No. 80-268 

IN THE SUPREBE COURT OF THE STATE OF MONTANA 

1980 

WENDELL D. HADFORD, 

Plaintiff and Appellant, 

VS . 

ELIZABETH M. HADFORD, 

Defendant and Respondent. 

Appeal from: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin. 

Honorable W. W. Lessley, Judge presiding. 

Counsel of Record: 

For Appellant: 

Landoe, Brown, Planalp, Kommers & Lineberger, Bozeman, 

Montana 

For Respondent: 

Morrow, Sedivy, Olson and Scully, Bozeman, Montana 

Submitted on briefs: December 30, 1980 

Decided: August 17, 1981 

AUG1.7 198 

Clerk 
Mr. Justice Daniel J. Shea delivered the Opinion of the Court. 

Wendell D. Hadford (husband) appeals a 1980 judgment of 

the Gallatin County District Court setting aside a property 

settlement agreement and decree entered in 1974. The 1974 

decree provided that the family home and laundromat in 

Bozeman be sold and the proceeds evenly divided. The 1980 

decree ordered the husband to convey his one-half interest 

in the home and laundromat to his ex-wife, subject to the 

existing mortgages. The husband also appeals from that part 

of the order directing him to pay $1,754 for college tuition 

advanced for two of the children. 

Although there are references in the trial court's 

memorandum to fraud on the court because the husband failed 

to disclose all his assets before the 1974 decree was entered, 

it appears that the trial court set the property settlement 

and decree aside on the ground that it was unconscionable. 

The husband argues that the 1974 property agreement and 

decree is res judicata on the question of unconscionability. 

He further argues that there is no evidence indicating fraud 

on the court. We reverse the trial court and hold that the 

court had no right to set aside the 1974 decree on the 

grounds of unconscionability; the failure of the wife to 

appeal from the court's decree, by which she could contest 

the conscionability of the property settlement and decree, 

has rendered this issue res judicata. We further hold that 

there is no basis in the record to hold that the husband 

committed a fraud on the court by not disclosing all his 

assets before the 1974 decree was signed. The record is 

barren of any failure to disclose assets. 
On the child support and college tuition issues, the 

husband admits the arrearages, but argues that certain 

payments made to his wife or children should be allowed to 

offset these obligations. We affirm the trial court on both 

issues. 

In 1974, the husband and wife negotiated a property 

settlement and child support agreement. Both had lawyers. 

After reaching this agreement, the wife and her attorney 

appeared in Gallatin County District Court to obtain the 

divorce and asked the court to approve the property settlement 

agreement. The property settlement was merged into the 

divorce decree. 

The child support provision stated that the husband 

would pay child support of $200 per month for each child 

until they reached majority. It further provided that the 

husband would pay college tuition for all the children that were 

willing and able to go to college. It also stated that the 

husband could pay this tuition to the wife, so that she 

could use the money to pay the normal living expenses of the 

children who lived at home while continuing their college 

education. 

The property distribution agreement stated that the 

property would be evenly divided. The dispute here centers 

on the Bozeman home which had an approximate equity of 

$15,000 in 1974, and the Bozeman laundromat, which had an 

equity of approximately $34,000 in 1974. The agreement 

stated that the equity in the home would be divided evenly 

between the husband and wife, but that the wife would be 

given credit for payments made on the home after the effective 

date of the property settlement agreement. The agreement also 

stated that the equity on the sale of the Bozeman laundromat 
and the sale of certain lots in Great Falls, would be evenly 

divided when they were sold. Finally, the agreement stated 

that if the real property was not sold within twelve months, 

the matter would be submitted to the court having jurisdiction of the case. 

In 1976, the husband sold the Great Falls lots and 

delivered one-half of the net proceeds to the wife. But 

neither the home nor the laundry was sold. The wife continued 

to live in the home with one or more of the children, and made 

the monthly mortgage payments. She also ran the Bozeman 

laundromat. 

On December 10, 1979, the wife filed a petition to set 

aside the property settlement merged into the 1974 divorce 

and property distribution decree. She asked for sole ownership 

of the home and laundromat. She also asked the court to 

order that the husband pay delinquent child support and reimburse 

her for college tuition expenses she paid for the children. 

The wife's grounds for setting aside the decree are 

vague, but unconscionability seems to be the central theme. 

With no supporting particulars, she alleged that in 1974 her 

mental state made her unable to comprehend the economics of 

maintaining a home and running a laundromat. She further 

alleged, without any supporting particulars, that the husband 

failed to make full and accurate disclosure of all assets 

and that his failure to do so amounted to fraud against the 

wife. 

The wife produced no evidence that the husband failed 

to disclose all the assets before the trial court entered 

the 1974 default decree against the husband. Nor did she 

present evidence that the 1974 agreement, as alleged in her 

petition, was unconscionable. Her evidence was geared to 

showing that the expenses of maintaining the home and running 
the laundromat, were more than what she anticipated when 

she agreed to the 1974 property settlement. She did testify, 

as did other witnesses in her behalf, that emotional problems 

caused by the breakup of the marriage affected her ability 

to think clearly when she signed the 1974 property settlement. 

She was, however, represented by counsel in negotiating the 

property settlement, and counsel was present when the divorce 

decree was signed and merged with the property settlement. 

The findings of the trial court are vague and conclusory. 

It appears, however, that the trial court set the 1974 

decree aside because it was unconscionable. The court made 

several conclusory findings for which there is no evidentiary 

support. The court found that the husband had not disclosed 

the property and income during the 1974 divorce proceeding. 

It was, however, the wife and her counsel who presented the 

proposed property settlement to the court. Further, the 

trial court did not state what property the husband had 

failed to disclose, and the record does not support a finding 

that the husband failed to disclose property. In finding 

that the wife did not have the "mental condition" to comprehend 

the 1974 property settlement, the court found this only as a 

general conclusion. 

Based on these findings (actually, conclusions) the 

trial court jumped to a finding (actually, another conclusion) 

that the property settlement agreement was "unconscionable," 

and therefore that the husband must give up his one-half 

interest in the house and laundromat to the wife. 

After the trial court's ruling, the husband moved the 

trial court to amend the findings and conclusions and to 

provide a memorandum of decision so that the husband would 

know the basis of the trial court's decision. Insofar as it 

applies here, the trial court merely amended the findings 

and conclusions to again make a bald conclusion that the 
property settlement agreement and decree was "unconscionable." 

The court did, however, file a memorandum opinion, but it 

also fails to set out a basis on which the trial court can 

be upheld. 

The memorandum simply repeats the allegations of the 

wife in her petition to set aside the 1974 decree, but it 

does not analyze whether the wife can prevail on any of 

these grounds. Except for the allegation of fraud (which 

was an allegation of fraud against the wife), the memorandum 

omits any discussion of these grounds. Without explanation, 

the trial court simply held that the husband committed a 

fraud on the court when the divorce was obtained in 1974. 

There is no discussion of the basis for this conclusion, and 

there is no evidence in the record to justify this conclusion. 

Without expressly stating, counsel for the wife impliedly 

admits that unconscionability standing alone is insufficient 

to set aside a property settlement agreement merged with a 

divorce decree, but argues that the settlement here was 

properly set aside because of fraud against the wife and on 

the court. But nowhere in their brief do they explain how 

the husband perpetrated a fraud against the wife or on the 

court. The record fails to support a ruling that the husband 

is guilty of fraud. 

We proceed next to the trial court's unsupported conclusion 

that the 1974 property settlement merged with the 1974 

decree must be set aside because it is unconscionable. 

First, as we have already stated, the record does not support 

such a conclusion. Second, the issue of conscionability 

versus unconscionability was decided by operation of law 

when the 1974 property settlement was approved and merged 

with the decree. Under the Uniform Marriage and ~ivorce 

Act, section 40-4-201(2), MCA, it was the duty of the court 

to inquire into the conscionability of the property settlement 
before it was approved, or it was the duty of the wife to 

ask the court to inquire into the conscionability of the 

decree before it was finally approved. But when neither the 

court nor the wife did this, this issue became final when the 

appeal time expired. The wife had no right six years later 

to attempt to relitigate this issue which the law requires 

to be decided before the entry of the decree if either the 

court or one of the parties questions the conscionability of 

the decree. Res judicata clearly bars this claim. 

By section 48-341(3), R.C.M. 1947 (not codified in MCA), 

the Uniform Marriage and Divorce Act (UMDA) applies to all 

proceedings started after its effective date (January 1, 1976), 

for the modification of a judgment or order entered before 

the effective date of the Act. 

Under section 40-4-201(2), MCA, the courts are bound by 

a property settlement agreement signed by both parties 

unless the court then finds the agreement to be unconscionable. 

Under this statute, the court can determine the question of 

conscionability on its own motion, or either of the parties 

can raise this issue before the agreement is merged into a 

decree and becomes final. 

Here, the wife appeared before the District Court on 

May 1, 1974, with counsel, and presented the proposed divorce 

decree together with the signed property settlement agreement, 

and asked the court to grant the divorce decree, to approve 

the property settlement agreement, and to merge the agreement 

with the decree of divorce. Neither the husband nor his 

counsel appeared at this proceeding. (Of course, it was 

understood that they would not, and that the wife would 

obtain the default decree and have the property settlement 

agreement approved by the court.) If the trial court was in 

doubt concerning the fairness of the property settlement 
agreement, it had a right to conduct whatever proceedings 

were necessary to determine the fairness of the agreement. 

If, after conducting the proceedings, it determined the 

agreement to be unconscionable, it had a right to set the 

agreement aside under section 40-4-201(2), or the wife 

herself had the right (under section 40-4-201 (2) ) , to ask 

the court to take a second look at the agreement before it 

was approved and became a part of the decree. 

Obviously the wife and her attorney thought the property 

settlement agreement was fair, for neither of them asked the 

trial court to look into its fairness. Nor did the trial 

court, on its own motion, decide to look into its fairness 

before signing the decree and merging the agreement with the 

decree. The wife and her attorney did nothing before the 

time to modify the decision expired (Rule 59(g), M.R.Civ.P.), 

and the wife and her attorney did nothing before the appeal 

time expired (Rule 5, M.R.App.Civ.P.) Rather, the wife 

waited six years after the entry of the decree before she 

went into court. 

By section 40-4-201(2), MCA, district courts must abide 

by the terms of a property settlement agreement unless its 

terms are unconscionable. This statute has a dual purpose. 

First, it expresses a clear policy encouraging property 

settlement agreements. Obviously, a property settlement 

agreement would be useless if the courts were free to set 

them aside whenever the mood struck. Under the statute, the 

property settlement decree must be approved unless the 

District Court finds it to be unconscionable. 

The second purpose has the goal of finality. A property 

settlement agreement would also be useless if the courts 

were free to set them aside at any time simply on the motion 
and allegation of one of the parties that the property 

settlement agreement merged with the decree is unconscionable. 

That is why section 40-4-201(2) also provides that when the 

property settlement agreement is presented to the District 

Court for approval, the District Court can, on its own 

motion, determine its conscionability, or, one of the parties 

can raise the issue before the decree is entered and the 

agreement merged with the decree. Applied here, it was the 

duty of the District Court or the wife to raise the issue of 

unconscionability. It was not raised, and it is too late to 

do so now. The issue has been clearly barred by the doctrine 

of res judicata. The doctrine applies not only to issues 

which were raised and decided, but to issues which should 

have been raised and decided. Sherlock v. Greaves (1938), 

Kedcen 

106 Mont. 206, 76 P.2d 87; and Swaim v. Pdeea (1936), 101 Mont. 

Section 40-4-201(2) squarely places the issue of conscionability versus unconscionability before the court at 

the time the parties present the property settlement agreement 

to the court for its approval. Under the statute, the court 

on its own motion can go behind the agreement to determine 

this issue, or one of the parties can ask the court to do 

so. Since the District Court failed to inquire into this 

issue on its own motion, it was the wife's duty to ask him 

to do so. Having failed to do so, she is not now in a 

position six years later to request that the court do so. 

We set out the four criteria for application of res 

judicata in Hopper v. Hopper (1979) , - Mont . , 601 

, P.2d 29, 36 St-Rep. 1695, and held that the husband was 

barred by res judicata from seeking to set aside the property 

settlement merged with the decree. The husband argues here 
that Hopper is inapplicable because when the decree was 

originally entered in Hopper, the trial court made a specific 

finding that the agreement was not unconscionable. Therefore, 

he contends that the issue was actually decided in Hopper, 

but was not decided here. Res judicata applies to issues 

that have been raised and decided, and to those which should 

have been raised and decided, and which are necessarily 

included in a final judgment. - Sherlock and Swain, supra. 

This principle is particularly important where a statute 

expressly imposes a duty on either the trial court or one of 

the parties to raise the issue of conscionability versus 

unconscionability before the decree is signed. It was not 

done here and the wife is barred. 

We next discuss the fraud issue, although we have 

stated that there is no basis in the evidence for concluding 

that the husband perpetrated a fraud on his wife or on the 

court. We also held in Hopper, supra, 601 P.2d 35-36, that 

before a final judgment can be reopened there must be a 

finding of extrinsic fraud. By this we meant such fraud as 

to "prevent the unsuccessful party from having a trial or 

from presenting his case fully." 601 P.2d at 36. 

Although it was the wife and her counsel who urged the 

trial court to adopt the property settlement agreement and to 

sign the decree, in effect, it is the wife who now claims to 

be the unsuccessful party. This procedural context does not 

by itself foreclose her from later claiming extrinsic fraud, 

but the plain fact is that extrinsic fraud does not exist in 

this case. Nothing in the record shows that the husband 

prevented the wife from fully presenting her case when she 

obtained the default decree against the husband, and nothing 

in the record shows that she lacked knowledge of all the 
marital assets. Further, nothing prevented the wife from 

then asking the court to go behind the face of the agreement 

to determine its conscionability. The trial court's bald 

conclusion that extrinsic fraud existed does not substitute 

for the evidence which must support this conclusion. That 

evidence is nonexistent. 

We proceed next to the issues involving child support 

and college tuition for the children. On child support, the 

decree stated that the husband would pay $200 per month for 

each of the minor children until they reached majority. On 

college tuition, the decree provided that the husband would 

pay the children's tuition and that the tuition could be 

paid to the wife while the children were attending college 

but living at home. 

In filing the petition to set aside the property settlement agreement, the wife also alleged that the husband was 

$1,800 behind in child support and that he owed $1,754 which 

the wife had advanced to the children for their college 

tuition. The husband admitted that he had not directly paid 

the child support and that the wife had paid the $1,754 

tuition which was the husband's duty to pay. However, on 

each claim he alleged an offset because of other payments 

made to the wife or to the children. 

He claims that the back child support obligation should 

be offset by the failure of the wife to return $1,399 of the 

1977 income tax refund. He signed the check, sent it to the 

wife to sign, but she signed it and kept all of the proceeds. 

He also claims in his brief, without specifying the amount, 

that he continued to make child support payments while the 

children stayed with him, and that this must be allowed as an 

offset. Finally, he claims to have given $1,000 to his 

daughter on her eighteenth birthday, and this should be 
allowed as an offset to past child support obligations. 

He claims offsets ($4,270) in the payment of college 

tuition, for the following payments: He overpaid maintenance 

to his wife (apparently during the year following the divorce, 

when he had agreed to pay her $300 per month maintenance 

for the first year); he claims mortgage payments made on 

certain property in Great Falls; and finally, he claims his 

son retained the proceeds of the sale of snowmobiles with 

his approval, and this also should be allowed as an offset. 

Nowhere in his brief does he breakdown the claimed amounts 

under each claimed offset; nor does he cite us to the record 

where this information may be found. 

As legal authority for offsets against both child 

support and college tuition, the husband relies on Haaby v. 

Haaby (1974), 165 Mont. 475, 529 P.2d 1387, which held that 

the cash monthly child support payments required by a divorce 

decree could be satisfied by house payments made by the 

obligated parent. There, we stated, "it is simply a matter 

of stripping away the form to get at the substance." In 

Haaby, however, the evidence was that the husband and wife 

agreed that the mortgage payments on the house could be made 

instead of child support. No such evidence exists in this 

case. 

Further, in Williams v. Budke (1980), - Mont. I 

606 P.2d 515, 37 St.Rep. 228, this Court held that the test 

is whether there is substantial compliance with the child 

support order. There was neither substantial compliance 

with the child support order nor with the college tuition 

agreement merged with the decree. In fact, there is not the 

slightest evidence that the claimed offsets were intended to 

offset either the payments for child support or the payments 

for college tuition. 

-12- 
Other factors also cause us to deny the offsets for 

child support. The $1,000 birthday present to the daughter 

on her eighteenth birthday was surely intended as a gift, 

and therefore cannot also be used to offset past support 

obligations. Presumably, the wife supported the daughter 

with her own earnings during the time that the husband was 

behind. The $1,000 given to the daughter cannot be said to 

offset the husband's obligation to pay the wife for the 

children's support. 

Nor should the wife's retention of the husband's onehalf of the income tax refund be permitted to offset the 

child support obligation. The question of who was entitled 

to the proceeds of the income tax return is purely a dispute 

between the husband and wife as to their property settlement, 

and it should not affect the separate child support obligation 

imposed on the husband. 

The same analysis applies to the claimed offsets against 

college tuition payments for the children. If the husband 

overpaid maintenance to the wife, that is a problem between 

them which does not offset the husband's duty to pay college 

tuition. The same is true of the husband's mortgage payments 

on the lots in Great Falls. He admits that his son, with 

his permission, kept the proceeds from the sale of snowmobiles 

(which made up part of the marital estate). He did not then 

tell his wife or his son that these sale proceeds were to be 

used for college tuition, and the permission thus given does 

not offset the duty to pay college tuition. In the property 

settlement, the husband agreed to pay college tuition, but he 

is delinquent in that obligation. Therefore, he must pay. 

The order of the District Court is reversed in part and 

affirmed in part. We remand this cause to the ~istrict 

Court for proceedings consistent with this opinion. 
We concur: 

Chief ~udice \ 

Justices 
Mr. Justice John C. Sheehy dissenting in part: 

I dissent to the portion of the majority opinion that 

reverses the District Court in its finding that the property 

settlement agreement was unconscionable as to the wife. 

Nowhere in the majority opinion is section 40-4-208(3) (b), 

MCA mentioned, although it is the statute under which the 

wife is proceeding in order to have the property settlement 

agreement modified to speak the best interests of the wife. 

That section provides: 

"(3) The provisions as to property disposition may 

not be revoked or modified by a court, except: 

"(b) if the court finds the existence of conditions 

that justify the reopening of a judgment under the 

laws of this state." (Emphasis added.) 

The power of the District Court to modify a property settlement agreement which has been incorporated in a judgment (decree 

of dissolution) is not limited to what the court could have 

found at the time of the original adoption of the property 

settlement agreement under section 40-4-202, MCA. The court 

may relieve a party under section 40-4-208(3)(b), MCA from a final 

judgment or order for mistake, inadvertence, surprise, 

excusable neglect, newly discovered evidence, intrinsic and 

extrinsic fraud, misrepresentation, misconduct, and "any 

other reason justifying relief from the operation of the 

judgment." Rule 60(b), M.R.Civ.P. The court is not limited 

as to time, if the effect of the petition is to "set aside a 

judgment for fraud upon a court." Rule 60(b), M.R.Civ.P. 

The District Court here was completely within its power 

to determine whether the judgment was attackable. The 

effect of the majority opinion here is that if a spouse does 

not raise the issue of unconscionability or fraud at the 
time of the original decree of divorce, he or she is thereafter 

foreclosed from raising such an issue. Such a construction 

too narrowly constricts the statutes applicable and the 

power of the District Court. I particularly oppose the 

proposition that res judicata applies once the District 

Court has adopted a property settlement agreement, because 

application of res judicata has the effect of negating 

section 40-4-208(3), MCA. 

The District Court found a fraud upon the court in the 

first instance, and also the inability of the wife to comprehend 

the provisions of the property settlement agreement at the 

time that she entered into the contract. I find no reasons 

in the record to set such findings or conclusions aside. I 

would therefore uphold the District Court's finding that the 

property settlement agreement was unconscionable. 

Justice