FACTS: Case before court of appeals. Husband and wife obtain a divorce.  Wife claims that husband "made material misrepresentations on his financial statement. . . at the time of the entry of the [divorce] judgment." She has a hearing to find out if she can have another divorce judgment based upon fraud on the court. At the hearing, counsel for the wife pointed out that the husband's financial statement reflected income of $40,000, while the tax returns the wife was asked to sign showed income of more than $76,000. Husband was drawing $40,000 per year from the corporation, which he listed as his income.  The probate and family court found that the husband did not hide assets, and complied with all discovery.  Also, the business he owned was listed on the financial statement as “having no estimated value.”

ISSUE: If there are no false statements on a financial statement and there is complete access, is there fraud on the court by statements such as “no estimated value” for the business, and erroneous income amounts, OR, is there a duty for the husband to provide a current and accurate financial statement?

HELD:  “In reaching the conclusion that the wife had not shown clear and convincing evidence of misrepresentation by the husband, the judge seemed to rely heavily on his finding that former counsel for the wife had "unfettered access" to the accountant and all documentation of the corporation. While our cases do impose a duty of reasonable diligence on opposing counsel where the asset is not hidden, . . . in this case, at least, we do not think access to the accountant and his records, by itself, is sufficient to absolve the husband of his obligation to provide an accurate and current statement of his income. As sole owner of the business he was obviously in a better position than the wife or her counsel to know its income. In view of the duties imposed by rule 401, he cannot avoid a finding of misrepresentation of his income by failing to look at evidence of such income.(13) While the accountant replied on September 6, 2002 to questions asked by former counsel to the wife, his answers in no way suggested that 2002 was a profitable year, but, in fact, suggested the contrary.(14)

RINALDO’S QUESTIONS for the class: Should the mother have had to hire an expert to properly appraise the value of the corporation?  Should the court have ordered an independent appraisal?  You can be found guilty of misrepresentation by “failing to look at evidence”? 

Is this the development of an “intentional ignorance” doctrine by the court? There is an old adage—ignorance of the law is not excuse, but ignorance of a fact is—is the law changing?  The court distinguished this case from a cited case because experts from both sides evaluated the business, thus there was no fraud there. 

Business valuations by an expert are not cheap—should the husband have to pay for such a valuation because the wife declined to do one herself?  Is it wise to have a theory of fraud predicated on a lack of a good accounting of the assets and profitability of a business rather than intentional misrepresentation?  In the larger context, could fathers be getting clubbed over the head for simply getting it wrong?  If a party provides “unfettered access” to information, should there be a duty to provide more information not currently within his grasp but that could be produced with an expensive evaluation? 

Can you ever win under a “deliberately ignored evidence” standard since, in theory, one can always pay an expert to evaluate a business?  Is this a good case because the economic burden of providing information is being placed on the person better suited to provide it?   Why didn't mom have an expert appraise the business? Just questions.

FURTHER HOLDINGS: “Because we are not sure whether the judge's decision was based almost exclusively on the wife's access to the accountant -- we note that the hearing does not suggest that the judge's decision rested on the credibility of the accountant -- we remand the matter for further subsidiary findings. The principal question is whether the evidence indicates that the husband or his agent, the accountant, was aware either that the figure of the $800 was incorrect at the time they prepared the rule 401 financial statement or that they deliberately ignored evidence that would have made them aware. In either case, misrepresentation would be made out whether or not the wife had access.

HOLDINGS AS TO “NO ESTIMATED VALUE” ON THE BUSINESS: “We consider the phrase "no estimated business value" to be ambiguous and note that some cases in the past have permitted parties to list assets as having an "'uncertain' value." We do consider it inappropriate for such terms to be placed on a financial statement without a detailed explanation as to why the asset cannot be valued or why it has no value. In the case of a business, such information as is available, e.g., tax returns, balance sheets, etc., must be appended.”

The Berkshire Fatherhood Coalition is an organization dedicated to promoting the Father/Child relationship and promoting gender equality in family law.