Petty v. Privette

• Decision Date: 06 February 1989
• Citation: 818 S.W.2d 743
• Parties: William W. PETTY, as Administrator CTA of the Estate of Flossie B. Walker, Plaintiff-Appellant, v. Thomas PRIVETTE, Jr. and John P. Valliant, Jr., Defendants-Appellees. 818 S.W.2d 743
• Court: Tennessee Court of Appeals

Page 743

818 S.W.2d 743

William W. PETTY, as Administrator CTA of the Estate of Flossie B. Walker, Plaintiff-Appellant, v. Thomas PRIVETTE, Jr. and John P. Valliant, Jr. Defendants-Appellees.

818 S.W.2d 743

Court of Appeals of Tennessee,

Western Section, at

Knoxville.

Feb. 6, 1989.

Application for Permission to Appeal

Denied by Supreme Court

May 8, 1989.

John C. Stophel, Richard W. Bethea, Jr., Michael S. Jennings, Stophel & Stophel, P.C., Chattanooga, for plaintiff-appellant.

John O. Threadgill, G. Kevin Hardin, Butler, Vines, Babb & Threadgill, Knoxville, for defendant-appellee Thomas Privette, Jr.

Stephen C. Daves, O'Neil, Parker & Williamson and Arthur G. Seymour, Frantz, McConnell & Seymour, Knoxville, for defendant-appellee John P. Valliant, Jr.

FARMER, Judge.

This is the appeal of a suit brought on behalf of the estate of Flossie Broome Walker seeking damages for negligence on the part of the initial executor of the estate and recovery of certain fees paid to an attorney retained by that executor during his administration of the estate.

The last will and testament of Mrs. Walker was drafted by Ivan T. Privette, Sr. and named him as executor of the estate. Thomas Privette, Jr., his son and law partner, was designated by the will as alternate executor. The will, which was executed by Mrs. Walker on December 15, 1978, also included the following provision:

XI.

No trustee or executor serving hereunder shall be liable or responsible for any act or omission unless such act or omission shall have been done or omitted in bad faith and any act or omission done or omitted by any executor or trustee serving hereunder upon the advice of legal counsel shall be conclusively presumed to have been done in good faith.

Mrs. Walker died on August 26, 1982 and her will was offered for probate in common form on September 2, 1982. Because Mr. Privette, Sr. declined to serve, Mr. Thomas Privette, Jr., a defendant in this action, was appointed executor of the estate. A will contest was threatened by a relative of Mrs. Walker and as a result, a petition for probate in solemn form was filed on July 13, 1983. There was no will contest.

Mrs. Walker's estate was quite extensive consisting of some $800,000.00 in cash, TVA bonds worth nearly $33,000.00 and approximately 160 acres of prime real estate located in West Knox County. This real estate was zoned agricultural as of the date of Mrs. Walker's death. However, prior to her death defendant Privette and others had worked to have the property rezoned to "planned commercial" so as to greatly enhance its value. The will provided for several specific bequests to relatives and charities. However, the bulk of the estate was to be distributed to ten charitable organizations as residuary legatees (the "charitable beneficiaries").

Mr. Privette's actions in administrating the estate were questioned by representatives of the various charitable beneficiaries on several occasions. On December 17, 1984, a petition for an accounting was filed by the charitable beneficiaries in the Knox County Chancery Court. When defendant Privette failed to respond, the charitable beneficiaries filed, on March 4, 1985, a petition to show cause as to why defendant Privette should not be removed as executor for failure to account to charitable beneficiaries. These were the first of many petitions filed by both defendant Privette and the charitable beneficiaries, all of which led to the order of March 10, 1986 which allowed defendant Privette to resign as executor. On March 31, 1986, the current administrator c.t.a., William Petty, was appointed. That same day Mr. Petty filed suit against Mr. Privette as well as Mr. Valliant, an attorney retained by Mr. Privette to help secure the rezoning of Mrs. Walker's property from agricultural to commercial.

The amended complaint alleges essentially that Mr. Privette failed to account to the charitable beneficiaries, failed to disburse the funds to the charitable beneficiaries in a timely fashion, made imprudent investments of the estate assets and made an excessive and unauthorized payment to defendant Valliant from whom the complaint demanded the return of the excessive portion of that payment. The complaint also named several others as defendants, however, these claims were settled and dismissed prior to trial.

After a trial on the merits, the Chancellor issued a memorandum opinion holding, inter alia, that the exculpatory clause in Mrs. Walker's will was void as against public policy; however, the court stated that "Mr. Privette took the actions that he took for the ultimate benefit of this estate and fully intended to increase the corpus of the estate." In spite of this, the court found that defendant Privette had violated the "prudent man rule" and on that basis awarded plaintiff damages on several claims by plaintiff, including the forfeiture of defendant Privette's executor fee. As to defendant Valliant, the court found that, considering the work done, the fee was reasonable and dismissed all claims against him.

The plaintiff appeals the decision of the trial court insofar as it declined to award damages against defendant Privette in several areas as well as the dismissal of the plaintiff's claims against defendant Valliant.

As a threshold question, we must consider defendant-appellee Privette's contention that the exculpatory language in Mrs. Walker's will bars any claim against him arising from an action taken in good faith. This is a question of law. See Affiliated Professional Services v. South Central Bell Telephone Co., 606 S.W.2d 671 (Tenn.1980). Therefore, we must consider this issue de novo on the record with no presumption of correctness for the conclusions of the trial court. Billington v. Crowder, 553 S.W.2d 590 (Tenn.App.1977).

Because Mrs. Walker's intentions are plainly set out in the exculpatory clause, this Court is bound to give effect to them unless some rule of law or public policy precludes it. Third National Bank v. First American National Bank, 596 S.W.2d 824 (Tenn.1980). Since our Supreme Court's decision in Moss v. Fortune, 207 Tenn. 426, 340 S.W.2d 902 (1960), the public policy of Tennessee has clearly favored the freedom of parties to contract that one shall not be liable to the other for his ordinary negligence. See also Adams v. Roark, 686 S.W.2d 73 (Tenn.1985) (one may not contract away liability for an act done intentionally or with reckless disregard). However, the validity of an exculpatory clause contained in a will appears to be a question of first impression in Tennessee, although other states have considered the question. Clauses holding the executor or trustee blameless for ordinary negligence and breach of trust have been upheld in several states in conformance with the nearly universal policy of attempting to give effect to the testator's wishes. See e.g. MAJS Investment, Inc. v. Albany Bank & Trust Co., 175 Ill.App.3d 478, 124 Ill.Dec. 918, 529 N.E.2d 1035 (1988); New England Trust Co. v. Paine, 317 Mass. 542, 59 N.E.2d 263 (1945); Jarvis v. Boatmen's National Bank of St. Louis, 478 S.W.2d 266 (Mo.1972); Bartlett v. Dumaine, 128 N.H. 497, 523 A.2d 1 (1986). See also Rest.2d, Trusts, Sec. 222. Texas has also allowed the use of exculpatory clauses in wills by statute. See Bliedan v. Greenspan, 742 S.W.2d 93 (Tex.App.1987). Guided by the case law of other jurisdictions and Tennessee's public policy favoring freedom to contract for exculpation, it would appear that ordinarily an exculpatory clause in a will should be upheld.

However, this is not the precise issue presented by this appeal. We perceive the issue to be whether an attorney serving as the executor of an estate, having been so designated in a will prepared by that attorney or a member of his firm, is protected by an exculpatory clause in the will limiting the executor's liability to acts of bad faith. ¹

Our Supreme Court has carved out an exception to the long-standing rule that exculpatory clauses are valid in Olson v. Molzen, 558 S.W.2d 429 (Tenn.1977). Olson involved a medical malpractice claim which the defendant doctor claimed was barred because the plaintiff patient had signed a release from liability form. The court found that such an exculpatory clause was offensive and contrary to public policy when its signing was a condition of receiving medical treatment. Six criteria were set out as the basis for determining whether a given transaction is against public policy:

[a.] It concerns a business of a type generally thought suitable for public regulation.

[b.] The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public.

[c.] The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards.

[d.] As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking the exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.

[e.] In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.

[f.] Finally, as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.

558 S.W.2d at 431. Olson applies only to professional service contracts. See Schmatter v. Development Enterprises, 584 S.W.2d 459 (Tenn.App.1979). Because the will at issue purports to protect a professional, i.e., an attorney, we must first consider the criteria set out by Olson.

First, the area of administration of wills is obviously...