NEW LAWS FOR FIDUCIARIES & ATTORNEYS IN TENNESSEE
Special to www.stopprobatefraud.com
Editor’s note: This is the first of our on-going series from Nashville Tennessee
Farmer, Purcell & White, the law firm of former Nashville mayor Bill Purcell (left) is at the center of a small case that is forcing big changes onto the landscape of Tennessee’s business and financial world.
The middle Tennessee state court of appeals has upheld a lower court finding by Judge James G. Martin III that effectively rules that it is now legal in Tennessee for fiduciaries (and the attorneys, accountants and others they hire) to hide and destroy evidence including trustees, legal, financial and accounting records from their client-beneficiaries.
The ruling imposes sweeping changes to what people can expect from the legal and financial professionals (fiduciaries) they employ—or are subject to—in the Volunteer state.
In the past, Tennessee (as in 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.
On the legal side, judges, attorneys, and police are considered “officers of the court.” Additionally, in most 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, who have broad powers to act as “officers of the court.”
Administrators of estates are thus in the unique position of being both “officers of the court” and “fiduciaries.”
The decision upheld by Tennessee’s court of appeals dramatically changes the rules governing both “fiduciaries” and “officers of the court” in that state.
BIG CHANGES TO BLACK-LETTER LAW:
The changes stem from a simple estate-accounting claim originating in the tiny hamlet of Leiper’s Fork in Williamson County. The case began in the court of Williamson County Clerk and Master Elaine Beeler, and was later heard by Williamson County Judge Timothy Easter and then Judge James G. Martin III.
A FAMILIAR STORY:
The story is a familiar tale in estate law: A surviving wife wanted more money and wanted to ignore the terms of the prenuptial that she had signed with her husband.
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. Some years later Woody remarried with a pre-nuptial in place between he and his new wife (the executrix).
Darken was one of three generations of the family that employed Nashville attorney Randle S. Davis for 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 mayor Bill Purcell).
As part of the firm’s estate planning work for the family, Davis had authored Mr. Darken’s portion of the pre-nuptial contract.
The firm was also the estate planning firm for Mr. Darken’s children.
When Darken died his children were trustees and beneficiaries of his estate and the trusts which had been established by the family for their benefit. Mr. Darken’s surviving wife, the executor, was not a beneficiary of any of the family’s trusts.
After the administration of the estate had begun, the trustees asked attorney Davis for their father’s legal and financial records which were held by the firm. Davis promised to deliver to them their family’s records.
But then the firm subsequently changed its tune and refused to deliver the files to the trustees.
THE TENNESSEE TWIST
Court records detail that when the executrix got married to Mr. Darken, she had used attorney Ed Yarborough to write her portion of the pre-nuptial. Yarbrough is a former federal prosecutor and now partner at the Nashville firm of Bone, McAllester and Norton (BMN).
But after the death of Mr. Darken, the executrix did not hire Yarborough and Bone McAllister and Norton to help with the administration of the estate.
Instead, she hired Lassiter, Tidwell, Davis, Keller & Hogan.
So, unknown to the Trustees at the time, the firm had been hired by the executor to help in her efforts to acquire more assets. The firm concealed this conflict of interest from both the Trustees, and the courts.
Trial records detail that for over two years, the executrix worked with the firm to hide a catalog 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, to which the trustees were denied access.
The fight took over three years and more than $250,000 in legal fees, but the trustees initially prevailed. Judge Timothy Easter ordered the firm and the executrix to deliver the hidden accountings to the trustees. Judge Easter also ordered the parties to mediate the damages inflicted on the trustees by the executrix and the firm.
Once the firm produced the 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” mediation and demanded a trial.
Judge Easter was removed from the case and replaced by Judge James G. Martin III, who presided over 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, and business contracts.
From the witness stand neither attorney Davis nor the executrix denied hiding and destroying the evidence from the trustees and the courts. 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 Davis and the executrix would be considered “officers of the court.” As such, the concealment of legal and financial records from a court proceeding would be considered obstruction of justice.
A LANDMARK DECISION
But in a landmark 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 worked to hide legal and accounting records from the trustees it was not fraud, obstruction of justice or even a breach of fiduciary duty in Tennessee.
The trustees appealed their case, but Martin’s ruling was upheld by the Middle Tennessee Court of Appeals. The appeals court decision makes Martin’s new definitions for fiduciaries and officers of the court the law governing all legal, accounting, finance and fiduciary transactions in the State of Tennessee.
The editors at www.stopprobatefraud.com contacted the office of Tennessee Attorney General Herbert Slatery III (shown right) 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 series for www.stopprobatefraud.com designed to help readers spot, stop and recover from fraud.
If you or someone you know has been the target of fraud, our volunteers can be reached at: email@example.com