Court Opinion

ID: 1070032
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:36:49.908829+00
Date Added: 2024-06-11T12:27:24.628924
License: Public Domain

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

                                 - 3 -
'(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)).

                             - 4 -
     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

                               - 6 -
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 . . .

                               - 8 -
     "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").

                              - 9 -
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

                             - 10 -
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

                             - 12 -
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.

                               - 13 -
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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