Jimenez v. Corr ( 2014 )

Present: Kinser, C.J., Lemons, Millette, Mims, McClanahan, and
Powell, JJ., and Lacy, S.J.
NANCY C. JIMENEZ
OPINION BY
v. Record No. 140112 JUSTICE LEROY F. MILLETTE, JR.
October 31, 2014
LEWIS S. CORR, JR.,
INDIVIDUALLY, AND AS EXECUTOR
OF THE ESTATE OF NORMA F. CORR
AND TRUSTEE OF THE NORMA F. CORR
REVOCABLE TRUST, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
Frederick B. Lowe, Judge
In this appeal we consider whether shares of stock, which
would otherwise be conveyed to an inter vivos trust by way of a
pour-over provision set forth in a shareholder's will, must
instead be bequeathed in a manner set forth in a shareholders'
agreement entered into by that shareholder several years after
executing her estate planning documents.
I. Facts and Proceedings
This appeal arises from a dispute over the disposition of
shares of stock in a family held business after the death of
that business's founding generation. Six people are central to
this dispute as it comes to us on appeal. Lewis S. Corr, Sr.
("Mr. Corr") and Norma F. Corr were married prior to their
deaths. Mr. Corr and Norma had three children: Lewis S. Corr,
Jr. ("Lewis"), Patricia Corr Williams, and Nancy Corr Jimenez.
Patricia is married to Thomas M. Williams.
Mr. Corr established Capitol Foundry of Virginia ("Capitol
Foundry" or "Company") in 1970 as a broker and reseller of
castings of heavy infrastructure. Capitol Foundry was
incorporated in 1976 with Mr. Corr initially as the sole
shareholder. Lewis joined the business when it incorporated
and later, in 1981, Mr. Corr allowed Lewis to purchase 5 newly
issued shares of Capitol Foundry stock. That same year, Nancy
joined the business.
In 1999, Mr. Corr passed away, and all of his outstanding
shares in Capitol Foundry were transferred outright to his wife
Norma. In 2002, Norma conveyed 5 of her shares to Nancy. At
the time of Norma's death in 2012, Norma owned 95 shares of
Capitol Foundry stock, Lewis owned 5 shares of Capitol Foundry
stock, and Nancy owned the remaining 5 shares of Capitol
Foundry stock.
After Norma's death, Nancy filed suit in the Circuit Court
of the City of Virginia Beach against Lewis, the executors of
Norma's estate, and Capitol Foundry. Nancy alleged that Norma,
Lewis, and Nancy entered into an agreement (the "Shareholders'
Agreement") which required Norma's executors to make Norma's 95
shares of Capitol Foundry stock available for purchase by
Capitol Foundry, and required Capitol Foundry to purchase those
shares.
2
The defendants countered that Norma's estate planning
documents, and not the Shareholders' Agreement, controlled
disposition of Norma's 95 shares of Capitol Foundry stock.
Therefore, in accordance with the estate planning documents,
those shares were to go into an inter vivos trust rather than
being subject to purchase under the Shareholders' Agreement.
Nancy then amended her complaint. In her amended
pleading, Nancy sought (1) declaratory judgment relief in the
form of the court declaring that the Shareholders' Agreement,
and not Norma's estate planning documents, governed disposition
of Norma's shares of Capitol Foundry stock, and (2) specific
performance relief in the form of Norma's executors making her
95 shares of Capitol Foundry stock available for purchase by
Nancy and Capitol Foundry.
While this litigation was ongoing, the parties entered
into an agreement that permitted Capitol Foundry to purchase
64.4 shares of Norma's Capitol Foundry stock so that Norma's
estate would obtain tax benefits under Internal Revenue Code
§ 303 (the "Stock Redemption Agreement"). The disposition of
Norma's remaining 30.6 shares of Capitol Foundry stock remained
at issue subsequent to this purchase.
After a two day trial, the circuit court entered a final
order in this matter. The circuit court held that the relevant
portions of the Shareholders' Agreement were not applicable to
3
Norma's shares of Capitol Foundry stock, and therefore those
shares were to pass to the inter vivos trust established by
Norma's estate planning documents. Moreover, because those
estate planning documents permitted Lewis to exercise an
exclusive option to purchase all Capitol Foundry stock which
passed into the inter vivos trust, Lewis properly exercised
such an option when he executed and delivered the document
called for under the terms of Norma's estate planning documents
(the "Exercise of Option").
Nancy timely filed a petition for appeal with this Court.
We granted eight assignments of error and one assignment of
cross-error. These assignments and cross assignment direct us
to address two issues:
1. How do Norma's estate planning documents and the
Shareholders' Agreement operate to dispose of Norma's
shares of Capitol Foundry stock upon her death?
2. Did the parties sufficiently plead the issue of
whether Lewis effectively exercised his exclusive
option to purchase Capitol Foundry stock held in the
inter vivos trust, so as to allow the circuit court to
rule on that issue?
In light of our determination of how the various documents
operate, which resolves this appeal, we do not reach this
second issue. Gardner v. Commonwealth, __ Va. __, __ n.3, 758
S.E.2d 540, 542 n.3 (2014).
4
II. Discussion
A. Standard of Review
We review de novo the circuit court's determination of
"the legal effect of [the] written document[s]" pertinent to
this appeal. Jones v. Brandt, 274 Va. 131, 135, 645 S.E.2d
312, 314 (2007).
B. Norma's Estate Planning Documents
When construing a particular legal instrument, if other
documents were "executed at the same time or contemporaneously
between the same parties, in reference to the same subject
matter" as the legal instrument, then all such documents "must
be regarded as parts of one transaction, and receive the same
construction as if their several provisions were in one and the
same instrument." Bailey v. Town of Saltville, 279 Va. 627,
633, 691 S.E.2d 491, 493 (2010) (internal quotation marks and
citation omitted). Norma's Last Will and Testament ("Norma's
Will") and the Norma F. Corr Revocable Trust document (the
"Trust Document") were both executed on July 17, 1992, were
both executed by Norma, and reference one another. We
therefore consider these two documents together "as parts of
one transaction." Id.
1. Norma's Last Will and Testament
Norma's Will nominated and appointed Lewis and Joseph L.
Lyle, Jr. as co-executors of the will, and named Thomas as co-
5
executor in the event that Joseph became unwilling or unable to
serve as executor. The parties agree that, at the time of
Norma's death, Lewis and Thomas were co-executors.
Norma's Will contains numerous specific bequests and
devises. Article VII of the Will governs disposition of the
residue of Norma's estate:
All the rest, residue, and remainder of my
property of every kind and description, and wherever
located, including any lapsed or void legacy or
devise, after satisfying all the bequests and devises
hereinabove set out and after the payment or provision
for payment of all administrative expenses and all
death taxes as hereinabove directed, I give, devise,
and bequeath to the Trustee of a trust agreement
between me as Grantor and as Trustee dated July 17,
1992, which is now in existence, to be held,
administered, and distributed in accordance with its
terms.
In the event any such property given, devised or
bequeathed to the Trustee of such trust agreement is,
under the terms of such trust agreement, to be
distributed immediately to any beneficiary thereof,
outright and free of trust, then such property may be
transferred directly to such beneficiary by my
Executor, without the necessity of passing through
such trust.
Article VII is a pour-over provision. "[S]ituations in
which the testator devises or bequeaths property according to
the terms of an inter vivos trust that is in existence and
properly referred to at the time the will is executed[,] but
which is subject to a reserved power of amendment in the
settlor of the trust[,] are most frequently referred to as
pour-over provisions." 2 William J. Bowe & Douglas H. Parker,
6
Page on the Law of Wills § 19.27, at 60-61 (2003). Article VII
operates to gather up the entirety of what remained of Norma's
estate after all debts, bequests, and devises had been settled,
and "pours over" that residuary estate into a trust which was
already existing and created by Norma.
One exception to this pour-over provision is supplied by
the terms of Article VII. This exception allows for property
to go directly to a beneficiary of the trust, without first
passing through the trust, if that beneficiary would
immediately receive such property under the terms of the Trust
Document. We will return to this exception later in order to
explain its relevance to the parties' arguments on appeal.
2. The Norma F. Corr Revocable Trust Document
The trust into which Norma's residuary estate was poured
was created by the Trust Document and was titled "Trust A."
The Trust Document named Lewis and Joseph L. Lyle, Jr. as
successor co-trustees in the event that Norma became unable to
serve as trustee, and named Thomas as a successor co-trustee in
the event that Joseph became unwilling or unable to serve as
trustee. The parties agree that, at the time of Norma's death,
Lewis and Thomas were co-trustees.
Because Norma's husband predeceased her, Article IV,
Sections (B)(3) through (B)(6) of the Trust Document governed
disposition of the trust's assets. Sections (B)(4) and (B)(5)
7
of Article IV are not relevant to this appeal, and we need only
review Sections (B)(3) and (B)(6).
Article IV, Section (B)(3) of the Trust Document provides:
3. To the extent not appointed by [Norma's] husband,
upon the death of [Norma's] husband, the then
remaining trust assets, if any, shall be divided, per
stirpes, into equal shares, one share for each child
of [Norma] then living and one share for each child of
[Norma] then deceased with surviving issue.
Each living child of [Norma] shall then be entitled to
request and receive, outright and free of trust, his
or her entire share. Prior to final distribution, the
Trustee shall pay to or apply for the benefit of each
of [Norma's] living children the entire income of his
or her respective share and so much of the principal
as the Trustee deems appropriate for his or her
support, maintenance, education (including college and
graduate school), and medical care. 1
Section (B)(3) provides that any property poured over into
Trust A shall be divided per stirpes 2 among the total number of
Norma's living children or, if deceased, Norma's children who
had living issue at the time of the per stirpes division.
Norma had three children, all living, when Norma's residuary
estate poured over into Trust A and became subject to the per
1
In this opinion, paragraph breaks have been added to some
quotations from the operative documents.
2
"Per stirpes means proportionately divided between
beneficiaries according to their deceased ancestor's share."
Sheppard v. Junes, 287 Va. 397, 406 n.4, 756 S.E.2d 409, 413
n.4 (2014) (internal quotation marks and alterations omitted).
8
stirpes division: Lewis, Nancy, and Patricia. Thus, any such
property would be divided equally into three shares.
Article IV, Section (B)(6) of the Trust Document provides
in relevant part:
Notwithstanding anything herein to the contrary, upon
the second to die of [Norma] and her husband,
[Norma's] son, Lewis S. Corr, Jr., is hereby granted
and given the exclusive right and option to
purchase[:]
(i) any or all shares of stock in Capitol Foundry of
Virginia, Inc., or any successor entity thereto, which
Trust A herein may own, and
(ii) any or all interests Trust A may own in [certain
real property].
. . . .
The option shall be exercised by written notice
delivered to the Trustee within ninety (90) days of
the date of the second to die of [Norma] and her
husband. If not exercised by such date, the option
shall then terminate and expire.
Within sixty (60) days of such exercise, at a mutually
acceptable date, time and place (the "Settlement
Date"), the Trustee shall convey such property so
elected to [Lewis] F. Corr, Jr. by stock certificate
. . . in exchange for a downpayment equal to all cash
or liquid assets distributable to him pursuant to the
terms of Trust A created herein and delivery of an
executed promissory note in form acceptable to the
Trustee for the balance of the purchase price, to be
paid in equal monthly payments of principal and
interest amortizing the balance of the purchase price
over ten years.
Section (B)(6) of the Trust Document provides that,
notwithstanding the per stirpes division of all property poured
over into Trust A by operation of Section (B)(3) of the Trust
9
Document, Lewis has an exclusive right and option to purchase
all shares of Capitol Foundry stock that Trust A might own. To
the extent shares of Capitol Foundry stock are owned by Trust
A, this would allow Lewis to purchase and acquire those shares
so that his siblings Nancy and Patricia, fellow beneficiaries
of Trust A, would not be able to acquire those shares through
the per stirpes distribution scheme set forth in
Section (B)(3). However, because Lewis's purchase of these
shares would put money back into Trust A, that money would be
subject to the per stirpes distribution. Thus, Nancy and
Patricia would ultimately receive the cash value of their
shares of Capitol Foundry stock held by Trust A, just not the
shares themselves.
3. Norma's Estate Planning Documents and Disposition of
Norma's Shares of Capitol Foundry Stock
It is important to set forth the distribution scheme of
Norma's shares of Capitol Foundry stock if only Norma's estate
planning documents governed this case.
The Trust Document does not provide what amount, if any,
of Norma's shares of Capitol Foundry stock pour over into
Trust A. That document merely provides that if such property
is owned by Trust A, it shall be subject to either a per
stirpes division by operation of Article IV, Section (B)(3), or
10
Lewis's exclusive purchase option by operation of Article IV,
Section (B)(6).
On the other hand, Article VII of Norma's Will provides
that her residuary estate shall pour over into Trust A. This
provision means that any shares of Capitol Foundry stock that
Norma owned upon her death, not subject to debts, specific
bequests, or devises, and therefore forming part of Norma's
residuary estate, pour over into Trust A. See Spinks v. Rice,
187 Va. 730, 740, 47 S.E.2d 424, 428 (1948) ("The essential
characteristic of a will is, that it operates only upon and by
reason of the death of the maker." (internal quotation marks
omitted)).
Reading these two documents together, they operate so that
pursuant to Article VII of her Will, Norma's shares of Capitol
Foundry stock would pour over into Trust A upon Norma's death,
and then, pursuant to Article IV, Section (B)(6) of the Trust
Document, Lewis would be able to exercise his exclusive option
to purchase those shares.
However, the analysis does not end here because these are
not the only two documents relevant to this appeal. Norma also
entered into the Shareholders' Agreement in December of 2002,
subsequent to executing her estate planning documents in July
of 1992. This Shareholders' Agreement is a contract separate
and distinct from Norma's Will. Nonetheless, the Shareholders'
11
Agreement could affect the operation of Norma's Will because,
even though these two documents were not executed
contemporaneously, a will and a contract are instruments that
both can relate to the same subject matter – the disposition of
property upon death of the owner – and simultaneously embody
the testator's intent on that subject. See McAfee v. Brewer,
214 Va. 579, 581, 203 S.E.2d 129, 131 (1974) (valid contract
must have mutual assent of the parties); Roller v. Shaver, 178
Va. 467, 472, 17 S.E.2d 419, 422 (1941) (valid will expresses
the testator's intent).
Further, it is clear from the substance of Norma's Will
and the Shareholders' Agreement that these two documents
operate in harmony. That is, Norma's Will created a general
provision – Article VII - governing the disposition of the
general residue of Norma's estate upon her death. The
Shareholders' Agreement, in turn, created a specific provision
– Section 3 - governing the particular disposition of Norma's
shares of Capitol Foundry stock upon her death. Norma's shares
are property that would fall into Norma's residuary estate
because they were not otherwise specifically devised or
bequeathed in Norma's Will. Although the general provision set
forth in Norma's Will still has effect, the scope of its
operation is necessarily limited to the extent it would govern
disposition of Norma's shares of Capitol Foundry stock, which
12
is instead governed by the more specific provision set forth in
the Shareholders' Agreement. Cf. Condominium Servs., Inc. v.
First Owners' Ass'n of Forty Six Hundred Condominium, Inc., 281
Va. 561, 573, 709 S.E.2d 163, 170 (2011) ("[A] specific
provision of a contract governs over one that is more general
in nature.").
It is thus necessary to construe the Shareholders'
Agreement to determine how it affects disposition of Norma's
shares of Capitol Foundry stock, and whether that instrument is
valid and enforceable.
C. The Shareholders' Agreement
The Shareholders' Agreement was executed by Norma, Lewis,
and Nancy as shareholders of Capitol Foundry. Section 3,
titled "Mandatory Sale and Purchase of Stock," provides in
relevant part:
(a) Death of an Agreeing Shareholder. Subject to
subparagraph (d) hereof, on the death of an Agreeing
Shareholder, all of the Shares of Stock owned by such
Agreeing Shareholder shall be sold by his personal
representative and shall be purchased by the Company
or the remaining Shareholders for the purchase price
and under the terms set forth in Section 4. Such
offer shall be deemed made and accepted on the
ninetieth (90th) calendar day following the date of
death, whether actually made and accepted or not.
. . . .
(d) An Agreeing Shareholder shall have the right to
convey or bequeath his/her shares to a member of such
Agreeing Shareholder's immediate family. Such right
shall apply during such Agreeing Shareholder's
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lifetime and shall also apply subsequent to the demise
of such Agreeing Shareholder, and then be applicable
to such Agreeing Shareholder's executor or
administrator. The term "immediate family" shall be
defined as children, spouses, parents and siblings of
such Agreeing Shareholder.
In light of the parties' arguments, we address these
paragraphs separately.
1. Section 3, Paragraph (d)
We first turn to the exemption provision of Section 3,
Paragraph (d) of the Shareholders' Agreement. To exempt her
shares from the mandatory purchase scheme of Section 3,
Paragraph (a), Norma was able to "convey or bequeath [her]
shares to a member of [her] immediate family." The term
"immediate family" is defined within this paragraph as Norma's
"children, spouses, parents and siblings."
a. Bequest of Norma's Shares by Trust
The parties agree that Paragraph (d) allowed Norma to
bypass the mandatory purchase scheme of Paragraph (a) by
bequeathing her Capitol Foundry stock to her children. The
parties disagree whether Paragraph (d) permitted Norma to do so
by way of the pour-over provision in Norma's Will, which, as
discussed, would convey Norma's shares of Capitol Foundry stock
to Trust A for the benefit of Norma's children.
Resolving this dispute requires ascertaining the nature of
an inter vivos trust. An inter vivos trust is not like a
14
corporation, which is "a legal entity entirely separate and
distinct from the shareholders or members who compose it."
Cheatle v. Rudd's Swimming Pool Supply Co., 234 Va. 207, 212,
360 S.E.2d 828, 831 (1987). So, for example, because a
corporation "is a legal person, separate and distinct from the
persons who own it," it is "the corporation, as the . . . owner
and operator of [a] business, [who] is the person entitled to
[the business's] profits." Keepe v. Shell Oil Co., 220 Va.
587, 591, 260 S.E.2d 722, 724 (1979).
In contrast, an inter vivos trust is inseparable from the
parties related to it, and the trust does not have separate
legal status. Indeed, the term "trust" refers not to a
separate legal entity but to "a fiduciary relationship with
respect to property, subjecting the person by whom the title to
the property is held to equitable duties to deal with the
property for the benefit of another person, which arises as a
result of a manifestation of an intention to create it."
Restatement (Second) of Trusts § 2 (1959). When such a trust
exists, it is not a separate legal entity being referred to,
15
but a fiduciary relationship between already existing parties,
be they real persons or other legal entities. 3
Those parties have specific titles to denote their various
roles within the trust relationship. There is the "settlor,"
or the "person who creates a trust," the "trustee," or the
"person holding property in trust," and the "beneficiary," or
the "person for whose benefit property is held in trust."
Restatement (Second) of Trusts § 3 (1959); see also Code
§ 64.2-701. Because there is no trust entity which retains
title over property held in trust, a settlor who will not also
be a trustee must convey title of trust property to another
party in order for a trust to be created. Code § 64.2-719(1).
In most trusts, 4 the trustee acquires legal title to the trust
property, while "[t]he beneficiary is the equitable owner of
trust property, in whole or in part." Fletcher v. Fletcher,
3
We note that the type of trust we refer to in today's
opinion – that is, a fiduciary relationship – is different in
kind from a business trust. A business trust under the
Virginia Business Trust Act, Code § 13.1-1200 et seq., is a
separate legal entity like a corporation. See Code § 13.1-1201
(defining "[b]usiness trust"); see also Code § 1-231 ("Whenever
the term 'person' is defined to include both 'corporation' and
'partnership,' such term shall also include 'business trust and
limited liability company.'").
4
Nancy invokes the legal principle that, to create a land
trust, the settlor must convey "both equitable and legal title
in the [trust] property to the trustee." Austin v. City of
Alexandria, 265 Va. 89, 95, 574 S.E.2d 289, 292 (2003).
Trust A is not a land trust, and therefore this principle does
not apply to the facts of this case.
16
253 Va. 30, 35, 480 S.E.2d 488, 491 (1997); see also Curtis v.
Lee Land Trust, 235 Va. 491, 494, 369 S.E.2d 853, 854 (1988).
Thus, legal and equitable ownership of property entered into
Trust A in this case is split between the trustees and
beneficiaries.
It would be incorrect, then, to adopt Nancy's argument
that because a trust is not defined in Paragraph (d) as a type
of "immediate family," Paragraph (d) prevented Norma from
bequeathing her shares of Capitol Foundry stock by way of
Trust A. Trust A, like all inter vivos trusts, is simply a
method to transfer property to another party including,
potentially, members of Norma's "immediate family." The
question is thus whether Trust A constitutes a mechanism by
which Norma bequeathed her Capitol Foundry stock to persons who
qualify as members of Norma's "immediate family." If so,
disposition of Norma's shares of Capitol Foundry stock by way
of Trust A was permitted by Paragraph (d) as an alternative to
the mandatory purchase scheme of Paragraph (a).
In undertaking this inquiry, we must determine whether
both the trustees and the beneficiaries of Trust A qualified as
members of Norma's "immediate family." This is because both a
trustee and a beneficiary have a substantial ownership interest
in trust property.
17
On the one hand, a beneficiary's equitable title permits
the beneficiary to enforce the terms of the trust and to seek
judicial remedy in the event of a breach. See Code § 64.2-
792(B) (setting forth methods for a court to "remedy a breach
of trust that has occurred or may occur"); Miller v. Trevilian,
41 Va. (1 Rob.) 1, 24 (1843) (holding that, when a trustee, as
the legal owner, has "failed to perform his duty," the party
retaining equitable ownership has the power to seek redress in
a court of equity).
On the other hand, a trustee's legal interest is more than
nominal. A trustee, though "a mere representative," must
"attend to the safety of the trust property and . . . obtain
its avails for the beneficiary in the manner provided by the
trust instrument." Fletcher, 253 Va. at 35, 480 S.E.2d at 491.
A trustee's legal title in trust property allows him to utilize
and, if appropriate, dispose of trust property so as to
effectuate his duty to administer the trust. See Code § 64.2-
763. In fact, unless limited by the terms of the trust, a
trustee may exercise "[a]ll powers over the trust property that
an unmarried competent owner has over individually owned
property." Code § 64.2-777(A)(2)(a). And, specifically,
"[w]ith respect to stocks" such as Norma's shares, a trustee
has the power to "exercise the rights of an absolute owner."
Code § 64.2-778(A)(7).
18
In light of the substantial nature of both a beneficiary's
and trustee's ownership interest in trust property, disposing
of property by trust is a method of conveying such property to
both the trustee and beneficiary. As such, although the
Shareholders' Agreement did not outright prevent Norma from
bequeathing her Capitol Foundry stock by way of Trust A, the
Shareholders' Agreement prevented Norma from bequeathing her
Capitol Foundry stock by way of Trust A if both the trustees
and beneficiaries do not qualify as Norma's "immediate family."
In this case, at the time Norma's shares of Capitol
Foundry stock were to pour over into Trust A, all the
beneficiaries of Trust A qualified as members of Norma's
"immediate family" because each beneficiary – Lewis, Nancy, and
Patricia – is either Norma's son or daughter, and therefore
qualify as Norma's "children."
However, at the time Norma's shares of Capitol Foundry
stock were to pour over into Trust A, all the trustees of Trust
A did not qualify as members of Norma's "immediate family."
Lewis and Thomas were co-trustees of Trust A at the time of
Norma's death. Thomas, being Patricia's husband, is Norma's
son-in-law. Because a son-in-law is not one of Norma's
"children, spouses, parents [or] siblings," Thomas is not a
member of Norma's "immediate family" as that term is defined in
Paragraph (d). We therefore hold that, because Norma's method
19
of bequeathing her shares by way of Trust A did not satisfy the
terms of Paragraph (d), Paragraph (d) did not exempt those
shares from the mandatory purchase scheme of Paragraph (a).
b. Bequest of Norma's Shares Free of Trust
It is now necessary to construe the exemption in Section
VII of Norma's Will. As previously stated, that exemption
permits property that would otherwise pass into Trust A to
instead pass directly to the trust beneficiaries if such
property would be "distributed immediately to any beneficiary"
under the terms of the Trust Document. Appellees argue that
this exemption applies to Norma's shares of Capitol Foundry
stock because the beneficiaries of Trust A will "immediately"
receive all of Norma's shares. Consequently, the argument
goes, because Section VII of Norma's Will permits Norma's
shares to bypass Trust A and be distributed directly to the
beneficiaries, and because all the beneficiaries are members of
Norma's "immediate family," the disposition of Norma's shares
in accordance with the terms of Norma's Will actually falls
within the scope of Paragraph (d).
We find this argument unconvincing because it stretches
the term "immediate" beyond its ordinary meaning. "The
language of the will itself must be relied on as the chief
guide [to understanding how the will operates]. If that
language be ordinary and popular, its meaning is to be
20
construed according to its usual acceptation." Senger v.
Senger, 81 Va. 687, 696 (1886). Immediate means "[o]ccuring
without delay" and "instant." Black's Law Dictionary 866 (10th
ed. 2014). We thus disagree with the appellees because Norma's
shares of Capitol Foundry stock could not be instantly
distributed to any beneficiary under the terms of the Trust
Document.
Unlike most other property poured over into Trust A, which
automatically underwent a per stirpes division under Article
IV, Section (B)(3) of the Trust Document, Norma's shares were
first subject to Lewis's exclusive purchase option under
Article IV, Section (B)(6) of the Trust Document. Lewis's
exclusive purchase option thus prevented every beneficiary from
"immediately" having their per stripes division of Norma's
shares "distributed" to them. And Lewis himself could not
"immediately" have Norma's shares "distributed" to him pursuant
to that exclusive option because he was required to first
determine how many of the shares he wanted to acquire, purchase
such shares, arrange or make payment under a specified payment
plan, and act within a set schedule as established by the terms
of Section (B)(6). This is not the type of automatic and
instant distribution contemplated by the term "immediate" as
that term would apply to most property poured over into
Trust A.
21
In sum, Lewis's exclusive purchase option prevented
Norma's shares of Capitol Foundry stock from simply passing
through Trust A and being "distributed immediately" to any
beneficiary. The exemption provision of Section VII of Norma's
Will does not apply to Norma's shares, and those shares were
required to pass through Trust A by the terms of Norma's Will
and the Trust Document. This argument therefore does not alter
our conclusion that Norma's estate documents failed to bequeath
Norma's shares in a manner consistent with Section 3, Paragraph
(d) of the Shareholders' Agreement.
2. Section 3, Paragraph (a)
As the exemption of Section 3, Paragraph (d) of the
Shareholders' Agreement does not apply, we must construe the
mandatory purchase scheme of Section 3, Paragraph (a) of that
agreement. We find the language of Paragraph (a) to be clear
and unambiguous, and therefore "the intention of the parties
must be determined from what they actually say [in the
contract] and not from what it may be supposed they intended to
say." McCarthy Holdings LLC v. Burgher, 282 Va. 267, 274, 716
S.E.2d 461, 465 (2011) (internal quotation marks omitted).
That is, we give effect to Paragraph (a), being the intended
"expression of the parties' agreement," the meaning derived
from the plain language of that contract provision. White v.
Boundary Ass'n, Inc., 271 Va. 50, 55, 624 S.E.2d 5, 8 (2006).
22
Paragraph (a) applies to Norma, Lewis, and Nancy because,
in executing the Shareholders' Agreement, they each are an
"Agreeing Shareholder." As an "Agreeing Shareholder," Norma
bound her "personal representative[s]" to have "all" of Norma's
shares of Capitol Foundry stock "sold." Moreover, Norma's
shares are required to "be purchased by the Company or the
remaining [Agreeing] Shareholders for the purchase price and
under the terms set forth in Section 4 [of the Shareholders'
Agreement]." Thus, Paragraph (a) requires Norma's personal
representatives to sell all of her Capitol Foundry shares to
either the Company or the remaining shareholders upon Norma's
death. 5
Appellees argue that this provision of the Shareholders'
Agreement is unenforceable because it contains an uncertain
material term. "It is well settled that a contract must be
complete and certain[,] and that the essential elements . . .
must have been agreed upon[,] before a court . . . will
5
Norma is deceased, and Lewis and Thomas are Norma's
personal representatives as executors of her estate. See
Bartee v. Vitocruz, __ Va. __, __, 758 S.E.2d 549, 552 (2014).
In administering Norma's estate, Lewis and Thomas must dispose
of Norma's shares consistent with the Shareholders' Agreement,
as such contractual obligations do not "involve any special
skills or training" and therefore Norma's death "does not
discharge [those] obligation[s]." Firebaugh v. Whitehead, 263
Va. 398, 405-06, 559 S.E.2d 611, 616 (2002); see also Code
§ 64.2-514 ("Every personal representative shall administer,
well and truly, the whole personal estate of his decedent.").
23
specifically enforce the contract." Roles v. Mason, 202 Va.
690, 692, 119 S.E.2d 238, 240 (1961). Appellees argue that
Paragraph (a) is uncertain when, as in this case, disagreement
exists about which parties will purchase Norma's stock, as well
as the quantities of stock each party would purchase.
We reject this argument. "The law does not favor
declaring contracts void for indefiniteness and uncertainty,
and leans against a construction which has that tendency."
Reid v. Boyle, 259 Va. 356, 367, 527 S.E.2d 137, 143 (2000)
(internal quotation marks omitted). We do not "permit parties
to be released from the obligations which they have assumed if
this can be ascertained with reasonable certainty from language
used, in light of all the surrounding circumstances." Id.
Such surrounding circumstances include other provisions of the
contract, as we "construe [a] contract as a whole." Schuiling
v. Harris, 286 Va. 187, 193, 747 S.E.2d 833, 836 (2013). Thus,
we review the entire Shareholders' Agreement to determine
whether the contracting parties established a mechanism to
provide certainty to this potentially indefinite term.
Section 14 of the Shareholders' Agreement, titled
"Survival of Benefits," establishes such a mechanism. Section
14 provides, in pertinent part:
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Any covenant or agreement made by the Company herein
shall also constitute a covenant and agreement by the
Agreeing Shareholders to vote the Shares of the
Company held by them to cause the Company to perform
any such covenant or agreement.
The Company, through its shareholders, agreed to purchase
Norma's shares of Capitol Foundry stock upon her death in
Section 3, Paragraph (a) of the Shareholder's Agreement. By
way of Section 14 of that agreement, Lewis, Nancy, and Norma,
as "Agreeing Shareholders," have an overriding obligation to
ensure that the Company performs that agreement. Thus, in the
event that the Company, Lewis, Nancy, and Norma's executors
cannot agree as to who will purchase Norma's stock, and in what
quantities, Section 14 obligates Lewis, Nancy, and Norma's
executors to vote their respective shares of the Company so
that the Company will perform its agreement by purchasing all
of Norma's stock.
In this manner, Section 3, Paragraph (a) of the
Shareholders' Agreement is not uncertain as to who will
ultimately purchase Norma's shares, and in what quantity.
Paragraph (a) certainly allows for an array of options as to
what might happen: either the Company, Lewis, or Nancy, or any
combination thereof, may make such a purchase, and in whatever
quantity they determine. But Section 14 provides definiteness
to this term in the event of disagreement by requiring the
25
Agreeing Shareholders to vote their shares to have the Company
purchase all of Norma's stock.
D. Proceedings on Remand
The resolution of the dispositive issues in this appeal
does not resolve the case itself. Nancy's amended complaint
sought relief in the form of an order compelling Norma's
executors to tender Norma's 30.6 shares to Capitol Foundry and
herself. Today, although we agree with Nancy that the
Shareholders' Agreement governs disposition of Norma's shares,
we do not enter the relief Nancy seeks in light of how Section
3, Paragraph (a) of that agreement actually operates.
We note that Paragraph (a) allows for the parties to first
attempt to come to an agreement how such a disposition shall
occur. We will remand this case to the circuit court so that
the parties may, in the first instance, attempt to resolve who
will purchase Norma's 30.6 shares, and in what quantities. If
the parties cannot reach such an agreement, Section 3,
Paragraph (a) and Section 14 of the Shareholders' Agreement
require the shareholders, including Norma's executors on
Norma's behalf, to ensure that Norma sells all 30.6 of her
shares to Capitol Foundry.
III. Conclusion
For the aforementioned reasons, we will reverse the
circuit court's judgment that Norma's estate documents govern
26
disposition of Norma's shares of Capitol Foundry stock, and
that Lewis properly exercised his exclusive purchase option
under the Trust Document. We hold that the Shareholders'
Agreement governs disposition of Norma's shares of Capitol
Foundry stock, and will remand this case for further
proceedings consistent with this opinion.
Reversed and remanded.
JUSTICE McCLANAHAN, dissenting.
The majority opinion elevates form over substance to hold
that Norma Corr's inter vivos trust violates the terms of the
Shareholders' Agreement. "The presumption in commercial
contracts is that the parties were trying to accomplish
something rational. Common sense is as much a part of contract
interpretation as is the dictionary or the arsenal of canons."
Fishman v. LaSalle Nat'l Bank, 247 F.3d 300, 302 (1st Cir.
2001) (internal citation omitted).
Under the terms of Section 3, Paragraph (d) of the
Shareholders' Agreement, Norma could have bequeathed her
Capitol Foundry of Virginia, Inc. (Capitol Foundry) stock to
her three children, subject to an option to purchase by Lewis,
by express provision in her will. The majority opinion
concludes that Norma nevertheless violated Section 3, Paragraph
(d) of the Agreement by her efforts to accomplish that exact
27
result through execution of estate planning documents commonly
used for transferring estate assets to the decedent's
beneficiaries, i.e., a "pourover" will and inter vivos trust.
The "apparent object of the parties" to the Shareholders'
Agreement, as indicated in Section 3, Paragraph (d), was to
limit ownership of Capitol Foundry stock to family members, as
defined therein, which, of course, included Norma's three
children. Flippo v. CSC Assocs. III, L.L.C., 262 Va. 48, 64,
547 S.E.2d 216, 226 (2001). The Agreement, however, placed no
restrictions on the method used for effecting such transfer of
ownership. Through her inter vivos trust, Norma provided for
the transfer of actual ownership of her Capitol Foundry stock
to her three children, subject to Lewis' option to purchase.
Indeed, such a trust is "a device for making dispositions of
property" to such beneficiaries, not trustees. Collins v.
Lyon, Inc., 181 Va. 230, 246, 24 S.E.2d 572, 579 (1943).
Accordingly, at the time of the momentary interim transfer of
the stock from Norma's estate (where it is being held) to the
trust, the trustees would hold no more than "bare" legal title
to the stock. See Restatement (Third) of Trusts § 42 cmt c
(2003) ("[A] trustee . . . ordinarily takes only what is
generally described as the 'bare' legal title to the trust
property."); see also Fletcher v. Fletcher, 253 Va. 30, 35, 480
S.E.2d 488, 491 (1997). That is, at no time would the
28
trustees, solely in that capacity, possess any beneficial
ownership interest in the stock. See id. (a trustee is a
"mere representative whose function is to attend to the safety
of the trust property and to obtain its avails for the
beneficiary in the manner provided by the trust instrument"
(quoting George G. Bogert, The Law of Trusts and Trustees §
961, at 2 (rev. 2d ed. 1983)).
No part of this transaction, based on a reasonable reading
of the Shareholders' Agreement, should be deemed a violation of
the Agreement. See Hairston v. Hill, 118 Va. 339, 342, 87 S.E.
573, 575 (1916) ("[A]n unreasonable construction is always to
be avoided."). Therefore, I would affirm the circuit court's
holding that the will, inter vivos trust and Shareholders'
Agreement are not in conflict, and that the trust provision
giving Lewis an option to purchase Norma's Capitol Foundry
stock is thus enforceable.
Because I reach this conclusion, I would proceed to
address the additional question presented by appellant as to
whether the "effectiveness" of Lewis' exercise of the option to
purchase under the terms of the trust was properly before the
circuit court. I would answer that question in the
affirmative. In their counterclaim, the executors and trustees
specifically requested that the circuit court "construe and
interpret the [w]ill, the [t]rust, and the [Shareholders']
29
Agreement so as to determine the rights of the parties named
herein with regard to [Lewis'] [s]tock [o]ption and
subparagraph 3(a) and 3(d) of the Agreement."
For these reasons, I dissent.
30