Answer and Grounds of Defense filed August 23, 1995

TABLE OF CONTENTS

Appendix Page

Motion for Judgment filed July 17, 1995 • . • . . . . . . . . . . . . . . . . . . 1

Answer and Grounds of Defense filed August 23, 1995 . . . . . . . . . . . 7

Defendant's Response to Plaintifrs First Request for Admissions to Defendant filed February 26, 1996 . . • • . • . . . . . • . . . • . . . . . • . . . • . . . . . . 10

Motion for Summary Judgment filed March 7, 1996 . . . . . . . . . . . . 16

Brief in Support of Plaintifrs Motion for Summary Judgment filed March 7, 1996 . . . . . . . . . . . . . . . . 17

Memorandum in Support of Defendant's Opposition to Plaintifrs Motion for Summary Judgment filed April 5, 1996 . . . . . . . . . . . . . . . . . . . . 23

Transcript of Proceedings before the Honorable Gerald Bruce Lee on April 12, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Order entered April 12, 1996 . . . . . . . . . . . . . . • . . . . . . . . . . . . . . 60

Defendant's Motion to Dismiss hand delivered May 22, 1996; filed May 24, 1996 . . . . • • . . . . . . . . . . . . . . . . . . 61

Transcript of Proceedings before the Honorable Arthur B. Vieregg, Jr. on May 22, 1996 . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Testimony of Nina Rosen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Testimony of William Smith . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

Letter Opinion dated May 24, 1996 ........................ 180

Order entered May 31, 1996 .................•........... 182

Motion to Vacate Order and to Permit Amendment of Plaintiffs Pleadings to Conform to the Evidence filed May 31, 1996 ............................ 185

Memorandum of Points and Authorities in Opposition to Plaintiffs Motion to Vacate Order and to Permit Amendment of Plaintiffs Pleadings to Conform to the Evidence filed June 5, 1996 .................................... 188

Letter Opinion dated June 11, 1996 ........................ 193

Order entered June 11, 1996 ...•......................... 195

Assignments of Error ................•................. 196

~ Ql) - ~ .....; "" "'; 0

CQ ..... ~ ~ ~ ~ .... !Oo -..... :00 "'I c, :C~QQN

0 ::;):::>"'"' c:c: :: :. ~

~ :c .... :s c ~8':~ <: 5 ... ~ ~ -:::: ~ i ~ -.... ~ ~ c:::. ~ ~ a r;; ~

..... )o,l 0 :c - ~ 0:::.. ~ ....; CQ ~ £: ~ <: :c ~

:.o..J E~ ~ ..., ~

... ""' -,: """ :::

I ,, I I

:.· r- • r .-I'll\

r. ·- .: ; ,...., ... , .... ,_

V I R G I N I A: L,:. :~ J.- i. ~.~.::.

r-' I"' r 7 I.. -;. ,. I

IN THE CIRCUIT COURT FOR THE COUNTY OF .. FAIRFAX·· ·· .. · 0

RYAN E. SMITH by her next friend* and parent, NINA ROSEN * 6530 Heather Brook Court * McLean, VA 22101 *

* Plaintiff

J:J~-r ·J T. F~:Y CLE:::\-c::~,·.-::,;:·; (~C.~-··:·~

r· · .. ~·. _· .. ·' ' . .. - • .. · ......... _ ... '

v.

* * * * * *

At Law No.:\~~~]~ WILLIAM C. SMITH 2891 Vinings Way Atlanta, GA 30339 *

*

SERVE:

Defendant *

MOTION FOR JUDGMENT

WILLIAM C. SMITH c/o Secretary of the Commonwealth Old Finance Building, Capitol Square Post Office Box 1-B Richmond, Virginia 23201

COMES NOW, the Plaintiff, RYAN E. SMITH, by her next

, friend and parent, NINA ROSEN, by counsel and moves for judgment

J ~I [ ~I

!

against the Defendant, WILLIAM C. SMITH, on the grounds and in the

amount as set forth:

1. RYAN E. SMITH is the minor daughter of NINA ROSEN

the Defendant, WILLIAM C. SMITH and at all times pertinent

resided in Fairfax County, Virginia.

!

and! I i I !

2. On or between September 1, 1984 and September 28, ! I

- ' . • P1 ' ' -- j 1984, the Defendant, WILLIAM C. SMITH, a~st:::-:.Duted to the - _a~nt:J..!!: : I

i cer~ain funds in the approximate amount: of $~6, 855.00 under a ! ~ I

! I I ;

!

I

II l

:j 1

..... ~ ;o """' :. ~ ....

J 0

~ '2: Q ;... Q ~

::.J -e ..... c.., ~~CIO~ 0 :l ~"" N

... :l :.e c:z:: ~ ~ :I ~ ~

... 0 ~ ~ ~U:.,-

<: . ""\,: 8 ~ ~ :ll: ~ ~ ... -~oo::::.. .....

~ ~ ~ ~ ~ - ;: ~ ... :) i; ~ :.., ~ ..... ~ ::Q <: ,:.; <:: <: :r:- -

.:l - :.< :.:.J c "' ;, ~ -- .. -'-J .....

::::

.,

:: :.-1 Uniform Gift to Minors Act Custodial accounc with Mer=~ll Lynch,

! i I

II

I i

I I

I ~~ ~I ..... ~I ~;,

!, ,. : !

Pierce, Fenner, & Smith, Inc. pursuant to former Vi=ginia Code §31-

26 et seq. and now §31-37 as amended. i

Thereafter the Defendant purchased cer~ain zero- i 3 . I

coupon bonds with the said funds for the benefit of Plaintiff. The I I

specific bonds purchased are itemized on Exhibit A which is I incorporated herein by reference. Such zero-coupon bonds w e r e I

i custodial property pursuant to Virginia Code §31-45 and its!

I

predecessor section. I 4. The Defendant and his agent, Merrill Lynch, Pierce, I

Fenner A. Smith, Inc. had a duty as custodian for property of I Plaintiff to keep such property in a manner sufficient to identify 1

it clearly as custodial property of the minor Plaintiff.

5. The Defendant, WILLIAM C. SMITH, had a duty as the

t=ansferor and an adult member of the minor's family, nee to

interfere with the r~ght of the minor Plaintiff in the custodial

par~y.

6. Notwithstanding such duties, the Defendant, WILLIAM

C. SMITH, sold said cus~odial proper~y of t~e minor Plaint~£= being

in the form of valuable zero-coupon bonds on or about February 7,

1994, May 19, 1994, July 21, 1994, Augus~ 8, 1994, August 10, 1994,

Oc-=ober :2, 1994, Oc-=obe!:" :!.9, 1994, and U'anuary 25, !.995 and

dis~=~buted the proceeds ~o ~~e De£endanc, WI~~IAM C. SM!~~, in a

manner insuf::~cienc to :..denci!y the cuscodial :1at::.1re of t!le ;

:;>r:>ceeds.

7. :n :ur~~e!:" ~reac~ of sue~ dut:~es, ~pon :~=o~ac~cn:

2

and belief, t~e Defendant, WIL~IAM C. SMITH, thereaf~er utilized:

said custodial proper~y of the minor Plainciff for his own use and

benefit. I

j

!

8. As a result of such unlawful and willful acts, the ~

Plaintiff has suffered damages including, but not limited to, the

loss of the fair market value of said property in the approximace

amount of $63,375; and has further incurred tax liability and

accounting expenses in the amount of $5,595.00 and an unk.a.,own

amount of tax penalty and future expenses. t

I WHEREFORE, Plaintiff prays that judgment be entered l

against--the Defendant, WILLIAM C. SMITH, in the amount of I

$74,970.00 compensatory damages plus tax and penalties as may be I decermined; and $50,000.00 as and for punitive damages, plus I

I interest, her attorney's fees and costs in t~is behalf expended, i

and such othe~ relief as the Court deems meet. I RYAN ::. SMITH by her next f=iend J

DAV!D ROSENBL~~' ESQUIRE Virginia Bar No. 019974 Counsel for Nina M. Rosen Rosenblum and Rosenblum A ?rofessional Corporac~on

! ?. o. Box sa I, 526 iCing St::-eec, Suite 211 : Alexandr~a, Vi=ginia 22313 ~elephone: 703/684-0060

3

I and parenc NINA ROS~~ 1

By:~ I Counsel

3

~ I • :mil Lvn c:::1

uca reiUiar at Smittl In~ TON 0 .c.

• ..,... ... , :'ZM;M :)...n>-1 ~·" Otll c=d • r·· ' ......... . . ~ ..... 3161 ~Sa~ 9ti5-l7j7 -· Z!·SS6QQC ~: IQI iQD I ~oac211"10H

;~oo T'=G~ se:R lS A.UGl.S a~,6-RG.· ------

•.a..-.!~

ro~

·QUa~' ... Qlo't'~ ~

•l~~~A~ C S~tTH ~~ ~

~YAN e~e S~tTh UG~A VA

2~31 QUESN AHNES ~~ N• ••SH%~GTO~ OC 20037

. :··

-..... '4 ·'-

.200J6

- ----, .. .,_-.,_.__ - PCCI _..._,. • ...a..._.,_........,, I

., .;~-···- .••• :~~o. .... ...... -~- '" ..... ~ ., ..... ~ .. . '" .. ~. ~·~ ....... .

-~~·

mill Lyndl llll l~ r~ SY. N••• ret..er- .... ..Jl'.f':

II'C8 Faluau a SmiUIIac. ~A~HCNGTON e.G. ZOU36 zo 2-o.S'1-7 2~ l. ... COIWWM I"'C 1o.w...- ,. :to.~ 'I'Q ... ~a.· ~. ~ SoiOC •C"OI'

.. ,.,t .-uwtO cfO~

TOUIAC~

""'OI"OUI ,OtCSS.

•• 7

Sla.rr Dt5Cii1Pf ...

Y'%Et..O" 12· so: 1'C .t.$ OP 041'10

0Z.<C)7RG

1t C~AM· C. 5,.,,. ... C/ ,:-

ltV AN eve s~ T1+ uG)I• "•· 2S31 QUe~~ ANNeS ~~ H•

••5HtNG~OH 0~ 20037

IHf. C&ftACIT.u. i . . . ,.,..,JII I

~s

~emu L¥adl llll TH S"r • ~ • .-.

ierc:a F1111ner tJ Snaittalac..

'=""-' ...... ~~·· o-~ aoua SlCUIIIY~

·.CCC I ~~~~ ScRL~ ~es1, QX~!AG

-------·

Y'IE!-0 •S QF

l2• 50% TQ

JA/10

•!t..~.:.A.- ;~,,. .. (.J

~v~~ ~ve ~~cT~ uc~a

.... , -:,,eo ::! • ! c •Ovt • • 5 "' C 1'4 G r ~ ,..,. •eu• •CC:ur•r

4411tHES 1.. ...

:.~ ~00.!7

··"" e, •-::;..• .:c•us.

·I

YA

.... "

2.0U j6

~r I lS7~2

• ·,~,.4S2l ~ l'\94o•Jva~4 I 7 2!'-Z i 37a l!

I ·••~ ;....-.:. T'IIAOIS loa,., o- .cc:n.•r"' .. ILOQ I'Qin\0 ...... ~ MIII'WAC.&IIa. .o-o •I 'l'llf ~• cw...,. ft~a.•r .,., """ ,... «•"'-•• • "G.c .-~ ~ • ""' uc. .. " -CJI ••• •••• ••o .,.-...., •• co~r •COCio. ., •• ._. -·• .... 1111&,: .... --.. .................... .

•..:cO'•-.-. -·•-•-c:.--•oc•• ·~ , • ...._ •• ,_ ...... , u.-..c .... .._ .,,:.••

~QI

a&MC • "''IOO'f" I . 177~

:

" 4C ca- ,_ ,~....,.. ':'Jt.

"'o. ~~~ I"'IC..W:.I(MC .,... ..-cnt SICMl ttiiU~

:..AHGi c. I ... ......,.,.. .. ...a.c • .,JI~

~~.. -I

I EXHIBIT ..

! A-···--..a. ..... -·-·-~ ;~ .. 1Gia- .. Qoe--O.I .. ·~·"' ... .- ...... ~rc~~· ...... , •• , ....

..., ••• ,.0 ,. ••••• •o ..... .,. t•o• -· ,......... ':10 •• ....,._ ·~····· :....•

·---~ •u.w_...,._cg ,.,..---·~---~-·-co.·•• ................ ·-· ... .. •• o- •C.C:Iw.,. ~.-o~•s ca..- ...... _. -•••·-• •••c• -- ·-<"o•• •• • : .. ·•c c;:--·" ,,._. uc--a. . ':':f :-e ....... , ........ o- v i •

· .. ~~.~-

·-·=--= .. .. ~-

-~~LA• ~ S~ITM CJ F ~YA~ E~E S~tTH UGMA V~

Z531 QUEEN ANH&S ~H Na a£SMI~GTCN OC 20037

..f1?:: :=:::.. =-= ..... ...................... ~_,.a.··-~ ..... -· ~. -·-· ··- ... ..,_....,. .. .,. _..... ~ cw.n __ ...,._~ ...... .._....... __ ..a., .. A. ~w..o ... _..,..._ __ _ . ..,~~000~~-· --.. a1'aell- .. m ;nQa ca• a. ..... ~" sniCa ~ COOt~ IMJ~•u.s.,...

llll l, TH ST. H••• •ASI'f.tfotG?OH o.e. Z.OO 36

Tes.!P,..Oh~

202-65+-722.2 -cc~ .. ~'~"'· ... ~,. '* .. &Me l'-. ...... ltM Sloe ... o.

s.u.wt~D .,.,0~

r'W'Qa~ ·IMOI~I ~

lSeJt.lGCOV sec.rr ODOIPUCW.

S£R l.~ ,:;ciiLS OXGQAG-·

Y% Et...:l 1.2. • SO s: YO AS' Ot=' 08..110'

•'~~-· C £~%TH ~ ~ ~VAN eve s~t~~ UG~~· YA

2531 QUEEN AHNES ~H N• •~S~tNGTCH OC 20037

NICI' . ... ,~.~""'"I I : : I .:~l~~l c;oSQl41

~~~·.~· ~!I ~l~!4.1lj7 l.Jed63GDOf

~:C::~~ I .!~J ceo 1

----------------· .::.~ ,. .. ..,E -:."EO 1 ..,.,.. rc -.:,~. 1

~" '!o..• .c:=~~'~' •: :-.;tNt ., .. ov,

• •OCIUS.

SICLIIIrr~

TtG~ S&RL~ ~ee1S OZOlAG

Y'!St.~ l.Z.e~C: TO

•S CF Ot-.1'10 Z/1~.101

• !L..~;~- .: iilll ( T,.. C. .I .;

::-v 4.N ;ve 3JI4 t r,.. UG~A \1.6

•e "1 ~ ~--. c:..:e:~ .a.HHES l...~ . ..., . ••~"'(...,~TON jC. 20037

NIIINHI"' I

304~0 .IIIII&. I . ~sf

,. ....... ~~--

~' ; I ,,.,_ Cl sr.\tt ~.u IIUIIII.Sll I __ ;:~~ ... tr .~-e~.;:

27'72;eO · Jibs! z~-

~

1 ~til-! 2i! ~-,4t6~ Sv ":"~ i : l ~ .. .: i !7 & 21 I .,,...... ~riOO "UAia '4• m o-~~ ~ .. ~~ rOSII"GaU •-oiGit ..wnaaao.. .... .ar~

, ~•• 01 l'OU4I rw~• '' .... ••Oft ... 111"14• • ; -.a- o• ~ ""''IJftftO • IWI Sla&a~IY -<:a. · -· •••• •••• __.,.__, cs• co~ -cOGaG.

~••• ..,,, ...,.cu ... , ._,._,.,._.. ••••• c. •••• •411&.& ...... ...,......_~ ........ coe-r..-.-.,,.

1 1 - t6--..e t.:.,.,. et-.rt 4!1.-.cliiiC ...... •CC~.,..,

5

·6- - ~· ... .,.,.. ... ·- -·~ Wllol .... --WI" ......... .. ~·• - .. ~nao _, • 0 • ••• ~-"o• ....... •o ........ ~·:~• 21w..c- - - .. ...,.. •CT9'-A••- •· ·~·--·c--• .. •&AM--·-::.c --·-... .._, .. ...:.. ... -·y ~- ·-~ ··., •-.c.c..cw•' ••oe•w'~ .:.-.•,..~ ... ••••••o s••c• .-. ·• , ••• ....._-,o- ... c -- ,.. c.~......-" .,oc.a ................ ·-=~• ~~ .,1, -..•to .... , ~ •

= . -·-tn'!ll ~vac::z a:."C8 l-~muu S ·SraJtls lAc.

T I&.f..D. • l%•·30%. lt7. %rU~G"~ . .:..-~-: .. ··. .. . PtlQS~ECTUS EftQ.OSCD

, .. ._.~ •tO~ ~~ ....cc::::uow .,. 01 'fOUC <IIIIS.1.

··wt~ • ro.cvt. ~~' ._. Olo 'ICUI ~

AS 01= 0'5/l.O' ........... -.. •: .. -.. . .. . . -·

•lL~lA• C S~lT" CJ ~ ~YAH eve SWtTW UG~~ VA

ZS31 QUEEN ANNES ~H -· ••SH%~GTO~ QC 20037

··~__,· It

~~~52!1 49•6~Jvv• ._.29'tZ ;. 37 6.22 ~La..,....IOIIttSO..MJ/I:tllflllll••

r .. ~.~u==~~ ~..:=~:.~-=

:lr~---- __ ..... -, -., .._ .,.,_, -•-. ... -•aa• ,..._.. .. ftiC....:IA..,.._._~ I

llll 19 fH ST. N~•• ~AS~t~GTON a.~. Z0036

"f" %£1...0 12 • .ZS%. TQ AS QP Q6~10

aLL~LA• ~ ~~·T~ C/ ~ ~~-~ eve s~rT~ uG~A v• ZS31 aue~H A~NES ~~ H• ••SHXNGTQN ~C 20037

6

~==-= .. --;:.., ................ ~~-· ...... ..__,.._ ..... ro .... -. ~~- • ~-011 ....... ~-· ............. ~ .,....._..,.._~ ---....aa.r6a• .. -...~....:a-ow• ~-... • .._ o,,.-~--~~ __.,....,.. ___ ~·-

---~ .. ~~ ~=oe ma •aM~ ..-..a .. _,~

I ,

!! II I, II '!

i : I

I

II q

!! i! li i! I' ;: li ·I ;; n :; I

'· ii li i: H

-":.

!-·

VIRGINIA:

IN THE CIRCUIT COURT OF FAIRFAX COUNTY

RYAN E. SMITH by her next friend and parent, Nina Rosen

) ) )

Plaintiff

vs.

) ) ) AT LAW NO. 142877 )

WILLIAM C. SMITH ) )

Defendant )

ANSWER AND GROUNDS OF DEFENSE

Comes now, WILLIAM c. SMITH, Defendant herein, by counsel, and

for Answer and Grounds of Defense to the Motion for Judgment filed by

Plaintiff, answers and says:

1. That Defendant admits the allegations contained in

Paragraph One {1), Two {2), Three (3), Four (4), Five (5) and Six (6)

of the Motion for Judgment filed herein.

2. That Defendant denies the allegation contained in Paragraph

Seven that he utilized said custodial property of the minor Plaintiff

for his own use and benefit, and affirmatively states that he has used

the funds for the minor child's private school education and other

expenses, all in accordance with §31-48 through §31-50 of the 1950 Code

of Virginia, as amended, and demands strict proof thereof.

3. That Defendant denies any unlawful and/or willful acts as

7

II

I I I I

II jl ,, 'i II

I! II

,.. .. ~ <t

0 ,... ..J

I

alleged in Paragraph 8, and denies that he caused Plaintiff to incur tax

liability and accounting expenses and/or unknown amount of tax penalty

and future expenses, and demands strict proof thereof.

For further answer, and grounds of defense, Defendant answers

and says as follows:

4. That the Defendant gave the minor Plaintiff certain funds

in the approximate amount of $16,855.00 under a Uniform Gift to Minor

Act Custodial Account with Merrill Lynch, Pierce, Fenner & Smith, Inc.

for the pu:x:~ose of investing said funds the his daughter's future

education.

5. That the Defendant did invest the funds from the Uniform

< Gift to Minor Act by purchasing zero-coupon bonds for the benefit of his )-

~ daughter's future education.

6. That the Defendant sold said zero-coupon bonds on or about

February 7, 1994, May 19, 1994, July 21, 1994, August 8, 1994, August

10, 1994, October 12, 1994, october 19, 1994 and January 25, 1995, and

at all times gave the Plaintiff's mother and step father an accounting

of receipts for the bonds sold and did work with them in computing the

tax liability on said income, which Defendant did pay.

WHEREFORE, Defendant asks this Court to dismiss said the Motion

for Judgment filed herein, and to deny Plaintiff all relief sought and

2

8

:·

grant him his attorney fees and costs incurred in defending said Motion

of Plaintiff.

Respectfully submitted,

~,{;Q,CMht e.s~ ~ WILLIAM C. SMITH

By Counsel

CERTIFICATE

I hereby certify that a true copy of the foregoing Answer and Grounds of Defense was mailed, first class, postage prepaid, this 23rd day of August, 1995, to David Rosenblum, Esquire, Rosenblum and Rosenblum, 526 King Street, suite 211, Alexandria, Virginia 22313 I Counsel for Plaintiff.

3

9

~·

V I R G I N I A:

IN THE CIRCUIT COURT FOR THE COL~TY OF FAIRFAX

RYAN E. SMITH by her next friend* and parent, NINA ROSEN, *

v.

WILLIAM

TO:

c.

* Plaintiff, *

* * At Law No.: L142877 *

SMITH, * *

Defendant. * WILLIAM C. SMITH c/o Betty A. Thompson, Esquire P.O. Box 12807 1800 North Kent Street, Suite 1001

·-Arlington, Virginia 22219-2807

PLAINTIFF'S FIRST REQUEST FOR ADMISSIONS TO DEFENDANT

COMES NOW, the Plaintiff, RYAN E. SMITH by her next

friend and parent, NINA ROSEN, by Counsel, pursuant to Rule 4:11 of

the Rules of Virginia Supreme Court, and request the Defendant to

admit or deny the truth of the following matters. You are hereby

given notice that you have twenty-one (21) days after service of

this request upon you to file a written answer or objection!

I addressed to this matter. You are further advised that under Rule

I 4:12 (c), should you refuse to admit the

~ ~~ forth herein as requested, the Plaintiff ,..,

truth of any matter setl

will apply to the Court ~ I ! a,,

~:; for an Order requiring you to pay the reasonable expenses il

incurred! I i

ti in il

Admit 1 making that proof, including reasonable attorney's fees. !I j: or Deny: .;

!I I' 1. The Bonds listed in Exhibit A were held by William

·! Smith, as custodian for Ryan Smith, pursuant to the Uniform Gift to

1

10

Minors Act, Virginia Code §31-26, et. seq. and now §31-37 as

amended.

RESPONSE TO REQUEST NO. 1: Admit

2. Exhibit A accurately reports the date such bonds were

sold and the amount of proceeds resulting from such sale.


3. All of the proceeds from the sale of the Bonds, as

listed on Exhibit A, were deposited into William C. Smith and Dana

Davis Srn!th' s personal checking Account #8819379564 with Trust

Company Bank, except for Bond #894643VV4.


4. Between February 10, 1994 and the present, you

deposited $58,093.03 of proceeds from the sale of the Bonds on

Exhibit A into the personal check account of William C. Smith and

Dana Davis Smith, Account #8819379564.


~ !!· 5. The proceeds from the sale of Bond #894643VV4 of l '0 I I a- ·I $11, 282 was paid by you as part of collateral forfeited for a loan!

.,_ il with the Coastal Bank of Georgia. I II !I I I· RESPONSE TO REQUEST NO. 5: Admit I ·I ! l,

l! ;i :, 'I ;j •i

2

II

II

6. The loan for which the Bond #894643VV4 was used as

part collateral to Coastal Bank of Georgia, was a working capital

loan to a partnership which owned and operated a restaurant in

Jekyl Island.


7. William C. Smith was a limited partner in the

partnership which owned and operated the restaurant described in

Request No. 6.


8. Ryan Smith had no ownership or investment interest in

the partnership described in Request No. 6.


9. William C. Smith has utilized the proceeds of the

sale of the Bonds listed on Exhibit A for his own use and benefit.

RESPONSE TO REQUEST NO. 9: Deny

10. Exhibit B is a true copy of the original Property

~ i! Settlement Agreement governing the child support obligations of j

~ :; William C. Smith, including medical expenses, insurance, expenses !

"",: for private pre-school, private elementary school, private high I :i I !i school and "higher education beyond secondary schooling." I


3

•I

I

:.· 11. Pursuant to the terms of the Property Settlement

Agreement, and upon his approval of such school, William Smith was

personally obligated to provide tuition for Ryan Smith to attend

the Langley School in McLean.

RESPONSE TO REQUEST NO. 11:

DAVID ROSENBLUM, ESQUIRE Virginia Bar No. 019974 Counsel for Plaintiff Rosenblum and Rosenblum A Professional Corporation Post Office Box 58 526 King Street, Suite 211 Alexandria, Virginia 22313 Telephone: 703/684-0060

Admit

1.3

RYAN E. SMITH by her next friend and parent, NINA ROSEN,

By:~~ .. Counsel

4

. -,. EXHIBIT A

Bond Sold Received Deposited

894643XB6 2/04/94 $3,729.81 2/10/94

894643W4 5/19/94 11,282.00 N/A

894643VK8 7/14/94 6,679.51 7/19/94

894643VM4 8/08/94 6,257.63 8/16/94

894643VR3 8/09/94 13,323.55 8/16/95

894643VP7 10/18/94 5,720.03 11/03/94

894643VT9 12/05/94 12,146.55 12/19/94

894643VXO 1/25/95 10,235.95 1/31/95

:! '!

5

i I

I I i

!I :I :i il il !I

'. ·•

COMMONWEALTH OF VIRGINIA to-wit:

COUNTY OF ARLINGTON

This day personally appeared before me, the undersigned Notary 1

Public in and for the State and County aforesaid, WILLIAM C. SMITH, who, ' after being duly sworn, deposes and says that the foregoing Answers to Plaintiff • s First Request for Admissions to Defendant are true and correct to the best of his knowledge and belief.

Subscribed and sworn to before me this 26th day of

My term of office expires: September 30, 1999

CERTIFICATE

I hereby certify that a true copy of the foregoing Answers to Plaintiff's First Request for Admissions to Defendant was mailed, postage prepaid, this 26th day of February, 1996, to David Rosenblum, Esquire, Counsel for Plaintiff, 526 King Street, Suite 211, Post Office Box 58 I Alexandria, Virginia 22313 .. --...()_' r

. r "' I /r / ---T" ·~: \. \\\ ~ . _)~J._i ,' \ ''--·· .. .., ........ . . --·--

'-BETTY' A. "THOMPSON

6

,, I (

••

V I R G I N I A:

IN THE CIRCUIT COURT FOR THE COUNTY OF FAIRFAX


Plaintiff,

v.

W!1LIAM C. SMITH,

Defendant.

* * * * * * *

*

At Law No.: Ll42877

MOTION FOR SUMMARY JUDGMENT

·-COMES NOW, the Plaintiff, RYAN E. SMITH, by her next

friend and parent, NINA ROSEN, by counsel, and moves this Court for

summary judgment, pursuant to Rule 3:18 because no material fact is

genuinely in dispute and Plaintiff is entitled to judgment as a , I

matter of substantive law.

DAVID ROSENBLUM, ESQUIRE Virginia Bar No. 019974 Counsel for Plaintiff Rosenblum and Rosenblum A Professional Corporation Post Offioe Box 58 526 King Street, Suite 211 Alexandria, Virginia 22313 Telephone: 703/684·0060

RYAN E. SMITH by her next friend and parent, NINA ROSEN

By~ ~C-o-un--se~l~--------------------

1

16

_I

il i

V I R G I N I A:



v.

WILLIAM c.

* Plaintiff, *

* * At Law No.: Ll42877 *

SMITH, * *

Defendant. *

BRIEF IN SUPPORT OF PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

While summary judgment rules and the discovery rules are

not intended to substitute a new method for trial when an issue of

fact exists, these rules "were adopted to allow trial courts to

bring litigation to an end at an early stage when it clearly

appeared that one of the parties was entitled to a judgment in the

case as made out by the pleadings and the admissions of the

parties." Kasco Mills. Inc. v. Ferebee, 197 Va. 589, 593, 90

S.E.2d 866, 870 (1956). This is such a case.

The Complaint charges and Defendant, William Smith, has

admitted (See Exhibit 1) that he purchased and transferred to the

o Plaintiff 1 his daughter I under the Uniform Gift to Minor Act ~!I "" q :'.! q (Virginia Code §31-26, et seq. and now §31-37) certain zero coupon ~:

[i I bonds; and held them in a custodial account for her; that he sold

all of these bonds (with the excepti.on c= one bend) between

February 10, 1994 and the present; that he deposited the pr~ceeds

of the sale of the bonds in the amount of $58,093.03, into his

1

:,·

personal checking account held jointly with his current wife, Dana

Davis Smith; that the proceeds of the one "unsold" bond in the ~ I

amount of $11,282 was paid by him as part of collateral forfeited 1

for a loan with the Coastal Bank of Georgia; that the loan was for I

a limited partnership operating a restaurant (where William Smith I 1 was a limited partner) in which the minor had no ownership or ·

investment interest. I !

Thus, the Defendant has been charged by the Bill of j

Complaint for misappropriating the custodial property of Ryan Smith I

to his own use, the sum of $69,375.00. Plaintiff seeks a judgment

in this amount, plus an appropriate punitive award for such

conversion.

The Defendant, while admitting that he sold this

custodial property of Ryan, states, by way of defense, that "he has I used the funds for the minor child's private school education and

other expenses, all in accordance with §31-48 through §31-50 of the

1950 Code of Virginia."

Defense, paragraph 2.)

{Defendant's Answer and Grounds of

But, such a defense is defective both factually and

I legally. Factually, it is obvious that not all of the proceeds

!I ., :I

'i i• ·i

;I L

:I il '! .; !

were used for the private school expenses as claimed. Indeed,

there is no dispute that one bond later sold for $11,282, was held

for collateral and directly forfeited to the Georgia Bank on a

partnership loan in whic~ the minor had no investme~t interest.

When the Defendant transferred the original property i~

1984 to Ryan, under the then Uniform Gift to Mi~or Act (§31-26)

2

1.8

;I d d ;1 (now amen e as Virginia Uniform Transfer to Minor Act §31-37),

I such transfer was "irrevocable and the custodial property is

indefeasibly vested in the minor." Va. Code §31-4fB.

As a result of the transfer naming himself as custodian,

Mr. Smith became a fiduciary with regard to the custodial accounts.

§31-48.

His use and appropriation of the minor's custodial l

property as collateral, which was later forfeited to pay off a I

!I

I I I

!I q

personal business loan, can only be characterized as a flagrant

breach of his fiduciary duties. Metro Trust Co. v. Northwestern

Sav. & Loan, 654 S.W.2d 631, 634 {Mo.App. 1983). Were the matter

to go to trial, Plaintiff could show that Defendant Smith expressly

directed the Bank to sell the minor's custodial bond and apply the

proceeds to his partnership note.

The balance of the custodial funds {$58, 093.03) were

deposited into his personal checking account. This too violates

the express fiduciary obligation under the Virginia Code.

"A custodian at all times shall keep custodial property separate and distinct from all other property in a manner sufficient to identify it clearly as custodial property of the minor." Va. Code §31-480.

We believe a close scrutiny of the checks drawn from this

:1. .1 joint checking account ;J ,,

(William Smith and his current wife) will

reveal that little, if any, of the funds were actually sp~nl on ;i I

:I Ryan's school tuition or child support, but rather for Defer:dant' s ' :: ......

·i ar:.a u:. s ll

wife's personal use and benefit.

=, But for purposes of arguing this summary judgment motion,

3

:,·

Plaintiff will assume that all of the Fifty Eight Thousand Dollars

deposited into his checking account was used to pay for or to .

reimburse him for private school tuition or child support. i I

Is this an authorized use of the custodial property ;

irrevocably transferred and indefeasibly vested as the property of I I

the minor? :

"Despite [broad language in the earlier statute-Uniform Gift to Minor Act UGMA], courts which have considered the issue have unanimously held that a custodian of a UGMA account may not use funds in the account to pay or reimburse herself either for expenditures which she is legally obligated to make from her own funds for the benefit of the minor who is the beneficiary of the custodial account. 11 Cohen v. Cohen, 609 A. 2d 57, 59 (N.J. Super. A.D. 1992).

See e.q. Newman v·. Newman, 123 Cal. App. 3d'618, 176 Cal.

Rptr. ~(1981) (A father holding property of his minor children

as custodian under

property to satisfy

the UGMA could not use the proceeds of the I

a court order for support); In Re Marriaae of i I I

Wolfert, 42 Colo. App. 433, 598 P.2d 524 (1979) (where the partners 1

I

I 1 are financially able to support their children, 11 the court may i 1t

II order that such gifts [UGMA funds] not be used to reduce the legal

11 obligation of support 11

) ; Weisbaum v. Weisbaum, 2 Conn. App. 270,

il ;! 477 A.2d 690 (1984) (The UGMA' s purpose is not to relieve a d i! ,j

parent's primary duty of support); Gold v. Gold, 96 Misc. 2d 481, I

i : 483, 409 N.Y.S.2d 114, 116 (Sup.Ct. 1978) (A mother/custodian is

., "barred from using the children's funds for their support, since by ';

reducing her child ca~e obligations, she would receive an indirect

financial advantage."); Sutliff v. Sutliff, 339 P.Super. 523, 537-

4

I

;i ,:,· 11 38, 489 A. 2d 764, 771 (1985) aff' d, 515 Pa. 393, 528 A. 2d 1318

(1987) (Because the burden of supporting minor children must be

borne by their parents, "a parent who is able to support his

children may not use custodial funds to discharge his support

obligation ... ");Erdmann v. Erdmann, 67 Wis. 2d 116, 226 N.W.2d

439 (197Si (The funds created for the benefit of the children could 1

be used by the custodian for the children's support and

I not

maintenance.) I

This unanimous construction of the UGMA has prevailed i "despite the broad language of the statute purporting to confer

wide discretion on the custodian." Cohen, sucra at 60.

Although this "broad language 11 has been carried over into

the new statute, more importantly, a new paragraph was added, which

expressly codified that any such payment from the custodial account

is "in addition to, not in substitution for, and does not affect

any obligation of a person to support the minor." Va. Code §31-

1 Virginia Code §31-50 provides: Ose of Custodial Property.-- A custodian may deliver or pay to the minor or expend! for the minor's benefit so much of the custodial property as the I custodian considers advisable for the use and benefit of the minor, I without court order and without regard to (i) the duty or ability ; of the custodian personally or of any other person to support the · minor, or ( ii) any other income or property of the minor which may · be applicable or available for that purpose.

On petition of an interes~ed person or the minor if the minor has attained the age of four~een years, the court may order the custodian! to deliver or pay to the minor or expend fer the minor's beneft't so much of the c~stodial property as the court considers adv'sable for the use and benefit of the minor.

Ad livery, payment or expenditure under this section is in addition to, not in substituticn for, and does not affect any obligacion of a person to support ~he minor. (1988, c. 516.)

5

I I

1

.•. As amended, there can be no doubt that the Defendant is

not legally justified in reimbursing himself for his legal support i

obligations from Ryan's custodial property. Nor is there any ; I

doubt, but that the prior legal obligation of William Smith to !

support Ryan included the duty to pay for her private schooling

under pa:t:agraphs 18 of the Property Settlement Agreement. See

Request for Admission #10 and 11, and Exhibit B attached thereto.

CONCLUSION

Plaintiff argues that Defendant's deposit of the proceeds

of the sale of Ryan's custodial property (the zero-coupon bonds)

into his. personal checking account, together with the forfeiture of

over $11,000 of another such bond, constitutes a breach of his

fiduciary duty and entitles Plaintiff to a judgment in the amount

so lost.

Because there are no material facts genuinely in dispute,

Plaintiff is entitled to judgment for compensatory losses in the : j

amount of $69,375, as a matter of law. The Court should also find j

that the Defendant has acted in bad faith, and has intentionally ! breached his fiduciary duties so as to warrant a claim for punitive

damages at least sufficient to reimburse the minor for her legal

expenses on this behalf incur=ed.

RYAN E. SMITH by he~ next friend , and parent, NINA ROSEN

!ly:~ Counsel

6

~·

VIRGINIA:



Plaintiff,

vs.

WILLIAM C. SMITH

) ) ) ) ) ) ) ) )

__________ D:=e~f~e~n~d~a~n~t~·----------------->

AT LAW NO. 142877

MEMORANDUM IN SUPPORT OF DEFENDANT'S OPPOSITION TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

Summary judgment shall not be granted where a genuine issue of a

~ material fact·exists. Rules of the Supreme Ct. of Va. 3:18. In deciding

a motion for summary judgment, a Court must look at the facts in the

light most favorable to the nonmoving party.

~ ...

See, Costner v. Lackey, 223

va: 377 (1982) i Carson ex. rel. Meredith v. LeBlanc, 245 Va. 135 (1993) . < , Because a genuine issue of both a material fact as well as a question of

- law exists, Plaintiff's Motion for Summary Judgment should be denied.

On September 29, 1983, Defendant and Nina Rosen entered into a

~ Prope~ty Settlement Agreement (PSA) {a copy of which is attached hereto

as Exhibit A) wherein Defendant agreed to pay all of Ryan's educational

expenses up to and including college and graduate school, subject to his

approval of a private school. 1 (PSA para. 18). Defendant also agreed to

pay all medical expenses including dental, orthodontic, and psychiatric

care. (PSA para. 16). Finally, he agreed to pay child support ~n the

1t-lhile Defendant has faithfully paid Ryan's educational expenses, Ns. Rosen breached the PSA by failing to disc~ss her choice of private schooling with Defendant. To date, Defendant has not chosen to raise this issue as that would only increase tension. In effec:, Ms. Rosen single-handedly makes all educational decisions, and, regardless of the cost, Defendant "foots" the bil::!...

amount of $1,000 per month to increase at the rate of 100 percent of the

increase in the consumer price index per annum. {PSA para. 1) .

Despite the fact that Defendant has suffered a substantial

deterioration in financial position since 1983 when he signed the PSA, he

has not breached the PSA. 2 He has paid Ryan's tuition bills, which have

totalled approximately $77,000 since she started school. He has

willingly paid medical, psychiatric and dental costs totalling $4,163

since February, 1994. Finally, he has faithfully paid child support

since 1983. Currently, child support payments are $1,585 per month.

In 1984, to ensure funds would be available for Ryan's educational

and related ~~penses, Defendant invested approximately $16,855 in zero

.,.; coupon bonds under the Uniform Gift to Minors Act {UGMA) {§31-26, et.

~ seq., now amended as Uniform Transfer to Minors Act §31-37, et. seq.

§ {UTMA)). Defendant was not under any contractual obligation under the :-

< PSA to purchase such bonds. Defendant voluntarily did so for the sole )o

... purpose of ensuring the availability of funds for Ryan's education, -

health care and related expenses.

Ten years later, in February, 1994, Defendant began cashing in such .. .. - bonds to pay the exorbitant tuition at Langley School and related

expenses. The proceeds from the bonds totalled $69,375. Out of those

proceeds, he has paid approximately $27,913.97 toward Ryan's educational

and related expenses at Langley School. The remaining proceeds will be

used for Ryan's education and related expenses. As she is only thirteen

::since 1983, when Defendant entered ir.to the PSA '.Hi tl: Ms. Rosen, his situation has changed drastically. He has remarried and no'.N has four (4) children with his present wife. All four (4} children attend public school. He has switched jobs and his current salary is cc~siderably less than his salary in 1983.

2

.:.· (13) years old and educational expenses have already totalled

approximately $77,000, it is reasonable to assume that Ryan's educational

expenses, including college and graduate school, will total much more

than the proceeds of the bonds.

Despite Defendant's excessive contributions toward Ryan's upbringing

and education, Plaintiff brings this action against him to recover

$69,375. As stated, this is money that already has been or will be

expended for Ryan's educational and related expenses. Plaintiff claims

that Defendant breached his fiduciary duty as custodian by depositing the ..

proceeds of funds into his personal account. Whether Defendant has

appropriated ~Fe minor child's funds by merely placing the bond proceeds

- in his account is a question of fact to be determined inasmuch as .... . Defendant contends he will more than expend the amount deposited for the

: benefit of his minor child. !""

~ Pursuant to §31-50, Defendant expended approximately $27,913.97 of

- the custodial property for the minor child's education at Langley School.

_ Since February, 1994, Defendant also spent $4,163 on the minor child's

~ medical expenses. The remaining $3 7, 298.03 will be also be used for

- future educational, medical and related expenses. Contrary to

Plaintiff's claim, Defendant has not used funds from the custodial

account to offset his primary obligation for child support. Instead, he

has expended funds for the use and benefit of Ryan's other needs.

Plaintiff cites case law from foreign jurisdictions which have held

that UTM.i; funds cannot be used to offset primary support. Plaintiff

c~tes no case law which holds that UT~i; funds cannot be used to def~ay

the minor child's educational and related expenses. Plaintiff cites no

3

"> , .. ... j

Virginia case on point. .. ,.

This case is distinguishable from those cited by Plaintiff. In this

case, Defendant has not used the proceeds from the UTMA account to offset

primary support, but to~ Ryan's educational, medical, psychiatric, and

other expenses. As Plaintiff admits, the Virginia UTMA grants custodians

broad discretion regarding custodial property. Fu~ther, Virginia Code

§31-50 expressly allows custodians to use custodial property in any

manner which will benefit the minor. Certainly, education and a healthy

~ mind and body benefit the minor.

Further, the addition of the final paragraph of Va. Code §31-50

i raises a ques_tj.on of law as to the extent of a custodian's authority to <

~ use custodial property for the use and benefit of the minor child. i ~ Pursuant to Virginia Code §31-50:

~

9

> <

A custodian may ... expend for the minor's benefit so much of the custodial property as the custodian considers advisable for the use and benefit of the minor without court order and without regard to (i) the duty or ability of the custodian personally ... to support the minor ...

A delivery, payment or expenditure under this section is in addition to, not in substitution for, and does not affect any obligation of a person to support the minor.

- No Virginia authority can be found interpreting this provision and its

apparent ambiguity. If the phrase "obligation of a person to support the

minor" in the final paragraph is interpreted broadly (e.g., includes

educational and medical expenses as well as primary support}, as

Plaintiff suggests, then that phrase directly conflicts with the language

of the first paragraph. The legislature added the final paragraph and

did not elimi~ate or amend the language of the first paragraph. The

entire statute must be read as a whole. If read as a whole, Defendant

4

argues the term "support" in paragraph 3 must refer to the primary duty

of a parent to support a minor child. 3 No Virginia authority can be

found interpreting or construing the language of §31-50 and the meaning

to be given to the final paragraph added in 1988. The 1988 amendment is

best interpreted to mean that while the custodian has the broad authority

as provided in the first paragraph of §31-50 to make expenditures for the

benefit of a child, this in no way relieves a custodian of any obligation

that custodian may have to support a child. The proper interpretation of

. Va. Code §31-50 raises a question of law for this Court.

Finally, Plaintiff is not entitled to attorney's fees as a claim for

attorney's fee~ is not expressly authorized by the UTMA. Defendant also <

- should not be punished where his sole purpose for purchasing zero coupon

bonds pursuant to UTMA was to further ensure the availability of funds

~ for future obligations and for Ryan's benefit under the PSA. To date, he

~ has fulfilled each and every obligation.

- CONCLUSION

Summary judgment should not be granted where a genuine issue of

- material fact and/or of law exists. Plaintiff claims Defendant violated

UT~A by depositing the proceeds from the custodial property into his

personal account. Defendant admits that the proceeds from the sale of

the zero coupon bonds were deposited into his personal account, but such

funds were used solely and will continue to be used to pay Ryan's

3Plainciff refers this Court to several cases from foreign jurisdictions which seem to interpret "support .. as primary support. It is unclear whether any of the jurisdictions cited, and on which Plaintiff relies to explain away the first paragraph which remains in § 31- 50, have adopted language similar to Virginia's 1988 amendment, which adds the final paragraph to Va. Code §31-50.

5

.. :.-

funds were used solely and will continue to be used to pay Ryan's

educational, medical and related expenses. Because factual disputes

exist regarding the purposes for which the funds have been and will be

used, and a legal dispute arises as to whether such purposes are proper

under the UTMA, a genuine issue as to a material fact as well as question

of law exists and, therefore, summary judgment should be denied.

tJJ fJJ ~\AA e .. sA'\A-~~ ~ BErTY A. THOMPSON, LTD.

~! < i -·--.. ej :- . : ,

~I : ~T' A. T ~~SB Number 008127 g Counsel for Defendant ~ 1800 North Kent Street -: Suite 1001 > Post Office Box 12807 1-

- Arlington, Virginia 22209 - Telephone: (703) 522-8100

:.

William C. Smith By Counsel

CERTIFICATE OF SERVICE

I hereby certify that a true copy of Plaintiff's Motion for Summary

Judgment was hand-delivered on April 5, 1996, to David Rosenblum, Counsel

for Plaintiff, Rosenblum and Rosenblum, King Street,

Suite 211, Alexandria, Virginia

6

1

1 V I R G I N I A

2 IN THE CIRCUIT COURT OF FAIRFAX COUNTY

3 - - - - X

4 RYAN E. SMITH, et al.,

5 Plaintiff,

6 -vs- AT LAW NO. 142877

7 WILLIAM C. SMITH,

8 Defendant.

9 - - - - - - - X

10 Circuit Courtroom No. 4D Fairfax County Judicial Center

11 Fairfax, Virginia

12 Friday, April 12, 1996

13 The above-entitled matter came on for

14 hearing before THE HONORABLE GERALD BRUCE LEE, Judge,

15 in and for the Circuit Court of Fairfax County,

16 Virginia, commencing at 12:07 o'clock p.m.

17 APPEARANCES:

18 On Behalf of the Plaintiff:

19 DAVID ROSENBLUM, ESQUIRE

20 On Behalf of the Defendant:

21 BETTY A. THOMPSON, ESQUIRE

22 - - -

23

CASAMO & ASSOCIATES C~lpeper (540) 825-7482 Alexandria (703: 7€5-9257

23

2

2 {Whereupon, the Court Reporter was sworn by

3 the Court.

4 MR. ROSENBLUM: Good afternoon, Your Honor.

5 THE COURT: Good afternoon.

6 MR. ROSENBLUM: Your Honor, I have filed my

7 brief. And essentially what we have here is the

8 father had, at the time of separation, entered into a

9 Property Settlement Agreement whereby it required him

10 to pay certain support and alimony, including

11 educational expenses and the like.

12 Thereafter, he, on his own, not required by

13 the agreement, purchased six-- he bought $16,000 at

14 that time worth of zero coupon bonds and put it in a

15 C/F, a custodial account, under the Uniform Gifts to

16 Minors Act to my client.

17 He maintained himself as the custodian.

18 And he held these zero coupon bonds for over ten years

19 and he transferred them. They were under Virginia

20 law. And thereafter, he started cashing them in.

21 And he cashed all of them in and put it

22 into his personal account, his personal checking

23 account. He had remarried. It went into his personal

CASAMO & ASSOCIATES Culpeper (540) 825-7~82 AleYand ..... ia (703) 765-9257 30 - .. ~

3

1 checking account. One bond he didn't. One bond,

2 however, he used as collateral for a personal loan and

3 that was later forfeited.

4 So, all of the money which he cashed in,

5 which is over $69,000, he has used, we contend, for

6 his personal use and benefit. And we come now before

7 you on a Motion for Summary Judgment because there are

8 no material issues of fact that are in dispute.

9 THE COURT: For purposes of this motion, do

10 you want me to assume that all $58,000 were deposited

11 into his checking account and used to pay for and

12 reimbursed him for private school tuition or child

13 support?

14 MR. ROSENBLUM: That's right.

15 I think they've admitted in Request for

16 Admissions that he has deposited it into that. Eleven

17 thousand he has admitted that he has used it for the

18 funds. And their answer, Your Honor, in their

19 response, they admit that they only paid 27,000 for

20 schooling, and the rest is still either in his account

21 or it's been expended theoretically.

22 I'm not asking the court at this point

23 to -- we contest that he has spent it for the use for

CASAMO & ASSOCIATES Culpeper (540} 825-7482 31 Alexandria (703) 765-9257

4 :r·

1 schooling education, but I think for purposes of this

2 motion -- only for the purposes of this motion we

3 would argue that -- assume that he has spent the

4 $27,000 for the educational or all of it for

5 educational.

6 But we think that the law is such that he

7 is not allowed to do that. That as a matter of law,

8 because under the Uniform Gifts to Minors Act, which

9 is now transferred, when he made that transfer, that

10 by statute, that transfer, that property became the

11 property of the daughter. Irrevocably, indefeasibly

12 vested in the daughter. That's the language of the

13 statute.

14 And I have cited some of the cases, and the

15 courts have looked at this and the question has come

16 up, although not in Virginia directly --

17 THE COURT: Well, the cases that you cited,

18 is there one where a party voluntarily created a UGMA

19 account?

20 MR. ROSENBLUM: Sure.

21 THE COURT: And that this issue comes up?

22 Is there one case like that?

23 MR. ROSENBLUM: They all have to be in the

CASAMO & ASSOCIATES c u 1 pep e :r- ( 5 4 0 ) 8 2 5 - 7 4 8 2 J ;~ Alex and r i a ( 7 0 3 ) 7 6 5 - 9 2 :: 7

:,· 5

1 sense that they all voluntarily

2 THE COURT: By that, I mean -- well, some

3 of them were court ordered in the divorce.

4 MR. ROSENBLUM: Yeah, but there are some

5 that are voluntarily.

6 THE COURT: But I guess my question ic :i.n

7 this case it seems that the argument advanced is that

8 the father created the account in order to insure his

9 abili~y to meet his obligations under the agreement.

10 MR. ROSENBLUM: Judge, he could have done

11 that by simply buying zero coupon bonds in his own

12 name.

13 THE COURT: But he wouldn't get the tax

14 benefit, would he?

15 MR. ROSENBLUM: Well, I understand. But

16 the tax benefits notwithstanding, he would still get

17 zero coupon bonds. I mean, they would still create a

18 source of funds if he wanted to. He would just have

19 to pay taxes on it instead of her having to pay taxes

20 on everything over $500 per year, which she did pay.

21 THE COURT: Let me do this because I've

22 read all the briefs and I've read all the cases.

23 MR. ROSENBLUM: Right.

CASAMO & ASSOCIATES Culpeper (540) 825-7482 J,J A2.exand~:.a {703) 765-9257

6

1 THE COURT: There are several things that I

2 would like to just hear your argument on.

3 One is in terms of the depositing of the

4 funds into his personal account --

5 MR. ROSENBLUM: Right.

6 THE COURT: you argue that the statute

7 requires him to maintain a separate and distinct

8 account.

9 Anything further you want to say about

10 that?

11 MR. ROSENBLUM: No. I believe that's

12 clear.

13 THE COURT: All right. What authority does

14 the court have to award punitive damages under these

15 circumstances if the funds are still available to

16 replenish the estate?

17 MR. ROSENBLUM: Judge, I have found no case

18 law in Virginia that says that the breach of fiduciary

19 duty in and of itself or in all cases will warrant a

20 punitive award.

21 Generally speaking, that may be, and I

22 think that frankly there are cases that I have cited

23 that found that -- that have touched on the subject as

CASAMO & ASSOCIATES Culpeper (540) 825-7482 J~ Alexandria (703) 765-9257

7 :.-

1 to whether or not this is such an egregious case or

2 whether it was done with such maliciousness or a

3 conscious disregard for the rights of another's

4 property.

5 And frankly, those cases -- none of the

6 cases that I have cited have held that have held

7 that in their case that it was warranted.

8 I don't mean to suggest that it is required

9 or mandated, but I would suggest that in this case, I

10 would argue, then, under Virginia law that where one

11 treats another's property, would socially disregard

12 the rights of another and their property, that that

13 would warrant in these circumstances an award of

14 attorney's fees or punitive damages, at least to the

15 extent of the attorney's fees in this regard.

16 THE COURT: So, there is no real issue here

17 about his using the funds to pay child support?

18 MR. ROSENBLUM: I would think not. I think

19 that it's clear. And Your Honor, I believe that the

20 law is clear that he's not authorized to use it to

21 reimburse himself for educational expenses.

22 The cases that we have cited and have

23 looked at the Transfer Act, it says that what he is

CASAMO & ASSOCIATES C u 1 pep e r ( 5 4 0 ) 8 :2 5 - 7 4 a 2 J .j A 1 ex and ria ( 7 0 3 ) 7 6 5 - 9 ::. S I

8

1 entitled to -- what that language means is this. If

2 he's not obligated to support the child that first

3 paragraph, I think, I don't need to requote it, but if

4 the court would like for me

5 THE COURT: No, I have it. I mean --

6 MR. ROSENBLUM: That first paragraph says,

7 you know, you can use it without regard to your legal

8 obligation to do so.

9 What that means is that if you're the

10 custodian of the estate, then it doesn't require

11 you can use the funds to pay for college education.

12 It doesn't require that you have a legal duty to

13 support the child. You can do that for the benefit

14 for the benefit of the child.

15 But what that last paragraph means when it

16 was amended in 1988, I think it made clear in what

17 cases it held prior to even the amendment, means that

18 if you have a prior obligation to pay for the

19 schooling and education, then you can't use the

20 child's fund to satisfy your legal obligation.

21 THE COURT: So then what you're saying is

22 that the Uniform Gifts to Minors Act or the -- I think

23 that's the name of it.

CASAMO & ASSOCIATES Culpeper (540) 825-7482 3 .-- A2.exandr:.a (703) 765-9:57

•,:,

9

1 MR. ROSENBLUM: That's right. Or now it's

2 called --

3 THE COURT: The Uniform Gifts to Minors Act

4 is that there is a disincentive to -- on the part of a

5 parent to set up one of these accounts if there is an

6 obligation to pay for college education, as a cushion

7 or as a fund to insure the parent's ability to fund

8 educational expenses in the future.

9 MR. ROSENBLUM: Well, there's not a

10 disincentive to set aside monies for education.

11 THE COURT: No. But my question was very

12 precise.

13 MR. ROSENBLUM: Yes.

14 THE COURT: And that is, the way you are

15 interpreting the Act, that it is not possible for a

16 parent who has a future obligation to pay college

17 tuition, to set aside those funds as they go along, to

18 address them under the Uniform Gifts to Minors Act.

19 MR. ROSENBLUM: Under the Uniform Gifts to

20 Minors Act.

21 I think that's a clear violation of the

22 statute because what you're doing, Your Honor, and the

23 cases are clear, that -- if I may quote one of the

CASAMO & ASSOCIATES CulpepeY (540) 825-7482 37 Alexa~dria (703) 765-?257

10 ••

1 languages of the court -- he can set aside funds.

2 Here he has a -- he has admitted that he

3 has a legal obligation, and he's not using this to pay

4 for college education. He's using it to pay for a

5 current legal obligation, for him to pay for the

6 private schooling, which he obligated himself.

7 THE COURT: But in this case the private

8 schooling is a part of the agreement. You're not

9 sayins_that Virginia law requires parents to pay for

10 private school tuition, are you?

11 MR. ROSENBLUM: No, but to the extent that

~

( 12 there is an agreement incorporated into the divorce

13 decree, then he has a legal obligation, which he has

14 admitted in the Request for Admissions that he has

15 this legal obligation.

16 If I may, I'm not trying to -- I'm not

17 trying to be argumentative.

18 THE COURT: No, you have to argue your

19 case. I'm not trying to dissuade you from arguing it.

20 I'm just trying to raise these concerns that I have

21 about your argument.

22 MR. ROSENBLUM: All right. Let me read to

23 you what I -- and I think the reason is this. The

CASAMO l~SSOCIATES Culpeper (540) 825-7482 Alexand~~a (703) 765-9257

11

1 Uniform Gifts to Minors Act is a very specific

2 requirement. There is nothing in the divorce decree

3 or the agreement that said that he had to do that. I

4 grant that.

5 But once he did it, once he gave the money

6 to her, this court, by saying, well, he's now able to

7 go back and use her money to pay for his legal

8 obligation, the net effect of that is to disregard the

9 clear language of the statute because the statute says

10 it's her money, indefeasibly vested in her.

11 If he had not done or not given her the

12 money at that time, he would be obligated to pay it.

13 THE COURT: And he could have retained the

14 funds. But now he --

15 MR. ROSENBLUM: He could also have bought

16 the zero coupon bonds in his own name to make sure

17 that he would have the funds. He could have promised

18 her, look, I'll have these funds set aside in some

19 source, whatever. But he didn't do that. He chose

20 this mechanism to do that.

21 THE COURT: All right. Tell me which

22 particular case you're relying upon because I have

23 read that Pennsylvania case which --

CASAMO & ASSOCIATES Culpeper (5~0) 825-7482 33 Alexandria (?03) 765-9257

:.- 12

1 MR. ROSENBLUM: The Cohen case.

2 THE COURT: Is that the Erdmann? No.

3 Which one? Wait a minute.

4 MR. ROSENBLUM: Sutliff.

5 THE COURT: Sutliff. But this is not

6 Sutliff. I mean, this is not a situation

7 MR. ROSENBLUM: No. The Cohen case is a

8 good case. Cohen versus Cohen. It's 609 Atlantic 2d.

9 THE COURT: Even on page 58 of that opinion

10 they say that Doctor Cohen and Jessica do not dispute

11 that Doctor Wayne Cohen's right to an allowance in

( 12 that amount for those payments, talking about Campton

13 schools. But that wasn't the issue in that case, was

14 it?

15 MR. ROSENBLUM: No, judge. If you look at

16 that case closely, what she does is this. What

17 happens is that she is paying for the Campton School.

18 But she doesn't have a legal obligation to do that.

19 In other words, if -- put it this way.

20 If the parties had not agreed to him paying

21 for the private education, okay, he doesn't have a

22 legal obligation to pay for her private schooling, all

23 right, because it's not in the agreement and not

CASAMO & ASSOCIATES Culpeper (540) 825-7482 40A:.exandria (703) 763-9257

:,· 13

1 incorporated in the divorce. And he set up this

2 account for her. And then he says, well, you know

3 and the parties say, you know, I think we ought to

4 send her to private school and they say okay.

5 If he spent it for that, for private

6 schooling, then it would be allowable because it's for

7 her benefit.

8 THE COURT: So, then you're saying, then,

9 there is a disincentive for parents to enter into

10 agreements to pay for private school tuition or

11 college tuition where they are not obliged to do so in

12 agreements because if they choose to use the Uniform

13 Gifts to Minors Act, they won't be able to benefit

14 from those funds. Is that what you're telling me?

15 MR. ROSENBLUM: I don't -- no, Your Honor,

16 because this is what happens. I think that the

17 Uniform Gifts to Minors Act is not designed to set up

18 for divorce cases to preserve interest or payments in

19 the future.

20 It is a specific statute that in which you

21 make a transfer, that property becomes the property

22 of the

23 THE COURT: I don't disagree with that part

CASAMOr. ~ ASSOCIATES Culpeper (540) 825-7482"1::£. A:exand:::-ia (703) 763-9257

14

1 of it.

2 MR. ROSENBLUM: And if it has a

3 disincentive, there are ways to work around the

4 disincentive. But what happens is this.

5 You can use it for the benefit of the

6 child. But what you do is when you create a legal

7 he didn't have to create the legal obligation on his

8 own part to pay for private schooling, but he did.

9 And once he did, that becomes his

10 obligation. Not the obligation of the child. He

11 didn't have to give him the 16,000. But once he did,

( 12 it became the property of the child and it can't be

13 used under the statute for his purpose, because what

14 it does is it discharges his obligation. It

15 discharges it's used for his benefit, not simply

16 for the child's.

17 If I may look to the Cohen case, on page

18 59, it says that, so, therefore, despite the little

19 language of the statute, courts which have considered

20 the issue have unanimously held that a custodian of a

21 UGMA account may not use funds in the account to pay

22 or reimburse herself either for expenditures which she

23 makes for her own benefit or for the expenditures

CASAMO & ASSOCIATES Culpeper {540) 825-7482 4.~ Alexa~dria (703) 765-9257

~-15

1 which she is legally obligated to make from her own

2 funds for the benefit of the minor who is the

3 beneficiary of the custodial account.

4 THE COURT: But read on. Those cases are

5 all cases where there were child support obligations,

6 aren't they?

7 MR. ROSENBLUM: No, Your Honor, those

8 aren't.

9 THE COURT: Gold versus Gold barred using

10 the child's funds for their support, thereby reducing

11 their child care obligations.

i \ 12 MR. ROSENBLUM: Your Honor, if you look at

13 those cases, there's not a distinction of legal

14 obligation. Child support in this case is as broad as

15 a legal obligation. I mean, I could enforce -- his

16 failure to pay the private schooling is an enforcement

17 of child support.

18 THE COURT: Okay.

19 MR. ROSENBLUM: Your Honor --

20 THE COURT: Okay. Let me ask you this.

21 Is there any provision of the statute or

22 common law you're relying upon in your request for

23 attorney's fees?

CASAMO & ASSOCIATES Culpeper (540) 825-7482 4J Alexa~dria (703) 765-9:57

16

1 MR. ROSENBLUM: No, Your Honor. Other than

2 that breach of a fiduciary duty may, I think in

3 certain circumstances, be so egregious that we would

4 be entitled to that.

5 THE COURT: So, you're saying to me that

6 your strongest cases are Cohen and Sutliff. I've read

7 the others. I have Erdmann, Sutliff and Metro Trust

8 all right up here. I don't see one that's directly

9 like y~urs.

10 MR. ROSENBLUM: Well, I think, Your Honor,

11 if I may, if I may look through this, I think Weisbaum

12 is

13 THE COURT: I've got Weisbaum right here.

14 That one is where he was paying the mortgage payment,

15 utilities

16 MR. ROSENBLUM: That's correct.

17 THE COURT: phone and all that. That's

18 not this case, is it?

19 He was court ordered to pay that and he

20 used the child's account. Everybody agrees you can't

21 do that.

22 MR. ROSENBLUM: Your Honor, this is but for

23 the fact that the judge hasn't -- there is a court

CASAMO & ASSOCIATES Culpeper (540} 825-7482 4·· Alexandria (703) 763-9257

17

1 order that he is obligated -- there is a divorce

2 decree that is entered that incorporates this

3 obligation to pay educational expenses and the like.

4 So, on that basis that he would be under a

5 court order to pay for this.

6 THE COURT: All right.

7 MR. ROSENBLUM: So, I don't think Weisbaum

8 is distinguishable on that. I think the

9 interpr.etation is that -- in the middle of that page,

10 693, it says the interpretation is unavoidable in

11 light of the fact that the gift is irrevocable and

( 12 gives the children an entity that's a legal

13 entitlement to a gift.

14 I think the next paragraph says, look, the

15 effect of the court order was to permit the defendant

16 to discharge from the custodial funds those other

17 obligations which the court imposed on him.

18 And that case would be no different than

19 this because the court imposed on him by virtue of his

20 agreement and the incorporation in the divorce decree

21 an obligation to pay the primary school.


23 MR. ROSENBLUM: And I don't think that's

CASAMO ~-ASSOCIATES cu:peper (540) 825-7482 ~·~ Alexand~ia (703) 765-9257

18

1 distinguishable. I think it's quite clear.

2 THE COURT: Thank you.

3 MR. ROSENBLUM: Thank you.

4 MS. THOMPSON: May it please the court,

5 Your Honor, I think to accept counsel's argument, you

6 have to accept his interpretation of the statute.

7 And while he puts great emphasis on the

8 last sentence of the amendment, the '88 amendment, he

9 doesn~~ answer the question of if the legislature

10 meant for a custodian to no longer have authority to

11 use funds for the benefit of the child without regard

12 to his duty or ability personally, they would have

13 done something about the first paragraph.

14 He says the way you read the last paragraph

15 is it's support. I read it to mean that

16 notwithstanding, a custodian has the right to use the

17 minor's funds for the use and benefit where he has a

18 duty. Otherwise, the duty that it does not, as a

19 matter of law, relieve him from his, per se, support

20 obligation which is inherent in the right and the duty

21 of a parent to his child. And therefore, because he

22 uses it properly under this first paragraph, he can't

23 say, well, now I don't have a duty to support my

CASAMO & ASSOCIATES Culpeper (540) 825-7482 ~5 Alexandria (703) 765-925~

:r· 19

1 child.

2 But if they meant to change the sense of

3 the first paragraph, the legislature would have done

4 something about it when they added the '88 amendment.

5 You have to read it as a whole.

6 THE COURT: Well, let me ask you this. His

7 argument is that the word support should mean whatever

8 is court ordered. I mean, that's generally his

9 argum~~t. And that where this Property Settlement

10 Agreement has been incorporated into a Final Decree of

11 Divorce it is an order of support.

( 12 Therefore, under his reading of this

13 statute those funds can't be used to pay anything that

14 is in any way related to -- I think it's paragraph 18

15 of the Property Settlement Agreement, dealing with

16 support.

17 MS. THOMPSON: First, Your Honor, as he

18 stated and I will also state, we have found no

19 Virginia cases that have ever interpreted this

20 statute. So, we have at best these cases from other

21 states and every case has a little bit of different

22 facts to it.

23 But the Gold case, which is one of his

CASAMO & ASSOCIATES Cu2.peper (540) 825-7482 47Alexandria (703) 765-9257

20

1 cases, says, however, withdrawal of a child's assets

2 may be permitted where the parent cannot afford a

3 necessity or to fund nonessential items such as

4 private education.

5 And the Sutliff case seems to distinguish

6 between support support and the luxury of private

7 school.

8 So, even though it's a form of support,

9 it's a nonessential one, and the very difference

10 between the fact that every parent has a duty to

11 support his child and the court can't order private

12 school, if you bring that on yourself, this statute

13 gives you the permission to use it for the benefit of

14 the child. It has not been taken out. And his cases

15 don't support his argument.

16 It would be nice if we had some cases. But

17 I think one of the issues of fact in this case,

18 everyone is relying on that agreement, the Property

19 Settlement Agreement, in paragraph 18, I believe it

20 is. That paragraph says he has a duty, but to pay for

21 private education with his approval.

22 Now, that's an issue of fact. I mean, he's

23 asking this court in 30 minutes or less to decide

CASAMO & ASSOCIATES Culpeper (540) 825-7482 ~8 Alexandr~a (703) 765-9257

~· 21

1 summarily and to presume that he didn't use any of the

2 money because he just asked for a judgment for $69,000

3 plus 50,000 punitive, and he said he did it in bad

4 faith and he did it intentionally, aren't those issues

5 of fact?

6 THE COURT: Well, let me ask you this. He

7 says that he's willing to concede, for purposes of

8 this argument, I think it's $27,913, something like

9 that.

10 MS. THOMPSON: No. It's more like 36,000.

11 THE COURT: No. I'm talking about in terms

( 12 of what was paid for school tuition. He agrees to

13 that.

14 If I accept that, couldn't the court reach

15 the issue of Summary Judgment on the issue of school

16 tuition? Couldn't I make a judgment about that,

17 whether or not that's support?

18 MS. THOMPSON: Well, but really, to answer

19 it indirectly, Your Honor, counsel likes to refer to

20 the school tuition. There was also psychiatric and

21 medical which brought the whole amount paid out to

22 36,000.

23 But we have an argument that has she

CASAMO & ASSOCIATES Culpeper (540) 825-7482 ~3 Alexandria (703) 765-92=7

22 •·

1 breached the agreement since she never gave him

2 approval. Has he paid monies that were not really

3 legally due because she paid for schooling. As our

4 brief points out, this child is only 13. What has he

5 already paid? A total of $77,000 towards her

6 educational loan. Mother picks school, the most

7 expensive one, and dad paid. It's supposed to be with

8 his approval.

9 And I think that for this court to

10 summarily read this statute and not hear the facts, I

11 think every one of these cases he cites, obviously

( 12 there can be the court can look at what the facts

13 were in that case and where this man chose to put this

14 money into these funds. He didn't have to do it, as

15 Your Honor pointed out.

16 So, he was doing it to try to insure his

17 ability. Shouldn't this court hear this case? I

18 mean --

19 THE COURT: Well, I mean, it seems that the

20 Motion for Summary Judgment, really, is attempting to

21 address some, I guess, some fundamental legal

22 questions.

23 MS. THOMPSON: Right.

CASAMO & ASSOCIATES Culpeper (540) 825-7482 JO Alexand~ia (703) 765-925 1

23 ~·

1 THE COURT: It seems to me that under

2 31-50, which is the statute relying upon the duty or

3 obligation of a person to support the minor, his

4 argument is that the court ought to be able to make a

5 judgment, a legal judgment, about what the word

6 support to the minor means. And whether it's

7 consistent with 21-08.1, that is, what is child

8 support, the law requires the parent to support their

9 child. But there are limits on that by statute.

10 I don't think that the court has the power

11 to order a parent to pay private school tuition or

12 even a college education. But if the parties agree to

13 it, and there may be some reason why the parties enter

14 into an agreement like that and then want the court to

15 embody it in the order, why shouldn't the court

16 consider that to be part of the support obligation.

17 And if I accept his stipulation, the only

18 purpose of a trial would be to categorize the

19 documents, to decide whether these were school

20 tuition, whether these were funds paid for a business

21 loan that have nothing to do with the child and

22 whether or not these funds were commingled. And the

23 statute seems real clear on that.

CASAMO & ASSOCIATES Culpeper (540) 825-7482 5~ Alexandria (703) 765-9257

24

1 Would you concede that he can't have these

2 funds commingled in his personal account?

3 MS. THOMPSON: He is not supposed to

4 commingle them. But as Your Honor pointed out to

5 counsel, and as we pointed out in our brief, defendant

6 says he is still going to pay the money. I mean, he

7 is going to use the money.

8 The fact that the bank levied on the one,

9 he lost $11,000, I would concede that. And I would

10 concede that if he uses that amount of money that he

11 took out for the use and benefit of the child, there

12 is nothing in this statute that says when he has to

13 use it either.

14 THE COURT: Well, I think that --

15 MS. THOMPSON: He did commingle them.

16 There is no question.

17 THE COURT: So, would you concede that he

18 has an obligation, at least from a legal standpoint,

19 to separate those funds out and to maintain them

20 distinctly?

21 MS. THOMPSON: I do agree with that, Your

22 Honor. There is no question.

23 But I think that to take sort of a summary

CASAMO & ASSOCIATES Culpeper (540) 825-7482 5Z Alexandria (703) 765-9257

1

2

3

4

5

6

7

8

9

10

11

{ 12

13

14

15

16

17

18

19

20

21

22

23

25

view of this is sort of -- doesn't really look at the

merits here. And I don't know how counsel can read

support in that added sentence to just wipe out

paragraph one.

And he did pay all total so far out of that

money, he has paid $36,299. Some of it was for

psychiatric that the mother said the child needed. He

sort of paid and paid, as you can see from the

numbers.

THE COURT: Well, let me just ask you this,

Ms. Thompson. The Sutliff case, and I'm not saying

that that is binding or should be the court here --

the case here, but Sutliff is the parent used the

custodial accounts which he set up while they were

married to pay school tuition and child support

expenses.

And in that court -- in that case the court

held, at least, that the custodian should not exercise

discretion in a way that allows one parent to avoid

expending their personal resources to meet the child'~

needs, and that they shouldn't just take the funds to

pay for college where they could otherwise pay for it.

I think that's what it says.

CASAMO & ASSOCIATES Culpeper (540) 825-7482 SJ Alexandria (703) 765-9257

:..· 26

1 MS. THOMPSON: Yes. And then in Sutliff,

2 it says where a parent is financially capable of

3 supporting the minor without seriously depriving

4 himself or other persons to whom he has a similar

5 obligation.

6 Now, all that would be factual issues that

7 we don't have before us today. And, of course, we

8 could very well show that he has four more kids and

9 that ~= was in very desperate circumstances when he

10 cashed in those bonds.


{ 12 MS. THOMPSON: And that's a factual issue.

13 We don't have that before us today. And it's a shame

14 we don't have any Virginia cases. It's not a new

15 statute, but apparently it's not been interpreted in

16 Virginia. Thank you.

17 THE COURT: All right. Thank you.

18 MR. ROSENBLUM: Your Honor, only briefly.

19 I would say that this is a uniform statute to the

20 extent that these cases, such as Weisbaum and the

21 others, refer to a statute that is in all identical

22 in all respects and the statute asks that it be

23 interpreted uniformly. To achieve that, then I think

CASAMO & ASSOCIATES Culpeper (540) 825-7482 5~6 Alexandria (703) 765-9257

27

1 this court can be guided by those cases.

2 In the Sutliff case, I want to address some

3 concerns the court has rather than just simply

4 respond.

5 THE COURT: If you would address the last

6 one raised by counsel having to do with the factual

7 the question of whether or not there is a genuine

8 issue of fact here --

9 MR. ROSENBLUM: Yes, I will.

10 THE COURT: that would preclude the

11 court from granting Summary Judgment.

( 12 MR. ROSENBLUM: Your Honor, I believe that

13 the correct response would be that if he was in a dire

14 situation, which we don't believe he is or was, that

15 the correct thing for him to have done was to come

16 into court and ask for relief from his obligation with

17 some modification of his duties of support, in the

18 first instance, rather than unilaterally take it upon

19 himself to take her funds and put it into his personal

20 checking account to pay for personal expenses.

21 And that I don't think that this court,

22 even if he was in dire straits at that time, can nunc

23 pro tunc authorize the past conversion of her funds

CASAMO & ASSOCIATES Culpeper (540) 825-7482 5~ Alexar.dria (703) 765-9257

28

1 for his own use.

2 I think that he has to get prior approval

3 before he can do that. And I think that he would at

4 least, in the first instance, he would at least be

5 called upon to come into court to modify his support

6 obligations.

7 And secondly, he would be required to come

8 into court and petition the court for the use of those

9 funds before doing so.


11 First, I want to thank both counsel for the

( 12 quality of your preparation of the briefs.

13 This matter is before the court on the

14 Motion to Summary Judgment filed by the plaintiff.

15 And the question presented is whether the defendant

16 improperly disposed of custodial funds under Virginia

17 Code 31-50 and whether the defendant's payment of

18 certain expenses constitute a payment of support that

19 the plaintiff contends are precluded under the statute

20 and whether plaintiff is entitled to Summary Judgment.

21 Under Rule 3:18 I can only grant Summary

22 Judgment if there are no genuine issues of fact.

23 I think the legal issues are quite clear.

CASAMO & ASSOCIATES Culpeper (5~0) 825-7482 Alexa~dria (703) 765-9237

55

29 .~·

1 and there are, it seems to me, pliable arguments on

2 both sides of a multitude of these issues that are

3 presented about the payment of the educational

4 expenses, that is, whether payment of private school

5 tuition from the Uniform Gifts to Minors Act account

6 is a payment of support which is precluded by Virginja

7 Code 31-50.

8 I'm not certain nor do I feel that I should

9 make a judgment now about whether 31-50 precludes a

10 parent from making an expenditure from the Uniform

11 Gifts to Minors Act account whereas here there was no

( 12 obligation to create the account in the first

13 instance.

14 I think there are genuine issues of fact

15 that preclude the court from granting summary

16 judgment. I think the legal issues are very novel and

17 I think that they have been well presented. But I

18 think that it would be premature to make a judgment

19 about the merits of any of the legal issues.

20 And accordingly, the court will deny

21 summary judgment, and the plaintiff's exceptions will

22 be preserved.


CASAMO & ASSOCIATES Culpepe~ (540) 825-7482 (703) 765-9257

30 ·-1 Your Honor, we are going to modify one of

2 the orders and present it.

3 THE COURT: Thank you very much. Please do

4 it before you leave the courthouse.


6 (Whereupon, at 12:38 o'clock p.m., the

7 hearing in the above-entitled matter was concluded.)

8 - - -

9

10

11

( 12

13

14

15

16

17

18

19

20

21

22

23

CASAMO & ASSOCIATES Culpeper (540) 825-7482 58 Alexandria (703) 765-9257

1

2

3

4

5

6

7

8

9

10

11

l 12 l

13

14

15

16

17

18

19

20

21

22

23

31

CERTIFICATE OF COURT REPORTER

I, Karen M. Davis, the stenographic

reporter who was duly sworn to well and truly report

the foregoing proceedings, do hereby certify that

they are true and correct to the best of my knowledge

and ability; and that I have no interest in said

proceedings, financial or otherwise, nor through

relationship with any of the parties in interest or

their counsel.

IN WITNESS WHEREOF, I have hereunto set

my hand this 19th day of July, 1996.

/_/ h-t 6 ~ft'"A..- /.:.( '~!2~ c • .'~ Karen M. Davis Certified Reporter

CASAMO & ASSOCIATES Culpeper (S.:;Q) 825-7482 59 Alexandria (703) 765-92=7

/r u VIRGINIA

R XN THE CXRCUXT COURT OF FAXRFAX C~UNTY

YAIIJ ~ ) CIWfCEilT/LAW NO:

Plaia tiff( a),

VBilSUS

tv1t/tW. f.~ Defendallt(a)

)

)

)

)

This cause came on to be hearcl on the /Z 1"L ciay of a~ on Plaintiff' s/DefeRdant' s motion for iliVtttVMAf"L( .::]v. d9M'f~J7-

Upon the matters presented to the Court at the hearinq it is ADJUDGED, ORDBIBD and DBCRBRD as follows:

Entered. this

Counse for Defendant(s)

-geff11 lh~

(

, 19~~

-.

VIRGINIA:

IN THE CIRCUIT COOR'l' OF FAIRFAX COUNTY


Plaintiff

vs.

WILLIAM C. SMITH.

Defendant

) ) ) ) ) ) ) )

AT LAW NUMBER 142877

MOTXOH

COMES NOW the Defendant, WILLIAM c. SMITH, by counsel, and moves

this Honorable Court to dismiss the within action on the ground that this

~ Court lacks jurisdiction to hear and determine this cause for the reason

f. that none of the jurisdictional prerequisites exists for application of

= j:

Virginia's Uniform Transfers to Minors Act as required by §31-36.

WHEREFORE, Defendant. asks this court to dismiss this action for lack

of jurisdiction.

. THO PSON VSB ~umber 008127 Counsel for Defendant 1800 North Kent Street Suite 1001 Post office Box 12807 Arlington, Virginia 22209 Telephone: (703) 522-8100

QtlOQ ~M e sj\M Dg WILL~ C. SMITH By Counsel

CERTIFICATE

I hereby certify that a true copy of the foregoing Motion was handdelivered, this 22nd day of May, 1996, to David Rosenbl~m, Esquire, Couneel for Plaintiff, 526 King Street, Suite 211, Post Office Box 58 1

Alexandria, Virginia 22313.

1 V I R G I N I A

2 IN THE CIRCUIT COURT OF FAIRFAX COUNTY

3 - - X

4 RYAN E. SMITH, by her next friend and parent,

5 Nina Rosen,

6 Plaintiff,

7 -vs-

8 WILLIAM C. SMITH,

9 Defendant.

10 - - - - - - - - - - - - - X

AT LAW NO. 142877

1

11 Circuit Courtroom No. 4D Fairfax County Judicial Center

12 Fairfax, Virginia

13 Wednesday, May 22, 1996

14 The above-entitled matter came on for

15 trial before THE HONORABLE ARTHUR B. VIEREGG, JR.,

16 Judge, in and for the Circuit Court of Fairfax County,

17 Virginia, commencing at 10:20 o'clock a.m.

18

19

20

21

22

23

APPEARANCES:

On Behalf of the Plaintiff:

DAVID ROSENBLUM, ESQUIRE

On Behalf of the Defendant:

BETTY A. THOMPSON, ESQUIRE DONNA KRAUS, ESQUIRE

CASAMO & ASSOCIATES Culpeper (540) 825-7482

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

.. :.- 2

PAGE

MOTION 3

OPENING STATEMENT ON BEHALF OF THE PLAINTIFF 25

OPENING STATEMENT ON BEHALF OF THE DEFENDANT 31

EVIDENCE ON BEHALF OF THE PLAINTIFF

WITNESS DIRECT CROSS REDIRECT RECROSS

Nina Rosen 42 61

PLAINTIFF'S FOR IDENTIFICATION

1 - Defendant's Response 43 to Request for Admissions

2 - Property Settlement 43 Agreement

3 - Final Decree 46

4 - List of Zero Coupon Bonds 47

5 - Zero coupon bonds 48

6 & 7 - Coastal Bank note 53

8 - Letter 54

12 - Calculation of interest 58

DEFENDANT'S FOR IDENTIFICATION

8 - Langley School payment document

25

CASAMO ~ ASSOCIATES

IN EVIDENCE

50

50

50

50

52

IN EVIDENCE

Culpeper (540' 825-7482 b··lr Alexandria {703) 765-9257

:.· 3

2 (Whereupon, the Court Reporter was sworn by

3 the Court.)

4 THE COURT: Good morning. This is the

5 matter of Ryan E. Smith versus William C. Smith.

6 Are counsel ready for trial?

7 MS. THOMPSON: Counsel is ready, Your

8 Honor.

9 MR. ROSENBLUM: Ready for the plaintiff,

10 Your Honor.

11 MS. THOMPSON: For the defendant, I have a

12 preliminary motion regarding jurisdiction that I would

13 like to make at this time.

14 THE COURT: Very well.

15 MR. ROSENBLUM: Your Honor, just for the

16 record, I wanted to note my objection on the morning

17 of trial. I was handed a motion. And Your Honor, I

18 was under the impression that these motions would have

19 been brought long before the trial to be heard. We

20 brought on a motion for summary judgment. It could

21 have been brought at that time.

22 MS. THOMPSON: The court please

23 THE COURT: Ms. Thompson.

CASAMO & ASSOCIATES : '...ll pep e ~ ( 5 4 0 ) 8 2 5 - 7 4 8 2 6 .:) A 1 ex a !1 d ~ i a · '"7 ~ 3 · 7 6 5 - 9 : :: !

4

1 MS. THOMPSON: my response to that is it

2 is at the eleventh hour. It is late. But however, in

3 the heat of preparing for trial sometimes you get down

4 to the nitty-gritty.

5 And in reviewing the statutes and the

6 jurisdiction of this court and considering the factn

7 that will come out in this case, it is our position

8 that this court lacks subject matter jurisdiction.

9 And Your Honor is well aware of the fact

10 that subject matter jurisdiction cannot be conferred

11 by the parties nor waived. It can only be conferred

12 by the constitution or by statute, and it can be

13 raised at any time, in any manner and in the Supreme

14 Court for the first time.

15 THE COURT: Well, i'll hear the matter.

16 But by the same token I'm certainly going to afford

17 Mr. Rosenblum an opportunity to fully respond.

18

19

MS. THOMPSON: Of course.

THE COURT: It seems to me in the context

20 of this case it's a matter of hearing the motion, uuc"i

21 perhaps if he needs to, to brief it or prepare to

22 argue it after the trial. The court will make a

23 decision subject to that determination.

1

'. ,.

MS. THOMPSON: Because it would appear,

2 Your Honor, that if this court has no jurisdiction

3 under the statute, then there would be no purpose in

4 proceeding further.

5

5 THE COURT: Well, that's true. Except for

6 under these circumstances, Ms. Thompson, where counsel

7 has not been given an adequate opportunity to prepare

8 for the motion, it seems to me the only fair way to

9 proceed would be to conduct the trial subject to the

10 court's ruling.

11 If the court didn't have subject matter

12 jurisdiction, then obviously any ruling that I might

13 otherwise make would be negated.

14 Having said that, please proceed.

15 MS. THOMPSON: Well, if the court please,

16 the only problem I have with it, I appreciate it's

17 late, and I don't mean to argue with the court, but

18 the whole principle of subject matter jurisdiction is

19 that the court can even raise it. As Your Honor

20 knows, it can appear at any time.

21 And since the facts would show that the

22 prerequisites for application of the Uniform Gifts to

23 Mi~ors Act, now the Uniform Transfers to Minors Act,

CASAMO & ASSOCIATES C"..l2.peper (540) 825-7482 ft"7 P..lexandria i703: '765-?:=-;-

•• 6

1 does not -- this court does not have authority, it

2 would seem that counsel for the other side, if he

3 needs more time, would certainly have the right to a

4 continuance. I'm not pursuing the issue and not

5 saying he doesn't have a right to be heard on it.

6 But if the court should agree with the

7 defendant that it has no jurisdiction, then it should

8 not proceed with the merits of the case.

9 THE COURT: What I'm telling you is I am

10 not going to make a decision on that point --

11 MS. THOMPSON: right.

12 THE COURT: until Mr. Rosenblum has had

13 an opportunity to deal with the matter. And given the

14 lateness with which this comes, it seems to me that

15 that's the fair way to address this issue.

16 MS. THOMPSON: Your Honor, may it please

17 the court, this is an action brought in tort for

18 damages for conversion, relying on the Uniform Gifts

19 to Minors Act as creating a custodial property in

20 certain zero coupon bonds that the defendant purchased

21 in 1984 for the benefit or the ultimate benefit of

22 securing his obligations for a higher education, many

23 other expenses incident to the child's education and

CAS.~MO ,5c. ASSOCIA':'~S

(540' 825-748~ b8 Alexa::d~ia ,.703) 765-9:=-:

.:.· 7

1 other expenses that he had obligated himself for under

2 a rather elaborate Property Settlement Agreement.

3 In looking at the Act, Your Honor, the

4 statute provides, Section 31-38 of the Act, that this

5 chapter applies to any transfer that refers

6 THE COURT: Let me interrupt you,

7 Ms. Thompson. Let me get the Act so I can follow

8 along with you.

9 MS. THOMPSON: Sure.

10 I'm looking at Section 31-38, Your Honor.

11 THE COURT: Yes. I just wanted to confirm

12 that there have been no amendments.

13 (The Court perusing document.)

14 Very well.

15 MS. THOMPSON: This section in effect says

16 when a transfer is made, that is referred to under

17 this Act, it must be made and this Act becomes

18 applicable if at the time of the transfer the

19 transferor, the minor, or the custodian is a resident

20 of this Commonwealth or the custodial property is

21 located in this Commonwealth.

22 Between approximately September 1 and

23 September 28, 1984 when the transfer -- the alleged

CASAMO & ASSOC!ATES Culpe;:er (540) 825-74g2 f.9 Alexandria (7C3) 765-925 7

:.· 8

1 transfer into a custodial account was made, the

2 transferor and custodian, William Smith, was residing

3 in the District of Columbia. At that time the minor,

4 also residing with her mother, resided in the District

5 of Columbia. And the property in question, i.e., the

6 zero bonds, were in the sole care and custody of the

7 defendant in the District of Columbia.

8 And while Mr. Smith subsequently moved out

9 of D. C. and Mrs. Rosen ultimately moved to Virginia,

10 I think we have to look at where they were at the time

11 that the transfer was made for this Act to come into

12 effect.

13 And the court is very familiar with the

14 principles of practically Horne Book law about

15 jurisdiction, about raising it even at this time.

16 Therefore, since we say none of the

17 prerequisites exist, if the court lacks the subject

18 matter jurisdiction, then it should not proceed to

19 apply this Act because the whole premise of the

20 plaintiff's case is the Virginia Act.

21 I mean, it's a very basic point here that

22 this Act does not apply if the transfer was made. The

23 evidence will show what I just proffered to the court.

CASAMO 1~SSOCI~TES C'.llpe;:.:::!" (54Q) 825-7482 ' .~.lex3!1C!"ia (7C3' 7,:;5-9237

.:. .. 9

1 So, the property wasn't in Virginia.

2 The alleged conversion, as you will, which

3 they are relying on, this is not a suit for breach of

4 duty, it is a straight action in tort for conversion

5 for damages, occurred, according to the pleadings, in

6 '94 over into '95.

7 But we have to apply the law that existed

8 at the time conversion is alleged to have taken place.

9 This Act says that if the transfer was made

10 at a time when none of the principals, if you will,

11 had any connection with Virginia, I guess that's the

12 sense of it, that it doesn't -- that the court doesn't

13 have jurisdiction to rely on that as the basis for the

14 custodial property that they are saying was created by

15 this Act.

16 THE COURT: All right. I understand your

17 position.

18 MS. THOMPSON: Thank you.

19 THE COURT: Mr. Rosenblum.

20 MR. ROSENBLUM: Your Honor, subject to my

21 abilicy to submit a document or a pleading later, I

22 would point out that the very document that we speak

23 of, before getting to the statute, the document is

CASAMO & ASSOCIATES Ct.:lpe!=-=:::- ( s.; .J)

,.~, ,., 825-7482 tl.. Alexand'!:"ia ''C}"2 ·

10

1 styled William C. Smith C/F, custodial fund, with Ryan

2 Eve Smith, UGMA VA.

3 In other words, when this was set up, it

4 was set up with the understanding that it was subject

5 to the Virginia Uniform Gifts to Minors Act because

6 that's how the custodial account was so designated.

7 I believe the evidence would reveal that in

8 1993 the parties entered into a Property Settlement

9 Agreement -- excuse me -- '83, I misspoke -- pursuant

10 to which the parties signed.

11 There was a -- in that agreement they

12 indicated that Virginia law would apply. That this

13 that the Uniform Gifts To Minors Act, the transfer was

14 not a part of that agreement. There was no reference

15 to that. That this was done sometime between that

16 date and 1984.

17 I think the evidence may be that the mother

18 moved to D. C. temporarily in May or sometime. But I

19 don't believe that it would be necessarily dispositive

20 of the jurisdictional requirement when the custodial

21 account was set up as a Virginia Uniform Gifts to

22 Minors Act.

23 Secondly, I would point out to the court

CASJ..MO, .. fc.> ASSOCIATES C-.; l p -=:;: -= ~ ( :: .; 0 ~ .'3 2 5 - '7 4 9 2 1 ,._, P..l ex and !" ::.. a ( ' o 3 " 7 '3 =:: - 9 2 :: -

I • .. 11

.. 1 that we made early on in this case a Request for

2 Admissions to the defendant. And request number one

3 was that the bonds listed in Exhibit A were held by

4 William Smith as custodian for Ryan Smith pursuant to

5 the Uniform Gifts to Minors Act, Virginia Code Sectiun

6 31-26 et. seq., and now 31-37 as amended. And that

7 was admitted by the defendant.

8 I don't believe they are now able to come

9 back, especially on the morning of trial and say,

10 well, we admitted it but now we don't admit it.

11 Thirdly, Your Honor, I believe that a fair

12 reading of the Uniform Gifts to Minors Act and now

13 supplemented by the Uniform Transfers to Minors Act,

14 which is a uniform law, therefore except for very

15 minor differences in various states, none of which

16 would apply, that the law in the District of Columbia

17 would be the same as it would be in controlling this

18 case, regardless of where the action was brought

19 pursuant to enforce that provision.

20 Indeed, that statute states under 31-59

21 that this chapter shall be applied and construed to

22 effectuate its general purpose to make uniform the law

23 with respect to the subject of this chapter among

CASAMO & ASSOCIA~ES 1 ( , ...., ..-.. •-J r l " 1 _, ' I - "'"' -.. -r. C -=- _ !"':-' ..... __ !::_ "':'

-:·....:_;-2p~!:' .=4J~ 82=- ,43~ ~'··J .-. .:..-:=xa::~~:.a · · J -- _ -

12

1 states enacting it.

2 I would represent to the court that my

3 understanding is that the District of Columbia also

4 has a signature to this uniform law.

5 And lastly, Your Honor, with regard to

6 argument this morning is that under 31-38, I don't

7 know that that is -- the language that she cites needs

8 to be an exclusive means by which this court would

9 retain jurisdiction.

10 It's true that the laws of Virginia would

11 be -- the Commonwealth of Virginia would -- could

12 obtain jurisdiction if any of those circumstances

13 exist. I certainly believe that the parties could by

14 agreement convey jurisdiction to this court at the

15 time that it set it up when he set it up as a gift

16 under Virginia law.

17 And thirdly, I think that it is clear that

18 a person who is designated as custodian under this

19 chapter is subject to personal jurisdiction in this

20 Commonwealth with regard to any matter relating to the

21 custodianship.

22 So, I think that we have personal

23 jurisdiction over him to ask him to account for why he

rA~~M.n ~ ~cc~cT~~~~ .._ _.'"\. - 7 ... - ..... v ... ~.!..=. ....

825.-7482 · .':t .~.lexar1d~:a t7')3' 7~=-9:::..,

•. :. .. 13

1 has converted these funds that were transferred to

2 him.

3 He has admitted, as the evidence will point

4 out, he had 11 -- one bond of over $11,000 in funds

5 were converted, forfeited to a personal loan of his.

6 Other funds -- all the other bonds were cashed in and

7 deposited to his personal account. And now he is a

8 resident of Virginia.

9 So, there is no question of personal

10 jurisdiction.

11 THE COURT: I don't think that that's the

12 issue that's being raised.

13 MR. ROSENBLUM: And I don't believe that

14 the issue of subject matter jurisdiction is excluded

15 by 31-38. I think that just sets the scope of the

16 jurisdiction.

17 And I believe that this court could apply

18 the laws of any state under which it was transferred

19 under which the Uniform Transfers to Minors Act was

20 created and hold the same result here, either applying

21 Virginia uniform law or the District of Columbia.

22 I don't believe that that would be the

23 basis for this court dismissing this action.

CASAMO & ASSOCIATES 825-7482 ,..J·: -~1-=xa:ld~ia ' 7 S'3 ·

,W .J

.. lr· 14


2 MS. THOMPSON: May it please the court, I

3 think counsel is confusing personal jurisdiction over

4 the parties with subject matter jurisdiction. And he

5 says that 31-38 is maybe not the exclusive basis. It

6 has to be. It is the scope and jurisdiction for the

7 application of the statute.

8 And the reason it's so important is in

9 31-45 it refers to what constitutes a transfer. In

10 other words, the predicate for his whole case is was a

11 gift made. And if there wasn't a transfer, then there

12 couldn't be a custodial account for which he could now

13 try and bring this action.

14 In other words, there was no gift. The)~c

15 was no conversion. And the Act is clear.

16 And in fact, paragraph two says that he

17 says we admitted it, that he transferred --

18 distributed to the plaintiff certain funds. We don't

19 admit -- the pleader does not admit the law of any

20 allegation.

21 He says in his pleading that it was

22 pursuant to the Virginia Act. That's where the flaw

23 in his argument on jurisdiction is. We can't confer

(54 0) CAS;..~-10

825-7492 & P..SSOCIATES , .. J -. A 1 .::::. .....-a~ ,..;; .... .: ::::: •t~J --·- .~'-4- ........

. -.... 15

1 jurisdiction.

2 So, there is no way that the parties, I

3 mean, Michie's Jurisprudence, Volume -- I believe it's

4 11-B, is just basic law that only can you confer

5 subject matter jurisdiction by the constitution or by

6 statute.

7 Now, he has not shown this court where --

8 anywhere else in the whole Act on which he is relying

9 for the transfer that there is some other way to get

10 jurisdiction in this case.

11 And the purpose of that section is to say

12 when do you have a transfer. If you don't have a

13 transfer, you can never have a gift. You could never

14 have this alleged conversion. We don't say it's

15 conversion. But given the benefit of that, we don't

16 have the custodial account established according to

17 the law.

18 So, how can the court adjudicate this case.

19 He says, well, D. C. law is the same. We don't know

20 if every section of theirs is the same. True, I've

21 made the motion at the late hour, but he didn't bring

22 this under the D. C. law. I would like to look at the

23 D. C. law and how the cases are interpreted over

CASAMO & ASSCC!ATES 82!:-7482 t""J•'""J Z'!. : ,::) v ::1 ..... ~ V".; :::

• 8 .......... _ -·-·""""··""-""- ---

.:.- 16

r/-~·~

1 there.

2 I would tell this court that there have

3 been no cases that either plaintiff or defendant have

4 found in Virginia, and all courts don't necessarily

5 read these cases the same. We have no decisions on

6 this point. But jurisdiction is -- how would you

7 say -- absolutely necessary for the court to find

8 conversion ultimately.

9 And if your statute says you have no

10 transfer and he says the transfer of the distribution

11 or the creation of the funds was in '84, maybe she

12 ultimately moved to Virginia, but she wasn't living

13 here then.

14 The agreement -- the parties' Property

15 Settlement Agreement was signed in September of '83.

16 But she had maintained the child was residing, and it

17 says the minor's residence, and her residence was

18 D. C.

19 I mean, it's so clear what the statute says

20 is the basis for proceeding under this Act. And, 1

21 mean, the fact of bringing it late, I think the court

22 has a right to be informed as to whether it would be,

23 in our judgment, an unnecessary exercise of the

CASAMO & ASSOCIATES , .. J 3 A 1 Q v a "'"' a~ ....... ..; ., : ~, 0 ... _.. ) ...,, f :::_ - q :'l ::_ "~ . ' r - ·- • • • • ... .... ~ - - - -

:.- 17

1 court's jurisdiction to go through the trial, put

2 everybody to that expense, have to appeal this case on

3 basic jurisdiction because as Your Honor knows, it can

4 be raised in the Court of Appeals.

5 And he has -- counsel has not pointed to

6 any excuse or explanation. He says because the bonds

7 had VA on it. But the section that we're relying on,

8 31-38, speaks in terms of a form, a transfer form,

9 which is set forth in the Code of how you do this.

10 Our facts would show that the defendant

11 never even understood that he was buying a gift for

12 his daughter. He called up his broker and said I

13 understand zero bonds are making a lot of money. I

14 would like to buy some that would mature in future

15 years. How much will it cost? He sends them a check

16 for, I think, something like 16, 17,000.

17 The bonds are sent to him at his home in

18 D. C. His address is D. C. Merrill Lynch had a

19 D. c. address. Why VA was put on there, but there is

20 no evidence that we're aware of that any agreement was

21 made to put it under the Virginia Act. And also, even

22 if they did, could they? That gets right back to

23 subject matter jurisdiction.

CASAMO & ASSOCIATES : ~..: l p e ~ e ~ ~ 5 4 Q ' 8 2 5 - 7 4 8 2 ~i' 3 A l ex a :;, d ~ i a ' : ·J 3 ' 7 6 5 - :? ~ :: -;

.~· 18

1 You can't give this court jurisdiction or

2 put this transfer under the Virginia Act if you don't

3 comply with its terms. It's sort of a nudum pactum.

4 It means nothing. And that's what we have here.

5 Even if it was intended, that has never

6 been raised in any of the issues so far in this case.

7 But assume for the moment that they intended it, that

8 would be again doing something under the statute that

9 doesn't permit it. I don't think you can do that.

10 If D. C. has such a wonderful similar

11 statute, why didn't they do it in D. C.?

12 But we're here on a very serious question

13 of conversion. And the whole case turns on was there

14 a valid transfer under the Act to potentially at lc:<a:t.

15 create a gift and therefore custodial property of the

16 minor.

17 THE COURT: Okay. Thank you.

18 MR. ROSENBLUM: Your Honor, just

19 THE COURT: Yes, sir.

20 MR. ROSENBLUM: -- I want to point out, l'm

21 not going to extend the argument on this, Section

22 31-57 of the Act says Applicability

23 THE COURT: Bear with me.

CASAMO & ASSOCIATES Cu~pepe~ (540) 825-7482

19

1 MR. ROSENBLUM: 31-57.

2 THE COURT: Yes, I have it.

3 MR. ROSENBLUM: First is that this chapter

4 applies to a transfer within the scope made after July

5 '88. But number one says it provides for anyone if

6 you did it under the Virginia Uniform Gifts to Minors

7 Act in 1988.

8 The second paragraph says, however, the

9 instrument by which the transfer purports to have been

10 made uses in substance the designation, "as custodian

11 under the Uniform Gifts to Minors Act" or "as

12 custodian under the Uniform Transfers to Minors Act"

13 of any other state, and the application of this

14 chapter is necessary to validate the transfer.

15 And I think what my -- I haven't had a lot

16 of opportunity to examine it entirely, the comments to

17 this under the uniform laws.

18 But I would believe that this would have

19 the effect that if the D. C. law -- if this was, as I

20 had indicated, the facts are that the transfer

21 purports to use that language, that Virginia would

22 validate that as in fact a transfer.

23 Or if in fact we would bring this case

20

1 under D. C. law, that it would -- D. c. law would have

2 a similar provision and therefore it would validate

3 the transfer under D. C. law since it uses those

4 terms, albeit, the Virginia Uniform Gifts to Minors

5 Act.

6 So, I think that this provision would work

7 in such a way that it would validate in either

8 jurisdiction the transfer as a transfer pursuant to

9 this statute or pursuant to a Uniform Transfers to

10 Minors Act statute. Thank you.

11 THE COURT: Mr. Rosenblum, after having

12 considered the arguments, I think this. First of all,

13 the motion that has been made presupposes facts that

14 are not in evidence at this point. Obviously, we have

15 not had testimony.

16 It seems to me, however, that if this trial

17 were to go forward today, there would be evidence that

18 this court would receive, and indeed if those facts

19 demonstrate that there is no jurisdiction, then as

20 Ms. Thompson suggests, this court would have an

21 obligation to dismiss it for lack of subject matter

22 jurisdiction.

23 I think upon -- after hearing the arguments

CASAf\10 SS~SOC!ATES C:.1::.peper .'54·J\ 925-7482 '~ .~.le:-:andr:.a -'7:~:3· '7t:.=:-~:::""'

.. .. 21

1 and considering the issue further, because of the

2 lateness of this motion, that this is a matter either

3 of granting you a continuance, which I would readily

4 do under these circumstances, or alternatively, trying

5 the case, but under circumstances where you would

6 understand that if the facts -- that there is the

7 risk, if you will, that the facts would demonstrate

8 that you do not have jurisdiction.

9 It seems to me that's particularly

10 important given the fact that it would appear to me

11 that the fiduciary obligations that are alleged are

12 ones under the Virginia statute.

13 Now, I heard the argument that you just

14 made and I'm not at all negating it, but I am

15 suggesting that if it doesn't hold water, ultimateJy

16 hold water, then that's a risk you would have to

17 assume.

18 So, I leave that matter up to you with

19 regard to whether you want to move for a continuance

20 at this point. If you do, it will be granted. But in

21 the absence of that, there is some risk in going

22 forward.

23 MR. ROSENBLUM: May I confer?

CASA~O & ASSOCIA~~S

22

1 THE COURT: Certainly.

2 (Counsel conferring with his client.)

3 MR. ROSENBLUM: Your Honor, we would prefer

4 to go forward with the hearing. We believe it would

5 not take very long to put on.


7 MS. THOMPSON: The court please, we will

8 reserve, of course, the jurisdictional plea. I think

9 as a matter of law it's reserved anyway, but based on

10 going forward at this time.

11 THE COURT: Okay. All who are going to

l_ 12 testify, if you will stand and be sworn by the clerk.

13 (Whereupon, the witnesses were sworn by the

14 Clerk of the Court.)

15 Is there a motion for a rule on witness~s?

16 MS. THOMPSON: The court please, we would

17 ask for a rule on the witnesses.

18 We have a witness here who was subpoenaed,

19 a Ms. Roberson from Langley School, with the

20 understanding that she's left some documents and she

21 will come back when we call her to testify as our

22 witness, but we had agreed with her that she would be

23 excused to come back on call.

CASAMO & ASSOCIATES CJ - ~ "'! .=.v::.,...,..:l.,....: o . :t .. -- - ......... - - - a

.:.· 23

1 THE COURT: I want to make it clear that if

2 she isn't here and ready to go at the time we get to

3 her, the court is not going to delay the proceedings

4 to accommodate.

5 MS. THOMPSON: Right. I would ask Mr. --

6 Mr. Rosenblum, if counsel wishes, the only thing she

7 was going to testify to is to the document she brought

8 from Langley School, that it is a record of the

9 tuition payments made at the school.

10 If he wants to stipulate to this document,

11 then we don't have to bring her back.

12 MR. ROSENBLUM: May it please the court,

13 I'm not sure what that document signifies.

14 MS. THOMPSON: The same thing.

15 MR. ROSENBLUM: I understand it's a record

16 of payment. But I think -- I'm not sure what they

17 what use they want to make of it and I'm not about to

18 stipulate that he has made payments equal to that

19 because those are payments -- part of those payments

20 were made by my client, some of which were reimbursed

21 by Mr. Smith.

22 THE COURT: Well, it seems to me that

23 that's not what's being stipulated to excuse me

CASAMO & ASSOCIATES Culoecer (54'.:\ 825-7482 8.; P•.:!.exand~ia (7·')3\ 7~5-?2:: 7

::.· 24

1 what is being asked to be stipulated to. Rather, that

2 those are the payments made, irrespective of who made

3 them.

4 MS. THOMPSON: That's correct.

5 MR. ROSENBLUM: I can agree to that. And I

6 would also ask that it further be stipulated that she

7 is a CPA, an accountant there, and that she could

8 testify that that school tuition is generally less

9 than other private schools in this area.

10 MS. THOMPSON: Well, I don't know that

11 that's even relevant. But what we're having -- all

12 we're talking about is what was paid to the school. I

13 don't know that this exhibit even demonstrates who

14 paid it.

15 MR. ROSENBLUM: I'll agree to that. I

16 didn't subpoena her.


18 THE COURT: Ma'am, you're excused, then.

19 It will not be necessary for you to testify.

20 And the court understands that the payments

21 reflected on that document -- let me make sure the

22 stipulation is clear.

23 It is either that this witness would

_,.,.._ ----. ~-: - ·: ... -

·- 25

1 testify that those are the payments, or alternatively,

2 in fact, that they indeed are the payments. Which--

3 is that -- is the latter fair?

4 MR. ROSENBLUM: They are payments received

5 by the school.

6 MS. THOMPSON: For Ryan Smith.

7 MR. ROSENBLUM: For Ryan Smith.

8 MS. THOMPSON: For the period indicated.

9 THE COURT: You're free to go, ma'am.

10 Thank you for appearing.

11 MS. THOMPSON: The court please, that has

( 12 been marked tentatively as Defendant's 8.


14 (Whereupon, the document was

15 marked for identification as

16 Exhibit No. 8.)

17 Mr. Rosenblum, opening statement?

18 MR. ROSENBLUM: Oh, yes, Your Honor.

19 OPENING STATEMENT ON BEHALF OF THE PLAINTIFF

20 MR. ROSENBLUM: Your Honor, in 1983 the

21 parties entered into a Property Settlement Agreement

22 which provided, among other things, that Mr. Smith

23 would pay for private schooling for Ryan Smith and

Culpep-=:r-CAS.:;MQ-,.~ P..S SOC I ATE S

(540: 825-7482°1 Al-=xar..d-::-:.a ('703' '":'&::::::_n-:=; J- .. --

26

1 would also pay for medical expenses, not -- all

2 unreimbursed medical expenses.

3 Subsequent to that, Mr. Smith bought --

4 used 15,000 of funds and purchased eight zero coupon

5 bonds and put them in the name -- in his name as

6 custodian for Ryan Smith, Uniform Gifts to Minors Act,

7 Virginia, and showed that these were a way of further

8 insuring the welfare of Ryan Smith for her future.

9 There was no requirement under the Property

10 Settlement Agreement to do that. The Property

11 Settlement Agreement was thereafter incorporated into

12 a Final Decree of Divorce and therefore those

13 obligations to pay --

14 MS. THOMPSON: The court please, I hate to

15 interrupt counsel, but I had asked for a rule on the

16 witnesses.

17 MR. ROSENBLUM: I'm not calling Mr. Rosen.

18 MS. THOMPSON: Right, but we had listed

19 Mr. Rosen, and this is our witness.

20 THE COURT: I will ask that Mr. Rosen, it

21 you will stand, first of all, and be sworn.

22 Ma'am, if you will stay here for just one

23 second.

CASAMO & ASSOCIATES 825-7482 sa .~lexandria (703\ 765-9:25"7

..

27

1 (Whereupon, the witness was sworn by the

2 Clerk of the Court.)

3 With respect to these two witnesses, if you

4 will each have a seat outside. Please don't discuss

5 the case with one another or anyone else. Please

6 don't leave unless excused by the court.

7 (Whereupon, the witnesses were excluded

8 from the courtroom.)

9 MS. THOMPSON: Sorry.

10 THE COURT: That was my fault. I should

11 have instructed them that before I asked Mr. Rosenblum

i.. 12 to begin.

13 Please continue.

14 MR. ROSENBLUM: Thank you, Your Honor.

15 The Property Settlement Agreement was

16 incorporated into a Final Decree of Divorce in

17 November of 1984. Thereby, those obligations became

18 the legal obligations of Mr. Smith to support Ryan

19 Smith.

20 The transfer of these funds, the zero

21 coupon bonds to Ryan pursuant to a Uniform Gifts to

22 Minors Act, regardless of whether it's under D. C. law

23 or under Virginia law, and we submit that it was under

Culpepe:r- (540) C.~SAMO .: . • -~SSOCIATES

825-7482 e~ Alexand~ia (703\ 765-92S7

.•. 28

1 Virginia law because it uses that language, had the

2 effect of, as Virginia Code 31-47B says, that a

3 transfer made pursuant to that is irrevocable and the

4 custodial property is indefeasibly vested in the

5 minor.

6 And we believe that although he had no

7 legal obligation to make such a transfer, once he did

8 so, that money became Ryan Smith's money. It did not

9 become Bill Smith's, the father's money, to make

10 whatever use of it that he wished.

11 Mr. Smith made the child support payments

12 and tuition payments, the medical expenses for the

13 next ten years. He moves out of the area to Atlanta,

14 Georgia. And sometime in the spring of 1995 -- during

15 this period of time -- let me back up.

16 Mrs. Rosen filed each year the tax returns

17 for Ryan showing the income that she has to show on

18 these bonds, because the income accrues. You don't

19 get any money, it's like phantom income, but you have

20 to report it and pay income taxes. The minor pays the

21 income taxes on these.

22 In the spring of 1995 Mr. Smith informs the

23 Rosens that this year they don't have -- next year we

CAS.~MO &c.A-S S 0 C :i: .;.. T E S .;jiJ 7\ , ,:) y = - .~ '\- ~ :::l

~. - ,_ ... ,,ppL •• '-' - - _,

.. .. 29

1 won't have to do any more 1099's because I have sold

2 them all. And this is the first time that they are

3 aware that he has made use of these funds.

4 The evidence will be, Your Honor, that all

5 eight of these bonds, seven of them he cashed, sold,

6 and the proceeds of which were over $58,000, and

7 deposited it into his personal checking account

8 belonging to him and his now current wife, commingled

9 it with his personal funds, paid ATM charges, anything

10 else out of his personal account.

11 The other bond, the eighth bond, he pledged

12 as a collateral to a loan, a partnership loan that

13 operated a restaurant, I believe, in Georgia. And

14 that that bond was forfeited to the bank loan. And

15 there is a letter.

16 And the evidence will show that he

17 authorized the bank to sell the funds -- the bond, and

18 the proceeds of over $11,000, to apply that to his

19 personal loan obligations.

20 We have submitted a series of Requests 1o:r

21 Admissions which would be designated as Exhibit 1

22 where he has admitted all of these facts. None of

23 these facts are in dispute.

CASAMO & ASSOC:~TES . - .......

=.:.: ..1

30

1 Your Honor, we believe that under 31-50 or

2 under the Virginia law or the equivalent of one under

3 any other state under which this arose under the

4 uniform law, that Bill Smith has converted these funds

5 for his own use and benefit and not for the use and

6 benefit of the minor.

7 Certainly there can be no mistake to the

8 fact that he has violated the section that requires

9 him to keep this property separate and not commingle

10 it and to always have it designated as a custodial

11 account.

12 When he deposited it into his personal

13 account, certainly he has violated it by

14 collateralizing the loan -- the note -- one of the

15 bonds to a personal note and allowing the $11,000 to

16 be sold and forfeited.

17 These funds would have generated over

18 $100,000 by the time they matured. And yet he has

19 realized over $69,000 of the proceeds and have used

20 them for his own benefit and use.

21 His argument is that, well, of the

22 11,000 -- I don't know that there is an argument

23 I'll allow counsel for him --

CASAMQ ~~ASSOCIA~ES c·..1loece~ (540' 825-7482 ,., ;._:exa:1d~ia {703' 765-~:5-;-

:.· 31

1 THE COURT: Make an opening statement.

2 MR. ROSENBLUM: I understand. But we argue

3 that to the degree that he asserts that his payments

4 for private school tuition is a use and benefit for

5 the child that he can use is not a correct reading of

6 the law.

7 And we believe that the law is as under

8 31-50. The last paragraph states that a delivery,

9 payment or expenditure under this section is in

10 addition to, not in substitution for, and does not

11 affect any obligation of a person to support the

12 minor.

13 We therefore do not believe that he is

14 entitled to use these funds to pay his legal

15 obligation for private schooling education, and that

16 he has used these funds as if they were his own in

17 violation of the statute.

18 And we ask that the court enter a judgment

19 for the amount of the proceeds he received, plus

20 interest at eight percent per annum. And that we have

21 calculated that in one of the exhibits of about

22 $9,700. Thank you.


CASAMC & ASSOCIATES c·.1lpep'=~ (540i 825-7482 93 .~lexa::d~:.a (703 .. 7:::5-923-

32

1 Ms. Thompson.

2 OPENING STATEMENT ON BEHALF OF THE DEFENDANT

3 MS. THOMPSON: May it please the court,

4 after only 21 months of marriage the plaintiff and the

5 defendant in this present suit were separated. They

6 had this one child Ryan who was then ten months old.

7 Nine days -- nine days after the separation

8 they executed the Property Settlement Agreement which

9 Mr. Rosenblum has described to the court and which is

10 the genesis for this whole matter.

11 That Property Settlement Agreement required

12 Mr. Smith to do a number of things not relevant here

13 today, but just to say for his then wife, substantial

14 property, money, alimony, et cetera. It also required

15 him to pay all of Ryan's educational expenses, private

16 school from preschool through high school, all

17 expenses and associated activities.

18 It also required him to pay child support

19 for this ten month old child beginning, and this is in

20 '83, beginning at 1,000 a month and subject ~o an

21 annual cost of living of 100 percent of the cost of

22 living. Today that amount is fifteen eighty-five, the

23 base amount.

CASAMO & ASSOCIA~ES Cul~eper (540) 825-7482 9 ~ ."A.lexa::d~ia (703', 765-92::"'

.. .. 33

1 This agreement also required Mr. Smith to

2 continue support, not till age of majority, but until

3 completion of college or age of majority, whichever is

4 later.

5 It further required him in addition to pay

6 all costs of a college education through graduate

7 school. It further required him to pay all medical,

8 dental, orthodontic, psychiatric, psychological,

9 medical expenses of the child not covered by insurance

10 and, of course, required him to provide the insurance

11 coverage.

12 It also provided that if the mother

13 remarried, the $500,000 life insurance policy on

14 Mr. Smith's life would be transferred to the child,

15 Ryan, naming her the sole beneficiary until, I

16 believe, it's at least age 23.

17 The evidence will show that the premium on

18 that policy alone is about 5,500 a year.

19 Now, why would any man sign such an

20 agreement one asks. But Mr. Smith at that time

21 this was the heyday of the real estate world and he

22 was a partner in a partnership business that dealt in

23 developing office buildings in Washington, D. C.

{540' CriSA~O

825-7482 ~ASSOCIATES

~J A~~xa~~~~a f70?'

.. ,,. 34

1 As the agreement states, he was earning

2 $500,000 at the time he signed this. But within by

3 1984, before this child was even two years old,

4 Mr. Smith began to worry how he was going to meet all

5 his expenses.

6 By that time, I believe almost that time, I

7 believe it was November of '84, Mr. Smith remarried.

8 He has subsequently had four children which he is

9 also, of course, obligated to support.

10 But in 1984 the evidence will show that

11 through the advice of a friend who said you ought to

12 get some of these zero bonds, they are bringing in

13 good interest, so he calls his broker at Merrill Lynch

14 and asks him how much it would cost to buy bonds that

15 would mature at different dates in the future, sort of

16 tied to, if you will, the various costs of all of

17 these educational expenses and related activities that

18 he had signed up for.

19 Now, he didn't go down to the Merrill Lynch

20 office and sign any form like is in the Code under

21 31-38 which the law appears to require that you do to

22 indicate a custodial account.

23 Mr. Rosenblum has sort of sloughed over

CASAMC & ASSOCIATES Culp-==per (540) 825-7~32 9.;

35

1 that by saying the bond itself says VA on it, UGMA VA,

2 and therefore that makes it so. But there is no

3 evidence that we know of that will show he got into a

4 contract, if you will, with Merrill Lynch and set up

5 an account.

6 And the reason that's important is the

7 evidence will show that Mr. Smith never knew he had

8 allegedly created a gift to his daughter of this

9 property until he was sued in this very court for the

10 money.

11 He thought, as many parents who know they

12 have to pay a lot of educational expenses in the

13 future, that he better do something while he had some

14 money to perhaps further insure his ability to do

15 this. It was not to give her a gift. He never

16 intended it as a gift.

17 The broker, he will testify, sent him the

18 bonds. He put them somewhere in his custody, kept

19 them. He didn't know that he couldn't use them. He

20 wasn't aware of the UGMA Act. You can say, well,

21 everybody is presumed to know the law. Well, they

22 didn't follow the Act anyway, as has already been

23 pointed out here this morning.

CASAMO & ASSOCIATES Culoe-cer (540) 825-7482 91!-.lexar!dria 1 703', 765-.?:="7

:.· 36

1 But in any event, he thought he could use

2 those bonds and the income from them for the benefit

3 of his daughter.

4 Now, as the income came in there were tax

5 liabilities. But who paid those tax liabilities?

6 Mr. Smith did. He paid all of them. The evidence

7 will show that he paid a substantial amount.

8 I think the exhibits we will put in will

9 show that from the time he cashed them in, he paid

10 $6,015. And prior to that, from the time they were

11 set up, he paid $7,274, over $13,000 in taxes.

12 We know that if you look at the Act, that

13 that's a cost. If it is a true custodial account,

14 that that would be a cost of the account, and he paid

15 it. So, we can say that he paid it with her money. I

16 mean, it was something that had to be paid.

17 But in any event, those bonds sat in his

18 stayed in his possession and began to increase in

19 value for ten years.

20 And what happened during those ten years?

21 That was when the bottom fell out of the real estate

22 market. Your Honor is probably familiar with what

23 happened to real estate developers. The money dried

CASAMO & ASSOCIATES Culpeper (540) 825-7482 93 Alcxand!:"ia

.. :.- 37

1 up. There was no capital. The banks called the loans

2 and down everything came. And so, he was really hit

3 with hard times.

4 And he continued to comply with every

5 single provision of this Property Settlement

6 Agreement. Private school from the lowest level. The

7 child is now in Langley and is approximately 14 years

8 of age, I believe. And the point is even preschool on

9 up he paid it all. Mother sent the child to a

10 psychiatrist. He paid that.

11 We will show that just medical, post the

12 cashing of the bonds, he paid $4,163. In educational

13 costs, post the cashing of the bonds, he paid $24,672.

14 And in child support he paid $46,631. All after he

15 fell on these hard times and after he cashed those

16 bonds that was paid.

17 THE COURT: All these payments were made

18 pursuant to the requirements under the Property

19 Settlement Agreement?

20 MS. THOMPSON: Right. And that's total,

21 Your Honor, of the items. Education, medical, tax on

22 bonds -- on the funds and child support comes to

23 $78,481, and that is just from February '94 to the

Culpeper {54 0)

C.~SAMO ~ .A.SSOCI.:; TES 825-7482 ~3 Alexandria (703\

-~- 38

1 present, a little over two years. Two years and two

2 months. If you add in the tax he paid before, you get

3 a grand total of $85,756.

4 But the point I'm making, Your Honor, is

5 that he was then really strapped and yet he made all

6 these payments. He didn't go to cash those bonds

7 until everything else had collapsed. He lost all of

8 his property, all of his real estate. Banks called

9 his loans. He got in difficulty over his own

10 property. It went to foreclosure. He had a judgment

11 against him for the deficiency. And he was really

12 hard up.

13 And in early '94, before he cashed the

14 bonds, he went to the mother or called her, I believe,

15 on the telephone and asked her if she would give him

16 some relief. It was really tough. He was having a

17 tough time. She obviously answered no. And so, he

18 finally took the bonds to keep paying these expenses.

19 And he will continue to pay them.

20 Now, counsel talks about 31-50 of the Act.

21 But, you know, it's going to be for this court to

22 interpret it. But as I pointed out earlier, Your

23 Honor, there's no Virginia cases. I guess you can

Culpeper CASAMCl,() .. jSSOCI~.TES

(540·, 825-7482 A:exandria ~7031 765-;.25-::-

. -~ 39

1 trust counsel for both sides, neither one of us have

2 found one, and I guess we've done a little research.

3 But paragraph one of 31-50 makes it clear

4 that he, as custodian, has the right to use this

5 money. He had a right to use it for her use and

6 benefit without regard to the duty or ability of the

7 custodian personally or any other person to support

8 the minor.

9 Now, the way plaintiff's counsel reads the

10 third paragraph that says an expenditure under this

11 section is in addition to, not in substitution for any

12 obligation of a person to support, does not say

13 therefore you do not have the authority under

14 paragraph one.

15 So, we're here on conversion. Did he

16 wrongfully convert this property. Did she have

17 immediate right to·possession, one·of the elements of

18 conversion. This is a damage suit. This isn't for

19 breach of duty referred to under 31-40 and 49.

20 The powers of the custodian under the

21 Virginia Act is different from some of the other

22 states. And that's why we don't --we can't say,

23 well, D. C. would be the same. None of us know that.

CASAMO~ ASSOCIATES Culpeper {540) 825-7482~Ui Alexandria (703) 765-9257

~- 40

1 And the court isn't here to apply D. C. law.

2 The custodian has broad powers over the

3 property, and he's not a fiduciary in the sense that

4 he has to be super careful because he's dealing with

5 someone else's property. It says shall -- it says

6 shall have over their own property -- he will have the

7 same authority over this property as his own.

8 THE COURT: Ms. Thompson, I think we're

9 getting into a legal argument.

10 MS. THOMPSON: Right. But I bring this up

11 because counsel jumped in with the law. And if we're

\ 12 going to set the tone

13 THE COURT: That's why I didn't stop you

14 earlier.

15 MS. THOMPSON: Right. But anyway, after

16 the hard times hit he cashed them in.

17 As I said, the evidence will show that he

18 has continued to meet his obligation, also taking care

19 of his family. And the evidence is that he has spent

20 78,481 for Ryan and he received $69,375 when he cashed

21 in the bonds, if you add them all up. I think that's

22 the one thing that counsel is not in dispute as to the

23 total of the proceeds was 69,375.

CASAMO & ASSOCIATES Culpeper (540) 825-748210.~ Alexandria (703) 765-9257

~- 41

1 Their suit also says $5,595 for tax

2 liability and accounting. But our evidence will show

3 that Mr. Smith paid that. It hadn't been paid as of

4 the day this suit was filed in July, but his testimony

5 would be, I think it was August of '95, that he

6 6overed that. So, that amount is no longer unpaid.

7 Your Honor, we just I mean, you can't

8 talk law in your opening statement, but part of the

9 case here, if you look at cases from other states, it

10 talks about the duty between support support and

11 nonessential support. They also talk about the

12 ability of that person, the custodian, to have other

13 money, use it.

14 And we would ask the court at the

15 appropriate time when we argue to give serious

16 consideration to what the statute gives him the

17 authority to do.·

18 But we are here today to say that he should

19 get credit. And if we give him credit for all he has

20 paid since, even though it was a duty or an

21 obligation, he has paid more than he got. Thank you.


23 Mr. Rosenblum, if you will call your first

CASAMO & ASSOCIATES Culpeper (540) 825-7482 ~03Alexand~ia (703) 765-9257

Testimony of Nina Rosen I Direct

42

1 witness.

2 MR. ROSENBLUM: Thank you. I would call

3 Ms. Nina Rosen.

4 Your Honor, I have all the exhibits and I

5 would hand them up as a package to the court.

6 THE COURT: Give them to the clerk, please.

7 EVIDENCE ON BEHALF OF THE PLAINTIFF

8 Whereupon,

9 NINA ROSEN,

10 called as a witness by counsel for the plaintiff,

11 having been duly sworn by the Clerk of the Court, was

( 12 examined and testified as follows:

13 DIRECT EXAMINATION

14 BY MR. ROSENBLUM:

15 Q Ms. Rosen, would you state your name and

16 tell us where you live.

17 A Yes. My name is Nina Rosen. And I live at

18 6530 Heather Brook Court in McLean, Virginia.

19 Q Is Ryan Smith your daughter?

20 A Yes, she is.

21 Q And the father of Ryan was William C.

22 Smith?

23 A Yes.

CASAMO & ASSOCIATES Culpeper (540) 825-7482 1,0~ Alexandria (703) 765-9257


43

1 Q I want to hand to you what's been marked as

2 Exhibit Number 1.

3 MR. ROSENBLUM: If the court please, I will

4 hand her my copy.

5 THE COURT: Yes, sir.

6 MR. ROSENBLUM: Actually, not Exhibit

7 Number 1. Well, Exhibit Number 2.

8 (Whereupon, the documents were


10 Exhibit Nos. 1 and 2.)

11 (Counsel handing document to witness for

{ 12 examination. )


14 Q Can you identify that document, please.

15 A Yes. It's a Property Settlement Agreement

16 that I entered into with Mr. Smith.

17 MR. ROSENBLUM: Your Honor, I would note

18 that Exhibit Number 1 is the Request for -- is the

19 Defendant's Response to Request for Admissions, and

20 this has been admitted, I believe, in Request

21 Admission Number 10 and Number 11.


23 Q I would like for you just -- the court will

CASAMO~~~SSOCIATES Culpeper (540) 825-7482 Alexandria (703) 765-9257


44

... · ....

1 read that, but I would like to ask you to turn to page

2 eight of that agreement. That's paragraph 16.

3 And does that provision of the Property

4 Settlement Agreement provide for who would pay for

5 medical expenses?

A 6 Yes, it does.

Q 7 And for any unreimbursed medical expenses?

A 8 Yes, it does.

·Q 9 Who do you understand that to be required

10 to pay?

11 A Mr. Smith.

( 12 Q Does it also, that paragraph, designate

13 what is medical expenses?

14 A Yes, it does.

15 Q And that includes medical and dental,

16 orthodontic, psychological and psychiatric care?

17 A Yes, it does, and hospitalization.

18 Q Right. Now, I would like for you to turn

19 to page ten of that document, paragraph 18.

20 A Okay.

21 Q Does this provision provide for private

22 school?

23 A Yes, it does.

CASAMO & ASSOCIATES Cu 1 pep e r ( 54 0 ) 8 2 5 - 7 4 8 2 1, o.; A 1 eX and ria ( 7 0 3 ) 7 6 5 - 9 2 5 7


45

1 Q Private preschool, elementary, primary

2 grades; is that correct?

3 A Yes.

4 Q And what does that provision your

5 understanding of who is to pay for that?

6 A Mr. Smith.

7 Q And it required he would have -- he would

8 have to approve the school which could not be

9 unreasonably withheld?

10 A That's correct.

11 Q Now, did there come a time that Ryan was

( 12 enrolled into a private school?

13 A Yes.

14 Q And what school is that?

15 A Langley School in McLean, Virginia.

16 Q What if anything did Mr. Smith do with

17 regard to looking at the school or agreeing to the

18 school?

19 A We had to go for a parent interview and he

20 accompanied me on that interview and we presented

21 ourselves as Ryan's parents.

22 Q Has he entered into in the course of the

23 years when she's been in that school, has he entered

CASAMO ~~SOCIATES Culpeper (540) 825-7482 1: ·Alexandria (703) 765-9257


46

1 into any written agreements with that school?

2 A Yes. He has signed contracts for her

3" tuition.

4 Q Now, I would like for you to turn to -- if

5 you will go to the next exhibit, which is Exhibit 3,

6 it says Final Decree. It would be the next.

7 {Whereupon, the document was


9 Exhibit No. 3.)

10 If you will look at that. I'm sorry.

11 Yours isn't tabbed.

( 12 A Okay.

13 (Witness perusing documents.)

14 I've got it.

15 Q Do you have it?

16 A (Witness nodding head.)

17 Q And is that the -- what is that?

18 A It's a Final Decree of Absolute Divorce.

19 Q Is it your understanding that that

20 divorce turn the page I think it's on the second

21 or the next to last page does that incorporate the

22 Property Settlement Agreement?

23 A Yes, it does.

CASAM0~().3SSOCIATES Culpeper (540) 825-7482 Alexandria (703) 765-9257


47

1 Q And pursuant to that divorce in November of

2 '84, you and Bill Smith were divorced; is that

3 correct?

4 A That's correct.

5 Q And Mr. Smith began making child support

6 payments and private school payments and medical

7 payments; is that correct?

8 A That's correct.

9 I'm handing to you now a document listed as

10 Exhibit Number 4. It's a list of zero coupon bonds.

11 Is that what that is?



14 Exhibit No. 4.)


16 examination.)

17 A Ye·s-, it is.

18 MR. ROSENBLUM: Your Honor, this is

19 admitted in exhibit number -- Admission number one,

20 two, three and four by the defendant.


22 Q Tell us, was there anything in the Property

23 Settlement Agreement that required Mr. Smith to make a

CASAM9Lft~SSOCIATES Culpeper (540} 825-7482 Alexandria (703) 765-9257


~· 48

( 1 custodial account transfer to Ryan?

2 A No, there was not.

3 Q When he sent these to you, was there

4 anything said by you to him or him to you about you

5 holding these bonds in your name as custodian?

6 A At the time I asked if I could hold the

7 bonds, yes.

8 Q What if anything did he say?

9 ·A He said no, that he would hold them.

10 Q And anything else?

11 A And that they would -- that I shouldn't

( 12 worry, they're in her name and they would be fine.

13 Q At the time that he transferred or showed

14 you that list -- and let me show you what's been

15 marked as Exhibit Number 5. These are -- those

16 documents, was that sent to you by Mr. Smith?



19 Exhibit No. 5.)


21 examination:)

22 A I don't believe it was sent at the time

23 that they were purchased, but subsequently.

CASAM01i,0-SSOCIATES Culpeper (540) 825-7482 Alexandria (703) 765-9257


49

1 Q And these are the coupons for -- the zero

2 coupons?

3 A That's right.

4 Q Can you read for the record any one of

5 them, how it's styled, the account is styled? Do you

6 see?

7 A Yes. William C. Smith --

8 MS. THOMPSON: Before she reads that, Your

9 Honor;-I don't think we have a copy of that. You've

10 only listed that as an exhibit.

11 MR. ROSENBLUM: I thought that you had

{ 12 provided these.

13 MS. THOMPSON: Did we?

14 MS. KRAUSE: No.

15 MS. THOMPSON: Oh, this. You're having her

16 read these?

17 MR. ROSENBLUM: Just this.

18 MS. THOMPSON: Your Honor, I'm going to

19 object to the reading. It speaks for itself and it's

20 attached to the Motion for Judgment.

21 THE COURT: Objection sustained. It's also

22 not in evidence.

23 MR. ROSENBLUM: Your Honor, I would move at

CASA~1~ ASSOCIATES Culpeper (540} 825-7482 ., Alexand~ia {703) 765-9257

(


. -,.

1 this time Exhibit Numbers 1, 2, 3 and 4.

2 THE COURT: Is there an objection to the

3 receipt of those exhibits?

4 MS. THOMPSON: None.

5 THE COURT: They will be received.

6 (Whereupon, the documents

so


8 Exhibit Nos. 1, 2, 3 & 4 were

9 received in evidence.)


11 Q The zero coupon bonds which you see in

12 front of you, how is the account held?

13 A It says William C. Smith, C/F

14 MS. THOMPSON: Objection, again, Your

15 Honor. I think that she's getting it in. She's

16 reading it. She's putting it in evidence indirectly.

17 I mean --

18 THE COURT: Objection sustained.

19 MR. ROSENBLUM: Your Honor, we have

20 admitted that into evidence.

21 THE COURT: That's Exhibit 5, is it not?

22 MR. ROSENBLUM: All right. I misspoke.

23 Thank you.

CASAMO & ASSOCIATES. Cu 1 pep e r ( 54 0 ) 8 2 5 - 7 4 8 2 1.1,~ A 1 ex and ria { 7 0 3 ) 7 6 5 - 9 2 5 7

Testimony of. Nina Rosen I Direct

51

1 BY MR. ROSENBLUM:

2 Q When you received this document, Exhibit

3. Number 5, did you believe that those were monies that

4 William Smith had at his disposal?

5 A No.

6 MS. THOMPSON: Did you say what she

7 believed?

8 MR. ROSENBLUM: Yes.

9 MS. THOMPSON: Well, I don't know whether

10 her state of mind, Your Honor, what she believed would

11 be admissible. I mean, it's her state of mind.

12 THE COURT: Mr. Rosenblum.

13 MR. ROSENBLUM: Your Honor, she's testified

14 that she asked him whether she would hold it and she's

15 testified that he said no, he would hold it and that

16 he couldn't get to it.

17 THE COURT: Objection sustained. Her state

18 of mind is not relevant.

19 MR. ROSENBLUM: Did anything that -- thank

20 you.

21 Your Honor, I would move Exhibit Number 5

22 into evidence.

23 THE COURT: Is there an objection?

CASA~1~ASSOCIATES Culpeper (540) 825-748~ ' Alexandria (703) 765-9257


.. :.· 52

1 MS. THOMPSON: No objection.

2 THE COURT: It will be received.

3· (Whereupon, the document


5 Exhibit No. 5 was received in

6 evidence.)

7 BY MR. ROSENBLUM:

8 Q Do you recall when it was that you

9 discussed with Mr. Smith that he was going to purchase

10 zero coupon bonds? Was it in September when they were

11 purchased or some time following?

12 A No. I was still living in the house that

13· we had lived in together in Old Town Alexandria.

14 Q Is that the marital horne?

15 A Yes.

16 Q And that was the -- that was the marital

17 home at the time crf- ·the Property Settlement Agreement?

18 A Yes.

19 Q That's where you were when you signed the

20 Property Settlement Agreement?

21 A Yes, it was.

22 Q And Ryan was living with you there?

23 A That's right. She was.

CASAMO ~,ASSOCIATES Culpeper (540) 825-7482 1 '~ Alexandria (703) 765-9257


.... 53

1 Q Did there come a time that you moved out of

2 that home in Alexandria?

3 A Yes. In May of 1994.

4 Q '84, you mean?

5 A 1984. I'm sorry.

6 Q Where did you move?

7 A To Washington, D. C.

8 Q And did you set up a residency in D. C.?

9 ·A Yes, I did.

10 Q Now, let me ask you to look to the next

11 exhibits, Exhibits 6 and 7. These have been

( 12 identified in Request for Admissions.

13 (Whereupon, the documents were


15 Exhibit Nos. 6 and 7.)

16 (Counsel handing documents to witness for

17 examination.)

18 Let me ask you, is that a note which -- do

19 you understand or can you identify what those exhibits

20 are, 6 and 7?

21 A It appears to be a note signed by Mr. Smith

22 to the Coastal Bank of Georgia.

23 Q I would submit to you that one of the bonds

CASAMO & ASSOCIATES Culpeper {540} 825-7482 1.13 Alexandria (703) 765-9257


54

1 listed in the exhibit, I think it's Exhibit Number 4,

2 is listed as collateral on that note.

3· My question to you is did you authorize

4 Mr. Smith to use her custodial bond to collateralize

5 this note?

6 A No, I did not.

7 Q Were you aware that he had collateralized

8 this note or loan with a bond, custodial account bond

9 of Ryan Smith?

10 A No, I was not.

11 Q Let me show you the next exhibit. I

12 believe that's exhibit number -- I don't have my list

13 here. The letter. I believe this is Exhibit Number

14 8.



17 Exhibit No. 8.)


19 examination.)

20 Can you identify that letter?

21 A Yes. It's a letter to the Coastal Bank of

22 Georgia from Mr. Smith authorizing them to deposit the

23 proceeds of the sale of the zero coupon bonds to be

CASAMO & ASSOCIATES Culpeper (540) 825-7482115 Alexandria (703} 765-9257


55

1 applied towards his loan with the Coastal Bank of

2 Georgia.

3 Q Did you authorize Mr. Smith to write such a

4 letter to the bank?

5 A No, I did not.

6 Q Were you aware that he had written this

7 letter to the bank?

8 A No, I wasn't.

9 ·Q When was it that you became aware that

10 Mr. Smith did in fact -- had cashed in these bonds?

11 A It was sometime prior to tax time 1995.

12 So_, I don't know if it was January, February, March of

13 1995.

14 Q And prior to that time had you authorized

15 him to make use of any of these bonds?

16 A No.

17 Q Let me ask you a few questions concerning

18 the medical bills and you getting reimbursed for that

19 and the school, how you got reimbursed.

20 First, the medical expenses, how would you

21 submit her medical bills to Mr. Smith for payment?

22 A I think in almost all instances I would pay

23 the physician or whatever medical related expense

CASAMO & ASSOCIATES Culpeper (540) 825-74821.1'·1. Alexandria (703) 765-9257


,:.· 56

1 there was directly. And then Mr. Smith would

2 reimburse me directly for that cost.

3 I would also submit copies of the bills for

4 his insurance company to him so that he could file for

5 coverage with his insurance company.

6 Q Is he current with regard to medical

7 expenses?

8 A I'm not sure. I think there are some

9 outstanding bills. I know there are some outstanding

10 bills. I do not believe that I have given them to him

11 yet.

\ 12 Q What about payments for school tuition?

13 A For a number of years Mr. Smith would pay

14 that directly to Langley School. And at this point I

15 have entered into the contracts directly with Langley

16 School. I have been paying Langley School directly.

17 Q Why is that?

18 A Well, because I don't know the exact number

19 of years ago, but a number of years ago when Mr. Smith

20 was having difficulty financially, he was also having

21 difficulty paying Ryan's tuition. And the school at

22 one point threatened not to let Ryan back into class

23 if the bill wasn't paid.

CASAMO l.~SSOCIATES Culpeper (540) 825-7482 ~ Alexandria (703) 765-9257


57

1 And I guess in order to feel that we were

2 in a little bit better control in terms of her

3 academic well-being, I felt that it was better that I

4 pay the bill directly because I knew that I would pay

5 it when it was due and not let it become delinquent.

6 Q And then he would reimburse you?

7 A Right.

8 Q Did you know at the time that he was making

9 any payments from custodial account fund?

10 A No.

11 Q And did there come a time after this that

( 12 he made direct payments? Did he thereafter make some

13 direct payments with the school?

14 A To the school?

15 Q Yeah.

16 A I really don't know because I know he had

17 worked out some kind of payment plan with them

18 directly and I don't know how long that was paid off

19 for.

20 Q Currently, how much is the tuition?

21 A It does go up every year, I guess, because

22 of cost of living and it also at times goes up

23 depending on what grade the students are in.

CASAMO & ASSOCIATES Culpeper (540) 825-74821,1:9 Alexandria (703) 765-9257


t -,.

1 For 1996, '97, I think it's in the 11 --

2 about $11,000 for the basic tuition, and then there

3· are other associated expenses.

4 Q And how does Mr. Smith reimburse you?

5 A Well, he's told me that he cannot pay.

6 Q How does he pay?

7 A He, since I think it was November or

58

8 September of '95, he has been adding $1,000 a month to

9 the child support check that he gives me and tells me

10 to apply that to tuition. Tuition is paid up-front,

11 sometimes prior to the year that it's due.

12 Q How much money is outstanding by him to you

13 in unreimbursed medicals and unreimbursed tuition

14 costs?

15 A According to my calculations, there is

16 about $14,000 outstanding. There will be another

17 6,000 or so dollars that I wili,·be paying·next week

18 for tuition, so it will be up to about $20,000.

19 Q As far as you know, Ryan Smith had no

20 your daughter had no interest in the limited

21 partnership in Georgia and the restaurant?

22 A Not as far as I know.

23 Q Let me show you this last document which

CASAM~~~SSOCIATES culpeper (540) 825-7482 4 Alexand~ia (703) 765-9257


59

1 has been marked as Exhibit 12.



4 Exhibit No. 12.)


6 examination. }

7 Is that a calculation of interest on the

8 bonds?

9 A Yes, it is.

10 MR. ROSENBLUM: Your Honor, we would

11 introduce that as an exhibit.

I

\ 12 THE COURT: Is there an objection?

13 MS. THOMPSON: Your Honor, we would only

14 object to we don't know whether the calculation, which

15 is in somebody's handwriting at the bottom, whether,

16 A, they are accurate, and B, we haven't done the math.

17 But also whether it's relevant because it purports to

18 give an advance forward, if you will, of what the

19 interest would have been if these bonds had stayed in

20 the form of a bond and hadn't been cashed.

21 In other words, it appears to compute the

22 interest up to '96. Until maturity, in other words.

23 MR. ROSENBLUM: If I may clarify. Your

CASAMO & ASSOCIATES Cu 1 pep e r ( 54 0 ) 8 2 5 - 7 4 8 2 1.2 1.., A 1 ex and r i a ( 7 0 3 ) 7 6 5 - 9 2 5 7

60

1 Honor, in fact, all that the calculations do is a

2 simple interest, not compounded, at the eight percent

3 legal rate of those funds at the time that they were

4 cashed, the bonds were cashed, through to today.

5 It is not a calculation of what they would

6 have been worth if the bonds were held at 14 percent

7 interest. These are simply an eight percent

8 calculation for the benefit of the court.

9 THE COURT: Well, it seems to me that's

10 exactly what this is, that both sides can agree on

11 these calculations. Otherwise, I suppose the court is

12 going to have to put the parties at some peril. But

13 the court would have to do those calculations.

14 I think, however, the objection has to be

15 sus~ained since this witness is really not a party to

16 the preparation of this document.

17 MR. ROSENBLUM: Very well, Your Honor.

18 During one of the recesses I may attempt to

19 go through the calculations.

20 THE COURT: I would appreciate that.

21 MR. ROSENBLUM: Your Honor, those are all

22 the questions that I have of Ms. Rosen.

23 THE COURT: Cross-examination.

CASAMO & ASSOCIATES C u 1 pep e r ( 54 0 ) 8 2 5 - 7 4 8 2 1.2 ~ A 1 e xa n d ria ( 7 0 3 ) 7 6 5 - 9 2 5 7

Testimony of Nina Rosen I Cross

.Jr· 61

1 CROSS EXAMINATION

2 BY MS. THOMPSON:

3 Q You were living in the District of Columbia

4 in September of 1984; isn't that right?

5 A Yes.

6 Q And Ryan Smith made her residence with you;

7 is that right?

8 A That's correct.

9 So, her residence was also in the District

10 of Columbia in September of 1984?

11 A Yes.

12 Q You did not have any authority or control

13 over those bonds, did you?

14 A No.

15 Q You were not named as a custodian --

16 A No, I was not.

17 Q or in any capacity a fiduciary over

18 those bonds?

19 A No, I was not.

20 Q And therefore, you did not have authority

21 to authorize Mr. Smith to tell him whether or not

22 he could collateralize those bonds or the loan at the

23 bank with those bonds; isn't that right?

CASAMO & ASSOCIATES Cu 1 pep e r ( 54 0 ) 8 2 5 - 7 4 81_2 ,] A 1 ex and ria ( 7 0 3 ) 7 6 5 - 9 2 5 7

J j

(


62

1 A That's correct.

2 Q You didn't have any say so or authority

3 that you had to give Mr. Smith to write the letter to

4 the bank; isn't that right?

5 A Correct.

6 Q And you didn't have any authority in any

7 way to tell him how to use those bonds, did you?

8 A No, I did not.

9 Q Did you consider them your property?

10 A No, I did not. I considered them my

11 daughter's property.

12 Q You mentioned or made reference to Mr.

13 Smith's financial downfall. You were aware, were you

14 not, in early '94, if not before, that Mr. Smith was

15 having financial difficulty; isn't that right?

16 A I'm sorry. What date?

17 Q In early 1994 and even before that.

18 A Probably in '94 I was aware of that, yes.

19 Q And in fact, he came to you or wrote or

20 talked to you about giving him some relief, did he

21 not, about that time?

22 A He did come to me asking for some relief.

23 I'm not sure if it was at that time or afterwards, but

CASAMO & ASSOCIATES Culpeper (540) 825-7482 1~- Alexandria (703) 765-9257

A, I.:,


63

1 he did ask.

2 Q And you declined to do that --

3 A That's correct.

4 Q -- did you not?

5 You were financially able to do that if you

6 wanted to, were you not?

7 MR. ROSENBLUM: Your Honor, I'm going to

8 object. This is not a forum for this. If he had a

9 legitimate reason to come to the court in a divorce

10 action asking for relief from the legal obligations of

11 the Property Settlement Agreement or Divorce Decree,

12 that would be one proceeding. I don't believe that

13 this proceeding is an appropriate forum for that.


15 MS. THOMPSON: It's just part of the

16 evidence to show the position he was in. On direct,

17 she brought up the subject of his financial

18 difficulties in direct questions, and it's just a

19 follow-up to that.

20 I think it's relevant to the -- the whole

21 Property Settlement appears to be at issue in this

22 case. True, this isn't a divorce case, but they've

23 injected all of that in. It's the genesis for

CASAMO & ASSOCIATES Culpeper (540) 825-7482 ~25 Alexandria (703) 765-9257


. ..:.- 64

1 bringing this action, really.

2 THE COURT: Objection sustained. There

3 might have been an objection to those questions as

4 well.

5 BY MS. THOMPSON:

6 Q Now, the Property Settlement Agreement did

7 not provide how or to whom Mr. Smith would pay his

8 tuition costs for Ryan, did it?

9 ·A It does not say -- if you're asking me does

10 it say that he would pay directly to the school or

11 directly to the doctors, no.

( 12 Q In other words, he is now paying you

13 monthly $1,000 a month; isn't that right?

14 A That was his unilateral decision, that's

15 right.

16 Q And wasn't it as a result of his writing

17 you a letter telling you that he couldn't come up with

18 these huge sums of money the way the school wanted it,

19 like in two payments a year?

20 A Three.

21 Q Three. And that he was going to pay you

22 $1,000 a month; isn't that right?

23 A He decided that on his own, yes.

CASAMO 2·ASSOCIATES C~lpeper (540) 825-7482 ~ b Alexandria (703) 765-9257


65

1 Q But you didn't even respond to that letter,

2 did you?

3 A No. I was advised by counsel not to.

4 Q And you were able to carry it, right? You

5 paid the

6 A Well, my husband carries it. I'm a social

7 worker and I don't have the kind of salary to support

8 that.

9 So, the tuition got paid, and you don't

10 dispute that it's been paid all along by Mr. Smith

11 A No, I do dispute it.

12 Q -- in one form or another?

13 A I am disputing that at this point.

14 Q You mean just currently. You're disputing

15 only the current amount that's outstanding?

16 A Correct. He's not paying the school

17 directly now. I am.

18 Q Excuse me. I think you misunderstood my

19 question.

20 A I misunderstood then.

21 Q You are not disputing that Mr. Smith has

22 fulfilled his obligation under the Property Settlement

23 Agreement to pay Ryan Smith's tuition at all the

CASAMO & ASSOCIATES c u 1 pep e r ( 5 4 o ) 8 2 5 - 7 4 8 2 12c7 A 1 ex and~ i a ( 7 IJ 3 ) 7 6 5 - 9 2 5 7

Testimony of Nina Rosen t·cross

:lr- 66

1 schools she's attended from the time she started

2 attending up .to now except for what may be currently

3 outstanding?

4 A Except for what's currently outstanding,

5 correct. Not just what's currently.

6 Are you referring to what's currently owed

7 the school or what's currently owed by Mr. Smith to

8 me?

9 Well, you said there was 14,000 --

10 A Right.

11 Q -- outstanding?

12 A That has been paid by me already.

13 Q And he is paying it to you by the month?

14 A As he sees fit.

15 Q Right. Now, there are other costs, aren't

16 there? You said it was about 11,000 a year. Aren't

17 there other costs? Does that include transportation?

18 A No, it does not include transportation.

19 Q So, if you include -- what's that?

20 Another

21 A That's 800 a year.

22 Q So, if you add it all up, it's really over

23 12,000 a year?

CASAMO & ASSOCIATES Cu 1 pep e r ( 54 0 ) 8 2 5 - 7 4 8 2 1.2 8 A 1 ex and ria { 7 0 3 ) 7 6 5 - 9 2 5 7


67

I 1 A That's correct. There are other costs

2 throughout the year which I have never asked Mr. Smith

3 to reimburse for that I've been paying.

4 Q And he's providing her health coverage, is

5 he not?

6 A Uh-huh.

7 Q You did not pay the tax on Ryan Smith's

8 income, did you, on the bonds?

9 ·A Yes, we did. And Mr. Smith reimbursed us.

10 Q But in other words, you're not out any

11 money?

12 A No.

13 Q He's paid that?

14 A I think there might be about $700 that he

15 owes us for payment of taxes. And I believe there was

16 a misunderstanding. It was $690, and he thought he

17 had paid me twice. And I don't think he's really

18 disputing whether he owes it. I think he didn't

19 understand that he did.

20 Q Have you written him about that?

21 A Yeah. I've been sending him letters for

22 years.

23 Q And his support now is -- basic support is

CASAMQ ~:fSSOCIATES Culpeper (540) 825-7482:1, .. Alexandria (703) 765-9257


68

,/-·

1 about fifteen eighty-five; isn't that right?

2 A Except that he hasn't paid the CPI incr~ase

3 this year. It's been in the two percent to three

4 percent range.

5 Q Doesn't that go into effect right about

6 now?

7 A Well, it was already in effect. He just

8 hasn't paid it. January 1 is when it goes into

9 effect:

10 Q I see. But he has regularly paid those

11 support payments over the years?

12 A He has been late consistently for many

13 years. There are times when I didn't get checks for

14 two, three, four months.

15 As of now he is only one month behind. I

16 haven't received anything for May.

17 Q Except for the one month he has caught up

18 on all his payments?

19 A Right now, uh-huh. But generally, the

20 history has been that it slides as soon as I stop

21 sending letters and I stop consulting lawyers.

22 Q You said that -- strike that.

23 You did not ask Mr. Smith as provided by

CASAM9L3(JSSOCIATES Culpeper (540) 825-7482 AlexandYia (703) 765-9257


69

1 the agreement for his approval of the schools you

2 selected in advance· of selecting them, did you?

3 A He accompanied me to the school on the

4 interview with Ryan.

5 Q Which school?

6 A Langley School, which is where she has been

7 since nursery.

8 Q I see.

9 A He came on the interview with me. He spoke

10 to the admission's director. He went on the school

11 tour. He has participated in some of her school

( 12 events over the years. He signed contracts with

13 Langley School for payment of tuition.

14 Q I think you've answered my question

15 A Thank you.

16 Q -- he did know about the school in advance.

17 And you're saying he didn't voice an

18 objection to it?

19 A Certainly not.

20 Q You selected it, though?

21 A We selected it together. He came on that

22 interview.

23 Q You believe you also have an obligation for

CASAMO :J.tASSOCIATES C~lpepe~ (540) 825-7482 1 ~ Alexandria (703) 765-9237


70

1 your daughter's support, don't you?

2 A I don't know what my obligation is legally.

3 Are you talking about financial obligation?

4 Q Yes.

5 A I don't know what my obligation would be

6 legally. I guess I understand there is a formula

7 according to income.

8 Q And you had been married only 21 months at

9 the time you all signed that agreement; isn't that

10 right?

11 A Probably, yes. I haven't calculated the

12 number of years yet, but it's about a year and a half.

13 Q Isn't it a fact, Mrs. Rosen, that you

14 decided to bring this suit on behalf of your daughter

15 because you're still angry at Mr. Smith for divorcing

16 you?

17 A No.

18 Q Didn't you tell his current wife Dana Smith

19 that some day Mr. Smith would eventually leave her

20 because he would resent the amount of money that he

21 had to give to you?

22 A I don't recall ever saying that to her.

23 Q And didn't you also say to her that you

CASAM'l_:i ;!\SSOCIATES C u 1 pep e r ( 54 0 ) 8 2 5 - 7 4 8 2 • .. ~ A 1 ex and ria ( 7 0 3 ) 7 6 5 - 9 2 5 7


71

1 would make him pay till the day he died?

2 A No. I have absolutely no recollection of

3 ever saying anything like that.

4 Q Are you denying you said it?

5 A I am absolutely denying that I said that.

6 Q You were remarried in 1987; is that right?

7 A Yes.

8 Q So, Mr. Smith, under this Property

9 Settlement Agreement, had to pay you alimony of 4,500

10 a month until --

11 MR. ROSENBLUM: Your Honor, it's clearly

12 irrelevant.

13 MS. THOMPSON: It goes to his -- again, to

14 his financial position, Your Honor, relevant in the

15 case. It's in the case law under this Act.

16 MR. ROSENBLUM: I don't believe that his

17 financial position is relevant.

18 THE COURT: Why is it relevant,

19 Ms. Thompson?

20 MS. THOMPSON: The cases cited by counsel

21 for plaintiff in earlier argument pointed out that --

22 THE COURT: Which case?

23 MS. THOMPSON: Just give me a minute, Your

CASAMO & ASSOCIATES Cu 1 pep e r ( 54 0 } 8 2 5 - 7 4 8 2 1.3 3 A 1 ex and ria ( 7 0 3 ) 7 6 5 - 9 2 5 7

Testimony of Nina Rosen t·cross

72

1 Honor.

2 (Counsel perusing documents.)

3 THE COURT: It's time for a break. We'll

4 take a break until ten of, and then perhaps you can

5 share those things with me at that point.

6 (A short recess was taken.)

7 - - -

8

9

10

11

( 12

13

14

15

16

17

18

19

20

21

22

23

CASA~~'ASSOCIATES Culpeper (540) 825-7482 Alexandria (703) 765-9257


1 CERTIFICATE OF NOTARY PUBLIC

2 I, Karen M. Davis, the officer before

3 whom the foregoing deposition was taken, do hereby

4 certify that the witness whose testimony appears in

5 the foregoing deposition was duly sworn by me; that

6

7

8

9

10

11

12

13

14

15

16

17

18

19

the testimony of said witness was taken by me

stenographically, and thereafter reduced to

typewriting by me; that said deposition is a true

record of the testimony given by said witness; that

I am neither counsel for, related to, nor employed

by any of the parties to the action in which this

deposition was taken; and, further, that I am not a

relative or employee of any attorney or counsel

employed by the parties thereto, nor financially or

otherwise interested in the outcome of the action.

Karen M. Davis Notary Public in and for the State of Virginia, at Large.

20 My Commission expires February 28, 1999.

21

22

23

73

CASAMQ. :]·~SSOC!ATES c t! 1 pep e r ( 54 0 ) 8 2 5 - 7 4 8 2 l.•.. :~ A l ex and r i a ( 7 0 3 ) 7 6 5 - 9 2 5 7

(


1 THE COURT: Ms. Thompson?

2 MS. THOMPSON: If it please the Court,

3 during the recess -- I'm sorry I couldn't locate

4 those quickly. I have a lot of papers with me

5 this morning. But some of the cases cited by

6 counsel, Cohen versus Cohen, 258 New Jersey,

7 Superior Court 24, a 1992 case, was on the

.8 question of use of funds.

9 And in that case, the Court held that a

10 custodian who is also a parent cannot properly use

11 assets of a UGMA account to defray parent's legal

12 obligation to a child if the parent is financially

13 able to support the child.

14 So his ability, as whether he is able to

15 financially support, is the predicate in that

16 case. In other words, it's turning it around the

17 other way: He can't use them if he has plenty of

18 money if he cannot.

19 ' The next case he cites which develops

20 that same point is In Re: Wolford, 42 Colorado

21 Appeals, 433, a 1979 case talking about how far

22 one could go.

23 During the marriage, husband used UGMA

1.36 CASAMO & ASSOCIATES

Alexandria (703} 765-9257 Culpeper (7031 825-7482


1 funds for minor children's education but this was

2 part of a divorce degree. The Court ordered the

3 father to pay and prohibited either party -- this

4 was the UGMA funds that were part of the divorce

5 decree. In this case, he did this voluntarily

6 after the fact.

7 Quote, Until there is a showing that such

. 8 utilization would be beyond the normal

9 requirements of what a parent must do to support

10 his or her children, the Court held that gifts are

11 not in fulfillment of a court-ordered pay support

12 and father was able to meet his support

13 obligations.

14 He could not use UGMA funds to offset his

15 support. Here father was attempting to use the

16 funds for the children's education. So, again, it

17 goes to his ability.

18 The next case is Sutliff, a Pennsylvania

19 case, 1987 --

20 THE COURT: Without going further, so the

21 thrust of these cases that you just cited is that

22 ·1 if, indeed, there is an inability to make the

23 payments, then the custodian has the right to

137 CASAMO & ASSOCJA TES

Alexandria (703} 765-9257 Culpeper (703} 825-7482

1

2

3

4

5

6

7

·8

9

10

11

( 12

13

14

15

16

17

~8

19

20

21

22

23


invade the gift.

\ \

MS. THOMPSON: Right. In other words, in

Sutliff the Court said whether a parent can

support a minor without resort to the UGMA

property is a threshold question.

THE COURT: Mr. Rosenblum?

MS. THOMPSON: These are his cases.

THE COURT: I understand. I may ask one

or both

MS. THOMPSON: And there are still others

but I put my hands on these three in a hurry.

MR. ROSENBLUM: Your Honor, my

recollection of those cases -- and we've cited

them before -- and I think really it would require

the Court to read the cases, but my recollection

is that all these languages are taken from a

discussion by the Court looking at what that

state's requirements are for the parent to support

the child.

In other words, they say that a parent's

duty to support a child is X, Y, X and therefore

as a custodian -- forget about the UGMA -- but as

a custodian, you couldn't use the child's assets

138 CASAMO & ASSOCIATES

Alexandria 1703} 765-9257 Culpeper 17031 825-7482

1

2

3

4

5

6

7

8

9

10

11

( 12

13

14 i

15

16

17

,18

19

20

21

22

23


to pay for that support, absent extraordinary

circumstances.

The reason why I submit that it's not

relevant here is that it would be relevant in the

event that he had gone to court and said, "I need

relief from this support obligation." I think

that's the proper forum, proper method to do it,

not something where he actually uses the funds and

then later tries to justify it. I don't think

that's what the courts are saying in that

instance.

THE COURT: They may or may not be and

I'll review the cases later, but I'll overrule the

objection.

MS. THOMPSON: If the Court please, if

you can just add to that list is Gold-v-Gold,

another one, 2 Mise 2d, 481, '78 case.

THE COURT: Those don't help me much.

There is no way I can have access to 42 Colorado

Appeals but if I might ask counsel to furnish me

copies at the end of today's hearing, I'll look at

them.

MS. THOMPSON: I think we may have 1.33

CASAMO & ASSOCIATES Alexandria (703J 765-9257 Culpeper (703J 825-7482

Testimony of Nina Rosen I ·cross

::..-

1 brought copies for the Court. I'm not sure. But

2 I know we have copies with us.


4 MS. THOMPSON: I think the question at

5 the time of the recess related to the fact I had

6 just asked the witness if she married in '87, and

7 then my question was: Up to that time, Mr. Smith

· 8 had been paying you alimony at 4500 a month. I

9 ! think that was the objected-to question, related

10 to how much he was paying out.

11 THE COURT: I frankly am not sure at this

12 ·point.

13 Can the court reporter help us?

14 THE COURT REPORTER: We just changed

15 reporters, your Honor.

16 THE COURT: Why don't you reframe your

17 question?

,18 MS. THOMPSON: All right.

19 BY MS. THOMPSON:

20 Q In 1987 you remarried; is that right?

21 A Yes.

22 Q And at that time, Mr. Smith no longer had

23 to pay you spousal support; isn't that right? 1.~0

CASAMO & ASSOCIATES Alex11ndria (703/ 765-9257 Culpeper (703/ 825-7482

,

I

I 1 I

I

2 I I

3 I I

4 I

I I

5

I 6 !

7

·a

9

10

11

( 12

13

14

15

16

17

~8

19

20

21

22

23


79

A Alimony, yes.

Q And at that time he was paying 4500 a

month, was he not?

A I don't remember exactly what it was but

I'll trust that you checked through it.

Q And you are aware of the real estate

downfall, are you not?

A From reading newspapers.

Q And you know what kind of work he was

doing when you were married to him?

A Yes.

Q And during the time of the life of this

UGMA fund from '83 to '94, before the bonds were

cashed, his financial situation went down, down,

down, did it not?

A He said it did, yes.

Q And his house was foreclosed; right?

A That's what he said.

Q Now, your Exhibit No. 4 which was the

zero coupon bonds which was attached to your

Motion for Judgment, they show Mr. Smith residing

in the District of Columbia, do they not, on Queen

Anne Street?

1.4:1. CASAMO & ASSOC/A TES

Alexandria (7031 765-9257 Culpeper (7031 825-7482

1

2

3

4

5

6

7

'8

9

10

11

! 12

13

14

15

16

17

·18

19

20

21

22

23


80

A Uh-huh.

Q And to your own knowledge, isn't it a

fact that in 1984, in September of 1984, he was

residing in the District of Columbia.

A Uh-huh.

Q And the bonds bear that address when they

were purchased.

A Yes.

Q Excuse me just a minute.

Referring to approximately a month or so

ago, isn't it a fact that you and your husband Mr.

Rosen and Dana Smith and Bill Smith had what I

would call a four-way telephone conversation?

A Yes, for part of the time it was four-way

and then become three-way.

Q And it got pretty heated at times, did

it not?

A Yes, it did.

Q And it was about Ryan and about this

case, wasn't it?

A It was about Ryan and about --

Q The money.

A some information that Mr. and Mrs.

CASA~'\~SSOC/ATES Alexandria (703} 765-9257 Culpeper (703/ 825-7482


81

1 Smith had informed Ryan about, which upset her

2 tremendously.

3 Q And it was also about money, too, wasn't

4 it, about the money

5 A Well

6 Q About this suit, about what was due under

7

8 A We called Mr. and Mrs. Smith because Ryan

9 came back --

10 Q If you'll just answer my question

11 MR. ROSENBLUM: Your Honor, she's asked

12 and I think she --

13 THE COURT: No, sir. The objection is

14 sustained. It was a very simple answer and can be

15 answered yes or no.

16 MR. ROSENBLUM: Very well, your Honor.

17 THE WITNESS: Could you say the question

~8 again, please.

19 BY MS. THOMPSON:

20 Q You had a discussion also about the money

21 that was at issue here in this case, did you not?

22 A

23 Q

Yes.

And isn't it a fact that you and your 14;3

CASAMO & ASSOCIATES Alexandria (703) 765-9257 Culpeper (7031 825-7482

I 1 I

I 2 I

3 I

4 I ! I

I 5

I 6 I

7 I I

8 I

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

82

.:.·

husband, or one of you said, to the --

MR. ROSENBLUM: Your Honor, I'm going to

object. I'm going to object.

MS. THOMPSON: Well, she was privy to the

conversation.

THE COURT: Let him make his objection,

please.

MR. ROSENBLUM: My objection is, your . -

Honor, that anything that is said in here that

would be construed as the settlement offer or

anything like that would not be admissible. I'd

like for her to proffer the relevancy of what

she's trying to

MS. THOMPSON: I am not at all going into

a -- There were no settlement offers in this

conversation that I'm talking about, your Honor.

This, I would proffer to the Court, that

in that conversation, the Rosens made it clear to

the Smiths that they wanted this money and that he

owed it and that they had plenty of money to take

care of this child, but that they wanted to build

this up. This was her nest egg for the future,

and that was the question.

1'-l~· CASAMO & ASSOCIATES

Alexandria (7031 765-9257 Culpeper (703) 825· 7482

Testimony of Nina Rosen I Redirect

1 MR. ROSENBLUM: I, again, reiterate my

2 objection. I don't know what the relevance of

3 that statement --

4 MS. THOMPSON: Well, it goes to motive.

5 MR. ROSENBLUM: -- would be and what the

6 relevance --

7 THE COURT: Objection sustained.

8 MS. THOMPSON: That's all I have. Thank

9 you.

10 REDIRECT EXAMINATION


12 Q So you remarried in 1987. So at least

13 since 1987, Mr. Smith hasn't had to pay you

14 alimony that he was required to pay under the

15 Property Settlement Agreement.

16 A That is correct.

17 Q The $4500 roughly a month.

18 A Correct.

19 Q And although he has told you his

20 financial condition has deteriorated with the

21 general demise of the real estate market, are you

22 aware of whether his life style has changed?

23 A Whether it's presently different now? 1.45

CASAMO & ASSOCIATES Alexandria (703J 765·9257 Culpeper (703} 825·7482

83


84

l. Q No, during this period of time from l.987

2 l.983

3 A Until?

4 Q Now.

5 A Present?

6 Q Yes.

7 A He certainly seems to be living, you

8 know, up until when he started telling me that he

9 was having problems. From all appearances, he was

l.O living very well.

l.l. Q And give us some examples of those

12 appearances.

l.3 A He has an estate on the Eastern Shore.

l.4 His four children went to private schools. They

l.S had quite a few house people working for them.

l.6 They had a full staff. They had a driver who

l.7 sometimes drove Ryan back and forth from my house

l.S to the Eastern Shore. They chartered private

l.9 planes to go traveling.

20 Personally, the children would come home

2l. all dressed in identical, very expensive clothing

22 from a jaunt on a private plane to, say, Georgia.

23 From all appearances, it certainly looked

1.~6 CASAMO & ASSOCIATES

Alexandria 17031 765-9257 CulpepeT(703J825-7482


85

.. :.·

1 like things were going very well financially.

2 Q Thank you.

3 MR. ROSENBLUM: Thank you. Those are all

the questions I have ..

MS. THOMPSON: If the Court please, may I

6 inquire as to material that goes beyond my

7 questions as to lifestyle because that was not

8 THE COURT: Overruled. You want to

9 inquire as --

10 MS. THOMPSON: Inquire as to new matter

11 that he's brought up in redirect.

12 THE COURT: I don't think it's new

13 matter. You've raised the question, Ms. Thompson,

14 that his financial condition, based on these

15 cases, and I accepted that line of inquiry.

16 MS. THOMPSON: Right. But then my

17 question is, going to the lifestyle, would be to

18 ask her: Didn't there come a time that all of

19 that fell apart? She's referring to --

20 THE COURT: Are you requesting to ask

21 additional questions

22

23

MS. THOMPSON: Questions on that --

THE COURT: on recross?

1.47. CASAMO & ASSOCIATES

Alexandria 17031 765-9257 Culpeper (703} 825-7482

Testimony of Nina Rosen I Recross

1 MS. THOMPSON: Right.

2 THE COURT: Certainly.

3 RECROSS EXAMINATION

4 BY MS. THOMPSON:

5 Q Isn't it a fact that what you have just

6 told the Court about lifestyle predated 1993 when

·7 Mr. Smith lost his property and had to move to

8 Georgia to rental property?

9 A Well, my daughter would visit him in

10 Georgia. It was my understanding that initially

11 they were in a rental property. However, there

12 were still family vacations. Their children were

13 in private schools.

14 Q When --

15 A Excuse me? I'll finish --

16 Q But I want you to tell me what you know

17 firsthand. That's what the question was.

18 A Firsthand? What would that mean?

19 Q After he moved to Georgia, what do you

20 know, not because someone else told you, but of

21 your own knowledge?

22 A From what Mr. Smith would tell me? Is

23 that what you mean? 148

CASAMO & ASSOCIATES AlexiJndriiJ ( 7031 765-9257 Culpeper (7031 825-7482

86

Testimony of Nina Rosen I Recross 87

.. lw·

1 Q Yes.

2 A I know that they lived in a rental house

3 and then moved to a house that was purchased by

4 his stepmother in Buckhead. And the first house,

5 I believe, was in Buckhead. I'm not sure exactly

6 where the second house was but, apparently, it was

7 quite an expensive neighborhood.

8 Q But you don't know whether it was

9 expensive other -- he didn't tell you it was an

10 expensive neighborhood?

A 11 No, he did not.

Q 12 You just assumed that?

13 A I didn't assume it. I happened

1.4 Q But someone bought it for him?

1.5 A His stepmother.

16 Q And then he moved back up here, did he

.17 not?

A 18 Correct.

Q 1.9 And lifestyle is not one of his four

20 children going to private schools

21 A Now, for the first time, as far as I

22 know, his children are not in private school. He

23 is, however, living in a lovely home in Great

14:9 CASAMO & ASSOCJA TES

Alexandria ( 7031 765-9257 Culpeper (7031825-7482

Testimony of Nina Rosen I Recross 88

1 Falls, a $611,000 home.

2 Q But he doesn't own that.

3 A His wife and his daughters rides horses,

4 as does Ryan.

5 Q But she does not own her horse, as does

6 Ryan; is that right?

•7 A From my understanding, she leases it.

8 That is correct.

9 Q And you didn't mean to say that you think

10 Mr. Smith owns that house he's living in.

11 A No, it's our understanding that it was

12 purchased after he found it and wanted it, by his

13 employer.

14 Q Just tell us what you know.

15 A I know that his employer purchased it for

16 him after he selected it.

17 Q But you don't know that firsthand, do

18 you?

19 A Yes, I do.

20 Q Because someone told you?

21 A Yes.

22 MS. THOMPSON: Then, your Honor, I would

23 strike that answer. 1.5·0

CASAMO & ASSOCIATES Alexandria (703} 765-9257 Culpeper (703) 825-7482

1

Testimony of William Smith I Direct

.. ,.

MR. ROSENBLUM: Your Honor, I believe

2 it's in the record.

3 THE COURT: Very well. The motion is

4 granted and that testimony will be stricken.

5 Have a seat with your counsel.

6 (The witness was excused.)

89

7 MR. SMITH: I would call Mr. William

8 Smith as an adverse witness.

9 Whereupon,

10 WILLIAM SMITH

11 the defendant, called by counsel on behalf of the

12 plaintiff and, having been first duly sworn, was

13 examined and testified, as follows:

14 DIRECT EXAMINATION


16 Q Mr. Smith, we've introduced an exhibit

17 which is the Property Settlement Agreement.

18 You recall signing that agreement, do you

19 not?

20 A Yes, sir.

21 Q And you recall that one of the provisions

22 was that you were going to pay for private

23 schooling.

1.51.. CASAMO & ASSOCIATES

Alexandria (703) 765-9257 Cu/pepeT (703) 825-7482

Testimony of William Smith I Direct 90


2 Q That thereafter you entered in you'd

3 visit Langley with now Mrs. Rosen; is that

4 correct?


6 Q And then you subsequently entered into

7 various agreements and have paid tuition to

8 Langley; is that correct?


10 Q That Property Settlement Agreement was

11 also incorporated into a final divorce decree. Do

12 you recall that?

13 A Yes, I do.

14 Q And, therefore, you would agree, would

15 you not, that the divorce decree order currently

16 requires that you pay Langley's school tuition.


18 Q Now, I want to ask the same series of

19 questions or abbreviate, if I can, with regard to

20 the unreimbursed medical expenses.

21 You understand that under the Property

22 Settlement Agreement you signed you are

23 responsible for unreimbursed medical expenses.

15Z CASAMO & ASSOCIATES

Alexandria (703) 765-9257 Culpeper (703/ 825-7482

1

2

3

4

5

6

7

8

9

10

11

\ 12

13

14

15

16

17

18

19

20

21

22

23


A Yes, I do.

Q And that that provision in the Property

Settlement Agreement was incorporated into the

divorce decree.

A Yes.

Q And that, therefore, pursuant to the

divorce order that is currently extant, that you

are required, legally required, to pay

unreimbursed medical expenses.

A That is correct.

Q And that would include medical, dental,

orthodontic, psychiatric, psychological. It's

spelled out; is that correct?

A That is correct.

Q And you, in fact, have made those

payments.

A Yes, sir.

Q Now, let's move to the zero coupon bonds.

There is no requirement in the Property Settlement

Agreement or the divorce decree orders that would

require you to have made a transfer to Ryan for

zero coupon bonds; is that correct?

A No, there is not. 1.~3

CASAMO & ASSOCIATES Alex11ndria {703} 765-9257 Culpeper (703) 825-7482

].

2

3

4

5

6

7

8

9

l.O

11

( 12

13

14

15

16

17

18

19

20

21

22

23


Q You did that, however, of your own

volition, voluntarily.

A Yes, I did.

Q Now, you've seen those things. What type

of business are you in, Mr. Smith?

A I'm in the real estate development

business.

Q And what exactly is that; do you build

houses, do you build commercial?

A Office buildings, primarily.

Q What company did you work for in

Washington at the time of your marriage with Nina?

A The John Ackridge Company.

Q And, thereafter, you moved to Georgia?

A Yes.

Q And with whom were employed there?

A Cousins Properties.

Q And you are currently still with Cousins

Properties?

A No, I'm with the HP Companies, Fairfax,

Virginia.

Q Hazel Peterson Company?

A Well, Hazel Peters was the predecessor.

15~ir CASAMO & ASSOCIATES

A/ex6ndria ( 703} 765-9257 Culpeper (7031 825-7482


. -,.

1 It's now HP Companies since September of 1995.

2 Q And exactly what do you do as a real

3 estate developer? What is your role in this

4 company?

5 A My personal role in the company? I

93

6 direct the office building group or division of HP

7 Companies.

8 Q And you've been involved in real estate

9 transaction, financing and the like?

10 A Sure.

11 Q So it would be fair to say that you are,

12 with regard to financing and lending and loans and

13 those sorts of things, a fairly astute

14 businessman, knowledgeable about financial

15 transactions?

16 A On commercial matters, yes.

17 Q Now, do you recall when you discussed

18 with Nina, now Nina Rosen, the zero coupon bonds?

19 A Yes, probably shortly after -- well,

20 sometime in '84, I would guess. She expressed

21 concern over -- we were having a lot of

22 discussions then which were not necessarily all

23 pleasant.


Alexandria ( 703) 765-9257 Culpeper (703) 825-7482

1

2

3

4

5

6

7

8

9

10

11

( 12

13

14

15

16

17

18

19

20

21

22

23

Testimony of William Smith I Direct -94

Q But do you recall that she asked you,

well, perhaps she should hold these bonds; she

should be the custodian?

A Oh, after I identified that I had bought

the bonds?

Q Yes, sir.

A Sure.

Q And do you recall what your response was?

A I told her no.

Q And do you recall you said, well, these

are her funds and I won't be able to get to them?

A No, I don't recall that.

Q Do you know how it is that the zero

coupon bonds, that certificates of the coupons

which are, I believe, Exhibit No. 5, how it was

that they came to be styled your name, custodial

account, for Ryan, UGMA Virginia?

A I'm not sure the VA stands for Virginia

but I'm not qualified to answer that.

The bonds carne about fairly simply.

Q My question to you is: Do you know how

it was it came about UGMA Virginia?

A No, I don' t .


AlexiJndriiJ ( 7031 765-9257 Culpeper (7031825-7482

1

2

3

4

5

6

7

8

9

10

1l.

( 12

13

14

15

16

17

18

19

20

21

22

23


.:.·

Q You'd recognize the initial UGMA is

Uniform Gift to Minors Act?

A I do now, yes.

Q Well, you indicated you had submitted

and signed a payor's request, a taxpayer

identification number, and where it says social

security number requested but not yet received; is

that correct? I'll show it to you.

A That's my signature.

Q So what that document purports to do is

that you're going to put Ryan's social security

number there; is that correct?

A That is correct. That was consistent

with my instructions with the brokers when I

ordered the bonds.

Q Now, there was nothing that would have

prevented you from buying zero coupon bonds in

your own name, was there?

A No. In retrospect, that was obviously

the thing to do.

Q Or there was nothing to prevent you from

putting in a custodial account naming Nina Rosen

as the custodian?


Alexandria f703J 765-9257 Culpeper {703} 825-7482

].

2

3

4

5

I 6

7 I II 8 il

9 !I II II

10 I

I

11 ! I I

\ 12 l

l.3

].4

15

16

17

18

19

20

2l.

22

23


A No, but I certainly don't see a reason

why I would have done that, just having agreed to

pay her all the money I agreed to pay her, and to

pay her.

Q Now, in l.984 you began cashing and

selling these bonds; is that correct?

A That is correct.

Q All right.

A 1994.

Q '94, excuse me. I misspoke. And Exhibit

No. 4 is a list of zero coupon bonds and the date

you sold them. I think you supplied them.

A I did supply a list and I am assuming

that you are describing that list.

Yes, sir.

Q Now, you didn't tell Nina Rosen or the

Rosens that you were doing this at the time you

began cashing them, did you?

A No, I did not.

Q And you deposited -- isn't it correct --

you deposited all but one of these bonds into your

personal checking account.

A That is correct. 1.58

CASAMO & ASSOCIATES Alexandria (7031 765-9257 Culpeper (7031 825-7482


1 Q A little over $58,000.

2 A Right, a little over $58,000.

3 Q And that account was you and your current

4 wife Dana; is that correct?


6 Q Personal checking account.


8 Q Now, from this personal checking account,

9 monies were drawn for ordinary living expenses,

10 yours and Dana's and your four children's?


12 Q ATM charges and the like.

13 A And expenses I paid for Ryan's benefit,

14 too.

15 Q Would you agree with the statement, would

16 you not, that depositing that money into your

17 personal account violated at least the requirement

18 of the Uniform Gift to Minors Act to keep the

19 profits separate at all times and distinct from

20 all other property in a manner sufficient to

21 identify it clearly as custodial property of a

22 minor?

23 A I had no intention -- I had no knowledge


Alexandri11 (7031 765-9257 Culpeper (7031 825-7482

i .

I i I

·I

. .


::.-

1 that I needed to do that.

2 Q Now, there is this one bond that shows

3 there it was as deposit. It says NA next to that,

4 and that was used as collateral for notes for a

5 partnership; is that correct?


7 Q And the notes are Exhibit Nos. 6 and 7.

8 I'll hand you copies of them.

9 A Sure.

10 Q These are notes that you signed; is that

11 correct?


13 Q And who is it for? Is it a general

14 partnership?

15 A No, it's a limited partnership.

16 Q And owned, operated a restaurant in

17 Georgia.


19 Q And Ryan had no interest, an official

20 interest or otherwise, in this partnership; is

21 that correct?

22 A

23 Q

No, not directly, no.

And did you advise the Rosens that you i-60

CASAMO & ASSOCIATES AlextJndtiiJ (703} 765-9257 Culpeper (703} 825-7482


. -,,.

1 were using this one bond as additional collateral

2 for those notes?

99

3 A Of course not. I didn't see any point to

4 it.

5 Q Now, there came a time, did it not, that

6 that loan was either called upon and you

7 authorized the bank to sell and apply the funds to

8 the loan?

9 A Yes, sir.

10 Q That's your letter, Exhibit No. 9, dated

11 April 18, 1994; is that correct?

12 A I don't recall the date. Let me see it

13 and I'll be happy to identify it.

14 Yes.

15 Q And that is the bank -- it's a letter on

16 bank stationery to the security to sell those

17 funds. In that letter you identified that these

18 funds are custodial funds of Ryan.


20 MR. ROSENBLUM: Your Honor, I'd move for

21 admission of Exhibits 6, 7 and 9.

22

23

THE COURT: Is there an objection?

MS. THOMPSON: Eo objection. 16i.

CASAMO & ASSOC/A TES Alexandrill (703} 765-9257 Culpeper (703J 825· 7482

1

2

3

4

5

6

7

8

9

10

11

{ 12

13

14

15

16

17

18

19

20

21

22

23


THE COURT: They will be received.

(Whereupon, the documents referred to

above, having been previously marked

for identification, were received in

evidence.)

BY MR. ROSENBLUM:

Q Mr. Smith, would you agree that the use

of the custodial funds, at least in using them to

secure and pay toward a limited partnership

agreement, would be a breach of your fiduciary

duties as the custodian?

MS. THOMPSON: Your Honor, I object. It

calls for a legal answer.

THE COURT: Sustained.

BY MR. ROSENBLUM:

Q Who is Pamela Forrester?

A My mother.

Q And certain documents that have been

produced to me, there are certain checks that were

made to the Rosens, I think on child support, that

were from an account of Pamela Forrester and R.P

Forrester.

A Uh-huh. 1.6Z

CASAMO & ASSOCIATES Alexandria (703} 765·9257 Culpeper (7031 825·7482


.. ,. 101

1 Q Is it your testimony that she made child

2 support payments on your behalf?

3 A No, she did not.

41 Q How is it that these checks that you've

5 listed in some of your documents for child support

6 come from her account?

7 A Because at the time CitiCorp, through

8 executing a judgment against me, had garnished my

9 checking accounts and garnished my salary. So

10 when I would pay -- when I would receive my

11 paycheck from Cousins, I would cash it and I would

12 ·give it to my mother to use her checking account

13 to pay my bills.

14 Q And the account we're talking about is

15 the bank account that you deposited the money into

16 from these zero coupon bonds; is that the account

17 that was attached by CitiCorp?

18 A Yes, it was.

19 Q And about when was this attached?

20 A Must have been March of '95 --March '95,

21 yes.

22 Q And were there any funds gathered by

23 CitiCorp at that time?


Alexandria (703) 765-9257 Culpeper {7031 825-7482

(

1

2

3

4

5

6

7

8

9

10

11

\ 12

13

14

15

16

17

18

19

20

21

22

23 .,


A Yes, it was probably about $6,000 in

there.

Q So your counsel had handed me a history

of educational expenses that had been paid in

February of '94 to February of '95 of about

$15,000. I think that's Exhibit 16.

MS. THOMPSON: Let me hand one to you so

he'll know what he's talking about. It happens to

be marked Defendant's 16.

BY MR. ROSENBLUM:

Q My question goes to this, Mr. Smith: It

is true, is it not, that you deposited over

$58,000 into your personal checking account

between the beginning of February of '94 into '95

as you cashed these zero coupon bonds, and you

only paid $15,000 of educational expenses during

this period of time. And the account had

thereafter been garnished and closed; is that

correct?

A That account is still open.

Q But zero balance. What's happened to the

rest of the funds?

A Also since that period of time, I've

16~ CASAMO & ASSOCIATES

Alexandria (703} 765·9257 Culpeper f703J 825· 7482

Testimony of William Smith I Direet 103

.l.·

1 actually paid closer to $24,700 in educational

2 expenses, about $4,200 in medical expenses --

3 Q Well, my question to you is, the money

4 that you put into that account, those funds have

5 been gone; is that correct? You're paying

6 additional amounts out of other sources, current

7 income.

8 A I pay expenses, other expenses other than

9 educational expenses, for Ryan's benefit. I mean,

10 I can't -- including child support, taxes on the

11 bonds, medical expenses. I don't see any reason

12 just to limit it just to that.

13 Q What was the CitiCorp foreclosure for,

14 CityBank foreclosure?

15 A Property in Maryland.

16 Q The Eastern Shore property?


18 Q And when was that foreclosed?

19 A February of '94.

20 Q And you had owned it since when?

21 A We actually settled in June of -- I guess

22 we settled in June of '91. We contracted to buy

23 · it in September of '90, I guess it was. 1,6~~

CASAMO & ASSOCIATES Alexandria (703} 765-9257 Culpeper (703} 825-7482

1

2

3

4

5

6

7

8

9

10

11

l 12

13

14

15

16

17

18

19

20

21

22

23


.. ·•

Q And what was the purchase price of that

property?

A Two million, nine.

Q And the mortgage?

A Two million, one.

Q And that wasn't your primary residence,

was it?

A Yes, it was my primary residence.

Q Until you moved to Atlanta?

A That is correct.

Q Mr. Smith, you've indicated, at least,

that your payments for tuition were required under

your divorce decree, obligation of support on your

divorce decree; isn't that correct?

A That is correct.

Q Your medical reimbursements were required

under the divorce decree, legal obligations; is

that correct?

A That is correct.

Q You would agree, would you not, that your

payments, therefore, for medical expenses and for

tuition at Langley were that you paid from these

zero coupon proceeds, if any, would be in


Alexandria (703) 765-9257 Culpeper (703}"825-7482

(


::r·

l. substitution for your legal obligation to support

2 Ryan under the terms of the Property Settlement

3 Agreement?

.4 A I'm not sure I understand that.

5 Q Well, let me see if I can rephrase it.

6 You would agree, would you not, with the

7 fact that you now claim that you utilized the

8 proceeds of these zero coupon bonds which you sold

9 and deposited into your personal account --

l.O A Right.

].]. Q to pay the Langley tuition and medical

l.2 expenses

l.3 A And other things, too.

Q -- were expenditures in substitution for

l.S your legal obligation to support Ryan under the

l.6 terms of the Property Settlement Agreement --

l.7 MS. THOMPSON: Your Honor, I'm going to

l.S object to the question because, first, I think it

l.9 calls for a legal conclusion and, further, he's

20 trying to paraphrase the statute. And for that

2l. reason, it's kind of asking him for a legal

22 answer, an interpretation.

23 And, secondly, the form of the question, 1.67

CASAMO & ASSOC/A TES Alex11ndti11 (7031 765-9257 Culpeper (7031 825-7482

I I I ! I I

'


••

1 it might be in fulfillment of an obligation but

2 not in substitution. And he's using the word so I

3 think it is something the witness can't answer.

. 4 He can give the facts. Yes, I cashed the

5 bonds. Yes, I paid these things with it. I think

6 it's for the Court to make that conclusion.

7 THE COURT: Well, the objection is

8 overruled. I think the sense of the question is

9 clear enough. I don't think that the

10 substitution of the -- excuse me, that the word

11 substitution varies, the word fulfillment varies

12 and the word substitution.

13 So you may answer the question, sir.


15 Q Would you answer the question.

16 A I used those funds to pay those

17 obligations.

18 Q And you would agree, would you not, that

19 the payment of the medical expenses and the

20 payment of the tuition were not payments that were

21 in addition to your legal obligation under the

22 support agreement but were, in fact, the very

23 obligations of the support.


Alexandria (7031 765-9257 Culpeper 1703} 825-7482

(


1 A Say that again.

2 Q These are not payments that were

3 additional support that you were obligated to pay,

. 4 were they?

5 ; !!·

MS. THOMPSON: That he was obligated to

6 pay?

7

8 :i l~

9 'I

:I ;I

10 ., I

11 !I !I :i

12 :I I

13

14

15

16

17

18

19

20 I

21

22

23

THE WITNESS: I was obligated to pay.

BY MR. ROSENBLUM:

Q That's right. So paying the tuition at

Langley or paying the unreimbursed medical

expenses were not additional, voluntary expenses

that you just voluntarily made. They were the

legal obligations to do it.

A I used all the funds I had available to

fulfill an obligation.

Q And, Mr. Smith, you have at no time

applied to any court for reduction of child

support.

A No, I have not .

Q Has anything that Mrs. Rosen or Ryan,

your daughter, has done or said to you that has

prevented you from so applying?

A Certainly I got the gist that my wife --

1.6~ CASAMO & ASSOCIATES

Alex~ndtilJ (703} 765·9257 Culpeper (703} 825·7482

1

2

3

. 4

5

6

7

8

9

10

11

( 12

13

14

15

16

17

18

19

20

21

22

23


I think the tenor of my wife's, my ex-wife's

demeanor with respect to our request to reduce it

led me to believe that that would not be something

that would be openly welcomed .

Q Let me ask one final series of questions,

Mr. Smith.

These zero coupon bonds earned a

substantial interest at the time that you

purchased them; do you recall?

A Interest rates were fairly high, yes.

Q Twelve or 14 percent

A Twelve and a half on some of the things,

in that range.

Q Now, you can't find zero coupon bonds at

that --

A The rates vary daily.

Q Do you recall what it was that, at

maturity, what these zero coupon bonds was, the

total amount of proceeds

A If each of them had matured, it would

have been $110,000. I bought four $20,000 bonds,

three 8000 and one 6000 to mature at the various

dates for high school and college education.


Alex11ndri11 (703) 765-9257 Culpeper (703} 825-7482


•·

1 Q And the interest -- have you ever

2 calculated or attempted to calculate what the

3 interest would be, just using the simple interest

4 at eight percent from the dates that you had sold

5 these bonds to the present date would be?

6 A No. Why would I do that?

7 Q It would be less, naturally, than the

8 fair market value of those bonds today.

9 A No, it would be less than their maturity.

10 Q Less than their maturity. I stand

11 corrected.

12 Now, do I understand your testimony that

13 when you purchased these bonds, that you knew that

14 they were a Uniform Gift to Minors custodial

15 account which is your testimony that you didn't

16 know it was Virginia or some other jurisdiction?

17 A I didn't know it was Uniform Gift to

18 Minors Act. My instructions to my broker were I

19 wanted to have them taxed at my daughter's tax

20 rate as opposed to my marginal tax rate.

21 He bought them. I told him I wanted them

22 to produce eight years. I told him the amounts.

23 He bought them. Told me how much I needed to send

l.·i'~ CASAMO & ASSOC/A TES

Alexandria (703) 765-9257 Culpeper (7031 825-7482

1

2

3

. 4

5

6

7

8

9

10

11

( 12

13

14

15

16

17

18

19

20

21

22

23


~-

him. I sent him a check, and that's the way they

showed up. My instructions to him were not to do

anything with respect to a gift or any sort of

gift act. It was a tax motivation .

Q Why was it, then, that you wouldn't want

to have them held by her mother?

A Because it was a voluntary act on my

part. I thought they were my funds. I thought I

could do with them whatever I needed to do to

fulfill whatever obligations I had. I had no idea

that those funds were not mine.

Q But the purpose of that would be to

assure some funds for Ryan.

A That's exactly right.

Q Some funds over and above your

obligations under the Property Settlement

Agreement.

A No, why would it be over and above? Why

couldn't I use those funds ·to fulfill my

obligation? I signed up for it. I simply wanted

to have some vehicle to make sure that, in future

times, if things turned differently, that I'd have

funds available to fulfill my obligation.

cAJAZ~& ASSOCIATES A/extmdrill (703} 765-9257 Culpeper (7031 825-7482

1

2

3 I

li . 4 ~I

jl

5

I 6 I

I 7

I 8 I I

9 !

10

11

12

13

·14

15

16

17

18

19 I

20 !

I I

21

II 22

23 !!

Testimony of William Smith I Cross

111

Why would that be in addition to it? I

don't understand.

Q And the reason ~hy you didn't want is

that the reason why you didn't want Nina to hold

them as custodian?

A Sure. They were my property. It would

be like giving her --

THE COURT: Mr. Rosenblum, we've been

over this before, twice.

MR. ROSENBLUM: Thank you.

Your Honor, just to make sure that I

introduced -- I think I've introduced what I

wanted. Thank you.

THE COURT: Cross?

CROSS EXAMINATION

BY MS. THOMPSON:

Q Just one question, Mr. Smith: ·The

divorce has been referred to. Was the divorce

between you and Nina Rosen entered by the court in

the District of Columbia?

A Yes, it was.

have.

MS. THOMPSON: Thank you. That's all I

CA~ & ASSOCIATES Alexandria (703} 765-9257 ~lpeper f703J 825-7482

Testimony of William Smith"/ Cross

1.12

1 THE COURT: Have a seat with your

2 counsel, sir.

3 THE WITNESS: Thank you.

. 4 (The witness was excused.)

5 THE COURT: Call your next w~tness,

6 please.

7 MR. ROSENBLUM: That would conclude my

8 case in chief.


10 MS. THOMPSON: If the Court please, I

11 would renew my motion to dismiss on grounds of

12 jurisdiction for the reason that the evidence of

13 the plaintiff has shown that there was not a

. 14 transfer pursuant to the Virginia Uniform Gift to

15 Minors Act and that therefore the property could

16 not become the custodial property of the child.

17 The evi'dence ·s·hO"ws on direct ·and cross

18 examination the residence of the child was with

19 the mother. And from May of '84 forward, at least

20 past September of '84, was with the mother in the

21 District of Columbia.

22 She has admitted -- the plaintiff has

23 admitted that the defendant lived in the District 1.7i~

CASAMO & ASSOCIATES Alexandria (703} 765-9257 Culpeper (7031 825-7482

r")

j!

1 I 2 I

! I

I 3

~ 4 I

I 5

I

I 6

I 7

8

9

10

11 (

12

13

14

15

16

17

18

19

20

21

22

23

113

'-..

of Columbia. The bonds that have been put into

evidence, the photocopies, show the address of the

property as being at Queen Anne Street or Lane in

the District of Columbia. And that old adage

about one's case can rise no higher than their own

evidence shows, on its face, that this isn't a

transfer under the Virginia act, and that's how

the case is postured here today.

THE COURT: Thank you.

Mr. Rosenblum?

MR. ROSENBLUM: Your Honor, I did want to

point out one thing, that I didn't have a chance

to look at the statute in its entirety this

morning when counsel sprang that on me but I did

want --

THE COURT: Well, sir, that's gone by.

MR. ROS·ENBLUM: · I understand. · I believe

that the provision 31-38, if I just may read this

one provision.

THE COURT: Yes, sir.

MR. ROSENBLUM: It says and this is

the last paragraph, "Transfer --"

THE COURT: Let me get it, though. I

1,73 CASAMO & ASSOCJA TES

Alex11ndria (703} 765-9257 Culpeper (703} 825·7482

1.

2

3

4

5

6 I ii

7 I

I 8

I 9 I

I I

10 I

11

12

13

14

15

16

17

18

19

20

21

22

23

1.14

~-

have it.

MR. ROSENBLUM: Last paragraph, sir.

"A transfer that purports to be made and

which is valid under the Uniform Gifts to Minors

Act or a substantially similar act of another

state is governed by the law of the designated

state and may be executed and is enforceable in

the Commonwealth if, at the time of the transfer,

the-transferror, the minor or the custodian is a

resident of the designated state or the custodial

property is located in the designated state."

I believe what that does, it says that,

look, if you want to enter into a Uniform Gift to

Minors Act out of D.C., it's enforceable here, and

I don't believe that that's the gravamen.

I think that this Court, like in a tort

case or anything like that, can apply the law. If

the Court deems that the District of Columbia laws

apply within this court, as certainly able to

under this act, it can apply the laws of the

designated states.

And I don't believe that the motion

should be --1.76

CASAMO & ASSOCJA TES Alexandria (703) 765-9257 Culpeper (703) 825-7482

1

2

3

4

5

6

7

a

9 I

10

11

( 12

13

14

15

16

17

18

19

20

21

22

23

.. ,. 115

THE COURT: The motion is granted. This

was a suit that was brought under the Virginia

act. It was not one that~was brought under the

D.C. act or any other act. The evidence is

conclusive on the point of this Court's subject

matter jurisdiction.

Accordingly, the Court grants the motion

to strike.

I'll ask counsel to prepare an order

before you leave today that's consistent with my

ruling.

MS. THOMPSON: I think, your Honor, I

have a very simple order, if I can put my hands on

it.

MR. ROSENBLUM: Your Honor, I'm not going

to endorse an order without taking the time to

adequately put on the order my objections. I'm

not trying to be overly argumentative but I'm --

THE COURT: Well, I am going to instruct

you to endorse an order, sir. You may take as

much time before you leave the courthouse today to

do that. In other words, I'll be here all

afternoon but I would like both of you to endorse

1:~7 CASAMO & ASSOCIATES

Alexllndtill (703/ 765-9257 Culpeper (703/ 825-7482

ll6

:lr·

1 an order that incorporates my ruling and includes

2 any exceptions to my ruling that you wish to note.

3 MS. THOMPSON: I noted the general

4 exception and, your Honor, he can write -- there

5 is plenty of room to write in. And the rest of my

6 order is very simple. It's basic.

7 MR. ROSENBLUM: And so that I am clear to

8 write my exceptions, then, as I understand the

9 Court's ruling is that by filing it under the

10 Virginia statute, that this Court doesn't have

11 jurisdiction

12 THE COURT: Subject matter jurisdiction

13 over the cause of action that you brought and that

14 that was demonstrated as part of the plaintiff's

15 case in chief, as all the testimony reflected, in

16 effect, argued prior to the beginning of this

17 trial, in the motions that were argued.

18 MR. ROSENBLUM: Very well, your Honor. I

19 think I understand where I need to proceed.

20 THE COURT: Very well. Thank you.

21 (Whereupon, the proceedings were

22 concluded at 12:35 o'clock p.m.)

23 1 .. i'8

CASAMO & ASSOCIATES Alexandria (7031 765-9257 Culpeper 1703} 825· 7482

;I II

!I ;I

i! il

II ;:

l __ ..,

CERTIFICATE OF COURT REPORTER

I, SHANNON C. HOPCHAS, VR, a verbatim

court reporter and a notary public and for the

Commonwealth of Virginia, the officer before whom

the foregoing hearing was taken, do hereby certify

that I took the notes of the foregoing hearing by

Stenomask, and thereafter reduced the same to

typewriting; that the foregoing is a true record

of· -said hearing to the best of my knowledge and

ability; that I am neither counsel for, related

to, nor employed by any attorney or counsel

i employed by the parties to the action in which the il ~ foregoing hearing was held; and further, that I am

;I -! not a relative or employee or any attorney or :f

counsel employed by the parties thereto; nor

financially or otherwise interested in the action.

SHANNON C. HOPCHAS, VR

Verbatim Court Reporter

1.i'3 CASAMO & ASSOCIATES

Alexandria (703} 765-9257 Culpeper (703} 825-7482

( (

-~.,P.: , o: ..

·<~~~2;;;,; ./ NINETEENTH JUDICIAL CIRCUIT OF VIRGINIA

:.· Fairfax County Judicial Center

4110 Chain Bridge Road Fairfax, Virginia 22030-4009 (703) 246-2221 Fax: (703) 385-4432

RICHARD J. JAMBORSKY F. BRUCE BACH

COUNTY OF FAIRFAX CITY OF FAIRFAX

J HOWE BROWN JACK B. STEVENS

MICHAEL P. McWEENY THOMAS S. KENNY

MARCUS D. WILLIAMS GERALD BRUCE LEE STANLEY P. KLEIN

ROBERT W. WOOLDRIDGE. JR ARTHUR B. VIEREGG. JR

JANE MARUM ROUSH M. LANGHORNE KEITH

DENNIS J. SMITH DAVID T. STITT

JUDGES

David Rosenblum, Esquire Rosenblum & Rosenblum 526 I<ing Street._ Suite 211 P. 0. Box 58 Alexandria, VA 22313-0058

Betty A Thompson, Esquire 1800 North I<ent Street Suite 1001 P. 0. Box 12807 Arlington, VA 22209

May 24, 1996

Re: Ryan E. Smith, et al. v. William C. Smith Law No. 142877

Dear counsel:

OR MARK A ZAFFARANO DIRECTOR. JUDICIAL OPERATIONS

JAMES KEITH LEWIS D MORRIS BURCH MILLSAP

BARNARD F JENNINGS LEWIS H. GRIFFITH

WILLIAM G. PLUMMER THOMAS J. MIDDLETON THOMAS A. FORTKORT QUINLAN H. HANCOCK

RETIRED JUDGES

I have reconsidered my ruling in the captioned case sua sponte. The plaintiffs motion for judgment asserted a cause of action alleging that the defendant, William C. Smith, had been designated a custodian and that a gift had been made to his daughter, Ryan E. Smith, under the Virginia Uniform Act. The evidence presented in the course of the plaintifrs case in chief showed that the designation and gift could. __ _ not have been made under the Virginia Act. Since the plaintiff did not allege that the gift was made pursuant of the laws of the District of Columbia; nor indeed was it shown that such a law as promulgated by the District of Columbia, the defendant's motion to strike predicated on Virginia Code Section 31-38 was appropriate and should have been granted.

180

Ryan E. Smith, et al. v. William C. 'Smith LawNo. 142877 May 24, 1996 Page2

I still conclude that the defendant's motion to strike, based upon the plaintiff's §ilure to demonstrate that either the gift or the parties had any nexus to Virginia at ~ ~ time the gift was made, should have been granted. Upon reconsideration, however, the motion should be granted, because the plaintiffs evidence f~: demonstrate that the defendant owed fiduciary duties der the Virginia Act as alleged, not that tius Court did not have subject matter jurisdiction. Tl\!s Court, of course, did have subJect matter Junsdiction to consider a cause of action based upon a violation of the terms of the Virginia Act.

For the foregoing reasons, I have vacated the order endorsed by the parties. Ms. Thompson is requested to prepare an order consistent with this letter opinion; to present it to Mr. Rosenblum for endorsement and for exceptions; and to file it with the Clerk for routing to me for entry not later than May 31, 1996. Your cooperation in meeting the above deadlines will be appreciated. If they are unduly inconvenient, please contact my law clerk, Richard Mitchell (246-41 89) to make alternative arrangements.

ABV/cw

1.Bl.

~-

VIRGINIA:



Plaintiff

vs.

WILLIAM C. SMITH

) ) ) ) ) ) AT LAW NUMBER 142877 ) ) )

----~D~e~f~e~n~d=a=n~t~--------------------------) ORDER

THIS MATTER CAME BEFORE THE COURT on the 22= day of May, 1996 upon

the evidence presented by Plaintiff, the argument of counsel, and the

~initial ruling of this Court from the bench granting Defendant's Motion -1 to Strike for lack of subject matter jurisdiction; and

·: UPON CONSIDERATION WHEREOF, it initially appeared to the Court thac

: this Court lacked subject matter jurisdiction as required by §31-38 of

~ the 1950 Code of Virginia, as amended, and therefore there was a lack of

· authority to hear and determine this action; and ~ ~

UPON RECONSIDERATION THEREOF, SUA SPO~!TE, it appearing to the Court

that this Court does have subject matter jurisdiction over matters

arising under the Virginia Uniform Transfer to Minors Act, Virginia Cod:

Section 31-38 et. seq.; and

IT FURTHER APPEARING TO THE COURT that Defendant's Motion to Strike

made at the conclusion of Plaintiff's case should be granted because tra:

evidence presented in the course of the Plaintiff's case in chief showe~

::.·

that the alleged designation under the Uniform Transfer to Minors A=:

could not have been made under the Virginia Act; and

IT FURTHER APPEARING TO THE COURT that the Plaintiff's evidence

failed to demonstrate that the Defendant owed fiduciary duties under the

Virginia Act as alleged; accordingly, it is

ADJUDGED, ORDERED and DECREED that Defendant's Motion to Strike be

and hereby is GRANTED on the ground that Plaintiff's evidence was

. insufficient to support the claim for relief sought herein, for the

:reason that -P-laintiff's evidence showed that the alleged designation and .. ~ gift was not made under the Virginia Uniform Transfer to Minors Act and

; therefore Defendant owed no fiduciary duties to Plaintiff under the

; Virginia Act. -:-

AND THIS CAUSE IS ENDED.

ENTERED this 3 / L'" day of /nAf 1996.

2

_"""_,..n r':') 'U. -~ (~GD) t. n-.u-r ~1 . ., , , , .. . ··- '..J 1,. J , ..... ~-'- J .~.,:.c-: .. ~1-~ -'· ,.,_.~ ... v t• t

ARTHUR B. VIEREGG, JR. JUDGE

1.83

Seen and Objected To:

ROSENBLUM and ROSENBLUM

By: ll/c~ltJ., ~Mw DAVID oNifLtJM 1

Counsel for Plaintiff 526 King Street Suite 211 Post Office Box 58 Alexandria, Virginia 22313-0058 Telephone: (703) 684-~060

We Ask For This:

3

a"i ~I

'I ll II I • ,.

V I R G I N I A:


RYAN E. SMITH by her next friend* and parent, NINA ROSEN *

* Plaintiff, *

* v. * At Law No.: 142877

* WILLIAM c. SMITH, *

* Defendant. *

*

MOTION TO VACATE ORDER AND TO PERMIT AMENDMENT OF PLAINTIFF'S PLEADINGS TO CONFORM TO THE EVIDENCE

. _ COMES NOW, the Plaintiff, RYAN E. SMITH, by her next

friend and parent, NINA ROSEN, by counsel, and moves this Court for

an Order permitting Plaintiff to amend its Motion for Judgment to

conform to the evidence and, in support of the same, states as

follows:

1. Plaintiff filed a lawsuit alleging breach of the

Virginia Code 31-38, Virginia Uniform Transfer to Minors Act by the

Defendant. Such allegations were presumptively valid, given the

fact that the custodial account created by the Defendant,

designated Virginia (i.e. 11 William C. Smith C/F Ryan Smith,

UGMAVA").

Moreover, the Plaintiff requested that the Defendant

1 admit and the Defendant, in fact, did admit that he had created a I i I

custodial account, pursuant to Virginia Uniform Gift to Minor Act,

now Uniform Transfer to Minors Act. (See Request for Admission No.

1, Plaintiff's Exhibit 1.)

1

ll '·

'

2. Only on the morning of the trial did the Defendant

raise, for the first time, the factual predicate that, at the time

the gift was made, both the Defendant and the minor were residents

of the District of Columbia.

3. The Defendant erroneously argued to the Court that

the Court did not have "subject matter jurisdiction." Plaintiff

argued that it had jurisdiction to enforce either Virginia or the

District of Columbia laws.

4. Plaintiff was under the impression that the Court

would allow Plaintiff to file pleadings at the conclusion of its

case to .determine the "jurisdictional" defense.

5. This Court has recently reviewed its _Ruling and

determined that the Court has jurisdiction.

6. Given this procedural history, the Plaintiff should ~ f (()/· 3~-=l

certainly be permitted to amend its pleadings to conform to the

evidence and to allege a violation of the District of Columbia

Uniform Gift to Minors Act {now Transfer to Minors Act) .

7. Copies of that Act are attached hereto and the Court

can take judicial notice, at least for purposes of this Motion,

that the Uniform Gift to Minors Act, now the Uniform Transfer to

Minors Act in the District of Columbia is identical to that of

Virginia.

8. Since both Plaintiffs and the Defendant are residents

of Virginia, this Court has jurisdiction over the Defendant.

Moreover, pursuant to the Uniform Acts of both the District of

Columbia and Virginia, this Court has the jurisdiction to enforce

2

'

I II :I

II ~ !

.. ,. the Act of either the District of Columbia or of Virginia.

WHEREFORE, Plaintiff prays that the Court enter an order

granting its motion to amend its Motion for Judgment to allege a

violation of the District of Columbia Uniform Gift to Minors Act,

now Uniform Transfer to Minors Act, and order that the case be

rescheduled to the trial docket.

DAVID ROSENBLUM, ESQUIRE Virginia-Bar No. 019974 Counsel for Plaintiff Rosenblum and Rosenblum A Professional Corporation Post Office Box 58 526 King Street, Suite 211 Alexandria, Virginia 22313 Telephone: 703/684-0060

RYAN E. SMITH by her next friend and parent, NINA ROSEN

By: ~----~------------------------Counsel

CERTiFICATE OF SERVICE

I hereby certify that a true copy of Plaintiff's Motion

to Vacate Order and to Permit Amendment of Plaintiff's Pleadings to

Conform to the Evidence was mailed by postage pre-paid, first class

mail to Betty A. Thompson, Esquire, 1800 Kent Street, Suite 1001,

Arlington, Virginia 22209, all on this 31st day of May, 1996.

David Rosenblum

3

187

4 >

VIRGINIA: IN THE CIRCUIT COURT OFF AIRF AX COUNTY


Plaintiff,

vs.

WILLIAM C. SMITH

Defendant.

) ) ) ) ) ) ATLAWN0.142877 ) ) ) )

MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO ~ PLAINTIFF'S MOTION TO VACATE ORDER AND TO PERMIT a AMENDMENT OF PLAINTIFF'S PLEADINGS TO CONFORM TO THE EVIDENCE ~

z 8 INTRODUCTION :1. ::?:

~ Plaintiffs motion seeks a new trial under the guise of amending her pleadings pursuant to i= <t > Section 8.07-377 of the Virginia Code. Her reliance on this statute is misplaced. This Court sustained ;ii.. c Defendant's Motion to Strike on the specific basis that "the designation and gift could not have been

- made under the Virginia Act." For the following reasons, the relief sought should be denied.

- I. VIRGINIA CODE SECTION 8.01-377 DOES NOT APPLY IN THIS CASE

A motion under Virginia Code 8.01-377 comes too late when made after the Court has decided

the case on its merits. The statute provides:

If, at the trial of any action, there appears to be a variance between the evidence and the allegations or recitals, the court, if it considers that substantial justice will be promoted and that the opposite party cannot be prejudiced thereby, may allow the pleadings to be amended, on such terms as to the payment of costs or the postponement of the trial, or both, as it may deem reasonable. Or, instead of the pleadings being amended, the court may direct the jury to find the facts, and, after such finding, if it consider the variance such as could not have prejudiced the

1.88

.,.

opposite party, shall give judgment according to the right of the case. (Emphasis added.)

On its face, the statute contemplates actions to be taken during the trial, and not on post-trial

motion. Moreover, Plaintiffs right to invoke the statute can be-- and was-- waived. A party wishing to

avail himself of such relief must timely object to the variance in the trial court. DuPont Eneineering

Co. V. Blair, 129 Va. 423, 106 S.E. 328 (1921). The effect of amendment under the statute is to admit

evidence that would not have otherwise been admissible, Norfolk & W. Railway v. Perdue, 117 Va.

111, 83 S.E. 1058 (1915), and the statute does not contemplate admitting new evidence after entry of a

~ Final Order.

< Plaintiff argues that because the evidence in her case in chief established that the parties and the Ci .... .J subject property were in the District of Columbia at the time of the transfer, the District of Columbia Q ~")

:! Uniform Transfer to Minor's Act applies. However, the D.C. Act was not put into evidence during the ~ 1-

# Plaintiffs case in chief. Indeed, only after entry of the Final Order does the Plaintiff ask this Court to ~

> 1-

~ take judicial notice of the D.C. Act.

In addition, Virginia Code Section 8.01-377 allows amendment only when there is no prejudice

~ to the opposite party. Here, allowing Plaintiff to amend her pleadings will permit her to retry her case

on new evidence based on a new theory after she had rejected this court's offer of a continuance. While

the D.C. Uniform Transfer to Minors Act is substantially similar to the Vfrginia'Unifo.riifTransfer to

Minors Act, the acts are not, as Plaintiff contends, identical.1 Granting the Plaintiffs motion would

substantially prejudice the Defendant, because a Section 8.01-3 77 amendment is appropriate only where

the evidence proved at trial conclusively establishes the Plaintiffs claim and does not surprise the

1For example, the D.C. act creates a more stringent duty on the part of a custodian than does the Virginia Act. Compare Section 21-312(b) of the D.C. Act to Section 31-48(B) of the Virginia Act.

2

Defendant. TM Graves Construction. Inc. v. National Cellulose Corp., 226 Va. 164, 306 S.E.2d 898

(1983).

In TM Graves, Plaintiff alleged negligent installation of insulation against the Defendant. At

trial, the evidence showed that the negligence lay in the preparation of the insulation material, not in the

installation per se. Defendant argued that "installation" as plead by Plaintiff did not include

"preparation" as proved at trial, and the trial court set aside the jury's verdict. The Virginia Supreme

Court reversed and entered final judgment for Plaintiff, finding that the evidence at trial established that

·!

"installation" did indeed include "preparation," and stating, in dicta, that even if it didn't include

"preparation," the variance in the evidence was such that it could not have surprised the Defendant. In

the instant case, however, the variance upon which Plaintiff relies involves evidence that was never ...1

- presented to the Court, and is in conflict with the evidence presented.

;: The Virginia Supreme Court rejected a similar situation in Hensley v. Dreyer, 247 Va. 25, 439

-~ S.E.2d 372 (1994). There, the Plaintiff sought rescission of a deed and contract of sale on the grounds

... of actual or constructive fraud. At the conclusion of the evidence, the court took the matter under

- advisement, and in a letter opinion granted rescission although it found there was no evidence of fraud,

- actual or constructive. Instead, the court granted Plaintiffs claim on the grounds of mutual mistake of

fact, upon which no evidence had been presented at trial. The Virginia Supreme Court reversed and

entered final judgment, finding that the Defendant was clearly prejudiced by being deprived ofthe

opportunity to offer defenses specific to a claim for mutual mistake of fact.

Such is the case here. Although Plaintiffs evidence established that the parties and the property

were in the District of Columbia in 1984 at the time of the purchase of the bonds, Plaintiff adduced no

evidence that Defendant complied with any threshhold requirement of the D.C. Uniform Transfer to

3

1.90

Minors Act. As this Court noted in it's May 24, 1996 Letter Opinion, Plaintiff put on no evidence "that

such a law [w] as promulgated by the District of Columbia." The evidence at trial did not prove that the

D.C. Act applied. Even if the Court took judicial notice of the D.C. Act at this late juncture, there is

nonetheless insufficient proof that the D.C. Act applies to this case. Thus, there is no basis for invoking

Section 8.01-3 77 to conform the evidence to the pleadings.

II. DEFENDANT'S ADMISSION DOES NOT PROVIDE GROUNDS FOR AMENDMENT

Plaintiff further argues ihat she should be allowed to amend her pleadings because Defendant's

4

> response to Plaintiffs Request for Admissions admitted that "the Bonds ... were held [by Defendant] as ,..

_ custodian for [Plaintiff] pursuant to the Uniform Gift to Minors Act, Virginia Code Section 31-26, et.

ci seq. and now Section 31-37 as amended." However, such admission fails to provide Plaintiff a basis for ~ '7

~ amending her pleadings for two reasons . .!

§ First, since Plaintiff did not introduce Defendant's admission into evidence in her case in chief, 1-

< >- she has waived the right to do so. Indeed, Rule 4:11 provides in pertinent part: ;-1-L..

c (d) Part of Record. - only such requests for admissions and the answers thereto as are offered in evidence shall become a part of the record.

Although Plaintiffs counsel may have referred to the admission in his argument to the Court, he

did not introduce the admissions in evidence. Had he done so, Defendant most certainly would have

objected and moved to withdraw the admission based on the facts adduced at trial through Defendant in

Plaintiff's case in chief. Having failed to introduce the admission into evidence at trial, Plaintiff has

waived her right to rely on the admission. Translift Equipment. Ltd. v. Cunningham, 234 Va. 84,360

S.E.2d 183 (1987). Moreover, even if the admission had been introduced in evidence, it directly

conflicts with her motion to amend for violation of the D.C. Act.

4

19l

Secondly, this Court has already ruled that the "designation and gift could not have been made"

under the Virginia Act. Therefore, Defendant's admission that he held the bonds "pursuant to" that Act

is materially void. Plaintiff cannot proffer any admission that the designation and gift were made under

the D.C. Act, so her argument that Defendant made an admission under the Virginia Act signifies

nothing. Nor can Defendant's admission of facts constitute an admission of law. Accordingly,

Defendant's admission is immaterial to Plaintiffs Motion to vacate and amend.

CONCLUSION

Plaintiffs Motion utterly fails to establish a right under Virginia Code Section 8.01-377 to

z amend her pleadings and go back to trial. While that statute is remedial in nature, it cannot serve to

ci remedy the failure in Plaintiffs proof at trial, nor can it serve to offer her yet another opportunity to put ~

z Q on proof under a different statute upon which no evidence was taken at trial. Therefore, her Motion ·~'

:l

i should be denied, the Final Order entered by this Court on May 31, 1996 should remain in effect, and ....

< Defendant should be awarded his attorneys fees in defending this motion.

5

1.9.~

Respectfully submitted,

Jn)~~~~efj~ ~LLIAM C.-SMITH

By Counsel

NINETEENTH JUDICIAL CIRCUIT OF VIRGINIA

Fairfax County Judicial Center 4110 Chain Bridge Road

Fairfax, Virginia 22030-4009 (703) 246·2221 Fax· (703) 385-4432

RICHARD J. JAMBORSKY F. BRUCE BACH J. HOWE BROWN JACK B STEVENS

COUNTY OF FAIRFAX CITY OF FAIRFAX

MICHAEL P. McWEENY THOMAS S. KENNY

MARCUS D. WILUAMS GERALD BRUCE LEE

STANLEY P. KLEIN ROBERT W. WOOLDRIDGE. JR.

June 11, 1996

ARTHUR B. VIEREGG. JR JANE MARUM ROUSH M. LANGHORNE KEITH

DENNIS J. SMITH DAVID T. STITT

JUDGES

Mr. David Rosenblum, Esq. Rosenblum and Rosenblum Post Office Box 58 526 King St~e~t, Suite 211 Alexandria, Virginia 22313

Ms. Betty A. Thompson, Esq. Betty A. Thompson, LTD. Post Office Box 12807 1800 North Kent Street, Suite 1001 Arlington, Virginia 22219-2807

RE: Smith v. Smith At Law No. 142877

Dear Counsel:

OR. MARK A ZAFFARANO DIRECTOR. JUDICIAL OPERATIONS

JAMES KEITH LEWIS D. MORAIS BURCH MILLSAP

BARNARD F. JENNINGS LEWIS H. GRIFFITH

WILUAM G. PLUMMER THOMAS J. MIDDLETON THOMAS A. FORTKORT QUINLAN H. HANCOCK

RETIRED JUDGES

Plaintiff's Motion to Vacate Order and to Permit Amendment of Plaintiff's Pleading to conform to the Evidence was heard on Friday, June 7, 1996. After reviewing the briefs submitted by counsel and hearing oral argument, I took this matter under advisement. I am now prepared to make my d~cision.

Plaintiff alleges that Plaintiff should be permitted to amend its pleading after trial pursuant to Virginia Code Section 8.01-377 to conform to the evidence and to allege a violation of the District of Columbia Uniform Gift to Minors Act (now Transfer to Minors Act). Plaintiff's reliance on Virginia Code Section 8.01-377 is misplaced. The statute provides, in pertinent part:

If, at the trial of any action, there appears to be a variance between the evidence and the allegations or recitals, the court, if it considers that substantial justice will be promoted and that the opposite party cannot be prejudiced thereby, may allow the pleadings

19.3

Smith v. Smith At Law No. 142877 June 11, 1996 Page 2

to be amended

(Emphasis added.)

.. ,.

. . . .

In the present case, Plaintiff attempts to amend her pleadings after the trial. Virginia Code Section 8.01-377 implicitly contemplates actions to be taken during the trial not on post-trial motions.

Accordingly, Plaintiff's motion is denied. An order embodying this decision has been entered.

ABV/rm.

V I R G I II I A&

v.

IH TBB CIRCUIT COURT OP ~AIRPAX COUNTY

) RYAH B. SMITH by her next ) friend and parent, Hina Rosen ) Plaintiff, )

) ) )

WILLIAM c. SMITH ) Defendant. )

ORDER

AT LAW HO. 142877

This action came before this court upon Plaintiff's Motion

to Vacate Order and to Permit Amendment of Plaintiff's Pleading

to Conform.to the Evidence argued before this Court on June 7,

1996.

Upon the matters presented to the Court by brief and at the

hearing, it is

ADJUDGED, ORDERED, AND DECREED that Plaintiff's Motion to

Vacate Order and to Permit Amendment of Plaintiff's Pleading to

Conform to the Evidence is denied. ,_. Entered thislj day of J

Jr., Judge

ENDORSEMENT OF THIS ORDER BY COUNSEL OF RECORD IS HEREBY WAIVED BY THE COURT PURSUANT TO RULE 1: 13 OF THE RULES OF THE SUPREME COURT OF VIRGINIA.

1.95

Assignments of Errors:

A. 'rhe trial court· erred in denying

Plaintiff's Motion for Summary Judgment

where there were no genuine issues of

fact in dispute.

B. 'l'he trial court erred in granting

Defendant's Motion to Strike where the

variance between Plaintiff's allegation

of. violation of Virginia law and proof

was created by Defendant's late

withdrawal of its admission and was

neither surprising nor prejudicial to

Defendant.

c. The trial court erred in denyinq

Plaintiff's Motion to permit amendment of

its pleadings to conform to the evidence,

pursuant to §8.01-377.

D. T.he trial court erred in ruling that

the evidence was insufficient to prove a

violation of the Virginia UGMA.

Documents

Answer and Grounds of Defense filed August 23, 1995