TENNESSEE COURTS OK’s HIDING LEGAL; FINANCIAL DOCS

Attorneys & Fiduciaries hid Legal, Accounting, Securities and other Records from Trustees

Nashville, Tennessee­­ | Team Reporting by SPF

Tennessee is now the only the only state in the nation that allows attorneys and financial principals to hide and destroy legal and financial records from others involved in a legal and financial transaction.

Tennessee’s appeals court has upheld a lower-court ruling in a breach of fiduciary duty case involving the accountings for an estate out of Williamson County. The ruling wipes out centuries of black-letter law and makes it legal in Tennessee for attorneys, bankers, brokers, realtors and other fiduciaries to hide legal and financial records from clients, beneficiaries—and the courts.

Williamson County Tennessee Judge James Martin III

The original ruling was made by Judge James G. Martin in a claim involving the accounting for an estate and trusts based in the small town of Leiper’s Fork.

At the federal level, and in all other states, if an attorney or fiduciary hides or destroys legal and financial records, or hides records from their client-beneficiaries, it is considered a breach of fiduciary duty, fraud and/or obstruction of justice.

The ruling from Tennessee’s courts is a seismic shift in their laws and alters what people can expect from the legal and financial professionals they employ—and are subject to—when doing business in the Volunteer state.

A DRILL-DOWN: BIG NAMES TIED TO A SMALL CASE

The case was a simple one with a common theme: The widow of a Tennessee man wanted more money than she had agreed to when she signed the pre-nuptial with her spouse. To get more money, the widow teamed up with her attorney to hide and destroy the records of those assets from the man’s sons, who were trustees and beneficiaries of the estate.

Court records show that the estate itself was relatively small, with less than $200,000 subject to probate. (Many of the family’s assets had been placed into trusts.)

The executor, Cherry-Lane Darken, was represented by the firm now headed by Bill Purcell, the Harvard lecturer and former mayor of Nashville. But the tiny case quickly expanded and eventually employed some of Tennessee’s top legal talent: Walle,r Lansden, Dortch and Davis; Howard Mobley, Hayes and Gontarek; Bone, McAllester, Norton and Chattanooga’s Richardson Law firm.

For those interested in more details, use this reference: In re Estate of Darken (Tenn. Ct. App. Dec. 20, 2016). 

BIG CHANGES TO BASIC LAW:

In the past, Tennessee, like most states, treated the administrators and trustees of estates as fiduciaries. A “fiduciary,” according to www.Law.comis “ …a person or business who has the power and obligation to act for another (a client or beneficiary) under circumstances which require total trust, good faith and honesty.”

Those who handle finances on behalf of another person (or group) are considered fiduciaries. Most bankers, insurance brokers, trustees, retirement advisors, POA holders, artist’s agents and managers are part of that group. Fiduciaries must act solely for the benefit of their client-beneficiaries, with the highest level of integrity and transparency. All states in the USA view estate administrators and executors as fiduciaries.

On the legal side, judges, attorneys, and police are considered “officers of the court.” In all others states when a person is sworn-in as the administrator (or executor or executrix) of an estate, the courts delegate rights and responsibilities in matters of the estate to those administrators. They are in effect “deputized” and given broad powers to act as “officers of the court.”

In a unique role, administrators of estates are considered both “officers of the court” and “fiduciaries.”

The court ruling in Tennessee has gutted the rules governing both “fiduciaries” and “officers of the court” in that state.

OLD STORY;  BIG NEW RULINGS

The big changes are rooted in a small estate-accounting claim arising from the hamlet of Leiper’s Fork. The case began with Williamson County Clerk and Master Elaine Beeler, and was later heard by Williamson County Judge Timothy Easter and then Judge Martin.

The story is a familiar tale: E.R. “Woody” Darken was a retired businessman living in Leiper’s Fork. His first wife, and the mother of their two children, had died from cancer in 1997. Years later Woody remarried with a pre-nuptial in place between he and his new wife (the executrix, referred to in court records as “Miss Cherry Lane”).

Nashville Attorney Randle S. Davis

Darken was one of three generations of the family that employed Nashville attorney Randle S. Davis for his legal work, including estate planning. Davis, (pictured at left) was the senior managing partner of the firm of Lassiter, Tidwell, Davis, Keller and Hogan. (The firm now operates from the same office, but has been renamed Farmer, Purcell, Lassiter and White; the business home of Purcell).

In addition to the family’s estate planning, Davis had authored Mr. Darken’s portion of the pre-nuptial contract that was signed before he married his second wife, “Miss Cherry Lane” the executor.

However, the pre nuptial accountings for executor, “Miss Cherry Lane” had been authored by Ed Yarborough, a former federal prosecutor and partner at Bone, McAllester, Norton.

When Mr. Darken died his estate named his two surviving sons as trustees and beneficiaries of his estate and the trusts which the firm had authored for the family. The trustees also were clients of the firm.

After the administration of Mr. Darken’s estate was opened, the trustees asked the firm for their father’s legal and financial records. Davis promised to give them the records he had stored in the firm’s files.

But then the firm changed its tune and denied the trustees access to their father’s papers. This included the pre-nuptial contract and accountings, which were still in force at the time of his death.

A TENNESSEE TWIST

But after the death of Mr. Darken, the executrix changed law firms. She left Yarborough and Bone McAllister and Norton and hired Davis at Lassiter, Tidwell, Davis, Keller & Hogan.

Neither Davis nor anyone else at the firm disclosed to the trustees that the firm was now representing the executor in her bid to acquire more assets.

Trial records detail that for over two years the executrix and the firm hid and destroyed a laundry-list of legal and accounting evidence from the trustees.

The trustees were forced into a legal battle for access to their family’s records which were held at the firm and in Mr. Darken’s home office.

The trustees were forced into a legal fight that took nearly three years and more than $250,000 in legal fees, but initially, the trustees prevailed: Judge Timothy Easter ordered the firm and the executrix to deliver the hidden accountings to the trustees. He also ordered the parties to mediate the damages inflicted on the trustees by the executrix and the firm.

Once the firm produced the boxes of evidence they had been hiding, it was revealed that the estate accountings that had been given to the trustees—and the courts—were false. Missing from the firm’s filings were thousands of shares of stock, loan contracts, trust accounts, vehicles, art and other assets.

MORE COURT BATTLES: THE EXECUTRIX DEMANDS TRIAL:

But the firm and the executrix “refused” Judge Easter’s mediation order and demanded a trial.

Judge Easter was removed from the case and replaced by Judge James G. Martin, who presided at the trial. Martin has a 40 year history in the law, and is a member of the “Inns of Court.”

At trial, hours of testimony detailed a long list of events that in other states are considered “breaches of fiduciary duty.” The evidence that was hidden or destroyed included computer drives, securities, appraisals, billings, accountings, trust files, loan and mortgage records, business contracts and the pre-nuptial agreement.

From the witness stand neither attorney Davis nor the executrix denied hiding and destroying the evidence from the trustees and the courts. In testimony and in billing records, Davis confirmed that he had worked closely with the executrix to hide records of Mr. Darken’s assets.

In other states these activities are widely referred to as accounting fraud, securities fraud and fraudulent concealment.

Additionally—in other state and federal jurisdictions—both attorney Davis and the court-deputized administrator would be considered “officers of the court.” As such, the destruction and concealment of legal and financial records from a court proceeding would be considered obstruction of justice.

A LANDMARK DECISION    

But in a massive departure from the laws governing finance and accounting in other states, Williamson County Court Judge James Martin III reversed Easter’s initial finding for the trustees.

Martin ruled that when the executrix and her attorney hid legal and accounting records was not fraud, obstruction of justice or even a breach of fiduciary duty in Tennessee.

Martin’s ruling denied the trustees any recovery for the costs needed to get the accountings hidden by the executrix and the firm. Additionally, he ruled that the trustees were liable for all expenses billed by the firm to defend the actions of Davis and the executrix.

The trustees appealed their case, but Martin’s ruling was upheld by the Middle Tennessee Court of Appeals. Martin’s new definitions for fiduciaries and officers of the court now stand as the law governing all legal, accounting, finance and fiduciary transactions in the State of Tennessee.

Tennessee Attorney General Herb Slatery III

The editors at www.stopprobatefraud.com contacted the office of Tennessee Attorney General Herbert Slatery III (shown left) for comment, but received no reply.

The editors also asked the Tennessee State Bar for comment, but received no response.

This is the first in an on-going special report for www.stopprobatefraud.com designed to help readers spot, stop and recover from fraud, shakedowns, rackets and corruption.

———————————

www.stopprobatefraud.com is a news and information resource for those interested in spotting, stopping and recovering from fraud in probate, trusts, estates and guardianships. The team can be reached by email: stopprobatefraud@gmail.com.

Follow us on Twitter: @Stopfraud4

 

About Edmund Burke 87 Articles
Volunteers working to help people spot, stop and recover from fraud and corruption in probate, trusts, estates & guardianships.