BETTY GOFF C. CARTWRIGHT, ET AL.
JACKSON CAPITAL PARTNERS, LIMITED PARTNERSHIP, ET AL
Session March 11, 2015.
[Copyrighted Material Omitted]
[Copyrighted Material Omitted]
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed and Remanded. Direct Appeal from the Chancery Court for Shelby County. No. CH-04-1266-2. Arnold B. Goldin, Chancellor.
Judgment of the Chancery Court Affirmed and Remanded.
Jerry E. Mitchell, John H. Dotson and Justin Edward Mitchell, Memphis, Tennessee, for the appellant, Alan C. Cartwright.
David Clark Wade and Andrew Roger Jeffrey Gardella, Memphis, Tennessee, for the appellees, Jackson Capital Partners, Limited, Jackson Capital Management, LLC, Alan L. Garner and Alice Cartwright Garner.
BRANDON O. GIBSON, J., delivered the opinion of the court, in which J. STEVEN STAFFORD, P.J., W.S., and KENNY ARMSTRONG, J., joined.
BRANDON O. GIBSON, J.
This appeal involves claims asserted by a beneficiary of various trusts against numerous defendants, including the beneficiary's sister and her husband, who serve as the trustee and co-trustee of some of the trusts. Among other things, the beneficiary alleged that the defendant-trustees breached their fiduciary duties by failing to pay the beneficiary all distributions to which he was entitled. The defendants moved for partial summary judgment, claiming that they had followed the terms of the trusts and paid the beneficiary all distributions to which he was entitled pursuant to the trust documents. In response to the motion for partial summary judgment, the beneficiary asserted that the trust documents were void because he executed them due to undue influence. In a previous appeal, this Court reversed the entry of partial summary judgment on the issue of undue influence, concluding that genuine issues of material fact existed. The parties engaged in additional discovery on remand, and after lengthy proceedings and numerous evidentiary and other rulings, the trial court granted summary judgment to the defendant-trustees and denied a motion for partial summary judgment filed by the beneficiary. The trial court also awarded attorney's fees and discretionary costs to the defendants. The beneficiary appeals. We affirm and remand for further proceedings.
I. Facts & Procedural History
This is the second time this case has been before this Court. The relevant facts and procedural history are set forth in this Court's previous opinion as follows:
In the early 1950's, James and Betty Cartwright adopted two children, Alan and Alice. James Cartwright was an attorney, and over the years, he placed the wealth that he and his wife accumulated into numerous trusts for the benefit of his family members and others. James Cartwright died in 1994. In 2004, Betty Cartwright remarried and initiated this case by filing a complaint in the chancery court of Shelby County, naming as defendants her children Alan and Alice, Alice's husband, eighteen trusts, and two entities involved with the family limited partnership. Alice served as trustee of several trusts of which Betty was a beneficiary, and the complaint alleged that Alice had breached fiduciary duties, engaged in self dealing, and created impermissible conflicts of interest. Accordingly, the complaint sought to have Alice removed as trustee. The complaint also alleged that Alice and her husband had breached their fiduciary duties as general partners of the family limited partnership, and it sought to have the family limited partnership dissolved. Betty's complaint further alleged
fraud, breach of contract, and breach of the duty of good faith and fair dealing. The complaint listed Betty's son Alan and the eighteen trusts simply as " Declaratory Defendants."
Alan Cartwright subsequently filed an answer and cross-claim against the other defendants, which stated, " To the extent that the allegations in the Complaint are found to be true, they are equally applicable to Alan Cartwright, and therefore, they are adopted and incorporated herein by reference as completely and fully as if restated herein verbatim[.]" Alan alleged that he had also been deprived of assets as a trust beneficiary, and he sought removal of Alice as trustee, in addition to access to the trust corpus to the extent that the court deemed appropriate.
Betty Cartwright died in May 2005, and thereafter, an order was entered dismissing with prejudice all of the claims set forth in her complaint against the original defendants. However, the cross-claim filed by Alan remained pending.
. . . .
Alice and her husband, who served as co-trustee of some of the trusts, filed a motion for partial summary judgment with respect to Alan's claim for breach of fiduciary duty, asserting that they had fully complied with the terms of the trust documents and that Alan had received all distributions to which he was entitled. According to the defendants, the benefits and payments which Alan sought were contrary to the terms of the trust documents. The defendants argued that, as a matter of law, the trustees could not be found to have breached their fiduciary duties when the undisputed facts demonstrated that they had followed the directions of the trusts. They cited several provisions of the Tennessee Uniform Trust Code, including Tennessee Code Annotated section 35-15-801, which directs a trustee to follow the terms and purposes of the trust, and section 35-15-1006, which states, " A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance." In sum, the defendants argued that Alan could not prove that they had violated the terms of the trust documents or failed to pay him what he was due under the trust documents, and therefore, there was no basis for removing them from their position as trustees.
In support of their motion for partial summary judgment, the defendants submitted numerous trust documents, interrogatory responses, and testimony by affidavit and deposition. This evidence showed that on June 30, 1978, James Cartwright and Alan Cartwright executed the " Alan Cook Cartwright Grantor Trust Agreement," which created what the parties commonly refer to as the ACC Grantor Trust. The Trust Agreement provided that the ACC Grantor Trust would " provide for [Alan's] personal financial security by preserving his property against his own spend thrift actions," as Alan was " not experienced in financial matters." According to the Trust Agreement, Alan was limited to drawing 75% of the net income of the ACC Grantor Trust for his use or benefit. The Trust Agreement provided that the ACC Grantor Trust was irrevocable, and that the Trust Agreement could only be amended or terminated upon written agreement of the trustee and Alan. James Cartwright was named as the trustee, and Betty was named as the successor trustee. Pursuant to a later amendment, Alan's sister Alice was named as an alternate successor trustee,
who would serve in the event that Betty became unwilling or unable to act as trustee.
James Cartwright died on September 11, 1994. " Amendment Number One" to the ACC Grantor Trust was executed by Alan, who was about 43 years old at the time, and his mother Betty, who had assumed the position of trustee, on or about September 7, 1995. The Amendment stated, in relevant part:
During [Alan's] lifetime, the Trustee shall pay (i) the lesser of $84,000 per year or one hundred percent (100%) of the net annual income of the trust in convenient installments, or otherwise, to or for the benefit of [Alan], plus (ii) such additional amount as the Trustee determines is necessary to pay the federal and state income tax of [Alan.] In computing the annual net income of the trust, any distributions of income from the trusts identified on Exhibit A which are added to this trust shall be considered income. . . .
[Alan] directs the trustees of the trusts listed in Exhibit " A" hereto to pay all amounts distributed to [Alan] under such trusts to the Trustee hereunder, such amounts to be added to the corpus of the Trust and distributed in accordance with its terms, and the Trustee hereby consents to such additions.
The referenced " Exhibit A" to the Amendment listed 15 other trusts of which Alan was a beneficiary. Therefore, pursuant to the terms of the Amendment, all amounts to be distributed to Alan from the 15 trusts would instead be added to the corpus of the ACC Grantor Trust, and therefore, subject to distribution under its terms. According to Alice's testimony, her mother directed the family attorney to prepare this Amendment, requiring all distributions to Alan to be made through the ACC Grantor Trust, in order to carry out the desire of Alan's recently deceased father to protect the assets from Alan's spendthrift tendencies, but also to ensure that there would be enough assets available to pay Alan his increased " allowance" of $7000 per month pursuant to the Amendment.
According to Alice's affidavit testimony, her mother later learned that Alan had acquired several vehicles, and she became upset about his high-interest car notes and speeding tickets. Betty then informed Alan that he would have to sell some of the vehicles and reimburse the Trust for the excessive expenses associated with them, such as auto insurance, which the Trust was paying on Alan's behalf. The Trust would also pay off the car notes. Consequently, Betty and Alan executed another amendment to the ACC Grantor Trust on April 29, 1996, which reduced his monthly distribution to $5000. The second amendment was inadvertently also titled " Amendment Number One," and it contained the same language quoted above, regarding the monthly allowance, and the addition of any distributions from the trusts in Exhibit A to the ACC Grantor Trust. However, it substituted $60,000 for the $84,000 figure in the first Amendment.
In December 1999, another amendment was executed by Alan and Betty, naming Alice as co-trustee of the ACC Grantor Trust, effective January 1, 2000. After Alice was named co-trustee, she and her mother increased Alan's monthly distribution to $7000 again, but the parties never executed another amendment to reflect this change.
According to Alice's testimony, her practice over the years, as trustee of the ACC Grantor Trust, was to treat the
specific dollar amounts listed in the Amendments as the amount that Alan would receive, even though the language of the Amendments provided that he would receive the lesser of 100% of the trust income or $84,000 per year. She explained that even when there was a substantial market downturn, or little to no income for distribution, she paid Alan a direct distribution of the amount referred to in the trust documents. As a result, she explained, Alan had received direct distributions of either $5000 or $7000 per month since 1995. Alice testified that over the years, the ACC Grantor Trust had also paid for Alan's major expenses, including all taxes, insurance (home, health, and automobile), medical costs, and home maintenance costs, and the ACC Grantor Trust also acquired and owned the home where Alan lived. She produced a spreadsheet indicating that Alan had received distributions of $592,477 in the past five years, and also, $696,437 in expenses were paid on his behalf during that time. In sum, Alice testified that all required distributions had been made to Alan through the ACC Grantor Trust, in accordance with the controlling trust documents.
Alan filed a response to the defendants' motion for partial summary judgment with the following  argument [relevant to this appeal]:
. . . .
3. The [defendants], both directly and indirectly by employing duress and undue influence by others, knowingly and maliciously defrauded the beneficiary of these trusts, Alan Cartwright, by trickery and by deception in failing to present alleged " Exhibit A" for review and in failing to explain the practical operation and consequences of the First Amendment(s) to the Amended and Restated Alan Cook Cartwright Grantor Trust at the time Cartwright was urged to sign the amendments to his Grantor Trust while under economic duress and/or by creating a false " Exhibit A" at a later time, all in contravention of the fiduciary duties owed to him at those times and all subsequent times thereto. As a result, the existence and operation of the so called " Exhibit A" is void and the First Amendment(s) are void as being made by the Grantor being led into a clear mistake of law and fact as to the meaning and consequences of executing the signature page that day.
In response to the defendants' statement of undisputed facts, Alan disputed one statement regarding " Exhibit A" to the Amendments, which listed the 15 trusts to be added to the ACC Grantor Trust. Alan contended that " reasonable minds could very well conclude that no such document existed until sometime later and that it is a fake." . . . .
Alan also submitted several excerpts from his depositions, apparently in an effort to demonstrate undue influence. Alan testified that when he signed the first Amendment Number One to the ACC Grantor Trust, he did not understand that he would be limited to the lessor of $84,000 per year or the income from the trust because no one told him. When asked whether he asked his mother what he was signing, Alan replied, " I didn't ask her anything. You don't ask questions in my family. You just do what they tell you to do." Alan conceded that he received $7000 per month in distributions from the ACC Grantor Trust until the issue arose about his ownership of numerous vehicles. Alan recalled his mother telling him that he was going to receive less money each month until the trust was reimbursed for the cost of his additional vehicles.
However, Alan testified that he did not remember if he was with his mother when he signed the second Amendment Number One, and he also said, " I don't remember anybody telling me about 60,000 a year." Alan testified that he did not remember reading the document or having anyone explain it to him. He said,
I didn't read this, but then again if I -- I don't even remember -- I don't know what this is. I never have seen this. I mean, I might have signed it, but maybe the rest of it wasn't there or something like this. I didn't -- I don't know -- I don't remember Mom signing it. When she signed it, she didn't tell me what it was. I don't know what--what else do I say here. I don't know how else to explain it.
Despite these protestations, Alan submitted a statement of undisputed facts in which he admitted that Betty, Alice, and the family attorney were present in the room with him when the second amendment to the ACC Grantor Trust was signed.
In reply to Alan's response, the defendants contended that there was no genuine issue of material fact regarding the validity or authenticity of Exhibit A. . . .
The defendants also argued that, despite Alan's conclusory assertions, the undisputed facts did not establish undue influence. They submitted Alice's deposition testimony wherein she suggested that the first Amendment may have been sent to Alan at his home in Hendersonville, because his signature was notarized in Sumner County, Tennessee, while Betty's signature was notarized five days earlier in Shelby County, Tennessee. With regard to the second Amendment, Alice testified that she specifically recalled the meeting at which Alan and her mother signed the Amendment. She testified that the meeting took place in Memphis, and that she was present, along with Alan, Betty, and the family attorney, Shellie McCain. Alice recalled that her mother got " really mad" because after she had increased Alan's monthly distribution, she found out that he had acquired three trucks and was paying notes on a couple of them. Alice recalled her mother telling Alan that he had to sell one of the trucks and that she was going to reduce his monthly distribution in order for him to repay the trust for paying off the balance on one of the notes. Alice testified that she did not recall a situation in which her mother instructed Alan to " just sign it." She said that Mr. McCain was there " to go over things with [Alan]," and that Mr. McCain " told Alan what we were doing." She also testified that Exhibit A was discussed at the meeting.
The defendants submitted testimony from the deposition of the former family attorney, Shellie McCain, as well. At Mr. McCain's deposition in 2009, he testified that, to the best of his recollection, he was present for at least one meeting when Alan signed amendments to the ACC Grantor Trust. Mr. McCain could not recall how many of such meetings he attended. However, he stated that his " most vivid memory" was " sort of a family sit down presided over by Mrs. [Betty] Cartwright" to discuss Alan's spending, and particularly his acquisition of a number of automobiles and the cost of keeping those automobiles insured. He recalled that " Alan arrived in a somewhat non-communicative mood with anyone in the office," but when Betty arrived, " Alan was suddenly communicative and yes ma'am, no, ma'am and very much acknowledging his mother's concerns." Mr. McCain testified that Alan essentially wanted to know
how many cars he could keep. He explained, " Mrs. [Betty] Cartwright was a very nice lady, but when she wanted to exercise her authority, she was fairly formidable." Mr. McCain said he did not remember the specifics of what he discussed with Alan during the meeting " other than if he signed documents in my presence, I'm certain that, you know, any questions he had I would have answered about those documents." Mr. McCain went on to say,
It is my recollection hazy as though it may be, that the purpose of inviting me to the office when Alan was there was to give Alan the opportunity to ask me questions. I don't remember if I gave preliminary overview to Alan about what, you know, at any point was being done in connection with the family's overall estate planning. I just don't remember. What I do remember is generally when I was in Alan's presence or when Alan was in my presence, he was generally and frankly somewhat indifferent to what was going on in the family business, if you will.
Mr. McCain testified that when he sat down with someone to present a document for his or her signature, it was his normal practice to explain what it was he or she was signing. He said he could not remember the specifics of what he discussed with Alan, but, he said, " if I was present when a document was signed, then if Alan Cartwright wanted to, I'm assuming that I probably explained what the document was he was signing and if he had questions, answered it."
During Alan's deposition, he testified that he did recall attending a meeting with Mr. McCain, Betty, Alice, and Alice's husband. He said, " I think they just told me $84,000 a year and sign it." When asked whether he agreed for the trust to pay him that amount, he replied, " Yeah, I -- I agreed, and I did sign this," but, he said he did not think that was all of the money that he would receive. He conceded that he did not ask whether he would receive any more money, stating, " like again they might have told me -- or this, but the main thing they just told me was to sign the paper. Here, sign the paper." Alan initially testified that no one told him, beforehand, that his annual distribution was going to be reduced to $60,000, and that he called Betty for an explanation when he received his first " light" check. However, Alan later testified that when he had the conversation with Betty about the trust paying off his car notes, he was in Memphis, and " [Alice and her husband] . . . they were all in there." As noted above, his own statement of undisputed facts admitted that Betty, Alice, and the family attorney were present in the room with him when he signed the second amendment to the ACC Grantor Trust.
The trial court ultimately entered an order granting the defendants' motion for summary judgment. The court found that the trust documents expressed the intention of Alan and his parents to provide for him but also to limit his access to unlimited funds. The court noted that Alan admittedly signed the original and all Amendments to the ACC Grantor Trust Agreement. The court noted that the Amendments set specific limitations on Alan's distributions and required that distributions from other trusts be added to the ACC Grantor Trust. The court found that the trustees were entitled to rely upon the terms of the trust documents, and that they had " done what they were entrusted to do." The court found " no dispute that the Trustees paid out to [Alan] the amounts to which he was
entitled under the documents as written." The court found it undisputed that the trustees had relied upon the terms of the trust, and it found that they were entitled to do so pursuant to Tennessee Code Annotated section 35-15-1006. Regarding the allegations of undue influence, the trial court noted that many years had passed since Alan and his parents signed the trust documents, and that his parents were no longer living. The court stated, " In light of the language of the documents and the passage of time, the Court cannot give weight to [Alan's] allegations of undue influence against his parents." Therefore, the court entered partial summary judgment in favor of the defendants on the issues surrounding the terms of the family limited partnership documents and the trust documents; whether Alan received the distributions to be made to him under the trust documents; and whether the defendants breached their fiduciary duties in conducting their responsibilities as trustees.
All remaining claims asserted by Alan, not resolved by the motion for partial summary judgment, were voluntarily dismissed without prejudice. Alan timely filed a notice of appeal of the order granting partial summary judgment to defendants.
Cartwright v. Jackson Capital (" Cartwright I" ), No. W2011-00570-COA-R3-CV, 2012 WL 1997803, at *1-8 (Tenn. Ct.App. Jun. 5, 2012) (footnotes omitted).
In Cartwright I, this Court reviewed the trial court's order granting partial summary judgment to the defendants. We noted at the outset that " this case revolves around allegations that Alan had not received sufficient distributions of assets from the trusts." Id. at *9. The basis for the defendants' motion for partial summary judgment was that Alan could not prove that they failed to pay the amounts required by the trust documents. According to the defendants, the undisputed facts demonstrated that they followed the trust terms, and they could not have breached their fiduciary duties by paying the amounts required by the trust documents. Id. Tennessee Code Annotated section 35-15-801 directs a trustee to follow the terms and purposes of the trust, and section 35-15-1006 states, " A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance." In support of their motion for partial summary judgment, the defendants submitted evidence regarding the execution and terms of the Amendments to the ACC Grantor Trust.
Id. at *10. They also submitted evidence demonstrating that since the execution of the Amendments, Alan had received either $5000 or $7000 per month, meeting or exceeding the ...