Daryl L. Faustini v. Vicki J. Duke, f/k/a etc ( 2001 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Elder, Annunziata and Senior Judge Coleman ∗
Argued at Richmond, Virginia
DARYL L. FAUSTINI
MEMORANDUM OPINION ∗∗ BY
v. Record No. 2750-99-2 JUDGE SAM W. COLEMAN III
FEBRUARY 13, 2001
VICKI J. DUKE, F/K/A
VICKI D. FAUSTINI
FROM THE CIRCUIT COURT OF POWHATAN COUNTY
Thomas V. Warren, Judge
Jonathan M. Murdock-Kitt (Lawrence D. Diehl,
on brief), for appellant.
Murray J. Janus (Deanna D. Cook; Bremner,
Janus, Cook & Marcus, on brief), for
appellee.
Daryl L. Faustini appeals the judgment of the circuit court
granting Vicki J. Duke's motions to reopen and revise the
equitable distribution award, to increase spousal support, and to
award Duke attorney's fees and costs. Faustini contends that the
trial court erred by (1) finding that he committed extrinsic
fraud, which enabled the court to reopen the equitable
∗
Judge Coleman participated in the hearing and decision of
this case prior to the effective date of his retirement on
December 31, 2000 and thereafter by his designation as a senior
judge pursuant to Code § 17.1-401.
∗∗
Pursuant to Code § 17.1-413, this opinion is not
designated for publication.
distribution award; (2) imputing income to him from BioSanitary,
Inc., thereby justifying an increase in spousal support;
(3) awarding Duke both an increase in spousal support due to
imputed income from BioSanitary and an equitable percentage of the
value of BioSanitary stock, as a marital asset; (4) awarding
attorney's fees to Duke as ordered in the November 2, 1998 order;
and (5) awarding attorney's fees to Duke for two attorneys. Upon
review of the case, we affirm the judgment of the trial court.
On appeal, we view the evidence and all reasonable inferences
in the light most favorable to Duke as the party prevailing in the
trial court. See McGuire v. McGuire, 10 Va. App. 248, 250, 391
S.E.2d 344, 346 (1990). "The trial court's decision, when based
upon credibility determinations made during an ore tenus hearing,
is owed great weight and will not be disturbed unless plainly
wrong or without evidence to support it." Douglas v. Hammett, 28
Va. App. 517, 525, 507 S.E.2d 98, 102 (1998).
I. BACKGROUND
The parties were divorced by decree entered July 18, 1997.
Under the terms of the final decree, Faustini paid Duke $1,000 in
monthly spousal support from April 15, 1997 until April 15, 1998,
at which time he was ordered to pay Duke $1,800 in monthly spousal
support. By motion filed April 23, 1998, Faustini petitioned the
court to terminate or reduce spousal support and requested other
relief. On October 6, 1998, Duke filed a motion to increase
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spousal support and to reopen the equitable distribution award on
the basis of fraud allegedly committed by Faustini on the court
and on Duke at the April 7, 1997 hearing. Following an
evidentiary hearing on October 13, 1998, the trial court denied
Faustini's motion to reduce or terminate spousal support and
granted Duke's motion to increase spousal support to $2,500 per
month. Following an additional hearing, the trial court found
that Faustini committed extrinsic fraud on the court as to the
ownership and value of his interest in BioSanitary and granted
Duke a monetary award of $35,361, representing one-half of a
twenty-five percent (25%) interest in BioSanitary and an
additional $9,251.45 in costs, expert witness fees, and attorney's
fees. Faustini appeals those rulings.
II. ANALYSIS
A. Reopening Equitable Distribution
Faustini contends that the trial court erred by reopening the
equitable distribution award based upon Duke's allegations of
intrinsic and extrinsic fraud. We find no error.
"'The charge of fraud is one easily made, and the burden is
upon the party alleging it to establish its existence, not by
doubtful and inconclusive evidence, but clearly and
conclusively. Fraud cannot be presumed.'" Aviles v. Aviles,
14 Va. App. 360, 366, 416 S.E.2d 716, 719 (1992) (citation
omitted). The party alleging fraud "has the burden of proving
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'(1) a false representation, (2) of a material fact, (3) made
intentionally and knowingly, (4) with intent to mislead,
(5) reliance by the party misled, and (6) resulting damage to
the party misled.'" Batrouny v. Batrouny, 13 Va. App. 441, 443,
412 S.E.2d 721, 723 (1991) (quoting Winn v. Aleda Constr. Co.,
227 Va. 304, 308, 315 S.E.2d 193, 195 (1984)).
"'Intrinsic fraud' includes perjury, use of forged
documents, or other means of obscuring facts presented before
the court and whose truth or falsity as to the issues being
litigated are passed upon by the trier of fact." Peet v. Peet,
16 Va. App. 323, 326-27, 429 S.E.2d 487, 490 (1993). A judgment
procured through intrinsic fraud is voidable only, and may not
be challenged by collateral attack. See id. at 327, 429 S.E.2d
at 490.
A collateral attack on a judgment procured
by intrinsic fraud has been deemed not
warranted because the parties have the
opportunity at trial through
cross-examination and impeachment to ferret
out and expose false information presented
to the trier of fact. When a party
discovers that a judgment has been obtained
by intrinsic fraud, the party must act by
direct attack or appeal to rectify the
alleged wrong and cannot wait to assail the
judgment collaterally whenever it is
enforced.
Id. (citing Jones v. Willard, 224 Va. 602, 607, 299 S.E.2d 504,
508 (1983)).
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Extrinsic fraud, on the other hand, "consists of 'conduct
which prevents a fair submission of the controversy to the
court' and, therefore, renders the results of the proceeding
null and void." Id. (citing Jones, 224 Va. at 607, 299 S.E.2d
at 508). Extrinsic fraud "'[keeps] the unsuccessful party away
from the court,'" either figuratively or literally. McClung v.
Folks, 126 Va. 259, 270, 101 S.E. 345, 348 (1919) (citation
omitted). "'[T]the unsuccessful party is really prevented, by
the fraudulent contrivance of his adversary, from having a trial
[of the issue] . . . .'" Id. "A collateral challenge to a
judgment obtained by extrinsic fraud is allowed because such
fraud perverts the judicial processes and prevents the court or
non-defrauding party from discovering the fraud through the
regular adversarial process." Peet, 16 Va. App. at 327, 429
S.E.2d at 490.
The trial court reopened the equitable distribution award
based upon the evidence presented by Duke that Faustini engaged
in extrinsic fraud regarding the disposition of his interest in
BioSanitary. At the time of the original equitable distribution
hearing in April 1997, Faustini represented to Duke that he had
sold his twenty-five percent (25%) stock interest in the
subchapter S corporation, BioSanitary, on October 1, 1996 for
$500, due to his concerns about his employer's new
conflict-of-interest policies. The trial court ruled that
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evidence related to BioSanitary was "water over the damn as far
as I'm concerned, and I'm not going to go back and try to dig
into that or retrieve it." Faustini, however, misled the trial
court and Duke by representing that he divested himself of all
interest in BioSanitary and that he retained no equitable
interest in BioSanitary.
At the evidentiary hearing in October 1998, Duke presented
evidence which the trial court found to be clear and convincing
that Faustini perpetrated extrinsic fraud upon the court and
upon Duke in both his disclosure and nondisclosure concerning
his interest in BioSanitary. The evidence presented by Faustini
was that he redeemed his BioSanitary stock in October 1996 for
$500, asserting that his ownership of BioSanitary stock created
a conflict of interest with his employer, Philip Morris.
Unbeknownst to Duke and a fact that was not disclosed at the
October 1998 hearing, Faustini's paramour had purchased
Faustini's redeemed shares on January 2, 1997 for the same $500
price. Within two months of purchasing the BioSanitary stock,
Faustini's paramour received her first dividend check for
$5,000. She has continued to received dividends checks, and
between February 1997 to August 1998, she received more than
$22,000. During this same time period, she deposited several
thousand dollars into Faustini's bank account. She and Faustini
were married in October 1997. Furthermore, the evidence proved
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that no significant change in Philip Morris'
conflict-of-interest policies occurred in 1996. In fact,
Faustini conceded that the provisions of Philip Morris' current
conflict-of-interest policy which pertained to him had been
instituted in 1991 and has not been materially altered since
that time. In addition, Faustini acknowledged that Philip
Morris' conflict-of-interest policy also pertained to spouses of
employees and would apply to his current wife who owns the
stock.
In ruling on whether Faustini committed extrinsic fraud,
the trial court noted:
It's apparent to me that Mr. Faustini
has tried to circumvent [his employer] and
tried to circumvent his former wife, tried
to circumvent the Court, and I am going to
impute income to him which is attributable
to these dividends that are continuing.
It's obvious that this is no defunct
company or corporation as was stated to the
Court when we had our earlier hearing in
April. This is a viable, money-making
operation, and I think Mr. Faustini is
getting the benefit from it.
The record supports the trial court's finding that clear and
convincing evidence proved that Faustini committed extrinsic
fraud upon the court and Duke by misrepresenting that he had
divested himself of an equitable interest in BioSanitary and at
the time of the October 1998 hearing he received no beneficial
income or held no beneficial interest in BioSanitary.
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We find Faustini's claim to be without merit that Duke
should have or could have discovered the circumstances
surrounding Faustini's redemption of the stock and the
subsequent purchase of the stock by his paramour at the time of
the equitable distribution hearing. The fact that Duke might
have been able to discover the extrinsic fraud that Faustini had
committed upon her and upon the court is of no consequence.
Duke reasonably relied on Faustini's representation that he had
to divest himself of the stock because of the conflict of
interest with his employer and that after he divested himself of
the stock, he no longer retained a beneficial interest in the
stock. Therefore, we find no error in the trial court's finding
of extrinsic fraud.
B. Increased Spousal Support
Faustini contends that the trial court erred by imputing
additional income to him from BioSanitary thereby justifying an
increase in spousal support. He contends that income from
BioSanitary should not be imputed to him because the income is
received by his current wife, not by him. We find no merit in
the contention. 1
1
Duke contends that Faustini's appeal of the spousal
support issues is time-barred. Faustini was not, however,
required to file his appeal of the interlocutory spousal support
decree, but was entitled to appeal from the final order entered
on October 20, 1999. See Code § 17.1-405(4); see also
Weizenbaum v. Weizenbaum, 12 Va. App. 899, 903, 407 S.E.2d 37,
Continued . . .
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"Code § 20-109 provides that '[u]pon the petition of either
party the court may increase . . . spousal support and
maintenance . . . as the circumstances may make proper.' The
party moving for a modification of support payments must prove
'both a material change in circumstances and that this change
warrants a modification of support.'" Furr v. Furr, 13 Va. App.
479, 481, 413 S.E.2d 72, 73 (1992) (citation omitted).
Both parties had moved for a modification of the prior
support award; Faustini moved to terminate or reduce his support
obligation, and Duke moved for an increase of support. Based upon
the evidence presented at the October 1998 hearing, the trial
court found that Faustini failed to prove a material change in
circumstances warranting a reduction in his spousal support
payments. The trial court noted that Faustini had greater income
and less debt than at the time of the last support determination.
The evidence supports the trial court's determination that
Faustini did not prove a material change in circumstances that
would have supported a reduction in spousal support.
To the contrary, the trial court imputed to Faustini the
income from BioSanitary, consisting of dividend distributions that
he formerly received for his twenty-five percent (25%) stock
39 (1991) (stating that "some orders adjudicating the principles
of a cause may be appealed at the time of entry but need not be
until there is a final order").
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interest but which were subsequently being paid to his current
wife. A trial court may impute income to a party under
appropriate circumstances where that party has diverted income to
a third person but the party continues to receive a beneficial
interest from the income. See, e.g., Stubblebine v. Stubblebine,
22 Va. App. 703, 708-11, 473 S.E.2d 72, 74-76 (1996) (en banc)
(imputing income following payor spouse's retirement); Cochran v.
Cochran, 14 Va. App. 827, 830-31, 419 S.E.2d 419, 421 (1992)
(remanding for imputation of income usually earned by payor spouse
from second job); Srinivasan v. Srinivasan, 10 Va. App. 728,
734-35, 396 S.E.2d 675, 679-80 (1990) (imputing income to payee
spouse). Here, the evidence supports the trial court's finding
that Faustini misrepresented his annual income by fraudulently
diverting income from BioSanitary to his current wife, of which he
continued to receive the benefit. Faustini purportedly sold the
stock for $500 that had produced between $8,000 to $50,000 in
annual income since 1986. He claimed to have sold the stock due
to a change in his employer's conflict-of-interest policy when, in
fact, no change had occurred. To the extent that the employer's
conflict-of-interest policy did preclude Faustini's activity, as
it had before, Faustini's scheme permitted him to continue to
receive the benefit of the income from BioSanitary that was being
paid to his wife. Three months after Faustini purportedly
disposed of his stock, his paramour purchased the stock, that had
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just yielded an annual dividend of $50,000, at the same initial
offering price of $500 for which Faustini had purchased the stock
in 1987. Within three weeks of the purchase, Faustini's paramour
received a dividend check for $5,000. Faustini married her within
three months after entry of the final divorce decree. Based on
these facts, the trial court found that Faustini fraudulently made
it appear to the court and to Duke at the evidentiary hearing that
his income had been substantially reduced because he had to sell
his BioSanitary stock, when in fact he had transferred it to his
fiancée. The evidence supports the trial court's conclusion that
Faustini attempted to fraudulently divert his income and the
court's decision to impute the income to Faustini.
Therefore, based upon the evidence and the trial court's
factual findings, we find no merit in Faustini's appeal of the
trial court's decision to impute income to him or to increase the
amount of his monthly spousal support obligation.
C. Award of Spousal Support and Share of Asset
Faustini contends that it was error for the trial court to
award Duke both spousal support based on his imputed income from
BioSanitary and a share of BioSanitary as a distribution of a
marital asset. He argues that this amounts to a double award from
a single asset. We disagree.
A spousal support award under Code
§ 20-107.1 serves a purpose distinctly
different from an equitable distribution
award fashioned under Code § 20-107.3.
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"Spousal support involves a legal duty
flowing from one spouse to the other by
virtue of the marital relationship. By
contrast, a monetary award does not flow
from any legal duty, but involves an
adjustment of the equities, rights and
interests of the parties in marital
property." "In determining spousal support,
the trial court's consideration must include
earning capacity, obligations, needs, the
property interest of the parties, and the
provisions if any, made with regard to
marital property."
Stumbo v. Stumbo, 20 Va. App. 685, 691, 460 S.E.2d 591, 594 (1995)
(citations omitted).
The stock ownership of BioSanitary was an income-producing
marital asset. As a marital asset imputed to and owned by
Faustini, Duke was entitled under the provisions of Code
§ 20-107.3(C)-(E) to a monetary award representing her equitable
interest in the marital asset. However, Faustini retained the
equitable ownership of the marital asset that continued to produce
substantial annual income which should have been available for
both Faustini's and Duke's support under Code § 20-107.1(E)(1).
Thus, although the value and income production of the monetary
award to Duke of her marital share of the BioSanitary stock must
be taken into consideration as an asset that she received under
Code § 20-107.1(E)(8) in determining her entitlement to spousal
support, the beneficial income that Faustini continued to receive
as annual dividends from BioSanitary was income to Faustini that
also was to be considered under Code § 20-107.1(E)(1) in
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determining spousal support. Accordingly, the trial court did not
err in awarding Duke her equitable share of the value of the
marital asset, nor did the trial court err in increasing
Faustini's spousal support obligation based upon the dividend
income that he continued to receive from the asset. See Moreno v.
Moreno, 24 Va. App. 190, 204, 480 S.E.2d 792, 799 (1997) (finding
that trial court did not err in finding that income from husband's
pension benefits, of which wife had already received a marital
share under the equitable distribution award, is a resource which
could be used to satisfy husband's spousal support obligation).
Therefore, we find no merit in Faustini's contention.
D. Award of Attorney's Fees
Faustini contends that the trial court erred by awarding
attorney's fees to Duke and by awarding her attorney's fees for
two attorneys. We find no error. "An award of attorney's fees is
a matter submitted to the trial court's sound discretion and is
reviewable on appeal only for an abuse of discretion." Graves v.
Graves, 4 Va. App. 326, 333, 357 S.E.2d 554, 558 (1987). The
standard for a proper award of attorney's fees is reasonableness
under the circumstances. See McGinnis v. McGinnis, 1 Va. App.
272, 277, 338 S.E.2d 159, 162 (1985).
The trial court awarded Duke $5,000 in attorney's fees and
$895.45 in costs. The trial court found the amount of time
devoted to the case and the rate of the fees to be reasonable.
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Based on the number and complexity of the issues involved and the
respective abilities of the parties to pay, we cannot say that the
award was unreasonable or that the trial judge abused his
discretion in making the award.
Accordingly, the decision of the circuit court is affirmed.
Affirmed.
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