Split COA reverses award of stock following divorce mediation

A woman who was awarded half of a disputed $122,000 stock account held by her former husband after the couple entered into a mediated divorce settlement agreement was stripped of that share of the stock account on appeal Wednesday. However, a dissenting judge would have affirmed the grant of money to the ex-wife.

Nearly one year after the Allen Circuit Court approved the settlement agreement negotiated during mediation between Russell and Stacey Berg, Stacey filed a verified Trial Rule 60(B) motion focused on a stock account her husband held, which was valued at roughly $122,000.

Stacey alleged that the settlement agreement “did not reference and therefore omitted” the stock account and that her lawyer had inadvertently omitted the account from the marital balance sheet the parties used at mediation. She argued that had she known of the account, she would not have agreed to the property disposition in the settlement agreement.

Russell objected, arguing that any evidence concerning “what went on during mediation, what became part of the mediated agreement” was inadmissible. However, while his objection was overruled and his motion to strike was denied, the trial court also declined to grant Stacey relief.

But after Stacey filed a motion to correct error with submitted proposed findings, the trial court later found fraud, constructive fraud, mutual mistake, or misrepresentation had occurred and that Russell had breached a warranty. It therefore awarded Stacey half of the value of the account.

In reversing that decision, a split Indiana Court of Appeals panel agreed with Russell that the judgment cannot stand without evidence of what occurred at mediation.

“Here, Wife offered the evidence to either (1) avoid the Settlement Agreement or (2) enforce the Settlement Agreement. The trial court admitted the evidence for both purposes, finding that Wife was entitled to relief under either approach,” Judge L. Mark Bailey wrote for the majority, joined by Judge Robert Altice.

But the appellate court concluded otherwise as to avoidance, finding that under Indiana Supreme Court precedent in Horner v. Carter, 981 N.E.2d 1210, 1212 (Ind. 2013), “mediation evidence cannot be admitted for that non-collateral purpose.” It further noted that the evidence must be excluded under Evidence Rule 408 in light of Indiana’s “robust policy of confidentiality of conduct and statements made during negotiation and mediation.”

“Without the mediation evidence, there is insufficient evidence to find that Wife could avoid the Settlement Agreement. Thus, to the extent the judgment in favor of Wife is based on principles of contract avoidance, the trial court erred,” the majority wrote.

Turning to whether the trial court properly granted relief based on a breach of a warranty, the majority concluded that both warranties are mutual and that Russell and Stacey assumed responsibility for the factual assertions.

“Therefore, assuming arguendo that the factual assertions in both warranties were untrue, both Husband and Wife breached the warranties,” it wrote. “… As earlier discussed, Wife may not avoid the Settlement Agreement. Therein, Wife asserted that all assets had been disclosed and reflected in the terms. Wife is estopped from claiming that her assertions are untrue. Thus, we discern no proper basis to uphold the judgment on a theory that Husband breached a warranty.”

Although the majority found the trial court had erred in granting the motion to correct error and by awarding Stacey half of the value of the account, Judge Terry Crone dissented in a separate opinion. Specifically, the dissenting judge opined that Russell’s argument that Stacey’s exhibits were inadmissible under Rule 408 “falls far short of establishing that the trial court abused its discretion in relying on Wife’s exhibits.”

“Indiana Appellate Rule 46(A)(8)(a) provides that an appellant’s argument ‘must contain the contentions of the appellant on the issues presented, supported by cogent reasoning’ and citation to relevant authorities,” Crone wrote. “I would find Husband’s argument on this issue waived for lack of cogency. I find no merit in his remaining arguments, and therefore I would affirm the trial court.”

The case is Russell G. Berg v. Stacey L. Berg,19A-DC-3038.