Title: Caine v. Freier

State: virginia

Issuer: Virginia Supreme Court

Document:

PRESENT:  Carrico, C.J., Hassell, Keenan, Koontz, Kinser, and 
Lemons, JJ., and Compton, S.J. 
 
SUSAN FREIER CAINE, ET AL.  
 
OPINION BY 
SENIOR JUSTICE A. CHRISTIAN COMPTON 
v.  Record No. 011961 
 
June 7, 2002 
 
AMY K. FREIER 
 
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY 
Leslie M. Alden, Judge 
 
 
In this appeal of a final decree entered in a suit for aid 
and guidance brought by the personal representative of a 
decedent's estate, the issues emphasized by the appellants 
involve the chancellor's refusal to rule that the widow had 
waived statutory rights and refusal to impose sanctions upon 
her. 
 
Dr. Andrew A. Freier, a resident of Fairfax County, died 
testate on January 27, 1998 at age 74.  In August 2000, 
appellant Bank of America, N.A., (formerly NationsBank, 
successor to Sovran Bank) filed a "Bill of Complaint for Aid and 
Direction."  The Bank was named personal representative of Dr. 
Freier's last will dated December 19, 1990, which is under the 
administration of the court below. 
 
Defendants in the bill of complaint were appellant Susan 
Freier Caine, an adult, the testator's only daughter and a named 
beneficiary under the will; appellant Jonathan M. Freier, an 
adult, the testator's only son and a named beneficiary under the 
will; and appellee Amy K. Freier, the surviving wife of the 
testator.  She had married the testator in September of 1994.  
His children were from an earlier marriage. 
 
The widow made an election against the will pursuant to the 
omitted spouse statute, Code § 64.1-69.1 (when testator fails to 
provide by will for surviving spouse who married testator after 
execution of will, omitted spouse shall receive same share of 
estate that spouse would have received if decedent left no will, 
unless it appears from will or a marital agreement that omission 
was intentional). 
 
Central to this controversy is the question whether a 
proposed marital agreement executed only by Amy Freier should be 
given effect in the distribution of the estate. 
 
There are very few conflicts in the relevant facts.  The 
testator conducted an active medical practice for many years 
prior to his retirement in 1996.  In November and December of 
1997, he was hospitalized due to medical problems associated 
with congestive heart failure.  Following the hospitalization, 
discussions took place among the testator, his wife, and their 
separate attorneys.  These discussions were designed to 
effectuate a change to the testator's estate plan.  Under the 
provisions of the 1990 will, the testator's entire estate was 
left to his two children. 
 
A portion of the estate consisted of three Individual 
Retirement Accounts (IRAs), two of which named the children as 
 
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beneficiaries; the third named the testator's estate as 
beneficiary. 
 
The first change to his existing estate plan was 
accomplished on January 21, 1998, when the testator executed the 
proper documentation to make his wife the sole beneficiary of 
the three IRAs.  On January 22, 1998, a draft marital agreement 
was prepared by the testator's attorney to implement additional 
changes to the estate plan.  The wife's attorney added an 
additional provision to the draft and a final copy of the 
agreement was prepared by the testator's attorney. 
 
On January 24, 1998, the agreement was brought to the 
Freier home and the wife executed it.  On that day, the 
testator's attorney planned to present the agreement and a newly 
prepared will to Dr. Freier for his signature.  However, the 
testator was unable to communicate with his attorney due to his 
failing health.  When he died on January 27, 1998, he had not 
signed the marital agreement or the new will. 
 
In September 1998, the Freier children filed a suit in the 
court below seeking to void the designation of the widow as 
beneficiary of the IRAs.  They alleged forgery of the signatures 
of the IRA beneficiary forms, lack of capacity of the decedent 
to execute the forms, and fraud and undue influence by the 
widow. 
 
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Prior to the June 1999 trial in the IRA litigation, 
presided over by the same judge who presided in the present 
suit, the children learned that the widow had executed the 
marital agreement prior to the decedent's death.  The Bank, 
although not a party to the IRA litigation, also became aware 
prior to that trial of the execution of the agreement by the 
widow only.  However, the children did not pursue the issue of 
the agreement's enforceability during trial, even though the 
court raised it sua sponte. 
 
The circuit court ruled against the children and in favor 
of the widow in the IRA suit.  The children's petition for 
appeal from that judgment was refused by this Court.  Caine v. 
Freier, Record No. 992581 (April 25, 2000).∗
 
The August 2000 bill of complaint in the present suit filed 
by the Bank identified a number of issues, the determination of 
which, according to the Bank, would give aid and direction to 
assist in distribution of the assets remaining in the decedent's 
estate.  The first issue was whether the proposed marital 
agreement executed by the widow is fully or partially 
enforceable against the widow by the decedent's estate.  That 
issue was the subject of a demurrer and plea in bar filed by the 
widow. 
                     
 
∗ In Caine v. NationsBank, 262 Va. 312, 551 S.E.2d 653 
(2001), we decided another case involving Dr. Freier's estate. 
 
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The proposed agreement provided, inter alia, that the widow 
accepted the jointly owned family home.  The document stated she 
would not seek payment of any portion of the mortgage debt from 
the husband's estate and would be solely responsible for payment 
of that sum.  After providing for disposition of certain 
personalty and for transfer of the IRAs, the document provided 
that the widow "waive[d] the right to take an elective share of 
[decedent's] estate as otherwise accorded her by the Virginia 
Code." 
 
The draft will referred to the proposed agreement, made 
certain bequests to the widow, and gave the residue of the 
estate to the children in equal shares. 
 
In the demurrer, the widow asserted the agreement was 
unenforceable as a matter of law.  In the plea in bar, the widow 
asserted that the doctrine of res judicata also barred the Bank 
from prevailing on that issue because the issue could have been 
resolved in the IRA litigation decided in her favor. 
 
Following argument of counsel, the trial court ruled that 
res judicata barred the litigation of the marital agreement's 
enforceability.  Further, the trial court ruled that, even if 
res judicata did not apply, the proposed marital agreement is 
unenforceable as a matter of law. 
 
Additionally, the chancellor ruled against the children's 
contention that the January 1998 oral discussions regarding the 
 
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decedent's overall general estate plan constituted an agreement 
enforceable in regard to his estate.  The court found that "a 
review of the facts here shows that Dr. and Mrs. Freier intended 
to take all steps necessary to formalize their discussions in 
writing." 
 
Accordingly, the trial court, in a January 2001 order, 
sustained the demurrer and plea in bar.  In that order, the 
court required counsel to list all issues remaining to be 
addressed. 
 
After consideration of further evidence and argument of 
counsel, the chancellor disposed of the remaining issues in a 
May 2001 bench ruling.  The court noted that the Bank argued 
that the widow, through her conduct and other actions, had 
waived her statutory rights or that she was estopped from 
asserting those rights.  The court said "the Personal 
Representative takes this position notwithstanding the previous 
ruling regarding the unenforceability of the contract."  
Referring to the omitted spouse statute, Code § 64.1-69.1, the 
court ruled "that in the absence of a valid marital contract or 
other valid testamentary evidence, . . . there is just no 
authority in Virginia law for this Court to find that one is 
disqualified or disentitled from taking statutory entitlements." 
In essence, the chancellor decided that because the proposed 
marital agreement was unenforceable, there could be no waiver of 
 
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the widow's statutory rights.  However, in an alternative 
ruling, the chancellor concluded that, "as a matter of fact 
. . . neither waiver nor estoppel have been proved." 
 
Addressing the sanctions issue, the chancellor stated:  
"The Personal Representative has filed a motion for sanctions 
against Mrs. Freier and/or her attorneys for discovery-related 
conduct . . . that in large part took place in the prior 
litigation, litigation which was concluded years ago; has been 
up to the Supreme Court and is long over."  The chancellor noted 
that the conduct complained of was failure to timely produce the 
draft of the proposed agreement that contained the widow's 
signature. 
 
The chancellor denied the sanctions claim, ruling that any 
problems with "the proper pursuit of discovery" in the IRA 
litigation "should have been resolved in that case." 
 
The trial court also ruled that the personal representative 
had an obligation to contribute to the jointly owned purchase 
money mortgage indebtedness on the home of Dr. and Mrs. Freier, 
owned as tenants by the entireties with right of survivorship, 
and that the sum of $217,415.83 already paid by the personal 
representative as contribution was the correct sum. 
 
Consequently, in a June 2001 final decree, the trial court 
memorialized the foregoing, and other, rulings on issues the 
Bank raised seeking aid and guidance.  We awarded this appeal 
 
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limited to consideration of five assignments of error set forth 
in the joint petition for appeal filed by the Bank and the 
children. 
 
Initially, we rule upon a procedural issue raised by the 
widow.  We agree with her contention that the Bank must be 
dismissed as a party appellant. 
 
Code § 8.01-670(A) provides that "any person may present a 
petition for an appeal to the Supreme Court if he believes 
himself aggrieved . . . (3) By a final judgment in any . . . 
civil case." 
 
In the present case, the personal representative is not 
aggrieved by the decree from which it seeks an appeal.  In the 
bill of complaint, the Bank merely asked for the aid and 
guidance of the lower court in administering the decedent's 
estate, and the decree complained of gave it that relief. 
 
The chancellor's rulings in no way adversely affected the 
estate represented by the Bank.  We reject the Bank's contention 
that it has some "institutional" interest in administration of 
decedents' estates, thereby causing it to be adversely affected 
by the chancellor's rulings.  The Freier children are the 
persons adversely affected.  The personal representative "has no 
right, at the expense of the estate, to seek [rulings] favorable 
to these legatees."  Shocket v. Silberman, 209 Va. 490, 492, 165 
S.E.2d 414, 417 (1969). 
 
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However, the absence of the Bank as a party appellant does 
not prevent us from considering the appellate issues, argument 
of which is set forth in appellate briefs filed jointly by the 
children and the Bank. 
 
The analysis begins with the observation that the children 
have not assigned error to the trial court's rulings sustaining 
the widow's plea in bar on res judicata grounds; nor have they 
assigned error to that portion of the chancellor's ruling 
sustaining the demurrer regarding the unenforceability of the 
proposed marital agreement.  Therefore, we shall disregard the 
children's effort to resurrect the enforceability issue in this 
appeal.  See Rule 5:17(c). 
 
Because the unenforceability of the proposed marital 
agreement has been finally decided in this case, the children's 
appeal falls apart.  The invalidity of the agreement takes the 
issue of waiver and estoppel out of the case because the alleged 
validity of the agreement formed the principal basis of the 
waiver and estoppel argument.  Therefore, little remains to be 
discussed, given the assignments of error to which the appeal 
has been limited. 
 
The only issues that have any possible viability are (1) 
whether the trial court erred in refusing to find there was an 
"enforceable oral agreement" (as distinguished from the proposed 
formal written agreement) for the testator's general estate plan 
 
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between Dr. and Mrs. Freier that was binding upon Mrs. Freier; 
(2) whether the trial court erred in deciding that the widow 
"was entitled to have the Estate, by right of contribution, pay 
part of the outstanding balance on the joint debt of Dr. and 
Mrs. Freier for a purchase money deed of trust loan to acquire 
their marital home as tenants by the entirety, and in ruling 
that the Estate had paid the correct amount"; and (3) whether 
the trial court erred in deciding that the widow, as an 
"asserted beneficiary and creditor" of the decedent's estate, 
and her attorney, "had no obligation to disclose to the Personal 
Representative or to the court that she had signed the Marital 
Agreement, and then erred in refusing to impose sanctions 
against them for that failure to disclose and for other 
misrepresentations in their pleadings." 
 
There is no merit to the contention that the trial court 
erred in ruling there was no enforceable general oral agreement 
regarding the decedent's estate distribution plans.  For 
purposes of this discussion, we will assume but not decide that 
Virginia law permits an oral, unwritten, enforceable estate 
distribution plan.  But see Code § 64.1-49 (will not valid 
unless in writing and signed by testator); Code §§ 20-155 and -
149 (marital agreements shall be in writing).  We do not need to 
address that question of law, because here there is no credible 
 
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testimony that Dr. and Mrs. Freier had a definite oral agreement 
for the distribution of his estate. 
 
Indeed, there was evidence to support the chancellor's 
finding that the Freiers contemplated a formal written agreement 
regarding the distribution.  For example, Dr. Freier's attorney 
confirmed in testimony that, from the first meeting about estate 
planning held in December 1997, the parties "were working 
towards a written formal agreement . . . that would provide for 
her in accordance with his estate distribution."  The evidence 
established that the terms of the proposed written agreement 
were being modified up until the date of the testator's death. 
 
This issue is not controlled by cases relied upon by the 
children in which the Court has approved enforcement of oral 
agreements. For example, in Snyder-Falkinham v. Stockburger, 249 
Va. 376, 457 S.E.2d 36 (1995), we gave effect to an oral 
agreement to settle a lawsuit even though the parties had 
contemplated a formal written settlement agreement.  In that 
case, however, unlike the present case, there was no dispute 
that all parties and counsel had agreed to all aspects of the 
settlement, when one party rejected the deal before a formal 
agreement was drafted but after the case had been dismissed with 
prejudice. 
 
Next, we reject the children's contention that the trial 
court erred in deciding that the estate properly paid, by right 
 
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of contribution, a part of the purchase money mortgage 
indebtedness on the marital home owned as tenants by the 
entireties with right of survivorship, and that the amount paid 
of approximately $217,400 was correct. 
 
In 1995, the Freiers, as husband and wife, purchased a home 
for their primary residence; it was titled and held as tenants 
by the entireties.  A portion of the purchase price was paid in 
cash, and a purchase money deed of trust was obtained for the 
balance.  Both husband and wife were jointly and severally 
liable for the obligation.  When Dr. Freier died, full ownership 
of the home passed to the widow by operation of law because of 
her status as the surviving tenant by the entireties. 
 
The widow continued to occupy the home until she sold it in 
March 1999.  At closing, there remained a balance of about 
$434,000 on the indebtedness.  At the widow's request, the 
personal representative made the foregoing payment, which 
represented one-half of the indebtedness, to the mortgage 
company at closing.  The children now dispute the payment, 
contending the personal representative was not required to make 
it, and that the incorrect amount was paid.  We disagree. 
 
Virginia follows "the common-law rule that in the absence 
of a contrary testamentary direction, the personal estate of a 
decedent is the primary fund for the payment of his debts, even 
though they may be secured by [a] deed of trust given by the 
 
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decedent in his lifetime on real [e]state."  Brown v. Hargraves, 
198 Va. 748, 750, 96 S.E.2d 788, 790 (1957).  This is true even 
if "the entire estate is vested in the surviving joint tenant, 
and the estate of the deceased takes nothing in the property."  
Id.
 
When, as here, each of the joint tenants became personally 
liable, jointly and severally, to the noteholder for the full 
amount of the note, "each was entitled to the right of 
contribution, an equity which arises when one of several parties 
liable on a common debt discharges the obligation for the 
benefit of all."  Id. at 751, 96 S.E.2d at 791. 
 
Therefore, because Dr. Freier's estate is liable for his 
debts, and the proceeds of his personal estate are primarily 
liable for paying them, Mrs. Freier is entitled, under the right 
of contribution, to have his personal estate charged with 
liability for one-half of the joint indebtedness evidenced by 
the note in question. See id. at 752, 96 S.E.2d at 791-92.  
Accord Pickett v. Spain, 254 Va. 107, 110, 487 S.E.2d 233, 235 
(1997).  See also Code § 8.01-11(B) (personal representative 
charged with joint obligations of decedent). 
 
And, the personal representative is liable for one-half of 
the indebtedness that is due at the time contribution is sought.  
Brown, 198 Va. at 752, 96 S.E.2d at 792.  Thus, the trial court 
 
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correctly decided that the personal representative paid the 
correct amount in contribution. 
 
Finally, we do not agree with the children's contention 
that the trial court abused its discretion by refusing to impose 
sanctions in this case upon the widow and her attorneys due to 
alleged failure in the IRA litigation promptly to disclose the 
existence of the proposed marital agreement signed by the widow.  
The children argue that the widow and her attorneys had an 
affirmative duty of disclosure, which they violated. 
 
As the trial court correctly ruled, there was no basis in 
the present case for sanctions regarding discovery in prior, 
concluded litigation, even assuming a duty of disclosure somehow 
existed and the duty was violated. 
 
Consequently, we will dismiss the personal representative 
as a party appellant and, finding no error in the judgment 
below, it will be 
Affirmed. 
 
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