Marriage of Cannon

No. 96-379

IN THE SUPREME COURT OF THE STATE OF MONTANA

IN RE MARRIAGE OF

RITA H. CANNON,

Petitioner and Appellant,

and

DANIEL H. CANNON.

Respondent and Respondent.

APPEAL FROM: District Court of the Twentieth Judicial District, In and for the County of Lake, The Honorable Robert S. Keller, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Timothy J. Lape, Attorney at Law, Missoula, Montana

For Respondent:

John H. Gilliam, Skjelset & Gilliam, Missoula, Montana

Submitted on Briefs: April 3, 1997

Decided: May 8, 1997 Filed: *2 Justice Jim Regnier delivered the opinion of the Court.

Pursuant to Section I, Paragraph 3(c), Montana Supreme Court 1995 Internal Operating Rules, the following decisionshallnot be cited asprecedentand shall be published by its tiling as a public document with the Clerk of the SupremeCourt and by a report of its result to State Reporter Publishing Company and West Publishing Company.

On September 5, 1984, the Fourth Judicial District Court, Lake County, granted a decreeof dissolution for the marriage of Rita and Daniel Cannon. The decree incorporated the parties’ written agreement, signed in 1980, setting forth their respective rights and interestsconcerningreal andpersonalproperty. The parties permanentlyseparatedin August 1990. On October 15, 1990, Rita tiled a multi-count petition and complaint seeking to obtain a fair distribution of the assetsacquiredduring the parties’ marriage and relationship. The District Court bifurcated the issueof common law marriage and putative spouseand the remaining issuesof constructive trust and fraud on the court. On June 16, 1994, the District Court enteredits findings of fact, conclusionsof law and order holding that Rita was neither a common law wife, nor putative spouse. The remaining issueswere tried and the District Court granted a directed verdict against Rita at the close of her case on her claim of constructive trust. The District Court order filed on February 7, 1996, denied Rita’s claim of fraud on the court. Rita appealsthis order and the findings and conclusions tiled on February 7, 1996, by the Twentieth Judicial District Court, Lake County. We affirm.

The issue on appeal is whether the District Court erred in its conclusion that the conduct alleged to constitute fraud upon the court did not rise to a legally recognizable action.

FACTUAL BACKGROUND

Rita Cannonis a Native American and an enrolled member of the ConfederatedSalish and Kootenai Tribes of the Flathead Reservation. Rita completed the eighth grade before dropping out of school in the ninth grade. Rita and Dan beganliving together in a common law marriage in April 1965. The parties had three children of their own, and from 1965 through 1984 they acquired a substantial amount of real and personal property.

In July 1974, Dan and Rita signed a separationagreementprepared by the law firm in which Keith McCurdy was a member. The terms of the agreement provided that Dan receive all of the real property (5 10 acres), all of the personal property in his possession (including all of the farm and ranch equipmentand livestock), and sole custody of their three children, subject to reasonable rights of visitation and a thirty-day per year temporary custody right by Rita. Rita signed quitclaim deeds to the real property to Dan. Dan meanwhile signedover to Rita all of his interest in ajointly owned 1973 Dodge automobile.

The parties purchasedan additional 150 acres for $120,000 in March 1980. Around this time, Dan went to see Keith McCurdy concerning the validity of the 1974 agreement. McCurdy drafted a new agreementwhich was signedby Dan and Rita on March 24, 1980. This agreementawarded Dan all the real property, all of the cattle, the farm machinery and *4 equipment, all checking and savingsaccountsin Dan’s name, the hay, grain, and other farm produce, and all additions to or substitutions for the chattels. The agreement awarded Rita her automobile and checking account. The agreement further provided that in the event of Dan’s demise, Rita would receive one-fourth of the net value of Dan’s estate in lieu of her elective share,homesteadallowance, exempt property, and family allowance. By the terms of the agreement,if Dan initiated dissolution proceedingsRita would receive one-fourth of the net value of Dan’sassets,but if sheinitiated dissolutionproceedingsshewould be entitled to only $10,000 as full satisfaction of all claims. McCurdy, who representedDan concerning the 1980 agreement, did not allow the parties to sign the agreementthe first time they met to review the document. McCurdy advised Rita to seek counsel and advised her that the agreement affected her rights.

From 1980to 1984, Rita managedthe Camas Bath House in Hot Springs, Montana, which was owned by the ConfederatedSalishand Kootenai Tribes. The Tribes initially paid for the heating oil for the bathhousebut informed Rita that they would no longer do so after the end of 1983. Rita did not have the funds to pay for the heating oil and therefore asked Dan to help her borrow money to purchase the heating oil, as all the property was in his name, and none in hers. Dan refused to help but suggestedthat Rita could get $10,000 by filing for a dissolution under the terms of the 1980 Agreement.

Rita went to Keith McCurdy to commence dissolution proceedings. McCurdy preparedthe dissolutionpleadings,including the petition, admissionof service, andproposed *5 findings of fact, conclusions of law, and decree of dissolution. The petition for dissolution of marriage was signedby Rita on July 23,1984, and Dan signedan admissionof service and waiver that sameday.

On September 5, 1984, McCurdy appearedwith Rita before the Fourth Judicial District Court in a default dissolution proceeding. McCurdy’s prepared proposed findings and conclusions included the statement that the real and personal property agreement of 1980,in which McCurdy representedDan, was “fair, equitableand not unconscionable,and shouldbe made a part of this Decree.” The District Court grantedthe dissolutionpetition and signedthe proposed findings and conclusions. After the dissolution hearing, Dan and Rita continued living together at their home in Hot Springs until August 1990 when they permanently separated.Thereafter, Rita filed a multi-count petition and complaint seeking to obtain a fair distribution of the assets acquired during the parties’ marriage and relationship. Rita appeals from the findings of fact, conclusions of law, and order of the District Court entered on February 7, 1996, denying her claim of fraud on the court.

DISCUSSION

Did the District Court err in its conclusionthat the conduct allegedto constitute fraud upon the court did not rise to a legally recognizable action?

This Court reviews a district court’s conclusions of law to determine whether the court’s interpretation of the law is correct. In re Marriage of Miller (1995), 273 Mont. 286, 291, 902 P.2d 1019, 1021; Carbon County v. Union Reserve Coal Co. (1995), 271 Mont. *6 459,469, 898 P.2d 680,686; Steer, Inc. v. Department ofRevenue (1990), 245 Mont. 470, 474-75, 803 P.2d 601,603-04.

Pursuant to Rule 60(b)(3), M.R.Civ.P., a party can seek relief from a judgment for fraud, either extrinsic or intrinsic. Relief under this provision, however, is only available if a motion is filed not more than sixty days after judgment. Rita’s motion to modify the dissolution here was madeapproximately eight yearsafter the decreewas entered. Therefore she does not have an avenue of relief under this provision. However, Rule 60(b), M.R.Civ.P., contains a residual clause allowing a party to bring an independent action to reopen a judgment for fraud upon the court without time limitation. It provides:

This rule doesnot limit the power of a court to entertain an independentaction to relieve a party from a judgment, order, or proceeding, or to grant relief to a defendant not actually personally notified as may be required by law, or to set aside a judgment for fraud upon the court.

This Court haspreviously held that to support an independentaction for fraud under this residual clause,the fraud must be extrinsic, not intrinsic. Miller, 902 P.2d at 1022; Filler v. Richland County (1991), 247 Mont. 285,289,806 P.2d 537,539. Extrinsic fraud must be collateral to the matters tried by the court and may not include fraud in the matters upon which judgment was rendered. Marriage of Miller, 902 P.2d at 1023; Salway v. Arkava (1985), 215 Mont. 135, 140, 695 P.2d 1302, 1306.

Rita assertsthat the District Court erred when it concludedthat although the conduct by McCurdy was egregious, it did not rise to the level of conduct necessary to support a legally recognizablecauseof action for extrinsic fraud. The District Court, in its conclusion number three, specifically statedthat

[t]he conduct in this casewas “egregious,” but it does not rise to the level of “bribery of ajudge or member of the jury; the fabrication of evidencein which an attorney hasbeen implicated; or the employment of counselto influence the court.”

Rita assertsthat this languageemployed by the District Court limits fraud upon the court to only consist of bribery, fabrication of evidence, or improper influence. Dan argues that the District Court’s languagederived from Miller, 902 P.2d 1019,only provided examplesof the type of conduct which can rise to the level of fraud upon the court.

Therefore, this Court must examine the record to determine if the District Court correctly interpreted the law when it concludedthat the conduct alleged to constitute fraud upon the court did not rise to a legally actionable level under Rule 60(b), M.R.Civ.P.

Rita specifically allegesthat Keith McCurdy failed to deal candidly with the court, as he did not inform the court of his prior representation of Dan and of his involvement in creating the property agreement. She also assertsthat McCurdy’s actions constituted fraud upon the court becausehe did not inform the court of his alleged belief that the agreement was unfair and that he presentedproposed findings of fact, and conclusions of law which stated that the agreementwas fair, equitable, and not unconscionable.

It is clear that these actions do not tit within any of the examplesof extrinsic fraud as provided in Miller, 902 P.2d 1019. Furthermore, even if the egregiousconduct by McCurdy *8 constituted fraud, it was intrinsic to the caseand not extrinsic. McCurdy’s failure to inform the court of his belief that the agreementwas not fair and his failure to introduce evidence of the parties’assetsand liabilities are directly related to matters upon which judgment was rendered. This failure did not prevent a fair submission of the controversy, as McCurdy testified that he did not introduce this evidencebecausethe parties had clearly agreed upon the distribution of their assets,and that once they had reachedthis agreementhe considered it to be fair and equitableand not unconscionablefor the parties. The District Court had the agreementbefore it and had Rita’s own testimony regarding the petition and the agreement when it specifically incorporated the agreement into the decree,

In addition, this Court has held that false or fraudulent representations or concealmentswhich are made during court proceedingsare intrinsic and not extrinsic fraud and therefore are not grounds for reopening a judgment by an independent action. Miller, 902 P.2d at 1023; State CompensationIns. Fund v. Chapman (1994), 267 Mont. 484,490, 885 P.2d 407,411. Therefore, evenMcCurdy’s allegedfailure to disclosehis personalbeliefs about the agreementdoes not rise to the level of extrinsic fraud, or fraud upon the court as is required to vacate a final judgment pursuant to the residual clause in Rule 60(b), M.R.Civ.P.

We therefore affirm the order by the Twentieth Judicial District Court. *9 We Concur:

Justices *10 Justice W. William Leaphart, dissenting.

I dissent. The District Court held that, although counsel’sconduct in this casewas egregious,it did not rise to the level of extrinsic fraud, i.e., bribery of ajudge or member of the jury or the fabrication of evidence,or the employment of counselto influence the court. In re Marriage of Miller (1995), 273 Mont. 286,292,902 P.2d 1019, 1022.

This Court agrees,holding that the allegedfraud is intrinsic to the case,not extrinsic. Although I find that it is not easy to neatly categorize acts of fraud as being intrinsic or extrinsic, this case, I believe, presents elements of both. I agree that counsel’sfailure to advise the court of his prior representation of Dan and of his involvement in creating the property agreement would constitute intrinsic, rather than extrinsic fraud.

However, the fact that the judicial process was used as a tool to lever Rita into accepting a measly $10,000 under the guise of a “divorce” is another matter. The whole “dissolution” proceedingwas a sham on the court perpetratedfor the solepurpose of denying Rita her fair share of the marital assets. She neededmoney to buy heating oil. Although there were sufficient marital assetsto cover this expenseor serve as security for a loan, Dan refused to give her the money. Insteadhe took advantageof her financial straits and levered her into filing for divorce so she would be restricted to an award of $10,000; the paltry sum which had been allotted to her under the property agreement if she tiled dissolution proceedings. There was, in fact, no dissolution of the marital relationship. The parties continued living together in their home for another six years. Through the machinations of Dan and the assistanceof counsel, the court unwittingly gave its stamp of approval to a *11 decreewhich allowed Dan to enjoy the best of both worlds. With decreein hand, Dan was ableto continue his marital relationship with Rita without any further concernthat shemight lay claim to a fair share of their considerablemarital assets.

Notwithstanding the fact that Rita was herself dupedinto participating in this ruse, the whole process was, nonetheless,an abuseof the judicial system for illegitimate purposes. When the court is deceived into allowing the judicial process to be used as a means to accomplish ulterior goals not contemplated by the law, that is collateral to the matter ostensibly tried to the court and, in my view, extrinsic fraud.