Court Opinion

ID: 3007725
Source: CourtListenerOpinion
Date Created: 2015-10-07 15:04:48.720533+00
Date Added: 2024-06-11T15:03:03.354844
License: Public Domain

Oct 07 2015, 9:07 am

      ATTORNEY FOR APPELLANT                                     ATTORNEYS FOR APPELLEE
      Anthony L. Kraus                                           Lindsey A. Grossnickle
      Michael M. Yoder                                           Matthew R. Shipman
      Patrick L. Jessup                                          Bloom Gates & Whiteleather, LLP
      Yoder & Kraus, P.C.                                        Columbia City, Indiana
      Kendallville, Indiana

                                                  IN THE
          COURT OF APPEALS OF INDIANA

      Steven M. Kelly,                                           October 7, 2015
      Appellant-Respondent,                                      Court of Appeals Case No.
                                                                 57A03-1502-DR-45
              v.                                                 Appeal from the Noble Superior
                                                                 Court
      Rebecca J. Kelly,                                          The Honorable Douglas Fahl,
      Appellee-Petitioner,                                       Special Judge
                                                                 Trial Court Cause No.
                                                                 57D01-9401-DR-7

      Bradford, Judge.

                                           Case Summary
[1]   Appellant-Respondent Steven M. Kelly (“Husband”) and Appellee-Petitioner

      Rebecca J. Kelly (“Wife”) (collectively “the parties”) were divorced in 1995.

      The parties entered into a property settlement agreement which was accepted

      Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015                   Page 1 of 16
      by the trial court and provided that Husband would pay Wife five million

      dollars over the course of several years. In 1997, the parties, by written

      agreement, amended the original settlement agreement and established a new

      payment schedule under which Husband would pay Wife $300,000 each year

      until 2014 (“1997 PSA”). The parties entered into two subsequent agreements,

      in 1999 and 2003, under which Husband advanced or loaned money to Wife

      from the amounts she would be entitled to receive under the 1997 PSA. In

      2007, Husband ceased making payments under the 1997 PSA payment

      schedule because he believed Wife had been advanced or loaned the maximum

      amount she would have been entitled to receive in the remaining eight years of

      the 1997 PSA.

[2]   In 2013, Wife filed a motion requesting that the trial court enforce the terms of

      the 1997 PSA, alleging that Husband owed her the annual payments from 2007

      to 2014 and that the agreements made following the 1997 PSA were

      unenforceable because they were not approved by the trial court. The trial

      court agreed with Wife, finding that it did not have jurisdiction to consider the

      1999 and 2003 agreements because it had not approved and incorporated those

      agreements into the dissolution decree. The trial court ordered Husband to pay

      Wife $2.4 million. We find that the parties were free to modify the settlement

      agreement without approval of the trial court and that the trial court erred in

      failing to consider the 1999 and 2003 agreements. We reverse and remand.

                             Facts and Procedural History
      Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015     Page 2 of 16
[3]   On November 3, 1995, the parties were divorced. The trial court incorporated

      into its dissolution decree a property settlement agreement (“Original PSA”)

      entered into between the parties. The Original PSA provided that Wife was

      entitled to settlement payments totaling five million dollars to be paid in

      increments by Husband pursuant to the terms of the agreement. The Original

      PSA also provided that the agreement could only be amended by a “writing,

      signed by each of the parties and approved by a court of competent jurisdiction.”

      App. p. 24 (emphasis added).

[4]   On November 26, 1997, the trial court approved an amended property

      settlement agreement submitted by the parties (“1997 PSA”). The 1997 PSA

      contained the following language:

              Section 2.3 Settlement Payments. The parties have had and may
              or may not continue to have financial transactions not precisely
              in compliance with the original agreement. These transactions
              have been cordial and in the spirit of mutual agreement and
              cooperation. To facilitate the continuing cooperation without the
              need for court intervention, the parties agree to a flexible
              payment schedule with only written unilateral agreement.
                                                   ***
              The new schedule of settlement payments is as follows:
              12-31-97 $400,000.00
              12-31-98 400,000.00
              12-31-99 300,000.00
              12-31-00 300,000.00
              12-31-01 300,000.00
              12-31-02 300,000.00
              12-31-03 300,000.00
              12-31-04 300,000.00

      Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015    Page 3 of 16
              12-31-05 300,000.00
              12-31-06 300,000.00
              12-31-07 300,000.00
              12-31-08 300,000.00
              12-31-10 300,000.00
              12-31-11 300,000.00
              12-31-12 300,000.00
              12-31-13 300,000.00
              12-31-14 300,000.00
              TOTAL PAYMENTS: $5,600,000.00
                                                   ***
              This schedule is flexible at the discretion of the parties with
              unilateral agreement….It is the intent of the parties to do so
              without the need of further court intervention.
      Ex. C pp. 3-4.

[5]   On May 10, 1999, the parties entered into a Property Settlement Reconstruction

      (“1999 Agreement”) which provides, in relevant part, as follows:

              [Wife] seeks advance payments from the 1997 court amended
              and approved revised schedule. [Husband] agrees to advance
              $1,200,000.00. By way of cash value compensation, [Wife]
              agrees to pay a 12% a.p.r. off setting adjustment due 12-31 each
              succeeding year. In accordance with the court amendment, this
              modification only requires agreement between the parties.

      Ex. D. The 1999 Agreement and all subsequent agreements between the parties

      were not submitted to the trial court for approval. Both parties testified that

      they viewed the agreements entered into subsequent to the 1997 PSA as

      ongoing modifications to the payment schedule outlined in the 1997 PSA.

      Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 4 of 16
[6]   In 2003, the parties entered into an agreement entitled the SMK-RJK Loan

      Agreement (“2003 Agreement”) which provides, in its entirety, as follows:

               [Wife] may borrow up to $500,000.00 in $100,000.00 increments.
               Interest is payable at 12% simple calculated at the per diem rate
               and payable upon return of the funds. If the funds are returned at
               any year-end, interest may be deducted from property settlement
               payments. Funds may be repaid at anytime in identical
               $100,000.00 increments. Security is not necessary because of the
               pending property settlement due Rebecca. Failure to repay the
               balances due will result in collection from the property settlement
               at the end of that agreement.

      Ex. E.

[7]   The parties do not dispute that Husband made all payments required under the

      1997 PSA through 2006. According to Husband, at the conclusion of 2007,

      Wife owed Husband a total of $1,414,200. Husband ceased payments under

      the 1997 PSA on the basis that the amounts owed between the parties were

      even and offset.

[8]   On April 25, 2008, the parties entered into an agreement titled Property

      Settlement Addendum (“2008 Addendum”). The 2008 Addendum states that

      Wife has “exhausted her ability to borrow from the Property Settlement

      Agreement, actually exceeding by $22,634.93,” that “[Wife] is desperate for

      $30,000,” and that Husband agrees to loan Wife $30,000 with collateral

      comprising of an automobile and two John Deere Gators. Ex. F.

      Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 5 of 16
[9]    On January 28, 2013, Wife petitioned for a rule to show cause, arguing that

       Husband should be required to pay the remaining balance due under the 1997

       PSA without consideration of the subsequent agreements. On November 19,

       2013, Wife filed a motion for proceedings supplemental and a motion to

       enforce the 1997 PSA. Wife argued that the following language from the 1997

       PSA is ambiguous: “To facilitate the continuing cooperation without the need

       for court intervention, the parties agree to a flexible payment schedule with only

       written unilateral agreement.” Ex. C p. 3. Wife argued that the phrase

       “unilateral agreement” was ambiguous and so the entire modification provision

       should be stricken from the agreement. Once stricken, the Original PSA would

       control the parties’ ability to modify the settlement. Wife argued that because

       the Original PSA required court approval for modifications, the agreements

       following the 1997 PSA were not valid modifications to the settlement

       agreement.

[10]   In its order on Wife’s motions, the trial court issued its own findings of fact and

       conclusions of law.

                                       FINDINGS OF FACT
               B. Motion for Proceeding Supplemental and Motion to
               Enforce Settlement Agreement

               1. The Original PSA allowed for settlement payments over time
               that accrued interest and allowed for yearly principal and interest
               payments to [Wife].

               2. The [1997] PSA called for yearly property settlement payments
               as follows: $400,000 on December 31, 1997 and December 31,

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 6 of 16
        1998; and payments of $300,000 on December 31st of every year
        from 1999 to 2014. These payments total $5.6 million dollars
        over the life of the [1997] PSA.

        3. [Husband] failed to make the [1997] PSA’s yearly payment of
        $300,000 due in 2007, 2008, 2009, 2010, 2011, 2012, 2013 and
        2014. [Husband’s] failure to make the payments due under the
        [1997] PSA result in a debt owed to [Wife] in the amount of 2.4
        million dollars.

        4. [Husband] provided evidence that he made two separate loans
        to [Wife] which loans were represented by the “May 1999
        Property Reconstruction” and the “$500,000 Additional Advance
        Agreement” (the “Loan Agreements”). The total loan amount
        according to these two loan agreements was $1,700,000.00.

        5. The Court will consider the Loan Agreements as a defense to
        the issue of contempt in this matter.

        6. The Court will find that the Court lacks jurisdiction to
        consider the Loan Agreements…because they were not approved
        by the Court and made part of the divorce decree. If [Husband]
        believes he is owed compensation under the Loan Agreements,
        the Court finds that he should proceed with said action in the
        appropriate venue.

                                             ***

        D. The Amended PSA is Patently Ambigious [sic]

        1. Section 2.3 of the [1997] PSA contains the following provision:
        “To facilitate the continuing cooperation without the need for
        court intervention, the parties agree to a flexible payment
        schedule with only written unilateral agreement.” This provision
        contains a patent ambiguity, with respect to the term “unilateral
        agreement.”

                                             ***
Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 7 of 16
                             CONCLUSIONS OF LAW
        A. Motion for Proceeding Supplemental and Motion to
        Enforce Settlement Agreement
        …
        9. In this case, [Husband] introduced the Loan Documents;
        however, these documents should not be considered by the Court
        because they were never approved and signed by the Court, and
        therefore, they are not legally binding on the parties….

        C. The [1997] PSA is Patently Ambigious [sic]

        1. A marital settlement agreement incorporated into a dissolution
        decree is treated as a contract and interpreted according to the
        rules of contract construction. Rodriguez v. Rodriguez, 818 N.E.2d
993, 995 (Ind. Ct. App. 2004) trans. denied.
        …
        6. A contract is ambiguous if reasonable people could come to
        different conclusions about its meaning. Simon Prop. Grp., L.P. v.
        Michigan Sporting Goods Distributors, Inc., 837 N.E.2d 1058, 1070
        (Ind. Ct. App. 2005) (citing Roy A. Miller & Sons, Inc. v. Industrial
        Hardwoods Corp., 775 N.E.2d 1168, 1173 (Ind. Ct. App. 2002)).

        7. A patent ambiguity “is apparent on the face of the instrument
        and arises from an inconsistency or inherent uncertainty of
        language used so that it either conveys no definite meaning or a
        confused meaning.” [Id. at 1070-71]
        …
        9. Extrinsic evidence is not admissible to resolve a patent
        ambiguity. [Id.]
        …
        11. Section 2.3 of the [1997] PSA contains the following
        provision: “To facilitate the continuing cooperation without the
        need for court intervention, the parties agree to a flexible
        payment schedule with only written unilateral agreement.” This
        provision contains a patent ambiguity, with respect to the term
        “unilateral agreement.” As such, Section 2.3 should be stricken
        from the [1997] PSA as it is patently ambiguous.
Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015    Page 8 of 16
               12. Once Section 2.3 is removed from the [1997] PSA, there is no
               authorization for the payment terms of the [1997] PSA to be
               modified subsequent to the date of the [1997] PSA. As such,
               [Husband] failed to make payments due under the [1997] PSA
               without justification or authorization from this Court.

               It is, therefore, ordered, adjudged, and decreed as follows:

               1. The Loan Agreements between parties are held to be outside
               the jurisdiction of this Court as the Agreements were not
               approved by the Court pursuant to Anderson v. Anderson, 399
N.E.2d 391, 398 (Ind. App. Ct. 1979).

               2. The Court further holds that the [1997] PSA is patently
               ambiguous with respect to section 2.3…. As such, and
               considering that contracts are construed against the drafter and
               that no extrinsic evidence is admissible to resolve a patent
               ambiguity, section 2.3 which allowed for payment arrangements
               without the court’s approval, is stricken from the [1997] PSA
               because it is ambiguous.

       App. p. 22-29.

                                   Discussion and Decision
[11]   On appeal, Husband claims that the trial court erred in failing to consider the

       1999 and 2003 Agreements as valid modifications of the settlement agreement.

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 9 of 16
                                          Standard of Review
[12]   Where, as here, the trial court entered findings of fact and conclusions thereon

       pursuant to Trial Rule 52(A), we apply a two-tiered standard of review. Mysliwy

       v. Mysliwy, 953 N.E.2d 1072, 1076 (Ind. Ct. App. 2011), trans. denied.

               [F]irst, we determine whether the evidence supports the findings,
               and second, whether the findings support the judgment. In
               deference to the trial court’s proximity to the issues, we disturb
               the judgment only where there is no evidence supporting the
               findings or the findings fail to support the judgment. We do not
               reweigh the evidence, but consider only the evidence favorable to
               the trial court’s judgment. Those appealing the trial court’s
               judgment must establish that the findings are clearly erroneous.
               Findings are clearly erroneous when a review of the record leaves
               us firmly convinced that a mistake has been made. We do not
               defer to conclusions of law, however, and evaluate them de novo.

       Id. (internal citations omitted).

                                 I. Patent v. Latent Ambiguity
[13]   The allegedly ambiguous provision of the 1997 PSA reads

               The parties have had and may or may not continue to have
               financial transactions not precisely in compliance with the
               original agreement. These transactions have been cordial and in
               the spirit of mutual agreement and cooperation. To facilitate the
               continuing cooperation without the need for court intervention,
               the parties agree to a flexible payment schedule with only written
               unilateral agreement.

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 10 of 16
       Ex. C. (emphasis added). We are not persuaded that this language is

       necessarily ambiguous and think it would be more aptly described as a

       misstatement.

[14]   Clearly, “unilateral agreement” is nonsensical in this context, both legally and

       grammatically. However, the parties agree, and it seems clear from the context

       of the agreement and subsequent action by the parties, that the intent of the

       language was to allow the parties to amend the payment schedule without

       approval by the trial court, i.e. the parties wanted to be able to amend the 1997

       PSA by mutual agreement. This is evidenced clearly by the 1999 Agreement

       which states, “In accordance with the [1997] court amendment, this

       modification only requires agreement between the parties.” Ex. D. As such,

       there are no conflicting interpretations of the agreement, as is required to find

       ambiguity. See Simon, 837 N.E.2d at 1070 (“language is ambiguous only if

       reasonable people could come to different conclusions about its meaning”).

       Still, because the parties seem to agree that the provision is ambiguous, we will

       address that issue.

[15]   Husband argues that the trial court erred in considering a distinction between

       patent and latent ambiguities because this legal standard has been abrogated.

       We note that Wife does not respond to this argument in her brief. Failure to

       respond to an issue raised in an opposing party’s brief is akin to failing to file a

       brief, as to that issue. Gwinn v. Harry J. Kloeppel & Assocs., Inc., 9 N.E.3d 687,

       690 (Ind. Ct. App. 2014). Where one party fails to file an appellate brief, we

       may reverse the trial court if the appellant presents a case of prima facie error.

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 11 of 16
       Id. “Prima facie means ‘at first sight, on first appearance, or on the face of it.’”

       Id. (quoting Ponziano Const. Servs. Inc. v. Quadri Enter., LLC, 980 N.E.2d 867,

       875 (Ind. Ct. App. 2012).

[16]   In 2006, the Indiana Supreme Court abrogated the patent/latent ambiguity

       rule, holding that “the latent/patent distinction has not been consistently

       applied and no longer serves any useful purpose. Accordingly, we conclude

       that where an instrument is ambiguous, all relevant extrinsic evidence may

       properly be considered in resolving the ambiguity.” Univ. of S. Ind. Found. v.

       Baker, 843 N.E.2d 528, 535 (Ind. 2006). Accordingly, the trial court erred when

       it failed to consider extrinsic evidence in interpreting the allegedly ambiguous

       language in the 1997 PSA.

        II. Freedom to Amend Property Settlement Agreements
[17]   Again, we find that the language in Section 2.3 of the 1997 PSA has only one

       rational meaning when considered in context of the entire document and based

       on the fact that the parties entered into several subsequent agreements without

       submission to the trial court for approval: to allow the parties to modify the

       payment schedule outlined in the 1997 PSA by mutual agreement without

       approval from the trial court. However, Wife claims that despite the parties’

       intent by this modification language, the parties were not free to modify the

       agreement without court approval pursuant to Indiana code sections 31-15-2-17

       and 31-15-7-9.1.

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 12 of 16
[18]   Indiana Code section 31-15-2-17 provides that “[t]he disposition of property

       settled by [a dissolution agreement] and incorporated and merged into the

       decree is not subject to subsequent modification by the court, except as the

       agreement prescribes or the parties subsequently consent.” Indiana Code

       section 31-15-7-9.1 provides that “[t]he orders concerning property

       disposition…may not be revoked or modified, except in case of fraud.” Wife

       argues that these statutes require court approval for any modification of a

       settlement agreement to be effective and enforceable by the dissolution court,

       regardless of whether the agreement itself requires court approval. We disagree.

[19]   The Indiana Supreme Court addressed these statutes in Johnson v. Johnson, 920
N.E.2d 253 (Ind. 2010).

               [P]roperty distribution settlements approved as part of a
               dissolution may be modified only where both parties consent or where
               there is fraud, undue influence, or duress, none of which is
               alleged here. Ind. Code § 31-15-2-17(c) (disposition of property
               settled by agreement may not be modified by court); Ind. Code § 31-15-
               7-9.1 (“orders concerning property disposition ... may not be
               revoked or modified, except in case of fraud.”); [Marriage of Snow
               v. England, 862 N.E.2d 664, 668 (Ind. 2007)] (“As with other
               contracts, a division of property may only be modified according to the
               terms of the agreement, if the parties’ consent, or if fraud or duress
               occurs.”); Myers v. Myers, 560 N.E.2d 39, 42 (Ind. 1990) (“A
               property settlement agreement incorporated into a final
               dissolution decree and order may not be modified unless the
               agreement so provides or the parties subsequently consent.”).

       Id. at 258 (emphases added); see also Bandini v. Bandini, 935 N.E.2d 253, 263-64

       (Ind. Ct. App. 2010) (“a final division of marital property may not be modified,

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015     Page 13 of 16
       except as prescribed by the agreement itself or subsequent consent of the parties,

       or in the event of fraud”).

[20]   Section 31-15-2-17(c) prohibits a court from modifying a property settlement

       agreement unless permitted by the agreement. It does not limit the parties’

       freedom to contract and modify the agreement as they wish. Such a limitation

       would run counter to longstanding public policy that “the parties [in a

       dissolution] are free to make such continuing financial arrangements as, in a

       spirit of amicability and conciliation, they wish.” Voigt v. Voigt, 670 N.E.2d
1271, 1277 (Ind. 1996) (citations omitted). It is clear that a property settlement

       agreement may be amended without approval of the dissolution court so long

       as the terms of the agreement do not require such approval.

[21]   Furthermore, it is well within a dissolution court’s discretion to interpret

       subsequent agreements between the parties regarding the original property

       settlement agreement even if the dissolution court was not required to and did

       not approve the amendments. Shepherd v. Tackett, 954 N.E.2d 477, 480 (Ind.

       Ct. App. 2011) (“A dissolution court retains jurisdiction to interpret the terms

       of its decree and decide questions emanating from its decree pertaining to its

       enforcement. Clarifying a settlement agreement, consistent with the parties’

       intent, is not the same as modifying the agreement.”).

[22]   With the foregoing in mind, we reverse and remand with instructions that the

       trial court consider the 1999 and 2003 Agreements, and amounts paid pursuant

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 14 of 16
       to those agreements, in determining what sum, if any, Husband owes under the

       1997 PSA.

           III. Whether the Trial Court Failed to Attach Interest to
                            the Judgment Award
[23]   Wife claims on cross-appeal that the trial court erred by failing to attach any

       interest payable on the $2.4 million judgment.1 It appears that the 1997 PSA

       was designed to incorporate the interest which would have accrued under the

       Original PSA directly into the amended annual payments so as to avoid tax

       liability for Wife on the interest received. The 1997 PSA states, “A new

       [payment] schedule retroactively eliminates all previous and future references to

       interest….” Ex. C p. 3. However, the default provisions of the Original PSA

       called for the payment of interest in the event of Husband’s default and the

       1997 PSA specifically preserved the default provisions of the Original PSA.

       Therefore, it is unclear whether and how interest would accrue in the event of

       default. The trial court did not address this issue. Additionally, it is unclear

       whether Husband defaulted on any scheduled payments. Accordingly, we will

       reserve judgment on this issue as the trial court will be in a better position on

       remand to address the issue once it has determined whether Husband owes any

       remaining amounts under the parties’ various agreements.

       1
         We note that the trial court’s monetary judgment will likely be reduced in whole or in part on remand
       pursuant to this decision. It is not clear whether the amounts owed between the parties offset evenly,
       therefore the issue of interest may or may not be relevant.

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015                        Page 15 of 16
[24]   The judgment of the trial court is reversed and remand with instructions.

       May, J., and Crone, J., concur.

       Court of Appeals of Indiana | Opinion 57A03-1502-DR-45 | October 7, 2015   Page 16 of 16