Ex-spouse charges fraudulently obtained credit card

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.

In the 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.