Paulson v. Paulson

FILED
IN THE OFFICE OF THE
CLERK OF SUPREME COURT
FEBRUARY 18, 2021
STATE OF NORTH DAKOTA
IN THE SUPREME COURT
STATE OF NORTH DAKOTA
2021 ND 32Kristofor John Paulson, Plaintiff and Appellee
v.
Shannon Marie Paulson, n/k/a
Shannon Marie Belgarde, Defendant and Appellant
No. 20200163
Appeal from the District Court of Grand Forks County, Northeast Central
Judicial District, the Honorable M. Jason McCarthy, Judge.
AFFIRMED.
Opinion of the Court by McEvers, Justice, in which Justice VandeWalle and
Justice Tufte joined, and Chief Justice Jensen and Justice Crothers concurred
in the result.
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.
Paulson v. Paulson
No. 20200163
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
1
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.
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[¶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
3
disputes generates judicial favor of the adoption of a stipulated agreement of
the parties.” Knutson, 2002 ND 29, ¶ 8. 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. 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.
[¶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
4
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 had sufficient suspicion of the conduct
for her to factor it as a possibility when reaching a settlement agreement.
Therefore, it was not new information unknown to her at the time the parties
negotiated their stipulation. The court concluded that Belgarde’s “belief that
[Paulson] engaged in an extramarital affair does not constitute and would not
constitute false pretenses, fraud, newly discovered evidence, duress,
misrepresentation, or misconduct by [Paulson], even if [her] allegations were
true.”
[¶14] We are concerned with the district court’s last conclusion. If Paulson
made false statements about the alleged affair prior to execution of the
settlement agreement, “the suppression of the truth with intent to induce
another to enter into a contract is fraud.” Dvorak, 329 N.W.2d 868, 872
(citation omitted). However, the court here did not find an extramarital affair
occurred, likely because the evidence in the record was conflicting and
inconclusive. The court concluded that Belgarde’s “belief” that Paulson
engaged in an extramarital affair did not constitute false pretenses, fraud,
newly discovered evidence, misrepresentation, or misconduct. “Generally, no
abuse of discretion will be presumed or inferred where there are conflicting
affidavits.” Haugo v. Haaland, 349 N.W.2d 25, 27 (N.D. 1984). The conflicting
affidavits in the record here do not provide clear and convincing evidence that
5
an affair occurred; therefore, Belgarde has not met her burden. On this record,
we cannot say the court abused its discretion in denying the motion to vacate
based on fraud, misrepresentation, or misconduct for the alleged affair or any
other alleged misrepresentation.
B. Duress
[¶15] The district court discussed the arguments made by Belgarde that
Paulson took advantage of her mental condition, constituting duress. Belgarde
submitted affidavits regarding her mental health issues before and after the
divorce. The court noted that Belgarde admitted she did not historically have
mental health issues, other than anxiety, prior to the divorce. The court noted
the evidence submitted that Belgarde made an attempt on her life after
reading the suggestive conversations between Paulson and another woman,
demonstrated that she was distressed upon forming a firm belief that Paulson
had an affair. However, the court found Belgarde formed this firm belief after
signing the stipulation, so it was not evidence of her mental state at the time
that she considered and signed it. The court concluded there was no evidence
that Belgarde’s mental health prevented her from making a free, voluntary,
and reasoned decision when she entered into the stipulation. We conclude that
the court’s findings are supported by the record and are not clearly erroneous.
On this record, we cannot say the court abused its discretion in denying the
motion to vacate based on the allegations of duress.
C. Unconscionability
[¶16] Belgarde argues the stipulation agreement should be vacated for
unconscionability. “An agreement is unconscionable if it is one no rational,
undeluded person would make, and no honest and fair person would accept, or
is blatantly one-sided and rankly unfair.” Eberle, 2009 ND 107, ¶ 18 (citations
omitted). While the question of unconscionability is a question of law, the
factual findings made by the district court to support the determination are
reviewed under a clearly erroneous standard. Terry, 2002 ND 2, ¶ 14. A finding
of fact is clearly erroneous if it has no support in the record, or even if there is
some supporting evidence, the reviewing court is left with a definite and firm
6
conviction a mistake has been made, or the decision was induced by an
erroneous view of the law. Id.[¶17] To vacate a divorce judgment as unconscionable, “there must be some
showing of both procedural and substantive unconscionability and courts must
balance the various factors, viewed in totality, to make its determination.”
Eberle, 2009 ND 107, ¶ 18 (citation omitted). Procedural unconscionability
focuses on the formation of the agreement and the fairness of the bargaining
process:
An agreement may be free from mistake, duress, menace,
fraud, or undue influence and still be procedurally unconscionable.
While there may not be mistake, duress, menace, fraud, or undue
influence, one party may be guilty of such oppressive conduct to
secure the agreement that the agreement should not be enforced.
See Derby v. Derby, 8 Va. App. 19, 378 S.E.2d 74, 79 (1989).
Settlement agreements in divorce cases are more susceptible to
overreaching and oppressive conduct because of the relationship
between the husband and wife, particularly when the negotiations
are between the parties rather than through their lawyers. Id.Behavior that may not constitute fraud, duress, mistake, menace,
or undue influence in an arms length context may be sufficient to
make an agreement unconscionable when the relationship is used
to take advantage of a situation and achieve an oppressive result.
Id.Eberle, at ¶ 20. Substantive unconscionability focuses on the one-sidedness of
the agreement. Id. at 18.
[¶18] Belgarde argues the stipulation was procedurally unconscionable
because it was the result of an unfair bargaining process. Specifically, she
argues Paulson’s assurances of a future reconciliation rendered the bargaining
process unfair. Belgarde also asserts the rushed timeframe between Paulson
requesting a divorce near the end of October 2019, Paulson drafting the
documents on November 9, 2019, and filing the documents on November 12,
2019 evidences procedural unconscionability. She argues that Paulson assured
her that attorneys were not necessary and she should not discuss the divorce
with anyone until it was over.
7
[¶19] Paulson argues Belgarde’s claims do not show procedural
unconscionability. He disputed her factual allegations in his affidavit about the
preparation of the divorce documents, asserting that the documents were
prepared by both parties, and that it was Belgarde who located the notary
public to notarize their signatures. He further argues Belgarde had time to
seek an attorney and he did not discourage her from seeking counsel.
[¶20] This Court has cautioned, as a matter of public policy, a stipulation in a
divorce proceeding should be viewed with great skepticism when it occurs
rapidly, with the use of one attorney, and under serious threats of harm to one
party. Eberle, 2009 ND 107, ¶ 27 (relying on Peterson v. Peterson, 555 N.W.2d
359, 362 (N.D. 1996)). In Eberle, despite concluding that the district court did
not err in finding a marital agreement was free from mistake, duress, fraud or
undue influence, this Court reversed a denial of a motion to vacate a divorce
judgment, holding the facts of the case showed the marital agreement was
procedurally unconscionable. Id. at ¶ 32 (holding an agreement procedurally
unconscionable where one party was not represented by counsel, the
agreement was rushed, and there was very little discussion between the
parties about the terms of the agreement). In Eberle, one party hired an
attorney who drafted the settlement agreement. Id. at ¶ 4. The agreement was
signed only a few days later by the other party, who was not represented by
counsel. Id. The parties in Eberle filed affidavits and testified about the process
the parties followed in reaching the terms of the settlement agreement. Id. at
¶¶ 22-25.
[¶21] Here, the parties did not testify or request an opportunity to testify or
cross-examine, so the district court had little or no opportunity to weigh the
credibility of the parties. Rather, the parties filed conflicting affidavits
regarding the procedural steps the parties took prior to the divorce. Unlike
Eberle, it is undisputed that neither of the parties here were represented by
counsel. The court found that Belgarde had time to seek counsel and
understand the permanence of a divorce prior to executing the stipulation.
While the short time frames here are concerning, we cannot say as a matter of
law that the court’s finding is clearly erroneous. The court found that because
neither party was represented by counsel, neither party had a clear advantage
8
over the other in the crafting of the stipulation. The court found both parties
were highly educated and capable of understanding the agreement they were
entering into. The court also noted Belgarde moved to vacate the judgment
only upon discovering evidence of an alleged affair, finding the timing
indicated she was motivated by a desire for retribution, rather than a
realization the agreement was inequitable. These findings are not clearly
erroneous, and are supported by the record. The court did not abuse its
discretion by concluding Belgarde failed to establish procedural
unconscionability. Although we affirm the court, there was some showing of
possible procedural unconscionability in regard to the short time frame
involved in drafting the settlement agreement. We therefore will review for
substantive unconscionability, considering the totality of the circumstances.
[¶22] Belgarde also argues the stipulation is substantively unconscionable.
She argues the property division, on its face, shows the judgment was
unconscionable. She further argues there was not sufficient evidence for the
court to make a conclusory decision concerning the marital equity.
[¶23] The terms of the settlement agreement here appear disparate, which is
a significant factor to consider in determining whether the agreement is
unconscionable. See Eberle, 2009 ND 107, ¶ 33. However, whether the
disparity is equitable must be considered under the facts of the case. The Ruff-
Fischer guidelines are not the standard used to determine unconscionability of
a property settlement in a divorce, but they may be considered. Vann, 2009 ND
118, ¶ 25. Under the Ruff-Fischer guidelines the court considers:
[T]he respective ages of the parties, their earning ability, the
duration of the marriage and conduct of the parties during the
marriage, their station in life, the circumstances and necessities of
each, their health and physical condition, their financial
circumstances as shown by the property owned at the time, its
value at the time, its income-producing capacity, if any, whether
accumulated before or after the marriage, and such other matters
as may be material.
Id. (citations omitted).
9
[¶24] The length of a marriage is a factor a district court must consider in
determining the equitable division of the marital estate under the Ruff-Fischer
guidelines. Lill v. Lill, 520 N.W.2d 855, 857 (N.D. 1994). There is no bright-
line rule to distinguish between short and long-term marriages. Hitz v. Hitz,
2008 ND 58, ¶ 16, 746 N.W.2d 732. Generally, a long-term marriage supports
an equal division of marital assets, but the division need not be equal to be
equitable. Bladow v. Bladow, 2003 ND 123, ¶ 8, 665 N.W.2d 724. In a short-
term marriage, the district court may distribute property based on what each
party brought into the marriage. Lill, at 857.
[¶25] The district court found that the Paulsons had a short-term marriage.
Belgarde and Paulson were married for six years, and cohabited for a decade
prior to marriage. A court may, but is not required to, consider a period of
cohabitation when calculating the length of a marriage. Schultz v. Schultz,
2018 ND 259, ¶ 13, 920 N.W.2d 483. Belgarde provided no evidence to the court
of the parties’ financial practices during the period of cohabitation, which may
have supported a finding cohabitation should be considered in calculating the
length of the marriage. The determination that the Paulsons had a short-term
marriage is not clearly erroneous.
[¶26] The source of the property is also a factor a district court should consider
in determining the equitable distribution of a marital estate under the Ruff-
Fischer guidelines. Lill, 520 N.W.2d 855, 857. The court considered this factor,
finding Belgarde entered the marriage with substantial student loan debt and
little to no assets. In contrast, the court found much of the marital estate was
either brought into the marriage by Paulson or contributed by his parents. The
court considered numerous factors and found in part:
Their positions when entering the marriage were vastly different,
[Paulson] having no debt and having already accumulated assets.
[Belgarde] had substantial student loan debt, and little to no
assets. This was a short term marriage. Both parties are young
and able bodied. Both have advanced degrees, and the same
advanced degrees at that, giving them similar to identical earning
capacities. While [Paulson] earns more annually at this time, he
also works two jobs, and [Belgarde] holds a position considered to
10
be a “public interest” position, qualifying her for forgiveness of her
student loans in a year and a half. This is in kind income of great
value. Much of the parties’ marital estate was either brought into
the marriage by [Paulson] or contributed by [his] parents.
[¶27] The district court found the stipulation appeared to be guided by the
parties’ mutual belief that they each owned certain assets and were responsible
for certain debts, and concluded the stipulation was not substantively
unconscionable in a short-term marriage. The court’s findings are based on the
affidavits submitted by the parties. Based on the record, the court’s findings
are not clearly erroneous. While on its face the divorce judgment appears
disparate, it is not arbitrary, unreasonable, or unconscionable to award a party
the debt that they incurred. We conclude the court did not abuse its discretion
in denying Belgarde’s motion to vacate the judgment based on
unconscionability.
[¶28] “Rule 60(b) attempts to strike a proper balance between the conflicting
principles that litigation must be brought to an end and that justice should be
done, and, accordingly, the rule should be invoked only when extraordinary
circumstances are present.” Knutson, 2002 ND 29, ¶ 7 (relying on Kopp v.
Kopp, 2001 ND 41, ¶ 9, 622 N.W.2d 726). See also Hildebrand v. Stolz, 2016
ND 225, ¶ 16, 888 N.W.2d 197; Watne v. Watne, 391 N.W.2d 636, 639 (N.D.
1986). Despite Belgarde’s N.D.R.Civ.P. 60(b) arguments, she has not argued or
demonstrated why the facts of this case present extraordinary circumstances
justifying relief. We conclude there are no extraordinary circumstances present
justifying relief from the judgment.
III
[¶29] We have considered the remainder of Belgarde’s arguments and conclude
they are either unnecessary to our decision or are without merit.
[¶30] We affirm the district court’s order denying Belgarde’s motion to vacate
the divorce judgment.
11
[¶31] Gerald W. VandeWalle
Lisa Fair McEvers
Jerod E. Tufte
I concur in the result.
Jon J. Jensen, C.J.
Daniel J. Crothers
12