No Arrears Due Under Order in Sham Divorce

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Sept. 2 — A trial court did not abuse its discretion in setting aside a couple's 1986 dissolution and child support judgments, along with the husband's child support arrears, after it found that the divorce was a sham intended to shield marital property from his bankruptcy creditors and that the family continued to live together after the marriage was dissolved, the Alaska Supreme Court held Aug. 28.

Agreeing with the lower court that the parties' dissolution “used the court system as a tool to defraud creditors and thus undermined the court's integrity,” Chief Justice Dana Fabe affirmed its determination that the dissolution was a fraud upon the court.

Thus upholding its grant of relief to the father pursuant to Rule 60(b)(6), Fabe said that the wife was not entitled to collect arrears under the 1986 support order after the parties separated for good in 2007.

An Admitted Sham 

The parties married in 1979 and divorced in 1986. As part of the dissolution, they agreed that the father would pay monthly child support. However, they did not actually end their relationship and later admitted that they filed for divorce only to shield marital assets from creditors in the father's bankruptcy.

The parties and their two children stayed together after the divorce, and the father provided financial support for the family. They separated from 1997 to 2001, and he paid child support to the mother during that time.

In 2001, the parties resumed living together as husband and wife, but separated for good in 2007. In 2010, the mother sought to enforce the father's child support obligation from 1986 to 2007 (totalling $118,000). He then moved for relief from the 1986 support order.

Concluding that the 1986 dissolution proceeding “was in essence a sham on the court perpetrated by both parties,” the trial court ruled that the appropriate relief, “afforded under Civil Rule 60(b)(6),” was to set aside the dissolution decree, support order, and arrears. It ordered a division of property and child support as of 2007, when the parties actually separated.

The mother appealed, arguing that the court erred in sua sponte setting aside the dissolution and support judgments where the father did not frame his request in terms of Rule 60(b).

Fraud on Court 

Fabe noted that Rule 60(b)(6) (“any other reason justifying relief from the operation of the judgment”), is a catch-all provision that “should be liberally construed to enable court[s] to vacate judgments whenever such action is necessary to accomplish justice.” Clauson v. Clauson, 831 P.2d 1257, 1261, 18 FLR 1347 (Alaska 1992).

Further noting that Rule 60(b)(6)'s “savings clause” recognizes the inherent power of courts to set aside judgments for fraud upon the court and contains no time limit, she turned to the mother's argument that fraud upon the court as contemplated by the rule should be “narrowly construed to embrace only that type of conduct which defiles the court itself.”

“That is precisely the type of conduct at issue here,” Fabe declared.

Because the parties dissolved the marriage in order to protect marital property from collection by creditors, their fraud “does not concern only private parties” and “involves more than an injury to a single litigant,” she explained, referring to cases holding that such examples do not constitute fraud on a court.

Disrupted `Good Order.'

Like the patent infringement proceedings that were the focus on the fraud on the court in Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246 (1944), “bankruptcy proceedings are `institutions set up to protect and safeguard the public, institutions in which fraud cannot complacently be tolerated consistently with the good order of society',” Fabe stated.

The parties here, she asserted, “disrupted this good order by attempting to shield assets from creditors through a sham dissolution. This behavior by the parties sullied `[t]he adjudicative integrity' of the superior court because it deprived adverse parties—creditors—of their substantive rights to collect debts.”

Not Necessary to Plead Rule 

Fabe resolved the fact that the father did not explicitly rely on Rule 60(b)(6) below, by saying that “[w]e now clarify that the trial court can grant a motion for relief from a judgment, order, or proceeding if it was based on a fraud on the court, even if a party's request for relief does not take the explicit form of a Rule 60(b)(6) motion. This authority is necessary for the superior court to meet its responsibility to uphold the court's integrity.”

In rejecting the mother's argument that relief was unable under the rule because the father's motion was not made within a “reasonable time” as the rule requires (she cited the 24-year gap between the dissolution and his motion), Fabe said that what constitutes reasonable “depends on the facts in each case.”

Finding that the mother was not prejudiced by the father's delay because she never sought child support during the years they lived together after the divorce, Fabe said the trial court thus did not abuse its discretion in granting Rule 60(b)(6) relief.

Functioned as Marital Unit 

Also rejecting her argument that the court's ruling impermissibly rewarded the father for his fraud and thus violated the in pari delicto doctrine, Fabe explained that “the doctrine does not limit the superior court's authority to right wrongs in fulfillment of its responsibility to uphold the court's integrity, nor should it be used to require that one wrongdoer pay child support to the other when the parties were not living apart and continued to function as a marital unit.”

Finally, she rebuffed the mother's argument that the court's determination that the father owed support only as of 2007 was “a retroactive vacation of child support [that] violates federal and state law.”

Because the father lived with and provided financial support for his children from 1986 to 1997 and 2001 to 2007, and actually did pay support from 1997 to 2001, the court's grant of relief “creates no windfall to [him] and does not deprive his children of funds to which they are entitled. As a result the superior court did not abuse its discretion in setting aside [his] child support arrearage for the time the parties lived together as a family,” Fabe concluded.

Justices Daniel E, Winfree, Craig F, Stowers, Peter J, Maassen, and Joel H. Bolger concurred.

The mother appeared pro se. The father was represented by Roberta C. Erwin and Robert C. Erwin, of Palmier-Erwin, LLC, Anchorage.

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