Should’ve, Could’ve, Would’ve: Is My Set Aside Motion Doomed Because I Didn’t Investigate?

sanctions-bad-behaviorFamily Code section 2122 allows a party to set aside a judgment because of fraud, perjury, and simple failure to disclose. An example of fraud would be telling a party they don’t have to participate in the proceedings while promising to be fair, but then proceeding to railroad them at a default proceeding. An example of perjury would be lying on the disclosure forms. Finally, an example of failure to disclose would be simply leaving out a material fact or record related to the value of a community asset.

However, pursuant to the public policy of California regarding the finality of judgments, there are time limits to when a party can move to set aside a judgment on the grounds of fraud, perjury, and failure to disclose.  Family Code section 2122 provides that a party must bring their motion to set aside within one year of the date they knew, or should have known, the facts constituting the fraud, perjury, and failure to disclose.

When should a spouse have known a fraud, perjury, or failure to disclose? The answer to that question is actually quite complicated and is only made clear through the review of case law.

In many civil cases, including fraud cases, the “should have known” standard can be pretty onerous on the party seeking relief. The run-of-the-mill civil cases hold that a duty to investigate arises once a reasonably prudent person should have suspected fraud and the facts that a reasonable investigation would have produced are charged to have been known by the defrauded party at the time the suspicion arose. However, this rule is much more relaxed in cases where the defrauded party is in a fiduciary relationship with the fraudulent party, as in the Eisenbaum v. Western Energy Resources, Inc. case. This case held that since one is entitled to rely on the statements of his or her fiduciary, knowledge of facts that would ordinarily raise a suspicion and a duty to investigate might not do so in the context of a fiduciary relationship.

Since the fiduciary relationship is the foundation for the disclosure requirements in California, it should be no surprise that California law on this issue reflects the reasoning of the Eisenbaum case. In another words, if a spouse makes a representation to the other spouse, the other spouse has a right to rely on those representations because of the fiduciary relationship.

A good example of this principle being applied in a family law setting, is the Rubenstein case. In this case, the Court determined that, in family law cases, the statute of limitations only begins to run when a spouse comes across information “that is diametrically opposed” to the information provided in the other spouse’s disclosure. This is a far cry from the standard in run-of-the-mill civil fraud cases. Set asides can be very difficult and complicated, and legal counsel can be invaluable in such cases.

Please contact us if you are considering divorce from your spouse, a legal separation, or if you have questions about set aside motions. Nancy J. Bickford is the only Certified Family Law Specialist (CFLS) in San Diego County who is also a licensed Certified Public Accountant (CPA) with a Master of Business Administration (MBA). Don’t settle for less when determining your rights. Call 858-793-8884 in Del Mar, Carmel Valley, North County or San Diego.

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