Virginia Fiduciary Law Blog

JUDICIAL EXPANSION OF A TORT'S ZONE OF DANGER: AN EMPLOYEE DUTY FOR WRONGFUL DISCHARGE

When an employment relationship sours, and a termination results, an employee may harbor the idea that he or she has a wrongful discharge claim.  Employees frequently use the label “wrongful discharge” to denote a broad range of claims for the unlawful firing of an employee.  In Virginia, wrongful discharge can be a legal term of art, and, until recently, it has meant a very narrowly circumscribed set of actionable claims. The state of the law may be changing, however.

 In a recent case, the Virginia Supreme Court advised the United States Court of Appeals for the Fourth Circuit that Virginia law would recognize the liability of an employee for the tort of wrongful discharge.  The potential for an employer to be liable for a wrongful discharge was not in question. The novel twist in the question before the Court was whether the supervisor of the allegedly wrongfully discharged employee also could be held liable for that tort.  In a sharply divided Virginia Supreme Court opinion, over the dissents of Justice Kinser who was joined by Justices Goodwyn and McClanahan, the Virginia Supreme Court held that a supervisory employee may be liable for the wrongful discharge of the employer.

 The majority opinion noted that the actual predicate giving rise to a wrongful discharge claim remains narrowly construed under Virginia law. The majority also noted that recognizing another employee’s potential liability for the employer’s wrongful discharge would be consistent with agency law principles by which “employers and employees are deemed to be jointly liable and jointly suable for the employee's wrongful act.”  Both the majority and dissenting opinions drew on out-of-state legal decisions in support of their stated rationales. 

 Justice Kinser’s dissenting opinion pointed out, however, that, at present, there exists no precedent in Virginia for the proposition that one employee may be liable to another for carrying out a wrongful discharge by the employer.  Justice Kinser noted that “the legal duty at issue in a claim for wrongful discharge does not flow from one employee to another employee.”  She noted that although the Court’s majority opinion was intended to further the policy of deterring a wrongful discharge in the workplace, “such policy determinations are for the General Assembly, not this Court.”  The case is VanBuren v. Grubb (Va. 2012). 

LITIGATING POWERS OF ATTORNEY: AN OUNCE OF PREVENTION

 Individuals looking for assistance with the management of their financial affairs are often advised that they need a “power of attorney.”  The notion is not altogether misplaced.  Few people want to be the subject of costly guardianship proceedings, involving court filings and medical or psychological determinations. Powers of attorney, now that they can be “durable” and can last through any period of disability, may be the right answer.  But, given the increasing litigation over actions taken by attorneys-in-fact or agents, the inquiry should not end there.

 Naming someone attorney-in-fact, or “agent” under modern Virginia statutes, creates a fiduciary relationship.  A fiduciary relationship implicates duties of care and loyalty by the fiduciary toward property or money belonging to the fiduciary’s principal. Standards of care and loyalty applicable to a fiduciary's dealings are generally higher than in arm's length commercial transactions.

 Both principal and agent must be mindful of these considerations.  In particular, and although a power of attorney may be designed to be revocable, if the principal were to become disabled, an agency under a power of attorney may in fact result in a longstanding legal relationship, possibly lasting until death.  (Death revokes all powers of attorney.) What is more, the majority of financial powers of attorney are drafted to take effect immediately:  that is, they are “live” upon the principal’s signing and do not require a prior determination of disability to be triggered. 

 The alternative to a “live” power of attorney would be to create “stand-by” powers of attorney.  Stand-by powers of attorney are dormant, “springing” into force upon the happening of some specified future event.  For most individuals, there may be cogent reasons not to create “stand-by” powers of attorney, however.  One such reason is that third parties, with whom the agent must deal, may not have a satisfactory  way of determining whether the conditions necessary to trigger the agency have occurred.  This could negate the agent’s effective ability to serve the principal if doing so requires the cooperation of such third parties.  Another reason may be  that triggering events can involve an emergency, such as a disabling event, and obtaining the requisite documentation at such a time may be inconvenient or, worse, impossible to obtain.

 Because financial powers of attorney frequently are broadly drafted, the intended principal who is considering asking his or her lawyer to draft up a power of attorney should first reflect on the objectives to be served by the power of attorney.  The choice of agent under a power of attorney merits equal consideration. If a client has a broader estate plan, care should be given to determine whether different appointments in fiduciaries are indicated—should your trustee be the same as your agent, for instance? 

 Despite the routine manner in which powers of attorney today may be treated by clients, lawyers and even non-lawyer commercial suppliers of power of attorney forms, clients seeking to create such relationships would do well to give careful thought to the nature and scope of such appointments.  Likewise, any agent who undertakes to fulfill such an appointment should consult counsel early to determine the contours of the agent’s duties.  The alternative is to be embroiled in costly fiduciary litigation—regardless whether the actions of an agent are ultimately held unlawful. 

SHORT-CHANGING A SURVIVING SPOUSE? THINK AGAIN….

Many people have heard the phrase “taking against the will” or “electing against the will.”  Generally, this refers to protections in the form of an “elective share” of an “augmented estate,” created for a surviving spouse who has been disinherited.  In Virginia, the concept of an “augmented estate” reflects a legislative public policy determination:  disinheriting a surviving spouse is easier said than actually done, even when a predeceasing spouse makes certain transfers before death. Moreover, the augmented estate can be affected not only by the assets owned or transferred by a decedent, but also by liabilities incurred.

    If a deceased spouse leaves no children from a prior marriage, a surviving spouse generally may elect to claim half of a predeceased spouse’s “augmented estate”—a statutory concept that involves a “lookback” to include certain pre-death transfers.  This election overrides the predeceased spouse’s will or estate plan to the contrary.  The applicable fraction is reduced to a third of the predeceased spouse’s augmented estate if there are children from a prior marriage. Sounds straightforward in the abstract, but is it in application? 

    In a recent case, the Virginia Supreme Court had occasion to deal with subtle distinctions in the law governing the composition of the augmented estate.  The decedent disinherited her husband and their two adopted children, leaving her entire estate to her son from a prior marriage.  In computing the augmented estate, two issues arose:  (1) whether the husband had consented to the wife's transfer, during her lifetime, of half of certain jointly owned funds to her son from a prior marriage; and (2) whether her surviving husband was entitled to contribution for half of a joint debt.  The trial court had held against the surviving husband on both counts. 

    The Virginia Supreme Court reversed, holding that the surviving husband had not consented to permit his wife to transfer her half of the jointly owned funds to her son. He had only consented to permit his wife to transfer these funds into her sole name, which did not “decrease the value of the decedent’s estate”—the linchpin of whether his consent did, or did not, exclude these funds from the computation of the wife’s augmented estate.  The Court also held that where the husband and wife were co-makers of a promissory note, they were subject to this liability equally, and the husband was entitled to contribution from the wife’s estate for the full half of the joint obligation.  The case is Tuttle v. Webb (2012).

EX POST FACTO LAWS: "RETROACTIVITY" IN A WILL CASE?

New statutes that create different obligations for past acts or affect vested rights are sometimes referred to as ex post facto laws.  Most people are familiar with the concept from civics class:  "after-the-fact laws" appear inherently unfair.  Article I, Section 9, Clause 3 of the United States Constitution, known as the "Ex Post Facto Clause," states:  "No Bill of Attainder or ex post facto Law shall be passed."  In this context, the question of what law may apply to determine if a writing qualifies as a will is more complicated than a mere glance at the calendar, however.

    In a recent case before the Virginia Supreme Court, a decedent left behind a writing dated March 20, 1984.  The decedent died on September 23, 2008.  The decedent’s son sought to admit the 1984 writing to probate as the decedent’s will pursuant to a statute first effective July 1, 2007.  The writing purported to devise the decedent's entire estate to the decedent's son.  The son’s siblings understandably objected, arguing that permitting the 2007 statute to apply to the 1984 writing unfairly would constitute the retroactive application of the law.

    The Court recognized that Virginia law generally disfavors the application of "retroactive laws."  Because a will is an "ambulatory instrument," however, the Court noted that a will is not intended to take effect until the death of its maker. The Court cited established precedent that, in the case of a will, the "death of the maker for the first time establishes the character of the instrument."  Thus, the Court allowed the 2007 statute to be used to determine whether the 1984 writing being offered by the son as his mother's will would constitute a valid will.  The Court noted that the 2007 law was in effect at the time of the decedent’s death in 2008 and was therefore not retroactive.  The case is Schilling v. Schilling.

QUALIFYING AS EXECUTOR OR ADMINISTRATOR OF AN ESTATE?

 Are you about to qualify as a personal representative (executor or administrator) of an estate for a decedent who died in Virginia?  If so, do you know that, under Virginia law, you are considered to be a “fiduciary” once you become the estate’s personal representative?  Do you know that you will have fiduciary duties toward the beneficiaries of the estate?  Before you qualify, you should be asking yourself some fundamental questions.

    Individuals who are about to qualify as executor or administrator of an estate should carefully consider obtaining legal counsel before taking such a step.   Familiarity with the obligations and liabilities of the position should be part of that determination.  If you are considering to be appointed a fiduciary, you would do well to remember that the position often requires time, care, and the application of skills with people and numbers.  For example, you may be faced with navigating complex legal documents, transferring an array of different property interests, handling requests affecting the rights of and demands by individual beneficiaries, dealing with institutional charitable beneficiaries, and working through claims made by creditors, whether now known or unknown. 

    You will also have inventory and certain accounting obligations to the Office of the Commissioner of Accounts.  The Office of your local Commissioner of Accounts serves as the arm of the local county circuit court under Virginia’s court-supervised probate process.  In addition, there are strictures relating to Internal Revenue Service and state taxing authorities.  You may be required timely to file state and federal tax returns, such as the decedent’s final income tax return, the estate’s federal and state income tax returns, and possibly an estate tax return.  With these obligations come deadlines that you must be prepared to meet.

    In considering whether to qualify as personal representative of an estate, a major consideration should be whether the estate’s debts and liabilities exceed the estate’s assets.  Insolvent estates can be especially difficult to administer.  Consider whether you should assume the obligations of becoming a personal representative of an insolvent estate before you are appointed.  Once appointed as the personal representative, resignation generally requires obtaining permission from the court.

    If you have counsel, question your lawyer whether serving as executor or administrator is right for you.  If you do not have counsel, or need a second opinion, you should seek out an experienced probate attorney before making a decision to assume significant legal obligations on behalf of other individuals, usually beneficiaries whose interests you must protect.  In short, when it comes to qualifying as personal representative of an estate, look before you leap.