Reineck v. Lemen, Record No. 151917

• Decision Date: 23 November 2016
• Docket Number: Record No. 151917
• Citation: 792 S.E.2d 269,292 Va. 710
• Court: Virginia Supreme Court
• Parties: William J. Reineck, curator of the Estate of Frank B. Still, Jr. v. LaVerne S. Lemen, et al.

292 Va. 710

792 S.E.2d 269

William J. Reineck, curator of the Estate of Frank B. Still, Jr.

v.LaVerne S. Lemen, et al.

Record No. 151917

Supreme Court of Virginia.

November 23, 2016

James E. Moore (Virginia H. Grigg ; Lindsay J. Raymond ; Christian & Barton, on briefs), Richmond, for appellant.

R. Peyton Mahaffey, Fairfax (Lawrence J. McClafferty, Leesburg; Autumn D. McCullough; McCandlish & Lillard, on briefs), for appellee LaVerne S. Lemen.

No brief filed by appellee Jeffrey B. Still.

PRESENT: All the Justices

OPINION BY JUSTICE STEPHEN R. McCULLOUGH

In this appeal we consider whether the trial court erred in upholding the actions of two children, LaVerne S. Lemen and Jeffrey B. Still, who relied on a broad power of attorney to create inter vivos trusts that disinherited other prospective heirs and caused the entire estate to pass to Lemen and Still. We also consider whether the trial court erred in awarding attorney's fees against the personal representative of an estate¹ in his personal capacity under Code § 64.2–795. We affirm the trial court's reading of the power of attorney, but we reverse the award of attorney's fees.

BACKGROUND

I. THE ESTATE PLANS

In 1991, husband and wife, Frank B. Still, Jr. and Jane F. Still, prepared similar estate plans.² Frank executed a will and a revocable trust. Jane also prepared a trust that mirrored Frank's trust in its dispositional provisions. Under the terms of these trusts, Frank's children, LaVerne S. Lemen and Jeffrey B. Still, were to receive 40% of the assets of both trusts. Jane did not have any children. The terms of both trusts, however, called for her relatives to receive a 60% share of both Frank's and Jane's trusts.

In 1999, Frank and Jane both amended their trusts. Frank's one-page amendment provided that Jane's relatives would receive 55% of the trust assets, down from the 60% the trust had provided in 1991. Frank's children would receive 45% rather than 40%, as provided in 1991. Jane similarly amended her trust, i.e. her relatives would receive 55% instead of 60% and Frank's children would receive 45% rather than 40%.

Frank also executed a durable power of attorney in 1999. He designated Jane as his attorney-in-fact should he become incapacitated, and Lemen as his successor attorney-in-fact should Jane be unwilling or unable to serve. Frank's power of attorney vested his agent with broad powers under Article II, including:

the power to do and perform in a fiduciary capacity as my Attorney–in–Fact may deem advisable anything of any character which I might do or perform for myself ... but excluding those matters which my Attorney–in–Fact is not permitted to do as expressly provided in this Power of Attorney or as provided by law.

The attorney-in-fact also had the power under section K of Article III to:

assign, transfer and convey all or any part of my real or personal property, or my interest in such property, to, and withdraw such property from, (i) any revocable trust established by me during my lifetime, or (ii) any revocable trust established by my Attorney–in–Fact during my lifetime which directs the trustee or trustees to administer the trust for my benefit.

The document further granted the attorney-in-fact the power to "manage" his Individual Retirement Accounts (IRAs),

including but not limited to (i) the exercise of all rights, privileges, elections, and options that I have with regard to any [IRA] ...; (ii) making withdrawals therefrom; (iii) determining forms of payments on my behalf, or my beneficiaries; (iv) making, changing or altering investment decisions; [and] (v) changing custodians or trustees.

(POA Art. III, § M).

Additionally, Frank's power of attorney vested his agent with the authority to create any instruments under seal, including inter vivos trusts, whether revocable or irrevocable, "for my benefit during my lifetime and/or the benefit of my wife and my descendants after my death." (POA Art. V, § F). The power of attorney restricted the agent's power to "cause assets to pass to my Attorney–in–Fact ... whether by inter vivos transfer, designation of beneficiary of any contract or in any other manner." Such actions are only permissible when "specifically authorized by this [POA]." (POA Art. VI).

Frank began to show signs of dementia

in 2000. He was diagnosed a few years later with Lewy Body Dementia. In April 2006, Jane amended her trust, significantly reducing Lemen and Still's share from 45% of her estate to a lump sum award of $20,000 for each. Frank was moved to a memory care unit in 2008. In May 2008, Jane again amended her trust, this time completely disinheriting Lemen and Still. Jane died in 2011. Her entire trust was distributed to her heirs. Lemen and Still received nothing from Jane's estate.

Upon Jane's death, Lemen became Frank's attorney-in-fact and she and Still became co-trustees of Frank's trust and the executors of his will. In January 2012, Lemen invoked her power as Frank's attorney-in-fact to amend Frank's trust. She added a provision to Frank's trust calling for the trustee to "distribute to [Frank's] descendants, per stirpes, the amount necessary to result in Frank's descendants receiving forty-five percent (45%) of the aggregate disposed of pursuant to Jane's Amendments [to her trust] and Frank's Trust."

On February 27, 2012, Lemen created two new trusts, the living trusts, naming herself as sole trustee of one and herself and Still as co-trustees of the other. The living trusts disinherited Jane's heirs and provided for Lemen and Still to receive Frank's entire estate at his death. When Frank died the following day, on February 28, 2012, Lemen withdrew the assets from the living trusts, totaling approximately $1.24 million and divided the funds between Still and herself.

II. LITIGATION ENSUES

Jane's heirs, including William J. Reineck, filed suit against Lemen and Still alleging that they breached their fiduciary duties. The court dismissed the case with prejudice on the basis that the plaintiffs, as contingent beneficiaries, lacked standing to bring the suit.

Reineck next successfully petitioned for an appointment as curator of Frank's estate. Reineck promptly filed a second suit, this time in his capacity as curator pursuant to Code § 64.2–451. He alleged that Lemen and Still breached their fiduciary duties and he asked for the imposition of a constructive trust. The trial court granted Lemen and Still's motion for summary judgment, finding that "Mrs. Lemen acted within the express scope of her authority as agent under Frank['s] Durable Power of Attorney and within the authority granted by the Virginia Uniform Power of Attorney Act, and accordingly did not breach any fiduciary duty thereunder." In addition, the trial court awarded attorney's fees against Reineck personally.

ANALYSIS

I. LEMEN'S ACTIONS WERE AUTHORIZED BY THE POWER OF ATTORNEY .

A. The power of attorney expressly authorized the creation of inter vivos trusts and gifts to Frank's children.

Reineck claims that Lemen's creation of the inter vivos trust, in which she shifted all of Frank's assets to herself and her brother at Frank's death, is inconsistent with the authority granted to her under the power of attorney. Where a document is unambiguous and "the sole issue on appeal is the legal effect of a written document, we review the issue de novo." Jones v. Brandt , 274 Va. 131, 135, 645 S.E.2d 312, 314 (2007).

Although powers of attorney are construed strictly, id. at 137, 645 S.E.2d at 315, Frank's power of attorney unquestionably vested his attorney-in-fact with broad powers. Article II provides that the attorney-in-fact has:

the power to do and perform in a fiduciary capacity as my Attorney–in–Fact may deem advisable anything of any character which I might do or perform for myself ... but excluding those matters which my Attorney–in–Fact is not permitted to do as expressly provided in this Power of Attorney or as provided by law.

Section K of Article III expressly authorized the attorney-in-fact to:

assign, transfer and convey all or any part of my real or personal property, or my interest in such property, to, and withdraw such property from, (i) any revocable trust established by me during my lifetime, or (ii) any revocable trust established by my Attorney–in–Fact during my lifetime which directs the trustee or trustees to administer the trust for my benefit.

Section F of Article V permitted Frank's attorney-in-fact to "make, execute, endorse, acknowledge, and deliver any and all instruments ... including, but not limited to, ... inter vivos trusts ... for my benefit during my lifetime and/or the benefit of my wife and my descendants after my death."

Reineck argues that section F of Article V permits only a trust that would benefit both Jane and Frank's descendants because it provides that an inter vivos trust must be created for Jane "and" his descendants. Because the trust benefitted only Frank's descendants, in Reineck's view, it is invalid. We disagree. The most natural reading of this clause, and particularly the "and/or" provision, is that the attorney-in-fact could make instruments, including inter vivos trusts, for Frank's benefit when he was alive, and upon his death, for the benefit of either his wife Jane or his descendants or both. Frank's wife Jane had pre-deceased him. This clause says nothing about Jane's possible heirs. The creation of inter vivos trusts by Lemen for the benefit of Lemen and Still is entirely in accord with the plain language of this clause.

Reineck's reading also cannot be squared with other clauses in the power of attorney. For example, section A of Article IV allows the attorney-in-fact to perform acts for the support and maintenance of "my wife, my dependents and me." Clearly, had the attorney- in-fact performed an act for the benefit of Frank exclusively, the act would not be rendered invalid because it had not also included acts for the support and maintenance of Jane and Frank's dependents.

Reineck also relies on section G of...