Virginia Lawyers Weekly VA Lawyers Weekly
Where appellees prevailed on their claim that appellants acquired a valuable firearm collection by fraud, appellants were properly ordered to pay more than $108,000 in attorney’s fees.
Background
Ernest Elsea had several health problems that caused cognitive deficits and hearing and vision problems. He had “had limited education and below average intellectual abilities. These circumstances left him vulnerable to undue influence or coercion.”
St. John, one of the appellants in this case, moved next door to Elsea. They became friends. “After one of Elsea’s brothers committed suicide, St. John and Elsea became especially close.” Elsea told St. John he was afraid his family might take his property and put him in a nursing home.
St. John learned that Elsea had a firearm collection worth almost $100,000 and was the beneficiary of several trusts. “St. John persuaded Elsea to transfer these firearms to a firearm trust St. John established and controlled, the JCS Trust. This transfer, St. John said, would prevent Elsea’s family from gaining possession of the firearms. St. John told Elsea that he would return the firearms upon request and that Elsea would retain control over them.”
Later, St. John had Elea sign a durable power of attorney. St. John obtained trust documents and other estate planning documents and “persuaded” Elsea to place property held by Elsea’s trust into the JCS Trust. He also had Elsea sign a letter firing his estate planning attorney and “revoking appointments made under a number of estate planning documents.”
St. John had Elsea execute a codicil to his will that named St. John and his partner, Katherine Cole, as beneficiaries. Later, after St. John moved, Elsea revoked St. John’s power of attorney. St. John revoked Elsea’s appointment to the JCS Trust, which cut off Elsea’s control of the firearms. Laura and W.R. Thompson, Elsea’s representatives, asked St. John to return the firearms. He refused. The Thompsons then filed this suit on Elsea’s behalf.
The three-count complaint sought an accounting and recovery of the firearms, alleged breach of fiduciary duty and further alleged fraud and undue influence. “The court ordered St. John to either return the firearms or to pay Elsea the value of the firearms.” The court relied on Prospect Dev. Co., Inc. v. Bershader, 258 Va. 75, 92 (1999) when it “ordered St. John and the JCS Trust, jointly and severally, to pay attorney’s fees in the amount of $108,211. St. John appeals from this decision.”
Fees properly awarded
“It is well established that Virginia follows the ‘American Rule,’ which provides that ‘[g]enerally, absent a specific contractual or statutory provision to the contrary, attorney’s fees are not recoverable by a prevailing litigant from the losing litigant.’ … That rule, however, does not apply in every instance.
“Historically, recovery of attorney’s fees in chancery court differed from recovery of attorney’s fees in common law courts. ‘Early English courts of equity allowed the Chancellor to award attorney’s fees to the prevailing party; the Chancellor, however, rarely granted fee awards unless the losing party acted in an abusive manner.’”
In Prospect Development Co., “we recognized that ‘in a fraud suit, a chancellor, in the exercise of his discretion, may award attorney’s fees to a defrauded party.’ … We explained that ‘[w]hen deciding whether to award attorney’s fees, the chancellor must consider the circumstances surrounding the fraudulent acts and the nature of the relief granted to the defrauded party.’ …
“St. John posits that an award of attorney’s fees is permissible under Prospect Development Co. only if the fraud is particularly egregious, and he maintains that the facts here do not rise to that level. We disagree with his premise.
“An award of fees under Prospect Development Co. does not depend on a showing of especially egregious fraud. Instead, fees are proper if the trial court, exercising its discretion in a fraud case, awards equitable relief, and further determines that the circumstances surrounding the fraudulent acts and the nature of the relief granted compel an award of attorney’s fees. Our review of this record reveals no abuse of discretion.”
The court properly awarded $108,211 in attorney’s fees. The court disallowed counsel’s request for an estimated $10,000 in fees to execute on the judgment. The court entertained St. John’s objections to some of the fees and evaluated explanations by counsel for Elsea.
“Although counsel for Elsea did not address each disputed entry, he stated that the entries speak for themselves and that all of them related to this case. The circuit court was entitled to credit this assertion, particularly in the absence of a countervailing explanation or evidence.”
Other party not required
St. John argues that some of the firearms were owned by Elsea’s trust. St. John argues that the trust was an indispensable party and because the trust did not participate in the litigation, the trial court’s decision must be reversed.
“The Thompsons respond that the record does not support the assertion that any of the firearms were owned by a trust. We agree with the Thompsons.
“The circuit court found that Elsea owned the firearms individually. Nothing in the record contradicts this finding. Elsea stated that the firearms were his. The record indicates that St. John, upon learning that Elsea owned a trust, prepared an additional document transferring any firearms owned by the trust to St. John.
“This maneuver obviated any title issues in the event the trust owned firearms, but it does not establish that this trust, in fact, owned any firearms. In short, the record does not support the conclusion that this trust included the firearms at issue.
“Therefore, the trial court committed no error in granting relief without this trust having been made a party to the suit.”
Affirmed.
St. John, et al. v. Thompson, et al., Record No. 200068 (McCullough) Feb. 25, 2021, Clarke County Cir. Ct. (Iden). William D. Ashwell (Mark B. Williams & Associates, on briefs), for appellants. Nate L. Adams III for appellees. VLW 021-6-007, 7 pp.
