Horton is banned from the debt relief business under a settlement with the Federal Trade Commission for his role in a mortgage relief scheme that falsely promised financially distressed homeowners foreclosure prevention and more affordable mortgage payments. The defendants claimed to have special relationships with particular lenders and unlawfully told consumers not to make mortgage payments to, or communicate with, their lenders. Many people incurred substantial interest charges and other penalties for paying the defendants instead of their lenders, and some lost their homes to foreclosure. The full judgment will become due immediately if he is found to have misrepresented his financial condition.
Many a spouse winds up feeling cheated after the dust settles which was raised by the marriage dissolution proceedings. In particular, the economically dependent spouse may begin to question whether the settlement was a good one and whether the other spouse may have held back vital information about the existence or value of marital assets.
It should not be surprising, therefore, that a great deal of postjudgment motions are filed seeking to set aside or reopen the decree. But the outcome in these proceedings is often difficult to predict. The general principles regarding fraud as a basis for postjudgment relief are well settled, but courts disagree on how these principles apply in the context of attacks on property division agreements and decrees.
As the recent cases discussed in this article illustrate, a whole host of issues complicates fraud-based motions for relief from judgment. Part I focuses on the accused spouse and examines what conduct may be characterized as fraud.
Part II focuses on the accusing spouse and examines the issue of due diligence and reliance, as well as the impact of a lack of independent legal advice. Part III addresses a number of miscellaneous issues. Identifying Fraudulent Conduct General Rule. The party attempting to set aside a decree on the ground that it was procured by fraud must make the usual showings required for fraud.
With respect to the conduct that constitutes fraud, Delaware's high court held that these showings were required: SchmeusserA.
Other courts have listed the same basic requirements albeit in slightly different wording. BillingtonConn.
DespainP. By analyzing how these elements apply to the facts in a particular case, counsel for the accused spouse may begin to see a defense theory take shape. For example, counsel might take the position that the alleged misrepresentation was one of opinion rather than fact.
BrownS. Alternatively, if the proof supports it, counsel might argue that his client did not know, or have reason to know, that the representations were false.
Castro31 Conn. Davidson53 Or. Another approach would be to characterize any misrepresentation or omission as a mistake or oversight made without intent to deceive.
Extrinsic Fraud Versus Intrinsic Fraud. Many states allow judgments to be attacked for intrinsic fraud, if at all, only within a short time often one year after judgment. But most states have a longer time limit, or no time limit at all, for attacks grounded on extrinsic fraud.
Extrinsic fraud is usually characterized as fraud on the court, while intrinsic fraud is the less serious evil of fraud committed against a party. In most cases, the concealment or misrepresentation is not discovered within a short time, and thus the spouse seeking to set aside a property needs to prove extrinsic fraud.
JohnsonS. Extrinsic fraud is traditionally defined as fraud directed at the court itself that precludes a party from presenting his or her case to the court. But Minnesota's high court said that such a narrow definition is inappropriate in marriage dissolution cases because of the trial court's unique role in such cases, where the trial court sits as a third party on behalf of the state to see that a fair distribution is made.
The court adopted a broader definition of fraud on the court: MarandaN.
Threats by one spouse that force the other into accepting a property settlement constitute extrinsic fraud, according to Gordon v.
GordonSo. After the parties' marriage was dissolved, the husband sought relief from the judgment, claiming that he agreed to the settlement only because the wife threatened to turn him in to the Internal Revenue Service for falsifying his tax returns to evade federal income tax.
The Florida appeals court held that his allegations, if proven, would amount to extrinsic fraud so as to justify relief from judgment. The essence of extrinsic fraud is "the deliberate use of some device to stop an adverse party's voluntary participation in the litigation process," the court said.
A strongly worded dissent asserted that the majority decision would "open the floodgates" for further judicial review of domestic relations cases previously thought to have been settled.
Most courts have held that a spouse's failure to divulge the existence of an asset to the other spouse constitutes extrinsic fraud. RidgwayIll. Some courts, however, have taken the view that a spouse's failure to disclose the existence of marital assets does not constitute extrinsic fraud so as to allow relief from a judgment dividing property.
Turoczy30 Ohio App.A loan agreement is proof that the money involved was a loan, not a gift. That could become an issue with the IRS. Loan agreements are especially useful when .
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For example, if a borrower defaults on a nonrecourse home loan, the bank can only foreclose on the home. The bank generally cannot take further legal action to collect the money owed on the debt.
Whether a debt is recourse or nonrecourse may vary from state to state, depending on state law. Acquisition debt can be excluded from tax under the Mortgage Forgiveness Debt Relief Act.
Home equity debt cannot be excluded under this new law. Instead, home equity debt may qualify under the insolvency or bankruptcy exclusions.