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 juris-
diction 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. P d e e a (1936), 101 Mont.
Section 40-4-201(2) squarely places the issue of con-
scionability 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 settle-
ment 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 one-
half 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 ~ u d i c e \
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 settle-
ment 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