Paul Galiotos, Individually, etc. v. Tasos A. Galiotos, Individually, etc.
0077241
| Va. Ct. App. | Dec 30, 2024Background
- Three brothers (Steve, Paul, Tasos Galiotos) are co-trustees and beneficiaries of two family trusts holding substantial real estate and assets, established by their late parents, Anthony and Irene Galiotos.
- Their parents’ estate documents generally provided for distribution of assets in "equal shares" among the sons.
- Years of familial conflict led to disputes over trust distribution: Steve and Paul, as majority trustees, advocated a non-pro-rata asset split, while Tasos insisted on a pro-rata split.
- Steve and Paul created a plan to divide the assets into three "equal" buckets, but assigned the least desirable bucket (in Tasos's view) to Tasos and allocated all of the estate debt to him; they refused to allow Tasos to swap buckets.
- Following a three-day trial, the circuit court rejected Steve and Paul's plan as unfair, found their asset valuations not credible, and ordered a pro-rata distribution, also ruling on attorney fees.
- Steve and Paul appealed, arguing their plan was fair and the court erred in its procedural assignments and findings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the non-pro-rata distribution plan was fair | Steve/Paul: Their plan created "equal shares" per the trust, using fair-market-value and appropriate discounts | Tasos: The plan unfairly devalued his share, gave him inferior assets and all the debt, and violated parents’ intent | Court found the majority trustees’ plan was unfair, asset valuations lacked credibility, and the process was procedurally and substantively deficient |
| Authority to impose plan as majority trustees | Steve/Paul: Trust language and VA Code gave them “conclusive” authority to determine values and distributions | Tasos: Trustees' discretionary powers are still limited by fiduciary duties of good faith and fairness | Court held even broad discretion is subject to fiduciary duties; procedural and substantive fairness required |
| Burden of proof for fairness of the plan | Steve/Paul: Tasos had burden as challenger to show unfairness | Tasos: Since Steve/Paul were conflicted fiduciaries, they must show plan fair | Court: Burden was correctly put on conflicted fiduciaries to show their plan was fair |
| Rejection of non-pro-rata plan without another chance to propose | Paul: Should have been given another opportunity to draft a fair non-pro-rata plan | Tasos: Feuding and delay justified ordering immediate pro-rata distribution | Court: No abuse of discretion in ordering final pro-rata distribution; sufficient attempts and decade-long delay |
Key Cases Cited
- Rafalko v. Georgiadis, 290 Va. 384 (trial court factual findings, including on bad faith, are reviewed for plain error)
- Keener v. Keener, 278 Va. 435 (mixed questions of law and fact in trust interpretation reviewed de novo for law, deferentially for fact)
- Giannotti v. Hamway, 239 Va. 14 (fiduciaries must prove fairness in conflicted self-dealing transactions)
- Stepp v. Foster, 259 Va. 210 (trustees may recover reasonable fee from trust unless they breach fiduciary duties)
- Ladysmith Rescue Squad, Inc. v. Newlin, 280 Va. 195 (settlor’s intent governs interpretation of trust instruments)
- Harbour v. Suntrust Bank, 278 Va. 514 (grantor’s intent controls trust construction)
- Gillespie v. Davis, 242 Va. 300 (rules for interpreting wills apply equally to trusts)
- Manchester Oaks Homeowners Ass’n v. Batt, 284 Va. 409 (failure to challenge all alternative grounds for a decision waives argument on those grounds)