J.C. Baker & Son, Inc. v. Cooper

J.C. Baker & Son, Inc., Defendant Below, Petitioner v. Daniel C. Cooper, Executor of the Estate ofGeorge C. Baker, Plaintiff Below, Respondent

No. 20-0338

STATE OF WEST VIRGINIA SUPREME COURT OF APPEALS

April 26, 2021

(Braxton County 18-C-6)

MEMORANDUM DECISION

Petitioner J.C. Baker & Son, Inc., by counsel R. Terrance Rodgers and Charles W. Pace Jr., appeals the Circuit Court of Braxton County's March 6, 2020, order granting summary judgment in respondent's favor in the amount of $1,555,112.72, plus post-judgment interest, following petitioner's default on its payment obligations under a stock purchase agreement. Respondent Daniel C. Cooper, Executor of the Estate of George C. Baker, by counsel Daniel C. Cooper, Jamison H. Cooper, and Raymond Keener III, filed a response. Petitioner filed a reply.¹

This Court has considered the parties' briefs and the record on appeal. The facts and legal arguments are adequately presented, and the decisional process would not be significantly aided by oral argument. Upon consideration of the standard of review, the briefs, and the record presented, the Court finds no substantial question of law and no prejudicial error. For these reasons, a memorandum decision affirming the circuit court's order is appropriate under Rule 21 of the Rules of Appellate Procedure.

On February 4, 2000, Petitioner J.C. Baker & Son, Inc. ("Petitioner Company") entered into an agreement (the "Stock Purchase Agreement") with George C. Baker to purchase all of George C. Baker's shares in Petitioner Company for $2,248,000, payable in monthly installments. Later, Petitioner Company and George C. Baker entered into an amended agreement (the "Amended Stock Purchase Agreement"), under which Petitioner Company was to pay the principal amount of $1,856,310.70 in 186 monthly installments of $16,170.46, commencing on November 29, 2002, and ending on April 29, 2018 (the "Obligation"). Payments under the Amended Stock Purchase Agreement were to total $3,004,531.60, which included principal in the amount of $1,856,310.70 and interest in the amount of $1,148,220.90.

On July 20, 2002, George C. Baker established a trust (the "Trust"), which was initially funded with $1.00. On this same day, George C. Baker executed his will. Article II of his will provided, in part, that

[a]ll estate, inheritance, and other death taxes (including interest and penalties, if any, but excluding any generation-skipping tax), together with all administrative expenses, payable in any jurisdiction by reason of my death (including those taxes and expenses payable with respect to assets which do not pass under this will) shall be paid out of and charged generally against the principal of my residuary estate.

Under Article IV he bequeathed

all my residuary estate, being all property, real or personal, wherever situated, in which I may have any interest at my death not otherwise effectively disposed of,but not including any property over which I have a power of appointment, to the acting trustee or trustees of that certain trust already created by me and known as the GEORGE C. BAKER TRUST DATED JULY 20, 2002.

George C. Baker died on September 6, 2009. On September 15, 2009, Respondent Daniel C. Cooper ("Respondent Executor") was appointed as the Executor of the Estate of George C. Baker (the "Estate"). Following George C. Baker's death, Petitioner Company continued making its payments due on the Obligation to the Estate.

Several years later, however, Petitioner Company ceased making payments on the Obligation. Accordingly, on January 26, 2018, Respondent Executor filed suit on behalf of the Estate against Petitioner Company for breach of contract, alleging that Petitioner Company was in arrears in the amount of $1,248,170.66 as of September 29, 2017. The Estate, by Respondent Executor, sought judgment in that amount as well as for any additional amounts owing under that agreement.

Petitioner Company moved to dismiss the complaint on the ground that Respondent Executor was not the real party in interest authorized to prosecute the claim and that the complaint, therefore, failed to state a claim upon which relief could be granted. Petitioner Company argued that, under the provisions of George C. Baker's will, he devised his residuary estate to the Trust. As a result, the right to enforce the Amended Stock Purchase Agreement passed to the Trust upon his death. In short, Petitioner Company argued, the trustees of the Trust were the real parties in interest with respect to any claim against Petitioner Company.

Petitioner Company also argued that the Respondent Executor's failure to administer the Estate for nearly a decade was unreasonable. Petitioner Company asserted that if the Estate had been timely distributed, Respondent Executor would have been divested of any claim over the assets of the Estate. "Equity and good conscience cannot recognize [Respondent Executor] as the appropriate party to resolve" the breach of contract claim, Petitioner Company argued. It further argued that Respondent Executor's actions were taken outside of the five-year period for administering an estate set forth in West Virginia Code § 44-4-14a; therefore, he was automatically removed as executor, his actions were taken outside the scope of the law, and he is not the real party in interest. And, Petitioner Company contended that because Respondent Executor is not the real party in interest, the complaint failed to state a claim.

In April of 2019, the circuit court denied Petitioner Company's motion to dismiss the Respondent Executor's complaint. The court found that Respondent Executor

has a fiduciary duty and obligation to administer the Estate and pursue any debts owed to the Estate. While the Trust will receive the residuary of the Estate of George C. Baker, the Trust was not granted authority to administer the Estate or to act on behalf of the Estate—that responsibility is reserved for the Executor.

The court also determined that an executor is not automatically removed because he or she fails to settle an estate within five years; rather, the county commission retained the authority "to determine if the delays in settling an estate are for good cause, and if the delays warrantdischarging the executor." The court concluded that so long as Respondent Executor was executor of the Estate, "he may seek to collect debts he asserts are owed to the Estate," and Respondent Executor is the real party in interest to collect the alleged debt owed to the Estate from Petitioner Company.

On December 17, 2019, Respondent Executor moved for summary judgment. Respondent Executor argued that the facts indisputably showed that Petitioner Company had defaulted on the Obligation and, as of January 1, 2020, owed $1,555,122.72.² In support, Respondent Executor argued that Petitioner Company failed to answer—and therefore admitted—Respondent Executor's requests for admission, which established the default. Respondent Executor also submitted other evidence in support, including the Amended Stock Purchase Agreement, an amortization schedule, a table of payments made, and an affidavit from Respondent Executor.

The circuit court granted Respondent Executor's motion for summary judgment by order entered on March 6, 2020. The court concluded that Petitioner Company's failure to respond to Respondent Executor's requests for admission resulted in those requests being deemed admitted. As a result, Petitioner Company had admitted, in sum, that it breached the Amended Stock Purchase Agreement "by failing to pay the amounts owed . . . in a timely and complete manner." The court also noted that the Amended Stock Purchase Agreement, amortization schedule, table of payments, and Respondent Executor's affidavit provided additional evidence of the outstanding debt. The court found that Petitioner Company owed $1,555,112.72, inclusive of interest, as of January 1, 2020, and judgment was rendered in that amount, plus post-judgment interest. This appeal followed.

Petitioner Company assigns as error the circuit court's denial of its motion to dismiss, which was predicated on Petitioner Company's assertion that Respondent Executor is not the real party in interest for purposes of enforcing the Amended Stock Purchase Agreement. In support, Petitioner Company argues four points. First, Petitioner Company claims that, under West Virginia Code § 44-1-14a, Respondent Executor was automatically discharged as executor of the Estate due to his failure to settle the Estate within five years of his September 15, 2009, appointment. Therefore, Petitioner Company contends that he was not the authorized personal representative of the Estate when he initiated the underlying litigation in January of 2018.

Second, Petitioner Company argues that Executor Respondent's unreasonable delay in settling the Estate will result in a windfall to the Estate. Petitioner Company points to the fact that it made the required payments to the Estate for several years following George C. Baker's death and that "[i]t was not until 2017 that all payments, inadvertently, ceased." Had Executor Respondent settled the Estate before the default occurred, the Trust would have been vested with "full and complete title" to the Amended Stock Purchase Agreement, and the trustees of the Trust would have been responsible for administering that agreement. Petitioner Company assertsthat, under these circumstances, if Respondent Executor's efforts to collect the Obligation are acknowledged as a proper exercise of his authority, it will result in a windfall to the Estate.

As a third basis for claiming that dismissal was appropriate, Petitioner Company argues that "[w]hile ordinarily bare legal title to the property of an estate devolves on the executor who then has authority to deal with the property, when a trust is involved the ordinary order of things changes." In support, Petitioner Company cites Gaylord v. Hope Natural Gas Co., where the Court stated that "[...