473 P.3d 637
Utah Ct. App.2020Background:
- Jodi Jensen and Gary Cannon divorced in 1998 after a settlement agreement resolving marital property was incorporated into the decree.
- Jensen later suspected Cannon had omitted assets from disclosure and filed suit in 2009 (dismissed without prejudice) and refiled in 2016; amended complaint asserted fraud, fraudulent nondisclosure, negligent misrepresentation, breach of the covenant of good faith and fair dealing, unjust enrichment, and accounting.
- Jensen alleged Cannon failed to disclose two assets at divorce: a 3.89-acre “Riverton Corners” parcel and an Option Agreement to buy a 3.4-acre “Green” parcel.
- Cannon moved for summary judgment; the district court dismissed Jensen’s non-fraud claims but allowed fraud and fraudulent nondisclosure claims to proceed as to the two properties.
- After a bench trial the court found Jensen failed to prove fraudulent nondisclosure by clear and convincing evidence, crediting Cannon’s testimony that he did not know the items were assets he had to disclose; the court also denied Cannon’s requests for bad-faith attorney fees and Rule 11 sanctions.
Issues:
| Issue | Plaintiff's Argument (Jensen) | Defendant's Argument (Cannon) | Held |
|---|---|---|---|
| Scope of knowledge for fraudulent nondisclosure (knowledge element) | Knowledge of the asset itself suffices; court erred by requiring that Cannon knew he had to disclose it | Court may consider defendant’s mental state; lack of belief that item was an asset defeats intent to deceive | Affirmed: court properly considered Cannon’s subjective belief; fraudulent nondisclosure requires intent and actual knowledge that fact was an asset to be disclosed |
| Viability of non-fraud claims in independent action under Rule 60(d) | Rule 60(d) permits independent actions for relief on non-fraud grounds (negligence, contract, equity) | Independent actions under Rule 60(d) are generally reserved for fraud or other extraordinary equitable grounds; negligence-based claims are not an adequate collateral attack | Affirmed: independent action is not limited to fraud, but negligence-based claims like Jensen’s cannot sustain a collateral attack on a divorce settlement; summary judgment for Cannon was proper |
| Request for bad-faith attorney fees under Utah Code §78B-5-825 | Jensen acted in good faith in bringing claims | Jensen’s suit was meritless and a bad-faith fishing expedition warranting fees | Affirmed: district court’s factual finding that Jensen acted in good faith was not clearly erroneous; fees denied |
| Rule 11 sanctions for Jensen’s spoliation motion | Spoliation motion was colorable and supported by permissible inferences | Motion accused Cannon of intentionally destroying a written Option Agreement and lacked evidentiary support, so Rule 11 sanctions were warranted | Affirmed: district court reasonably concluded the motion had inferential support and did not merit Rule 11 sanctions |
Key Cases Cited
- Anderson v. Kriser, 266 P.3d 819 (2011 UT 66) (fraudulent nondisclosure is an intentional tort; actual knowledge and intent to deceive are central to analysis)
- Hess v. Canberra Dev. Co., 254 P.3d 161 (2011 UT 22) (discusses fraudulent nondisclosure elements)
- Mitchell v. Christensen, 31 P.3d 572 (2001 UT 80) (fraudulent nondisclosure elements articulated)
- Christensen v. Christensen, 619 P.2d 1372 (Utah 1980) (rejecting collateral attack on divorce settlement based on negligent misrepresentation)
- St. Pierre v. Edmonds, 645 P.2d 615 (Utah 1982) (recognizes independent equitable actions under Rule 60(d))
- Gillmor v. Wright, 850 P.2d 431 (Utah 1993) (independent actions may lie for non-fraud grounds like mistake)
- Pepper v. Zions First Nat’l Bank, 801 P.2d 144 (Utah 1990) (discusses Rule 60(b) and collateral relief)
- Jensen v. IHC Hosps., Inc., 944 P.2d 327 (Utah 1997) (constructive fraud elements)
- Morse v. Packer, 15 P.3d 1021 (2000 UT 86) (Rule 11 sanctions standard)
- Beggerly v. United States, 524 U.S. 38 (1998) (independent Rule 60 relief is narrow; requires showing of grave miscarriage of justice)