Bond forfeited in conservatorship case

Virginia Lawyers Weekly//October 31, 2023//  

Where a conservator did not report some of the decedent’s accounts to the commissioner of accounts and made “questionable disbursements” from one of them, the trial court “did not err in confirming the Commissioner’s report and entering a final order forfeiting [the conservator’s] bond.”

Overview

Wilder was married to Thelma Wilder. They had three children: Eric, Brian and Cynthia. The trial court determined that Wilder was an incapacitated adult and appointed Minor, Wilder’s granddaughter, as his estate’s conservator.

The trial court explained that a conservator was needed “based on ‘the financial dissipation conducted by Brian Wilder and allowed by Mrs. Thelma Wilder.’” Minor was appointed conservator and posted a $1.2 million bond.

Minor did not disclose five of the Wilder’s join bank accounts on her estate inventory “as well as an additional bank account Mr. Wilder held with Burke & Herbert Bank identified as ‘-4200’ (‘Account -4200’).

“It was this undisclosed bank account that gave rise to this appeal. …

“On October 15, 2018 — just three days after her appointment as Mr. Wilder’s temporary guardian and conservator — Minor opened Account -4200 with funds Mr. Wilder already maintained in another account — identified as ‘-4197’ — with Burke & Herbert Bank (‘Account -4197’). During the latter part of 2018 and 2019, Minor made a number of questionable purchases with funds from Account -4200.”

Eric, later joined by Cynthia, alleged that Minor had underreported the assets of Wilder’s estate. Eric asked the commissioner for a hearing and also requested “production of certain bank records, including records from Burke & Herbert Bank.”

A hearing was convened on Dec. 5, 2020, and then postponed to Jan. 5, 2021, “because the Commissioner had received documents and allegations which indicated the potential for forfeiture of the surety bond, and she wanted the surety on Minor’s bond to appear as well.”

Before the hearing was adjourned, “Minor confirmed the existence of the undisclosed Account -4200.

“In anticipation of the January 5 hearing, counsel for Minor filed a hearing brief, asserting, among other arguments, that Eric and Cynthia were not ‘interested parties’ within the meaning of Code § 64.2-1209, and therefore the proceeding was improper.”

Eric’s counsel was allowed to respond, both before and during the Jan. 5 hearing.

The commission subpoenaed bank records from Burke & Herbert. “The bank’s response reflected both statements from Account -4197, which accurately reflected and accounted for transactions spent on Mr. Wilder’s guardianship and his estate, and from Account -4200, transactions for which Minor never accounted.

“Finally, on February 3, 2021, the Commissioner convened the hearing concerning the objections of Eric and Cynthia for the third time. … However, no report or further action was taken by the Commissioner as a direct result of these investigatory hearings.”

The commissioner asked Minor for “documentation explaining the propriety of the expenditures from Account -4200. … The Commissioner determined that Minor’s response was insufficient[.]” When Minor did not file “a proper final account,” the commissioner filed a “report of noncompliance” with the trial court.

The trial court issued a show cause summons. Minor’s counsel argued the proceeding was “a nullity” and claimed the commissioner “was not an impartial adjudicator.” The court order the commissioner to conduct a hearing and determine where Minor should be removed as conservator and whether the bond should be forfeited.

Minor did not attend the hearing. Her counsel did not provide evidence to explain “to explain how the funds from Account -4200 were used to benefit Mr. Wilder.”

Counsel also argued Minor was denied due process because the commissioner was “acting both as a prosecutor and as an adjudicator, and she again argued that the proceedings were a ‘nullity’ because they were instituted by Eric and Cynthia, both of whom lacked standing as ‘interested person[s]’ under Code § 64.2-1209.

“Counsel for Minor and for Liberty Mutual also argued in the alternative that the amount that they ought to be liable for was far less than the $574,462.27 that the Commissioner asserted.”

The trial court affirmed the commissioner’s report, which recommended Minor’s removal and forfeiture of the bond. Minor appealed.

Hearing process

“Appellants’ first assign error to the trial court’s ruling by arguing that the entire proceeding was a ‘nullity’ because it was instituted by Eric and Cynthia. …

“Appellants argue that, because Eric and Cynthia were not ‘interested persons’ under the statute, ‘the only thing the Commissioner could do with the objections before her would be to dismiss the objections for lack of standing.’ …

“[W]e agree with the trial court that ‘while [Code § 64.2-1209] does prescribe a method by which the Commissioner can have a hearing, the statute does not say that is the only way a commissioner may conduct a hearing.’”

The commissioner has “the duty and authority to ensure the correct administration of estates.” By statute, the commissioner has ‘the power to subpoena “any person to appear before them.”’

“The record demonstrates that that is what occurred here, and we see no issue with that process. The investigatory hearings that appellants complain of were well within the Commissioner’s ‘supervisory’ authority …. and her authority to require ‘any person’ to appear before her[.] …

“Further, the Commissioner was carrying out her statutory obligation to ensure Minor made a ‘complete and proper account.’”

Neutral arbiter

“Appellants seize upon several statements made by the Commissioner during the investigatory hearings wherein she intimated that, notwithstanding the fact that Eric and Cynthia may not be ‘interested persons’ …, she, herself, was an ‘interested person’ for purposes of the hearing, that she ‘had standing in the case,’ and that she was not ‘neutral.’

“Appellants argue that these statements evince bias on the part of the Commissioner and that the hearing process, in turn, violated their due process rights. …

“[T]he record makes clear that the Commissioner, in making the assertions that she was ‘interested,’ ‘had standing’ in the case, and was not ‘neutral,’ merely intended to express the fact that she, as Commissioner of Accounts, had a duty to assess the evidence presented to her and ensure the proper administration and distribution of Mr. Wilder’s estate. …

“The Commissioner’s statements do not render her an impartial adjudicator. In fact, the trial court came to this very conclusion[.] …

“The trial court further acknowledged that ‘although the words that she used might not have been the most artful words to use in that context, [she was saying] that the Commissioner of Accounts had duties and obligations.’ …

“[A]ppellants argue that the Commissioner violated their due process rights by exercising both ‘enforcement’ and ‘adjudicatory’ authority. …

“The Commissioner makes findings of fact and conclusions of law in her report, which, upon submission to the trial court, are merely recommendations which the trial court may accept or reject.”

Remedy

Appellants argue that Eric and Cynthia’s “remedy was limited to a suit to surcharge and falsify under Code § 64.2-1213. …

“The trial court’s order and rulings were not made on behalf of Eric and Cynthia, as ‘interested persons’ proceeding pursuant to Code § 64.2-1209.

“In fact, neither Eric nor Cynthia were parties to the instant case; they received no judgment or remedy, and their legal rights were not affected in any way by the trial court’s ruling.

“Therefore, any arguments related to what remedies may or may not have been available to Eric and Cynthia are not relevant to the instant case.”

Affirmed.

Minor, et al. v. Heishman, Record No. 0980-22-4, Oct. 10, 2023. CAV (published opinion) (Fulton III) From the Circuit Court of Fairfax County (Smith). Joseph W. Stuart for appellants. Robert B. McEntee, III, Assistant Attorney General (Jason S. Miyares, Attorney General, on brief), for appellee. Amicus Curiae: Virginia Conference of Commissioners of Accounts (John K. Cottrell; Cottrell Fletcher & Cottrell PC, on brief), for appellee. VLW 023-7-396, 30 pp.

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Bond forfeited in conservatorship case - Virginia Lawyers Weekly