Paulson v. Paulson

955 N.W.2d 92

Kristofor John PAULSON, Plaintiff and Appellee

v.Shannon Marie PAULSON, n/k/a Shannon Marie Belgarde, Defendant and Appellant

No. 20200163

Supreme Court of North Dakota.

FILED FEBRUARY 18, 2021

Jessie L. VanCamp, Grand Forks, ND, for plaintiff and appellee.

Jacey L. Johnston (argued), and Olivia A. Jureidini (appeared), Grand Forks, ND, for defendant and appellant.

McEvers, Justice.

[¶1] Shannon Marie Belgarde appeals from an order denying her motion to vacate a divorce judgment, which was entered pursuant to a stipulation. We affirm.

I

[¶2] Shannon Belgarde (formerly Shannon Paulson) and Kristofor Paulson began dating in 2003, and married in 2013. They divorced on December 4, 2019 based on a stipulated settlement agreement signed by both parties and filed with the district court on November 12, 2019. Neither party was represented by counsel during the drafting or execution of the settlement agreement. According to the settlement agreement, at the time of the divorce, the parties jointly owned two vehicles, a home, and multiple financial accounts. Their debts included an automobile loan of approximately $8,500, a mortgage balance on the marital home of $130,000, and student loan debt of $150,000.

[¶3] Following the terms of the stipulation, the district court awarded Paulson the marital home, subject to the mortgage, both vehicles, subject to the loan, household goods of $35,000, his retirement and investments accounts, and a substantial amount of funds in checking and savings accounts. Belgarde was awarded $10,000 in household goods, her retirement account, some funds in checking and savings accounts, and was responsible for $150,000 in student loan debt. The property and debt division resulted in a net award to Paulson of $314,510 and a net debt to Belgarde of $105,100.

[¶4] On January 27, 2020, Belgarde moved to vacate the divorce judgment under N.D.R.Civ.P. 60(b). She argued the judgment should be vacated on the grounds of duress, newly discovered evidence, fraud, misrepresentation, misconduct, and because the divorce stipulation was so one-sided as to be unconscionable. Belgarde argued she relied on Paulson's statements regarding future reconciliation when she signed the settlement agreement. She stated she did not realize these statements were false until she discovered evidence of an alleged affair. Belgarde also argued the divorce stipulation was so one-sided as to be unconscionable. Belgarde submitted affidavits and several exhibits in support of her motion.

[¶5] Paulson resisted the motion, arguing Belgarde failed to assert grounds justifying relief under N.D.R.Civ.P. 60(b) and the settlement agreement was not unconscionable. In his affidavit, Paulson denied having an affair, and asserted he entered the marriage with property and no debt, while Belgarde entered the marriage with little property and substantial debt. Neither party requested a hearing on the motion.

[¶6] Despite no request for a hearing from the parties, the district court held a hearing on the motion. No testimony was offered at the hearing, neither party objected to admission of the parties’ affidavits as evidence, and the court took the matter under advisement. Based on the affidavits and exhibits submitted in record, the court found Belgarde was a highly educated person, with capacity to contract, who was free to seek independent legal advice before agreeing to the terms of the divorce stipulation. Further, the court considered Belgarde's arguments and concluded that the facts and circumstances of the case did not rise to the level of fraud, misrepresentation, or misconduct. Finally, the court determined there was insufficient evidence of unconscionability. The court denied the motion to vacate the divorce judgment on April 14, 2020, and Belgarde appealed.

II

[¶7] On appeal, Belgarde argues the district court abused its discretion by denying her motion to vacate the divorce judgment because the agreement was the result of mistake, duress, menace, fraud, or undue influence. More specifically, she argues the court did not apply the correct analysis under N.D.R.Civ.P. 60(b)(3) or (6), or for unconscionability. Belgarde also complains the court abused its discretion by not specifically referring to the contents of her exhibits.

[¶8] "This Court reviews a district court's denial of a motion to vacate a judgment for an abuse of discretion." Vann v. Vann , 2009 ND 118, ¶ 10, 767 N.W.2d 855. In reviewing the district court's denial of a N.D.R.Civ.P. 60(b) motion to set aside a judgment, this Court does not determine whether the court was substantively correct in entering the judgment from which relief is sought. Terry v. Terry , 2002 ND 2, ¶ 4, 638 N.W.2d 11. Instead, this Court determines only if the court abused its discretion in ruling that sufficient grounds for disturbing the finality of the judgment were not established. Id. The district court abuses its discretion when it acts in an arbitrary, unreasonable, or unconscionable manner, when it misinterprets or misapplies the law, or when its decision is not the product of a rational mental process leading to a reasoned determination.

Knutson v. Knutson, 2002 ND 29, ¶ 7, 639 N.W.2d 495. An abuse of discretion is never assumed and must be affirmatively established. Dvorak v. Dvorak , 329 N.W.2d 868, 870 (N.D. 1983). We will not overturn a district court's decision merely because it is not the one we may have made. Interest of D.J.H. , 401 N.W.2d 694, 700 (N.D. 1987). The district court's findings are not disturbed on appeal unless they are clearly erroneous. Terry , at ¶ 5 ; N.D.R.Civ.P. 52(a).

[¶9] The district court may set aside a judgment under N.D.R.Civ.P. 60(b)(3) for fraud, misrepresentation, or misconduct by an opposing party. The court may also set aside a judgment for "any other reason that justifies relief" under N.D.R.Civ.P. 60(b)(6). "Just as courts will not enforce an agreement that is illegal, so too courts should vacate judgments that are unconscionable. Rule 60(b)(vi), N.D.R.Civ.P., is available for just such a rare occasion and exceptional circumstance." Varty v. Varty , 2020 ND 165, ¶ 10, 946 N.W.2d 713 (quoting Crawford v. Crawford , 524 N.W.2d 833, 836 (N.D. 1994) ). Accordingly, we will consider Belgarde's unconscionability and her other arguments under N.D.R.Civ.P. 60(b)(6) together.

[¶10] The divorce judgment in this case was entered based on a stipulation. "This Court encourages peaceful settlements of disputes in divorce matters, and the strong public policy favoring prompt and peaceful resolution of divorce disputes generates judicial favor of the adoption of a stipulated agreement of the parties." Knutson , 2002 ND 29, ¶ 8, 639 N.W.2d 495. A district court ordinarily should not decree a distribution of property that is inconsistent with a voluntary stipulation agreed to by the parties. Eberle v. Eberle , 2009 ND 107, ¶ 15, 766 N.W.2d 477. However, a court has a duty to equitably distribute the marital estate, which includes the duty to decide whether an agreement as executed is a result of mistake, duress, fraud, menace, or undue influence. Id.

A. Fraud, Misrepresentation, or Misconduct

[¶11] Belgarde argues the divorce judgment should be vacated under N.D.R.Civ.P. 60(b)(3) because Paulson deliberately misrepresented his reasons for the divorce to fraudulently induce her to sign a one-sided agreement favoring his interests. The party seeking relief from a judgment based on fraud has the burden of proof and must establish fraud by clear and convincing evidence. Dvorak, 329 N.W.2d 868, 872 (citations omitted). When the judgment sought to be set aside was entered pursuant to a stipulation of the parties, the party challenging the judgment has the additional burden of showing a justification under the law of contracts. Terry , 2002 ND 2, ¶ 4, 638 N.W.2d 11. Relief under N.D.R.Civ.P. 60(b)(3) for fraud, misrepresentation, or other misconduct is extraordinary relief that should only be granted in exceptional circumstances. Id. " Rule 60(b), N.D.R.Civ.P., is not to be used to relieve a party ‘from free, calculated, and deliberate choices he or she has made.’ " Id. at ¶ 7 (quoting Fleck v. Fleck , 337 N.W.2d 786, 791 (N.D. 1983) ). A stipulation will not be rescinded on the grounds of mistake or fraud if a party had the opportunity to read the agreement without being misled as to its contents. Eberle , 2009 ND 107, ¶ 26, 766 N.W.2d 477.

[¶12] Belgarde argues Paulson promised that there would be reconciliation, that her name would be restored to the home title, and that he would help her when she needed it. Belgarde alleged Paulson repeatedly denied having an affair prior to divorce, but she discovered text messages and call logs between Paulson and another woman after she signed the agreement. Belgarde argues this is evidence of an affair demonstrating that Paulson misrepresented his intentions regarding a future reconciliation with her and his reasons for wanting a divorce. Paulson argues Belgarde misconstrued his statements as promises, and maintains he did not have an extramarital affair.

[¶13] The district court considered the submissions and arguments of the parties and noted both parties are well-educated adults with advanced degrees, with the full ability and capacity to enter contracts freely. The court noted Belgarde submitted no evidence to suggest she did not understand the finality of a divorce decree. The court concluded there was nothing enforceable about a discussion, or even an agreement, to reconcile in the future. The court stated the risk of relying on such an agreement was apparent and foreseeable at the time she agreed to the stipulation. The court also found Belgarde had time to read and understand the stipulation. Regarding the alleged extramarital affair, the court noted Belgarde suspected Paulson was having an affair prior to signing the settlement agreement, while Paulson has continuously denied the allegation. The court found Belgarde...