Virginia Lawyers Weekly VA Lawyers Weekly
The circuit court correctly determined appellant was not entitled to a statutory accounting from her brother relating to his management of their father’s financial affairs under a power of attorney.
The power of attorney document specifically prohibited such accounting.
Further, appellant’s equitable accounting claim “should have been asserted, if at all, in the probate proceeding[.]”
Background
In 2004, John Rohrbaugh Sr. executed a power of attorney naming his son, Rohrbaugh Jr., as his agent. The POA explicitly provided that “‘it is my intention that, except as specifically provided for herein, my agent shall never be required to make disclosure or inspection of my affairs, or their actions as my agent, either under this instrument or otherwise, to any third party.’ … (emphasis in original).”
In 2009, Rohrbaugh Jr. started to assist with managing his father’s financial affairs. Rohrbaugh Jr, acted as agent until his father’s death in 2016.
Phillips, the appellant in this case, is Rohrbaugh Sr.’s surviving daughter and Rohrbaugh Jr.’s sister. Rohrbaugh Sr.’s will named Rohrbaugh Jr. and John Davies as his estate’s co-executors.
In 2017, Phillips sought information about gift transfers Rohrbaugh Jr. made under the POA. Phillips cited “suspicious or self-dealing activity” but stated she was not asserting any “improper actions.”
Rohrbaugh provided some information. Phillips was not satisfied. She mailed a demand letter in December 2018, seeking to have the estate’s counsel protect her interest in the estate. In 2019, she requested information “‘about various unexplained and questionable transactions’ in the joint money market account[.]”
Phillips sued Rohrbaugh Jr. in his individual capacity and as the estate’s co-executor, along with Davies. “Phillips alleges that Rohrbaugh Jr. has not satisfied her request for clarification and information[.]”
In her amended complaint, Phillips sought a statutory accounting from Rohrbaugh Jr. and an equitable accounting from him and Davies as the estate’s co-executors. The complaint did not allege any breach of fiduciary duties. Instead, it noted “‘suspect transactions.’”
Rohrbaugh Jr. and Davies demurred. They “argued that Rohrbaugh Sr.’s POA specifically forbade his agent from making disclosures to anyone under specific disclosure statutes ‘or any other statute[.]’”
The circuit court ruled against Phillips. She appeals dismissal of her complaint.
Equitable accounting
“An equitable accounting should not be misunderstood as merely a judicially managed discovery proceeding in anticipation of a possible lawsuit. It is best understood as a means to enforce an implied duty of disclosure and reckoning arising out of an equitable relationship. …
“In this case, Phillips and Rohrbaugh Jr. were never in a principal-agent relationship with each other. In his capacity as his father’s agent, Rohrbaugh Jr. owed no fiduciary duty to account to his sister concerning his management of their father’s financial affairs. She thus has no cause of action in her personal capacity for an equitable accounting against her brother. …
“As a general rule, the personal representative of an estate has exclusive standing to sue on behalf of an estate. … Phillips … contends that she fits within a narrow exception to the general rule that enables certain beneficiaries to serve as ad hoc representatives of an estate under special circumstances. …
“[T]he exception may apply if the allegations in the complaint, ‘so far as they are well pleaded,’ … at least approximate the typical scenarios. These scenarios include a showing of ‘fraud’ or the ‘refusal to sue,’ … as well as ‘the insolvency of the personal representative, collusion between him and the debtor, the fact that the debtor was … a trustee holding property for, or an agent of, the decedent.’ …
“‘A [complaint] which fails to charge these or other special circumstances which will take the case out of the general rule is bad on demurrer.’ …
“Phillips does not accuse her brother of fraud or claim that Davies has turned a collusive blind-eye to any wrongdoing. Nor has she alleged any factually supportable cause of action that the Estate could assert against her brother. At best, the complaint speaks of ‘suspicious transactions[.]’ …
“We hold that the allegations in Phillips’s complaint … do not demonstrate that the circuit court erred by refusing to permit Phillips to serve as a de facto representative of the Rohrbaugh Estate for the purposes of seeking an equitable accounting from Rohrbaugh Jr., either in his capacity as his father’s inter vivos agent or as co-executor of the Estate. We similarly see no special circumstances pleaded in Phillips’s complaint that warrant an accounting claim against Davies in his capacity as co-executor.”
Statutory accounting
“Subsection A of Code § 64.2-1614 grants standing to several categories of claimants, including a principal’s relatives, to ‘petition a court to construe a power of attorney or review the agent’s conduct, and grant appropriate relief.’ If we were to stop reading there, we might presume (as Phillips does) that she has an indefeasible right to an accounting. Four other provisions of the Virginia Power of Attorney Act, however, make clear that such an assumption would be mistaken. …
“The underlying theme of all of these provisions is that courts should respect the personal financial privacy of competent principals while at the same time providing opportunities for others to initiate account-rendering litigation on behalf of incompetent or deceased principals. …
“We acknowledge Phillips’s concern for the need for such information to be disclosed when there is a good reason to believe the principal is incapacitated and possibly being taken advantage of. But the remedy for that scenario was crafted into subsection B(1) of Code § 64.2-1614, and that issue-specific remedy does not apply when a principal makes clear in the power of attorney (as Rohrbaugh Sr. did in his) that he does not want this protection and says so at a time when he was fully competent to make that decision.”
Conclusion
“[T]he circuit court did not err when it dismissed on demurrer Phillips’s equitable and statutory accounting claims. The equitable accounting claims should have been asserted, if at all, in the probate proceeding, and the statutory accounting claim was barred by Rohrbaugh Sr.’s expressly declared intent to prohibit it in his POA.”
Affirmed.
Phillips v. Rohrbaugh, et al., Record No. 200840 (Kelsey) Oct. 21, 2021. From the Circuit Court of Madison County (Farris). Kimberley Ann Murphy (Lisa M. Campo; Hale Ball Carlson Baumgartner Murphy, on briefs), for appellant. John F. Boland (Rees Broome, on brief), for co-executor appellees. Robert E. Scully, Jr. (Ian McElhaney; Blankingship & Keith, on brief), for appellee John Mark Rohrbaugh, Jr., in his individual capacity. VLW 021-6-069, 20 pp.
