Ayers v. Shaffer ( 2013 )

Present: Kinser, C.J., and Lemons, Goodwyn, Millette, Mims,
and Powell, JJ., and Koontz, S.J.
SHARA AYERS, ET AL.
OPINION BY
v. Record No. 122043 SENIOR JUSTICE LAWRENCE L. KOONTZ, JR.
September 12, 2013
TONI L. SHAFFER, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF BRISTOL
Sage B. Johnson, Judge
In this appeal, we consider whether the circuit court
erred in sustaining a demurrer to an amended complaint
alleging that certain inter vivos financial transfers, which
significantly reduced a decedent's estate, were the result of
undue influence exercised by persons in confidential
relationships with the decedent during her lifetime.
STANDARD OF REVIEW
Familiar principles of appellate review guide our
resolution of this appeal. This case was decided on demurrer.
"A demurrer admits the truth of all material facts properly
pleaded. Under this rule, the facts admitted are those
expressly alleged, those which fairly can be viewed as
impliedly alleged, and those which may be fairly and justly
inferred from the facts alleged." Rosillo v. Winters, 235 Va.
268, 270, 367 S.E.2d 717, 717 (1988); see also Runion v.
Helvestine, 256 Va. 1, 7, 501 S.E.2d 411, 415 (1998). "A
demurrer tests the legal sufficiency of facts alleged in the
pleadings, but not the strength of proof. Because the
decision whether to grant a demurrer is a question of law, we
review the circuit court's decision de novo." Kaltman v. All
Am. Pest Control, Inc., 281 Va. 483, 489, 706 S.E.2d 864, 867-
868 (2011) (citation omitted). "Additionally, when, as here,
a circuit court sustains a demurrer to an amended complaint
that does not incorporate or refer to any of the allegations
that were set forth in a prior complaint, 'we will consider
only the allegations contained in the amended pleading to
which the demurrer was sustained.'" 1 Lewis v. Kei, 281 Va.
715, 719, 708 S.E.2d 884, 888 (2011) (quoting Yuzefovsky v.
St. John's Wood Apartments, 261 Va. 97, 102, 540 S.E.2d 134,
136 (2001)).
PROCEDURAL BACKGROUND
The original complaint in this action was filed in the
Circuit Court of the City of Bristol on November 7, 2011, and
an amended complaint was filed by leave of court on February
27, 2012. We will consider the allegations in the amended
complaint under the standard of review cited above.
1
Although the amended complaint did not expressly
incorporate any of the allegations of the original complaint,
it did reference exhibits attached to the original complaint.
Accordingly, those exhibits, which were already a part of the
record, are properly considered part of the amended complaint
for purposes of resolving the demurrer. See Rule 3:4(b).
2
When so viewed, the amended complaint established that
the plaintiffs, Shara Ayers and Ryan Riley, are the great
grandchildren of Elsie R. Smith ("Elsie") and legatees to one
half of her residuary estate under a will dated August 3,
2004. This will was admitted to probate following Elsie's
death on March 22, 2010. The defendants are Audrey Wingo
("Audrey"), Elsie's sister and legatee to the remaining half
of her residuary estate, Toni Lynn Shaffer ("Toni"), her
husband Bruce Shaffer ("Bruce"), and their son Michael T.
Shaffer ("Mike"). Elsie's will nominated Toni as executrix,
and she qualified as executrix of Elsie's estate on April 14,
2010.
Ayers and Riley acknowledge that Elsie had become
estranged from their mother, Elsie's only living grandchild
and nearest living lineal descendent, and that they had lived
with their mother in Colorado "for a number of years." During
this time, Elsie and her husband, Charles Smith ("Charles"),
lived on their farm in Washington County. In 2004, both Elsie
and Charles were in poor health and no longer able to care for
themselves and manage their property and affairs without
assistance. Beginning April 1, 2004, Toni and Bruce, who
lived nearby, began providing assistance to the Smiths.
Charles died on April 23, 2004. Elsie, who was then 80
years old and suffered from diabetes, dementia and other
3
medical problems, suffered a rapid decline in her mental and
physical health following Charles' death. The Shaffers
continued providing care to Elsie, assisting her with the
daily activities of living as well as managing her property
and affairs.
On May 13, 2004, Elsie went to the office of attorney
H.G. Peters where she executed a durable power of attorney
("DPOA") naming Toni as her agent and attorney-in-fact and
Bruce as alternate agent and attorney-in-fact. The amended
complaint expressly alleges that "at least [from] the time
when Toni Shaffer became [Elsie]'s agent under the DPOA, and
until her death, [Elsie] lacked the mental and physical
capacity . . . to seek and obtain independent advice on her
own; to fully understand the complexities and effects of most
financial transactions." However, the amended complaint
further alleges that this lack of capacity did not impair
Elsie's ability "to decide whom she wished her assets to pass
to upon her death, and to express those wishes in her Will."
On August 3, 2004, Elsie, Toni, and Bruce returned to
Peters' office where Elsie executed her last will and
testament. Article VI of the will references a "contract with
Toni Shaffer and her husband, Bruce Shaffer" which was
executed in Peters' office that day. The contract stated that
Toni and Bruce would provide "needed care" for Elsie for which
4
they would be paid $500 per week. Additionally, Toni and
Bruce were to receive $8000 for the assistance given to Elsie
and Charles since April 2004. The agreement further provided
that Toni and Bruce would "be paid the monies owed by [Elsie]
from [her] estate," rather than during her lifetime.
Likewise, the will directed "payment of any and all sums due
pursuant to [this] contractual agreement," but otherwise made
no bequest to Toni or Bruce. The amended complaint expressly
acknowledges that Toni and Bruce provided care under the
agreement over the next three years, during which time Elsie
became "increasingly disoriented, calling [Toni and Bruce]
several times daily, and at nights."
On October 29, 2007, Elsie began residing in an assisted
living facility in Bristol, Tennessee, where her daily needs
became the responsibility of the staff. In July 2008, she was
admitted to a local hospital and then moved to a nursing home,
where she received round-the-clock care from the staff.
During this time, under the authority of the DPOA, Toni sold
Elsie's home and the farm. Accordingly, the amended complaint
alleges that after October 2007 the need for any assistance
from the Shaffers in caring for Elsie and managing her
property and affairs was greatly diminished or eliminated
entirely.
5
Following Elsie's death on March 22, 2010, an initial
accounting of her estate filed by Toni in her capacity as
executrix showed that at the time of her death Elsie had cash
assets in excess of $1,000,000. However, as a result of
certain inter vivos financial transactions which included
survivorship or pay on death provisions, the probate estate
was less than $600,000. The amended complaint alleges that
these inter vivos transactions occurred after Toni was made
Elsie's agent and attorney-in-fact under the DPOA, and were
the result of Elsie's "complete dependence upon, and justified
trust in Toni" and the "strong confidential relationship" that
existed between Elsie and Toni and Bruce, under which they
"owed [Elsie] the highest degree of fidelity."
The general background allegations of the amended
complaint conclude with the assertion that it "relates to
activities and conduct by Toni Shaffer, after being appointed
as agent for [Elsie] under the DPOA, and that of [Elsie]'s
sister, Audrey Wingo, from 2004 until shortly after [Elsie]'s
death in 2010." Other than to reference her relationship to
Elsie and identify her as a residuary legatee of Elsie's will,
no other allegations concerning Audrey are found in the
general allegations of the amended complaint.
The amended complaint then lists a series of "financial
transactions involving Toni Shaffer while serving as [Elsie]'s
6
agent under the durable power of attorney." Despite this
description, however, it is not alleged that any of the
transactions were accomplished using the authority of the
DPOA. These transactions may be summarized as follows:
• On May 21, 2004, Elsie signed a customer access agreement
for an account at Wachovia Bank. Sometime prior to March
2009, the account was redesignated as "Elsie R. Smith and
Toni Shaffer, POA." Following Elsie's death, the final
statement of the account showed only Elsie as the owner
and indicated that the balance of $83,467.89 was
withdrawn from the account by a cashier's check payable
to Audrey directly, rather than to Elsie's estate.
• On June 22, 2004, Elsie, accompanied by Toni and Audrey,
transferred the balance of an account at First Tennessee
Bank titled solely in her name into a certificate of
deposit of $80,500.00 titled jointly with Toni and Audrey
with right of survivorship. Toni and Audrey received the
proceeds from this account following Elsie's death.
• On November 23, 2004, Elsie, accompanied by Toni and
Audrey, transferred the balance of a certificate of
deposit at Highlands Union Bank titled solely in her name
into a certificate of deposit of $75,018.13 titled
jointly with Toni and Audrey with right of survivorship.
When the certificate matured in November 2008, Toni,
acting as a joint holder of the account, received a
cashier's check for $87,769.85, with which she opened a
certificate of deposit at Wachovia Bank in the name of
Elsie, herself, and Bruce and a pay on death designation
in favor of Audrey and Benjamin Shaffer ("Benjamin"), the
Shaffers' grandson. Following Elsie's death, Mike,
Benjamin's father, received half the proceeds of the
certificate as custodian for Benjamin, and Audrey
received the remainder.
• On September 7, 2007, Toni redeemed certificates of
deposit at TruPoint Bank and Wachovia Bank for $97,260.56
and $53,766.84 respectively and deposited these funds
into an account at Wachovia Securities titled jointly
with right of survivorship in Elsie's and her names.
Following Elsie's death, Toni withdrew the account
balance of $156,976.08 and deposited these funds into an
7
account titled in her name only. This account was later
retitled in the Shaffers' names jointly.
The amended complaint sets out 11 counts which can be
summarized as follows: Counts 1, 2 and 3 allege breach of a
"duty as an agent on a joint bank account" by Audrey, Bruce
and Toni respectively and seek to recover funds for inclusion
in Elsie's estate. Counts 4, 5 and 6 seek to set aside all
transactions that directly or indirectly benefited Toni, Bruce
and Audrey respectively in that they were "procured by undue
influence" and to recover those funds for inclusion in Elsie's
estate. Counts 7 and 8 seek to remove Toni as executrix of
Elsie's estate and to assess damages against her for waste of
the estate's assets. Counts 9 and 11 are alleged to be
"against all defendants," but make no express allegations
against Mike, the Shaffers' son, and seek a declaratory
judgment concerning Elsie's testamentary intent and
establishing a constructive trust for any unjust enrichment of
the defendants. Count 10 seeks a declaratory judgment against
Toni and Bruce with respect to their contract for personal
services with the Smiths to determine the amount of
compensation, if any, they are due from the estate.
As relevant to this appeal, within the various counts the
amended complaint repeatedly asserts that Toni, Bruce and
Audrey each had a confidential relationship with Elsie and
8
that "[w]here one standing in a confidential relationship to
another person receives a benefit from that person without an
exchange of full and fair compensation, a presumption arises
that the benefit resulted from the exercise of undue
influence. This presumption is sufficient to satisfy
Plaintiffs' burden of establishing a prima facie case of undue
influence."
On March 19, 2012, the defendants jointly filed a
demurrer to the amended complaint. The defendants alleged
that the amended complaint as a whole fails to state any cause
of action because it asserts that Elsie had testamentary
capacity. They contended, therefore, that Elsie was likewise
competent to undertake the financial transactions in which she
personally participated. Moreover, they contended that since
Elsie personally participated in these transactions, Toni's
role as agent and attorney-in-fact are not relevant to
establishing whether she had a confidential relationship with
Elsie as to these transactions.
The defendants further contended that the amended
complaint fails to allege "facts, as opposed to legal
conclusions, sufficient to establish that the defendants
abused their confidential relationship with Elsie Smith."
This was so, they contended, because Ayers and Riley are
"rely[ing] upon an evidentiary presumption in order to . . .
9
circumvent their pleading requirements." Finally, the
defendants generally denied that the amended complaint
adequately states grounds for the declaratory relief sought,
for the establishment of a constructive trust, or for removing
Toni as executrix of the estate and charging her with waste.
As relevant to this appeal, Ayers and Riley responded to
the demurrer by asserting that Elsie's capacity to personally
participate in some of the financial transactions did not
negate the possibility that she engaged in those transactions
as a result of the undue influence of the defendants.
Moreover, they contended that it was not necessary that Toni
act directly in her capacity as Elsie's agent and attorney-in-
fact for the confidential relationship implied by that role to
give rise to an inference of undue influence, especially where
she benefited disproportionately from the transactions. Ayers
and Riley further responded that the facts alleged in the
amended complaint support the evidentiary presumption, that
the circuit court was required to accept these allegations as
true and, thus, also that the presumption would apply.
Similarly, they contended that the allegations of the
complaint as a whole support the claims for equitable relief
to restore a portion of Elsie's estate.
The circuit court conducted a hearing on the demurrer to
the amended complaint on July 25, 2012. The parties presented
10
arguments in accord with their positions stated above. At the
conclusion of the hearing, the court opined that the demurrer
would be sustained because the amended complaint was "devoid
of any allegation that [Toni] took any specific act under her
Durable Power of Attorney to include herself on any account
that [Elsie] had titled solely in her name." In the court's
view, the existence of the DPOA was irrelevant to whether any
action taken personally by Elsie was the result of undue
influence, because the confidential relationship implied by
the existence of a power of attorney was relevant only to
transactions accomplished by virtue of a party acting as an
attorney-in-fact.
In a final order entered August 21, 2012, the circuit
court found that
the Amended Complaint merely alleges that the
defendant, Toni Shaffer, transported and accompanied
[Elsie] when [Elsie] signed various documents
including her will, general power of attorney, and
various bank documents adding Ms. Shaffer and others
as joint owners of various accounts. Significantly,
the Amended Complaint fails to state facts that
allege that Toni Shaffer, while acting as an agent
under the power of attorney, arranged for [Elsie]'s
assets to pass at death to Toni Shaffer or the other
named defendants. To the contrary, the exhibits
attached to plaintiffs' Amended Complaint indicate
that the assets in question were retitled by [Elsie]
personally.
The plaintiffs argued that the fact that
[Elsie] executed a power of attorney naming Mrs.
Shaffer as an agent calls into question the validity
of any subsequent transfer from the principal to the
agent. The plaintiffs' assertion is not the law in
11
Virginia. Additionally, plaintiffs continue to rely
upon the evidentiary presumption that where an agent
acts under a power of attorney to consummate a
transaction to the benefit of the agent, the act is
presumptively fraudulent. . . . [P]laintiffs'
reliance is misplaced inasmuch as there is no
allegation in the Amended Complaint that Mrs.
Shaffer acted under the power of attorney to
consummate any transaction to the benefit of the
agent.
The circuit court further found that "the plaintiffs'
remaining pleadings which attempt to set forth various
theories of recovery against the defendants fail to allege
facts sufficient to state a cause of action." The court
neither addressed nor made any express ruling with regard to
the defendants' argument that the amended complaint fails to
adequately plead that Elsie could have been subject to undue
influence by Toni or others because it also alleges that she
had testamentary capacity to make her will. Ayers and Riley
filed written exceptions to the court's judgment, and this
appeal followed.
DISCUSSION
At the outset, we will clarify what aspects of the
amended complaint are before us in this appeal. In their
assignments of error addressing the sustaining of the
demurrer, Ayers and Riley expressly identify Counts 1, 2, 3,
4, 5 and 6 of the amended complaint as having been erroneously
dismissed by the circuit court. As the court's order
12
sustained the demurrer as to all 11 counts, we hold that Ayers
and Riley have abandoned Counts 7, 8, 9, 10 and 11 by failing
to make these claims the subject of an assignment of error.
WBM, LLC v. Wildwoods Holding Corp., 270 Va. 156, 164, 613
S.E.2d 402, 407 (2005). Because only Counts 9 and 11 assigned
liability to "all defendants" and no other count predicated
any liability against the Shaffers' son Mike, we further hold
that the court's judgment is final as to him.
We clearly and concisely stated the law of undue
influence in the formation of contracts in Parfitt v. Parfitt,
277 Va. 333, 672 S.E.2d 827 (2009). What we said there bears
repeating here.
A court of equity will not set aside a contract
because it is "rash, improvident or [a] hard
bargain" but equity will act if the circumstances
raise the inference that the contract was the result
of imposition, deception, or undue influence. To
set aside a deed or contract on the basis of undue
influence requires a showing that the free agency of
the contracting party has been destroyed. Because
undue influence is a species of fraud, the person
seeking to set aside the contract must prove undue
influence by clear and convincing evidence.
Direct proof of undue influence is often
difficult to produce. In the seminal case of
Fishburne v. Ferguson, 84 Va. 87, 111, 4 S.E. 575,
582 (1887), however this Court identified two
situations which we considered sufficient to show
that a contracting party's free agency was
destroyed, and, once established, shift the burden
of production to the proponent of the contract. The
first involved the mental state of the contracting
party and the amount of consideration:
13
[W]here great weakness of mind concurs
with gross inadequacy of consideration, or
circumstances of suspicion, the
transaction will be presumed to have been
brought about by undue influence.
. . . .
The second instance Fishburne identified arises when
a confidential relationship exists between the
grantor and proponent of the instrument:
[W]here one person stands in a
relationship of special confidence towards
another, so as to acquire an habitual
influence over him, he cannot accept from
such person a personal benefit without
exposing himself to the risk, in a degree
proportioned to the nature of their
connection, of having it set aside as
unduly obtained.
277 Va. at 339-40, 672 S.E.2d at 829 (quoting Bailey v.
Turnbow, 273 Va. 262, 267, 639 S.E.2d 291, 293 (2007)).
Thus, "the presumption of undue influence arises and the
burden of going forward with the evidence shifts [to the
defendant] when weakness of mind and grossly inadequate
consideration or suspicious circumstances are shown or when a
confidential relationship is established." Friendly Ice Cream
Corp. v. Beckner, 268 Va. 23, 33, 597 S.E.2d 34, 39 (2004)
(emphases in original); accord Parfitt, 277 Va. at 340, 672
S.E.2d at 829. Such a confidential relationship is "not
confined to any specific association of the parties; it is one
wherein a party is bound to act for the benefit of another,
and can take no advantage to himself. It appears when the
circumstances make it certain the parties do not deal on equal
14
terms, but, on the one side, there is an overmastering
influence, or, on the other, weakness, dependence, or trust,
justifiably reposed; in both an unfair advantage is possible."
Friendly Ice Cream Corp., 268 Va. at 34, 597 S.E.2d at 39-40
(internal citation omitted); accord Parfitt, 277 Va. at 341,
672 S.E.2d at 830.
We have further explained that "[t]rust alone, however,
is not sufficient. We trust most men with whom we deal.
There must be something reciprocal in the relationship before
the rule can be invoked. Before liability can be fastened
upon one there must have been something in the course of
dealings for which he was in part responsible that induced
another to lean upon him, and from which it can be inferred
that the ordinary right to contract had been surrendered."
Friendly Ice Cream Corp., 268 Va. at 34, 597 S.E.2d at 40.
"We have identified several particular classes of
relationships that may give rise to a presumption of undue
influence. Among them . . . is when one person is an agent
for the other." Parfitt, 277 Va. at 341, 672 S.E.2d at 830
(citing Bailey, 273 Va. at 268, 639 S.E.2d at 293).
Undeniably, one such relationship is that between a principal
and a person authorized to act as her agent and attorney-in-
fact. Grubb v. Grubb, 272 Va. 45, 53, 630 S.E.2d 746, 751
(2006). Importantly, in such cases, the presumption of undue
15
influence will "arise[] independently of any evidence of
actual fraud, or of any limitations of age or capacity in the
other party to the confidential relationship, and is intended
to protect the other party from the influence naturally
present in such a confidential relationship." Id. at 54, 630
S.E.2d at 751 (emphasis added).
A confidential relationship "springs from any fiduciary
relationship, and when such relationship is found to exist,
any transaction to the benefit of the dominant party and to
the detriment of the other is presumptively fraudulent."
Nicholson v. Shockey, 192 Va. 270, 278, 64 S.E.2d 813, 817.
(1951)(emphasis added). Thus, whenever a fiduciary
relationship exists between parties, the existence of one or
more transactions which benefit the party who owes a fiduciary
duty to the other shifts the burden of proving the bona fides
of the transaction to the party owing the duty. Id. at 277,
64 S.E.2d at 817. It is not necessary that the transaction be
accomplished directly as a result of the fiduciary
relationship, but rather, it is the fact that "a confidential
relationship existed between the parties at the time of the
transaction" that gives rise to the presumption and the
shifting of the burden of going forward with the evidence.
Diehl v. Butts, 255 Va. 482, 489, 499 S.E.2d 833, 838 (1998);
Friendly Ice Cream Corp., 268 Va. at 33, 597 S.E.2d at 39.
16
From this summary of the law, it is clear that to survive
a demurrer, a complaint seeking to set aside a contract or
other transaction favorable to a defendant or her interests
because of undue influence by the defendant must allege either
that because of great weakness of mind of the other party the
defendant obtained the bargain for grossly inadequate
consideration or under some other circumstance of suspicion,
or alternately that a confidential relationship existed
between the parties at the time of a transaction beneficial to
the defendant, even in the absence of other suspicious
circumstances. Both allegations will support a finding of
undue influence resulting in a fraudulent transaction, and may
be pled independently or in the alternative.
Because the two circumstances that will suffice to allege
undue influence are not interdependent, the capacity, or lack
thereof, of the party allegedly defrauded by the defendant to
conduct her own business is not relevant to establishing a
presumption of undue influence based upon the existence of a
confidential relationship. Likewise, the absence of an
allegation of a confidential relationship alone would not
defeat a claim that the undue influence arose from the
defendant taking advantage of the other party's diminished
capacity. In short, while it may frequently be the case that
a claim of undue influence may be supported by allegations
17
that the defendant both overbore the will of the other party
through weakness of mind and also took advantage of a
confidential relationship, in considering a demurrer to such
claims the trial court must evaluate the sufficiency of each
theory independently.
Although the amended complaint in this case contains
allegations that the defendants exercised undue influence over
Elsie both through her diminished capacity and as a result of
confidential relationships, it is clear that the circuit
court's determination to grant the demurrer was premised only
on its determination that there was no confidential
relationship between Elsie and Toni. The court concluded that
because the transactions were conducted by Elsie personally,
or by Toni as a joint account holder, no confidential
relationship between Elsie and Toni arose by virtue of the
DPOA, which in the court's view precluded any presumption of
undue influence. Without elaborating further, the court
summarily concluded that the amended complaint also failed to
allege facts sufficient to find that a confidential
relationship existed between Elsie and either Bruce or Audrey. 2
2
The circuit court made no express ruling on whether the
amended complaint adequately pled facts to support a finding
that one or more of the defendants exercised undue influence
over Elsie because of her weakness of mind in obtaining a
benefit for inadequate consideration or under other suspicious
circumstances, and neither party has addressed that issue in
18
Ayres' and Riley's first assignment of error challenges
the circuit court's ruling that there was no confidential
relationship between Elsie and Toni because the transactions
at issue did not require Toni to exercise her powers under the
DPOA. Unquestionably, the amended complaint pleads that Toni
was in a position of trust and exercised habitual influence
over Elsie, as evidenced by Elsie having entrusted the
management of her property and affairs to Toni though the
DPOA, such that a confidential relationship existed between
Elsie and Toni. Contrary to the court's ruling and the
position urged by the defendants below and in this appeal, it
was not necessary under the allegations of the amended
complaint for Toni to have exercised her authority under the
DPOA to accomplish the transactions that benefited her or
others close to her for the presumption of undue influence to
apply. Accordingly, we hold that the circuit court erred in
ruling that no confidential relationship could arise between
Elsie and Toni solely because Toni may not have exercised her
powers under the DPOA with respect to the challenged
transactions.
this appeal. Accordingly, we express no opinion on whether
the amended complaint would have supported a cause of action
based on the alternate method of proving undue influence.
19
We now consider the issue raised by Ayers and Riley in
their second assignment of error challenging the sustaining of
the demurrer as to Counts 1, 2 and 3. In each of these
counts, the amended complaint alleges that a confidential
relationship existed between Elsie and Audrey, Toni, and Bruce
respectively because they were each parties to a joint account
with Elsie for which she provided all the assets.
Code § 6.2-619(A) provides that "[p]arties to a joint
account in a financial institution occupy the relation of
principal and agent as to each other, with each standing as a
principal in regard to his ownership interest in the joint
account and as agent in regard to the ownership interest of
the other party." In Parfitt we explained that where, as in
this case, a joint account is established between two parties
under which all the assets are contributed by one party, the
second party becomes "an agent with regard to the entire
account. By statute, a confidential relationship was
established creating a fiduciary duty [and] a presumption that
the self-dealing transactions were unduly obtained." 277 Va.
at 342, 672 S.E.2d at 830 (internal citations and quotation
marks omitted). Under such circumstances, it need not be
alleged or proven that the defendant procured the creation of
the joint account by undue influence. Rather, the existence
of the account itself imposes a fiduciary duty on the
20
defendant and with regard to a subsequent transaction creates
the presumption of undue influence which shifts to the
defendant the burden of proving the bona fides of the
transaction. Id.; Nicholson, 192 Va. at 277, 64 S.E.2d at
817.
Because the amended complaint alleges that Audrey, Toni,
and Bruce were each made co-owners of one or more accounts
with Elsie for which Elsie provided all the funds, under Code
§ 6.2-619(A) a confidential relationship existed between each
of the three and Elise as a matter of law with respect to
those accounts, and the burden would fall upon each of them to
rebut the presumption that the transactions were the result of
undue influence. 3 Accordingly, we hold that the circuit court
erred in sustaining the demurrer as to Counts 1, 2 and 3.
In their third assignment of error, Ayers and Riley
challenge the circuit court's sustaining the demurrer as to
3
Because this case was decided on a demurrer, we are not
here concerned with what quantum of evidence the defendants
would need to present to rebut the presumption of fraud
arising from the statutorily-imposed confidential relationship
between joint owners of an account. Indeed, it is self-
evident that such evidence will be case specific and, thus,
should be decided by a trier-of-fact on evidence adduced at
trial. It is also self-evident, however, that these
transactions clearly reduced Elsie's estate, that neither Toni
nor Bruce are legatees under Elsie's will, and that, as she is
a residuary legatee under the will, Audrey's share of the
estate could be increased if funds were to be recovered for
the estate as a result of this litigation.
21
Counts 4, 5 and 6, which respectively asserted that Toni,
Bruce and Audrey each had a confidential relationship with
Elsie apart from that implied by the creation of the joint
accounts. We have already determined that the court erred in
finding that no confidential relationship arose between Toni
and Elsie because of the DPOA. Moreover, even without the
existence of the DPOA, the amended complaint contains
allegations that would support a finding that a confidential
relationship developed between Elsie and Toni. Specifically,
it is alleged that Elsie was "dependent on Toni . . . for both
physical and mental/intellectual assistance" calling upon her
both day and night. Likewise, in Count 5, the complaint
alleges that "[e]ven without the confidential relationship
arising . . . from the multi-owner bank account, a
confidential relationship existed between [Elsie] and . . .
Bruce . . . because of the aid Mr. and Mrs. Smith needed and
requested" from him.
A confidential relationship will not necessarily arise in
every case where a person requests or receives regular aid
from another. Nonetheless, when the amended complaint is
viewed as a whole, it is clear that Elsie was alleged to have
relied almost exclusively on Toni and Bruce to maintain her
property and for most of her daily needs and activities until
October 2007, and a reasonable inference can be made that
22
Elsie was dependent on Toni and Bruce to such an extent that a
confidential relationship existed between them. Given the
standard of review applicable to a demurrer, we hold that the
circuit court erred in sustaining the demurrer as to Counts 4
and 5.
With respect to Audrey, the amended complaint alleges in
Count 6 that a confidential relationship between her and Elsie
was demonstrated by the fact that Audrey "collaborated with
Toni Shaffer in the handling of [Elsie]'s financial affairs,
and especially in the process of persuading [Elsie] to sign
documents to accomplish many of the . . . transactions which
Toni Shaffer proposed, advised, or persuaded [Elsie] to
participate in," and that when Elsie was accompanied by Audrey
to the banks to conduct these transactions, "[s]he was
completely under the influence of, and dependent upon Toni
Shaffer and/or her sister, Audrey Wingo. This was especially
true in regard to the management of her financial affairs."
Additionally, there are allegations that the familial
relationship between Elsie and Audrey was of a confidential
nature "especially after certain events caused [Elsie] to
distrust her granddaughter (Plaintiffs' mother)."
While these allegations are less specific than those
concerning Toni and Bruce, they nonetheless constitute facts
and reasonable inferences which, taken as true, give rise to
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the existence of a confidential relationship and the
consequent presumption of undue influence upon Elsie in those
transactions that benefited Audrey. Accordingly, we hold that
the circuit court erred in sustaining the demurrer to the
amended complaint with respect to Count 6. 4
CONCLUSION
For these reasons, we will affirm the judgment of the
circuit court sustaining the demurrer to the amended complaint
as to Counts 7, 8, 9, 10 and 11, and the dismissal of Michael
T. Shaffer as a defendant. We will reverse the judgment of
the circuit court sustaining the demurrer to the amended
complaint as to Counts 1, 2, 3, 4, 5 and 6, and remand the
case to the circuit court for further proceedings consistent
with the views expressed in this opinion.
4
We will briefly address an issue raised by Ayers' and
Riley's fourth assignment of error. As framed, this
assignment of error asserts that the circuit court erred in
determining that Toni was entitled to reimbursement of her
costs in defending the suit as executrix of the estate. Ayers
and Riley contend that this was error because the suit was
filed against Toni only in her personal capacity. While the
court stated from the bench that it would allow reimbursement
of costs incurred by Toni on behalf of the estate, neither the
final order nor any other order entered by the court
memorialized an award of costs and, thus, there is no ruling
on this issue to review. However, because we will remand the
case for further proceedings, the court may revisit the
question of whether Toni is entitled to reimbursement of any
costs of this litigation if they were incurred in her capacity
as executrix.
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Affirmed in part,
reversed in part,
and remanded.
25