Hunter v. Hunter

1

ELEANOR A. HUNTER, ET AL. v. CHARLES M. HUNTER, JR.

CHARLES M. HUNTER, JR. v. ELEANOR A. HUNTER, ET AL.

Nos. 1087-22-1, 1237-22-1

Court of Appeals of Virginia

October 31, 2023

FROM THE CIRCUIT COURT OF THE CITY OF WILLIAMSBURG AND COUNTY OF JAMES CITY Charles J. Maxfield, Judge Designate

Daniel R. Quarles (George H. Bowles, Sr.; Otey Smith & Quarles Williams Mullen, P.C., on briefs), for Eleanor A. Hunter, et al.

William W. Sleeth, III (Brett C. Herbert; Gordon Rees Scully Mansukhani, LLP, on briefs), for Charles M. Hunter, Jr.

Present: Judges AtLee, Causey and Callins Argued at Norfolk Virginia

MEMORANDUM OPINION ^[*]

RICHARD Y. ATLEE, JR. JUDGE

These cross-appeals concern the effect of "no-contest" provisions in two trust agreements and related litigation. The parties are the children of the individuals who created the trusts. Eleanor Hunter^[1] argues that the circuit court erred when it found that Charles M. Hunter, Jr. ("Chip") did not violate the terms of these no-contest provisions. Chip argues that the circuit court erred in permitting Eleanor to present certain evidence and testimony and in granting her request for attorney fees (and denying his own request for the same). For the following reasons, we affirm.

I. Background

Charles M. Hunter, Sr. and Theresa Hunter married in 1953 and had two children, Eleanor and Chip, as well as one granddaughter. Charles executed a trust agreement in 2010, naming his daughter, Eleanor, and wife, Theresa, as substitute trustees if he became unable to serve. Charles died in 2013, at which point all his assets passed outright to Theresa, free of any trust. Theresa executed a trust agreement in 2011, naming Eleanor as the initial trustee. Her trust agreement provided that upon the death of both Charles and Theresa, Chip would receive one-third of the trust assets, minus the value of certain loans previously extended to him, and that Eleanor and the granddaughter's trust would each also receive one-third of the trust assets.

Both trust agreements contain no-contest provisions that would revoke a beneficiary's interest if they took certain actions.^[2] Each trust agreement also waived the trustee's "formal requirements to inform and report set forth in" former Code § 55-548.13 (current Code § 64.2-775).

Theresa died in 2015, at which point Eleanor began serving as trustee. Sometime thereafter, Chip allegedly learned of a significant decline in the value of the trust's assets that he did not believe was attributable to market forces. In 2017, Chip filed a two-count complaint for declaratory judgment against Eleanor as trustee and individually. In the first count, Chip sought a judicial declaration that the second count would not violate the no-contest provisions of the trust agreements. The second count sought a judicial declaration of the obligations owed by Eleanor, as trustee, to provide Chip with information and documents relating to the trusts. The second count provided, however, that the circuit court was to address the second count "[i]f, and only if," the circuit court first found that Chip's second count would not trigger the no-contest provisions.

Eleanor filed a counterclaim that asserted that Chip's complaint violated the no-contest provisions because he sought to avoid the trust agreements' waiver of the trustee's inform-and-report obligations under Code § 64.2-775. She argued that Chip's complaint violated the no-contest provisions and that his interests in the trusts were therefore revoked.

Eleanor moved for summary judgment on her counterclaim. In Chip's brief in opposition, he contended that the Virginia Uniform Trust Code imposed "non-waivable duties" on a trustee. Therefore, he argued that "permitting a waiver" of statutory and common law duties to inform and report and finding that "his efforts to determine his rights" triggered the no-contest clauses would violate the Uniform Trust Code. After a hearing, the circuit court found that Chip's complaint "contested, or sought to invalidate, nullify, set aside, render unenforceable or otherwise avoid the effect of," the trust agreements' waiver of statutory inform-and-report obligations and thus triggered the no-contest provisions of the trusts. Therefore, the circuit court granted Eleanor's motion for summary judgment and held that Chip's interest in the Theresa trust was revoked.

Chip appealed to the Supreme Court of Virginia, which found that the circuit court improperly reached the complaint's second count without first determining whether doing so would violate the no-contest provisions. Hunter v. Hunter (Hunter I), 298 Va. 414, 430 (2020). The Supreme Court reversed the circuit court's ruling and found that Chip had properly employed an alternative pleading model as set forth in Virginia Foundation of Independent Colleges v. Goodrich, 246 Va. 435 (1993), and thus had not triggered the no-contest provision. Therefore, in finding Chip in violation of the no-contest provisions, the circuit court had erroneously reached the second count of Chip's complaint without first addressing the first count regarding whether his claims would violate the no-contest provisions. Id. at 437. The Supreme Court briefly discussed, but did not address on the merits, Chip's argument that "if the inform-and-report waiver and no-contest provisions were incorrectly interpreted to erect an impregnable barrier to judicial review of a fiduciary's duty to inform and report, then neither provision would be enforceable as a matter of law." Id. at 436. The Supreme Court noted, however, that it had "little doubt that this claim, if Chip had pleaded it in his complaint, could have been challenged as a contest of either the no-contest or the waiver provisions." Id. The Supreme Court declined to address it, however, because in employing the alternative pleading model, "Chip never pleaded that argument, and expressly disclaimed it in his declaratory judgment complaint." Id.

On remand, the circuit court granted Eleanor's motion for leave to file an amended counterclaim. The amended counterclaim addressed Chip's arguments concerning the enforceability of the no-contest provisions, which he had raised in his opposition to her motion for summary judgment and his brief to the Supreme Court, and argued that Chip had violated the no-contest provisions in those proceedings. Chip then nonsuited the second count of his complaint, effectively disclaiming his challenges to Eleanor's administration of the trust and those trust provisions. The circuit court entered an agreed order bifurcating the trial on Eleanor's amended counterclaim from a later hearing on attorney fees and costs. After the trial on the amended counterclaim, the circuit court found that Chip had not violated the no-contest provisions as Eleanor alleged. The circuit court therefore entered judgment in favor of Chip on Eleanor's amended counterclaim. Eleanor appeals this ruling.

Before the second phase of the trial, the parties filed competing motions for attorney fees under Code § 64.2-795.^[3] Chip objected to Eleanor offering witness testimony or exhibits as to attorney fees because she had not filed a witness and exhibit list as required by the pretrial scheduling order. The circuit court, noting that the nature of the bifurcated trial accounted for the inadvertence and that Chip suffered no prejudice, overruled Chip's objections and allowed the witnesses' testimony and admitted the exhibits. Chip also specifically objected to one of Eleanor's witnesses, attorney Michael Ware, testifying as an expert witness on the issue of the reasonableness of Eleanor's attorney fees, asserting that Eleanor, as a prevailing party, had not made a timely disclosure. The circuit court overruled that objection and allowed the testimony.

After the hearing on attorney fees, the circuit court found that "nobody won" the litigation, which only "resolve[d] a point of law . . . that you have standing to do a declaratory judgment in the face of" a no-contest provision without reaching Chip's contention that Eleanor breached her fiduciary duties as trustee. The circuit court denied Chip's request for attorney fees because he had not established wrongdoing by Eleanor because she did not act "in bad faith in defending the trust." It also denied Eleanor's request for an award of attorney fees against Chip. The circuit court, however, found that Eleanor's attorney fees were reasonable and properly payable as trust expenses. It therefore granted her request for attorney fees from the trust. Chip now appeals.

II. Analysis: Eleanor's Appeal

Eleanor argues that the circuit court ought to have granted her motion for a declaratory judgment that Chip violated the no-contest clauses in the trust agreements in the course of opposing her counterclaim and in his arguments to the Supreme Court.

A. Standards of Review

Whether a beneficiary has triggered a trust's no contest clause presents "a mixed question of law and fact." Rafalko v. Georgiadis, 290 Va. 384, 401 (2015) (quoting Keener v. Keener, 278 Va. 435, 441 (2009)). "What activity or participation constitutes a contest or attempt to defeat a [trust] depends upon the wording of the 'no contest' provision and the facts and circumstances of each particular case." Keener, 278 Va. at 441 (quoting Womble v. Gunter, 198 Va. 522, 529 (1956)). "Accordingly, we accord deference to the circuit court's findings of historical fact, but review questions of law de novo." Id. B. The circuit court did not err in concluding that Chip did not violate the no-contest provision.

The thrust of Eleanor's argument on appeal is that Chip, in making certain arguments in response to her counterclaim and on appeal, violated the no-contest provision of the Theresa trust...