NEW LAWS FOR FIDUCIARIES & FRAUD IN TENNESSEE
Special to www.stopprobatefraud.com
October 26, 2018
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 legal, financial and accounting records from their client-beneficiaries.
The ruling imposes sweeping changes to what Tennesseans can expect from the legal and financial professionals (fiduciaries) in the Volunteer state.
In the past, Tennessee (as in most states) treated the administrators and trustees of estates as part of a select group of professionals called fiduciaries.
A “fiduciary,” according to www.Law.com is “ …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.”
In broad strokes, anyone who handles the money or assets on behalf of another person (or group) is considered a fiduciary. Bankers, insurance agents, stock brokers, investors, retirement advisors, artist’s agents and managers are typically part of the group called fiduciaries. Fiduciaries must act solely for the benefit of their clients or beneficiaries.
On the legal side, Tennessee judges, attorneys, and police are sworn to uphold the law, and are considered “officers of the court.” Historically, when a person is sworn in as the administrator (or executor or executrix) of an estate, they are given special rights and responsibilities and also deputized to act as “officers of the court.”
Their position of power in the court system and their control over finances and accountings make administrators in Tennessee both “officers of the court” and “fiduciaries.”
SMALL CASE. BIG CHANGES
But a small estate from the tiny hamlet of Leiper’s Fork in Williamson County is changing the landscape of Tennessee’s legal and financial laws.
The new rules spring from the accounting for an estate that started 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.
THE CRUX OF THE MATTER:
The case is rooted the accountings for the estate of Woody Darken. Darken was a retired businessman living in Leiper’s Fork. His first wife, and the mother of their two children, had died from cancer. Some years later, Woody remarried.
Darken was one of three generations of the family that employed attorney Randle S. Davis. Davis was the senior managing partner of the firm of Lassiter, Tidwell, Davis, Keller and Hogan for estate planning. (The firm now operates from the same office, but has been renamed Farmer, Purcell, Lassiter and White; the business home of mayor Bill Purcell).
When Darken died, his two sons were trustees and beneficiaries of his estate and trusts that had been constructed by the firm. They also were clients of the firm. The Trustees asked attorney Davis for their father’s legal and financial records which were held by the firm. Davis promised to deliver to the records.
But then the firm subsequently changed its tune and refused to deliver the files to the trustees.
Case records detail that the executrix of the estate, Mr. Darken’s surviving wife, wanted more money and wanted to ignore the terms of the prenuptial that she had signed with Mr. Darken.
Court files 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.
Trial records detail that for three years the executrix worked with Davis to hide the estate’s legal, financial and accounting records from the trustees. The trustees were forced into a legal battle for access to their family’s records with were held at the firm and in Mr. Darken’s home office.
The fight took nearly three years years, and more than $250,000 in legal fees, but the trustees 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.
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 through a promotion to Tennessee’s appeals court. Easter was replaced on the case by Judge James G. Martin, who presided over the trial.
At trial, hours of testimony detailed a long list of events that in other states are are considered ” breaches of fiduciary duty” including destroying and hiding legal documents, computer files, securities, appraisals, billings, accountings, trust documents and financial records.
During testimony at trial, neither attorney Davis nor the executrix denied hiding and destroying the family’s records from both the probate court and the trustees.
In other states these activities are widely referred to as accounting fraud, securities fraud and fraudulent concealment. Additionally—at least in most state and federal jurisdictions—the concealment of legal and financial records from a court proceeding is considered obstruction of justice.
A LANDMARK DECISION
But in a landmark decision, Williamson County Court Judge James Martin III reversed Easter’s initial finding for the trustees.
Martin ruled that when the executrix and her attorney teamed up 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.
Martin’s ruling denied the trustees any recovery for the costs needed to get their family’s hidden records. In addition, the judge ruled that the trustees were liable for all legal expenses billed by the firm to defend the concealments of the administrator and attorney Davis.
The trustees appealed their case, but Martin’s ruling was upheld by the Middle Tennessee Court of Appeals.
“It’s a small case but a big decision,” said Brett Darken in an interview from his home in Virginia. Darken, 58, was co-trustee with his brother in the case.
“This ruling on fiduciaries impacts every family and business in Tennessee” said Darken. “It changes the nature of every financial transaction in the state. But all we can do now is try to help educate people about those changes.”
The editors at www.stopprobatefraud.com contacted the partners at Lassiter, Purcell & White for comment but received no reply.
“New Rules for Families and Finance in Tennessee” is a multi-part special report for www.stopprobatefraud.com designed to help Tennessee business and families navigate the state’s revised legal and financial landscape.
Part two of our Tennessee series can be found here: