Worsham v. Worsham

• Decision Date: 11 January 2022
• Docket Number: Record No. 0663-21-3
• Parties: Gabriel Seth WORSHAM, Executor of the Estate of Raleigh Elmore Worsham v. Kathleen Bonnie Crispin WORSHAM, Individually and as Trustee of the Raleigh E. Worsham QTIP Trust
• Court: Virginia Court of Appeals

74 Va.App. 151

867 S.E.2d 63

Gabriel Seth WORSHAM, Executor of the Estate of Raleigh Elmore Worsham

v.Kathleen Bonnie Crispin WORSHAM, Individually and as Trustee of the Raleigh E. Worsham QTIP Trust

Record No. 0663-21-3

Court of Appeals of Virginia, Lexington.

JANUARY 11, 2022

Paul McCourt Curley (Six East Law Group—Curley Law Firm, PLLC, on briefs), for appellant.

Monica T. Monday (Glenn W. Pulley, Danville; Amanda M. Morgan, South Boston; Timothy M. Purnell, Manassas; Gentry Locke; Purnell, McKennett & Menke, PC, on brief), for appellees.

Present: Judges Humphreys, AtLee and Raphael

OPINION BY JUDGE STUART A. RAPHAEL

Under the parol-evidence rule, when a written contract unambiguously expresses the agreement of the parties, extrinsic evidence of the parties’ prior or contemporaneous discussions is inadmissible to contradict the written terms. The primary issue on appeal here is whether a post-nuptial agreement is ambiguous about whether—if the parties divorced and the husband died first—the wife is entitled to monthly income from a trust that the husband had to establish as a "QTIP" trust—a "qualified terminable interest property" trust for a "surviving spouse" under § 2056 of the Internal Revenue Code. 26 U.S.C. § 2056. Following the couple's divorce and the husband's death, the executor failed to transfer assets to the trust sufficient to pay the monthly amount. He asserted that, because the couple divorced, the trust could not be considered a "QTIP" trust. He contends that his interpretation is supported by parol evidence that should have been considered by the trial court because, he claims, the post-nuptial agreement is at least ambiguous about whether the trust's obligations to the wife survived the divorce.

We conclude, however, that the post-nuptial agreement unequivocally established the wife's continuing entitlement to monthly payments from the trust, even if the parties’ divorce prevented the trust from qualifying for deferred estate-tax treatment as a QTIP trust under the Internal Revenue Code. We therefore affirm the circuit court's ruling that the agreement must be enforced as written and that the executor's proffered parol evidence is inadmissible. We agree with the circuit court that the relief it awarded—requiring the executor to restore funds withheld from the trust—fell within the relief requested in the prayer for relief. We also agree that the attorney-fee award to the wife was proper under the post-nuptial agreement. We affirm and remand the case to the circuit court to determine if the wife is entitled to further attorney fees and, if so, the appropriate amount.

I. BACKGROUND

Kathleen Bonnie Crispin Worsham married Raleigh Elmore Worsham in August 1979.¹ Raleigh had two sons from a previous marriage. Raleigh and Bonnie separated two decades later, in 2001.

In 2002, while still separated, Raleigh and Bonnie agreed to a "Post-Nuptial Agreement." The introductory clause of the agreement named the parties in full but then defined them as "Husband" and "Wife." Those terms were then used throughout the agreement to specify the parties’ respective rights and obligations, including after any divorce. E.g. , ¶¶ 2, 7. The agreement, among other things, provided for Raleigh to pay Bonnie certain spousal support (¶ 1) and set forth their respective rights in several parcels of real property (¶¶ 2-4).

This appeal centers mainly on paragraph 5 of the post-nuptial agreement, which required Raleigh to "establish, at his sole expense, a Qualified Terminable Interest Property (QTIP) trust for Wife's lifetime benefit." Raleigh promised to transfer to the trust certain real property and improvements called "Spring Street." Income from the trust was "payable to Wife on a monthly basis, during her lifetime," permitting Raleigh "to direct the disposition of the trust assets at the time of Wife's death." "Additionally," paragraph 5 provided that, at Raleigh's death, "additional assets will be added" by Raleigh's personal representative sufficient to generate a "gross monthly income equal to what the parties would call the ‘Widow's Benefit.’ " If Raleigh died after June 1, 2010—as later happened—the "Widow's Benefit" would be $10,000.

The post-nuptial agreement specifically contemplated the possibility of divorce. For example, paragraph 24 required that, if the parties divorced, the agreement had to be ratified and incorporated into any final divorce decree. Similarly, paragraph 35 provided for the agreement to continue "in full force and effect" even after divorce. Paragraph 5 contained no language conditioning Bonnie's "lifetime" benefit on her remaining married to Raleigh. Paragraph 7, by contrast, created an explicit financial incentive for Bonnie to stay married to Raleigh, providing a $100,000 payment to Bonnie if they were still married when Raleigh died.

The post-nuptial agreement also contained a fee-shifting provision. Paragraph 21 provided that, if either party defaulted in their obligations, the other could recover attorney fees incurred in suing to "compel compliance" with the agreement.

The marriage lasted only a short time longer. Raleigh filed for divorce in 2004.

In February 2005—while the divorce case was pending—Raleigh established The Raleigh E. Worsham QTIP Trust, naming Raleigh and Bonnie as co-trustees. Although "QTIP" appears in the title, the document does not cite the Internal Revenue Code and does not provide that its validity depends on its qualifying as a QTIP trust under federal tax laws. The trust recites that it was "established pursuant to the terms of Section 5" of the post-nuptial agreement. Article 8 is entitled "Overriding Tax Purposes" but identifies only "some of [Raleigh's] purposes in creating this trust." Paragraph A ("Marital Deduction") said that he intended the "gift of an income interest" to be a "completed gift qualifying for the gift tax marital deduction." Paragraph B said that "[w]hile I am married to [Bonnie], this trust shall be a grantor trust for federal income tax purposes." And paragraph C said that the "income interest given to my wife shall give her those rights ordinarily associated with ownership of an asset for life."

As required by the post-nuptial agreement, Raleigh transferred the Spring Street property to the trust. Schedule B of the trust document set forth the same payment amounts that the post-nuptial agreement called the "Widow's Benefit," but retitled the payment schedule as the "Monthly Amount." Article 4 made the trust "irrevocable," providing that Raleigh "cannot alter, amend, revoke, or terminate it in any way." Article 5 provided that, during Bonnie's lifetime, the trustee would distribute to Bonnie the net monthly income from the trust.

Less than a month later, the circuit court entered the couple's final decree of divorce. The final decree provided that "the terms of the post-nuptial agreement dated June 10, 2002 are hereby ratified, affirmed, adopted, incorporated, but not merged, approved and expressly made a part of this decree, and the parties hereto are ORDERED to comply therewith."

A few months after they divorced, Bonnie and Raleigh signed a "Supplemental Post-Nuptial Agreement" to settle various disputes that had arisen between them, none of which is pertinent here. That document, however, provided that "[a]ll other portions" of the post-nuptial agreement "shall continue in full force and effect." Raleigh and Bonnie agreed to a consent order in the divorce case incorporating the supplemental agreement.

After the divorce, Bonnie began receiving the income from Spring Street. Raleigh died testate in December 2017. His grandson, defendant Gabriel Seth Worsham ("Seth"), was appointed executor. As executor, Seth began paying Bonnie $10,000 a month but stopped distributing income from Spring Street. He subsequently claimed that Bonnie was not entitled to the monthly payment because she was not Raleigh's "widow."

II. PROCEEDINGS BELOW

In January 2019, Bonnie—individually and in her capacity as co-trustee of the trust—sued Seth, individually and as executor of Raleigh's estate.² She claimed that Seth breached the post-nuptial agreement and the trust document by withholding the promised Spring Street income and by failing to ensure that the trust contained sufficient assets to generate the $10,000 "Monthly Amount" or "Widow's Benefit." Bonnie sought an order compelling Seth to transfer to the trust additional income-producing assets sufficient to generate at least $10,000 a month in benefits; awarding "Bonnie, as beneficiary of the trust," judgment against Seth in the amount of the Spring Street income withheld from the trust; awarding her costs and attorney fees; and awarding "such additional and further relief [as] the Court deems just and proper."

The circuit court, Judge R. Edwin Burnette, Jr., presiding, denied the parties’ cross-motions for summary judgment, concluding that a trial was necessary because the post-nuptial agreement was ambiguous and the material facts were in dispute. He reasoned that "reasonable people" could disagree whether "the use of wife in one part of the postnup and widow in the other ... creates an inconsistency that the trier of fact is entitled to decide. I can't make that call." (Emphasis added). Judge Burnette denied Bonnie's motion for reconsideration and set the case for trial.

After Judge Burnette retired, the case was assigned to Judge F. Patrick Yeatts. On the day set for trial, Judge Yeatts "sua sponte , reopened the summary judgment proceedings and heard additional argument" on the parties’ motions. He issued a letter opinion in March 2020, granting Bonnie partial summary judgment on the breach-of-contract claims. Judge Yeatts found that paragraph 5 of the post-nuptial agreement provides "two separate income sources for Bonnie and that the "$10,000 per month for the Widow's Benefit is a separate income source for Bonnie in addition to the Spring Street income." He rejected Seth's argument that Bonnie was...