Plaintiff lacks standing to sue for undue influence

Where plaintiff was not the personal representative of the decedent’s estate, he lacks standing to sue his sister for undue influence, unjust enrichment and breach of fiduciary duty. His fraud claim, however, goes forward. His request for an accounting is granted.

Overview

Susan Forbes, John B. Forbes and Chip Forbes are heirs to the decedent, Shelley Forbes.

Before her death, decedent opened an LPL investment account and a Union Bank checking account. After winding up the family’s businesses, SWM Properties, she deposited $2.5 million in the LPL account.

Decedent then executed a power of attorney naming Susan, the defendant in this case, as her agent. Defendant then sought a declaration that the decedent was incompetent to handle her affairs.

“Once the power of attorney was executed, Defendant made a series of payments to herself and Kathleen Shelley, whose relation to Decedent is unclear. After these transactions were made, Decedent executed a second Power of Attorney[.] …

“Decedent added Defendant as the transfer-on-death beneficiary of 100% of the LPL Account. On October 16, 2018, Defendant paid herself $15,000 from the LPL Account as an annual exclusion gift. No gifts were received by, or distributed to, Plaintiff, Chip, or any other unidentified heirs.

“On November 16, 2018, Decedent died intestate. Decedent was survived by Defendant, Plaintiff, and Chip. … Defendant became the sole beneficiary of over $2.5 million. No assets were distributed to Plaintiff, Chip, or any other heirs.

“In September 2019, Chip became aware of both the sale of SWM Properties and Decedent’s distributions from that sale.” Eventually, decedent’s attorney “provided an accounting of Defendant’s actions [but] only from the time Decedent moved to Virginia in 2017 until December 2019.”

Chip was named administrator of decedent’s estate. Plaintiff, in his individual capacity, and Chip as personal representative and in his individual capacity, sued defendant, alleging “undue influence, unjust enrichment, breach of fiduciary duty, and fraud. …

“Plaintiff and Chip took a voluntary nonsuit of the First Complaint. On May 22, 2022, keeping within the limitations date to recommence the suit, … Plaintiff alone recommenced his action by filing the current Complaint … alleging undue influence, unjust enrichment, and breach of fiduciary duty.”

Chip was not a party in the second complaint. He died on May 28, 2022. Defendant filed a plea in bar.

Standing

Defendant argues that plaintiff lacks standing to sue. “[T]he proper party to litigate on behalf of a decedent’s estate is the personal representative of the estate. … Plaintiff is not, and never has been, the personal representative of Decedent’s estate. …

“Although I find that Plaintiff lacks standing to bring this action as to the counts of Undue Influence, Unjust Enrichment, and Breach of Fiduciary Duty, I believe I should address one erroneous argument put forth by Defendant in support of her Plea in Bar. Her argument is that after a nonsuit, any refiled action must include all plaintiffs from the first action. …

“In support of this assertion, Defendant cites Dalloul v. Agbey, 255 Va. 511 (1998).” The language defendant cites in Dalloul “does not stand for the proposition that after a nonsuit all plaintiffs from the original complaint must be included as plaintiffs in a refiled complaint. …

“The Supreme Court discussion of standing begins with the proposition that ‘Virginia Law establishes that ‘“[t]he personal representative, not a beneficiary of the estate, is the proper party to litigate on behalf of the estate and that is true even when the personal representative is also a proper beneficiary of the estate.’ … Platt v. Griffith, 299 Va. 690, 692 (2021) …

“The appellants ‘consistently denied’ that they were challenging the estate or suing on behalf of the estate. To this assertion the Supreme Court pointed out that the appellants’ claim relating to the recission of the inter vivos transfers are inherently on behalf of the estate because the [decedent] could have brought the claims during his lifetime. …

“That analysis holds true here. Everything Plaintiff requests would have belonged to Decedent during her lifetime. However, I find that the analysis does not control my finding as to the accounting and Count IV, Fraud.”

Accounting

Defendant argues that plaintiff did not timely request an accounting. “Defendant premises her argument on the fact that because Plaintiff did not request an accounting under Virginia §64.2-1612(I) that he cannot now seek relief under Virginia Code §64.2-1614. …

“Virginia Code §64.2-1614 does not enumerate any condition precedent which Defendant would have this Court insert. [Code] §64.2-1614 simply states, ‘In addition to the remedies referenced in §64.2-1621, the following persons may petition a court to construe a power of attorney or review the agent’s conduct, and grant appropriate relief.’” These are “[t]he principal’s spouse, parent, or descendant. Plaintiff is a descendant[.]”

In Phillips v. Rohrbaugh, 300 Va. 289 (2021) the court stated that there are “three limitations on the plaintiff who seeks an accounting[.] …

“First, the plaintiff must allege ‘a good faith belief that the principal suffers an incapacity or, if deceased, suffered incapacity at the time the agent acted.’ …

“Second, [the statutes] include ‘a proviso [e]xcept as otherwise provided in the power of attorney’ which gives the principal the power to forbid account-rendering disclosures to anyone but himself.

“Fatal to Phillips’s claim was the fact that the power of attorney included such a provision. The Second Power of Attorney here does not include such a provision.

“Third, the request must be made within one year of the principal’s death. Decedent died on November 16, 2018. Plaintiff retained counsel to submit the request to Defendant. Counsel’s letter is dated October 29, 2019. Defendant was served with the request, by private process server on November 12, 2019, four days before the one year had elapsed.”

This case will be referred for an accounting.

Fraud

“[T]here is an exception to the general rule that only the personal representative of an estate may bring an action on behalf of the estate.” In Phillips, “[t]he Court … noted that Phillips argued that she fit into a narrow exception to the general rule, and the exception enables certain beneficiaries to serve as ad hoc representatives of the estate under special circumstances.

“[T]he Court found that Phillips had not sufficiently pled her special circumstances.

“The Court identified two possible scenarios that might allow a plaintiff such as Phillips, or Plaintiff in this case, to proceed with the action – ‘fraud’ or the ‘refusal to sue.’ … Phillips had not alleged fraud, the Court stated. … In this case, however, I find that Plaintiff has sufficiently alleged fraud to deny the Plea in Bar [as to the fraud and accounting claims].

Forbes v. Forbes, Record No. CL-2022-6734, Dec. 27, 2022. Fairfax County Circuit Court (Smith). Kristof G. Koletar, Elizabeth Chichester Morrogh for the parties. VLW 022-8-079, 7 pp.