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George v. Dunn

Court of Appeals of Tennessee, Knoxville

November 2, 2016


          Session Date: August 9, 2016

         Appeal from the Chancery Court for Knox County No. 189422-1 John F. Weaver, Chancellor

          Theodore R. Kern, Knoxville, Tennessee, for the appellant, Tessa G. Dunn.

          Dudley W. Taylor, Knoxville, Tennessee, for the appellees, Arianna A. George and Alexa C. George.

          Thomas R. Frierson, II, J., delivered the opinion of the court, in which D. Michael Swiney, C.J., and Frank G. Clement, Jr., P.J., M.S., joined.



         I. Factual and Procedural Background

         The prior action filed on behalf of the beneficiaries also came before this Court on appeal. See Taylor v. George, No. E2014-00608-COA-R3-CV, 2015 WL 1218658 (Tenn. Ct. App. Mar. 16, 2015), perm. app. denied (Tenn. June 11, 2015). The trusts at issue were created through the Last Will and Testament of Gloria G. George ("Decedent"), who died in 2007 as a resident of Maryland. In her will, which was probated in Maryland, Decedent provided for the establishment of separate trusts for each of her two granddaughters, the plaintiffs, Arianna A. George and Alexa C. George (collectively, "Plaintiffs"), to be initially funded with $50, 000.00 each. Decedent named as trustee her daughter, the defendant, Tessa G. Dunn, who is Plaintiffs' aunt. Plaintiffs are the children, now adults, of Decedent's son, James T. George, and his former wife, Melissa L. Taylor. Decedent also established a trust for Mr. George in her will, for which Ms. Dunn was the trustee. See Taylor, 2015 WL 1218658, at *2.

         Decedent's will originally established Plaintiffs' trust funds with the following provisions:

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 postgraduate 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.

         As part of the 2001 Final Order of Separate Maintenance and Support, entered by a South Carolina court, Mr. George had agreed that he owed Ms. Taylor $80, 000.00 in unpaid spousal and child support. See Taylor, 2015 WL 1218658, at *1.

         On June 30, 2009, Ms. Taylor, acting on her own behalf and as next friend of Plaintiffs, filed an action against Mr. George and Ms. Dunn in the Knox County Chancery Court ("trial court"). Ms. Taylor alleged, inter alia, that Mr. George and Ms. Dunn had conspired to compel her to sign a release, as required by Decedent's will, in return for a $70, 000.00 settlement of the $80, 000.00 divorce judgment while failing to inform her that the $70, 000.00 would be deducted from Plaintiffs' trust funds. Id. at *2. Ms. Dunn had written a $35, 000.00 check from each Plaintiff's respective trust fund, and Mr. George had then delivered the $70, 000.00 payment to Ms. Taylor's husband, Plaintiffs' current counsel, Dudley W. Taylor. Id. Ms. Taylor sought declaratory judgment regarding the parties' rights and liabilities, enforcement of the $80, 000.00 divorce judgment, and a finding that Ms. Dunn had breached her fiduciary duties. Id. Ms. Taylor deposited the $70, 000.00 check she had received into the registry of the trial court. Id.

         On August 31, 2012, the trial court entered an agreed order dismissing with prejudice the claims filed against Ms. Dunn on behalf of Plaintiffs. The agreed order provided that the funds held by the court would be released to Ms. Dunn as trustee so that she could restore the funds to Plaintiffs' trust accounts. Id. The order further provided that the funds would be disbursed by Ms. Dunn "from the respective trusts for the benefit of Alexa C. George and Arianna A. George pursuant to the terms of the trust agreement[.]"

         The remaining parties proceeded to trial on the claims brought in Ms. Taylor's name against Mr. George and Ms. Dunn. The trial court ultimately dismissed the claims against Ms. Dunn while upholding the divorce judgment against Mr. George and assessing prejudgment and postjudgment interest. Taylor, 2015 WL 1218658, at *1. In upholding the trial court's judgment, this Court concluded:

[T]he evidence supported the trial court's finding that Ms. Dunn and Mr. George did act in concert and conspire to deplete Mr. George's trust assets so that Ms. Taylor would be unable to collect her judgment against the trust. As the trial court also properly found, however, there was no proof of an underlying tortious or wrongful act that would support Ms. Taylor's conspiracy claim. The will provided Ms. Dunn, as trustee, discretion to make disbursements of Mr. George's trust fund assets. Even though Ms. Dunn was aware of Ms. Taylor's unpaid judgment, Ms. Dunn was not violating a court order or lien or otherwise acting in a fraudulent or tortious manner by disbursing trust fund assets to Mr. George. By transferring funds to Mr. George, Ms. Dunn initiated actions that she was lawfully entitled to take as trustee. The fact that Ms. Dunn's actions resulted in depletion of the trust assets before Ms. Taylor could enforce her judgment against the trust does not render Ms. Dunn's actions fraudulent or tortious. See, e.g., Burton v. Hardwood Pallets, Inc., No. E2001-00547-COA-R3-CV, 2001 WL 1589162 at *5 (Tenn. Ct. App. Apr. 29, 2002) (holding that there was no fraudulent conduct where a defendant creditor's lawful actions to collect a debt resulted in an unsecured creditor's debt going unsatisfied). Therefore, without the demonstration of the commission of a tortious or wrongful act by Ms. Dunn, there can be no cognizable claim of civil conspiracy. We determine that the trial court properly dismissed Ms. Taylor's claims against Ms. Dunn in this matter.

Id. at *7.

         The instant action was commenced on April 13, 2015, when Plaintiffs filed a complaint alleging that Ms. Dunn had violated the terms of the August 2012 agreed order and her fiduciary duty to Plaintiffs by writing checks to herself and Mr. George against Plaintiffs' trust funds. Ms. Dunn acknowledges that in September 2012, she wrote two "reimbursement" checks on each trust account, ostensibly to reimburse her personal funds and Mr. George for attorney's fees incurred in defense of the prior action brought on behalf of Plaintiffs. On September 20, 2012, the trial court clerk disbursed to Ms. Dunn $70, 734.10, including the $70, 000.00 provided by the agreed order plus interest earned. On September 20, 2012, Ms. Dunn wrote two checks in the amount of $12, 500.00 to Mr. George, one drawn from each of the Plaintiff's trust funds. On September 21, 2012, Ms. Dunn wrote two checks in the amount of $2, 781.58 to herself, also drawing one check from each of Plaintiff's trust funds. Ms. Dunn explained in an affidavit presented to the trial court that although she initially had utilized monies from Mr. George's trust, for which she was also the trustee, to pay legal expenses, she wrote the corresponding "reimbursement" checks directly to Mr. George because his trust had been dissolved by that time. The total amount that Ms. Dunn withdrew from Plaintiffs' combined trust funds was $30, 563.16.

         Although Plaintiffs had requested an award of attorney's fees "if applicable" in their original complaint, Plaintiffs filed an amendment to their complaint on April 30, 2015, adding that they sought "their reasonable attorney fees for the intentional breach by Defendant of her fiduciary duty . . . ." Ms. Dunn subsequently filed an answer, documenting her legal expenses for defense of the prior action and asserting that pursuant to Maryland law governing the establishment of the trust accounts, she was entitled to be reimbursed from the trusts for her legal fees incurred in defense of the prior lawsuit.

         Ms. Dunn maintains that the legal expenses for which she reimbursed herself pertained to defense of the action pursued on Plaintiffs' behalf and not the action pursued by Ms. Taylor individually. Ms. Dunn also maintains that she met with Plaintiffs in September 2012, prior to writing the reimbursement checks, and explained to Plaintiffs that she would be reimbursing herself from their trust funds for the substantial legal fees she had incurred in defending against their prior lawsuit. Plaintiffs deny that such a meeting took place and deny that Ms. Dunn provided them with advance notice that she would be withdrawing funds from their trust accounts as reimbursement for her legal fees.

         On June 23, 2015, Plaintiffs filed a motion for summary judgment and a statement of "Material Facts as to which there is No Genuine Issue for Trial." Ms. Dunn filed a response and statement of additional facts on July 27, 2015, inter alia, acknowledging that she did not obtain consent from Plaintiffs for the trust withdrawals at issue but asserting that she did provide them with prior notice of the withdrawals.

         Following a hearing conducted on August 6, 2015, the trial court granted the parties ten days for supplemental briefing on applicable Maryland law. Specifically, the court directed in an order entered August 14, 2015:

After taking into account all documents filed in support of and against the Motion, the Court elected to defer its ruling in order to give the parties, through counsel, an opportunity to research the issue of whether Maryland law offers any support for the proposition that a trustee of a trust is protected against claims of the beneficiaries for making disbursements of trust funds to persons who are not trust beneficiaries, by reason of giving advance notice of such intended disbursements, whether or not the beneficiaries consent.

         On September 24, 2015, the trial court entered a Memorandum Opinion, granting partial summary judgment in favor of Plaintiffs. Upon finding that Ms. Dunn had violated the agreed order and breached her fiduciary duty to Plaintiffs, the court awarded to each respective Plaintiff the amount of $15, 281.58, plus prejudgment interest of five percent per annum calculated from September 20, 2012, on each $12, 500.00 check and from September 21, 2012, on each $2, 781.58 check. The court also awarded to Plaintiffs reasonable attorney's fees but reserved the amount for an evidentiary hearing. The court entered an Order to this effect on November 6, 2015.

         Ms. Dunn filed a notice of appeal on December 4, 2015. On January 8, 2016, the trial court entered an order awarding to Plaintiffs attorney's fees in the amount of $6, 000.00 and costs in the amount of $244.33, contingent upon Plaintiffs' success on appeal. Upon submission of the final judgment, this Court treated Ms. Dunn's premature appeal as timely pursuant to Tennessee Rule of Appellate Procedure 4(d).

         II. Issues Presented

         Ms. Dunn presents three issues on appeal, two of which we determine to be included in her overall issue of whether the trial court erred by granting partial summary judgment in favor of ...

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