Parrish v. Jessee

• Decision Date: 03 November 1995
• Docket Number: No. 950044,950044
• Citation: 464 S.E.2d 141,250 Va. 514
• Parties: Sandra T. PARRISH v. E. Ann JESSEE, etc. Record
• Court: Virginia Supreme Court

Page 141

464 S.E.2d 141

250 Va. 514

Sandra T. PARRISH v. E. Ann JESSEE, etc.

Record No. 950044.

Supreme Court of Virginia.

Nov. 3, 1995.

Daniel A. Carrell, Richmond (John M. Williamson; Hunton & Williams, on briefs), for appellant.

H. Duncan Garnett, Jr., Louisa, for appellee.

Present: CARRICO, C.J., COMPTON, STEPHENSON, LACY, KEENAN and KOONTZ, JJ., and POFF, Senior Justice.

KOONTZ, Justice.

This appeal arises out of an action filed by the present guardian of a person under a disability challenging a prior court-approved settlement agreement entered into on behalf of that person by a former guardian. The present guardian sought to void the settlement in part in the circuit court with supervisory jurisdiction over her guardianship more than a year after the settlement had been approved by another circuit court which had jurisdiction over the underlying tort claim.

On August 9, 1985, Douglas Parrish (Douglas) was catastrophically injured and rendered incompetent in an automobile accident. For purposes of this appeal, it is conceded that the driver of the other vehicle, a cement truck owned by Mega Contractors, Inc. (Mega Contractors) was at fault. Sandra T. Parrish (Parrish), Douglas' wife, was at the time pregnant with the couple's only child, Alicia, who was born less than a month after her father's accident.

On October 18, 1985, the Circuit Court of Goochland County (the Goochland court) appointed Parrish as guardian for Douglas. In May of the following year, Parrish, in her capacity as guardian for Douglas, filed suit for damages resulting from his injuries against Mega Contractors in the Circuit Court of the City of Richmond (the Richmond court). The parties reached a compromise and submitted a settlement agreement to the Richmond court for approval pursuant to Code § 8.01-424. Incorporated into the motion for approval were exhibits detailing the proposed settlement, an agreement of assignment between Mega Contractors' liability insurance carrier and a long-term annuity assurer to fund the settlement, schedules of eleven deferred benefit funds, and a professionally prepared distribution plan on which the schedules had been based.

The Richmond court initially approved the agreement following an ore tenus hearing on July 28, 1987. At that hearing, the Richmond court had questioned whether it had the power to approve portions of the settlement which designated funds to be directed to payees for their sole benefit rather than to the guardian for the benefit of the disabled person. After considering argument of counsel, the Richmond court found that the settlement could include payment of funds to third parties, or jointly to the guardian of the person under a disability and a third party, in satisfaction of the obligations of the person under a disability to the third parties.

Although the Richmond court approved the payment of benefits to third parties as contemplated in the agreement, the benefit schedule attached to the agreement failed to designate payees. On August 24, 1987, the Richmond court, in order to "clarify" the July 28, 1987 order, entered an order which designated the classes of payees with respect to each category of benefits and directed the parties to enter into an addendum in accord with the order. ^* The August 24, 1987 order and resulting addendum to the agreement specified payees and contingent payees for the various funds. The funds and their designated payees were as follows:

An additional fund, established for the payment of legal fees, is not relevant to this appeal.

When Parrish received distributions from the "joint" funds, she was advised by counsel that one-half of the funds belonged to her individually and that one-half of the funds were to be administered by her as guardian for Douglas. During the period of her guardianship, Parrish received a total of $90,000 in disbursements from these funds, $45,000 of which she deposited into a guardianship account. The remaining $45,000 Parrish used or retained for her own benefit, including paying off the loan on her personal automobile, acquiring a housing lot, purchasing a certificate of deposit, and paying for the repair of her mother's automobile.

On January 14, 1989, Parrish arranged to move Douglas into the home of his sister, E. Ann Jessee (Jessee). On March 17, 1989, the Goochland court entered an order granting Parrish's motion to substitute Jessee as guardian for Douglas. In the same order, the court directed that the payees of certain funds created by the settlement agreement were to be changed. The order permitted Parrish to continue receiving payments from the fund designated for her personal maintenance, but required that those payments which were jointly payable to Parrish and Douglas' guardian or to Parrish as Alicia's natural guardian would thereafter be paid to the court for administration. The order also directed that the court would become the contingent payee for all the funds except the fund for Parrish's personal maintenance. Jessee, as guardian, became the payee on those funds designated for Douglas' sole benefit.

On July 17, 1990, Parrish filed a motion in the Goochland court to vacate those portions of the March 17, 1989 order which modified the settlement agreement approved by the Richmond court. On July 25, 1990, Jessee filed a motion in the Goochland court to vacate as void certain portions of the approved settlement agreement. Jessee asserted that "[s]o much of the [Richmond court's] Order of July 28, 1987 as effected a diversion of the settlement proceeds ... to persons other than Douglas A. Parrish [was] void as a matter of law." In support of this assertion, she cited Code § 8.01-424(D)(4) for the principle that where the settlement agreement "provides for payments to be made over a period of time in the future ... the court shall approve the settlement only if it finds that all payments which are due to be made are" properly secured by bond or are to be made by an insurance company and will be paid to the court in accord with Code § 8.01-606 or to a duly qualified fiduciary.

After extensive proceedings, the Goochland court entered a final order on October 11, 1994, in which it found that, since the benefits of the settlement agreement should have been vested in Douglas alone, the designation of payees other than Douglas' guardian was improper under Code § 8.01-424, and that all monies due under the agreement were to be delivered to Jessee as guardian or to the court. The Goochland court further ordered that Jessee was to pay child support to Parrish, pursuant to a motion filed by Parrish during the proceedings, with an offset of $45,000 for funds previously disbursed by Parrish for her personal use from payments made pursuant to the joint schedules. Parrish was further ordered to submit a final accounting of her guardianship to the Commissioner of Accounts. The Goochland court dismissed as "moot" Parrish's challenge to its original reformation of the agreement in its March 17, 1989 order.

On appeal, Parrish assigns error to the legal and factual determinations of the Goochland court and raises a challenge to its jurisdiction to set aside the provisions of the settlement agreement approved by the Richmond court. Jurisdiction is always a threshold issue. Where the lower court lacked jurisdiction to act, its actions are a nullity and not subject to substantive review. Accordingly, we first address Parrish's challenge to the jurisdiction of the Goochland court with regard to the settlement agreement, which we find dispositive of the principal issues of this appeal.

Jessee's motion in the Goochland court sought relief on the ground that the Richmond court's order was, at least in part, void as a matter of law because the trial judge had not properly applied Code § 8.01-424. The motion further asserted that the Goochland court had jurisdiction to consider the matter because of its supervision of Douglas' estate by appointment of the guardian and by the inherent power of any court to address the validity of a void judgment. Assuming, without deciding, that the assertions of Jessee's motions are correct with respect to the application of Code § 8.01-424, we hold that the alleged errors would render the Richmond court's order merely voidable, and not void ab initio.

Under settled legal principles, a judgment is void ab initio only if it "has been procured by extrinsic or collateral fraud, or entered by a court that did not have jurisdiction over the subject matter or the parties." Rook v. Rook, 233 Va. 92, 95, 353 S.E.2d 756, 758 (1987). Otherwise a judgment is merely voidable and may be set aside only (1) by motion to the trial court filed within twenty-one days of its entry, Rule 1:1, (2) on direct appeal, Rook, 233 Va. at 95, 353 S.E.2d at 758, or (3) by bill of review, Code § 8.01-623, Blunt v. Lentz, 241 Va. 547, 550, 404 S.E.2d 62, 64 (1991). "Judgments that are void [ab initio], however, may be attacked in any court at any time, directly or collaterally." Rook, 233 Va. at 95, 353 S.E.2d at 758.

The validity of a judgment based upon a challenge to the application of a statute raises a question of trial error, and not a question of jurisdiction. Pflaster v. Town of Berryville, 157 Va. 859, 864, 161 S.E. 58, 60 (1931). See generally, M.L. Cross, Annotation, Validity and Effect of Judgment Based upon Erroneous View as to Constitutionality or Validity of a Statute or Ordinance Going to the Merits, 167 A.L.R. 517 (1947). "[I]f the inferior court has jurisdiction of the subject matter of the controversy, and the parties are before it, ... a mistaken exercise of that jurisdiction does not render its judgment void." County School Bd. v. Snead, 198 Va. 100, 107, 92 S.E.2d 497, 503 (1956). "[T]he court has jurisdiction to err, as well as to correctly adjudicate the questions before it for decision, and the remedy to correct the errors of the court is solely by appeal." Farant Investment...