Grubb v. Grubb

PRESENT: All the Justices

ROY GRUBB, ET AL.

v. Record No. 051859

ERNEST E. GRUBB, INDIVIDUALLY AND AS
EXECUTOR OF THE LAST WILL AND TESTAMENT
OF EVA BELLE LOGAN, DECEASED

OPINION BY
JUSTICE BARBARA MILANO KEENAN
June 8, 2006

ERNEST E. GRUBB, INDIVIDUALLY AND AS
EXECUTOR OF THE LAST WILL AND TESTAMENT
OF EVA BELLE LOGAN, DECEASED

v. Record No. 051860

ROY GRUBB, ET AL.

FROM THE CIRCUIT COURT OF WASHINGTON COUNTY
C. Randall Lowe, Judge

In these consolidated appeals, we consider an executor’s

claim that the chancellor erred in ordering him to pay to the

decedent’s estate the value of certain assets in which the

executor asserted an ownership interest. We also consider

claims by certain of the decedent’s siblings that the chancellor

erred: 1) in determining that he could not adjudicate the

executor’s responsibility to reimburse the estate for the value

of one contested asset because a necessary party was not before

the court; 2) in refusing to award prejudgment interest; and 3)

in declining to require the executor to pay an award of costs

and attorneys’ fees pursuant to Rule 4:12(c).
 In November 1996, Eva Belle Logan (Logan) executed a

general durable power of attorney naming her brother, Ernest E.

Grubb (Ernest), as her attorney in fact. Logan died in February

1999. In addition to Ernest, Logan was survived by three other

brothers, W. H. Grubb, Roy Grubb, and Gilbert Grubb, and by

three sisters, Reba Grubb, Lula Mae Freeman, and Katherine G.

Davenport.1 In her last will and testament, Logan named Ernest

executor of her estate and directed that her estate be divided

in equal shares among her seven siblings.

According to the inventory Ernest filed, Logan’s probate

estate included assets of $326,783.74, with an additional

$418,727.77 held outside the estate in funds Logan maintained in

various joint bank accounts. This latter amount was divided

among the following accounts: 1) $251,630.06 held in eight

certificates of deposit issued by Wachovia Bank, formerly known

as Central Fidelity Bank, that were listed as jointly owned by

Logan and Ernest (Wachovia certificates); 2) $75,000.00 held in

one certificate of deposit issued by Highlands Union Bank that

was listed as jointly owned by Logan and Ernest (Highlands

certificate); 3) $11,528.81 held in one certificate of deposit

issued by Bank of America, formerly known as NationsBank, that

was listed as jointly owned by Logan and Ernest (Bank of America

certificate); 4) $58,068.90 held in one Bank of America checking

1
Reba Grubb died in February 2001.

2
account that was listed as jointly owned by Logan and Ernest

(Bank of America checking account); and 5) $5,000.00 held in one

certificate of deposit issued by Wachovia that was listed as

jointly owned by Logan and Ernest’s granddaughter, Meagan Marie

Grubb (Meagan).2 Each of the Wachovia and Highlands certificates

was designated as a “Joint Account – With Survivorship.”

After obtaining Logan’s power of attorney, Ernest either

opened or renewed several of the above accounts that were not

included in the inventory for the probate estate. The bank

records involving these accounts did not indicate whether Ernest

was previously listed as a joint owner on the accounts.

However, Ernest maintained that Logan had placed his name on the

various certificates before he received her power of attorney,

and that his actions after November 1996 on accounts showing him

as a joint owner were limited to the renewal of existing joint

accounts.

This litigation began when a lawsuit concerning certain

real estate was filed against all the Grubb siblings in the

circuit court. Three of Ernest’s siblings, Roy Grubb, Gilbert

Grubb, and Katherine G. Davenport (collectively, Roy), filed a

cross bill against Ernest, alleging that Ernest improperly used

his power of attorney to transfer assets from Logan’s sole

2
An additional $17,500.00 was held in bonds, which Ernest
distributed to various members of Logan’s family without
objection.

3
ownership to accounts jointly owned by her and Ernest with

rights of survivorship. Roy also alleged that Ernest committed

constructive and actual fraud by adding his name to the accounts

without Logan’s knowledge and consent, and by entering her

signature on the documents that created or renewed the joint

accounts. Roy asked that the court order the amounts at issue

returned to Logan’s estate so that they could be distributed

equally among the surviving siblings in accordance with the

terms of Logan’s will.3

Before trial, the parties obtained the deposition testimony

of Mary M. Millsap, an employee of the Abingdon branch of

Wachovia Bank (the bank) since 1989. Millsap testified that she

personally dealt with Ernest on all but two of the Wachovia

financial instruments at issue. Although the bank had not

retained copies of any original certificates, Millsap stated

that based on the bank’s policy she was certain that Ernest’s

name was on each of the accounts before their renewal.

According to Millsap, under the bank’s policy, “[i]f you

were joint owner on an account with a customer and then after

that you became their power of attorney, you could come in and

renew that certificate for that person using your power of

3
The chancellor granted the complainant’s motion to sever
the action pending in the bill of complaint from the action
pending in the cross bill. The original complaint is not at
issue in this appeal.

4
attorney.” Millsap also stated that the bank would not allow an

individual to add his name to a certificate using a power of

attorney if the certificate did not previously list his name.

In such a circumstance, Millsap explained, the person seeking to

add his name to the account would need the account owner to sign

a signature card making the attorney in fact a joint owner of

the certificate. During the deposition, Roy objected to

substantial portions of Millsap’s testimony on the grounds of

hearsay and violations of the “best evidence rule.”

At the beginning of trial, Roy offered Millsap’s deposition

testimony into evidence. Roy submitted the deposition without

qualification, despite the earlier objections he had noted

during portions of Millsap’s testimony. The chancellor admitted

Millsap’s deposition without addressing Roy’s earlier

objections.

As part of his case, Roy presented Ernest as a witness.

Ernest gave equivocal testimony regarding the signatures on the

financial instruments. He initially testified that he could not

recall whether Logan signed the documents or whether he signed

them on her behalf. However, he later testified that he

witnessed Logan sign each document.

With regard to the Highlands certificate, which was

purchased after Ernest obtained Logan’s power of attorney,

Ernest admitted that all the money used to purchase the

5
certificate came from Logan’s assets. However, Ernest could not

recall whether he or Logan signed the document to procure the

Highlands certificate, but contended that Logan wished to share

the account with him.

Dr. Larry S. Miller, a forensic document examiner who

qualified as an expert witness, also testified as part of Roy’s

case. He opined that Ernest, not Logan, actually signed Logan’s

name on all but one of the Wachovia certificates at issue.

At the conclusion of Roy’s case, Ernest made a motion to

strike the evidence. The chancellor denied the motion, holding

that Roy’s evidence raised a rebuttable presumption of

constructive fraud.

Ernest presented evidence on his own behalf, including the

testimony of his brother, W. H. Grubb, who recalled the close

relationship between Logan and Ernest. In addition, Ernest

again testified that Logan made him a joint owner on each of the

accounts in question before giving him her power of attorney,

and that he renewed the certificates at issue with Logan’s

consent. However, Ernest failed to produce documentary evidence

confirming the existence of any jointly owned certificates that

he alleged existed before Logan provided him her power of

attorney.

In a letter opinion, the chancellor first concluded that

Meagan was not properly before the court and that, therefore,

6
the ownership of the Wachovia certificate listing her and Logan

as joint owners could not be determined. With regard to the

eight Wachovia certificates that named Logan and Ernest as joint

owners, the chancellor determined that only one of the documents

used to obtain or renew these certificates was actually signed

by Logan. The chancellor found that the remaining seven

accounts, in the total amount of $239,624.83, were created by

Ernest using his power of attorney and, thus, Ernest’s actions

involving these accounts were subject to a presumption of

constructive fraud.

The chancellor further concluded that Ernest had not

rebutted the presumption of constructive fraud, stating that

“Ernest [had] not proven the existence of any records that

indicate [the Wachovia] accounts were joint with survivorship

prior to the execution of the power of attorney.” The

chancellor directed that these funds be paid to Logan’s estate.

The chancellor did not rule on the objections raised by Roy at

Millsap’s deposition, nor did the chancellor indicate to what

degree he had considered Millsap’s testimony in reaching his

conclusions regarding the Wachovia certificates.

Additionally, the chancellor concluded that Ernest failed

to rebut the presumption of constructive fraud regarding the

Highlands certificate because that instrument was purchased

using money Logan acquired from the sale of her property. The

7
chancellor further directed that the funds from this account be

paid to Logan’s estate. The chancellor also ordered that Ernest

pay to the estate the funds from the two disputed Bank of

America accounts.4

After the chancellor issued his letter opinion, Roy filed a

motion pursuant to Rule 4:12(c) requesting attorneys’ fees and

costs for Ernest’s failure to admit during the discovery process

that he signed Logan’s name on the various accounts. Roy also

requested an award of prejudgment interest on the funds that the

chancellor ordered returned to the estate.

The chancellor denied Roy’s request for costs and

attorneys’ fees, as well as his request for prejudgment

interest. However, the chancellor ordered that Ernest pay to

Logan’s estate the interest accrued during the litigation on the

funds that Ernest was found to have fraudulently converted.

Ernest appeals from the chancellor’s final decree ordering

Ernest to pay to Logan’s estate the funds from the Highlands

certificate and the seven Wachovia certificates that the

chancellor found Ernest fraudulently converted. He asserts that

4
In his brief on appeal, Ernest does not refer to the Bank
of America certificate and checking account nor does he
reference exhibits 16 and 17, the documentary evidence
pertaining to those accounts. Therefore, we conclude that he
has waived argument regarding those accounts. See Rule 5:27 and
5:17(c)(3) and (4); Whitley v. Commonwealth, 260 Va. 482, 492,
538 S.E.2d 296, 301 (2000); Carstensen v. Chrisland Corp., 247
Va. 433, 445, 442 S.E.2d 660, 667 (1994); Quesinberry v.
Commonwealth, 241 Va. 364, 370, 402 S.E.2d 218, 222 (1991).

8
Millsap’s deposition testimony was undisputed that the Wachovia

certificates listed him as a joint owner before he obtained

Logan’s power of attorney. He further contends that the

chancellor should not have applied a presumption of constructive

fraud because Ernest proved that as a joint owner of the

accounts, he merely renewed the accounts in order to maintain

the “status quo.” With regard to the Highlands certificate,

Ernest likewise maintains that the evidence established that he

was an owner of the account before being granted power of

attorney. In the alternative, Ernest argues that if the

chancellor was correct in applying a presumption of constructive

fraud to Ernest’s actions as attorney in fact, the evidence

showed that he rebutted that presumption. We disagree with

Ernest’s arguments.

Ernest had a confidential relationship with Logan in which

Ernest acted as Logan’s attorney in fact and provided her advice

on many financial matters. As a result of this confidential

relationship, Ernest owed a fiduciary duty to Logan. See

Economopoulos v. Kolaitis, 259 Va. 806, 812, 528 S.E.2d 714, 718

(2000); Jackson v. Seymour, 193 Va. 735, 740-41, 71 S.E.2d 181,

184-85 (1952); Nicholson v. Shockey, 192 Va. 270, 278, 64 S.E.2d

813, 817-18 (1951).

Based on Ernest’s status as Logan’s attorney in fact, any

transaction involving her assets that he consummated to his own

9
benefit while acting as her fiduciary is presumptively

fraudulent. See Economopoulos, 259 Va. at 812, 528 S.E.2d at

718; Nicholson, 192 Va. at 277-78, 64 S.E.2d at 817-18. When a

presumption of constructive fraud arises, the burden of proof

shifts to the fiduciary to produce clear and convincing evidence

to rebut the presumption.5 Creasy v. Henderson, 210 Va. 744,

749-50, 173 S.E.2d 823, 828 (1970); Nicholson, 192 Va. at 277,

64 S.E.2d at 817; see Carter v. Williams, 246 Va. 53, 59, 431

S.E.2d 297, 300 (1993). This rule arises independently of any

evidence of actual fraud, or of any limitations of age or

capacity in the other party to the confidential relationship,

and is intended to protect the other party from the influence

naturally present in such a confidential relationship.

Nicholson, 192 Va. at 277, 64 S.E.2d at 817; Stiers v. Hall, 170

Va. 569, 577-78, 197 S.E. 450, 454 (1938).

We have defined clear and convincing evidence as the degree

of proof that provides the fact finder a firm belief or

conviction regarding the allegations that a party seeks to

establish. This evidentiary standard is intermediate in nature,

exceeding the “preponderance” standard but not requiring the

level of certainty in criminal cases of “beyond a reasonable

5
Although Code § 6.1-125.5(A) generally provides a right of
survivorship to a joint account holder in sums remaining on
deposit on the death of another joint account holder, that
statute is not applicable here because the presumption of fraud
attached to Ernest’s actions before Logan died.

10
doubt.” Commonwealth v. Allen, 269 Va. 262, 275, 609 S.E.2d 4,

13 (2005); Judicial Inquiry & Review Comm’n v. Lewis, 264 Va.

401, 405, 568 S.E.2d 687, 689 (2002); Fred C. Walker Agency,

Inc. v. Lucas, 215 Va. 535, 540-41, 211 S.E.2d 88, 92 (1975).

Here, the Highlands transaction and the seven Wachovia

transactions at issue are subject to a presumption of

constructive fraud because Ernest either opened or renewed those

accounts using his power of attorney. These transactions were

consummated to Ernest’s own benefit because he signed his name

as a joint owner of all these accounts. Therefore, we review

the evidence presented to determine whether the chancellor erred

in concluding that Ernest failed to rebut the presumption of

constructive fraud arising from those transactions.

In making this determination, we apply an established

standard of review. With the exception of Millsap’s testimony,

the chancellor heard the evidence ore tenus and evaluated the

witnesses’ testimony and their credibility. Thus, his judgment

is entitled to the same weight as a jury verdict. Forbes v.

Rapp, 269 Va. 374, 379-80, 611 S.E.2d 592, 595 (2005); The

Dunbar Group, LLC v. Tignor, 267 Va. 361, 366-67, 593 S.E.2d

216, 219 (2004). Accordingly, we will not set aside the

chancellor’s judgment on appeal unless it is plainly wrong or

without evidence to support it. Code § 8.01-680; Forbes, 269

11
Va. at 380, 611 S.E.2d at 595; Shooting Point, L.L.C. v.

Wescoat, 265 Va. 256, 264, 576 S.E.2d 497, 501 (2003).

In determining the credibility of the witnesses and the

weight to be accorded their testimony, the chancellor may

consider the appearance and manner of the witnesses, their bias,

and their interest in the outcome of the case. Schneider v.

Commonwealth, 230 Va. 379, 383, 337 S.E.2d 735, 737 (1985); see

Cherrix v. Commonwealth, 257 Va. 292, 301-02, 513 S.E.2d 642,

648-49 (1999); Burket v. Commonwealth, 248 Va. 596, 614-15, 450

S.E.2d 124, 134 (1994); Fisher v. Commonwealth, 228 Va. 296,

300, 321 S.E.2d 202, 204 (1984). Here, the chancellor made

findings against Ernest’s credibility that were critical to the

decision in the case.

The chancellor first observed that Ernest had contradicted

himself on the crucial issue whether he or Logan had signed the

eight Wachovia certificates. After making this observation, the

chancellor accepted Dr. Miller’s opinion that Logan had signed

only one of those certificates. Upon the chancellor’s own

review of the documents, he plainly rejected Ernest’s testimony,

finding that “a handwriting expert is not needed to determine

that each time ‘Eva Belle Logan’ was penned, that it was by the

same person but that person was not Eva Belle Logan.”

In reaching his decision, the chancellor also cited the

fact that Ernest had not produced any documentary evidence to

12
support his position. The chancellor stated in his letter

opinion that “the [c]ourt relies on the fact that Ernest Grubb

has not proven the existence of any records that indicate these

accounts were joint with survivorship prior to the execution of

the power of attorney.”

Admittedly, the chancellor did not reference Millsap’s

testimony when considering the issue whether Ernest had rebutted

the presumption of constructive fraud. However, even if we

assume that the chancellor accorded some weight to her

testimony, we nevertheless conclude that the record supports his

determination that Ernest failed to rebut the presumption with

regard to the Wachovia certificates at issue. Having completely

rejected Ernest’s credibility, the chancellor could properly

conclude that the remainder of Ernest’s evidence did not meet

the clear and convincing standard.

Significantly, Millsap’s testimony showed only a limited

recollection of the circumstances surrounding the issuance of

each certificate, and she had to rely on her knowledge and

application of the bank’s policy regarding the processing of

such certificates. In addition, Millsap could not testify that

she observed either Ernest or Logan sign the signature cards for

the certificate accounts. Accordingly, we conclude that the

evidence concerning the Wachovia certificates supports the

chancellor’s determination that Ernest failed to rebut the

13
presumption of constructive fraud with clear and convincing

evidence.

We reach the same conclusion with regard to the Highlands

certificate. The chancellor found that Ernest obtained the

certificate by using his power of attorney, and that the funds

for this certificate “were predominantly created by the sale of

Eva Belle Logan’s personal residence.” Also noting that Ernest

used his power of attorney to convey Logan’s real estate, the

chancellor held that “Ernest Grubb has not rebutted the

presumption of constructive fraud in regard to this account.”

We conclude that the above-stated evidence plainly supports this

determination. Thus, we hold that the chancellor did not err in

ordering Ernest to pay to the estate the funds held in the

Highlands certificate and the Wachovia certificates at issue.

We next consider the claims raised by Roy in his appeal.

Roy first argues that the chancellor erred in holding that he

could not adjudicate the issue of the Wachovia certificate held

jointly by Meagan and Logan because Meagan was not made a party

in the case. Roy contends that he was not required to make

Meagan a party because he did not attack her ownership interest

in the Wachovia certificate but merely sought to have Ernest

account for and pay to the estate the amount of the funds he

fraudulently converted in that account.

14
 In response, Ernest observes that it is undisputed that

Meagan is listed as a joint owner of the Wachovia certificate.

Thus, Ernest maintains, if the chancellor were to determine that

the funds from the certificate should be placed in the estate,

Meagan’s interest in those funds “will be totally and completely

affected.” We disagree with Ernest’s argument.

In his cross bill, Roy alleged that Ernest breached his

fiduciary duty to Logan when he removed the various amounts from

her accounts and purchased the certificates of deposit at issue.

Roy requested that the chancellor order Ernest “to pay unto the

Estate of Eva Belle Logan the proceeds of all certificates of

deposit . . . acquired by him from Eva Belle Logan . . . with

interest thereupon from the date of said transfer.”

A necessary party is a person, natural or artificial, who

has a legal or beneficial material interest in the subject

matter or event of the litigation. Jett v. DeGaetani, 259 Va.

616, 619, 528 S.E.2d 116, 118 (2000); Atkisson v. Wexford

Assocs., 254 Va. 449, 455, 493 S.E.2d 524, 527 (1997); Kennedy

Coal Corp. v. Buckhorn Coal Corp., 140 Va. 37, 49, 124 S.E. 482,

486 (1924). If such a person is not made a party to the suit, a

decree cannot be rendered in the cause. Id. Among other

things, the rule is designed to avoid having persons deprived of

their property without giving them an opportunity to be heard

15
and defend their interests in the property. Atkisson, 254 Va.

at 456, 493 S.E.2d at 528.

In the present case, however, Roy did not seek to

invalidate Meagan’s ownership interest in the Wachovia

certificate in which Meagan and Logan were listed as joint

owners. Roy also did not attempt to recover funds from that

account, or ask that the chancellor take any other action

regarding the account or Meagan. Instead, Roy asked that Ernest

be held liable to pay the amount of the proceeds held in that

account, plus accumulated interest, to Logan’s estate.

Therefore, we hold that because Meagan’s interest in the funds

held in the Wachovia certificate could not be affected by Roy’s

claim and requested relief, she was not a necessary party to the

suit and the chancellor erred in concluding otherwise.

Roy next argues that the chancellor abused his discretion

in failing to award prejudgment interest on the amounts that

Ernest was found to have fraudulently converted. We disagree.

As Roy acknowledges in his argument, the award of

prejudgment interest rests in the chancellor’s sound discretion.

Code § 8.01-382; see Tauber v. Commonwealth, 263 Va. 520, 544,

562 S.E.2d 118, 131 (2002); Dairyland Ins. Co. v. Douthat, 248

Va. 627, 631, 449 S.E.2d 799, 801 (1994); Skretvedt v. Kouri,

248 Va. 26, 36, 445 S.E.2d 481, 487 (1994). Here, although the

chancellor refused Roy’s request for prejudgment interest, the

16
chancellor ordered that Ernest pay the interest accrued during

the course of this litigation on the account funds that were

fraudulently converted. We hold that this provision was a

reasonable exercise of the court’s discretion, and that the

chancellor did not abuse his discretion by failing to award

prejudgment interest.

Finally, Roy argues that the circuit court abused its

discretion by denying his motion under Rule 4:12(c) for costs

and attorneys’ fees for failing to provide accurate answers in

response to Roy’s requests for admission. In his request for

admissions, Roy asked Ernest to admit that, for each of the

accounts at issue, Ernest signed Logan’s name. In response to

each such request, Ernest either denied that he had signed

Logan’s name, denied that Logan had not signed her name, or

stated that he could neither admit nor deny who had signed a

particular document because he could not recall that

information.

We conclude that the chancellor did not abuse his

discretion in denying Roy’s request for costs and fees.

Although these issues of fact on which admissions were sought

were ultimately decided against Ernest, he had a reasonable

basis for failing to admit the signatures on the Wachovia

certificates based on Millsap’s testimony. See Rule 4:12(c)(3).

While Ernest did not have similar corroborative evidence to

17
support his testimony regarding the remaining accounts in

dispute, we nevertheless conclude that the chancellor did not

exceed the broad discretion granted him by this Rule in denying

the requested relief. See Erie Ins. Exch. v. Jones, 236 Va. 10,

14, 372 S.E.2d 126, 128 (1988).

In conclusion, we will reverse the part of the chancellor’s

judgment holding that Meagan was a necessary party to the claims

involving Exhibit # 3, the Wachovia certificate that listed her

as a joint owner. We will affirm all remaining parts of the

chancellor’s judgment before us in this appeal.

Accordingly, we will affirm in part, and reverse in part,

the chancellor’s judgment and remand the case for further

proceedings related to Exhibit #3, the Wachovia certificate

bearing Meagan Marie Grubb’s name as a joint owner of that

account.

Affirmed in part,
reversed in part,
and remanded.

18