In re Estate of Fletcher

• Decision Date: 06 December 2017
• Docket Number: No. M2015-01297-SC-R11-CV,M2015-01297-SC-R11-CV
• Citation: 538 S.W.3d 444
• Parties: IN RE ESTATE OF Calvert Hugh FLETCHER
• Court: Tennessee Supreme Court

538 S.W.3d 444

IN RE ESTATE OF Calvert Hugh FLETCHER

No. M2015-01297-SC-R11-CV

Supreme Court of Tennessee, AT NASHVILLE.

April 5, 2017 Session Heard at Jackson
FILED December 6, 2017

Henry D. Fincher, Cookeville, Tennessee, for the appellants, Elaine Fletcher, Janet L. Fletcher Brady, Richard H. Fletcher, and Peter J. Fletcher.

Kenneth S. Williams, Cookeville, Tennessee, for the appellee, Nelda Karene Fletcher.

Michael T. Harmon and Timothy L. Amos, Nashville, Tennessee, for Amicus Curiae, Tennessee Bankers Association.

Sharon G. Lee, J., delivered the opinion of the court, in which Jeffrey S. Bivins, C.J., and Cornelia A. Clark, Holly Kirby, and Roger A. Page, JJ., joined.

Sharon G. Lee, J.

A husband and wife deposited funds in a joint checking account designated with a right of survivorship. Later, the husband withdrew most of the funds from the joint account and placed the funds in a certificate of deposit issued solely in his name. After the husband’s death, a dispute arose between his surviving spouse and his children from a previous marriage regarding ownership of the certificate of deposit. The trial court, relying on Mays v. Brighton Bank , 832 S.W.2d 347 (Tenn. Ct. App. 1992), held that the certificate of deposit was an asset of the husband’s estate because the funds ceased to be entireties property when withdrawn from the joint account. The Court of Appeals reversed and, relying on In re Estate of Grass , No. M2005-00641-COA-R3-CV, 2008 WL 2343068, at *1 (Tenn. Ct. App. June 4, 2008), held that the certificate of deposit belonged to the surviving spouse because the funds were impressed with the entireties and could be traced to the joint account. We hold that once funds are withdrawn from a bank account held by a married couple as tenants by the entirety, the funds cease to be entireties property. Accordingly, the certificate of deposit issued to the husband from funds withdrawn

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from the joint bank account belongs to his estate, not his surviving spouse. We reverse the Court of Appeals and remand to the trial court for further proceedings.

I.

In April 2012, Calvert Hugh Fletcher and his wife, Nelda Karene Fletcher, refinanced their home and paid off a line of credit secured by the home. They deposited most of the proceeds into a newly-opened joint checking account with FSG Bank. The FSG Bank account agreement designated the account as "JOINT—WITH SURVIVORSHIP (and not as tenants in common)." Funds could be withdrawn from the account based on the signature of either Mr. or Mrs. Fletcher.

In January 2013, Mr. Fletcher withdrew $100,000 from the joint checking account and obtained a $100,000 certificate of deposit solely in his name, issued by FSG Bank. The certificate of deposit was pledged as security for a $100,000 line of credit, although the line of credit was never used. In February 2013, the FSG joint checking account was closed.

Mr. Fletcher became ill in March 2013 and died on September 6, 2013. In his will, Mr. Fletcher bequeathed his tangible personal property and effects to Mrs. Fletcher and left the residuary estate to his four adult children from a prior marriage.

Mrs. Fletcher filed the will for probate in the Putnam County Probate Court and was appointed executrix for the estate. Mrs. Fletcher filed an estate inventory with the court, listing the certificate of deposit as a non-estate asset, and later filed a petition asking the probate court to designate the certificate of deposit as her separate marital property. Mr. Fletcher’s children maintained that the certificate of deposit was estate property.

At the hearing to determine ownership of the certificate of deposit, Mrs. Fletcher testified that in April 2012, she and Mr. Fletcher opened a joint bank account in a money market fund at FSG Bank with an initial deposit of $100,415.73. Of these funds, $89,779.97 came from the refinancing of the mortgage on their marital home, and the rest of the money came from marital funds. Mrs. Fletcher said she knew Mr. Fletcher intended to use the funds in the joint account for potential future investments, but she did not agree for Mr. Fletcher to transfer $100,000 from the joint bank account into a certificate of deposit issued solely in his name. Mrs. Fletcher testified she did not know the funds had been withdrawn until December 2013, when she spoke with a bank officer to receive an update on the couple’s accounts.

Mrs. Fletcher admitted that she signed the joint account card that provided only one signature was required for withdrawal of funds. Mrs. Fletcher explained that she paid the family’s bills and that bank statements were mailed to the marital home. Although her practice was to open and review the bank statements, Mrs. Fletcher did not recall seeing a statement evidencing a withdrawal in January 2013 of just over $100,000 or a statement indicating that the joint account had been closed in February 2013. Although Mrs. Fletcher knew that Mr. Fletcher was investing in real estate and working to develop Walden Villages subdivision when he became ill, she did not try to prevent him from investing. Mrs. Fletcher testified that she knew if he wanted to, Mr. Fletcher would use the money from the refinance loan for investment purposes. When asked if she would have agreed for Mr. Fletcher to withdraw $100,000 to purchase stock, Mrs. Fletcher acknowledged that he probably would not have asked her because that was his practice. Mrs. Fletcher agreed that she

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could have withdrawn $100,000 from the joint account but would not have done so.

Mr. Fletcher’s daughter, Elaine Fletcher, testified that in April 2013, her father asked her to assist Mrs. Fletcher in repaying a loan. While at the Fletchers' home, Elaine Fletcher saw a statement on the kitchen table for an account only in her father’s name containing $100,000, which she and Mrs. Fletcher discussed. Elaine Fletcher overheard Mrs. Fletcher’s side of a conversation with FSG Bank Vice-President Howard Bilbrey. Elaine Fletcher also spoke with Mr. Bilbrey, who told her that the money was in a certificate of deposit and would be difficult to withdraw. When Elaine Fletcher relayed this information to Mrs. Fletcher, they were both surprised to learn the money was in a certificate of deposit, but Mrs. Fletcher was not surprised that it was in only Mr. Fletcher’s name.

Janet Fletcher Brady, another of Mr. Fletcher’s children, testified she came to help care for her father in March and April 2013. Ms. Brady said that Mrs. Fletcher knew of the investment in Walden Villages subdivision and that Mrs. Fletcher was handling the finances for herself and Mr. Fletcher.

The probate court ruled that the certificate of deposit was an asset of Mr. Fletcher’s estate, relying on Mays v. Brighton Bank , 832 S.W.2d 347, 351 (Tenn. Ct. App. 1992), which held that the withdrawn funds ceased to be tenancy by the entirety property upon withdrawal. The probate court found that after the April 2013 telephone conversation with Mr. Bilbrey, Mrs. Fletcher knew or should have known that the certificate of deposit existed, or at least that the funds were held in something other than the Fletchers' joint checking account, and that she acquiesced in creating the certificate of deposit. Further, the probate court ruled that there was no proof of fraud, noting that Mr. Fletcher directed FSG Bank to send the certificate of deposit account statements to the marital home. The probate court held that the funds from the Fletchers' joint account ceased to be entireties property. Because the certificate of deposit was only in Mr. Fletcher’s name at the time of his death and there were no designations of payment on death to any individual, the certificate of deposit was part of Mr. Fletcher’s estate.¹ Mrs. Fletcher appealed.

The Court of Appeals reversed and held that the funds in the certificate of deposit belonged to Mrs. Fletcher, as the certificate of deposit was entireties property at Mr. Fletcher’s death. In re Estate of Fletcher , No. M2015-01297-COA-R3-CV, 2016 WL 3090920, at *10 (Tenn. Ct. App. May 23, 2016). The Court of Appeals noted the split of authority on this issue in the Tennessee appellate courts and in other jurisdictions. Id. at *4. Compare Mays v. Brighton Bank , 832 S.W.2d 347, 350–51 (Tenn. Ct. App. 1992) (following McEntire v. Estate of McEntire , 267 Ark. 169, 590 S.W.2d 241, 244–45 (1979) (holding that the wife’s withdrawal of funds from a joint account eliminated the entireties nature of the funds)), with In re Estate of Grass , No. M2005-00641-COA-R3-CV, 2008 WL 2343068, at *14 (Tenn. Ct. App. June 4, 2008) (following Madden v. Gosztonyi Sav. & Trust Co. , 331 Pa. 476, 200 A. 624, 630–31 (1938) (holding that funds withdrawn from a marital account remained impressed as entireties property and receipt of the property was subject to the entirety provision)). The Court of Appeals rejected Mays and relied on Grass , based on its conclusion that a spouse’s ownership interest

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should not cease because the other spouse withdrew funds from the joint account. Fletcher , 2016 WL 3090920, at *9. Further, the Court of Appeals reasoned that the joint account agreement should not be construed as proof of...