Mitchell v. Johnson
| Decision Date | 12 November 2021 |
| Docket Number | M2020-01243-COA-R3-CV |
| Citation | 646 S.W.3d 754 |
| Parties | John L. MITCHELL, Administrator for the Estate of Louisianna Clardy McClaron, Deceased v. William C. JOHNSON et al. |
| Court | Tennessee Court of Appeals |
Michael P. Mills, Franklin, Tennessee, for the appellants, Rita Y. Johnson and William C. Johnson.
Roger A. Maness, Clarksville, Tennessee, for the appellee, John L. Mitchell.
This is an action by the administrator of the estate of Louisianna McClaron ("the decedent" or "Ms. McClaron") to recover assets converted by the decedent's attorneys-in-fact based upon, inter alia , their use of the power of attorney to name themselves as joint owners with right of survivorship on the decedent's financial accounts, as the pay-on-death beneficiaries of her annuities, and as beneficiaries of the decedent's life insurance policies. The attorneys-in-fact used the power of attorney to sell real estate, the proceeds of which they deposited into a joint account that benefitted themselves. They also used the power of attorney to transfer $112,000 of the decedent's bank funds to themselves and their children. The attorneys-in-fact admitted to engaging in all of the transactions identified in the complaint and did not contest the existence of a confidential relationship; rather, they denied liability, contending their actions were authorized and beneficial to Ms. McClaron based on "an understanding" they had with her. They contended to having an oral agreement with the decedent whereby they would care for and assist the decedent and her sister, who lived together, until they died, at which time the attorneys-in-fact would receive the decedent's estate. Following discovery and the admission by the attorneys-in-fact of all the material facts set forth in the administrator's statement of undisputed facts, the administrator moved for partial summary judgment. After ruling that any evidence of a purported understanding with the decedent was barred pursuant to the Dead Man's Statute, the trial court granted partial summary judgment as to liability on the basis of the presumption of undue influence and the breach of fiduciary duties by the attorneys-in-fact for engaging in transactions that resulted in no benefit to the decedent. Following a bench trial on damages, the court entered a judgment identifying the property to be restored to the estate and the amount of damages to be awarded; the court also declared a deed purportedly conveying the decedent's home to the attorneys-in-fact null and void. The attorneys-in-fact appeal, contending the grant of summary judgment was inappropriate because material facts are in dispute. More specifically, they contend the trial court erroneously deemed the subject of their "understanding" or "agreement" with Ms. McClaron inadmissible under the Dead Man's Statute, which precluded them from presenting clear and convincing evidence of the fairness of the transactions or how Ms. McClaron benefitted from the transactions. The record before us reveals it is undisputed that the attorneys-in-fact exercised the power of attorney; therefore, a fiduciary relationship existed. See Childress v. Currie , 74 S.W.3d 324, 328–29 (Tenn. 2002). As a consequence, they owed a fiduciary duty to deal with Ms. McClaron's property in the "utmost good faith," see Ralston v. Hobbs , 306 S.W.3d 213, 221 (Tenn. Ct. App. 2009), and to act primarily for the benefit of Ms. McClaron, see McRedmond v. Est. of Marianelli , 46 S.W.3d 730, 738 (Tenn. Ct. App. 2000). However, the undisputed facts establish that the transactions orchestrated by the Johnsons were not necessary to protect the interest of Ms. McClaron. See Folts v. Jones , 175 Tenn. 77, 132 S.W.2d 205, 208 (1939). The undisputed facts establish that Ms. McClaron did not benefit from the transactions at issue and the transactions were not fair to Ms. McClaron. In contrast, the undisputed facts reveal that the Johnsons benefitted from each transaction. Having determined that the undisputed material facts and the relevant legal principles fully support the trial court's determination that the Johnsons breached their fiduciary duties to Ms. McClaron as well as the trial court's grant of partial summary judgment in favor of the administrator of the estate on the issue of liability, we affirm the trial court in all respects.
Ms. McClaron and her sister, Frankie Harrington ("Ms. Harrington"), resided together for years in a home on Cheshire Road in Clarksville, Tennessee, which they owned as joint tenants with right of survivorship. The defendants to this action, husband and wife William and Rita Johnson (collectively, "the Johnsons"), lived down the street.1 Barbara Johnson, the mother of defendant William Johnson, was a long-time friend of Ms. McClaron and Ms. Harrington and served as a volunteer caregiver for the sisters for a number of years before and after the Johnsons became the attorneys-in-fact for the sisters.2
Prior to when Rita Johnson became personally acquainted with Ms. McClaron, her mother-in-law, Barbara Johnson, assisted the sisters with their daily needs. After becoming acquainted with Ms. McClaron sometime in 2009 or early 2010, Rita Johnson assisted in caring for the sisters and was principally responsible for taking them to doctors, dentists, hairdressers, and other appointments. It was during this time that Rita Johnson realized, based on her day-to-day communications with Ms. McClaron, that Ms. McClaron was exhibiting signs of dementia and was incapable of managing her personal affairs.3
On October 5, 2010, Ms. McClaron executed a durable general power of attorney ("the Power of Attorney") appointing the Johnsons as her attorneys-in-fact.4 Shortly after being appointed attorney-in-fact, Rita Johnson took Ms. McClaron to her doctor, Dr. Paul S. Cha. During this visit, Ms. Johnson learned that Ms. McClaron had been previously diagnosed with Alzheimer's Disease and dementia.
Within six weeks of being appointed attorney-in-fact, Rita Johnson began making material changes to substantially all of Ms. McClaron's assets, including bank accounts, insurance policies, and annuity contracts. All of these changes significantly benefitted Rita Johnson and/or her husband, either immediately or upon Ms. McClaron's death.
On November 10, 2010, Rita Johnson set up accounts at First Federal Savings Bank for Ms. McClaron, on which Rita Johnson designated herself as the joint owner and as the pay-on-death beneficiary. In July 2011, Rita Johnson closed three of Ms. McClaron's bank accounts at Regions Bank and deposited the proceeds into a joint account at First Federal Savings Bank (now First Advantage Bank).
In the interim, on December 23, 2010, Rita Johnson executed paperwork to add herself as the beneficiary of Ms. McClaron's annuity with Lincoln Financial. It had an account value of $56,965.54 as of February 26, 2018.
Ms. McClaron owned an annuity with Delaware Life. In October 2011, Rita Johnson executed paperwork to designate herself as the beneficiary of the annuity. It had a value of $171,857.96 as of March 31, 2018.
Rita Johnson executed paperwork to make herself the beneficiary of Ms. McClaron's annuity with New York Life sometime before August 11, 2013. As of August 11, 2017, it had a value of $32,840.37.
Ms. McClaron owned another annuity with New York Life. In August 2011, Rita Johnson executed paperwork to add herself as a beneficiary of the annuity. It had a value of $55,622,56 as of February 5, 2018.5
As noted above, Ms. McClaron and her sister, Ms. Harrington, owned their home on Cheshire Road in Clarksville, Tennessee, as joint tenants with right of survivorship. In January of 2013, Rita Johnson drove Ms. Harrington to Lloyd Title and Escrow in Clarksville to execute a quitclaim deed. The deed, which was prepared at the request of Rita Johnson, purported to convey Ms. Harrington and Ms. McClaron's home on Cheshire Road to themselves and Rita and William Johnson as "joint Tenants in Common with Rights of Survivorship." Ms. Harrington signed the deed in the presence of the notary, Lettie Kendall, and the acknowledgment of Ms. Harrington's signature on the deed was notarized by Ms. Kendall. Ms. McClaron also signed the deed, but she did not go to the offices of Lloyd Title and Escrow, and Ms. McClaron did not sign the deed in the presence of a notary. No consideration was shown on the deed. Moreover, neither Ms. Harrington nor Ms. McClaron had independent advice of counsel before signing the deed.
On May 3, 2013, Rita Johnson closed two of Ms. McClaron's accounts at SunTrust Bank and deposited the proceeds into an account at First Advantage Bank that listed Rita Johnson as a joint owner and the pay-on-death beneficiary.
Ms. McClaron also owned a rental home on Joyner Avenue in Nashville, Tennessee. Using the Power of Attorney, William Johnson sold that home in 2013 and deposited the proceeds from that sale into one of the bank accounts at First Advantage Bank, on which Rita Johnson was a joint owner and the pay-on-death beneficiary.
In addition to the foregoing transactions, Rita Johnson used the Power of Attorney on several occasions to transfer cash payments from Ms. McClaron's bank accounts to herself, her husband, William Johnson, and/or her children, Taylor and Mason. The total of these financial transactions was $112,000.00.
By the time Ms. McClaron passed away, the Johnsons had consolidated her assets and arranged for themselves to have the survivorship rights or be the pay-on-death beneficiaries of bank and investment accounts in excess of $700,000. In addition, the Johnsons arranged to be joint tenants with right of survivorship with respect to her house and residential lot on Cheshire Road in Clarksville. Significantly,...
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