Family Law

Mississippi Supreme Court says husband committed fraud on court

By Robert M. Kisselburgh, Esq.

Fraud in Mississippi divorce financial disclosure costs spouse well over $150,000 seven years after the divorce

In any divorce in Mississippi, parties are required to complete and exchange financial disclosures under Rule 8.05. In those disclosures, spouses are required to identify all assets and liabilities as well as place a value on those items. That is what occurred in when the Trim's divorced in Hinds County, Mississippi in 2000. The husband owned stock in a closely held business and listed its value at $100,000.00. The wife was not represented by an attorney and no other discovery was conducted during the case. Ultimately, the couple agreed on an irreconcilable divorce and agreed on a division of the property based upon the financial disclosures. The property was the $100,000 stock, $120,000 owned by the wife in her retirement account, and $30,000 equity in the marital home. The couple agreed to split their assets equally with the wife keeping her retirement account plus $5,000 of the equity in the home while the husband kept his stock and the marital home.

The problems started for the husband a year after the divorce when his business relationship with his partner soured and he was "squeezed out" of the company. As a result, he filed suit in Madison Chancery Court seeking to dissolve the company. Well, the critical aspect of dissolving a company is valuing it. During the trial of this case, experts offered differing values of the company, but ultimately, the Chancellor adopted the value offered by the ex-husband's expert, $1,186,000.00. That's a big difference between the $100,000 he told his wife the stock was worth when they divorced. That is where the problem arose. Either the value of the business had dramatically increased since the divorce or Mr. Trim had seriously undervalued his stock on the financial disclosure to this wife.

The ex-Mrs. Trim thought the latter and filed a lawsuit in 2004 to set aside the property settlement due to fraud on Mr. Trim's part. Normally, setting aside a divorce settlement four years later is a serious uphill battle. Mississippi Rule 60(b) states, in part, that if a party seeks to set aside a judgment based on fraud, misrepresentation, or other misconduct of an adverse party, such motion must be filed within six months after the judgment was entered. However, Rule 60(b) also states that "This rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding, or to set aside a judgment for fraud upon the court."

So in order for Mrs. Trim to prevail, she had to show the misrepresentation of the value of the stock by Mr. Trim was a "fraud on the court" given she filed her action almost four years after the divorce.

After a hearing before Hinds County Chancellor DeWayne Thomas, the Chancellor found Mr. Trim misstated the value of his stock during the original divorce proceedings. The Chancellor valued the stock at $694,000, subtracted the $100,000 originally equitably distributed during the divorce and awarded Mrs. Trim twenty-five percent of the $594,000 plus attorney fees and costs. Part of the Chancellor's decision was based upon personal financial statements submitted to a Bank in 1999 valuing his stock at $1,100,000 and another one in December, 2000, valuing the stock at $1,837,500. Although the Chancellor did not feel Mr. Trim committed fraud upon the court, he did think the misrepresentation of the stock value was so egregious, he had the equitable power to set aside the original judgment under Rule 60(b)(6), which says the judgment can be set aside for "any other reason justifying relief from the judgment." This portion of 60(b) does not have the six month time limit found in 60(b)(1-3).

Mr. Trim appealed the decision. Stay tuned to see what the Mississippi Court of Appeals and Mississippi Supreme Court say about this decision.

Information provided by Robert Kisselburgh, Mississippi Divorce Attorney

Full post as published by Mississippi Family Law Blog on May 03, 2010 (boomark / email).