Jackson v. Jackson

• Decision Date: 19 June 1984
• Docket Number: No. 2694,2694
• Citation: 478 A.2d 1026,2 Conn.App. 179
• Court: Connecticut Court of Appeals
• Parties: Johnnie M. JACKSON, Jr. v. Deborah S. JACKSON.

Page 1026

478 A.2d 1026

2 Conn.App. 179

Johnnie M. JACKSON, Jr. v. Deborah S. JACKSON.

No. 2694.

Appellate Court of Connecticut.

Argued Feb. 3, 1984.

Decided June 19, 1984.

David S. Maclay, Bridgeport, for appellant (defendant).

Lawrence P. Weisman, Westport, with whom, on the brief, was Ellen B. Lubell, Danbury, for appellee (plaintiff).

Before DANNEHY, C.P.J., and DUPONT and HULL, JJ.

HULL, Judge.

The defendant appeals ¹ from the trial court's denial of a motion to open or to reform a judgment dissolving the parties' marriage, claiming that the stipulation on which the judgment was based was the result of fraud, accident or mistake.

The judgment dissolving the marriage was rendered on December 12, 1980, based on the written stipulation of the parties. The stipulation provided in significant part as follows: (1) that the plaintiff would transfer to the defendant 2100 shares of stock in C 3, Inc., by December 31, 1980; (2) that the proceeds of the sale of the parties' former residence should be divided evenly between the parties; (3) that the plaintiff husband would pay to the defendant wife $13,200 in periodic alimony terminating on September 30, 1982.

On March 10, 1981, the defendant, through new counsel, filed a motion to open or to reform the judgment of dissolution, the denial of which motion by the court is the basis of this appeal. ² To put the fundamental issue simply, the defendant claims that she and her lawyer thought they were getting slightly less than half of the plaintiff's 4277 shares of stock in C 3, Inc., when, in fact, as known by the plaintiff but unknown by them at the time the stipulation was entered into, the stock had split three for one during the negotiations resulting in the plaintiff's owning 12,831 shares. As a result, the defendant got approximately one sixth of the stock, rather than almost one half, and the plaintiff got five sixths of the stock rather than just over one half. The defendant's 2100 shares were sold in February, 1981, for $67,200; therefore, the disparity in the division of the stock is very substantial.

The defendant briefed three major issues as follows: Where the defendant wife agreed in a marriage settlement to accept an amount of stock which she mistakenly thought was fifty percent of the plaintiff husband's substantial holding in that stock, and where it actually was only sixteen percent of his holding because of a recent three-for-one stock split received by the plaintiff husband but not disclosed to her: (1) was the plaintiff husband required to disclose the true facts where he was at all times fully aware of her mistake; (2) was the defendant wife entitled to equitable relief; or (3) was she barred by her own failure to find out about the stock split which her husband had deliberately concealed from her? ³

The trial court applied the four pronged test outlined in Varley v. Varley, 180 Conn. 1, 4, 428 A.2d 317 (1980), as follows: the relief of vacating a judgment based on fraud will be granted only if (1) there has been no laches or unreasonable delay by the injured party after the fraud was discovered; (2) there must have been a diligent effort made in the original action to discover and expose the fraud; (3) there must be clear proof of the fraud; and (4) there must be a substantial likelihood that the result of the new trial will be different. The court concluded that previous counsel had all the necessary information concerning the financial status of the C 3, Inc., stock available to him at the time he counselled the defendant to agree to the terms of the settlement. The court further found that counsel's failure to secure a more advantageous agreement can be attributed only to his own inadvertence and not to any act or omission of opposing counsel or the plaintiff. It pointed out that during the trial on the motion to open the judgment of dissolution, the defendant's trial counsel specifically stipulated that if he had read the prospectus concerning the C 3, Inc., stock going public and had noted the information concerning the stock split, "we wouldn't be here today." The court finally found lack of due diligence on the defendant's part and "absolutely no evidence of any fraud, deception or mistake." The trial court, during proceedings on the plaintiff's motion for rectification, found that the defendant knew, or should have known, based on the information that was available to her and to her attorney, that the C 3, Inc. stock had split three for one.

"Every cause will have its own peculiar complexion and leading cast." Stoddard v. Bird, 1 Kirby 65, 69 (1786). Under the circumstances of this case, in the context of relatively amiable negotiations leading to a stipulation and an uncontested judgment of dissolution, we conclude that the plaintiff took unconscionably fraudulent advantage of the defendant's ignorance of the three-for-one stock split, resulting in a substantial injustice. Therefore, we reverse the judgment of the trial court.

The underlying facts are not in dispute. The parties to this action were married on June 22, 1968. No children were born of the marriage. Both parties worked during the marriage, the plaintiff as an attorney and the defendant as a school teacher. At the time of the dissolution action, the plaintiff was employed as an attorney at the Olin Corporation. The defendant had attended law school briefly but withdrew in September, 1980. The plaintiff instituted an action for dissolution of marriage on May 20, 1980. Both parties were represented by counsel. In the summer of 1980, counsel commenced negotiations concerning a property settlement. At the start of negotiations on June 26, 1980, the plaintiff's attorney sent to the defendant's attorney the plaintiff's financial statement. It showed modest assets totalling $41,223 including the plaintiff's one half interest in the Stamford real estate. It also included: "Securities: 4277 shares C-3, Inc. @ $1.50 (note: this is lettered investment stock for which there is no real market) (basis = $10 per share net after federal and state taxes) $4499.44." ⁴ C 3, Inc., was a privately held unlisted company in the computer software business.

The parties themselves worked out a division of the major items of personal property by August 1980. They agreed upon a written stipulation dated October 29, 1980, which gave the defendant 60 percent of the proceeds from the sale of the home, 60 percent of an agreed upon $6000 valuation of the 4277 shares of C 3, Inc., stock and two years of alimony totalling $13,200. The case was then set down for an uncontested hearing to be held on November 18, 1980.

On October 29, 1980, the plaintiff received a notice dated October 25, 1980, addressed to C 3, Inc., shareholders announcing a meeting on November 6, 1980, to consider approval of a three-for-one stock split of the common stock preparatory to going public with the stock. The plaintiff did not inform the defendant of this notice.

On November 12, 1980, C 3, Inc., notified the plaintiff by letter that the stock split had been approved at the November meeting. The letter enclosed a certificate for 8554 shares and a copy of the C 3, Inc., "red herring" prospectus filed with the Securities and Exchange Commission (SEC) on November 12, 1980.

On November 14, 1980, the defendant, then living in Washington, D.C., happened to read an article in the Washington Post concerning a public offering of C 3, Inc., stock. The article said that the stock would be offered for between $24 and $28 per share for stock then worth $2.67 per share. The article made no reference to the recently completed stock split. On that same day, the defendant's attorney notified the plaintiff's attorney about the news of the public offering and cancelled the October 29 stipulation.

The defendant's attorney secured a copy of the SEC prospectus and mailed a copy to the plaintiff's attorney. He also talked on numerous occasions with brokers at E.F. Hutton, the underwriter of the C 3, Inc., public offering. The parties continued to negotiate further and on December 8, 1980, the defendant executed a new stipulation providing her the same two years of alimony, 50 percent of the house proceeds instead of the earlier 60 percent, and 2100 shares of the C 3, Inc., stock. She also prepared and executed another stipulation identical to the one newly negotiated, except that it gave her 2138 shares of C 3, Inc., stock rather than 2100 shares. Her December 8 letter to her lawyer explained that he should try to get 2138 shares because it represents more exactly one half of the plaintiff's stock. The plaintiff, however, would agree only to transfer 2100 shares of the stock and a stipulation providing for this was executed on December 9, 1980.

On December 12, 1980, an uncontested dissolution of marriage was granted based upon the stipulation of December 9. The plaintiff's affidavit showed total assets of $44,367 including the house proceeds, and a monthly income of $3510. The affidavit was in manuscript form and at the bottom of page two it stated: "Securities: C-3 Corporation Common stock." On the next page, the following note is included: "The plaintiff has an interest in the Common Stock of C-3 Corporation which corporation is filing a registration with the Securities and Exchange Commission indicating a proposed sale price of $24-28 per share. This price is speculative and it is not known at this time when and if the public offering will become effective. The fair market value of the shares is $6,415.50, based upon the last known sales price of $0.50 per share. The shares have a low basis. The estimated Federal and State capital gains tax would be approximately 31 per cent, leaving a net value of $4,426.70. If the public offering becomes effective and assuming that the plaintiff's shares are free from restrictions on sale, the value could be substantially greater."

The defendant thereafter sold her stock on February...