agreement for a deficiency that remains on their second mortgage includes Loscher's payments for criminal restitution on that deficiency. We affirm.
In 1999, Loscher and Hudson purchased a home for approximately $354,500. Loscher prepared a mortgage loan application for Norwest Mortgage, claiming that she and Hudson would use their own funds to make a down payment of approximately $153,000. In support of her application, Loscher provided a falsified bank statement indicating that she and Hudson had $2,647.10 and $157,145.34 in their checking and savings accounts, respectively. In reality, they only had $838.87 in their checking and $4 in their savings accounts.
At the time of closing, Loscher called Shirley Hudson (Loscher's mother-in-law who lived in Colorado) for a short-term loan of $150,000. Loscher told Shirley that the bank was improperly holding funds that she intended to use for the down payment of the house, which was untrue. Based on the understanding that Loscher would repay the loan within days, Shirley agreed to provide them a loan. Shirley obtained a 30-day bank loan and wired the funds to Loscher who used the funds for the down payment.
After Loscher and Hudson moved into their new home, Loscher did not repay the loan to Shirley. Instead, she undertook several actions to circumvent her repayment obligation.
First, Loscher told Shirley's bank that she had the money and would send the check via Federal Express. The bank, however, checked with Federal Express and, finding no record of the shipment, contacted Loscher. In response, Loscher faxed false copies of the Federal Express Airway bill and the payoff check and mailed an empty Federal Express envelope to the bank.
Second, Loscher began fraudulently using the identity of an attorney, faxing multiple letters and making telephone calls to the bank and Shirley. Purporting to be the attorney or the attorney's assistant, Loscher stated she was aggressively pursuing the release of Loscher and Hudson's funds. Loscher also forged the attorney's signature.
Third, Loscher interfered with Hudson being contacted by Shirley or his other family members to discuss the loan/down payment matter. Loscher refused to relay telephone messages left for Hudson in their home; deleted messages left for Hudson on the voice mail system at his old office; and falsely informed family members that Hudson did not have a telephone in his new office.
Loscher's nonrepayment of the loan forced Shirley to cash out several certificates of deposit to repay the bank. Shirley then placed a second mortgage on Loscher's and Hudson's home. Once the home was sold, Shirley recovered $87,402.55, leaving a difference of $66,000.84 unpaid.
For this reason and others, Loscher and Hudson divorced. Incorporated into their November 21, 2000, divorce decree, the separation agreement contained a hold harmless provision stating that Hudson would be liable for any deficiency that existed from the parties' second mortgage to Shirley.
"The real property owned by the parties, commonly known as 13701 West 54th Terrace, Shawnee, Kansas, and legally described as:
LOT 3, BLOCK 2, Woodland Place, a subdivision in the City of Shawnee, Johnson County, Kansas, according to the recorded plat thereof.
is currently on the market for sale.
"The marital residence is currently encumbered by a first mortgage to Norwest Mortgage Company in the approximate sum of $203,000, and a second mortgage to Shirley Hudson in the sum of $150,000. The marital residence has an approximate market value of $369,000.
"As of November 1, 2000, Husband shall control the listing and marketing of the sale of the marital residence. Once the marital residence is sold, in the event a deficiency exists with regard to the second mortgage, Husband shall completely satisfy any such deficiency and hold wife harmless therefrom." (Emphasis added.)
In entering into the agreement, the parties specified their general intent was as follows:
"As the premises of this Agreement, the parties state:
"5. GENERAL INTENT OF MARITAL SETTLEMENT. The parties intend to settle all rights or claims between them arising out of their marriage relationship, including but not limited to property division, maintenance, and inheritance rights."
Sometime afterwards, the United States Attorney for the District of Colorado filed multiple charges against Loscher for her unlawful acts related to the nonrepayment of Shirley's loan. In 2004, Loscher entered a plea of guilty to one count of wire fraud. In exchange for her plea, the United States Attorney agreed to dismiss the remaining counts and not file any other federal criminal charges against Loscher. Because Loscher stated that she was freely and voluntarily pleading guilty to the crime and because she was guilty of the crime, for no other reason, the United States District Court for the District of Colorado accepted her guilty plea.
For her sentence, the federal district court applied the Mandatory Victims Restitution Act of 1996 (MVRA) and ordered full restitution. Under 18 U.S.C. § 3663A (2000), the court sentenced Loscher to a 5-year term of probation with restitution in the amount of $66,000.84 to be owed to Shirley as a condition of probation. A special assessment of $100 was also ordered against Loscher.
However, for the reason that additional financial obligations would hamper Loscher's ability to pay her criminal restitution, the federal district court declined to further impose a fine against Loscher, which could have ranged from ...