Berg v. Berg

• Decision Date: 29 June 2021
• Docket Number: Supreme Court Case No. 21S-DC-320
• Citation: 170 N.E.3d 224
• Parties: Russell G. BERG, Appellant (Respondent below) v. Stacey L. BERG, Appellee (Petitioner below)
• Court: Indiana Supreme Court

170 N.E.3d 224

Russell G. BERG, Appellant (Respondent below)

v.Stacey L. BERG, Appellee (Petitioner below)

Supreme Court Case No. 21S-DC-320

Supreme Court of Indiana.

Argued: April 29, 2021

Filed June 29, 2021

ATTORNEYS FOR APPELLANT: Lierin A. Rossman, Christopher L. LaPan, Stucky, Lauer & Young, LLP, Fort Wayne, Indiana

ATTORNEY FOR APPELLEE: John B. Powell, Shambaugh Kast Beck & Williams, LLP, Fort Wayne, Indiana

On Petition to Transfer from the Indiana Court of Appeals, No. 19A-DC-3038

Goff, Justice.

Alternative Dispute Resolution (A.D.R.) plays an important role in our justice system. Because our public policy strongly favors the amicable resolution of disputes, we encourage parties to communicate openly and honestly during A.D.R. proceedings such as mediation. For this reason, communications during settlement negotiations are deemed confidential.

The question here is whether documents produced in anticipation of mediation fall under this confidentiality requirement. We conclude that they do and hold that the trial court erroneously admitted a marital balance sheet prepared for mediation to allow Wife to avoid the parties’ settlement agreement. But, because the trial court also found that Husband had breached the settlement agreement, we affirm the trial court.

Facts and Procedural History

In 2017, Stacey Berg (Wife) sued Russell Berg (Husband) for dissolution of marriage. After limited discovery, Wife and Husband participated in mediation and signed a settlement agreement (the Agreement) under which each party retained all stock accounts in their respective names and Husband received all jointly held stock accounts. The Agreement contains a warranty stating, "[e]ach of the parties further represent and warrant one to the other that all assets and debts owned or owed by the parties, either individually or jointly, have been correctly and truly revealed to the other and reflected within this [A]greement." Appellant's App. Vol. 2, pp. 21–22. The trial court approved the Agreement and incorporated it into the dissolution decree.

One year later, Wife filed a Trial Rule 60(B) motion for relief from judgment, alleging that the Agreement shouldn't be enforced because it was procured through fraud, constructive fraud, misrepresentation, mutual mistake, or other misconduct. Wife's motion rested on the omission of a stock account from the balance sheet that the parties had used in determining the division of assets. Husband had identified that account to Wife's lawyer during their exchange of information. The lawyers discussed getting together to reconcile the parties’ balance sheets. When Wife's attorney gave Husband's attorney her version of the balance sheet, Husband's attorney pointed out one of Wife's accounts that was missing but said nothing about Husband's missing account. After Wife added her missing account to the balance sheet, Husband's attorney said they would use her balance sheet at mediation. Wife maintains that the parties used her sheet, which omitted Husband's account, when determining the division of assets at mediation.

Husband moved to strike the evidence submitted by Wife as inadmissible mediation evidence. The trial court overruled Husband's objection and initially denied relief to Wife. Wife then filed a motion to correct errors, which the trial court granted. Because the trial court found that fraud, constructive fraud, mutual mistake, or misrepresentation had occurred and that Husband had breached the Agreement's warranty provision, it awarded Wife half of the value of the account.

In a 2-1 published opinion, the Court of Appeals reversed. Berg v. Berg , 151 N.E.3d 321 (Ind. Ct. App. 2020). In the majority's view, the evidence that Wife proffered, and which the trial court relied on in granting relief, was inadmissible because it was evidence of what transpired at mediation. Id. at 329. The trial court erroneously granted Wife's motion to correct errors, the majority reasoned, because the inadmissible evidence was required to avoid the Agreement and because Wife was estopped from claiming that Husband had breached the warranty. Id. at 331.

In dissent, Judge Crone would have affirmed the trial court on grounds that Husband cited no authority for the proposition that evidence prepared in anticipation of (rather than during) mediation is inadmissible under Evidence Rule 408. Id. at 331–32 (Crone, J., dissenting). See Ind. Appellate Rule 46(A)(8)(a) (requiring a party to support his or her arguments with "cogent reasoning" and "citations to the authorities").

Wife petitioned this Court for transfer, which we now grant, thus vacating the Court of Appeals opinion. See App. R. 58(A).

Standards of Review

Because we generally review a ruling on a motion to correct error for an abuse of discretion, we will only reverse "where the trial court's judgment is clearly against the logic and effect of the facts and circumstances before it or where the trial court errs on a matter of law." Perkinson v. Perkinson , 989 N.E.2d 758, 761 (Ind. 2013). But, where a ruling turns on a question of law, our review is de novo. Id.

An abuse-of-discretion standard likewise applies to a ruling on a Trial Rule 60(B) motion. Citimortgage, Inc. v. Barabas , 975 N.E.2d 805, 812 (Ind. 2012). "[A] court's exercise of power under Trial Rule 60(B) is subject to the limitations of the substantive law itself." Ryan v. Ryan , 972 N.E.2d 359, 370 (Ind. 2012). So, when a 60(B) motion involves a marital settlement agreement, the Court treats the matter "as a contract dispute, subject to the rules of contract law." Id. at 370–71.

Discussion and Decision

Wife argues that the trial court properly admitted her evidence to allow her to avoid the contract because the information was exchanged before mediation (thus falling beyond the reach of Rule 408 ) and because the evidence was discoverable outside of mediation under A.D.R. Rule 2.11(B)(2). She also argues that, even if the evidence isn't admissible for that purpose, it is admissible to prove that Husband breached the warranty. Husband, on the other hand, argues Wife's evidence should be excluded under Indiana A.D.R. Rule 2.11 and Indiana Rule of Evidence 408. He also characterizes the warranty as a mutual warranty and argues that Wife cannot now argue that the assets and debts weren't correctly revealed or reflected.

I. Wife's evidence was inadmissible to avoid the Agreement under Indiana Evidence Rule 408.

Because "Indiana judicial policy strongly urges the amicable resolution of disputes," we embrace "a robust policy of confidentiality of conduct and statements made during negotiation and mediation." Horner v. Carter , 981 N.E.2d 1210, 1212 (Ind. 2013). This robust policy takes root in both our A.D.R. Rules and Evidence Rule 408, which govern the mediation process. As relevant here, A.D.R. Rule 2.1 provides that mediation is "the confidential process by which a neutral, acting as a mediator, selected by the parties or appointed by the court, assists the litigants in reaching a mutually acceptable agreement." While "[e]vidence discoverable outside of mediation shall not be excluded merely because it was discussed or presented in the course of mediation," A.D.R. 2.11(B)(2), the mediation itself "shall be regarded as settlement negotiations governed by Indiana Evidence Rule 408," A.D.R. 2.11(B)(1).

Evidence Rule 408, in turn, operates to foster an open exchange between the parties during settlement negotiations by excluding from evidence statements made or documents prepared for mediation. Worman Enter., Inc. v. Boone Co. Solid Waste Mgmt. Dist. , 805 N.E.2d 369, 376 (Ind. 2004). Specifically, when a party attempts to "prove or disprove the validity or amount of a disputed claim or to impeach by a prior inconsistent statement or a contradiction," Rule 408 renders inadmissible evidence of "furnishing, promising, or offering, or accepting, promising to accept, or offering to accept a valuable consideration in order to compromise the claim" and "conduct or a statement made during compromise negotiations about the claim." Ind. Evidence Rule 408.

A. Information exchanged specifically to assist in mediation, but disclosed prior to mediation, falls under Rule 408.

Wife acknowledges "that evidence of what transpired at mediation is deemed confidential and presumably not admissible." Pet. to Trans. at 6. She contends, however, that the evidence she submitted "did not transpire at mediation." Id. Rather, she insists, the evidence can't be excluded under Rule 408(a)(2) because the "exchange of information" about "marital assets and debts, the valuation of marital assets and debts," and the use of the balance sheet "all took place weeks before the mediation session." Id.

We disagree with Wife's reading of the rules. While the A.D.R. rules and Rule 408 don't apply when a mediation is "not instituted pursuant to judicial action in a pending case," Vernon v. Acton , 732 N.E.2d 805, 808 n.5 (Ind. 2000), nothing in Rule 408 limits the application of 408(a)(2) to the mediation session itself. In Kerhof v. Kerhof , the Court of Appeals held that an alleged statement made by the husband outside of any formal settlement negotiation fell under Rule 408. 703 N.E.2d 1108, 1112 (Ind. Ct. App. 1998). The wife in that case sought to admit evidence that, after the filing of the dissolution petition but before the final dissolution hearing, the husband told her that he would have to pay her $150,000 in the settlement. Id. The Court of Appeals affirmed the trial court's exclusion of that evidence, noting that there was sufficient evidence that the statement by the husband was part of settlement negotiations. Id.

Because Rule 408 is intended "to promote candor by excluding admissions of fact," communications to facilitate settlement "are not admissible into evidence." Worman, 805 N.E.2d at 376–77. And here, the contents of the balance sheet are "admissions of fact" that certain assets and debts exist and about the value of the...