Court erred in not considering subsequent property settlement agreements

The Indiana Court of Appeals reversed a ruling in favor of a woman on her claim that her ex-husband owed her more than $2.4 million based on a 1997 property settlement agreement. The judges found the trial court should have considered subsequent property settlement agreements the two entered into without the court’s approval.

Steven and Rebecca Kelly divorced in 1995 and entered into a PSA accepted by the court in which Steven Kelly would pay his ex-wife $5 million over the course of several years. In 1997, the parties amended the original PSA and established a payment schedule in which Steven Kelly would pay Rebecca Kelly $300,000 each year until 2014.

The two entered into two subsequent agreements, in 1999 and 2003, in which Steven Kelly advanced or loaned money to Rebecca Kelly from the money she would be entitled to receive under the 1997 PSA. In 2007, he stopped making payments under the 1997 PSA because he believed his ex-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.

Rebecca Kelly filed a motion in 2013 to enforce the terms of the 1997 PSA. She argued the 1999 and 2013 PSAs were unenforceable because they were not approved by the trial court. The trial court ruled in her favor and ordered Steven Kelly to pay her $2.4 million.

The Court of Appeals reversed in Steven M. Kelly v. Rebecca J. Kelly, 57A03-1502-DR-45, finding the parties were free to modify the settlement agreement without approval of the trial court and that the court erred by not considering the 1999 and 2003 agreements.

Indiana Code 31-15-2-17(c) prohibits a court from modifying a PSA unless permitted by the agreement, but it does not limit the parties’ freedom to contract and modify the agreement as they wish, Judge Cale Bradford wrote.

The case is remanded for further proceedings.