Ex-spouse charges fraudulently obtained credit
Ex-spouse charges fraudulently obtained credit
card MBNA America Bank, N.A. v. Garcia, --- P.3d ----, 2009 WL
839352 (Or.App. Apr 01, 2009) (NO. 050505309, A134952)
Without defendant’s knowledge, defendant's
former wife obtained credit cards from plaintiff in defendant’s
name. She then incurred substantial debt. Plaintiff submitted the
matter to arbitration as provided in the credit card contract. On
the recommendation of his former wife, defendant retained a man who
falsely represented that he was an attorney and who, in the
arbitration and in several federal court cases, raised a number of
obviously bogus claims and defenses, the result of which was an
arbitration award against defendant, duly confirmed by a judgment in
circuit court. Defendant retained a licensed attorney who convinced
the trial court to vacate the judgment. The plaintiff appealed.
Facts of the Case
Plaintiff sent a credit card application form
addressed to defendant at his home address. His former wife
intercepted the application and filled it out in defendant's name,
providing an address that was either a post office box or the
residence of a friend, neither of which defendant knew about. She
then used the cards and accumulated substantial debt, which
defendant did not discover until plaintiff began collection
proceedings. Defendant agreed on a payment plan. Four years later,
defendant defaulted on making payments on the account, and
plaintiff, pursuant to the credit card agreement, initiated
arbitration proceedings in the National Arbitration Forum (NAF).
Acting on a recommendation from his former wife, defendant
“retained” a man named Barlow to represent him, believing Barlow to
be a licensed attorney. Barlow was not licensed to practice law.
Apparently, he advised defendant that defendant could favorably
resolve the collection matter by demanding that plaintiff submit the
claim to an arbitrator, Alta Arbitration Associates, working out of
Billings, Montana, which would invoke certain obscure legal theories
to invalidate the debt. Defendant followed that advice. Alta
Arbitration Associates, which apparently relied on theories it
obtained on the Internet, was not one of the fora approved in the
agreement between the parties. Plaintiff refused to participate.
Alta Arbitration Associates then rendered a “judgment” in
defendant's favor and bestowed on him an “award” of $62,765.46 plus
interest and costs. When defendant, still “represented” by Barlow,
attempted to enforce the “judgment” from Alta Arbitration Associates
in federal court, the court twice dismissed the complaint.
meantime, plaintiff and defendant participated in arbitration
proceedings before the NAF, resulting in an arbitration award in
favor of plaintiff and against defendant for $23,515.33. Plaintiff
filed a motion to confirm the award in Multnomah County Circuit
Court, defendant failed to appear at the hearing, and, on February
18, 2005, the trial court issued a default judgment confirming the
award and awarding plaintiff a money judgment.
In May 2006,
defendant contacted the Oregon State Bar in regard to his pending
dissolution of marriage case, and the Bar referred him to a licensed
attorney. At that point, defendant learned that Barlow was not
licensed to practice law. Meanwhile, plaintiff sought to enforce the
judgment against defendant through garnishment proceedings.
Defendant filed a motion for relief from judgment under ORCP 71 C
(court's inherent power to set aside a judgment). On February 5,
2007, the court granted defendant's motion.
Intrinsic v Extrinsic Fraud
A court may grant relief under ORCP 71 C based on extrinsic
fraud, but will deny it if the fraud is intrinsic. Wimber v. Timpe,
109 Or.App. 139, 146, 818 P.2d 954 (1991). Extrinsic fraud consists
of acts not involved in the factfinder's consideration of the merits
of the case; it provides a basis for relief from a judgment because
it prevents the unsuccessful party from fully trying the case.
Examples of extrinsic fraud include keeping a party in ignorance of
an action, false offers of compromise, an attorney's betrayal of the
client's interest to an adversary and other acts of a similar
nature. Intrinsic fraud, in contrast, consists of acts involved in
the merits of the case, typically perjured testimony. If the fraud
is intrinsic, the litigant had an opportunity to refute the
representations, and a court will deny relief because of the strong
policy favoring finality in litigation.
The court held the fraud
perpetrated by defendant's former wife was intrinsic, because
whether she fraudulently opened a credit card account in defendant's
name goes to the merits of the case-that is, to whether defendant is
liable for the debt incurred and is bound by the agreement to
arbitrate. However, the fraud perpetrated by Barlow was extrinsic.
It did not involve a fraudulent representation as to any matter that
was at issue in the case; rather, it was a fraudulent representation
that prevented defendant from having a genuine attorney present his
case, and was therefore “of a similar nature” to “an attorney's
betrayal of the client's interest to an adversary.”
ORCP 71 B(1)(c)
does not limit to the court to only vacate a judgment on account of
intrinsic fraud of an “adverse party.”
The trial court remanded the
case to the arbitrator. The Court of Appeals interpreted the mandate
to mean that, if plaintiff chooses to pursue the case, it can return
to arbitration, where the arbitrator will decide as a threshold
question whether the credit card agreement that contains the
arbitration provision is enforceable.