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There is no relief from judgment for intrinsic fraud (or do your due diligence)

South Carolina Rule of Civil Procedure 60(b) list five different ways one can use a streamlined procedure to obtain relief from a judgment within one year of the order or judgment. Item three includes, “fraud, misrepresentation, or other misconduct of an adverse party.”

While the parallel rule of Federal Procedure, upon which the South Carolina rule is based, no longer makes a distinction between extrinsic and intrinsic fraud, the South Carolina Supreme Court has interpreted Rule 60 to make this distinction and does not allow Rule 60 relief from judgment for intrinsic fraud. As discussed in Gainey v. Gainey, 382 S.C. 414,675 S.E.2d 792, 798 (Ct.App. 2009):

Extrinsic fraud is fraud that induces a person not to present a case or deprives a person of the opportunity to be heard. Relief is granted for extrinsic fraud on the theory that because the fraud prevented a party from fully exhibiting and trying his case, there has never been a real contest before the court on the subject matter of the action. On the other hand, intrinsic fraud is fraud which was presented and considered at trial. It is fraud which misleads and induces the court to find in favor of the party perpetrating the fraud.

The court grants relief for extrinsic but not intrinsic fraud on the theory that intrinsic deceptions should be discovered during the litigation itself, and to permit such relief would undermine the stability of all judgments. The essential distinction between intrinsic and extrinsic fraud for purposes of relief from judgment is the ability to discover the fraud.

Citations omitted.

Thus, in family court, one cannot get Rule 60 relief from judgment because the other party hid assets or income or lied or failed to disclose adultery. The court expects such deceptions to be discovered during the litigation and the failure to discover those deceptions goes to the detriment of the innocent party. When one party has concerns that the other party is hiding income or assets some due diligence is required. Sometimes this can be as simple as obtaining a current pay stub, a Social Security earnings statement, and a credit report. Other times it may require the hiring of a forensic accounting expert. If the other party seeks alimony, evidence of potential adultery needs to be sought before trial or reaching an agreement.

Rule 60 anticipates that one can potentially bring a new action for relief from judgment on bases that look like intrinsic fraud. However the circumstances in which this can happen are very narrow. In Mr. T v. Ms. T, 378 S.C. 127, 662 S.E.2d 413, 417 (Ct. App. 2008), an Ex-Husband filed a complaint for paternity fraud. The family court dismissed the case with prejudice, finding that the parties’ divorce decree included a final determination of paternity, and that Ex-Husband’s claim was in the nature of intrinsic fraud; thus not subject to relief.

The Court of Appeals reversed and remanded the matter for further litigation. It noted that Rule 60(b)(4 & 5) do not contain the one year time limitation of Rule 60(b)(1-3). Rule 60(b)(4 & 5) allow relief from judgments when the judgment is void or the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application. Mr. T considered that Ex-Husband might have a legitimate argument that “it is no longer equitable that the judgment should have prospective application.” It further noted Rule 60 specifically “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.”

In deciding whether Ex-Husband should be granted relief, the Court of Appeals held:

Although an issue is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, relitigation of the issue in a subsequent action between the parties is not precluded in the following circumstances:…

The indispensable elements of such a cause of action are 1) a judgment which ought not, in equity and good conscience, to be enforced; 2) a good defense to the alleged cause of action on which the judgment is founded; 3) fraud, accident, or mistake which prevented the defendant in the judgment from obtaining the benefit of his defense; 4) the absence of fault or negligence on the part of the defendant; and 5) the absence of any adequate remedy at law.

Mr. T creates a very narrow set of circumstances to obtain relief from judgments based on the other party’s litigation fraud or misconduct. However this remedy is not available for mere financial fraud.  I don’t necessarily agree with how the South Carolina Supreme Court has balanced a desire for finality in judgments against the injustice of allowing parties to benefit from fraud but that is the current state of the law.  A party must do his or her due diligence before trial or obtaining court approval of a separation or support agreement.

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