LERZAK v. LERZAK (2025)

MEMORANDUM DECISION

[1] Rheina S. Lerzak (“Rheina”) appeals the division of marital assets after a contested final hearing and the entry of the Court's Decree of Dissolution (“Decree”) dissolving her marriage to Iris ¹ Alethea Lerzak (“Iris”). Rheina raises one restated issue for our review: whether the trial court abused its discretion when it allowed Iris to repudiate the parties’ Mediation Agreement. We affirm.

Facts and Procedural History

[2] On September 9, 2021, Rheina filed her Verified Petition for Dissolution of Marriage in Johnson County, Indiana, and four days later, the trial court signed and issued its Alternative Dispute Resolution Order, which required the parties to mediate all contested issues. On October 15, 2021, the trial court issued an Order for Panel of Mediators, and on October 22, 2021, prior to the parties selecting a mediator, Iris filed a Motion for Change of Venue, which was granted on November 5, 2021. On January 7, 2022, the matter was transferred to Marion County.

[3] On January 25, 2022, the parties filed a Notice of a Selection of Mediator, and the same day, the trial court appointed the selected mediator. The trial court issued its discovery compliance order on February 28, 2022, ordering Rheina “by counsel, to submit all pending discovery to opposing counsel [of Iris] within one (1) week of today's date[, February 28, 2022].” Appellant's App. Vol. II p. 41.

[4] As a part of discovery, Iris, by counsel, served numerous interrogatories on Rheina. Interrogatory number five asked Rheina to:

Please state whether or not you have any of the following: retirement programs; 401(k), I.R.A., or like account; credit union or profit-sharing plan; stock; certificate of deposit; savings plan, bond plan, or thrift plan; fringe benefits (e.g. car, medical insurance, etc.) at your place of employment; life insurance; interest in a business; and/or an asset someone else is holding for your benefit. If so, please describe each such asset, and list its location and value at the date of marriage, the date of filing the pending action[,] and the present.

Id. at 62. In addition to the interrogatories, Iris also served numerous requests for production which included the disclosure of documents related to Rheina's finances. Specifically, request for production question number nine asked Rheina to provide “[a] copy of any and all documents showing the balance of any assets, including but not limited to retirement accounts, as of the date of any petition or motion for relief except continuance filed in this matter.” Id. at 71.

[5] In response interrogatory number five, Rheina answered: “Yes[,] I have the following, Fresenius Medical Care North America 401(k) Savings Plan, Chase Investment Account, Basic Life Insurance, AD&D, Long Term Disability, Supplemental Life, Dependent Life, H[SA], Medical, Dental and Vision. Please review the documents provided for further information.” Id. at 62. In response to request for production number nine, Rheina answered: “Attached as Response No. 9.” Id. at 71. Rheina provided documentation in Response No. 9 for the “Chase accounts and an IRA[,]” but failed to provide statements or documentation for the 401(k) account. Tr. Vol. II. p. 11. The parties subsequently proceeded to mediation, and the parties signed a mediated settlement agreement.

[6] On May 3, 2022, the court-appointed mediator submitted the Final Mediated Settle Agreement and Waiver of Final Hearing (“Mediation Agreement”) to the court. The Mediation Agreement divided the marital estate between the parties but did not include any numerical values for the marital property or debt. The Mediation Agreement did include an acknowledgment regarding the parties’ knowledge of the marital estate and the ability to conduct discovery, which provided that:

Petitioner and Respondent hereby represent and warrant to each other that there has been a full disclosure of all marital assets and liabilities, and that the property referred to in this Agreement represents all of the mutual property of any sort whatsoever, and wheresoever real, personal[,] and mixed, which either of them have any interest and a right to, whether legal or equitable.

Appellant's App. Vol. II. p. 49. Two days later, Iris filed a Motion to Repudiate Mediated Settlement Agreement (“Motion”) arguing in part that during discovery Rheina failed to provide statements for a certain 401(k).

[7] No action was taken on the Motion and the parties returned to mediation with a new mediator, which was unsuccessful. The trial court scheduled a final hearing for March 28, 2023, which was subsequently converted to a hearing on the Motion. At the hearing, the trial court heard testimony that Rheina had only disclosed two accounts in her interrogatory response: the Chase investment account and the 401(k). However, in response to the request for production, Rheina provided documentation for her Chase investment account and a Roth IRA account, but failed to include any documentation for the 401(k). Iris explained that after mediation she learned of the existence of statements or documentation for the 401(k), which prior to the mediation, had not been provided by Rheina. Iris was only able to obtain the statements disclosing the value of the 401(k) account after she filed the Motion. Iris explained that prior to filing the petition of dissolution, the value of the 401(k) account was over $200,000. See Tr. Vol. II p. 13. Near the end of the hearing, the trial court requested written submissions from the parties. On April 10, 2023, after responsive briefing from the parties, the trial court issued its Order Granting Motion To Repudiate Mediated Agreement (“Order”).

[8] On May 8, 2023, Rheina filed her Notice of Interlocutory Appeal, appealing the trial court's Order. On May 12, 2023, in response to Rheina's notice of interlocutory appeal, Iris filed Appellee's Motion To Dismiss The Appeal, and after responsive briefing from Rheina, on June 16, 2023, this court dismissed the appeal without prejudice and remanded the case back to the trial court for further proceedings.

[9] On August 7, 2024, the trial court conducted a final dissolution hearing. On November 21, 2024, the trial court issued its Decree and with respect to the repudiation of the Mediation Agreement stated, that it “would not revisit [its] decision to allow [Iris] permission to repudiate the [Mediation Agreement].” Appellant's App. Vol. II p. 20. The trial court then divided the marital estate based upon the evidence presented at the final hearing and made the following orders regarding the 401(k) “Iris shall receive $67,605 from Rheina's 401([k]) as of the date of filing, to include any additions or reductions since the date of filing[ ]” and ordered Rheina to pay Iris $175,000 as a cash equalization payment. Id. at 29. Rheina now appeals.

Discussion and Decision

[10] Rheina appeals the division of marital assets after a contested final hearing and the entry of the Court's Decree. Specifically, Rheina argues that the trial court erred when it permitted Iris's request to repudiate the Mediation Agreement. Rheina further argues that the trial court should have accepted the Mediation Agreement and incorporated the terms of the Mediation Agreement into the Decree.

[11] Agreements in actions for dissolutions of marriage are generally favored by the law and governed by Indiana Code section 31-15-2-17. See Myers v. Myers, 560 N.E.2d 39, 42 (Ind. 1990). Indiana Code section 31-15-2-17(b) provides that “[i]n an action for dissolution of marriage: ․ the terms of the agreement, if approved by the court, shall be incorporated and merged into the decree and the parties shall be ordered to perform the terms[.]” (emphasis added). “Settlement agreements are governed by the same general principles of contract law as any other agreement.” Elrod v. Bauman, 136 N.E.3d 232, 240 (Ind. Ct. App. 2019), trans. denied. “The interpretation of a contract is a question of law to which a de novo standard of review applies.” Thomas v. Valpo Motors, Inc., 258 N.E.3d 236, 239 (Ind. 2025). However, “[a] trial court has the discretion to accept, modify, or reject a negotiated settlement agreement.” Gabriel v. Gabriel, 654 N.E.2d 894, 897 (Ind. Ct. App. 1995), trans. denied. “[A] trial court is not required to approve a property settlement agreement automatically, but has some discretion in that regard, [but] such discretion must be exercised reasonably and upon a rational basis supported by the evidence.” Stockton v. Stockton, 435 N.E.2d 586, 589 (Ind. Ct. App. 1982). A trial court abuses its discretion when it rejects or modifies “an otherwise fairly-entered-into and reasonable settlement agreement where no rational basis for such action is supported by the record[.]” Id. at 589–90. The court in Stockton explained:

[A] trial court should not reject a property settlement agreement arbitrarily or based upon whim or because the court believes it could write a better agreement. Unless the record demonstrates some unfairness, unreasonableness, manifest inequity in the terms of the agreement, or that the execution of the agreement was procured through fraud, misrepresentation, coercion, duress, or lack of full disclosure, the court should not second-guess the parties, particularly where both are represented by counsel.

Id. at 589.

[12] With respect to a party's ability to repudiate a settlement agreement, our court has held that “[u]ntil a property settlement agreement is approved by the trial court, it can be repudiated by a party.” Sanders v. Sanders, 105 N.E.3d 1102, 1108 (Ind. Ct. App. 2018). In McClure v. McClure, our court explained that there is a “simple two-step process necessary to bring a valid property settlement agreement into existence[,]” 459 N.E.2d 398, 401 (Ind. Ct. App. 1984), which requires that “(1) the parties must come to a valid agreement and (2) the trial court must approve it[,]” Sanders, 105 N.E.3d at 1108.

[13] Here, there is no dispute that the parties signed the Mediation Agreement and the mediator submitted the Mediation Agreement to the trial court for review, thus satisfying the first requirement under Sanders. See id. Here, however, the trial court never approved the Mediation Agreement, as it granted Iris's Motion prior to approving the Mediation Agreement. We rely on Sanders for the general principal that “[u]ntil a property settlement agreement is approved by the trial court, it can be repudiated by a party.” Id. In Sanders, the agreement was accepted by the trial court prior to the filing of the motion to repudiate and was therefore deemed untimely. However here, the trial court never approved the Mediation Agreement. Iris filed the Motion two days after the Mediation Agreement was submitted to the trial court by the mediator. Since the trial court had not yet accepted, rejected, or enforced the Mediation Agreement, Iris was permitted to repudiate the Mediation Agreement. Therefore, we cannot say the trial court erred in permitting Iris to repudiate the Mediation Agreement. See id.

[14] Even if Iris was not permitted to repudiate the Mediation Agreement, we cannot say the trial court abused its discretion in rejecting the Mediation Agreement. At the hearing on the matter, Iris presented testimony that Rheina failed to properly disclose the value of her 401(k) through her responses to discovery prior to mediation. In its Order granting Iris's Motion, the trial court stated, “[t]here appears to be an argument as to if the Marital Estate has been fully and accurately appraised[ ]” and that the “[c]ourt believes that there is no unfair prejudice which will result if the submitted [Mediation] Agreement is repudiated, and the Parties were to re-examine the value of the combined Marital Estate.” Appellant's App. Vol. II p. 96. Because the Mediation Agreement was procured, at least in part, based upon a lack of a full disclosure of the marital estate, the trial court had a rational basis to reject the Mediation Agreement. We cannot say the trial court abused its discretion by refusing to incorporate the terms of the Mediation Agreement into its Decree.

[15] We conclude that the trial court did not abuse its decision when it permitted Iris to repudiate the Mediation Agreement and thereafter divided the marital estate without regard to the terms of the Mediation Agreement.²

[16] Affirmed.

FOOTNOTES

1.   On March 22, 2023, Iris filed a Motion to Amend Caption which was granted the next day. See Appellant's App. Vol. II p. 11. For purposes of this appeal, any filings prior to March 22, 2023, which reference Iris's former name “Chirstopher,” are referenced herein as “Iris.”

2.   Because we conclude that the trial court did not abuse its discretion by permitting Iris to repudiate the Mediation Agreement, we do not address Iris's arguments regarding breach of warranty and estoppel. See Appellee's Br. pp. 10–12.

Foley, Judge.

Kenworthy, J. and Scheele, J., concur.