Farmers & Merchants Bank, Inc. v. First & Merchants National Bank

This case is now ready for a decision on the demurrer of the defendant. Counsel have filed excellent briefs, and the Court has reviewed the applicable law and is of the opinion that the demurrer should be overruled.

The only important issue raised by the demurrer is whether or not a creditor of an estate has standing to institute a suit to surcharge and falsify the accounts of the fiduciary of the estate. This is a rather remote point, but three cases in the Virginia Supreme Court appear to hold that a creditor may bring such a suit. See Smith’s Executor v. Britton, 2 Pat. & H. 124 (1856); Young v. Bowen, 131 Va. 401, 407 (1921), and First Funding Corp. v. Birge, 220 Va. 326, 335 (1979).

A creditor certainly would have the right as an interested party to file exceptions to the report of a commissioner of accounts, under § 26-33, if the commissioner had disallowed the creditor’s claim. A creditor as an interested party should likewise have the same right to file a suit to surcharge and falsify.

If the fiduciary violates § 64.1-157 in the handling of the estate funds so as to constitute a devastavit, the fiduciary could be personally liable to a creditor. In such a case a court of equity in a suit to surcharge and falsify would be the proper forum, rather than a court of law.