Opinion ID: 1952992
Heading Depth: 1
Heading Rank: 1

Heading: Fraudulent Misrepresentation of Assets

Text: Based upon our review of the evidence in this case, including Frank's appalling behavior, we are satisfied that the final divorce judgment and settlement agreement were properly before the Family Court. The evidence disclosed that defendant intentionally had failed to disclose various assets and misrepresented his income in negotiating the marital settlement agreement. The trial justice proceeded to award plaintiff 80 percent of the amount that subsequently was ascertained. A misrepresentation of the terms, quality or other aspects of a contractual agreement that leads another to enter into a transaction with a false impression of the risks, duties, or obligations involved is fraud in the inducement. Black's Law Dictionary 671 (7th ed.1999). One who has been induced to enter into a contract based upon a fraudulent misrepresentation is not bound by its terms, Bjartmarz v. Pinnacle Real Estate Tax Service, 771 A.2d 124, 127 (R.I.2001), and may seek rescission of the agreement or affirmance of the contract and a suit for damages. Halpert v. Rosenthal, 107 R.I. 406, 412-13, 267 A.2d 730, 733-34 (1970). It follows logically from this rule that, when one induces another by means of a material misrepresentation to forgo a benefit to which he [or she] is legally entitled under a contract, the latter may recover that which he [or she] has forgone. Dudzik v. Leesona Corp., 473 A.2d 762, 767 (R.I.1984). Despite the original case caption and number, this claim for damages, arising from fraudulent misrepresentations of defendant's assets and income, was independent of the original divorce proceeding. The trial court retained the inherent power to adjudicate Rosemarie's claim of fraud, notwithstanding the passage of six years. Although Rule 60(b)(3) of the Family Court Rules of Procedure for Domestic Relations provides relief from a judgment upon fraud   , misrepresentation, or other misconduct of an adverse party, by motion, not more than one year after entry of judgment, this rule does not limit the power of a court to entertain an independent action   , or to set aside a judgment for fraud upon the court. Rule 60(b). Additionally, independent actions are separate and distinct avenues of relief    not governed by the time limit imposed upon 60(b) motions. Paul v. Fortier, 117 R.I. 284, 289, 366 A.2d 550, 553 (1976). The claim for relief instituted by Rosemarie was not a Rule 60(b) motion, but was an independent action to reopen the judgment and was not inconsistent with the Rules of Procedure for Domestic Relations. Clearly, there was demonstrated evidence of fraud committed during the settlement process sufficient to warrant the court to entertain this claim. In Giha v. Giha, 609 A.2d 945 (R.I.1992), the wife, upon discovering that her ex-husband had failed to disclose a winning lottery ticket while the parties were still married, sought post-final-decree relief from a divorce judgment more than one year after its entry. The trial court dismissed the action, holding that the interlocutory order relating to a division of assets severs `the economic ties between the parties,' id. at 947, and that once the property rights of the parties were adjudicated, public policy requires that there must be an end to litigation rather than subject our judicial system to chaos by a continual uncertainty of judgments. Id. at 949. Rejecting the notion that lingering uncertainty would result if an independent action were allowed to alter a final judgment, this Court confirmed the authority of the Family Court to entertain an independent action to set aside the judgment and remanded the case for a determination of what portion of the lottery prize, if any, should be equitably distributed between the parties. Id. This Court has had occasion to address the significance of a non-merged property settlement agreement in the context of a motion to modify its provisions. On those occasions we have adhered to hundreds of years of contract theory and declared that property settlement agreements that are incorporated by reference, but not merged into the final divorce decree, retain the characteristics of a contract. Riffenburg v. Riffenburg, 585 A.2d 627, 630 (R.I.1991). Implicit in this holding is the caveat that the agreement must be fair and equitable and not the product of fraud or coercion. See Borden v. Borden, 649 A.2d 1028, 1030 (R.I.1994) (a property settlement agreement that was reasonable and fair, rather that the product of fraud or coercion remains an independent, binding contract). If it is later determined that the agreement was reached through fraud and trickery, as in any other contract claim, a party may sue for damages in an action for deceit or may rescind the contract and recover what he has paid under it. Halpert, 107 R.I. at 412, 267 A.2d at 733. In those circumstances, this Court has recognized that the Family Court has jurisdiction, both legal and equitable, over a non-merged property settlement contract, including a suit for specific performance or wage garnishment. Bowen v. Bowen, 675 A.2d 412 (R.I.1996) (per curiam). Specifically, G.L. 1956 § 8-10-3 sets forth the jurisdiction of the Family Court and includes the power to hear and decide matters pertaining to property settlement agreements and all other contracts between persons who were married at the time of execution of the agreement. We are satisfied that this jurisdictional grant includes the authority to adjudicate claims of fraud in the inducement and to order such relief as is equitable under the circumstances. Furthermore, in In re Lisa Diane G., 537 A.2d 131 (R.I.1988), we declared that the Family Court was vested with inherent authority to hear and determine a complaint seeking nullification of an adoption decree based on allegations of fraud by the Department for Children and their Families [4] and that the Family Court's power was not restricted to actions set forth in Rule 60(b). Reasoning that the Family Court had exclusive jurisdiction over adoptions, we concluded that it was vested with the inherent authority to determine a claim of fraud committed during the adoption process. In re Lisa Diane G., 537 A.2d at 133. Accordingly, we reject defendant's argument that the Family Court hearing justice lacked authority to reopen the final judgment of divorce and the property settlement agreement based upon Rosemarie's allegations of fraud. The trial justice, vested with the authority to entertain Rosemarie's complaint, heard evidence and found that Frank had committed a fraud upon the court and his ex-wife. This finding was based upon a credibility assessment of Frank's testimony, which was riddled with inconsistencies, and, significantly, upon his own admission that he failed to disclose income and assets. [5] In his June 1999 decision, the trial justice declared, [Frank's] failure to cooperate in Family Court made for very arduous sessions. The defendant suggested oversights when discrepancies were called to his attention. On other occasions he passed the blame to accountants or other [t]hird [p]arties never accepting any of the responsibilities himself. The [d]efendant was not a credible witness to say the least. The trial justice further found that defendant not only committed fraud in the original divorce proceedings, but also that during his testimony in the present case he continually attempted to defraud his ex-wife and the court. The defendant was described as weaving a web of deceit and confusion, and sparring with the court. We will not disturb a trial justice's findings of fact and credibility determinations unless he or she overlooked or misconceived material evidence or was otherwise clearly wrong. Giha, 609 A.2d at 949. Discerning no such deficiency in the decision before us, the finding of fraud will not be disturbed.