PRESENT: Koontz, Kinser, Lemons, Goodwyn, Millette, and Mims,
JJ., and Russell, S.J.
CHRISTINE DOLBY
OPINION BY
v. Record No. 091023 JUSTICE LEROY F. MILLETTE, JR.
June 10, 2010
CATHERINE DOLBY, ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Robert J. Smith, Judge
In this appeal of a suit to seek aid and direction
regarding the administration of a decedent’s estate and trust,
we address whether the circuit court erred in ruling that the
decedent’s estate was not liable for a debt evidenced by a
promissory note, that was executed solely by the decedent, and
secured by a deed of trust on real property held by the
decedent and the decedent’s surviving spouse as tenants by the
entirety with the right of survivorship.
BACKGROUND
In 2002, Cornelius A. Dolby (Dolby) acquired title, in
his name alone, to a house in McLean (the Property). In
connection with the acquisition of the Property, Dolby
executed a promissory note, also in his name alone, secured by
a deed of trust with the Property as security. In 2005, Dolby
refinanced and satisfied the original note and executed a new
promissory note secured by a new deed of trust with the
Property as security. Dolby was the sole obligor on the new
2005 note.
In early 2006, Dolby married Christine G. Dolby (Mrs.
Dolby). On August 28, 2006, Dolby executed a deed
transferring the Property to himself and Mrs. Dolby as tenants
by the entirety with the right of survivorship. Dolby
remained the sole obligor on the note after this transfer of
ownership. Mrs. Dolby was not added as a joint obligor on the
note, nor did she assume the obligation.
On September 19, 2006, Dolby executed a will and an
amended trust. Article 1.3 of the will provides for the
payment of “all legally enforceable debts.” Article 1.3
stated in part:
I hereby expressly empower my executor to pay such
debts and expenses . . . . My Executor shall not be
required to pay prior to maturity any debt secured
by mortgage, lien or pledge of real or personal
property owned by me at my death, and such property
shall pass subject to such mortgage, lien or pledge.
Dolby died on December 25, 2006, and Mrs. Dolby, as the
surviving spouse and tenant by the entirety, received title to
the Property in fee simple absolute by operation of law. Mrs.
Dolby, Kent Dolby, and Kirkmon Dolby (collectively, the
Executors) were appointed as co-executors of the estate
pursuant to Dolby’s will. The Executors filed a complaint for
aid and direction regarding the estate, asking the circuit
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court to determine whether Dolby’s estate or Mrs. Dolby was
liable for payment of the indebtedness on the note secured by
the deed of trust (the mortgage debt). Mrs. Dolby filed an
answer asking that the estate be responsible for the mortgage
debt. Catherine J. Dolby, Kimberly Dolby Lauth, and Heather
Dolby Kho (collectively, the Dolby children), as beneficiaries
under the trust, filed an answer requesting that the mortgage
debt not be paid from the estate, but instead pass with the
Property as a lien on the Property.
At the conclusion of the bench trial, the circuit court
issued a letter opinion and an order ruling that the mortgage
debt was not an obligation of Dolby’s estate and shall not be
paid from the estate, and that the Property should pass to
Mrs. Dolby subject to the debt. The circuit court held that
Article 1.3 of Dolby’s will evinced his intent that the
Property pass to Mrs. Dolby subject to the mortgage debt.
Mrs. Dolby appeals. The Executors and the Dolby children
participated in the appeal as appellees.
DISCUSSION
Mrs. Dolby argues that the circuit court erred in ruling
that the mortgage debt is not an obligation of Dolby’s estate
because Virginia law requires that an estate pay its just
debts. Mrs. Dolby contends that the mortgage debt is a debt
of the Dolby estate because Dolby executed the note in his
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name alone, and thus was personally and solely liable for the
mortgage debt, even though it was secured by the mortgage on
the Property. Mrs. Dolby asserts that a testator does not
have the authority to direct his or her estate not to pay a
just debt or to shift the obligation of the debt to property
that is outside of the testator’s estate.
In response, the Dolby children argue that a testator may
assign his or her debts to property that secures that debt.
The Dolby children concede that the Property is not part of
Dolby’s estate and that the pertinent language in the will
refers only to transfers under the will. The Dolby children
argue, however, that the circuit court’s ruling was correct
because it gave effect to Dolby’s intent that the mortgage
debt pass with the Property.
The issue whether Dolby’s estate is liable to pay the
mortgage debt is resolved by answering two questions: (1)
whether Dolby had a personal obligation to pay the debt, and
(2) whether the mortgage debt is secured by real property
owned by Dolby upon his death. The answer to the first
question is that Dolby was personally and solely liable for
the note that he signed. Brown v. Hargraves, 198 Va. 748,
751, 96 S.E.2d 788, 791 (1957). In Brown, we addressed
whether a deceased joint tenant’s estate was liable for
payment of a debt evinced by two notes, jointly executed by
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both joint tenants, which were secured by deeds of trust on
land held as joint tenants with the right of survivorship.
Id. at 749, 96 S.E.2d at 789. In holding that the deceased
joint tenant’s estate was liable for one-half of the joint
debt, we stated:
The answer to the question presented us depends
upon whether or not the obligation was one for which
each of the makers thereof was personally liable.
That question must be answered in the affirmative.
In this case, whether the debt was for a loan
for money advanced, for purchase-money, or was
secured or unsecured, is not material in fixing
liability. Where the obligation to pay the debt is
personal, joint and several, as here, it is the
nature of the obligation which controls. Cf.
Annotation, 5 A.L.R. page 503. The debt evidenced
by the notes was created when the notes were
executed. The makers thereof became primarily
liable, jointly and severally. The deeds of trust
merely created liens on the realty, a collateral
security for the payment of the notes.
Id. at 751-52, 96 S.E.2d at 791 (emphasis added).
In this case, unlike in Brown which involved a joint
obligation of the two owners of the secured property, the
mortgage debt arises from a note upon which Dolby was solely
liable. Mrs. Dolby was not added as a joint obligor on the
note, nor did she assume the obligation. Although Dolby and
Mrs. Dolby owned the Property as tenants by the entirety with
the right of survivorship upon Dolby’s death, the mortgage
debt on the Property remained a personal obligation of Dolby
at the time of his death. Therefore, the mortgage debt is a
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debt of Dolby’s estate. Id. at 752, 96 S.E.2d at 791-92. See
also Caine v. Freier, 264 Va. 251, 259, 564 S.E.2d 122, 127
(2002) (holding that a deceased spouse’s estate is liable for
contribution to the surviving spouse on a mortgage debt upon
which both spouses were personally liable). Additionally,
Article 1.3 of Dolby’s will directs the Executors to pay all
of the estate’s “legally enforceable debts.”
The second question we must answer to determine if
Dolby’s estate is liable for the mortgage debt is whether the
mortgage debt is secured by real property owned by Dolby upon
his death. The answer to that question is no. Article 1.3
provides that the Executors are not required to pay prior to
maturity any debt secured by mortgage on real property that is
owned by Dolby upon his death. This exception does not apply
to the Property because Dolby’s ownership interest did not
survive his death. Id. at 259, 564 S.E.2d at 126. Rather,
Dolby and Mrs. Dolby owned the Property as tenants by the
entirety with the right of survivorship. Therefore, the
Property passed to Mrs. Dolby by operation of law and is not
part of the Dolby estate. The exception exempting the
Executors from paying a debt prior to its maturity does not
apply, and the Dolby estate must, according to the will, pay
the mortgage debt. The circuit court erred in concluding that
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the exception in Article 1.3 for mortgages on real property
applied.
The Dolby children’s argument that the estate is not
liable to pay the mortgage debt because Dolby did not intend
for his estate to pay the mortgage debt is without merit.
Virginia law has long held that the testator’s intent is the
“guiding star” in interpreting wills. Smith v. Trustees of
Baptist Orphanage, 194 Va. 901, 903, 75 S.E.2d 491, 493
(1953). When such intent is ascertained, “effect will be
given to it unless it violates some rule of law, or is
contrary to public policy.” Conrad v. Conrad, 123 Va. 711,
716, 97 S.E. 336, 338 (1918). Clearly, a testator cannot
lawfully direct the executor of his or her estate not to pay
lawfully enforceable debts based upon the testator’s sole and
personal obligation, or to charge such debts against property
that passes outside of the testator’s estate. Edmunds v.
Scott, 78 Va. 720, 726 (1884) (holding that the duty of an
executor of an estate is to first pay the decedent’s debts).
CONCLUSION
For the reasons stated, we will reverse the judgment of
the circuit court and enter final judgment in favor of
Christine Dolby that the mortgage debt is an obligation of and
shall be paid from the estate of Cornelius A. Dolby.
Reversed and final judgment.
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