Court Opinion

ID: 4673575
Source: CourtListenerOpinion
Date Created: 2021-04-01 13:17:29.938103+00
Date Added: 2024-06-11T08:03:14.813682
License: Public Domain

PRESENT: Lemons, C.J., and Goodwyn, Powell, Kelsey, McCullough, and Chafin, JJ., and
Koontz, S.J.

THOMAS K. PLOFCHAN, JR.,
CO-TRUSTEE OF THE PAULA G.
PLOFCHAN REVOCABLE TRUST, ET AL.
                                                                    OPINION BY
v. Record No. 200237                                       JUSTICE S. BERNARD GOODWYN
                                                                     April 1, 2021
PAULA G. PLOFCHAN

                   FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
                               Robert J. Smith, Judge
       In this appeal, we consider whether the circuit court erred in concluding that the plaintiffs

lacked standing and were collaterally estopped from litigating the issue of the defendant’s

relevant states of mental competency, because of rulings in a prior out of state guardianship

proceeding.

                                         I. BACKGROUND

       Paula G. Plofchan (Ms. Plofchan), matriarch of the Plofchan family, is 82 years old. Ms.

Plofchan was married to Thomas K. Plofchan, Sr. Ms. Plofchan and her husband had seven

children.

       On April 14, 1997, Ms. Plofchan executed a general durable power of attorney (POA).

Ms. Plofchan was residing in Texas at the time of execution, thus the POA is governed by Texas

law. In the POA, Ms. Plofchan appointed her husband to be her attorney-in-fact, but provided

that in case her husband was not able to serve, one of her sons, Thomas Plofchan, Jr. (Thomas),

would serve as her attorney-in-fact. In 2001, after Ms. Plofchan’s husband passed away, Thomas

became her attorney-in-fact pursuant to the terms of the POA.

       The POA conferred broad powers on Ms. Plofchan’s attorney-in-fact, but also

specifically authorized the attorney-in-fact to “[d]emand, sue for, and receive all sums of money

. . . [and] property (both real and personal)” owed to Ms. Plofchan. It further authorized the

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attorney-in-fact to “take all means for the recovery” of funds owed to Ms. Plofchan, including

actions at law and suits in equity.

       Several years later, on September 30, 2006, Ms. Plofchan executed the Paula G. Plofchan

Revocable Trust Agreement (the Trust Agreement), creating the Paula G. Plofchan Revocable

Trust (the Trust). In addition to being the grantor, Ms. Plofchan was also the trustee. The Trust

Agreement provided that the grantor reserved “the right and power to alter, amend, or revoke this

[T]rust [A]greement, at any time, and from time to time, without the consent of the trustee or any

person.” The Trust Agreement also stated that “[a]ny trustee is entitled to receive reasonable

compensation for such trustee’s services rendered in the administration of the [T]rust.” Although

Ms. Plofchan was still residing in Texas when she created the Trust, the Trust Agreement

provided that it would be “construed and administered in accordance with the laws of the State of

Virginia.”

       In 2013, Ms. Plofchan moved to New York to reside with one of her daughters, Jennifer

Tyler (Jennifer). In June 2014, after undergoing a medical evaluation, Ms. Plofchan was

diagnosed with Alzheimer’s disease.

       On November 20, 2016, Ms. Plofchan resigned as trustee of the Trust, and named two of

her children, Elizabeth Plofchan (Elizabeth) and Thomas, as co-trustees to succeed her. In her

resignation letter, Ms. Plofchan provided that “[i]n so resigning, I recognize that the successor

co-trustees shall consider that my powers of alteration, amendment, revocation and withdrawal

are suspended under the conditions set forth in the article titled Rights Reserved by the Grantor.”

Less than a week later, two doctors, Dr. Maria Muste (Dr. Muste) and Dr. Jeannette Yuen (Dr.

Yuen), signed certificates of incapacity stating that Ms. Plofchan was deemed incapacitated

pursuant the terms of the Trust Agreement.

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       On May 29, 2018, Ms. Plofchan executed a Revocation of Durable Power of Attorney,

regarding the POA that appointed Thomas. On the same date, Ms. Plofchan petitioned the

Supreme Court of Westchester County, New York, (the New York guardianship court) to

appoint a guardian for her, pursuant to Article 81 of the New York Mental Hygiene Law.

       In her petition, Ms. Plofchan claimed that while she was initially comfortable with

Thomas’ handling of her finances, she had been displeased with his recent actions, which she

believed displayed a desire for increased control over her personal choices. She alleged that his

actions were interfering with her personal freedom and her ability to make choices about her own

quality of life. Thus, she asked the New York guardianship court to appoint her daughter,

Jennifer, as her property guardian.

       In her petition, Ms. Plofchan also requested that the New York guardianship court

terminate all authority granted to Thomas and Elizabeth as co-trustees of the Trust. She further

requested that the New York guardianship court revoke any documents “indicating or

suggesting” that she had surrendered her capacity or competency in favor of the authority of

Thomas and/or Elizabeth pursuant to the Trust.

       On August 21, 2018, Dr. Muste and Dr. Yuen signed and notarized revocations of their

prior certificates of incapacity concerning Ms. Plofchan. Dr. Muste indicated that her last

examination of Ms. Plofchan was in early May of 2018. She stated that Ms. Plofchan’s

Alzheimer’s diagnosis remained in place and that she had some short term memory loss, but that

Ms. Plofchan had “a broad understanding of her finances.” Dr. Muste further indicated that she

believed Ms. Plofchan was “capable of making overall determination[s] and decisions as to the

use and management of her investments and the proper use of her daily expenditures.” Dr. Yuen

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indicated that she last examined Ms. Plofchan a month prior and reported that Ms. Plofchan’s

medical condition was stable.

         On August 22, 2018, Ms. Plofchan sent to all her children, including Thomas and

Elizabeth, a letter with the subject line “Paula G. Revocable Trust.” The body of the letter stated

simply: “Please be advised that in accordance with Article IIIA of the Paula G. Plofchan

Revocable Trust Agreement, I hereby revoke the Trust Agreement in its entirety.” The letter was

signed by Ms. Plofchan.

         The New York guardianship court held proceedings regarding Ms. Plofchan’s petition

over the course of four days: August 23, 2018 and September 4-6, 2018. The New York

guardianship court noted that Ms. Plofchan was present, “meaningfully participated,” and was

represented by a counsel of her choosing. Ms. Plofchan testified at the proceeding. She

explained that she never managed her own finances during her adult life, stating that it was

something her husband handled. She indicated that she “has never budgeted her finances and

simply spends what she wants and expects her agents to pay the bills.”

         Thomas also testified. He stated that there had been a “closure of communication” and

characterized Ms. Plofchan’s actions as an “‘overreaction’ to the co-trustees’ budgeting

decisions.” He explained that his concern with Ms. Plofchan having an unrestricted budget was

that Ms. Plofchan’s resources may be insufficient to provide for her needs for another 10 or 12

years.

         The court-appointed evaluator also testified and her report was admitted into evidence.

She noted that Ms. Plofchan could not delineate her assets or expenses, but that Ms. Plofchan felt

she was being deprived of things she loved due to certain bills not being paid. The court-

appointed evaluator observed that some internal family conflict existed and that only two of Ms.

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Plofchan’s seven children supported her petition, whereas the other five children supported the

system already in place where Thomas and Elizabeth managed Ms. Plofchan’s finances.

       On January 22, 2019, the New York guardianship court entered an order denying Ms.

Plofchan the relief she sought and dismissing the proceeding. The New York guardianship court

found that Ms. Plofchan was not an incapacitated person as the term is defined in Article 81 of

the New York Hygiene Law, and declined to accept her consent to appoint a guardian. The New

York guardianship court explained that while it was clear that Ms. Plofchan was unhappy with

Thomas and Elizabeth’s management and felt a loss of control over her day-to-day decision-

making, that there was no evidence of any fiduciary violations “sufficient to render the current

advanced directives [including the POA and Trust] insufficient or unreliable.” The New York

guardianship court found that the POA and Trust executed by Ms. Plofchan were still appropriate

and sufficient to provide proper protection of Ms. Plofchan’s assets and obviated the need for

appointing a guardian.

       On April 30, 2019, Thomas and Elizabeth, as co-trustees of the Trust, and Thomas as the

attorney-in-fact for Ms. Plofchan, filed a complaint against Ms. Plofchan in the Circuit Court for

Fairfax County. They alleged that Ms. Plofchan is incapacitated as it relates to financial matters,

and that she had ineffectively attempted to revoke the POA and the Trust. Thomas and Elizabeth

claimed that beginning in June 2018, Ms. Plofchan, along with the help of two of her daughters,

had frustrated the administration and management of Trust assets by contacting certain financial

institutions in efforts to remove the co-trustees from the accounts, resulting in the co-trustees’

loss of access to the accounts. Thomas and Elizabeth stated that they have not been able to

regain access to the Trust’s accounts or to Ms. Plofchan’s accounts. They claimed they have not

been able to “substantially communicate” with Ms. Plofchan since May 2018.

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       Thomas and Elizabeth sought injunctive relief to prohibit Ms. Plofchan from dissipating

Trust assets and interfering with the Trust’s administration. They averred that funds were

removed from the Trust to pay for Ms. Plofchan and Jennifer’s attorneys in the New York

guardianship proceeding and that Ms. Plofchan paid Jennifer with funds from the Trust in an

amount that went “above and beyond” a reasonable amount for room and board; Thomas and

Elizabeth requested that the circuit court enter a mandatory injunction requiring the funds to be

returned to the Trust. Lastly, Thomas and Elizabeth argued that even if the circuit court found

that Ms. Plofchan was not incapacitated and that she properly revoked the Trust Agreement and

POA, they were still entitled to reimbursement for costs and expenses incurred while carrying

out their duties as co-trustees and attorney-in-fact. Therefore, they asked the circuit court to

grant them all fees, costs, and reasonable attorneys’ fees expended in defense of the Trust and the

POA.

       In June 2019, Ms. Plofchan filed what she titled a “plea in bar” in response to Thomas

and Elizabeth’s complaint. In her plea in bar, Ms. Plofchan asserted that plaintiffs lacked

standing and that collateral estoppel barred the plaintiffs from challenging Ms. Plofchan’s mental

capacity.

       Specifically, Ms. Plofchan claimed that Thomas lacked standing to bring the action as her

attorney-in-fact because she revoked the POA in May 2018. Further, she claimed that she

revoked the Trust in August 2018, and thus Thomas and Elizabeth lacked standing to bring the

action as co-trustees of the Trust because the Trust did not exist as of the date of the filing of the

complaint, meaning that they held no fiduciary position. Lastly, Ms. Plofchan argued that the

doctrine of collateral estoppel barred the plaintiffs from relitigating the issue of her mental

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capacity because the New York guardianship court had made a factual finding that she was not

an incapacitated person.

       On August 30, 2019, the circuit court held a hearing on the plea in bar. After hearing

arguments from both sides, the circuit court ruled from the bench that the plea in bar was

sustained; the circuit court did not elaborate on its ruling. The circuit court noted that because

the plea in bar regarding standing was sustained, the plaintiffs did not have standing to request

fees and costs of any type. On the same date, the circuit court entered an order sustaining the

plea in bar and dismissing the complaint with prejudice.

       Thomas and Elizabeth appeal. We granted three assignments of error:

   1. The Court abused its discretion in sustaining the Plea in Bar for Collateral Estoppel. This
      was an error of law and not harmless.

   2. The Court abused its discretion in sustaining the Plea in Bar for Lack of Standing. This
      was an error of law and not harmless.

   3. The Court abused its discretion in sustaining a plea in bar to the Fiduciaries’ claims for
      fees and costs because such claims could not be resolved by the plea in bar.

                                           II. ANALYSIS

                                       A. Collateral Estoppel

       Thomas and Elizabeth argue that the circuit court erred in sustaining Ms. Plofchan’s plea

in bar. They contend that collateral estoppel does not bar their action. They assert that the issue

litigated in the New York guardianship proceeding and the issues in the current proceeding

concerning Ms. Plofchan’s mental capacity are not the same. Specifically, they argue that the

standards to determine mental capacity are different in New York, Virginia, and Texas. They

also contend that the parties and their privies are not the same.

       Ms. Plofchan argues that the circuit court correctly sustained the plea in bar because

collateral estoppel bars Thomas and Elizabeth’s action. Ms. Plofchan contends that her mental

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capacity was actually litigated in the New York proceeding, and that Thomas and Elizabeth are

precluded from relitigating the issue of her mental capacity in this lawsuit. She argues that even

though the legal standards are different, the factual finding made by the New York guardianship

court, that Ms. Plofchan was not an incapacitated person, meets the capacity requirements in

Virginia and Texas. Additionally, Ms. Plofchan argues that the New York guardianship court

found that Ms. Plofchan understood and wanted to take authority away from Thomas to act as

her agent and give it to Jennifer; she contends this established her capacity to revoke the POA

pursuant to Texas law. Ms. Plofchan contends that privity is satisfied because Thomas and

Elizabeth were parties in the New York guardianship proceeding.

       Collateral estoppel, also referred to as issue preclusion, prevents the same parties from

“[re]litigating in a subsequent suit any issue of fact actually litigated and essential to a valid and

final personal judgment in the first action.” Funny Guy, LLC v. Lecego, LLC, 293 Va. 135, 142

(2017) (internal quotation marks and alteration omitted). “Whether a claim or issue is precluded

by a prior judgment is a question of law this Court reviews de novo.” Lane v. Bayview Loan

Serv., LLC, 297 Va. 645, 653 (2019).

       In order to successfully assert collateral estoppel, a party must establish the following:

       (1) the parties [or their privies] to the two proceedings must be the same, (2) the
       issue of fact sought to be litigated must have been actually litigated in the prior
       proceeding, (3) the issue of fact must have been essential to the prior judgment,
       and (4) the prior proceeding must have resulted in a valid, final judgment against
       the party against whom the doctrine is sought to be applied.
Id. at 654–55 (alteration in original) (internal quotation marks omitted). If a party fails to prove

any one of these elements, then collateral estoppel does not bar the litigation.

       We conclude Ms. Plofchan failed to establish that the issues of her mental capacity to

revoke the POA in May 2018 and to revoke the Trust in August 2018, and her mental capacity at

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present, were actually litigated in the New York proceedings. This is so for two reasons. First,

the New York guardianship court evaluated Ms. Plofchan’s mental capacity in terms of whether

she needed a guardian appointed to protect her interests, applying a different standard than is

applied when determining testamentary or contract capacity. Second, the issue of whether Ms.

Plofchan specifically had the capacity to revoke her Trust and POA was not actually litigated.

        The standard New York courts apply in a guardianship proceeding is set forth in the

Mental Hygiene Law, which provides that

        the determination of incapacity shall be based on clear and convincing evidence
        and shall consist of a determination that a person is likely to suffer harm because:
        1. the person is unable to provide for personal needs and/or property management;
        and 2. the person cannot adequately understand and appreciate the nature and
        consequences of such inability.
N.Y. Mental Hyg. Law § 81.02. Notably, this standard is different from the New York standard

for determining whether an individual had capacity to execute trust documents. See, e.g., In re

Estate of Donaldson, 956 N.Y.S.2d 840, 842–43 (N.Y. Sur. Ct. 2012). When evaluating an

individual’s capacity to execute trust documents, New York courts apply the “contract standard

of capacity, which focuses on whether the person was able to understand the nature and

consequences of a transaction and make a rational judgment concerning it.” Id. at 843. The

determination of whether Ms. Plofchan had capacity to execute or revoke the POA and the Trust

was not actually litigated in the New York guardianship proceeding.

        Additionally, to the extent the issue of Ms. Plofchan’s mental capacity was litigated in

New York, it was done using a different standard than that which would be applicable in this

lawsuit. Under Virginia law, “[t]he capacity required to create, amend, revoke, or add property

to a revocable trust, or to direct the actions of the trustee of a revocable trust, is the same as that

required to make a will.” Code § 64.2-750. “Such capacity exists, if at the time a will is

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executed, the testator is capable of recollecting her property, the natural objects of her bounty

and their claims upon her, knew the business about which she was engaged and how she wished

to dispose of the property.” Kiddell v. Labowitz, 284 Va. 611, 629 (2012) (internal quotation

marks omitted). The time at which a document is executed is the “vital time for mental capacity

to exist.” D’Ambrosio v. Wolf, 295 Va. 48, 57 (2018).

       The same is true regarding Ms. Plofchan’s capacity to revoke the POA, which is subject

to Texas law. In Texas, a person has the mental capacity to revoke a power of attorney if he or

she understands the nature and consequences of his or her actions. See In re Estate of Vackar,

345 S.W.3d 588, 597 (Tex. Ct. App. 2011). Similar to Virginia, Texas courts also evaluate

whether an individual had capacity at the time the documents were executed. Kinsel v. Lindsey,

526 S.W.3d 411, 419 (Tex. 2017). This determination may include looking to “state of mind at

other times if it tends to show one’s state of mind on the day a document was executed.” Id.

       The New York guardianship court analyzed the issue of Ms. Plofchan’s capacity for

purposes of deciding whether to appoint a guardian under the proper New York Mental Hygiene

Law standard, not the Virginia trust or Texas power-of-attorney standard regarding capacity to

execute or revoke those documents. The New York guardianship court did not even apply New

York’s standard regarding whether Ms. Plofchan had the capacity to execute documents; it only

determined the narrow issue of whether she needed a guardian pursuant to the New York

Hygiene Law. It found that she did not.

       For collateral estoppel to preclude the litigation of an issue, it must be certain that the

issue was actually litigated in a prior proceeding, and simply put, the issues of Ms. Plofchan’s

mental competency to revoke the POA or the Trust, and her mental competency at present, were

not actually litigated in the New York guardianship court. The issue before the New York

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guardianship court was whether an “appointment of a guardian was necessary to provide for [Ms.

Plofchan’s] personal needs or to manage [] her property and financial affairs.” The New York

guardianship court only evaluated Ms. Plofchan’s capacity in that context and pursuant to the

standard set forth in Article 81 of the Mental Hygiene Law. The New York guardianship court

stated that it did not find that Ms. Plofchan was incapacitated, but its finding was limited only to

that time and her mental capacity as defined in Article 81 of the Mental Hygiene Law.

       The key inquiry, regarding Ms. Plofchan’s mental capacity, in the action initiated by

Thomas and Elizabeth is whether Ms. Plofchan had the mental capacity on the dates she signed

the revocations of the POA and the Trust and presently, not whether she generally had the mental

capacity to manage her affairs at the time of the guardianship hearing. Even if the New York

guardianship court’s order could be construed as ruling on Ms. Plofchan’s mental capacity

generally, it made no findings regarding her mental capacity on May 29, 2018, and August 21,

2018, the dates she attempted to revoke the POA and the Trust. Thus, the issues regarding Ms.

Plofchan’s mental competence, relevant to the instant lawsuit, were not actually litigated in the

New York guardianship proceeding, and collateral estoppel does not preclude those issues from

being litigated in this case. Therefore, the circuit court erred in sustaining Ms. Plofchan’s plea in

bar based upon collateral estoppel.

                                               B. Standing

       Thomas and Elizabeth argue that they have standing to bring their action and that the

circuit court erred in concluding otherwise. They assert that because Ms. Plofchan failed to

present evidence to support her plea, the circuit court was required to accept the well-pled

allegations in their complaint as true and that their complaint alleged sufficient facts to give rise

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to standing. They aver that they not only had standing to bring the suit, but an obligation to do

so to protect the Trust and Ms. Plofchan’s assets.

         Further, Thomas and Elizabeth also assert that even if the plea in bar was properly

sustained regarding the bulk of their complaint, the circuit court erred in sustaining the plea in

bar concerning their claim to recover fees and costs. They contend that even if Ms. Plofchan

validly discharged them as fiduciaries, they still had the right to claim fees and costs incurred

while serving in their representative capacity. Thomas and Elizabeth aver that to claim this right

they had to appear before the court in the same capacity in which they held this right; in other

words, they could not appear before the court as individuals to claim fees and costs incurred at a

time when they served in fiduciary capacities. They claim that they were entitled to fees and

costs for the time period they served in their fiduciary capacities.

         Ms. Plofchan asserts Thomas and Elizabeth lack standing to bring their action and that

the circuit court properly dismissed the action. She argues that she lawfully revoked the Trust

and POA prior to the initiation of this suit, and the circuit court properly relied on the pleadings

in concluding that she did so. Therefore, in her view, the circuit court correctly determined that

the named plaintiffs lacked standing to sue.

         Ms. Plofchan contends that Thomas and Elizabeth’s argument that they can sue for fees

incurred in their fiduciary capacity, prior to the revocation of the Trust, fails. She avers that the

statute Thomas and Elizabeth rely on only allows fees and costs to be paid “from the trust that is

the subject of the controversy;” thus, because the Trust had been dissolved prior to the

commencement of their action, there was no way for the circuit court to award fees from the

Trust.

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       The standard of review on appeal when considering a plea in bar is “functionally de

novo” when the appellate court must consider solely the pleadings to resolve the issue presented.

Massenburg v. City of Petersburg, 298 Va. 212, 216 (2019). When the circuit court takes no

evidence on the plea in bar, we accept the plaintiff’s allegations in the complaint as true. Station

#2, LLC v. Lynch, 280 Va. 166, 169 (2010). No evidence was taken by the circuit court

regarding the plea in bar ruled upon in this case.

        “Broadly speaking, standing can be established if a party alleges he or she has a ‘legal

interest’ that has been harmed by another’s actions.” Howell v. McAuliffe, 292 Va. 320, 330

(2016). Under Virginia law, trustees have the power to “[p]rosecute or defend an action, claim,

or judicial proceeding in any jurisdiction to protect trust property and the trustee in the

performance of the trustee’s duties.” Code § 64.2-778.

       Here, Thomas and Elizabeth alleged that they were co-trustees of the Trust, that Thomas

was Ms. Plofchan’s attorney-in-fact, that Ms. Plofchan did not have the mental capacity to

revoke her Trust or the POA, and that they, in their fiduciary capacities, were bringing suit to

protect the assets and administration of the Trust. Taking these allegations as true, as the circuit

court was required to do when ruling on a plea in bar without taking evidence, Thomas and

Elizabeth have standing to bring the underlying action. Therefore, the circuit court erred in

sustaining the plea in bar for lack of standing.

       Relatedly, the circuit court also erred in dismissing Thomas and Elizabeth’s claims for

fees and costs they purportedly incurred in carrying out their fiduciary duties, because that ruling

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was based upon the circuit court’s erroneous determination that Thomas and Elizabeth did not

have standing to bring those claims. *

                                         III. CONCLUSION

       In sum, the circuit court erred in sustaining the plea in bar because collateral estoppel did

not preclude Thomas and Elizabeth’s presenting relevant evidence concerning their allegations

regarding Ms. Plofchan’s competence, and as pled, the allegations in their complaint established

that they had standing to pursue the claims asserted in their complaint. Thus, the circuit court

erred in granting the plea in bar and dismissing Thomas and Elizabeth’s action. Accordingly, we

will reverse the judgment of the circuit court and remand this case for further proceedings

consistent with this opinion.

                                                                           Reversed and remanded.

       *
         We need not address Thomas and Elizabeth’s third assignment of error in any greater
detail because “the doctrine of judicial restraint dictates that we decide cases on the best and
narrowest grounds available.” Henderson v. Cook, 297 Va. 699, 710 (2019) (internal quotation
marks omitted).

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