In re Ballard

• Docket Number: E2022-01147-COA-R3-CV
• Decision Date: 14 September 2023
• Parties: IN RE ESTATE OF MARY HUTCHESON MOON BALLARD
• Court: Tennessee Court of Appeals

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IN RE ESTATE OF MARY HUTCHESON MOON BALLARD

No. E2022-01147-COA-R3-CV

Court of Appeals of Tennessee, Knoxville

September 14, 2023

Session June 20, 2023

Appeal from the Chancery Court for Hamilton County No. 19-P-511 Jeffrey M. Atherton, Chancellor

In this matter concerning the interpretation of a will, John Moon and Shannon Moon ("John" and "Shannon") ("Claimants," collectively) filed a claim in the Chancery Court for Hamilton County ("the Trial Court") against the estate of their late sister, Mary Hutcheson Moon Ballard ("Mary").^[1] Arthur Ballard ("Arthur"), Mary's husband, filed an exception to the claim. Mary's grandmother, Elise Chapin Moon ("Elise"), had established a trust for her grandchildren, including Mary. It is Claimants' position that a bloodline provision in Elise's will ("the Moon Will") excludes spouses of grandchildren from receiving trust proceeds. The Trial Court, having put certain questions to a jury, ruled in favor of Arthur. Claimants appeal. We hold that once Mary received the funds from the trust, which dissolved in 2016, the funds were hers outright and no longer subject to the will's "bloodline" restriction. We hold further that the Trial Court erred by putting questions to a jury when the case was resolvable as a matter of law. However, the error was harmless. We affirm the judgment of the Trial Court.

Tenn R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed; Case Remanded

Alvin Y. Bell and R. Dee Hobbs, Chattanooga, Tennessee, for the appellants, John Moon and Shannon Moon.

Ira M Long, Jr., Chattanooga, Tennessee, for the appellee, Arthur Ballard, personal representative.

D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which THOMAS R. FRIERSON, II and KRISTI M. DAVIS, JJ joined.

OPINION

D. MICHAEL SWINEY, CHIEF JUDGE

Background

Mary the decedent whose funds are at issue in this appeal, was born in August 1957. Mary and Arthur were married in 1989. In 2019, Mary executed a will. Her will named Arthur as residual beneficiary. In June 2019, Mary died at age 61. Arthur thereafter opened Mary's estate. The present controversy stems from the disposition of certain funds which Mary received from the trust established by her grandmother, Elise. Mary's brothers, Claimants, contend that they are entitled to those funds in keeping with their grandmother's will. John, born in 1952, is Mary's oldest brother. Shannon, born in 1954, is Mary's older brother. Elise was Mary and Claimants' paternal grandmother.

In July 1968, Elise executed the Moon Will. The Moon Will established a trust funded by Elise's residuary estate. Named as trustees were American National Bank and William Deaderick Moon, Jr. ("W.D."), son of Elise and father of Mary and Claimants. Item V of the Moon Will provided that the Trust be divided into three parts: one part for W.D. and his children, and two parts for Elise's daughters and their children. Item VI of the Moon Will designated Elise's living grandchildren as primary beneficiaries of the trust and set out a distribution schedule. Income was to be distributed when a grandchild reached the age of 27 at which time each grandchild would receive half the corpus and accumulated income. The other half would remain in trust until the grandchild turned 32. Item VII stated, in part: "I would like for all income from my estate to be distributed with reasonable promptness after my death to my various beneficiaries, but direct that a substantial part of the income from estate assets be used toward meeting inheritance and estate taxes and obligations of my estate, to the end that no more of the principal than is absolutely necessary shall be disposed of." Item VII stated further: "My Trustees shall make all income payments to all beneficiaries not less frequently than quarterly."

The Moon Will provided that the grandchildren were to be the "major recipients" of each part of the trust but that the corporate co-trustee had the discretion to encroach upon the corpus of each child's part for the use and benefit of that child. Item VI stated: "Upon the attaining of twenty-seven (27) by the oldest grandchild, no grandchild thereafter born or adopted shall share in the trust proceeds. Wherever 'grandchild' or 'children of children' are referred to in this will, it shall mean issue, and not adopted children." Item VI stated further:

All income and any distribution of corpus as regarding a grandchild shall be paid by my Trustees to the beneficiaries receiving the same, free from the claim or right of any spouse of any beneficiary, either during said beneficiary's lifetime or after their death, and said payments shall be made free from the claim or right of any creditors of any of said grandchildren, and there shall be no power in any of said grandchildren to anticipate, assign or pledge their interest in either principal or income and none of their creditors shall have the right to reach either principal or income in any manner whatsoever. All income and corpus payments made by said Trustees shall be direct into the hands of said beneficiaries, or in case of minors, to such minor's legally qualified Guardian, or in the discretion of Trustees, to those furnishing necessaries to said minors.

Item VIII granted discretion to the corporate trustee to encroach upon principal for W.D. or his sisters. Item VI afforded discretion to trustees to encroach upon any grandchild's principal before the distribution date upon marriage for purposes of acquiring or making a down payment on a suitable home.

Item VII addressed a contingency in which one of Elise's children died without surviving issue. In that case, that child's share would be directed into other parts of the trust for her surviving children and their children. Item VII did not address a contingency whereby a grandchild died without issue with her assets still in trust. Item VIII conferred limited appointment power on W.D. and his sisters to modify the age of distribution of corpus to each of their children and grandchildren.

In December 1968, when Mary was 11 years old, Elise died. Mary's brother John turned 32 in December 1984 and the trustees distributed to him in a timely way all of the trust's assets to which he was entitled. Shannon turned 32 in May 1986, and he also received what he was entitled to from the trustees. In August 1984, Mary turned 27. However, Mary did not receive a distribution of corpus. W.D., Mary's father, was a trustee as of July 1986. He resigned in December 2008. Over the years, various financial institutions served as corporate trustee of Mary's trust. The last such institution was Southeastern Trust Company ("SETCO"). In 2008, Claimants, Mary, Arthur, and W.D. executed the "Nonjudicial Trust Settlement Agreement," under which SETCO consented to serve as corporate successor trustee to Mary's trust.

In 2014, SETCO determined that the trust had terminated when Mary turned 32. Until 2016, the proceeds of Mary's trust were in a trust account held by SETCO. The trust account was closed, with the assets transferred to an investment account in Mary's name. Arthur, as personal representative, had the funds in the agency account paid into the Mary Ballard Estate account. In support of their argument that they are entitled to Mary's funds, Claimants point to a copy of a letter dated July 24, 1986 from W.D. to American National Bank, "cc" Mary H. Moon, which purports to alter the ages of distribution to Mary to 85 and 87.^[2] Shannon said that he found the letter during a search for documents at his father's home. The letter referenced ages 32 and 37 as though W.D. had previously designated those ages.

In October 2019, Claimants filed a claim against Mary's estate in the Trial Court, requesting a jury determination. In December 2019, Arthur filed an exception to the claim. Arthur also filed a motion for judgment on the pleadings, which the Trial Court denied. In February 2022, Claimants filed a motion for summary judgment, stating in part that "there is no genuine issue of material fact as to the proper distribution of the only asset currently held by the Estate and because Claimants are entitled to summary judgment as a matter of law." Claimants stated further that "[s]uch asset consists of funds that pass outside probate and are the property of the Claimants, and summary judgment to this effect should be granted on their behalf." Arthur filed a response in opposition to Claimants' motion for summary judgment as well as a motion for summary judgment against Claimants. In April 2022, the Trial Court heard the parties' motions for summary judgment.

In May 2022, the Trial Court entered an order denying the parties' respective motions for summary judgment. In its order, the Trial Court stated, in part:

[T]he Court finds that each party has demonstrated the existence of specific material facts that defeat the other party's summary judgment motion.

With respect to the motion of the Estate, the Court holds that there are disputed questions of material fact regarding the following: whether distributions of corpus were made prior to the death of the Decedent; whether W.D. Moon, Jr. exercised his power of appointment given him in the will of his mother; whether Southeastern Trust Company was aware of the exercise of his power of appointment; whether the power of appointment could not extend the date for the final distribution of corpus; whether W.D. Moon, Jr. acted in bad faith in extending the ages of distribution; and whether he followed the requirements of his mother's will by stating in writing an initial exercise of the power of appointment.

Meanwhile, with respect to the motion of the Claimants, the Court holds that there are disputed questions of fact regarding the

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