RIVERSIDE HEALTHCARE ASS'N, INC. v. Forbes
709 S.E.2d 156
Va.2011Background
- The Uniform Principal and Income Act (UPIA) was enacted to provide uniformity in allocating receipts and expenses between income beneficiaries and remaindermen.
- The trust at issue, known as the Sarah E. Forbes Riverside Trust, forbids selling trust property except to a condemnor and provides income to the Grantor during her lifetime with principal to Riverside upon her death.
- In 2008 a portion of the trust property was condemned, and condemnation compensation was disputed as to whether it should be allocated to income or principal.
- The trust defines net income to include all funds from rental or generated by the trust property and any proceeds from the trust property, less specified expenses.
- The circuit court granted partial summary judgment for the Trustee, determining condemnation proceeds fall under net income; it also sustained the Trustee’s demurrer to an equitable accounting.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who controls the allocation of condemnation proceeds? | Riverside argues UPIA governs allocation to principal. | Trustee argues trust terms allocate proceeds as income. | UPIA governs unless the trust expressly provides otherwise; here trust terms allocate as income. |
| Are condemnation proceeds to be treated as income or principal under the trust terms? | Condemnation proceeds are not defined as income under net income; should be principal. | Proceeds are included in net income; thus income to Grantor. | Proceeds from eminent domain fall within 'proceeds' and are allocated to income per the trust terms. |
| Did the circuit court err in ruling on equitable accounting? | Riverside may seek equitable accounting under Code § 8.01-31 for trustee wrongdoing. | Trustee complied with order; no further accounting needed. | Circuit court erred in demurring to Riverside’s equitable accounting claim; remanded for further proceedings. |
Key Cases Cited
- Harbour v. SunTrust Bank, 278 Va. 514 (Va. 2009) (grantor intent controls interpretation of trust terms)
- Keener v. Keener, 278 Va. 435 (Va. 2009) (pure questions of law; de novo review)
- Horner v. Department of Mental Health, 268 Va. 187 (Va. 2004) (statutory interpretation; de novo review)
- Venables v. Seattle-First Nat'l Bank, 60 Wash. App. 941 (Wash. App. 1991) (UPIA-like aims; default rules vs. trust terms)
- Estate of Reynolds, 494 Pa. 616 (Pa. 1981) (settlor direction vs. statutory allocation of stock dividends)
- Manufacturers Trust Co. v. Roanoke Water Works Co., 172 Va. 242 (Va. 1939) (condemnation awards as replacement for property)