Wills and Trusts – Co-trustees sue third co-trustee for damaging Trust

Where the circuit court held that two co-trustees lacked standing to challenge conduct by the third co-trustee, it erred. Their claims were based on their overall allegation that the third co-trustee’s actions caused injury to the Trust.

Background                              

In 2016, Irene A. Galiotos, mother of Steve, Paul and Tasos Galiotos, died. Her will provided that her entire probate estate was to be transferred to the Irene A. Galiotos Revocable Trust. The Trust instrument provided that the three brothers would serve as co-trustees upon Irene’s death. Irene’s will appointed Tasos and Steve as co-executors of the Estate.

At the time, she held a 35.8 percent interest in Executive Cove LLC with Tasos having the remaining 64.2 percent interest. In 2018, Tasos asserted that the Operating Agreement gave Executive Cove and its members the opportunity to purchase Irene’s interest in Executive Cove before it was transferred to the Trust. Steve rejected this interpretation.

On Oct. 1, 2018, Executive Cove redeemed the Estate’s interest in Executive Cove

for a purchase price of $565,620. Shortly before the redemption, Tasos filed an amended petition and complaint asking the circuit court to remove Steve as co-executor of the Estate. Steve then filed a counterclaim against Tasos, asking the circuit court to remove Tasos as co-executor of the Estate. The circuit court removed both Tasos and Steve as co-executors and appointed Stephanie Smith as the Estate’s sole administrator.

In August 2023, Smith filed an amended complaint for declaratory judgment, or in the alternative, petition for aid and direction, regarding the redemption. In response, Steve and Paul filed multiple pleadings challenging Tasos and Executive Cove’s actions in redeeming the Estate’s interest in the LLC. The circuit court dismissed Steve and Paul’s claims against Tasos on “the narrow issue of standing.”

The circuit court then granted Tasos and Executive Cove summary judgment on Smith’s complaint, finding that the redemption of the Estate’s interest in Executive Cove and the purchase price were both proper. The circuit court’s order also included the finding that “[t]he [a]dministrator’s [c]omplaint was brought in good faith and was necessary to resolve issues for the administration of the Estate.”

Article 10.4

Steve and Paul argue that the circuit court erred in granting Tasos and Executive Cove’s motions for summary judgment. This court agrees. Article 10.4 plainly applies only to transfers of company interests and, at the time of her death, Irene’s interest in Executive Cove was not a “Company Interest.” Rather, it was a membership interest with assignee rights rather than a company interest.

And because Article 10.4 only applies to transfers of company interests, this provision did not apply to the transfer of Irene’s interest upon her death. Accordingly, the circuit court erred in determining that the redemption of the Estate’s interest in Executive Cove was proper, and in granting summary judgment on that basis.

Standing

The circuit court also erred in ruling that Steve and Paul lacked standing to assert their cross-claims and third-party claims in the declaratory judgment/aid and direction action. Steve and Paul’s pleadings allege that but for Tasos’s acts, the Trust would have received Irene’s interest in Executive Cove. Their claims, brought in their capacities as co-trustees of the Trust, were thus based on their overall allegation that Tasos’s actions caused injury to the Trust. Accordingly,  as co-trustees, Steve and Paul had standing to assert claims against Tasos in his capacity as another co-trustee.

Good faith

The circuit court found that “[t]he [a]dministrator’s [c]omplaint was brought in good faith and was necessary to resolve issues for the administration of the Estate.” This court agrees with Steve and Paul that the circuit court erred in including this finding in the order, because this issue was not raised in the pleadings before the court.

Reversed and remanded.

Galiotos v. Galiotos, Record Nos. 2041-24-1, 2063-24-1, April 7, 2026. CAV (unpublished opinion) (Malveaux.). From the Circuit Court of the City of Virginia Beach (Conway Jr.). Joseph M. Rainsbury (Richard H. Ottinger; Katherine Lennon Ellis; Woods Rogers Vandeventer Black PLC, on briefs), for appellant Paul A. Galiotos, Individually and as Co-Trustee of the Irene A. Galiotos Trust. Roman Lifson (David B. Lacy; Grayson B. Cassada; Stavros P. Galiotos, pro se; Christian & Barton, L.L.P., on briefs), for appellant Stavros P. Galiotos, Individually and in his capacity as Co-Trustee of the Irene A. Galiotos Trust. Gary A. Bryant (Bethany J. Fogerty; Willcox & Savage, P.C., on briefs), for appellees Tasos A. Galiotos, Individually and as Co-Trustee of the Irene A. Galiotos Trust, and Executive Cove, LLC. Kyle McNew (Alison R. Zizzo; LeeAnne C. Schocklin; MichieHamlett PLLC; Midgett Preti Olansen PC, on brief), for appellee Stephanie C. Smith, Administrator of the Estate of Irene A. Galiotos, deceased. VLW 026-7-136. 20 pp.

Full-Text Opinion

VLW 026-7-136
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