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FAUSTINI v. DUKE



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subject to formal revision. If you find a typographical error or
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FAUSTINI

v.

DUKE


FEBRUARY 13, 2001

Record No. 2750-99-2

Present: Judges Elder, Annunziata and Senior
Judge Coleman
[1]

Argued at Richmond, Virginia

DARYL L. FAUSTINI

v.

VICKI J. DUKE, F/K/A

VICKI D. FAUSTINI

FROM THE CIRCUIT COURT OF POWHATAN COUNTY

Thomas V. Warren, Judge


MEMORANDUM OPINION [2]
BY JUDGE SAM W. COLEMAN III

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 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 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 ‘(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)).

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 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 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.

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.
[3]

"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 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 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
fianc?e. 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. "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 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. 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.

FOOTNOTES:

[1] 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.

[2] Pursuant to Code
? 17.1-413, this opinion is not designated for publication.

[3] 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, 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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