Zaino v. Zaino

• Decision Date: 03 March 2003
• Docket Number: No. 2000-74-Appeal.,2000-74-Appeal.
• Citation: 818 A.2d 630
• Parties: Rosemarie ZAINO v. Frank N. ZAINO.
• Court: Rhode Island Supreme Court

818 A.2d 630

Rosemarie ZAINO v. Frank N. ZAINO.

No. 2000-74-Appeal.

Supreme Court of Rhode Island.

March 3, 2003.

Present Williams, C.J., Lederberg, Flanders, and Goldberg, JJ.

Colleen Crudele, Steven N. Ortoleva, for Plaintiff. Lauren E. Jones, Providence, Jeremy W. Howe, for Defendant.

OPINION

GOLDBERG, Justice.

This case came before the Court for oral argument on December 2, 2002, on appeal by the defendant, Frank N. Zaino (Frank or defendant) from a Family Court judgment in favor of the plaintiff, Rosemarie Zaino (Rosemarie or plaintiff).

On August 11, 1989, after thirty-three years of marriage, Rosemarie initiated divorce proceedings against her husband, alleging irreconcilable differences which led to the irremediable breakdown of the marriage; Frank subsequently filed a counterclaim seeking the dissolution of the marriage on the same grounds. Based upon the income and assets disclosed to each other at that time, the parties executed a marital settlement agreement on November 15, 1990; this agreement later was approved and incorporated by reference, but not merged, into the interlocutory decree and final judgment of divorce. The agreement provided for an equitable distribution of the marital assets, providing Rosemarie with title to the marital domicile, her automobile, two burial vaults, and her personal property. Frank was provided with the remaining real estate, his engineering business, boat, automobiles and personal property. The parties each took a one-half interest in the proceeds from the sale of land, a time-share property in the Caribbean, and the approximately "$30,000-$32,000" contained in a joint bank account at Citizens Bank. In addition, in lieu of alimony or "support," and apparently in order for Rosemarie to gain tax benefits by its classification, Frank agreed to pay Rosemarie a "marital settlement agreement payment" of $208,000, $1,000 per week for the next four years. He agreed to pay $25,000 in legal fees incurred by Rosemarie, and $5,500 for the certified public accountant Rosemarie employed to examine Frank's assets and income over the course of the discovery process. Most notably, both parties signed a provision in the settlement agreement representing that "each has made a full disclosure * * * of all assets owned by him or her[.]" Overall, the distribution of assets was set by agreement at 80 percent for Rosemarie and the remaining 20 percent for Frank. This settlement agreement was approved by the Family Court General Magistrate. Thereafter, Frank complied with the distribution provisions in the agreement and paid Rosemarie and her creditors accordingly. However, at the time when the agreement was signed, and for years thereafter, Frank was not forthcoming about the true value of his assets and income. He was gravely noncompliant with the terms of the disclosure provision that he had carefully read and signed before executing the settlement agreement. It was Rosemarie's later discovery of this blatant dishonesty that has led us to the present appeal.

The divorce from Rosemarie would not be Frank's final interaction with the courts in this state. Years after the final divorce decree, Frank was among a group of individuals under investigation for the crimes of bribery and extortion during the administration of Governor Edward D. DiPrete.¹ Frank cooperated with the state and agreed to truthfully disclose any illegal activity known to him in exchange for immunity from criminal prosecution. During the course of this investigation, it became apparent that as part of his allegedly illegal dealings Frank had failed to disclose to Rosemarie and the Internal Revenue Service the full extent of his income and assets during his marriage. Subsequent investigation revealed the true value of the resources under Frank's control during the marriage, an amount far in excess of Frank's previous disclosures. In 1995, pursuant to the immunity agreement, and in an apparent attempt to make him a more palatable state's witness, Frank was required by the Attorney General to file an amended income tax return and declare his unreported earnings for the years 1988, 1989, and 1990, a period in which he was still married to Rosemarie. In 1997, upon reading a newspaper article detailing Frank's role in the DiPrete scandal, Rosemarie became aware of Frank's fraudulent conduct.

Rosemarie returned to Family Court and filed a complaint for post-judgment relief, seeking an ex-parte restraining order to freeze Frank's assets, a constructive trust of the assets of Frank's current wife and sister in which Rosemarie had an equitable interest, and a finding of contempt against Frank. The Family Court entertained her complaint and the General Magistrate reopened the divorce judgment and settlement agreement based upon Rosemarie's allegations of fraud.

The hearings in this matter spanned more than eighteen months, from April 30, 1997, to December 16, 1998. Among the many impediments to its speedy resolution was Frank's noncompliance with his discovery obligations. At the onset of discovery, Rosemarie requested a myriad of financial records pertaining to Frank's business transactions. Frank failed to comply with even the most rudimentary request; he repeatedly was evasive in his answers to interrogatories and failed to produce requested documents, alleging that his business records were in the custody of the Attorney General and beyond his reach, having been produced in compliance with a statewide grand jury subpoena for the DiPrete investigation. Rosemarie filed motions to compel more responsive answers, for production of documents, and for sanctions. On December 22, 1997, after two hearings during which Frank testified, the trial justice ordered an immediate sanction of $250 per day, to commence the following day, until Frank fully complied with discovery. This monetary sanction served to galvanize Frank into action. The next day, December 23, 1997, Frank appeared at the Attorney General's office and copied thousands of documents relating to the discovery orders. Eight days later, Frank served upon Rosemarie's counsel supplemental answers to the original interrogatories. In January 1998, Frank filed a motion to terminate the sanctions. However, the trial justice denied his request, noting that Frank had failed to produce several relevant statements and cancelled checks from his engineering business, F.N. Zaino & Associates (Zaino Associates). The trial justice directed that the records custodian at the Attorney General's office be contacted to verify whether Frank had access to the records that he had thus far failed to produce.

On February 16, 1998, Christopher Cotta, an investigative auditor for the Attorney General, executed an affidavit affirming that several documents pertaining to Zaino Associates had been stored in a separate evidence locker while the state was seeking appellate review in the DiPrete case. The affiant declared that these documents had not been made available to Frank on a timely basis. However, it is unclear from the record whether the trial justice was apprised of this information. Ultimately, Frank faced sanctions totaling $64,750 running from December 23, 1997 until December 16, 1998.²

After three days of hearings on the merits, devoted primarily to Frank's own testimony, the trial justice issued a decision and commented upon Frank's "lack of sincerity and blatant deceit" and found his testimony to be evasive. He declared that Frank was not a credible witness and found that throughout the course of the proceedings Frank had engaged in fraudulent and deceitful conduct. Frank was deemed to be in willful contempt and, based upon the numerous inconsistencies in Frank's testimony, his reluctant admissions, and the damning documentary evidence, the trial justice found that Frank had attempted to defraud his former wife and the Family Court.³

After making deductions for state and federal income taxes, the trial justice calculated the amount of Frank's undisclosed earnings, income, and hidden assets, and ordered him to pay Rosemarie $525,483, based upon his earlier agreement to distribute 80 percent of the marital estate to Rosemarie. Additionally, based on the "total lack of cooperation and defiance with [Family Court] orders," and for having caused this proceeding to take two years, "rather than accepting the responsibility in the first instance," Frank was ordered to pay $64,750 in discovery sanctions and $61,900 for Rosemarie's legal fees. Finally, Frank was ordered to pay accounting fees for the court-appointed receiver ordered to oversee Frank's business to protect Rosemarie's interests during this proceeding. Frank filed a motion to reopen the case, and upon its denial, Frank perfected this appeal.

On appeal, Frank asserts that the trial justice erroneously reopened the fully executed divorce settlement agreement and judgment and did so based upon insufficient evidence. The defendant argues that because the fraud alleged in the case was intrinsic in nature, it should not be grounds to revisit the final judgment or property settlement agreement. He urges this Court to characterize Frank's perfidy as a failure to disclose discoverable facts that ought to have been challenged during the divorce proceeding, but was voluntarily waived by Rosemarie when she agreed to the property settlement agreement. In the alternative, Frank argues that even if the case was correctly reopened, the trial justice erred by improperly including his undisclosed income in the calculation of marital assets and by awarding Rosemarie duplicative recovery of certain funds that he alleges had been previously distributed. Additionally, Frank challenges the award of attorney fees. Finally, Frank claims that the trial justice abused his discretion by imposing discovery sanctions before the issuance of an order to compel production, or alternatively, in failing to vacate the sanctions after he had...