By recent unpublished order in the matter of Harold v. Devening, Administrator of the Estate of Donald Wayne Ayers, the Virginia Supreme Court upheld a monetary judgment entered against a power of attorney agent for breach of fiduciary duty. The order provides an instructive analysis and look at the legal framework for a relatively common estate dispute scenario.
The facts of the case were that the principal under the power of attorney (the person signing the power of attorney) (“Principal”) moved in with a family friend, Harold (“Agent”), about nine months before his passing. Principal passed away in 2013 with a bank account worth about $2.4 million. [Note: As we have discussed in a prior post, it is important to keep in mind that any nonprobate/nontestamentary assets may pass outside the Will and by other means]. This account had a payable-on-death designation. The designation provided that the account was to be split three ways – to the Principal’s two sons and family friend Agent.
Agent had helped to take care of Principal after Principal’s wife’s passing a few years earlier. Before he moved in with Agent, Principal signed a general power of attorney authorizing Agent to perform any acts on his behalf (“POA”). Principal also allegedly signed a gift letter that gave Agent $300k to build a house. After the POA was executed, Agent conducted many dubious transactions on behalf of Principal, including bank account transfers and other payments to herself and others, including creating a trust for her own son.
After Principal passed away, the Estate of Principal filed suit against Agent seeking to set aside these dubious transactions. In the litigation, the Principal’s sons argued that their shares of the bank account (for which they were payable-on-death beneficiaries) were greatly diminished by Agent’s malfeasance and wrongful acts under the POA. In response, Agent claimed that she was acting on Principal’s instructions and for his benefit. However, she failed to provide a sufficient explanation for many of these transactions.
In the lawsuit, the Estate alleged claims for lack of capacity, undue influence, breach of fiduciary duty, and unjust enrichment against Agent. A two-day jury trial was held, and the jury awarded a judgment in favor of the Estate, and against Agent, for $327,197.34.
After the trial, Agent filed a motion to set aside the verdict. This is a motion that losing litigants may make to ask the Judge to reduce, or set aside, a jury’s verdict on account of the verdict not being supported by law and/or fact. The trial court ultimately reduced the verdict to $263,761.83.
Both sides appealed, with Agent seeking to have the verdict set aside due to insufficient evidence. The standard for seeking to have a jury verdict set aside for insufficient evidence is an extremely difficult one in Virginia. Jury verdicts are generally given great deference by appellate courts. Ultimately, the Virginia Supreme Court affirmed the finding of the jury and the trial court and found no error.
In the order, the Virginia Supreme Court analyzed the elements of breach of fiduciary duty, and also the various burdens of the litigants regarding such a claim. The elements of breach of fiduciary duty are a legal duty owed by the fiduciary, a breach of that legal duty, and a showing that the breach proximately caused the plaintiff damages.
Generally speaking, the plaintiff bears the burden of proof in the litigation. In other words, the plaintiff must prove (convince the factfinder) and present evidence to establish the various legal elements of her claim. The defendant typically does not bear any burden except in certain circumstances. However, when an agent under a power of attorney engages in transactions that benefit herself, a presumption of fraud arises by operation of law. Once that presumption is established, the burden of proof shifts to the defendant (fiduciary) to produce clear and convincing evidence to rebut the presumption, or in other words, prove why the transaction was not fraudulent or improper.
In this case, the Virginia Supreme Court upheld the jury’s verdict which found that Agent had not rebutted this presumption of fraud. The Virginia Supreme Court pointed out that her testimony was self-serving, contradictory, and mostly uncorroborated. The Virginia Supreme Court ultimately held that a reasonable jury could have concluded that Agent engaged in transactions that depleted the Principal’s assets and benefited her. Accordingly, she was liable to the Estate for the amounts that she had misappropriated under the POA.
The Virginia Supreme Court found no error in the Estate’s cross-assignments of error – appealing the trial court’s reduction of the jury’s verdict, and denial of an award of accountant fees.
This order provides a useful analysis of the breach of fiduciary duty framework with respect to fiduciary disputes. Power of attorney and estate disputes are full of complex legal issues. If faced with such a dispute, it is best to speak with an experienced power of attorney/estate dispute attorney.