Jimenez v. Corr

• Decision Date: 31 October 2014
• Docket Number: Record No. 140112.
• Citation: 288 Va. 395,764 S.E.2d 115
• Court: Virginia Supreme Court
• Parties: Nancy C. JIMENEZ v. Lewis S. CORR, Jr., Individually, and As Executor of The Estate of Norma F. Corr and Trustee of the Norma F. Corr Revocable Trust, et al.

288 Va. 395

764 S.E.2d 115

Nancy C. JIMENEZ

v.Lewis S. CORR, Jr., Individually, and As Executor of The Estate of Norma F. Corr and Trustee of the Norma F. Corr Revocable Trust, et al.

Record No. 140112.

Supreme Court of Virginia.

Oct. 31, 2014.

Mark R. Baumgartner (Kristen R. Jurjevich ; Pender & Coward, on briefs), for appellant.

Alan D. Albert (Neal P. Brodsky ; LeClairRyan, Norfolk, on brief), for appellee Lewis S. Corr, Jr.

Winthrop A. Short, Jr. (Neil L. Rose ; Kaufman & Canoles; Willcox & Savage, Newport News, on brief), for Corr, and as Trustees under the Norma F. Corr Revocable Trust.

(John McIntyre ; Cara M. Cotter ; Wilson & McIntyre, Norfolk, on brief), for appellee Capitol Foundry of Virginia, Inc.

PRESENT: KINSER, C.J., LEMONS, MILLETTE, MIMS, McCLANAHAN, and POWELL, JJ., and LACY, S.J.

Opinion

Opinion by Justice LEROY F. MILLETTE, JR.

In this appeal we consider whether shares of stock, which would otherwise be conveyed to an inter vivos trust by way of a pour-over provision set forth in a shareholder's will, must instead be bequeathed in a manner set forth in a shareholders' agreement entered into by that shareholder several years after executing her estate planning documents.

I. Facts and Proceedings

This appeal arises from a dispute over the disposition of shares of stock in a family held business after the death of that business's founding generation. Six people are central to this dispute as it comes to us on appeal. Lewis S. Corr, Sr. (“Mr. Corr”) and Norma F. Corr were married prior to their deaths. Mr. Corr and Norma had three children: Lewis S. Corr, Jr. (“Lewis”), Patricia Corr Williams, and Nancy Corr Jimenez. Patricia is married to Thomas M. Williams.

Mr. Corr established Capitol Foundry of Virginia (“Capitol Foundry” or “Company”) in 1970 as a broker and reseller of castings of heavy infrastructure. Capitol Foundry was incorporated in 1976 with Mr. Corr initially as the sole shareholder. Lewis joined the business when it incorporated and later, in 1981, Mr. Corr allowed Lewis to purchase 5 newly issued shares of Capitol Foundry stock. That same year, Nancy joined the business.

In 1999, Mr. Corr passed away, and all of his outstanding shares in Capitol Foundry were transferred outright to his wife Norma. In 2002, Norma conveyed 5 of her shares to Nancy. At the time of Norma's death in 2012, Norma owned 95 shares of Capitol Foundry stock, Lewis owned 5 shares of Capitol Foundry stock, and Nancy owned the remaining 5 shares of Capitol Foundry stock.

After Norma's death, Nancy filed suit in the Circuit Court of the City of Virginia Beach against Lewis, the executors of Norma's estate, and Capitol Foundry. Nancy alleged that Norma, Lewis, and Nancy entered into an agreement (the “Shareholders' Agreement”) which required Norma's executors to make Norma's 95 shares of Capitol Foundry stock available for purchase by Capitol Foundry, and required Capitol Foundry to purchase those shares.

The defendants countered that Norma's estate planning documents, and not the Shareholders' Agreement, controlled disposition of Norma's 95 shares of Capitol Foundry stock. Therefore, in accordance with the estate planning documents, those shares were to go into an inter vivos trust rather than being subject to purchase under the Shareholders' Agreement.

Nancy then amended her complaint. In her amended pleading, Nancy sought (1) declaratory judgment relief in the form of the court declaring that the Shareholders' Agreement, and not Norma's estate planning documents, governed disposition of Norma's shares of Capitol Foundry stock, and (2) specific performance relief in the form of Norma's executors making her 95 shares of Capitol Foundry stock available for purchase by Nancy and Capitol Foundry.

While this litigation was ongoing, the parties entered into an agreement that permitted Capitol Foundry to purchase 64.4 shares of Norma's Capitol Foundry stock so that Norma's estate would obtain tax benefits under Internal Revenue Code § 303 (the “Stock Redemption Agreement”). The disposition of Norma's remaining 30.6 shares of Capitol Foundry stock remained at issue subsequent to this purchase.

After a two day trial, the circuit court entered a final order in this matter. The circuit court held that the relevant portions of the Shareholders' Agreement were not applicable to Norma's shares of Capitol Foundry stock, and therefore those shares were to pass to the inter vivos trust established by Norma's estate planning documents. Moreover, because those estate planning documents permitted Lewis to exercise an exclusive option to purchase all Capitol Foundry stock which passed into the inter vivos trust, Lewis properly exercised such an option when he executed and delivered the document called for under the terms of Norma's estate planning documents (the “Exercise of Option”).

Nancy timely filed a petition for appeal with this Court. We granted eight assignments of error and one assignment of cross-error. These assignments and cross assignment direct us to address two issues:

1. How do Norma's estate planning documents and the Shareholders' Agreement operate to dispose of Norma's shares of Capitol Foundry stock upon her death?

2. Did the parties sufficiently plead the issue of whether Lewis effectively exercised his exclusive option to purchase Capitol Foundry stock held in the inter vivos trust, so as to allow the circuit court to rule on that issue?

In light of our determination of how the various documents operate, which resolves this appeal, we do not reach this second issue. Gardner v. Commonwealth, ––– Va. ––––, –––– n. 3, 758 S.E.2d 540, 542 n. 3 (2014).

II. Discussion

A. Standard of Review

We review de novo the circuit court's determination of “the legal effect of [the] written document[s]” pertinent to this appeal. Jones v. Brandt, 274 Va. 131, 135, 645 S.E.2d 312, 314 (2007).

B. Norma's Estate Planning Documents

When construing a particular legal instrument, if other documents were “executed at the same time or contemporaneously between the same parties, in reference to the same subject matter” as the legal instrument, then all such documents “must be regarded as parts of one transaction, and receive the same construction as if their several provisions were in one and the same instrument.” Bailey v. Town of Saltville, 279 Va. 627, 633, 691 S.E.2d 491, 493 (2010) (internal quotation marks and citation omitted). Norma's Last Will and Testament (“Norma's Will”) and the Norma F. Corr Revocable Trust document (the “Trust Document”) were both executed on July 17, 1992, were both executed by Norma, and reference one another. We therefore consider these two documents together “as parts of one transaction.” Id.

1. Norma's Last Will and Testament

Norma's Will nominated and appointed Lewis and Joseph L. Lyle, Jr. as co-executors of the will, and named Thomas as co-executor in the event that Joseph became unwilling or unable to serve as executor. The parties agree that, at the time of Norma's death, Lewis and Thomas were co-executors.

Norma's Will contains numerous specific bequests and devises. Article VII of the Will governs disposition of the residue of Norma's estate:

All the rest, residue, and remainder of my property of every kind and description, and wherever located, including any lapsed or void legacy or devise, after satisfying all the bequests and devises hereinabove set out and after the payment or provision for payment of all administrative expenses and all death taxes as hereinabove directed, I give, devise, and bequeath to the Trustee of a trust agreement between me as Grantor and as Trustee dated July 17, 1992, which is now in existence, to be held, administered, and distributed in accordance with its terms.

In the event any such property given, devised or bequeathed to the Trustee of such trust agreement is, under the terms of such trust agreement, to be distributed immediately to any beneficiary thereof, outright and free of trust, then such property may be transferred directly to such beneficiary by my Executor, without the necessity of passing through such trust.

Article VII is a pour-over provision. “[S]ituations in which the testator devises or bequeaths property according to the terms of an inter vivos trust that is in existence and properly referred to at the time the will is executed [,] but which is subject to a reserved power of amendment in the settlor of the trust[,] are most frequently referred to as pour-over provisions.” 2 William J. Bowe & Douglas H. Parker, Page on the Law of Wills § 19.27, at 60–61 (2003). Article VII operates to gather up the entirety of what remained of Norma's estate after all debts, bequests, and devises had been settled, and “pours over” that residuary estate into a trust which was already existing and created by Norma.

One exception to this pour-over provision is supplied by the terms of Article VII. This exception allows for property to go directly to a beneficiary of the trust, without first passing through the trust, if that beneficiary would immediately receive such property under the terms of the Trust Document. We will return to this exception later in order to explain its relevance to the parties' arguments on appeal.

2. The Norma F. Corr Revocable Trust Document

The trust into which Norma's residuary estate was poured was created by the Trust Document and was titled “Trust A.” The Trust Document named Lewis and Joseph L. Lyle, Jr. as successor co-trustees in the event that Norma became unable to serve as trustee, and named Thomas as a successor co-trustee in the event that Joseph became unwilling or unable to serve as trustee. The parties agree that, at the time of Norma's death, Lewis and Thomas were co-trustees.

Because Norma's husband predeceased her, Article IV, Sections (B)(3) through (B)(6) of the Trust Document governed disposition of the trust's assets. Sections (B)(4) and (B)(5) of Article IV are not relevant to this appeal, and we need only review Sections (B)(3) and (B)(6).

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