Doris E. Young, Administratrix v. Gary Douglas Young ( 2017 )

FILED
November 2, 2017
Nos. 16-0603 & 16-0955 – Young v. Young released at 3:00 p.m.
EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
Justice Ketchum, joined by Chief Justice Loughry, dissenting:
This is a difficult case involving a number of competing interests: the
freedom to contract, a partnership’s ability to craft a succession plan upon the death of
one of its partners, and the policy considerations underlying our elective share statute. In
my view, resolving these competing equities requires a focus on three unassailable points
of law: (1) “relations among the partners and between the partners and the partnership are
governed by the partnership agreement;”1 (2) “[i]t is not the right or province of a court to
alter, pervert or destroy the clear meaning and intent of the parties as expressed in
unambiguous language in their written contract or to make a new or different contract for
them”;2 and (3) the purpose behind our elective-share statute is to prevent the
disinheritance of the spouse.3
In this case, we have a partnership agreement which: (1) existed between
two partners in a closely-held partnership for twenty-six years at the time of decedent
father’s death, and (2) provided a clear statement, expressed in unambiguous language,
1
W.Va. Code § 47B-1-3(a) [1995]. This Court has noted that our partnership law
“allows for the partnership to continue even with the departure of a member because it
views the partnership as an entity distinct from its partners.” Valentine v. Sugar Rock,
Inc., 234 W.Va. 526, 541, 766 S.E.2d 785, 800 (2014) (internal citation and quotation
omitted).
2
Syllabus Point 3, Cotiga Dev. Co. v. United Fuel Gas Co., 147 W.Va. 484, 128
S.E.2d 626 (1962).
3
See generally John W. Fisher II & Scott A. Curnutte, Reforming the Law of
Intestate Succession and Elective Shares: New Solutions to Age-Old Problems, 93 W.Va.
L. Rev. 61, 98-115 (1990).
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regarding what would happen to the partnership upon decedent father’s death. We also
have a widow who has not been “disinherited.” Quite the contrary in fact—Mrs. Young
has received approximately one million dollars following her husband’s death.
Nevertheless, the majority opinion refused to apply the plain language of
the partnership agreement, concluding that to do so would contradict the “public policies
and principles of the elective share statutory scheme.” This is a curious resolution: the
majority opinion rejects an unambiguous, valid partnership agreement that has been in
effect for twenty-six years based on public policy concerns—the prevention of a widow
being disinherited—in a case where the widow has inherited one million dollars.
The majority opinion could substantially impact every partnership
agreement in West Virginia. I urge our legislature to examine this issue and invite them
to provide specific guidance on the unique interests at play herein. Guidance from the
legislature would assist all West Virginia partnerships in planning how to operate
following the death of a partner.
A. Consideration
The majority opinion first concludes that the option agreement is
unenforceable because it “was unsupported by consideration.” I disagree.
The option agreement was executed in 1987 and was incorporated by
reference into the 1987 amended partnership agreement (“partnership agreement”).4 The
4
See Syllabus Point 2 of State ex rel. U-Haul Co. of West Virginia v. Zakaib, 232
W.Va. 432, 752 S.E.2d 586 (2013) (“In the law of contracts, parties may incorporate by
reference separate writings together into one agreement. However, a general reference in
one writing to another document is not sufficient to incorporate that other document into
2
option agreement includes the following language: “In consideration of the promises, and
the mutual covenants herein contained, and other good and valuable consideration, it is
hereby agreed as follows: 1. In the event of the death of [decedent father], [the son] shall
have the option to purchase [decedent father’s] interest in the partnership for the amount
of Fifty Thousand Dollars.” (Emphasis added). The partnership agreement includes the
following provision: “The partners may not sell, convey, assign or otherwise dispose of
their partnership interest except to the other partner.”
The circuit court correctly determined that the partners’ mutual agreement
not to dispose of their partnership interest except to the other partner constituted a
“restraint on the alienability of the [parties’] respective partnership interests [which]
clearly meets the definition of a ‘detriment’ to the parties and, therefore qualifies as valid
consideration.”
Consideration may be demonstrated in a number of ways. “A valuable
consideration may consist either in some right, interest, profit or benefit accruing to the
one party or some forbearance, detriment, loss or responsibility given, suffered, or
undertaken by the other.” Syllabus Point 1, Tabler v. Hoult, 110 W.Va. 542, 158 S.E. 782(1931) (emphasis added). In Dan Ryan Builders, Inc. v. Nelson, 230 W.Va. 281, 287,
737 S.E.2d 550, 556 (2012), this Court noted: “The term consideration has been defined
a final agreement. To uphold the validity of terms in a document incorporated by
reference, (1) the writing must make a clear reference to the other document so that the
parties' assent to the reference is unmistakable; (2) the writing must describe the other
document in such terms that its identity may be ascertained beyond doubt; and (3) it must
be certain that the parties to the agreement had knowledge of and assented to the
incorporated document so that the incorporation will not result in surprise or hardship.”).
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as . . . some forbearance, detriment, loss, or responsibility given, suffered, or undertaken
by another. A benefit to the promisor or a detriment to the promisee is sufficient
consideration for a contract.” [Citations and internal quotation omitted]. This Court
further emphasized that consideration may consist of a detriment in Citizens Telecomms.
Co. of W.Va. v. Sheridan, 239 W. Va. 67, ___, 799 S.E.2d 144, 149 (2017), stating, “[a]
benefit to the promisor or a detriment to the promisee is sufficient consideration for a
contract. 17 Am.Jur.2d, Contracts, Section 96.”
Additionally, this Court has provided that “[c]ourts of law, as a rule, will
not enter upon any inquiry as to the adequacy of a consideration in a contract. They
presume this to have been determined by the parties to the contract, if they are capable of
contracting.” Rease v. Kittle, 56 W.Va. 269, 49 S.E. 150, 153 (1904).5 Also, this Court
has long adhered to the principle that “[i]t is not the right or province of a court to alter,
pervert or destroy the clear meaning and intent of the parties as expressed in
unambiguous language in their written contract or to make a new or different contract for
them.” Syllabus Point 3, Cotiga Dev. Co.
Despite the clear, unambiguous language contained in the partnership
agreement demonstrating the detriment both parties agreed to undertake, the majority
5
There is no question that the parties in the present case were “capable of
contracting.” Similarly, the plain language of the option agreement and of the partnership
agreement leaves no doubt as to the intention of the parties. See Syllabus Point 3, Dan
Ryan Builders, Inc., 230 W.Va. 281, 737 S.E.2d 550 (“‘The fundamentals of a legal
contract are competent parties, legal subject matter, valuable consideration and mutual
assent. There can be no contract if there is one of these essential elements upon which the
minds of the parties are not in agreement.’ Syllabus Point 5, Virginian Export Coal Co. v.
Rowland Land Co., 100 W.Va. 559, 131 S.E. 253 (1926).”).
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opinion concluded that the option agreement is void of consideration because it was not
supported by “new consideration.” I disagree with this conclusion and find that it is at
odds with our holding in Syllabus Point 6 of Dan Ryan Builders, wherein this Court
addressed whether every clause of a contract requires individual consideration:
The formation of a contract with multiple clauses only
requires consideration for the entire contract, and not for each
individual clause. So long as the overall contract is supported
by sufficient consideration, there is no requirement of
consideration for each promise within the contract, or of
“mutuality of obligation,” in order for a contract to be
formed.
The option agreement is incorporated by reference into the partnership
agreement. The partnership agreement is supported by consideration—the partners’
agreement not to dispose of their partnership interest except to the other partner. Further,
the option agreement, by its own terms, provides “[i]n consideration of the promises, and
the mutual covenants herein contained, and other good and valuable consideration[.]” It
is not this Court’s province to destroy the clear intent of parties who enter freely into
written agreements. The option agreement, incorporated by reference into the partnership
agreement, is plainly supported by consideration, and expresses in unambiguous language
the intent of the parties.
Because I find that the option agreement is supported by consideration, I
also disagree with the majority opinion’s conclusion that the option agreement is a
testamentary disposition. The majority’s finding that the option agreement is an
attempted testamentary disposition is premised on its conclusion that the option
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agreement is not supported by consideration. For the reasons previously discussed, I
disagree with this finding.
B. Elective Share
The majority opinion next provides that “even if a valid contract were
executed between Decedent and his son, when viewed in the face of an elective share
claim by the surviving spouse, the $50,000 option price cannot be enforced against her to
the extent it does not compensate her full statutory share.” After examining the various
equities at play, the majority opinion concludes that “the freedom to contract must give
way to the elective share statute. . . . equity and the public policy behind the elective
share statutes dictate that . . . the option price is ineffective and the full value of the
partnership must be included in the augmented estate for purposes of calculating Mrs.
Young’s elective share.” I disagree with the majority opinion’s conclusion that freedom
to contract must give way in this matter.
The elective share statute specifically exempts “enforceable claims,” such
as the option agreement, from inclusion in the augmented estate. Our elective share
statute, W.Va. Code § 42-3-1(a) provides:
(a) The surviving spouse of a decedent who dies domiciled in
this state has a right of election, against either the will or the
intestate share, under the limitations and conditions stated in
this part, to take the elective-share percentage of the
augmented estate, determined by the length of time the
spouse and the decedent were married to each other[.]
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Pursuant to W.Va. Code § 42-3-2(b), the augmented estate includes: “(1)
The value of the decedent’s probate estate,6 reduced by funeral and administration
expenses, homestead exemption, property exemption and enforceable claims[.]”
(Emphasis added). The option agreement, incorporated by reference into the partnership
agreement, gives the son a valid and enforceable option contract that is supported by
consideration. This clear, unambiguous option contract, which had existed between the
two partners for twenty-six years, plainly gives the son an “enforceable claim” against the
estate.
This exception for “enforceable claims” contained in our elective share
statute is consistent with this Court’s long-standing recognition that the freedom to
contract is sacred and should not be disregarded. “This State’s public policy favors
freedom of contract which is the precept that a contract shall be enforced except when it
violates a principle of even greater importance to the general public.” Syllabus Point 3,
Wellington Power Corp. v. CNA Sur. Corp., 217 W.Va. 33, 614 S.E.2d 680 (2005). This
Court emphasized in Wellington Power that persons
of full age and competent understanding shall have the utmost
liberty of contracting, and that their contracts, when entered
into freely and voluntarily, shall be held sacred, and shall be
enforced by courts of justice. Therefore, you have this
paramount public policy to consider,—that you are not lightly
to interfere with this freedom of contract.
217 W.Va. at 38, 614 S.E.2d at 685 (emphasis added).
6
“‘Probate estate’ means property, whether real or personal, movable or
immovable, wherever situated, that would pass by intestate succession if the decedent
died without a valid will.” W.Va. Code 42-3-2(a)(iv).
7
While the freedom to contract “shall be held sacred and shall be enforced
by courts of justice,” it is also clear that there is a substantial public policy purpose
behind our elective share statute. As this Court noted in Mongold v. Mayle, 192 W.Va.
353, 356, 452 S.E.2d 444, 447 (1994):
[T]he purpose behind the elective-share provision set forth in
W.Va .Code, 42-3-1 [1992] is to prevent spousal
disinheritance in order to ensure that the surviving spouse’s
contribution to the acquisition of property during the marriage
is recognized and in order to ensure that the surviving spouse
has continuing financial support after the death of his or her
spouse.
In the present case, enforcing the clear, unambiguous language contained in
the option agreement does not result in Mrs. Young being disinherited. In fact, Mrs.
Young has already received approximately one million dollars and would receive an
additional $50,000.00 once Mr. Young exercised his option. Therefore, applying the
plain, unambiguous language contained in the option contract would be consistent with
our public policy favoring the freedom to contract, and it would not frustrate the public
policy underlying our elective share statutes—the disinheritance of a spouse.
C. Limited Holding
One final note on the majority opinion’s holding—the new syllabus point
provides that “if a contract or contract term is a substitute for a will . . . [it] is
unenforceable as against the electing surviving spouse for the purposes of determination
of his or her elective share.” The majority opinion determined that the option agreement
was a will substitute because it was not supported by consideration. While I disagree with
the majority opinion’s conclusion that the option agreement in the present case lacked
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consideration, I emphasize that an option agreement that is supported by consideration is
not subject to the new syllabus point. Instead, this new syllabus point is limited to a
situation in which a contract or option agreement is void of consideration and can thus be
characterized as a “will substitute.” An option agreement that is supported by
consideration is not a “will substitute” and thus would not be subject to the new syllabus
point.
D. Valuation on Remand
The option agreement has been voided and the circuit court will need to
conduct a valuation of decedent father’s interest in the partnership on remand. The West
Virginia Revised Uniform Partnership Act “governs partnership affairs when there is no
partnership agreement, or to the extent a partnership agreement does not otherwise
provide.” Valentine v. Sugar Rock, Inc., 234 W.Va. at 540, 766 S.E.2d at 799. See W.Va.
Code § 47B-1-3(a) (providing that “relations among the partners and between the
partners and the partnership are governed by the partnership agreement. To the extent the
partnership agreement does not otherwise provide, this chapter governs relations among
the partners and between the partners and the partnership.”). Under W.Va. Code § 47B­
6-1(7)(i), a partner who dies is dissociated from the partnership. The “buyout price” of a
dissociated partner’s interest is set forth in W.Va. Code § 47B-7-1(b).
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