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ECONOMOPOULOS, et al. v. KOLAITIS



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ECONOMOPOULOS, et al.

v.

KOLAITIS


April 21, 2000

Record No. 991245

ANASTASIA ECONOMOPOULOS, ET AL.

v.

ANDREW M. KOLAITIS

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY

Stanley P. Klein, Judge

PRESENT: Carrico, C.J., Lacy, Hassell, Keenan,
Koontz, and Kinser, JJ., and Stephenson, Senior Justice


OPINION BY SENIOR JUSTICE ROSCOE B. STEPHENSON,
JR.

This case involves claims of constructive
fraud, conversion, "intentional interference with
inheritance," and unjust enrichment. In this appeal, the
plaintiffs have assigned twelve errors, and the defendant has
assigned one cross-error. These alleged errors present three
principal issues, viz.:

1. Whether the trial court erred in finding the
existence of a confidential relationship between a father and
son.

2. Whether the trial court erred in striking
the plaintiffs’ constructive fraud claim.

3. Whether the trial court erred in striking
the plaintiffs’ claims of conversion, "intentional
interference with inheritance," and unjust enrichment.

I

By separate four-count motions for judgment,
Anastasia Economopoulos, Aphroditi Kolaitis, and Fereniki
Kolaitis (the Plaintiffs) sued Andrew M. Kolaitis (the
Defendant). Each Plaintiff sought to recover $262,500 in
compensatory damages and $50,000 in punitive damages arising from
the redemption of certain Treasury bills. The Plaintiffs alleged
conversion and misappropriation in Count I, constructive fraud in
Count II, unjust enrichment in Count III, and "tortious
interference with inheritance" in Count IV. The Plaintiffs
also sought certain equitable relief, including the imposition of
a constructive trust.

By an agreed order, the actions were
transferred to the chancery side of the court, and the trial
court consolidated them for trial. At the conclusion of the
Plaintiffs’ case-in-chief, the trial court struck the Plaintiffs’
evidence as to all counts and entered judgment in favor of the
Defendant. This appeal ensued.

II

Michael A. Kolaitis died on April 21, 1997. He
had four children, Anastasia Economopoulos, Aphroditi Kolaitis,
Fereniki Kolaitis, and Andrew M. Kolaitis.

Michael had been a businessman in Arlington
County, and, from the mid-1960′s until 1980, he operated the
Parkington Sleep Center. In 1966, Andrew began working at the
business on a part-time basis, and, upon his graduation from
college in 1973, he became a full-time employee. About 1980,
Andrew took over the business from his father, although Michael
continued to work part-time, and the two remained co-owners of
the real property upon which the business was located.

Andrew operated the business until 1990, when
the business property and several adjoining properties, also
co-owned by Michael and Andrew, were sold to Arlington County for
about $3 million. As a result of the sale, Michael and Andrew’s
business relationship terminated, and, as co-owner of the
properties, Michael netted $956,502.91.

Michael invested $900,000 of his portion of the
sale proceeds in five Treasury bills: three $200,000 bills, each
titled jointly with a daughter; a $50,000 bill titled jointly
with Andrew; and a $250,000 bill titled solely in Michael’s name.
The Treasury bills were deposited in Michael’s bank account, and
Michael told his three daughters that he had invested $200,000
for each of them.

From April 1990 until May 1996, Michael renewed
the Treasury bills quarterly. In 1994, Michael executed a codicil
to his 1992 will, directing his executor (Andrew) to divide into
three equal shares $600,000 of the Treasury bill funds and to pay
the shares to his three daughters.

From about 1991 until 1996, Andrew and Michael
engaged the same accountant, Larry D. Spring. Spring prepared
their personal tax returns, and each was present when the other’s
tax return was discussed with Spring.

On April 1, 1996, Michael signed a check,
prepared by and payable to Andrew, in the amount of $40,000.
Andrew testified that Michael had directed him to prepare the
check and that Michael intended the sum as four gifts of $10,000
each to Andrew, Andrew’s wife, and Andrew’s two sons.

On April 3, 1996, Andrew, at Michael’s request,
was added as a signatory on Michael’s First Union Bank account.
Andrew, however, wrote no checks on that account.

In March 1996, at age 82, Michael was diagnosed
with kidney disease, and he was hospitalized for renal failure
several times between March and June of that year. During this
period, Michael’s health steadily declined. In late June 1996,
Michael began thrice-weekly dialysis treatments, which continued
until his death. About the same time, Michael’s wife, Theresa,
also was experiencing serious medical problems. She was diagnosed
with cancer and underwent treatment until her death in January
1997.

In May 1996, Michael, during one of his
hospitalizations, directed Andrew to retrieve Michael’s
NationsBank checkbook from his house. On May 16, Andrew brought
the checkbook to the hospital, and Michael instructed Andrew to
prepare a check, which Michael signed, payable to Andrew and in
the amount of $300,000. At that time, Michael’s account did not
contain sufficient funds to cover the check.

On May 17, 1996, while Michael was
hospitalized, Andrew went to Michael’s home and retrieved
Michael’s mail, including renewal notices for the Treasury bills.
Michael, however, had decided to redeem all of the Treasury bills
so that he would have control over his funds. Consequently,
Michael directed Andrew to hold the $300,000 check until June 27,
1996, the day the Treasury bills were to be redeemed and the
funds deposited in Michael’s NationsBank account. Michael also
directed Andrew to place the funds represented by the check in an
account in Andrew’s name and to hold the funds until further
notice. Andrew did as directed.

In early July 1996, Michael told Andrew that he
wanted $140,000 of the $300,000 returned to him and that the
$160,000 balance was a gift to Andrew. Consequently, at Michael’s
direction, Andrew drew two checks, payable to Michael, each in
the amount of $70,000. Thereupon, Michael deposited one of the
checks in a new Signet Bank account, and he deposited the other
$70,000 check in his existing account at Chevy Chase Bank. The
funds remained in these two accounts, subject to Michael’s
control, until his death. Upon Michael’s death, the funds were
paid to Andrew.

On July 11, 1996, Michael executed a new will
by which he divided his residuary estate equally among his four
children. By his new will, Michael also revoked all prior wills
and codicils. This will was admitted to probate upon Michael’s
death.

Throughout 1996, Michael exercised control of
his various bank accounts and made financial decisions on his
own. In addition to the gifts to Andrew, Michael wrote checks to
Anastasia in July 1996 for expenses she incurred on a trip to
Virginia to visit him. Michael also made separate gifts to each
of Anastasia’s two children, as well as a $4,000 gift to
Anastasia.

In November 1996, Michael learned that Fereniki
had altered a check he had drawn by changing its face amount. Up
to that time, Fereniki had filled out many of Michael’s checks
for his signature. Upon learning of the altered check, Michael
took steps to ensure that Fereniki no longer had access to his
checkbooks.

In January 1997, Michael directed Andrew to
take his financial information to Spring so that Spring could
prepare Michael’s tax returns. Andrew took the information to
Spring and advised Spring of the gifts that Michael had made to
him in 1996. Spring then prepared gift tax returns that Michael
subsequently signed.

III

Initially, we consider the effect to be given
to Andrew’s testimony resulting from his having been called and
examined by the Plaintiffs as an adverse party. It is well
established that, when an adverse party is called and examined by
an opposing party, the latter is bound by all of the former’s
testimony that is uncontradicted and is not inherently
improbable. Brown v. Metz, 240 Va. 127, 131, 393
S.E.2d 402, 404 (1990); Crabtree v. Dingus, 194 Va.
615, 622, 74 S.E.2d 54, 58 (1953); Saunders v. Temple,
154 Va. 714, 726, 153 S.E. 691, 695 (1930). Also, under such
circumstances, Code ? 8.01-397 (the so-called "Deadman’s
Statute") does not apply. Brown, 240 Va. at 131-32,
393 S.E.2d at 404; Balderson v. Robertson, 203 Va.
484, 488, 125 S.E.2d 180, 184 (1962).

In the present case, Andrew’s testimony about
the events in issue is uncontradicted and is not inherently
improbable. Nevertheless, the Plaintiffs contend that these
longstanding evidentiary rules do not apply in matters regarding
confidential relationships or claims of fraud. They cite no
authority for this proposition, and we are not aware of any. We
see no reason to create this exception to these rules, and,
therefore, we reject the Plaintiffs’ contention.

IV

A

We now consider the issue raised by Andrew’s
assignment of cross-error; that is, whether the trial court erred
in finding the existence of a confidential relationship between
Andrew and Michael. The existence of such a relationship would
give rise to a presumption of fraud and shift to Andrew the
burden to prove the bona fides of the transactions
at issue. Nicholson v. Shockey, 192 Va. 270,
277-78, 64 S.E.2d 813, 817 (1951).

A parent-child relationship, standing alone, is
insufficient to create a confidential or fiduciary relationship. Nuckols
v. Nuckols, 228 Va. 25, 36-37, 320 S.E.2d 734, 740 (1984);
Carter v. Carter, 223 Va. 505, 509, 291 S.E.2d 218,
221 (1982). On the other hand, we have found a confidential
relationship to exist in a familial relationship that is
accompanied by an attorney-client relationship, Nicholson,
192 Va. at 276-77, 64 S.E.2d at 817, or by a principal-agent
relationship, Creasy v. Henderson, 210 Va. 744,
749-50, 173 S.E.2d 823, 828 (1970). We also have recognized a
confidential relationship where one family member provides
financial advice to or handles the finances of another family
member. Jackson v. Seymour, 193 Va. 735, 740-41, 71
S.E.2d 181, 184-85 (1952).

In the present case, the Plaintiffs, in
claiming that a confidential relationship existed between Michael
and Andrew, rely strongly on Michael and Andrew’s seventeen-year
business association. While this association existed, such a
relationship may have arisen. However, the business association
ended in 1990, approximately six years before the time of the
events at issue in this case. Therefore, Michael and Andrew’s
former business association cannot serve as a basis for a
confidential relationship at the time of the events at issue.

The Plaintiffs further assert that, after 1990,
Andrew advised and assisted Michael in his business affairs.
Although Andrew did assist his father in his latter years, the
undisputed evidence shows that Michael had complete and exclusive
control of his financial affairs up to the time of his death.

We conclude, as a matter of law, that the
evidence fails to establish a confidential relationship between
Michael and Andrew, and the trial court erred in finding
otherwise. Consequently, the transactions at issue were not
presumptively fraudulent, and the burden to prove fraud remained
on the Plaintiffs.

B

Next, we consider whether the trial court erred
in striking the Plaintiffs’ evidence with respect to their
constructive fraud claim. Fraud, whether actual or constructive,
must be proved by clear and convincing evidence. Henderson
v. Henderson, 255 Va. 122, 126, 495 S.E.2d 496, 499
(1998).

A finding of constructive fraud requires proof
that a false representation of a material fact was made,
innocently or negligently, and that the injured party suffered
damage as a result of his reliance on the misrepresentation.
. . . In addition, the evidence must show that the
false representation was made so as to induce a reasonable person
to believe it, with the intent that the person would act on this
representation.

Id. (citations omitted).

When the sufficiency of a plaintiff’s evidence
is challenged by a motion to strike, a trial court must resolve
all reasonable doubt as to the evidence’s sufficiency in the
plaintiff’s favor and deny the motion unless it is conclusively
apparent that the plaintiff has proved no cause of action. Higgins
v. Bowdoin, 238 Va. 134, 141, 380 S.E.2d 904, 908 (1989); Williams
v. Vaughan, 214 Va. 307, 309, 199 S.E.2d 515, 517 (1973).
When a trial court strikes a plaintiff’s evidence, an appellate
court, in reviewing the ruling, must view the evidence and all
reasonable inferences to be drawn therefrom in the light most
favorable to the plaintiff. West v. Critzer, 238
Va. 356, 357, 383 S.E.2d 726, 727 (1989).

As previously stated, there is no presumption
of fraud in the present case because Michael and Andrew did not
have a confidential relationship at the time of the events at
issue. Consequently, when we view the Plaintiffs’ evidence in the
light most favorable to them, absent a presumption of fraud, we
are compelled to conclude that the Plaintiffs failed to present a
prima facie case of constructive fraud. To the
contrary, the Plaintiffs’ uncontradicted evidence shows that
Michael intended to give Andrew the $160,000 and that Michael
also intended to redeem the Treasury bills. Moreover, the
Plaintiffs do not contend that Michael was enfeebled in mind or
subjected to undue influence, and, indeed, the evidence clearly
shows that he was fully capable of managing his financial affairs
and did so until the time of his death. We hold, therefore, that
the trial court did not err in striking the Plaintiffs’ evidence
relating to their claim of constructive fraud.

V

The Plaintiffs also contend that the trial
court erred in striking their claims of conversion, unjust
enrichment, and "tortious interference with
inheritance." We do not agree.

Conversion is the wrongful assumption or
exercise of the right of ownership over goods or chattels
belonging to another in denial of or inconsistent with the
owner’s rights. Credit Corp. v. Kaplan, 198 Va. 67,
75-76, 92 S.E.2d 359, 365 (1956). An action for conversion can be
maintained only by the person having a property interest in and
entitled to the immediate possession of the item alleged to have
been wrongfully converted. United Leasing Corp. v. Thrift
Ins. Corp.
, 247 Va. 299, 305, 440 S.E.2d 902, 906 (1994).

In the present case, the Plaintiffs were not
entitled to the immediate possession of the Treasury bills at the
time they allegedly were wrongfully converted. Moreover, as the
trial court correctly noted, "the failure to renew the
Treasury bills cannot be a conversion because, even assuming that
Andrew Kolaitis was involved in the fact that they were not
renewed, the monies from the T-bills went into an account in
Michael Kolaitis’ name."

Additionally, as previously noted, the
uncontradicted evidence shows that Michael intended to redeem the
Treasury bills and to make the $160,000 gift to Andrew. In the
face of that evidence, there could be no conversion, even if we
assume that the Plaintiffs had standing to institute the action.

The same analysis is applicable to the
Plaintiffs’ claim of unjust enrichment. The uncontradicted
evidence of Michael’s intent respecting the redemption of the
Treasury bills and the gift to Andrew runs counter to any such
claim.

We also agree with the trial court that a cause
of action for "tortious interference with inheritance"
is not recognized in Virginia. A person who is mentally competent
and not subject to undue influence may make any disposition of
his property he chooses during his lifetime or by will at his
death. Moreover, the Plaintiffs had only an expectancy in the
Treasury bills while Michael was alive and in control of them.

VI

In sum, we hold the following:

1. A confidential relationship did not exist
between Michael and Andrew, and, therefore, there was no
presumption of fraud.

2. The trial court did not err in striking the
Plaintiffs’ constructive fraud cause of action because their
uncontradicted evidence failed to present a prima facie
case of constructive fraud.

3. The trial court did not err in striking the
Plaintiffs’ claims of conversion, unjust enrichment, and
"tortious interference with inheritance."

Accordingly, the trial court’s judgment will be
affirmed.

Affirmed.

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