ANALYSIS OF OCTOBER 21, 2021 SUPREME COURT OPINIONS
(Posted October 21, 2021) The Supreme Court today issues two published rulings, including a decision in the court’s oldest previously undecided appeal.
Civil procedure
The justices take up seemingly contrary statutory provisions relating to confessed judgments in Ayers v. Brooke Road, LLC. Ayers was one of several borrowers on bank loans about 15 years ago. In 2009, the loans went into default. The bank utilized the notes’ confessed-judgment provisions, and got immediate judgments. Two weeks later, it tendered to the clerk of court returns from a process server, showing personal service of the judgments on Ayers at a location in Orange County.
The judgments evidently languished for nine years before the bank sold the judgments to Brooke Road, LLC. That company filed suit against Ayers in an attempt to collect the judgments. A bit over seven weeks after being served with the new complaint, Ayers filed his own action to set aside the underlying default judgments. He alleged that he was never served in 2009, and the returns of service were false. He attached copies of several criminal convictions suffered by the process server for dishonesty.
Brooke Road demurred to Ayers’s suit, citing a statute that requires a challenge to a default judgment to be filed within 21 days after the debtor is served. Ayers responded that under another statute, the failure to serve a default judgment within 60 days renders the judgment void ab initio, so the 21-day limit doesn’t apply.
The circuit court agreed that Ayers had a valid claim on the facts, because a return of service isn’t conclusive; only prima facie evidence of service, and that can be rebutted. But the court agreed that Ayers did have a 21-day window within which to challenge the judgments, and he missed that. The court thus sustained the LLC’s demurrer.
Today the justices unanimously reverse and remand the case for trial. A judgment that’s void ab initio is a legal nullity, and the plaintiff can retroactively reincarnate it by subsequent action. Once that 60 days passed, assuming (as the court must at the demurrer stage) that Yates wasn’t actually served, the judgment simply vaporized and the creditor has to start over again. Yates doesn’t get a final judgment in his favor, but he now gets to prove that he really wasn’t served. As an aside, if he succeeds in doing so, I might anticipate that the court may have something to discuss with the process server thereafter.
Fiduciaries
The other opinion issued today also takes up the interplay between related statutes. Phillips v. Rohrbaugh is a suit by one beneficiary, a decedent’s daughter, against her brother, who is a co-executor of the decedent’s estate. The daughter perceived that her brother’s handling of their late father’s affairs – before death under a power of attorney, and after death in estate administration – were suspicious or constituted self-dealing.
The daughter requested certain documents from her brother; the brother gave her some of what she sought. She decided that what he sent her was insufficient, so she filed a suit in equity seeking an equitable accounting and a statutory accounting. Her brother replied that neither option was available. The circuit court agreed with the brother and dismissed the case.
The power of attorney had some language that I found remarkable, and the Supreme Court today finds dispositive. I’ll italicize the most relevant text, but the bolding is in the original:
Pursuant to the provisions of section 11-9.6 of the Code of Virginia of 1950, as amended, 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. I authorize my agent to refuse any request for disclosure or inspection, and they have the sole discretion to determine the scope, if any, of disclosure or inspection they may wish to permit. I authorize my agent as an expense of the agency to resist any proceeding to compel such disclosure or inspection. . . . Without limitation of the foregoing sentences in this paragraph, I specifically intend that my agent shall never be required to make disclosure of their actions or permit inspection of my affairs under this instrument, pursuant to section 11-9.1, section 11-9.6, section 37.1-134.22 of the Code of Virginia of 1950, as amended, or any other statute.
Well, that seems definitive enough to get the point across. Citing this provision, the Supreme Court today honors the decedent’s wishes. The court rules that under the power, the brother had no obligation to disclose anything to his sister, in that she wasn’t his agent. That duty runs to the principal, not a relative. An equitable accounting is thus a matter of the chancellor’s discretion.
Turning to the daughter’s claims under the will, the justices today find that she does indeed have standing to raise such a claim, but it has to come in an estate proceeding before the commissioner of accounts (and eventually the circuit court), not in this collateral action.
The court also rejects the daughter’s statutory claims for relief under the Power of Attorney Act. While a general provision of the Act permits a relative of the principal to petition a court to “construe a power of attorney or review the agent’s conduct,” other related statutes narrow the scope of such petitions. The daughter finds herself on the outside of these provisions, as the Supreme Court rules that she cannot compel a statutory review at this point, in this proceeding.
Today’s ruling disposes of this lawsuit but doesn’t close the book on this sibling dispute. It’s eminently foreseeable that the same parties may revisit the Supreme Court at some point down the line.
As I mentioned above, this appeal is the oldest on the court’s current calendar. The advocates argued the appeal to the justices in April; they had to wait six months to get today’s unanimous ruling. Waits like that are agonizing, but there’s nothing to be done but to be patient.
