Waters v. Jolly

• Court: Supreme Court of Alabama
• Citation: 582 So.2d 1048
• Parties: John Richard WATERS, Jr., and Phillip Lynch Waters v. J. Ralph JOLLY, et al. William Donald WATERS, Jr. v. J. Ralph JOLLY, et al. 89-628, 89-625.
• Decision Date: 24 May 1991

Page 1048

582 So.2d 1048

John Richard WATERS, Jr., and Phillip Lynch Waters v. J. Ralph JOLLY, et al.

William Donald WATERS, Jr. v. J. Ralph JOLLY, et al.

89-628, 89-625.

Supreme Court of Alabama.

May 24, 1991.

Rehearing Denied June 28, 1991.

William C. Wood of Norman, Fitzpatrick, Wood, Williams & Parker, Birmingham, and Alexander W. Jones, Jr. of Pritchard, McCall & Jones, Birmingham, for appellants John Richard Waters, Jr. and Phillip Lynch Waters.

Douglas Corretti of Corretti & Newsom, Birmingham, and Jesse P. Evans III of Najjar, Denaburg, Meyerson, Zarzaur, Max, Wright & Schwartz, Birmingham, for appellees.

KENNEDY, Justice.

John Richard Waters, Jr., and Phillip Lynch Waters appeal from a summary judgment entered against them and in favor of J. Ralph Jolly and Jeanne Waters Jolly. William Donald Waters, Jr., appeals from a denial of his motion to intervene in the above action. We have consolidated the appeals for purposes of writing one opinion.

These appeals arise out of the third action that was filed in the Jefferson Circuit Court concerning the disposition of assets of a trust created pursuant to the wills of Newman H. and Anna Lois Waters. Newman H. Waters's will was probated in 1973, and Anna Lois Waters's will was probated in 1976. In each of the wills, Newman and Anna established a trust with their grandchildren as beneficiaries. John Richard Waters, Jr., and Phillip Lynch Waters (hereinafter collectively referred to as "the plaintiffs"), and William Donald Waters are 3 of 11 grandchildren of Newman and Anna. In their respective wills, Newman and Anna named their son, Newman H. Waters, Jr., their daughter, Jeanne Waters Jolly, and their son-in-law, J. Ralph Jolly, as trustees of the trust created for the grandchildren's benefit. The plaintiffs and William Donald Waters are not the children of the trustees.

During the administration of the trust, the plaintiffs filed an action in the circuit court ("the first action") against the trustees, ¹ alleging various breaches of their fiduciary duties by attempting to enhance the assets that would ultimately be distributed to the beneficiaries who are their children. The parties executed a settlement agreement, as a result of which the plaintiffs received money and property in settlement of their claims; the parties also agreed that all parties to the agreement were released from any claims that may have existed as of the date of the agreement related to the wills of Newman and Anna and the trust established thereby. The circuit court approved the settlement agreement on March 4, 1982.

On January 31, 1983, the trustees filed an action in the circuit court seeking a declaratory judgment ("the declaratory judgment action") naming all beneficiaries as defendants and seeking court approval of the proposed disposition of the trust's various remaining assets. ²

On February 18, 1983, the plaintiffs filed an answer to the declaratory judgment action, and, concurrently, served interrogatories in which they asked the trustees to state the present value of all assets held in the trust and to attach a copy of any appraisal of an asset. The plaintiffs did not receive a response to their interrogatories, and they filed a motion to compel answers to interrogatories. In response, the trustees moved the trial court for a protective order, or, alternatively, for an order limiting the scope of interrogatories to events that occurred after March 4, 1982, the date on which the trial court approved the parties' settlement agreement in the first action. In that motion, the trustees stated that they had previously furnished the plaintiffs with all appraisals made before March 4, 1982. The trial court granted the motion to limit the scope of the interrogatories.

In an amendment to the complaint in the declaratory judgment action, the trustees requested the circuit court to order that an appraiser be appointed to appraise approximately 347 acres of land in Jefferson and Shelby Counties, Alabama (hereinafter referred to as the "Swann Property"), and, thereafter, to enter an order authorizing the trustees to sell the Swann Property. The circuit court appointed Henry Graham to appraise the property, and Graham subsequently appraised the property at $1,200,000. The following is the relevant portion of the court's order:

"[Trustees] shall make every reasonable effort to sell the Swann [Property] prior to the vesting date of said trusts at the best available price. In the event said real property is not sold on or before November 25, 1983, [Beneficiaries] or their representatives, and any other interested parties, shall appear before the Register of this Court who shall conduct a public auction of said real property ... on November 28, 1983. The Register shall sell said real property to the highest bidder for cash, but in no event shall said real property be sold for a net sales price less than One Million Two Hundred Thousand and no/100 Dollars ($1,200,000.00). In the event the Swann [Property] is sold on or prior to the vesting date of said trusts, the net proceeds derived from such sale shall be distributed to [Beneficiaries] in accordance with their proportionate interests in the trust estate of Newman H. Waters, Sr. on the vesting date of said Trust.

"....

"That on the compliance by [Trustees] with all of the provisions of this Final Judgment, each of them shall forever be released and discharged as Trustees and individually, from any and all liability and obligations of all kind and character arising out of, in connection with or relating to their acts, activities and services as Trustees of said trust estates."

The Swann Property was not sold before November 25, 1983. The circuit court appointed a standing master to conduct a public sale, which was held on November 28, 1983. The standing master's report stated that at the sale J. Ralph Jolly successfully bid $1,246,000 on the Swann Property as agent for his wife and co-trustee, Jeanne Waters Jolly; his brother-in-law and former co-trustee, Newman H. Waters Jr.; and five of the beneficiaries, four of whom were his children. The plaintiffs bid unsuccessfullly on the property. On December 12, 1983, the circuit court confirmed the standing master's report and ordered that a deed to the property be executed in return for payment of the balance due. On that date, a deed was executed, conveying the property to the purchasers. The trustees were then dismissed and released from liability in connection with their activities as trustees of the trust. No appeal was taken.

At some point thereafter, the plaintiffs learned that Frank White, an appraiser, had appraised the Swann Property on April 17, 1981, prior to the institution of the first action filed by the plaintiffs and, therefore, prior to the effective date of the order issued in the second action that limited discovery to after March 4, 1982. During the litigation of this the third action, the trustees produced a copy of a memorandum written by J. Ralph Jolly, which stated as follows:

"Mr. Frank White, appraiser, and I visited this property several weeks ago so that he might give me some idea as to relative values. Since that time, he has returned and looked at the property again and has also discussed it and that general area with some other appraisers and with some realtors. Mr. White now indicates to me that it is his opinion that should the entire tract be sold it should bring $5,000 to $5,500 per acre [for a minimum of $1,735,000 ]. If smaller tracts are sold, some would bring up to $10,000 per acre depending upon location, accessibility, the lay of the land and related matters."

"Mr. White reported that he had checked for sales in the area and, while these are relatively few, some of the property has sold for as much as $10,000 per acre. Two tracts are now on the market for that figure but have not been sold and some of the other property has gone for as low as $3,000 per acre."

(Emphasis added.)

On October 9, 1986, approximately three years after the public sale of the Swann Property, First Equity Mortgage Company offered to purchase the Swann Property for approximately $5,600,000. Trustee J. Ralph Jolly, as agent for the owners, made a counter offer in which he raised the amount of earnest money to $100,000. The record does not indicate that the counter offer was accepted or rejected.

On October 27, 1986, the plaintiffs filed this action against the trustees in circuit court, alleging fraud and breach of fiduciary duty. In their complaint, the plaintiffs demanded a jury trial and requested both compensatory and punitive damages.

The trustees filed a motion for summary judgment, arguing that the plaintiffs' claims were procedurally barred. In opposition to the motion for summary judgment, the plaintiffs submitted a copy of J. Ralph Jolly's memorandum concerning the April 17, 1981, appraisal by Frank White; the October 9, 1986, offer and counter offer to sell the Swann Property; and the affidavit of Van E. Belcher. In his affidavit, Belcher stated that on November 28, 1983, the date of the public sale of the Swann Property, he was present at the sale and that he heard J. Ralph Jolly tell Newman H. Waters III (a beneficiary of the trust) that, if the bidding exceeded $1,500,000, he would have to get authority to continue bidding. Belcher stated that he did not come forward until he learned of the offer and counter offer made in October 1986. The plaintiffs also submitted a memorandum in which they argued that the trustees' legal arguments were without merit.

At the hearing on the motion for summary judgment on May 18, 1989, William Donald Waters, Jr., a beneficiary of the trust, filed a motion to intervene in the action pursuant to Rule 24, A.R.Civ.P. In his motion, he stated that he was a minor at the time of the sale of the Swann Property and that he became aware of the action filed by the plaintiffs on or about May 3, 1989. He adopted the...