Opinion ID: 1937963
Heading Depth: 1
Heading Rank: 7

Heading: Irregularities in the Trial Court Proceedings

Text: The lower court proceedings were plagued by a series of scheduling problems. There were more than 17 continuances granted for various reasons. After the court of appeals denied Edward's counsel's request for a writ ordering the trial court to grant an additional continuance, she appeared late for what turned out to be the final hearing. Edward's counsel informed the court that Edward had, against her advice, left the country on a previously planned trip and repeated her request for a continuance. When this request was denied, Edward's counsel refused to cross-examine Mary's expert even though she had heard his direct testimony and stated that she was prepared to cross-examine him. After Edward's counsel refused to participate further in the proceedings, the trial court stated that it would make its decision based on the evidence presented to that point. By order dated February 10, 1988, the trial judge granted judgment in favor of Mary in the amount of Five Hundred Eighty-nine Thousand, Fifty-six and No/100 Dollars ($589,056.00) including attorney fees, costs, expert fees, and interest. The issues presented in this case are as follows: I. Did the trial court have jurisdiction? II. Does the conduct of a party entering into a property settlement stipulation presented to the court as the basis for entry of a marriage dissolution judgment constitute fraud on the court where the party has excluded the spouse from access to financial information throughout the marriage and materially misrepresented the existence and value of substantial marital property prior to entering into the stipulation and presenting it to the court? III. Is there sufficient evidence in the record to support the trial court's determination of the 1979 value of the marital estate? IV. Did the trial court abuse its discretion by refusing to grant a continuance on February 8, 1988? V. Was Mary Maranda entitled to attorney fees on appeal? In his briefs to the court of appeals and to this court, Edward argues that the trial court lacked jurisdiction to vacate the 1979 judgment. This argument is without merit. Mary brought her motion to vacate the 1979 judgment in September of 1985 pursuant to Minn.R.Civ.P. 60.02(3), (6). In Lindsey v. Lindsey, 388 N.W.2d 713 (Minn.1986), this court considered a similar motion. In Lindsey, this court decided that, although the motion before it had been brought pursuant to Rule 60.02, it should be treated as a motion to exercise the court's inherent power to modify a final divorce decree based on an allegation of fraud on the court. Lindsey, 388 N.W.2d at 716. The Lindsey court concluded, however, that the lower court's interpretation of an earlier case was incorrect and noted: In the future, however, motions to modify divorce decrees brought under Rule 60.02 should not be entertained by the district courts. The district courts lack jurisdiction under Rule 60.02 to consider such motions. Only when facts are alleged that amount to fraud on the court as enunciated in Bredemann [ v. Bredemann, 253 Minn. 21, 91 N.W.2d 84 (1958)] may a district court set aside a divorce decree. Lindsey, 388 N.W.2d at 716 n. 1 (emphasis added). Accordingly, because Mary brought her Rule 60.02 motion before this court's prospective remarks in Lindsey concerning a district court's jurisdiction to consider such a motion, the trial court in the present case had jurisdiction to consider this matter. In the present case, as in Lindsey, this court will treat Mary's Rule 60.02 motion as a motion to exercise the court's inherent power to modify a final divorce decree based on an allegation of fraud on the court. [1] A finding of fraud on the court and the administration of justice must be made under the peculiar facts of each case. Lindsey v. Lindsey, 388 N.W.2d 713, 716 (Minn.1986). Courts, however, favor stipulations, particularly in marriage dissolution cases, as a means of simplifying and expediting litigation. Tomscak v. Tomscak, 352 N.W.2d 464, 466 (Minn.App.1984) (citing Anderson v. Anderson, 303 Minn. 26, 225 N.W.2d 837 (1975)). On appeal, a trial court's determination whether or not to vacate a stipulation will not be disturbed in absence of an abuse of discretion. Id. Similarly, a trial court has broad discretion in evaluating and dividing property in a marriage dissolution and will not be overturned except for abuse of discretion. Castonguay v. Castonguay, 306 N.W.2d 143, 146-47 (Minn.1981); Bogen v. Bogen, 261 N.W.2d 606, 609 (Minn.1977). The significance of a finding of fraud on the court is that it eliminates the time restriction for bringing a motion to vacate a judgment. See Minn.R.Civ.P. 60.02. In order for the 1-year time limit for motions brought under Rule 60.02(3) to make any sense, however, there must be a difference between ordinary fraud and fraud on the court. Beugen v. Beugen, 352 N.W.2d 821, 823 (Minn.App.1984). This court has not previously defined this difference. Other courts construing Rule 60.02 have sought to distinguish between circumstances constituting ordinary fraud and those constituting fraud on the court in order to determine which motions are subject to the 1-year limitations period. See e.g., Kupferman v. Consolidated Research & Mfg. Corp., 459 F.2d 1072, 1078 (2d Cir. 1972); Angier v. Angier, 415 N.W.2d 53, 56 (Minn.App.1987); see generally 2A Herr & Haydock, Minnesota Practice § 60.24 (1985). The United States Court of Appeals for the Eighth Circuit has characterized fraud on the court as a scheme to interfere with the judicial machinery performing the task of impartial adjudication, as by preventing the opposing party from fairly presenting [their] case   . Pfizer, Inc. v. International Rectifier Corp., 538 F.2d 180, 195 (8th Cir.1976) (citing, inter alia, Kupferman v. Consolidated Research & Mfg. Corp., 459 F.2d 1072, 1078 (2d Cir.1972); England v. Doyle, 281 F.2d 304, 309 (9th Cir.1960)). In England, the Ninth Circuit Court of Appeals stated that, [i]n order to set aside a judgment or order because of fraud upon the court    it is necessary to show an unconscionable plan or scheme which is designed to improperly influence the court in its decision. England, 281 F.2d at 309 (citations omitted). The Pfizer court apparently narrowed this definition by stating: A finding of fraud upon the court is justified only by the most egregious misconduct directed to the court itself, such as bribery of a judge or jury or fabrication of evidence by counsel   . Pfizer, 538 F.2d at 195. It is the narrower Pfizer definition which is urged on this court by Edward's counsel. The court of appeals cited Kupferman v. Consolidated Research & Mfg. Corp., 459 F.2d 1072, 1078 (2d Cir.1972), as authority for the notion that fraud on the court only includes that species of fraud which defiles the court itself or is perpetrated by officers of the court. Maranda v. Maranda, 435 N.W.2d 621, 624 (Minn.App.1989). This court refuses to adopt such a narrow definition of fraud in marriage dissolution cases. While such a standard may be applicable to ordinary civil litigation, it has no place in family law. In dissolution cases, the court sits as a third party, representing all of the citizens of the State of Minnesota to see that a fair property distribution is made. Karon v. Karon, 435 N.W.2d 501, 503 (Minn.1989). Because of the court's unique role in marriage dissolution cases, the narrow standard of fraud on the court articulated in Kupferman and Pfizer is inappropriate. In a stipulated marriage dissolution, if one party defrauds the other, he or she necessarily defrauds the court which sits as a third party to the stipulation. This is significantly different from stipulations involving ordinary commercial parties and a court that is not a party to the stipulation. While we decline to outline a precise definition of fraud on the court, we will focus on whether the offending party engaged in an unconscionable scheme or plan to influence the court improperly. Under this approach, the difference between fraud and fraud on the court is primarily a difference of degree rather than kind. In Ronnkvist v. Ronnkvist, 331 N.W.2d 764, 765-66 (Minn.1983), this court stated that parties to a marital dissolution have a duty to make a full and accurate disclosure of all assets and liabilities to facilitate the trial court's property distribution. Thus, we hold that fraud on the court must be an intentional course of material misrepresentation or non-disclosure, having the result of misleading the court and opposing counsel and making the property settlement grossly unfair. The record in this case supports a conclusion that the trial court did not abuse its discretion in vacating the 1979 judgment and decree. In particular, the following factors support the trial court's determination: (1) throughout the parties' marriage and the separation period, Mary was systematically excluded from access to information concerning the parties' finances; (2) Edward willfully misrepresented and failed to disclose the existence and value of marital property; (3) given the fact he knew that he was being paid by Edward, there is considerable doubt as to whether Mary's counsel exercised competent and independent judgment by failing to take any steps to determine the nature and value of the parties' property; (4) Edward's unmitigated contempt for the judicial process, including dissipating assets during the pendency of these proceedings and being less than candid in his answers to interrogatories, supports an inference that, even if Mary would have had the money to engage in discovery at the time of the stipulation, Edward would still have misrepresented the facts; (5) the fact that Edward induced Mary to accept the stipulation by promising to be fair for the sake of the children; and (6) the fact that Edward concealed hundreds of thousands of dollars such that, as in Lindsey, the stipulation here is grossly unfair, making it impossible for the original trial court to approve a fair settlement. One of the most troubling aspects of this case is that there was a delay of over 6 years between the original judgment and decree and the motion to vacate. We fully understand the need for finality in dissolution decrees. We also understand that the passage of time dissipates the ability to reconstruct the value of the marital estate at the time of separation. In most cases, a year or two should suffice to discover the fraud. In cases brought an unreasonably long time after the original judgment, the doctrine of laches should be used to prevent abuse. While the 6-year delay in this case is an extreme example and probably reaches to the outer limits of reasonableness, the record is clear that Edward's conduct prevented Mary from having sufficient facts to bring the case earlier. Therefore, we decline to apply laches in this case. The trial court's evaluation of a marital estate should be affirmed if it has an acceptable basis in fact even if this court might have taken a different approach. Castonguay v. Castonguay, 306 N.W.2d 143, 147 (Minn.1981). Mary's expert, Professor Palmer, testified at length regarding the representations contained in the financial statements Edward supplied to various banks and the information Edward provided to the IRS. The fact that Edward's tax return for 1979 was unavailable makes the expert's conclusions about the 1979 value of the marital estate somewhat conjectural. However, Edward had exclusive possession and control over this tax return so if the return were unavailable, he is partly responsible for Mary's inability to prove with certainty what the 1979 value of the estate was. Again, the trial court had the opportunity to observe the expert witness and assess his demeanor and credibility. The expert studied financial statements from 1977 and 1978 and then compared the representations therein with those provided in the financial statements given to banks in 1980, 1981, 1983, and 1985 as well as the tax returns for 1981, 1982, 1983, 1984 and 1985. The expert testified that, by comparing what Edward said the value of the estate was before the divorce and what he said it was after the divorce, it is possible to interpolate or fill in the gap as to the 1979 value. The most speculative part of the trial court's determination is the One Hundred Eighty-one Thousand, One Hundred Fifty-nine and No/100 Dollars ($181,159.00) accumulation adjustment added to the court's basic determination that Mary's share of the estate is Three Hundred Eighty Thousand and No/100 Dollars ($380,000.00). The court concluded that the 1979 value of the estate was Five Hundred Seventy-nine Thousand and No/100 Dollars ($579,000.00). The Five Hundred Seventy-nine Thousand and No/100 Dollars ($579,000.00) is the intermediate estimate of the 1979 value of the marital estate given by Mary's expert, Professor Palmer. In arriving at that figure, Professor Palmer took the sum of Four Hundred Sixty-four Thousand and No/100 Dollars ($464,000.00) from the September 1980 financial statement and added One Hundred Thousand and No/100 Dollars ($100,000.00) to account for the value of the insurance agency and Fifty-six Thousand and No/100 Dollars ($56,000.00) for the assets which had already been distributed to Mary. The total of Six Hundred Twenty Thousand and No/100 Dollars ($620,000.00) is Professor Palmer's best estimate of the value of Edward's estate as of September 7, 1980. This amount was then discounted at 6 percent to arrive at Five Hundred Seventy-nine Thousand and No/100 Dollars ($579,000.00) as the value of the marital estate as of August 1979. Using the Five Hundred Seventy-nine Thousand and No/100 Dollars ($579,000.00) figure, the court concluded that Mary's proper share should have been Two Hundred Eighty-nine Thousand and No/100 Dollars ($289,000.00). The court then subtracted the Fifty-six Thousand and No/100 Dollars ($56,000.00) Mary actually received as a result of the 1979 judgment to arrive at a net figure of Two Hundred Thirty-three Thousand and No/100 Dollars ($233,000.00). The court compounded this amount at a rate of 6 percent per annum to reach a figure of Three Hundred Eighty Thousand and No/100 Dollars ($380,000.00). In selecting the 6 percent figure, the court used Mary's expert's calculation of the actual rate of growth of Edward's assets during the period from September 1979 to December 1987. However, because Edward admitted to selling some of his assets in order to maintain his lifestyle during this period, the expert concluded that this 6 percent accumulation rate was a lower rate of growth than that which would have occurred if Edward had not sold the assets. Professor Palmer testified that if Mary had invested these assets in investment grade bonds during this period, she would have been able to earn 12 percent per annum. As an alternative to the 12 percent rate, Professor Palmer calculated the value of the estate compounded at 6 percent, but with an additional adjustment to account for the value of the assets sold by Edward during this period. Instead of adopting the 12 percent rate of return, the court decided to adopt 6 percent and adjust it to account for the value of the assets that Edward sold during the relevant period. We conclude, therefore, that the net amount decided by the trial court as Mary's additional share of the marital estate is not clearly erroneous and was a reasonable conclusion based on the evidence before the court with the exception as follows: Regarding the One Hundred Eighty-one Thousand, One Hundred Fifty-nine and No/100 Dollars ($181,159.00) accumulation adjustment added to the Three Hundred Eighty Thousand and No/100 Dollars ($380,000.00) basic share of the marital estate, due to Mary we find that this figure is too speculative, appears to be at least a partial duplication of the return and is not based on sufficient evidence to be sustained. We thus agree with the court of appeals that the One Hundred Eighty-one Thousand, One Hundred Fifty-nine and No/100 Dollars ($181,159.00) trial court award is clearly erroneous, and the trial court is reversed on that item. It is affirmed in granting Mary an additional award of Three Hundred Eighty Thousand and No/100 Dollars ($380,000.00) as part of the marital estate. We also agree with the court of appeals that the trial court did not abuse its discretion in refusing to grant a continuance at the February 8, 1988 hearing. The record shows that the trial court was a model of restraint and patience in dealing with respondent and his counsel. The courts of this state are not a smorgasbord, available only at the time and place of litigants' choosing. The conduct of respondent throughout these proceedings cannot and will not be tolerated. The final issue is the question of attorney fees. We reinstate the attorney fees and costs awarded by the trial court. In addition, we award petitioner Five Thousand and No/100 Dollars ($5,000.00) in additional attorney fees and costs and disbursements incurred in the appeals before the court of appeals and this court. The case is remanded to the trial court for the purpose of amending the original decree of dissolution to award Mary an additional Three Hundred Eighty Thousand and No/100 Dollars ($380,000.00) plus attorney fees and costs in accordance with this opinion.