Session October 30, 2014.
Appeal from the Circuit Court for Polk County No. 12-CV-49 J. Michael Sharp, Judge.
Dorothy Lewis and Roscoe Lewis, although not legally married, held themselves out as husband and wife for over 41 years. At an earlier time, Roscoe Lewis had been married. He had three sons by that marriage, one of whom is the defendant Sam Lewis. In 2010, after Roscoe Lewis' health declined, Sam Lewis took care of his father and Dorothy. On April 7, 2011, Sam Lewis took his father to several banks. While there, Roscoe Lewis authorized the banks to add the names of Sam Lewis and Dorothy to multiple accounts that had previously been only in Roscoe Lewis' name. On April 26, 2011, Dorothy and Roscoe Lewis each executed an individual power of attorney granting Sam Lewis authority and control over their financial and medical decisions. On that same day, Dorothy and Roscoe Lewis executed a warranty deed conveying a remainder interest in their home and farm to Sam Lewis and his wife Lora Lewis for $40, 000, less than one-third of the fair market value as found by the trial court. On March 9, 2012, two days before Roscoe Lewis died, Sam Lewis withdrew funds totaling over $600, 000 from the accounts held jointly in the names of Sam, Roscoe, and Dorothy Lewis. He placed the withdrawn funds in accounts held in the names of Sam Lewis and his wife, Lora Lewis. Dorothy Lewis brought this action alleging, among other things, that the real estate and bank account transfers should be rescinded because of Sam Lewis' undue influence on his father and Dorothy. The trial court found and held (1) that Sam Lewis exercised undue influence over them and (2) that he committed conversion and fraud. The court's judgment against Sam Lewis included an award of attorney's fees to Dorothy Lewis. The same fees were also awarded against a constructive trust established by the trial court. On appeal, we hold that the trial court's award of attorney's fees against the constructive trust is not supported by the evidence or by any legal or equitable principle. As a consequence of this holding, we reverse the trial court's order granting attorney's fees against the constructive trust created by the trial court for the use and benefit of Dorothy Lewis during her lifetime. In all other respects, we affirm the trial court's judgment.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed in Part and Reversed in Part; Case Remanded
H. Franklin Chancey, Cleveland, Tennessee, for the appellant, Sam Lewis.
Joshua H. Jenne and Michael E. Jenne, Cleveland, Tennessee, for the appellee, Dorothy Lewis, in her individual capacity and by Roy Waters, her brother and next friend.
Ginger Wilson Buchanan, Cleveland, Tennessee, administrator for the appellee, estate of Roscoe Lewis.
Charles D. Susano, Jr., C.J., delivered the opinion of the court, in which D. Michael Swiney and Thomas R. Frierson, II, JJ., joined.
CHARLES D. SUSANO, JR., CHIEF JUDGE.
Roscoe Lewis and Laura Lee Lewis were married on December 17, 1949. As previously noted, they had three sons. They separated on November 16, 1970, and were divorced by final order of a Georgia court, executed on December 4, 1972 and entered of record on March 28, 1973. Dorothy Lewis alleges that she and Roscoe Lewis were wed in a church ceremony in Alabama in February of 1972. On this point, the trial court found as follows:
Roscoe Lewis purportedly married Dorothy Lewis on February 14, 1971, somewhere in the State of Alabama (this is based upon a prior hearing of this court, wherein Dorothy Lewis testified that she and Roscoe Lewis were married in a small church somewhere in Alabama). However, the court finds, based upon the trial exhibits entered with the court, that the State of Alabama Department of Public Health Center for Health Statistics and Office of Vital Records issued a certificate of failure to find any record of marriage to exist for Roscoe Lewis and Dorothy Lewis, the records having been searched for the years 1970 through 1980. . . . However, [Dorothy Lewis] presented proof through a copy of a page from the family bible, "certificate of marriage" certifying that Roscoe Lewis and Dorothy Waters were married on February 2, 1971 in holy matrimony.
The court finds that at all times from and after February of 1971, Roscoe and Dorothy Lewis held themselves out to be man and wife, and the evidence before the court is that they lived together at all times as man and wife from February of 1971 through the date of Roscoe Lewis' death on March 11, 2012. . . . [A]t all times from February 1971 through March 11, 2012, Roscoe Lewis and Dorothy Lewis held most of their bank accounts together as man and wife, and generally speaking, conducted their business affairs as man and wife.
During the last decade of Roscoe Lewis' life, Dorothy Lewis suffered from significant mental disabilities. The trial court, relying, among other proof, on the testimony of her personal physician, found that she was mentally incompetent during this time, as further discussed below. In 2010, Roscoe Lewis' physical health began a serious decline. Sam Lewis started taking care of his father and Dorothy Lewis on a full-time basis around December of 2010.
On April 7, 2011, Sam Lewis drove his father to three financial institutions: BB&T, United Community Bank, and Copper Basin Federal Credit Union. Dorothy Lewis was with them for the trip to BB&T, but Sam Lewis dropped her off at her house before the other banks were visited. At the banks, the account holder names on numerous accounts owned by Roscoe Lewis were changed to add the names of Sam Lewis and Dorothy Lewis. Prior to the change, five of the accounts had been owned by Roscoe Lewis with Dorothy Lewis designated as the pay-on-death beneficiary. The total amount of money in these five accounts at that time approximated $520, 000. Two other accounts were owned by Roscoe Lewis with no pay-on-death beneficiary. There was about $100, 000 in those two accounts.
On April 26, 2011, Roscoe and Dorothy Lewis executed several legal documents drafted by attorney Laura Crawford, who visited their home on that date. They each executed two durable powers of attorney in favor of Sam Lewis, one for healthcare decisions and the other for financial matters. They also executed a warranty deed conveying a remainder interest in the marital real property - being their house and approximately fourteen acres - to Sam Lewis and his wife, Lora Lewis. Dorothy and Roscoe Lewis retained a life estate. In consideration for the transfer, Sam and Lora Lewis executed a promissory note and deed of trust in the amount of $40, 000. The promissory note provided for "interest at the rate of ZERO percent (0%) per annum in 400 monthly installments of principal in the amount of $100.00 each." (Capitalization in original.) The trial court found that the fair market value of the marital residence at that time was "a little in excess of $130, 000."
Roscoe Lewis' health, including a condition of adenocarcinoma,  continued to decline due to his several illnesses. On March 6, 2012, he was admitted to the hospital. He died five days later. On March 9, 2012, while Roscoe Lewis was still alive, Sam Lewis withdrew the funds in the accounts held in the joint names of Sam Lewis, Roscoe Lewis, and Dorothy Lewis. He deposited these funds, over $600, 000, in three accounts, all of which were in his name and the name of his wife. One of the accounts designated the daughter of Sam and Lora Lewis as the pay-on-death beneficiary. Sam Lewis did not tell either Roscoe or Dorothy Lewis about these transfers. He admitted that, after the transfers, Dorothy Lewis no longer had access to the funds. As previously noted, Roscoe Lewis died on March 11, 2012, at the age of 83.
After Roscoe Lewis' death, Dorothy Lewis' brother, Roy Waters, came from Georgia to assist his sister. Both Sam Lewis and Waters testified that a day or two after the funeral, Sam Lewis told Waters to get off his property - the former marital residence of Roscoe and Dorothy Lewis, where Dorothy Lewis was then still residing. At some point shortly after Roscoe's funeral, Dorothy Lewis asked Waters to take her to BB&T to see how much money was in the bank accounts there. They discovered that all, or nearly all, of the funds had been removed by Sam Lewis. Shortly thereafter, Dorothy Lewis went to live with her brother in Georgia.
Dorothy Lewis filed her complaint on March 23, 2012. She alleged that Sam Lewis wrongfully appropriated and converted the funds in the bank accounts by the exercise of undue influence, fraud and deceit, and breach of fiduciary duty. She asked the trial court, among other things, to rescind the real estate transaction regarding the marital real property. Later, when Dorothy Lewis' mental capacity was called into question, an amended complaint was filed in her individual capacity and by her next friend and brother, Roy Waters. After Dorothy Lewis suffered a debilitating stroke, Roy Waters and his son were named her co-conservators.
After a two-day bench trial, the court found and held that: (1) Roscoe and Dorothy Lewis were never "legally" married and, consequently, did not own the marital residence and other joint assets as tenants by the entireties; (2) the transfer of the marital residence "fails due to the incompetency of Dorothy Lewis as well as the mental capacity of Roscoe Lewis at the time, as well as the undue influence and coercion of Sam Lewis"; (3) the transfer of ownership of the bank accounts at issue was the product of undue influence resulting from a confidential relationship abused by Sam Lewis; and (4) Sam Lewis was guilty of fraud and conversion of funds rightfully belonging to Dorothy Lewis.
Based upon these findings, the trial court held that the marital real estate was owned one-half by Dorothy Lewis and one-half by Roscoe Lewis' estate, as tenants in common, and ordered that it be sold and the proceeds divided accordingly. Regarding the monies in the bank accounts, the trial court ordered as follows:
[A]ll of the funds shall be returned to their status prior to any changes of ownership that were made on April 7, 2011. . . . All bank accounts, other than the two accounts noted above, had [pay-on-death] beneficiary designations, which shall control the payment of those accounts based upon the death of Roscoe Lewis.
With regard to any accounts payable to the estate of Roscoe Lewis at his death, as there was no [pay-on-death] beneficiary designation controlling those accounts at this death, the court finds that those accounts shall be paid into the estate of Roscoe Lewis, and the funds used as set out herein.
With regard to all of the funds payable to the estate of Roscoe Lewis, . . . there is no question that Roscoe Lewis intended his funds and/or assets to be used for the use and benefit of Dorothy Lewis for the remainder of her life. He expressly indicated this to his son Sam Lewis, and the court finds that based upon the fact that he held himself out to be the husband of Dorothy Lewis for a period in excess of 41 years in the community, and that they spent all of their 41 years together in the same home, working toward the same apparent goals and ambitions, the court finds that the funds belonging to the estate of Roscoe Lewis shall be deposited into and held in a constructive trust for the use and benefit of Dorothy Lewis for the remainder of her life. A trustee shall be appointed to oversee this trust.
The trial court further ordered "that Sam Lewis shall be responsible for the attorney fees and court costs of Dorothy Lewis, as well as the costs incurred in this matter." The sole ground stated by the trial court to support the award of attorney's fees was the trial court's finding that Sam Lewis was guilty of fraud, a cause of action now appropriately called intentional misrepresentation.
Sam and Lora Lewis filed a motion to alter or amend, and the estate of Roscoe Lewis filed a motion for clarification of the trial court's order. Dorothy Lewis died on December 18, 2013. The trial court entered a final order addressing the remaining motions on January 24, 2014, stating in pertinent part as follows:
The Court at a hearing conducted January 7, 2014 in chambers, . . . reiterated . . . that the assets of Roscoe Lewis, including the bank accounts solely in the name of Roscoe Lewis existing as of April 7, 2011, and Roscoe Lewis' 50% of the proceeds realized from the sale of the real property, should be placed into Trust for the use and benefit of Dorothy Lewis during her natural lifetime. . . . [A]ll expenses associated with her care and maintenance from and after the death of Roscoe Lewis until Dorothy Lewis' death which occurred December 18, 2013 shall be paid from said Trust and reimbursed to the Conservator, Roy Waters, as herein provided. In addition, it is the intention of the Court and Order that the attorney fees and expenses which were incurred on behalf of Dorothy Lewis and awarded to Jenne, Scott & Jenne totaling $92, 675.76 be paid from said Trust funds. Upon payment of said amount to Jenne, Scott & Jenne from said Trust funds, Jenne, Scott & Jenne and for the Estate of Dorothy Lewis shall assign to said Trust the Judgment rendered against Sam Lewis for attorney fees and expenses totaling $92, 675.76.
Sam Lewis timely filed a notice of appeal.
The issues presented are as follows:
(1)Whether the trial court erred in its determination that the marriage of Roscoe Lewis and Dorothy Lewis was bigamous and therefore void.
(2) Whether the trial court erred in finding that Sam Lewis abused a confidential relationship and exercised undue influence over his father, Roscoe Lewis, and Dorothy Lewis.
(3)Whether the trial court erred in its award of the real estate and bank accounts at issue.
(4)Whether the trial court erred in its award of attorney's fees and costs against Sam Lewis in the amount of $92, 675.76 and in taxing those expenses to the ...