Caine v. Freier

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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