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Young v. Young

Supreme Court of West Virginia

November 2, 2017

DORIS E. YOUNG, Individually and in Her Capacity as the Administratrix of the Estate of Gary Ray Young, Defendant Below, Petitioner
v.
GARY DOUGLAS YOUNG, Plaintiff Below, Respondent.

          Submitted: September 20, 2017

         Appeal from the Circuit Court of Putnam County The Honorable Philip M. Stowers, Judge Civil Action No. 14-C-129, REVERSED AND REMANDED

          Harvey D. Peyton Thomas H. Peyton Peyton Law Firm, PLLC Nitro, West Virginia Counsel for the Petitioner

          Perry W. Oxley, Esq. J.E. White, Jr., Esq. J. Jarrod Jordan, Esq. Anspach Meeks Ellenberger LLP Charleston, West Virginia Counsel for the Respondent

          JUSTICE WALKER delivered the Opinion of the Court. CHIEF JUSTICE LOUGHRY and JUSTICE KETCHUM dissent and reserve the right to file a dissenting opinion.

          SYLLABUS

         1. "A circuit court's entry of summary judgment is reviewed de novo." Syllabus Point 1, Painter v. Peavy, 192 W.Va. 189');">192 W.Va. 189, 451 S.E.2d 755 (1994).

         2. "No promise is good in law unless there is a legal consideration in return for it." Syllabus Point 1, Thomas v. Mott, 74 W.Va. 493');">74 W.Va. 493, 82 S.E. 325 (1914).

         3. "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');">110 W.Va. 542, 158 S.E. 782 (1931).

         4. "The promise of a party to a contract, in order to be a good consideration for the undertaking of the other party thereto, must be such as to impose a legal liability. Where the promise relied upon as constituting the consideration for the contract does not impose any legal liability upon the promisor, it will not ordinarily be held to be a sufficient consideration on the part of the other party." Syllabus Point 2, Banner Window Glass Co. v. Barriat, 85 W.Va. 750, 102 S.E. 726 (1920).

         5. If a contract or a contract term is substituted for a will such that it prevents an electing surviving spouse from receiving the full value of his or her distributive share of marital property owned by his or her spouse at the time of death, the contract or contract term is unenforceable as against the electing surviving spouse for the purposes of determination of his or her elective share.

          WALKER, Justice:

         Gary Ray Young (Decedent) and his son Gary Douglas Young (Decedent's son) formed a partnership in 1985. After Decedent died without a will in 2016, a dispute arose between Decedent's son and Decedent's wife of more than thirty years, Doris Young (Mrs. Young) about the disposition of Decedent's one-half interest in the partnership, which Mrs. Young has valued at approximately $1 million. Decedent's son claims that he has a valid contractual option to purchase Decedent's entire one-half interest in the partnership for $50, 000 according to an option agreement executed between Decedent and his son in 1987. Mrs. Young contends that her elective share should be based upon the full value of the partnership rather than upon the option price of $50, 000.

         Mrs. Young instituted this appeal to challenge the circuit court's summary judgment determination that the option agreement was supported by consideration and that the option price of $50, 000 would be used in calculating her elective share. Upon review, we conclude that the option agreement was unsupported by consideration and testamentary in nature, executed in the guise of a partnership agreement. Further, we find that the option agreement, as structured, contradicts the public policies and principles of the elective share statutory scheme and is unenforceable against Mrs. Young for the purposes of determining her elective share.

          I. FACTUAL AND PROCEDURAL BACKGROUND

         Decedent married Mrs. Young on April 9, 1982. While Decedent had two children from a previous marriage - Gary Young and Rita Marion - he did not have any children with Mrs. Young. During his marriage to Mrs. Young, Decedent and his son formally organized their partnership, G&G Investments, by executing the Agreement of Partnership ("1985 Partnership Agreement") on December 9, 1985. Decedent and his son were the only two partners. As to the partnership's disposition upon death of one of the partners, the 1985 Partnership Agreement provided:

In the event of the death of one of the partners prior to the otherwise termination of the partnership, the partners hereby irrevocably grant to each other the exclusive right and option to purchase such deceased partner's interest in the partnership property from the estate of such deceased partner for an amount equal to one-half of the net book value of the partnership property as of the date of such partner's death, it being the intent of the partners that the surviving partner shall receive all of the partnership property.

         On October 14, 1987, Decedent and his son amended their partnership agreement by executing an Amended Partnership Agreement for G&G Investment, a West Virginia Partnership ("1987 Partnership Agreement"). The new agreement contained the same terms as the 1985 Partnership Agreement except for the provision relating to the partnership's disposition on the death of one of the partners. This provision was amended to read as follows:

In the event of the death of one of the partners prior to the otherwise termination of the partnership, the deceased partner's interest in the partnership shall be governed by the provisions of a separate contract between all the partners hereto. The heirs, executors, administrators, or legal representatives of a deceased partner shall be bound by that separate contract.

         That same day, Decedent and his son executed a new document - the G&G Investments Purchase and Sale Agreement ("Option Agreement") giving Decedent's son the option to purchase Decedent's undivided one-half interest in the partnership for $50, 000. The exact language is as follows:

I. In the event of the death of [Decedent], [Decedent's son] shall have the option to purchase [Decedent's] interest in the partnership for the amount of Fifty Thousand Dollars ($50, 000.00), by providing the legal representative of the estate of [Decedent] written notice of such election within six (6) months of the date of death of [Decedent].
[Decedent's] estate shall be paid in full the above referenced purchase price within one year after the notice of [Decedent's son's] election to purchase such interest. The above specified purchase price does not necessarily represent the fair market value of [Decedent's] interest in said partnership at the time of the formation of this agreement or in the future, but represents the amount [Decedent] desires [his son] to pay in order to receive full ownership of the partnership and its assets.
II. On [sic] the event of the death of [Decedent's son] his interest in the partnership shall be assumed by his estate according to the terms and conditions set forth in his last will and testament.

         G&G Investments operated under the 1987 Partnership Agreement until Decedent passed away on November 1, 2016, without a will. At the time of his death, the partnership was worth significantly more than the $50, 000 price in the Option Agreement.[1]

         Twenty-one days after Decedent's death, his son notified Mrs. Young, the administratrix of Decedent's estate, of his intent to exercise his option to purchase Decedent's half of G&G Investments. Mrs. Young refused to convey the partnership interest. Decedent's son then filed a Petition for Declaratory Judgment and Associated Relief to compel the conveyance. Mrs. Young filed a counter-claim and cross-claim seeking a declaration of her rights to an elective share of the augmented estate. The parties both filed motions for summary judgment and sought the circuit court's review of whether the Option Agreement was valid and enforceable and how to value Decedent's partnership interest for the purpose of probate and assignment of Mrs. Young's elective share.

          The circuit court determined that the Option Agreement was valid and enforceable because it was incorporated by reference in the 1987 Amended Partnership Agreement and therefore was supported by consideration because that underlying agreement was supported by consideration. Next, the circuit court recognized two competing interests - on the one hand, freedom of contract, and on the other, a statutory scheme aimed at preventing disinheritance of a spouse. As a solution, the circuit court devised a balancing test to determine which interest should prevail, considering whether the consideration was more than a nominal sum, whether there was a legitimate business purpose for the transfer, and whether the agreement was in place for a sufficient period of time in order to abate concerns that the transfer was solely designed to defeat the spouse's elective share claim.

         Having already determined that the Option Agreement was valid, enforceable, and supported by consideration, the circuit court found that determination of partnership interest at death was a legitimate business purpose, and that the agreement had been in effect for more than thirty years, so there was no evidence that it was designed solely to defeat the spouse's elective share claim. Thus, pursuant to the balancing test created by the circuit court, all factors weighed in favor of Decedent's son's contractual claim to the partnership property over Mrs. Young's elective share.

          On appeal, Mrs. Young contends that the Option Agreement was unsupported by consideration and an attempted testamentary disposition of property, and that the circuit court's balancing test imparted an element of intent to disinherit, when there is no such requirement under the elective share statutes. Additionally, Mrs. Young asserts that "the public policy and purpose of the elective share statute dictates the inclusion of [Decedent's] partnership interest in his probate estate for the purpose of elective share just as if it were being considered a part of his marital estate for equitable distribution."

         II. STANDARD OF REVIEW

         The issues before us arise from a grant of summary judgment. It is well established that "[a] circuit court's entry of summary judgment is reviewed de nova."[2]

         III. ANALYSIS

         Mrs. Young raises two interrelated arguments on appeal. First, she argues that the Option Agreement is unenforceable because it lacks consideration and is an attempted testamentary disposition that is not compliant with the Statute of Wills.[3]Second, she argues that even if the Option Agreement is enforceable, the purchase price is not binding on a surviving spouse electing against her intestate share because the public policy and purpose of the elective share statute requires that the actual value of the partnership be included in the estate for calculation of her elective share. Decedent's son counters that the Option Agreement is valid and specifically enforceable because his contractual right to purchase Decedent's partnership interest is superior to Mrs. Young's claim as a surviving spouse.

         We preface our analysis with a discussion of the elective share statutory scheme[4] in order to consider Mrs. Young's challenges to the validity and enforceability of the Option Agreement in context. The elective share statute, which codifies rights of a surviving spouse against disinheritance, provides:

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 [as determined by the statutory schedule].[5]

         The statutory schedule provides that after fifteen years of marriage, a surviving spouse is entitled to fifty percent of the "augmented estate."[6] The "augmented estate" is composed of the probate estate as well as the "reclaimable estate, " both of which are used to value the spouse's elective share.[7]The "reclaimable estate" returns to the estate, for purposes of calculation of the elective share, certain nonprobate assets the now-decedent spouse transferred to persons other than his spouse or held with persons other than his spouse with right of survivorship.[8]

         According to the statute, Mrs. Young is entitled to elect against her intestate share and receive fifty percent of the augmented estate based on the length of her marriage to Decedent. The critical inquiry before us is whether the partnership property at issue in the Option Agreement should be included in the augmented estate. In order to resolve this question, we must decide whether the Option Agreement included the requisite consideration or if it merely was an instrument through which assets were transferred at death outside of the probate process. Finally, we must weigh the competing public policies at issue. With this context in mind, we turn to an analysis of the validity of the Option Agreement.

          A. Failure of Consideration

         We have acknowledged "[t]hat consideration is an essential element of, and is necessary to the enforceability or validity of a contract is so well established that citation of authority therefor is unnecessary."[9] Further, "[n]o promise is good in law unless there is a legal consideration in return for it."[10] And, "where there is no benefit moving to the promisor or damage or injury to the promisee, [the contract] is void."[11]Consideration is a broad term; we have stated that "[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."[12]

         Decedent's son argues that because the Option Agreement is incorporated by reference into the 1987 Partnership Agreement, it need not be supported by separate consideration because it benefits from the consideration given in the 1987 Partnership Agreement. Decedent's son further argues that the Option Agreement on its face states that the agreement was made "[i]n consideration of the promises, and the mutual covenants herein contained, and other good and valuable consideration."

         Indeed, we have held that so long as a multi-clause contract overall is supported by consideration, separate consideration is not required for each promise contained within it.[13] Decedent's son's contention on this point is inapplicable, however, when one considers that the 1987 Partnership Agreement contains the exact same terms of the 1985 Partnership Agreement, except for the provision referring to a "separate contract" governing disposition of a deceased partner's interest (Buy-Sell Provision). By its terms, the 1987 Amended Partnership Agreement is a single modification of the 1985 Partnership Agreement for the sole purpose of including the Buy-Sell Provision.

         Under these circumstances, the Option Agreement requires new consideration. We have determined that "not only must such modification or alterations be by mutual agreement but must be based upon a valid consideration, and the original consideration . . . cannot be used as consideration for any agreement of modification or alteration in connection therewith."[14] Similarly, we have held that "[c]onsideration is an essential element of a valid contract, and it is axiomatic that past consideration already given for a previous agreement cannot constitute valid consideration for a new agreement."[15] Thus, even if we were to find that the terms of the Option Agreement were incorporated by reference, the terms of the 1987 Partnership Agreement cannot provide consideration for the Buy-Sell Provision because it remained unchanged and already bound the parties. The Buy-Sell Provision is a modification of the original 1985 Partnership Agreement and requires new consideration.

         In light of that finding, we turn to whether, standing alone, the promises contained in the Option Agreement are supported by consideration. The Option Agreement is prefaced with the language "[i]n consideration of the promises, and the mutual covenants herein contained, and other good and valuable consideration, it is hereby agreed . . . ." Initially, we dispose of Decedent's son's argument that this bare recital of consideration alone somehow creates consideration. While a recital of consideration containing a sum paid or detriment undertaken in return for the promises made in the agreement may be sufficient consideration, the recital here contains no such statement.[16]Decedent's son has neither argued nor demonstrated that the "good and valuable consideration" recited references that he paid any sum in return for the option, undertook additional duties in the partnership, bore more losses, or any other manifestation of consideration that may not be apparent from the four corners of the document. Accordingly, we limit our review of applicable consideration to the language in the Option Agreement relating to the promises and mutual covenants made.

         The Option Agreement is, in contractual terms, a promise in return for a promise. Decedent promises that on his death, his son has the option to purchase his interest in the partnership for $50, 000. Decedent's promise further acknowledges that $50, 000 is not representative of the actual fair market value at the time of executing the agreement or in the future, but is the amount he desired his son to pay for full ownership. His son, in turn, promises that upon his death, his interest in the partnership is assumed by his estate according to his will.

         In theory, because this agreement purports to be a bilateral agreement, the consideration given by Decedent's son could be either (1) realization of Decedent's desire to have his son take over the business; or (2) his return promise to allow his estate to assume his partnership interest on his death according to his will. As discussed below, both of these fail because they are legally insufficient consideration.

          With respect to Decedent's promise, the language of the Option Agreement makes it clear that Decedent was motivated to enter into the agreement in order to provide a means for his son to assume his partnership interest on his death at a certain price, if his son so elected, regardless of its actual value. Other jurisdictions have concluded that the motives behind a party's decision to enter into a contract are insufficient to enforce it in the absence of actual consideration. Citing the ...


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