CX-99-1198

In Re the Marriage of:

Roger C. Johnson, petitioner,
Appellant,

vs.

Carol A. Johnson,
Respondent.

Filed March 28, 2000

Affirmed

Davies, Judge

Dakota County District Court

File No. F19813223

Terry H. Rueb, Rueb & Karl Law Office, 12700 Nicollet Ave. S., Burnsville, MN 55337 (for appellant)

Suzanne M. Remington, Robert N. Schlesinger, Robert N. Schlesinger, P.A., 700 St. Paul Building, Six West Fifth St., St. Paul, MN 55102 (for respondent)

Considered and decided by Lansing, Presiding Judge, Davies, Judge, and Harten, Judge.

U N P U B L I S H E D O P I N I O N

DAVIES, Judge

The district court vacated all financial provisions of a dissolution judgment entered pursuant to a marital-termination agreement on the grounds that: (1) husband engaged in fraud by misleading the court and failing to make complete asset disclosure; and (2) wife was under duress when she signed the agreement. We affirm.

FACTS

Appellant Roger Johnson and respondent Carol Johnson were married in 1962. In March 1998, after 35 years of marriage, appellant told respondent that he wanted a marriage dissolution. Twenty-seven days later, appellant and respondent signed a marital-termination agreement. About two weeks later, the district court ordered a dissolution judgment on the agreement.

At that time, appellant was 59 years old and earning about $5,000 a month. He was also receiving a monthly pension from Northwest Airlines. Respondent had been a traditional homemaker during the marriage, raising two sons and earning virtually no outside income.

In connection with the dissolution, appellant retained an attorney. This attorney prepared all proposed stipulations and all negotiations were held in his offices. Respondent did not retain counsel; she claims appellant repeatedly warned her not to retain an attorney and threatened to freeze all assets if she did so, saying she would not have enough money to buy even a pack of cigarettes. She also claims appellant had a history of using intimidation to accomplish his goals. At the time she signed the agreement, respondent was still living with appellant in the marital home. Although she did not retain counsel, respondent secretly conferred with a family-law attorney on three brief occasions, but had the lawyer send the bills to a neighbor’s address so her husband would not find out. Respondent admits that, even before she signed the agreement, she intended to seek to have the agreement and resulting judgment overturned.

On May 9, 1998, respondent moved out of the marital home and about three weeks later retained counsel and promptly moved to vacate the judgment on the ground of duress. After a period of discovery, she added a second ground--that appellant committed fraud in failing to make complete asset disclosure and in misleading the court. The district court granted the motion to vacate on both grounds.

D E C I S I O N

I. Vacation of Judgment

The factual findings on whether the judgment was prompted by fraud, duress, or mistake will be upheld unless they are clearly erroneous. Hestekin v. Hestekin, 587 N.W.2d 308, 310 (Minn. App. 1998). If the district court finds circumstances that might permit vacating the judgment, its decision on the question of whether vacation is the appropriate remedy must be upheld in the absence of abuse of discretion. Id. (citing Kornberg v. Kornberg, 542 N.W.2d 379, 386 (Minn. 1996)).

Once a stipulation is merged into a judgment, the sole relief lies in meeting the requirements of Minn. Stat. § 518.145, subd. 2. Shirk v. Shirk, 561 N.W.2d 519, 522 (Minn. 1997). The motion to vacate was properly brought under that provision, which in relevant part reads:

Subd. 2. Reopening. On motion and upon terms as are just, the court may relieve a party from a judgment and decree * * * and may order a new trial or grant other relief as may be just for the following reasons:

* * * *

(3) fraud, whether denominated intrinsic or extrinsic, misrepresentation, or other misconduct of an adverse party.

Minn. Stat. § 518.145, subd. 2 (1998).

A. Fraud

The district court vacated the judgment on the ground that appellant engaged in fraud by failing to make complete asset disclosure and by misleading the court and respondent.

The standard for proving fraud under section 518.145 is preponderance of the evidence. Kornberg, 542 N.W.2d at 387 n.3 (Minn. 1996). The supreme court has stated that fraud in a marital dissolution consists of: (1) an intentional course of material misrepresentation; (2) having the result of misleading the court and opposing counsel; and (3) making the property settlement unfair. Id. at 387. Case law in the area of family law does not make a clear distinction between mere “fraud” and “fraud upon the court.” See, e.g., Maranda v. Maranda, 449 N.W.2d 158, 165 (Minn. 1989) (rejecting narrow definition of “fraud upon the court” in family-law matters because court sits as third party to any stipulation, and noting “the difference between fraud and fraud upon the court is primarily a difference of degree rather than kind”).

Parties to a marital dissolution have a duty to make full and accurate disclosure of all assets and liabilities. Ronnkvist v. Ronnkvist, 331 N.W.2d 764, 765-66 (Minn. 1983). A breach of the duty to disclose constitutes fraud sufficient to set aside the judgment. Id. at 766; see, e.g., Sanborn v. Sanborn, 503 N.W.2d 499, 503-04 (Minn. App. 1993) (husband who represented value of business as one-third actual value committed fraud justifying vacation of judgment), review denied (Minn. Sept. 21, 1993); Maranda, 449 N.W.2d at 166 (fraud not to disclose existence and value of marital property, among other things); cf. Kornberg, 542 N.W.2d at 388 (vacating for fraud not proper when no misrepresentation or concealment of funds and when wife was not excluded from access to information concerning assets).

Here, the district court found that appellant “did not make a full and complete disclosure of assets” and that his presentation to the court and respondent was “false and misleading.” This finding is not clearly erroneous. The record shows that the extent and value of various assets, including a 401(k) and some Northwest Airlines shares, were not disclosed to respondent. Appellant also did not disclose the present value of his Northwest Airlines pension. Further, appellant did not disclose almost $85,000 in additional assets, claiming they were “non-marital.” But, even now, it has not been established that these assets are non-marital.

More importantly, the record supports the finding that the “structure” (or presentation) of the marital-termination agreement was misleading. The agreement represented that the division of investment assets was $328,190 to appellant, and $268,674 to respondent. But in the tabulation of assets leading to those totals, appellant included a non-marital asset for respondent ($87,000 inheritance from her father) and failed to include for himself the present value of his Northwest Airlines pension (valued at $314,289). If the non-marital asset is removed and the pension added, the property distribution becomes $642,479 for appellant compared with $181,674 for respondent. The corrected totals show a differential that by itself would signal an inequitable division. In short, the structure of the agreement misled the court and respondent.

The finding of fraud is supported by ample evidence in the record. The district court did not abuse its discretion in vacating the judgment on this ground.

B. Duress

The district court also concluded that respondent entered the agreement under duress, finding appellant used fear and intimidation to keep her from retaining counsel and from otherwise looking out for her own interests.

Duress is not specifically listed as a ground for vacating judgments, but it can constitute “other misconduct of an adverse party.” Minn. Stat. § 518.145, subd. 2(3); see Hestekin, 587 N.W.2d at 310 (section 518.145 elaborates only slightly on historic standards of “mistake, fraud and duress”). Under common law, duress is available as a defense to a contract when the agreement is coerced by “physical force or unlawful threats.” Bond v. Charlson, 374 N.W.2d 423, 428 (Minn. 1985).

In the context of marital-termination agreements, we defer to the district court findings on whether the circumstances rise to the level of “duress” unless those findings are clearly erroneous. See Merickel v. Merickel, 414 N.W.2d 208, 212 (Minn. App. 1987) (court found no duress when wife had been represented by competent attorney who drafted stipulation, reviewed it with her, and advised against stipulating to property as non-marital); Hestekin, 587 N.W.2d at 310 (court found no duress when wife was not represented by counsel, wife consented to stipulation in open court, and record supported court’s finding that husband had not been abusive).

The record supports the district court findings. The facts show a traditional homemaker who worked only four weeks during this 35-year marriage. At the time of the dissolution, she was living in the marital home with a husband who exerted control through intimidation. He repeatedly directed her not to retain her own attorney. He threatened to freeze all assets and take away her only source of funds. Although she consulted briefly with a family-law attorney, she did not retain the attorney and was fearful enough to have the attorney’s bills sent to a neighbor’s address. She did not retain her current attorney until after she moved out of the marital home. Under these circumstances, the district court was justified in ruling that respondent signed the agreement under duress.

II. Applicability of “Unclean Hands” Doctrine

Appellant also claims the district court erred in failing to rule that “unclean hands” barred respondent from bringing the motion to vacate.

The equitable doctrine of “unclean hands” requires a bad motive or unconscionable conduct. Johnson v. Freberg, 178 Minn. 594, 597-8, 228 N.W. 159, 160 (1929). Under these undisputed facts, there is no support for a finding of bad motive or unconscionable conduct by respondent. Instead, her candid admission that in her own mind she intended to seek to overturn the agreement and resultant judgment even as she signed it supports the finding of duress. If she had been free to exercise her own free will, she would have simply refused to sign the agreement at all.

Nor does the doctrine of “unclean hands” bar the motion to vacate on grounds of fraud through failing to disclose assets and misleading the court. The fraud that was perpetrated in this case was a result of appellant’s actions, and was not discovered until after respondent moved to vacate the judgment. At the time of execution, respondent had no actual knowledge that appellant was concealing assets and misrepresenting the agreement to the court.

Under the undisputed facts in this record, the doctrine of unclean hands has no application.

Affirmed.