Case Title: Roberts v. Roberts

Citation: 

Docket Number: 000071

State: virginia

Court: Virginia Supreme Court

Date: 2000-11-03T00:00:00Z

Document:
Present:  All the Justices 
 
SCOTT T. ROBERTS, EXECUTOR OF THE 
ESTATE OF LEVI J. ROBERTS, DECEASED 
 
v.  Record No. 000071    OPINION BY JUSTICE DONALD W. LEMONS 
 
 
 
November 3, 2000 
CRAIG T. ROBERTS, ET AL. 
 
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK 
Marc Jacobson, Judge 
 
 
In this appeal, we consider whether Code § 64.1-57(1)(k) 
insulates a fiduciary against a claim of negligence in the 
preparation and filing of an estate tax return by an “agent or 
professional representative.” 
I. Background 
 
Admiral Levi J. Roberts (“Levi Roberts”) died on December 
24, 1989 in the City of Norfolk.  On January 4, 1990, 
appellant, Scott T. Roberts (“Scott” or “executor”), the 
grandson of the deceased, was qualified as executor of the 
estate of Levi Roberts.  Article VI of the will stated that, 
“[i]n addition to the powers granted by law,” the executor was 
granted “the powers set forth in Section 64.1-57 of the Code 
of Virginia,” which were incorporated by reference. 
 
Under the terms of Levi Robert’s will, a trust was to be 
established for the benefit of his friend, Coralie B. Digges.  
Digges was permitted to live in Levi Roberts’ former residence 
and receive a monthly sum from the estate for the remainder of 
her life or until she remarried or abandoned the property, at 
 
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which time the trust would terminate.  The will provided that, 
upon termination of the trust, the residence with all 
furniture and fixtures would be conveyed out of trust to Scott 
and the remaining assets from the trust would be distributed 
to Scott’s five siblings.  Each sibling would receive a one-
sixth share of the assets, except for Craig T. Roberts 
(“Craig”) who would receive a two-sixth share. 
 
At the time of Levi Roberts’ death, Scott owned bearer 
bonds that had been given to him by his grandfather.  The 
bonds were held in a safe deposit box owned jointly by Levi 
Roberts and Scott. 
 
Scott testified that, shortly after he was appointed 
executor, the task of administering the estate became 
“tremendously more complicated, way beyond my area of 
expertise.”  Accordingly, Scott “went to people that were in 
the business of doing this on a big scale . . . looking for 
what I thought was the best talent to help me get through all 
this.”  Eventually Scott concluded that Sovran Bank1 was most 
qualified to handle the estate. 
 
Scott met with John B. Wallin, a vice-president of Sovran 
Bank, who “went to great lengths to explain to me all the 
pitfalls of handling your own estate or somebody else’s 
                     
1 Sovran Bank later became NationsBank and then Bank of 
America. We will consistently refer to Sovran Bank. 
 
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estate, and he made it clear to me that I really didn’t have 
all the resources to do this and they did and they were 
probably the best candidate to handle that for me.”  Scott 
testified that he relied upon Sovran Bank to prepare the tax 
return for the estate accurately because “I had the biggest 
guy in town, and he had all the information.  I felt 
comfortable that it was in their best interest to prepare it 
accurately for them and me.”  
 
Wallin testified that he and Scott had several meetings.  
According to Wallin: 
[W]e were asked to participate in two 
relationships, one relationship being assisting 
in the settlement of the estate. Our 
discussions would naturally focus on the bonds 
in that role.  Any time somebody walks in a 
bank with cash or bearer bonds, you need to 
proceed with caution in my opinion. 
 
So we discussed that we did not want to 
serve in a fiduciary capacity.  If Scott wanted 
to hire us as an agent for him as executor, we 
would act on his direction and follow his 
direction in settling the estate.  We would 
achieve for him the things that needed to be 
done that he might not be capable of doing, 
like accountings, record keeping, safe keeping, 
and investing estate assets, looking at the – 
serving as an agent for the continued trusts 
that were I believe either trust or life 
estates that would have been under the will of 
Levi Roberts. 
 
 
Wallin further stated that he would have informed Scott 
that Sovran Bank had a tax division to help prepare the estate 
 
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tax return.  Wallin also stated that on January 31, 1990, 
Sovran Bank received physical possession of the bonds. 
 
Once the administration of the estate began, Scott’s main 
contact with the bank was John Abbitt, a trust officer.  Scott 
provided Sovran Bank with any documents it requested and he 
specifically informed Abbitt that he had received bonds from 
his grandfather as gifts.  In addition, Wallin testified that 
he and Abbitt had discussed that there was a “high degree of 
potential that those bonds would be included in the taxable 
estate.” 
 
Mary L. Williams, a vice president and trust officer with 
Sovran Bank, prepared and signed the estate tax return.  The 
tax return did not list any bonds.  In addition, there was a 
section on the return which asked whether there was anything 
which was in a safe deposit box that was omitted from the 
return.  This section was left blank. 
 
Scott testified that, prior to signing the tax return,  
he met with Williams and that: 
This is a complicated document.  For someone 
who knows nothing about this, who’s never 
prepared a tax return, to review it in five or 
10 minutes and to know everything about it is a 
stretch. 
 
I relied on experts who I hired to prepare 
this that knew all the details of my side, 
their side.  Everything that I knew about this 
they had all the details of, and they prepared 
this tax return correctly in reference to the 
law.  
 
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In addition, Scott stated that when he reviewed the tax return 
he asked Williams whether the bonds were included and she said 
“everything was included and it was correct.”   
 
Williams testified that she had met with Scott, but that 
she could not recall how many times.  In addition, she was 
unsure whether she had a meeting with him to sign the estate 
tax return, but she admitted that in the normal course of 
business, she would have had such a meeting.  Although the 
bank was in possession of the bonds, Williams testified that 
she was not aware that the bonds existed when she prepared the 
tax return.  The federal estate tax return was filed on 
September 24, 1990 and the estate paid taxes in the amount of 
$167,749.28. 
In 1990, Craig and the remaining siblings filed an action 
against Scott alleging that the bonds were property of the 
estate.  A settlement agreement and release terminating that 
litigation was entered into by the parties in 1991.  The 
parties agreed that the “bonds and all proceeds thereof are 
the sole property of Scott T. Roberts by gift from Levi J. 
Roberts.”  The document also provided that “this release shall 
not be deemed to release Scott T. Roberts as Executor and 
Trustee under the Will from any liability as a fiduciary for 
any acts or omissions occurring after the date hereof.”  
 
6
 
The Internal Revenue Service (“IRS”) initiated an audit 
to determine whether the bonds should have been included in 
the taxable estate.  On September 24, 1993, the IRS issued a 
Notice of Deficiency in the amount of $243,323.02.  The IRS 
sought additional penalties totaling $230,576.64.  Scott and 
the IRS subsequently reached a compromise, agreeing to a net 
deficiency against the estate in the amount of $193,687.43 and 
no additional penalties were assessed.  In addition, the IRS 
and the Commonwealth of Virginia assessed interest against the 
estate totaling $99,276.05. 
 
In 1996, Craig and his remaining siblings filed “Suit to 
Surcharge and Falsify” in the Circuit Court of the City of 
Norfolk.  On July 1, 1996, the trial court entered an order 
sustaining Scott’s plea of release as to the issue of 
ownership of the bonds and referring the remaining issues to a 
commissioner in chancery.  Additionally on July 1, 1996, the 
trial court referred to the same commissioner in chancery the 
exceptions noted to a report of the commissioner of accounts 
concerning similar issues.  After an evidentiary hearing, the 
commissioner in chancery issued his report. 
 
The commissioner in chancery concluded that Scott had 
“not met his burden in overcoming the presumption of 
correctness of the facts set out in [the commissioner of 
accounts’ report].”  The commissioner of accounts had found 
 
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that Scott “refused to include the bonds on the Inventory of 
the estate assets” and had filed federal and state estate tax 
returns “omitting mention of the bonds.”  The commissioner of 
accounts surcharged Scott individually for interest and 
attorney’s fees in the controversy with the IRS.  There is no 
indication that the commissioner of accounts heard testimony 
of witnesses and his report makes no mention of Code § 64.1-
57(1)(k). 
 
The commissioner in chancery concluded that Scott owed a 
duty to the estate to review in detail the estate tax return 
and indicated that while Sovran Bank “certainly was 
negligent,” Scott “did not use ‘reasonable care and skill’ 
when he blindly relied upon Sovran Bank.”  Accordingly, the 
commissioner in chancery recommended that Scott be surcharged 
$40,379.76, a figure representing the loss to the estate as a 
result of the late payment minus income earned by the estate 
from those funds as a result of the taxes not having been paid 
when due. 
 
Both parties filed exceptions to the commissioner in 
chancery’s report and on April 3, 1998, the trial court issued 
an opinion confirming its main findings and recommendations.  
Specifically, in a July 6, 1998 order, the trial court ruled 
that the commissioner in chancery applied the correct legal 
standard in determining the consequences of Scott’s reliance 
 
8
on professionals to file the estate tax return.  Additionally, 
the trial court ruled that the executor was negligent in 
failing to pursue a claim against Sovran Bank on behalf of the 
estate. 
 
On appeal, Scott maintains that the trial court erred in 
confirming the commissioner in chancery’s recommendation that 
he be surcharged for interest assessed for late payment of 
additional estate taxes.  Specifically, Scott contends that he 
was not negligent in his reliance upon Sovran Bank and 
pursuant to § 64.1-57(1)(k), he may not be held liable for the 
negligence, if any, of Sovran Bank.  Additionally, Scott 
asserts that the trial court erred in finding him negligent 
for not pursuing a claim on behalf of the estate against 
Sovran Bank.  Scott further contends that the commissioner in 
chancery and the trial court did not consider the binding 
effect of adverse witnesses’ testimony.  He maintains that the 
report of the commissioner of accounts was not supported by 
the evidence and was based upon erroneous legal principles, 
and consequently, was not entitled to any deference.  Finally, 
Scott contends that, if he is subject to surcharge, it was 
improperly calculated. 
 
Craig and the remaining siblings assign no cross-error, 
but urge the affirmance of the trial court’s rulings. 
II.  Standard of Review 
 
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We have previously summarized the rules to be applied 
when a trial court considers a report of a commissioner in 
chancery and when we review the matter on appeal. 
While the report of a commissioner in chancery 
does not carry the weight of a jury’s verdict, 
Code § 8.01-610, it should be sustained unless 
the trial court concludes that the 
commissioner’s findings are not supported by 
the evidence.  This rule applies with 
particular force to a commissioner’s findings 
of fact based upon evidence taken in his 
presence, but is not applicable to pure 
conclusions of law contained in the report.  On 
appeal, a decree which approves a 
commissioner’s report will be affirmed unless 
plainly wrong; 
 
Hill v. Hill, 227 Va. 569, 576-77, 318 S.E.2d 292, 296-97 
(1984) (citations omitted).  The same principles of law apply 
to a trial court’s consideration of a report of the 
commissioner of accounts.  Morris v. United Virginia Bank, 
237 Va. 331, 377 S.E.2d 611 (1989). 
 
In the case before us, exceptions were noted from the 
report of the commissioner of accounts.  Contemporaneously, a 
chancery action entitled “Suit to Surcharge and Falsify” was 
filed in the trial court.  The issues were similar in nature 
and the trial court referred both the chancery suit and the 
exceptions to the commissioner of accounts’ report to the 
same commissioner in chancery.  Upon exceptions to the 
commissioner in chancery’s report, the trial court had before 
it the exceptions to the commissioner of accounts’ report 
 
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augmented by additional findings of the commissioner in 
chancery and the commissioner in chancery’s report on the 
referred chancery suit.  See Code § 26-33. 
III. Analysis 
 
Section 64.1-57 grants a fiduciary certain specific 
powers if the statute is incorporated in whole or in part into 
any will or trust agreement.  Scott contends that a surcharge 
for interest charged to the estate for failure to include the 
bonds in the taxable estate may not be imposed upon him 
because he falls under the umbrella of protection provided by 
Code § 64.1-57(1)(k) which specifies that a fiduciary has the 
power: 
To employ and compensate, out of the principal 
or the income or both as to the fiduciary shall 
seem proper, agents, accountants, brokers, 
attorneys-in-fact, attorneys-at-law, tax 
specialists, licensed real estate brokers, 
licensed salesmen and other assistants and 
advisors deemed by the fiduciary needful for 
the proper administration of the trust or 
estate, and to do so without liability for any 
neglect, omission, misconduct, or default of 
any such agent or professional representative 
provided he was selected and retained with 
reasonable care. 
 
 
In our interpretation of this statute, we must “ascertain 
and give effect to the intention of the legislature [and] that 
intention must be gathered from the words used.”  Watkins v. 
Hall, 161 Va. 924, 930, 172 S.E. 445, 447 (1934).  When the 
language of a statute is clear and unambiguous, the statute’s 
 
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plain meaning must be accepted.  Virginia Dept. of Labor v. 
Westmoreland Coal Co., 233 Va. 97, 99, 353 S.E.2d 758, 760-61 
(1987). 
 
The clear and unambiguous language of the statute states 
that fiduciaries are entitled to employ agents “and to do so 
without liability for any neglect, omission, misconduct, or 
default of any such agent or professional representative 
provided he was selected and retained with reasonable care.” 
We find that this language evinces an intent of the 
legislature to shield certain fiduciaries from liability for 
the actions of the agents they select to aid them in the 
administration of their duties.  The statute does not, 
however, preclude a fiduciary from being liable for his own 
negligent conduct. 
 
The commissioner in chancery’s report states that: 
 
The Executor testified he employed Sovran 
Bank to advise him as to the administration of 
Levi Roberts Estate because of their expertise 
in estate administration and that he was not 
experienced and qualified to do so.  At the 
beginning of his relationship with Sovran Bank, 
Executor Roberts advised Sovran Bank of the 
gifts of the municipal bonds by Levi Roberts.  
He also employed Sovran Bank to administer his 
personal assets, including the $585,000.00 
municipal bonds gifted by Levi Roberts to him.  
He relied upon Sovran Bank to advise and 
perform the administrative duties which an 
executor performs. 
 
The Levi Roberts Estate Tax Return was 
prepared by Sovran Bank as part of their duties 
for which they were employed with full 
 
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knowledge of the facts and circumstances about 
the $585,00.00 inter vivos gifts of municipal 
bonds by Levi Roberts to Executor Roberts. 
 
Trust Officer John Wallin of Sovran Bank 
was the marketing person with whom the Executor 
first met.  Wallin and John Abbitt, who the 
Executor described as his Sovran contact 
person, discussed the gift and advised that the 
Executor would have to be able to prove such 
bonds were gifts; and that there was a high 
probability such bonds would be held by IRS to 
be part of the taxable estate.  Such discussion 
occurred shortly after Sovran Bank was employed 
by Executor Roberts. 
 
The Executor testified that he spent no 
more than ten minutes with Mary Williams, the 
Sovran Bank employee who prepared the Levi 
Roberts Estate Tax Return.  He did not read 
such return, expecting same to be correct. 
 
These factual findings indicate that the commissioner in 
chancery determined that: (1) the executor selected Sovran 
Bank to assist him in the administration of the estate because 
of the bank’s expertise; (2) the executor relied upon Sovran 
Bank because of its expertise; (3) Sovran Bank knew of the 
bonds prior to preparing the tax return for the estate; and 
(4) the executor fully informed Sovran Bank of the facts 
necessary to prepare the tax return for the estate. 
 
Despite these findings, the commissioner in chancery 
concluded that “the Executor owed a duty to the Estate to 
review in detail the Levi Roberts Federal Estate Tax Return 
. . . [and] the Executor did not use ‘reasonable care and 
skill’ when he blindly relied upon Sovran Bank.”  The trial 
court confirmed these conclusions.  Upon review of the record, 
 
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we hold that the trial court and the respective commissioners 
erred in their application of Code § 64.1-57(1)(k) to the 
facts of this case. 
 
Code § 64.1-57(1)(k) would be rendered meaningless if a 
fiduciary could hire an agent whose expertise is essential to 
managing an estate or trust and then be held liable for 
relying on the expertise provided by that agent.  There is no 
evidence of negligence in Scott’s selection or retention of 
Sovran Bank.  His reliance upon the bank’s work was not 
“blind”; rather, it reflected the sort of reliance anticipated 
by Code § 64.1-57(1)(k), which contemplates the situation 
where a fiduciary does not have the ability to perform this 
function himself. 
 
In addition to confirming the commissioner in chancery’s 
report, the trial court stated that: 
[A]ssuming arguendo that the Executor is 
correct and cannot be held liable for his own 
negligence because of Section § 64.1-57(k) and, 
assuming arguendo Sovran Bank is the sole 
wrongdoer and Sovran Bank was liable because 
its agents knew of the bonds, the Estate gained 
a chose in action following the injury to the 
Estate resulting from the alleged wrong doing 
of Sovran Bank.  The Executor had a duty to 
pursue this asset by taking appropriate legal 
action against Sovran Bank. 
 
 
There is no evidence supporting the conclusion that Scott 
was negligent in not filing a claim against Sovran Bank.  
First, there is no evidence as to whether such action was or 
 
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was not considered by Scott.  Furthermore, in its opinion, the 
trial court noted that attorney’s fees for such an action 
could not be recovered, raising the question whether an action 
against Sovran Bank would have been cost effective.  Finally, 
Sovran Bank was not a party to this litigation and had no 
opportunity to assert defenses to claims of its negligence.  
There is no evidence of potential defenses to a claim by the 
estate against the bank.  On this record the trial court erred 
in concluding that the executor was negligent in failing to 
pursue a claim against Sovran Bank. 
 
We hold that Code § 64.1-57(1)(k) insulates the executor 
from liability for any negligence that may have been committed 
by Sovran Bank in failing to include the bonds in the taxable 
estate.  The executor was entitled to rely upon the bank’s 
expertise in the preparation and filing of the estate tax 
return.  Additionally, there is no evidence to support the 
conclusion that the executor was negligent in failing to 
maintain a cause of action on behalf of the estate against the 
bank.  The trial court erred in surcharging the executor. 
 
It is not necessary to consider Scott’s assignments of 
error based upon evidentiary issues and improper calculation 
of the surcharge.  We will reverse the judgment of the trial 
court and remand the matter for entry of orders consistent 
with this opinion. 
 
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Reversed and remanded.