MELISSA L. TAYLOR ET AL.
JAMES T. GEORGE, II, ET AL.
November 25, 2014 Session
Appeal from the Chancery Court for Knox County No. 175472-1 John F. Weaver, Chancellor
Jonathan Swann Taylor and Courtney R. Houpt, Knoxville, Tennessee, for the appellant, Melissa L. Taylor.
James T. George, II, Knoxville, Tennessee, Pro Se.
Theodore Kern, Knoxville, Tennessee, for the appellee, Tessa G. Dunn.
Thomas R. Frierson, II, J., delivered the opinion of the Court, in which D. Michael Swiney and John W. McClarty, JJ., joined.
THOMAS R. FRIERSON, II, JUDGE
I. Factual and Procedural Background
The plaintiff, Melissa L. Taylor, was formerly married to the defendant, James T. George, II. Two children were born of the marriage, Alexa and Arianna, both of whom are now adults. Ms. Taylor and Mr. George divorced in 2002 in South Carolina. As part of their divorce proceedings, Ms. Taylor and Mr. George entered into a Final Order of Separate Maintenance and Support, wherein Mr. George agreed that he owed Ms. Taylor $80, 000 in unpaid spousal and child support.
Following entry of the divorce, Ms. Taylor relocated with the children to Knoxville. Mr. George subsequently moved to Knoxville as well. In February 2004, Ms. Taylor sought to register the South Carolina Final Order in Knox County, Tennessee. Acting on her petition, the Knox County Circuit Court entered an order finding that the Final Order of Separate Maintenance and Support was entitled to full faith and credit in Tennessee. Mr. George did not, however, pay any amount towards satisfaction of the $80, 000 judgment.
In 2007, Mr. George's mother, Gloria George, died in Maryland. Her will provided that separate trusts would be established for Alexa and Arianna to be funded with $50, 000 each. The will further provided:
a. If my son is then living, and if he has an obligation to make any payment to his former wife, Melissa L. George, pursuant to the Final Order of Separate Maintenance and Support dated November 27, 2001 and the Property and Separation Agreement dated November 27, 2001, and if Melissa L. George shall execute a receipt and release acknowledging satisfaction of said obligation in part (in the case of my son's older living child) or in whole (in the case of my son's younger living child), then:
(1) Upon such child attaining age eighteen (18), my Trustee shall distribute Forty Thousand Dollars ($40, 000) from such child's trust to Melissa L. George for the express purpose of providing for such child's college, professional, and/or post-graduate education.
(2) With respect to the balance of such child's trust, my Trustee may expend such amounts of the net income, and to the extent the net income is insufficient then of the principal, of the trust as is necessary or appropriate, in my Trustee's sole and absolute discretion, for the college, professional, and/or post-graduate education of such child.
The will also provided for a trust fund benefitting Mr. George. Mr. George's sister, Tessa Dunn, was named in the testamentary instrument as personal representative and trustee of the trusts. The will also provided that Ms. Dunn, as trustee, could expend for Mr. George's benefit "such amounts of the net income, and to the extent the net income is insufficient then of the principal, of the trust as is necessary or appropriate, in my Trustee's sole and absolute discretion." Further, Ms. Dunn was directed by the will to make all trust payments directly to the respective beneficiaries.
While Ms. Taylor engaged in numerous discussions with Mr. George regarding the provisions of the will, Ms. Taylor was eventually told that the will's provisions tied payment of Ms. Taylor's judgment to her children's college trust funds. Ms. Taylor vehemently objected to the use of the college trust funds to satisfy her judgment against Mr. George. At some point during these discussions, Ms. Taylor offered to settle the judgment against Mr. George for $70, 000, which offer Mr. George accepted. In return, Mr. George asked Ms. Taylor to execute a release of the $80, 000 judgment, which she did. However, when Mr. George delivered the payment of $70, 000 to Ms. Taylor's husband, attorney Dudley Taylor, Ms. Taylor learned that the checks had been written by Ms. Dunn from Alexa's and Arianna's respective college trust funds. When Ms. Taylor asked Mr. George to tender the release in exchange for return of the checks, Mr. George did not respond.
Ms. Taylor subsequently filed the instant declaratory judgment action on June 30, 2009, requesting that the trial court declare the rights and liabilities of the parties regarding this matter. Mr. George and Ms. Dunn were named as defendants. For relief sought, Ms. Taylor requested that the parties' $70, 000 settlement be set aside. Ms. Taylor further petitioned the court to direct Ms. Dunn, as trustee of Mr. George's trust, to pay the $80, 000 judgment from his trust funds. Ms. Taylor also sought a finding by the court that Ms. Dunn had violated her fiduciary duties as trustee of the college trust funds for Alexa and Arianna. Ms. Taylor initially deposited the checks written on her children's trust funds into an escrow account. Following the filing of the instant action, she deposited those funds into the registry of the court.
Ms. Dunn filed a motion to dismiss, asserting that the trial court lacked personal jurisdiction over her because of her North Carolina residence. Mr. George similarly filed a motion to dismiss, contending that Ms. Taylor's complaint failed to state a claim upon which relief could be granted. Upon consideration, the trial court denied both motions. Ms. Taylor amended her complaint to include a claim of civil conspiracy, alleging that Mr. George and Ms. Dunn conspired to defraud Ms. Taylor's children by disbursing their college trust fund monies to satisfy the judgment owed by Mr. George. On August 31, 2012, the parties entered into an agreed order allowing the funds being held by the court to be released to Ms. Dunn as trustee so that the monies could be restored to the college trust funds of Alexa and Arianna.
Ms. Taylor subsequently sought a second amendment to her complaint, presenting a claim that, despite their knowledge of Ms. Taylor's $80, 000 judgment against Mr. George, Ms. Dunn and Mr. George had disclosed that all the funds in Mr. George's trust were depleted. In furtherance of the claim, Ms. Taylor alleged that Ms. Dunn had conspired with Mr. George and inappropriately disbursed money to him in order to defeat Ms. Taylor's claim to those funds.
A trial on the merits was conducted in this matter over the course of four days: March 4, March 5, April 15, and July 24, 2013. At the conclusion of trial, Ms. Taylor filed a motion seeking to amend the pleadings to conform to the evidence and asserting that the parties had tried the issue of enforceability of the $70, 000 settlement by express or implied consent. Ms. Taylor thus sought to enforce this settlement as an alternative remedy.
Having taken the case under advisement, the trial court issued a memorandum opinion on February 28, 2014, elucidating extensive findings regarding the issues presented. In its memorandum opinion, the trial court, inter alia, found that the South Carolina court had entered a Final Order establishing a judgment against Mr. George for unpaid support totaling $80, 000 and that the Fourth Circuit Court had domesticated and adopted the Final Order of the South Carolina court in Tennessee. In its order, the Fourth Circuit Court had granted a sixty-day stay of enforcement based on Mr. George's representations that he wished to attack the validity of the underlying order. In the instant action, the trial court noted that this sixty-day period had long since expired. The court also found that the evidence established the defendants' recognition of the $80, 000 judgment and that the judgment represented unpaid child and spousal support.
Regarding other issues joined, the trial court determined that Mr. George and Ms. Dunn attempted to use the children's trust funds to satisfy the judgment against Mr. George. As the court found, Ms. Taylor and Mr. George had entered into a settlement agreement whereby Ms. Taylor agreed to accept the reduced amount of $70, 000; however, she had made it clear that she would not accept payment from the children's funds to satisfy this obligation. According to Ms. Taylor, any payment would have to be derived from Mr. George's trust funds.
With reference to the payment made, the court specifically found that while Mr. George had tendered the checks, it was later discovered that these checks were drawn on the children's trusts. Consequently, Ms. Taylor thereafter deposited the funds with the court and sought to invalidate the settlement. Ms. Taylor's attorney later proffered that his client wanted the original settlement to be recognized but with the funds to be paid out of Mr. George's trust. In support, Ms. Taylor filed a motion seeking to amend the pleadings to conform to the evidence at trial. The court acknowledged that while Mr. George requested in his answer that the settlement be enforced, Ms. Dunn sought through her answer a dismissal of the claim for invalidation of the settlement. However, the court determined that Ms. Taylor's children had attained the age of majority and were not pursuing claims to invalidate the settlement because the funds had been restored to their trusts. By reason of the action's procedural posture, the court thus observed that "plaintiff and defendants have come full circle."
Relative to the claims against Ms. Dunn, the trial court found that she had participated with Mr. George to shield his trust funds from the payment of his $80, 000 spousal and child support obligation and judgment. Moreover, the court noted that Ms. Dunn was aware of the judgment from the inception of the ...