Case Title: SunTrust Bank v. Farrar

Citation: 

Docket Number: 080550

State: virginia

Court: Virginia Supreme Court

Date: 2009-04-17T00:00:00Z

Document:
Present: Hassell, C.J., Keenan, Koontz, Lemons, and Millette, 
JJ., and Carrico, and Lacy, S.JJ. 
 
 
SUNTRUST BANK, INDIVIDUALLY  
AND AS TRUSTEE OF THE TRUST  
UNDER THE LAST WILL AND TESTAMENT 
OF CHARLES E. WILSON, DECEASED 
 
 
 
 
 
 
 
 
OPINION BY 
v. 
Record No. 080550 
 
JUSTICE LEROY F. MILLETTE, JR. 
 
 
 
 
 
 
 
  April 17, 2009 
SYDNEY D.F. FARRAR, ET AL. 
 
 
FROM THE CIRCUIT COURT OF NOTTOWAY COUNTY 
Thomas V. Warren, Judge 
 
In this appeal, we consider whether the circuit court 
erred in entering a monetary judgment against the trustee and 
in favor of the beneficiaries of a trust for breach of 
fiduciary duty arising from the management of a coal mining 
property when the only evidence of damages presented by the 
beneficiaries was based on an appraisal without evidence of a 
willing buyer at the appraised value. 
BACKGROUND 
Charles E. Wilson (Mr. Wilson) died in 1921, survived by 
his wife, Mary C. Wilson, and two sons, Charles Everett Wilson, 
Jr. (Everett) and Richard B. Wilson (Richard).  In his will, 
Mr. Wilson established a trust (the Wilson trust) that 
contained land in Harlan County, Kentucky (the property), upon 
which a coal mine (the coal mine) was located.  Old Dominion 
Trust Company in Richmond, Virginia, now SunTrust Bank (the 
Trustee), was named as co-trustee, along with Mrs. Wilson.1 
The property was the sole principal asset of the Wilson 
trust from 1921 until it was sold in 1997.  Believing there to 
be “no safer or more permanent or more profitable investment,” 
Mr. Wilson used strong language in his will directing the co-
trustees to hold the coal mine “unless conditions undergo a 
very radical change from what they are at present.”  According 
to the will, the income from the coal mine was to be paid to 
Mrs. Wilson, Everett, and Richard, during their lifetimes.2  
Following their deaths, the income would be distributed to Mr. 
Wilson’s remaining beneficiaries.  The Wilson trust was to 
terminate 20 years from the date of death of the last of the 
three income beneficiaries, and income and principal 
distributed to “such persons as shall at that time be [Mr. 
Wilson’s] heirs at law under the Virginia Statute of Descents 
and Distributions.” 
Everett, who became the last surviving income beneficiary, 
died in 1984.  Following Everett’s death, the Trustee 
petitioned the Circuit Court of Nottoway County to terminate 
the Wilson trust or, in the alternative, to obtain authority to 
                                                 
1 Mrs. Wilson died in January 1976, leaving only the 
Trustee charged with the administration of the Wilson trust. 
2 Richard died in 1926. 
 
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sell the property and reinvest the proceeds into “more 
profitable and safer investments.” 
At the June 1987 hearing, in support of its petition, the 
Trustee presented evidence that the coal mine’s income had 
dropped significantly in the preceding few years.3  Hartwell 
Harrison, the Trustee’s vice president and administrative 
officer responsible for the Wilson trust since 1983, testified 
that the trust was on an August fiscal tax year and from 
September 1983 to August 1984, the trust had a total income of 
approximately $113,000, the vast majority of which was income 
from the property.  For the fiscal tax year 1984 to 1985, the 
trust income, which was still primarily income from the 
property, was approximately $110,000, but dropped to $52,000 
for the fiscal tax year 1985 to 1986 and down to $13,000 from 
September 1986 to May 1987.  Harrison acknowledged that the 
“income ha[d] dropped quite drastically.”  When asked 
“generally how the assets of th[e] trust could be converted 
into safer and more profitable investments,” Harrison replied 
that “the bank would pro[b]ably use a balanced approach, and a 
balanced approach would mean an allocation of the [proceeds 
from the sale of the property] between common stocks of maybe 
                                                 
3 The Honorable Thomas V. Warren also presided over the 
1987 hearing.  
 
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55 to 65 percent, and the balance would be exposed to fixed 
income securities or bonds.” 
William H. Eanes, head of the Trustee’s real estate 
division with primary responsibility for the Wilson trust since 
1960, testified that when Everett died in 1984, the coal market 
was on a “trend downward” and there had been little mining 
activity on the property since that time.  Eanes also testified 
that the property was encumbered by coal mining leases, 
including a lease in which the lessee was “in bankruptcy.”  
Nevertheless, Eanes stated: 
It is my opinion that the property could be 
sold.  I think the timing of the sale is 
critical.  I believe there is a market for the 
property.  It is a risky asset in terms of 
management, a lot of labor problems associated 
with it, a lot of negotiations, and it is an 
expensive asset to manage. 
 
Following the 1987 hearing, the circuit court entered an 
order granting the Trustee authority to sell the property.  To 
accomplish a sale, the Trustee sought the assistance of Dennis 
D. Willis, a licensed professional engineer.4  In 1986, the 
Trustee had asked Willis to appraise the property.  Willis 
appraised it at $1.1 million “[b]ecause that [was] the value of 
the property . . . if all the coal was indeed there, the 
                                                 
4 In Kentucky, Willis was classified a “professional mining 
engineer.”  It was undisputed at the trial underlying this 
appeal that Willis is an expert appraiser and engineer. 
 
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measured, the indicated and the inferred.”5  The property was 
sold in 1997, for $350,000. 
In October 2004, twenty years after Everett’s death, the 
Wilson trust terminated.  Thereafter, the Trustee sought 
guidance from the circuit court regarding distribution of the 
trust assets to its beneficiaries.  In August 2007, beneficiary 
Sydney D.F. Farrar, on behalf of himself and other 
beneficiaries (collectively, the Beneficiaries), filed an 
amended complaint against the Trustee, alleging breach of 
fiduciary duty and seeking compensatory as well as punitive 
damages.  At a bench trial conducted in December 2007, the 
Beneficiaries maintained that for years the property could have 
been sold for the $1.1 million appraised value and presented 
evidence of damages based on that premise.   
 
The only witness offered by the Beneficiaries at trial to 
prove damages was Robert W. Cook, Jr., an expert in economics.  
Cook testified that he gleaned the Trustee’s “investment 
                                                 
5 At trial, Willis explained that: 
 
Reserves are classified as measured and 
proven or probable reserves and inferred 
reserves.  There’s [sic] three 
classifications.  Proven or measured 
reserves are the most reliable because you 
have more measurements to take at known 
points. . . . [T]he indicated reserves would 
be further out, and inferred reserves are 
much further out.  They are just like the 
name implies, inferred. 
 
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philosophy” of allocating the trust portfolio between common 
stocks and fixed income securities or bonds from Harrison’s 
testimony at the 1987 hearing.  Cook used this hypothetical 
allocation to construct investment scenarios to determine the 
value of the trust portfolio in 1997 if the property had been 
sold for $1.1 million at the time the Trustee was granted 
permission to sell, and the $1.1 million had been invested on 
September 1, 1987.  The September 1, 1987 date was suggested to 
Cook by the Beneficiaries’ counsel, based upon the premise that 
since the hearing was in June 1987, it “[gave] a reasonable 
period of time here so that the property could in fact be sold 
and these investments could be made.”  Cook employed the $1.1 
million figure because “[t]hat’s all [he] knew,” but conceded 
on cross-examination that the $1.1 million appraised value 
would not actually have been placed into the investment 
portfolio.  Instead, what would have gone into the portfolio 
would have been the net proceeds after deduction of the 
commission on the sale.   
Cook determined that if, on September 1, 1987, 65 percent 
of $1.1 million was invested in stocks and 35 percent in bonds, 
trust distributions would have been $1,761,000, and the 
remaining trust portfolio would contain $3,709,000 in stocks 
and bonds, totaling $5,470,000.  Cook testified that he used a 
mathematical formula to create his scenarios: 
 
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Arithmetic and algebra.  That is all that’s 
required here, because I was looking back 
rather than in the future.  The numbers that 
I was adding and subtracting and multiplying 
were known with certainty.  I looked them up 
from documents that I had at my disposal 
that I researched, and then I applied some 
arithmetic and division that I used to get 
to the results.  
 
However, Cook acknowledged that he was not testifying that on 
September 1, 1987 there was a buyer willing to purchase the 
property for $1.1 million. 
 
Willis testified that his $1.1 million valuation took into 
account existing coal market conditions, which he described as 
in a state of decline from 1975 until 2003 or 2004.  However, 
Willis was not aware of any buyer willing to pay $1.1 million 
for the property as of the 1986 appraisal.  According to 
Willis, the property was not sold in 1987 because no one was 
interested in it.  In addition, Willis acknowledged that “[t]he 
appraisal was probably somewhat high.  Based upon the declining 
coal market it was high, but it was based upon available 
information at the time.”  Further, a sale of the property was 
not feasible until the termination or expiration of all of the 
coal mining leases encumbering the property, because there was 
not any production or very little production of coal on the 
property at that time and the leases would have a considerable 
negative effect on the value of the property.  Willis could not 
 
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recall if he took the existence of the leases into 
consideration in the 1986 appraisal.          
The circuit court found that the Trustee failed to 
appropriately market the property, allowed the coal mine to 
become “unproductive of income,” allowed it to become a 
“wasting asset,” and failed to diversify the trust assets in a 
timely manner.  For these reasons, the circuit court determined 
that the Trustee did not act as a prudent person would, 
constituting a breach of its fiduciary duty to the 
Beneficiaries.  The circuit court awarded judgment to the 
Beneficiaries for $2.4 million, which was “a net judgment 
considering [a] 5% brokerage fee, the $350,000 received from 
sale, [the] date of court authorization [of the sale], [the] 
date of sale, and accrued interest.”     
In a separate action on the Trustee’s objections to the 
Commissioner of Accounts’ reports, the circuit court held that 
the Beneficiaries’ incurrence of $89,028.30 in trust 
expenditures from September 1992 through August 1998 resulted 
from the Trustee’s breach of its fiduciary duty.  The circuit 
court concluded that these expenditures, which included 
engineering fees in maintaining the property, would not have 
been incurred had the Trustee not breached its fiduciary duty 
by failing to sell the property and diversify the Wilson trust 
 
8
portfolio.  The circuit court ordered the Trustee to reimburse 
these fees, with interest, to the Beneficiaries.  
DISCUSSION 
 
The Trustee assigns error to the circuit court’s holding 
that the Trustee breached its fiduciary duty and to the damages 
awarded to the Beneficiaries.  The Trustee alleges that the 
Beneficiaries failed to prove there was a buyer willing to pay 
the appraised value for the property.  In addition, the Trustee 
contends the circuit court erred in disallowing certain 
engineering expenses and trustee’s fees, as that ruling was 
based solely on the circuit court’s erroneous conclusion that 
the Trustee breached its fiduciary duty by not selling the 
property and timely diversifying the trust assets.   
The Trustee argues that the circuit court’s judgment in 
effect made the Trustee an insurer of the appraised value of 
the property, which the evidence showed was unobtainable given 
the actual market conditions.  The Trustee maintains the 
Beneficiaries did not meet their burden of proving damages, 
because the award of damages was based upon the assumption that 
there was a willing buyer for the property at the appraised 
value when the circuit court granted the Trustee the authority 
to sell, and the proceeds of the sale would be available for 
investment by September 1987.  The Trustee contends that, by 
making this assumption, the circuit court disregarded the 
 
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depressed coal market conditions and other impediments to the 
sale of the property existing at that time.    
The Beneficiaries contend the circuit court’s conclusion 
that the Trustee breached its fiduciary duty to preserve the 
value of the property and to timely diversify the trust 
portfolio must be upheld because the circuit court’s judgment 
is supported by sufficient evidence and is not plainly wrong.  
The Beneficiaries assert that the Trustee failed to market the 
property in a manner that satisfied the prudent person 
standard, and sold the property at a sacrificial price of 
$350,000 despite its appraised value of $1.1 million.  
According to the Beneficiaries, no law exists to support the 
Trustee’s contention that the damages award must be reversed 
because the Beneficiaries failed to show that there was a buyer 
willing to pay the appraised value.    
It is well-settled that when a decision is rendered 
following a bench trial and a party objects to the ruling on 
the ground that it is contrary to the evidence, the judgment 
shall be upheld unless it appears from the evidence to be 
plainly wrong or without evidence to support it.  Pizzarelle v. 
Dempsey, 259 Va. 521, 527, 526 S.E.2d 260, 263 (2000); Code 
§ 8.01-680.  We hold that the circuit court’s judgment was 
erroneous, because the Beneficiaries failed to meet their 
burden of proof on the issue of damages.   
 
10
The Beneficiaries, as the plaintiffs below, had the 
“‘burden of proving with reasonable certainty the amount of 
damages and the cause from which they resulted; speculation and 
conjecture cannot form the basis of the recovery.’”  Shepherd 
v. Davis, 265 Va. 108, 125, 574 S.E.2d 514, 524 (2003) (quoting 
Carr v. Citizens Bank & Trust Co., 228 Va. 644, 652, 325 S.E.2d 
86, 90 (1985)); Sunrise Continuing Care, LLC v. Wright, 277 Va. 
148, 156, 671 S.E.2d 132, 136 (2009).  Damages cannot be 
recovered if derived from uncertainties, contingencies, or 
speculation.  Saks Fifth Avenue, Inc. v. James, Ltd., 272 Va. 
177, 188, 630 S.E.2d 304, 311 (2006); Shepherd, 265 Va. at 125, 
574 S.E.2d at 524.  In Shepherd, we held that the evidence of 
damages was speculative because the calculations submitted were 
based on the assumption that the property could be sold to a 
large, well-known home and building supply retailer.  265 Va. 
at 125, 574 S.E.2d at 523-24.  Likewise, in this case, the 
evidence of damages was premised on the assumption that the 
property could have been sold for $1.1 million in 1987.   
Although there was testimony from a developer regarding an 
offer to purchase the property in Shepherd, 265 Va. at 125-26, 
574 S.E.2d at 524, damages calculated from that offer were 
rejected because of the need for rezoning and other 
contingencies rendering the valuation speculative.  Here, the 
Beneficiaries presented no evidence that there was a buyer 
 
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willing to purchase the property, regardless of the 
encumbrances, for $1.1 million in 1987 or at any time 
whatsoever.  In fact, evidence to the contrary was presented to 
the circuit court.  Willis, the expert appraiser and engineer, 
and Cook, the Beneficiaries’ economics expert, each testified 
that he was not aware of the existence of such a buyer.  Willis 
specifically testified that the property was not sold in 1987 
because “no one was interested in it.”   
Nowhere in the record of this case is there evidence of a 
willing buyer or other proof to show the existence of a viable 
market for the property at the appraised price.  This Court has 
held that damage calculations based on unsupported projections 
are improper.  See Saks Fifth Avenue, Inc., 272 Va. at 187, 630 
S.E.2d at 310.  Estimates of damages based entirely upon such 
assumptions “are too remote and speculative to permit ‘an 
intelligent and probable estimate of damages.’”  Vasquez v. 
Mabini, 269 Va. 155, 159, 606 S.E.2d 809, 811 (2005) (quoting 
Bulala v. Boyd, 239 Va. 218, 233, 389 S.E.2d 670, 677 (1990)).   
Willis described the depressed coal market in Harlan 
County, Kentucky during the relevant period.  He explained that 
the coal market peaked in 1974 and 1975 due to an oil embargo 
that caused coal prices to escalate rapidly.  After the embargo 
ended, the coal market was in a continuous state of decline 
 
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until 2003 or 2004.  Eanes confirmed that by the end of the 
1980s, “the bottom had fallen out” of the coal market.     
Willis testified that he was familiar with the coal market 
in Harlan County in 1986, and that the price per ton of coal 
continued to decline from the 1970s peak.  Willis wrote a 
letter dated February 11, 1987 to Eanes, informing him that 
“[i]n recent months, it has come to our attention that the 
depressing coal market has caused a decrease in the activity on 
the C. E. Wilson Estate property.”  In an interoffice 
memorandum written in April 1987, with “C.E. Wilson Estate – 
1600 Acres in Harlan, KY” as the subject, Eanes stated:   
At present, due to the depressed coal 
market, there [is] little or no mining 
activity on the property or in the area. . . 
. Coal is selling for $19.00 to $20.00 per 
ton; the cost to mine the coal is almost 
$19.00 - $20.00 per ton so it is not 
economically feasible to mine and sell coal 
in today’s market at a profit. 
 
At trial, Eanes testified that “[a]ny purchaser would buy the 
property for the reserves, but if he couldn’t mine the reserves 
and he couldn’t sell the coal, it had a very negative impact on 
the ability to sell the property.”   
Although the Trustee introduced only scant evidence of its 
efforts to market the property from 1987 to 1997, the 
Beneficiaries presented even less evidence as to anyone’s 
reasonable interest in purchasing the property.  Based upon the 
 
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lack of evidence of a market for the property, it is impossible 
to conclude that anything the Trustee did or did not do caused 
any damage to the Beneficiaries.  We have cited with approval 
the legal principle that a trustee who retains a trust asset 
during a “‘precipitous decline in the market,’” when there was 
no market for the asset, “‘cannot be held to account,’” so long 
as the trustee acted as a reasonable and prudent person would 
act in light of then existing conditions.  Harris v. Citizens 
Bank & Trust Co., 172 Va. 111, 125-26, 131, 200 S.E. 652, 657, 
659 (1939) (quoting In Re Pettigrew’s Estate, 171 A. 152, 155 
(1934)).  
To appraise the property in 1986, Willis had employed 
present worth, price per ton, and comparable sales approaches.  
However, the present worth and price per ton approaches 
utilized estimates only, and the comparable sales Willis relied 
upon were sales in 1979 and 1980, when the uncontroverted 
testimony was that the coal market was in a continuous state of 
decline from 1975 until 2003 or 2004.  While comparable sales 
often provide the soundest basis for an appraisal, in a 
declining market, sales completed six or seven years prior to 
the appraisal date cannot provide an accurate means of 
valuation.  The comparable sales were also of properties “much 
larger than the C.E. Wilson Estate.” 
 
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The goal of an appraisal is to reflect the fair market 
value of the subject property.  “We have defined the fair 
market value of a property as its sale price when offered for 
sale ‘by one who desires, but is not obliged, to sell it, and 
is bought by one who is under no necessity of having it.’”  
Keswick Club, L.P. v. County of Albemarle, 273 Va. 128, 136, 
639 S.E.2d 243, 247 (2007) (quoting Tuckahoe Woman’s Club v. 
City of Richmond, 199 Va. 734, 737, 101 S.E.2d 571, 574 
(1958)).  The record is devoid of sufficient evidence to 
substantiate the $1.1 million appraisal.  Eanes’ testimony at 
the 1987 hearing that the property “could be sold” and that 
there was “a market for the property,” without factual support, 
was insufficient to show there was a willing buyer.   
The earliest evidence of a willing buyer for the property 
was an offer in October 1992 for $75,000.  Thereafter, the 
following offers were made:  August 1996 – $281,190, November 
1996 – $25,000, and March 1997 - $100,000.  The last offer was 
countered by the Trustee at $350,000 and accepted in May 1997.  
The record contains no evidence of a willing buyer prior to 
1992 or of a buyer at any time willing to pay close to $1.1 
million for the property.  With no evidentiary support for the 
$1.1 million figure, and evidence contrary to the accuracy of 
the appraisal, it was an improper figure to serve as the 
expert’s foundation for the damages award.   
 
15
 
The circuit court’s order that the Trustee reimburse 
$89,028.30, plus interest, in engineering fees and trust 
expenses from 1992 through August 1998 rested on its conclusion 
that the Trustee’s failure to sell the property and timely 
diversify the Wilson trust portfolio resulted in additional 
damages to the Beneficiaries.  We need not resolve the issue of 
whether the Trustee breached its fiduciary duty to the 
Beneficiaries, because the Beneficiaries failed to present 
sufficient evidence that a sale of the property before 1997 was 
possible, and therefore failed to prove damages.  Since there 
was insufficient evidence to show that any action or inaction 
by the Trustee resulted in a failure to sell the property prior 
to 1997, and to invest the sale proceeds to accomplish 
diversification, there is insufficient evidence to support the 
circuit court’s order that the Trustee repay fees and expenses 
incurred in maintaining the property. 
CONCLUSION 
The circuit court erred in awarding damages to the 
Beneficiaries for breach of fiduciary duty on this record, 
which contained no evidence supporting the appraiser’s 
assumption and premise that there existed a willing buyer or 
other circumstances creating a viable market at the appraised 
or other reasonable value to enable the Trustee to diversify 
the Wilson trust portfolio in 1987.  For the reasons stated, we 
 
16
will reverse the judgment of the circuit court and enter final 
judgment in favor of the Trustee. 
Reversed and final judgment. 
 
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